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May 1998
The Employment Rights (Dispute Resolution Act) 1998, which received Royal Assent in April 1998, is not yet in force. It is likely that Part 1 of the Act which renames Industrial Tribunals as Employment Tribunals will come into force by August 1998 and the remainder of the primary legislation will come into force by the end of the year but at the time of the publication of this chapter, the exact position was unknown.
76.14 Scope of statutory protection
Only employees and not independent contractors are eligible for most employment protection rights. The employee must also have completed the minimum qualifying period of service, which is different for each right, and make his claim in time. The qualifying period for redundancy payments has always been two years' continuous service but the time for unfair dismissal has varied. Since 1985 it has been two years' continuous service with some exceptions e.g. where dismissal is by reason of pregnancy. There has been doubt cast on the validity of this requirement and a decision is awaited from the Court of Justice of the European Communities. Consequently, tribunals are holding as "pending" any cases of unfair dismissal where there is more than one year’s continuous service.
The intention is that claims for compensation are presented promptly. The employee has three months from the effective date of termination in which to present a claim to an industrial tribunal for unfair dismissal and six months for redundancy. There is no limitation period for references to industrial tribunals of claims under the contractual redundancy pay provisions which used to exist under the Whitley Council Agreement other than the six year period under the Limitation Act 1980.
The industrial tribunal may extend the time limit where it is satisfied that it was not reasonably practicable for the complaint to be presented before the end of the three month period.
The general view of the courts is that an employee cannot claim employment protection rights when his contract is tinged by illegality e.g. if the parties make an agreement to submit inaccurate tax returns or evade tax, then the court would not enforce the contract (see Napier v National Business Agency Ltd 1951] 2 All ER 264). The courts may mitigate this effect by considering whether the employee was aware of the illegality, allowing severance of the illegal terms and leaving the remainder of the contract valid. Incidental illegality during the course of a contract does not render the whole contract void.
Notes: [SI 1985 No 782] [s108 ERA1996] [s111(2)ERA1996]76.15 Special provision for certain types of employees
Employees of central government and Territorial Army Associations in permanent posts are not covered by the redundancy payment scheme although, they have their own provisions. Persons in certain government employment are exempted from statutory redundancy payments. Civil servants are specifically included within the scope of unfair dismissal provisions despite the fact that they cannot claim to have been wrongfully dismissed. The redundancy payments legislation does not apply "to any person in respect of his employment in any capacity under the Government of an overseas territory". An applicant is excluded from claiming unfair dismissal if on or before the effective date of termination, the person has attained the "normal retiring age" for an employee holding the position held, or if a man or woman has attained the age of 65, unless dismissal is for a trade union reason. The age limit also does not apply to dismissals by reason of pregnancy or a protected Sunday worker or by reason of health and safety activities. An application of the age limit may raise difficult questions of law and specialist advice may be required, in the first instance reference should be made to Technical Section.
Any provision in an agreement is void in so far as it purports to exclude or limit the operation of the unfair dismissal provisions or in so far as it precludes any person from pursuing a claim for unfair dismissal. An employee under a contract of employment for a fixed term would normally be entitled to claim unfair dismissal or a redundancy payment on its expiry without it being renewed under the same contract. Any agreement which purports to exclude a person from presenting a complaint to an industrial tribunal is void unless a conciliation officer has "taken action" under section 18 of the Industrial Tribunal Act 1996. Certain agreements not to take proceedings before industrial tribunals are exempt from the general rule that they are void but they must comply with stringent conditions. The Secretary of State has residuary power to bring specifically excluded employees or holders of certain public offices within the scope of the Act and to exclude employees otherwise included in its coverage.
Notes: [s159ERA 1996] [S191 ERA1996] [S160(1)ERA1996] [s109(1)ERA1996][s203ERA 1996] [s95(1)(b) and s130(1)(b) ERA 1996] [s203(1)(b) ERA 1996] [s203(3)ERA1996] [s209(1)ERA 1996]There are several ways in which the contract of employment may be terminated at common law. The contract of employment is terminated by automatic operation of law without action by employer or employee in the following circumstances :
Except in the case of a fixed term contract, an employee is employed for an indefinite period subject to termination by a reasonable period of notice. The length of notice is usually expressly agreed, in which case it must be stated in the written particulars of employment. Otherwise common law will imply a period of reasonable notice depending on the circumstances of the particular employment. The statutory rule is that the employer must give one week's notice to an employee who has served between one month and two years and thereafter one week for each year served up to a maximum of 12 weeks (for 12 years). In return, the employee must give at least one week's notice of resignation if employed for more than one month. However, this code does not apply to Crown servants, those working outside Great Britain or House of Commons staff. The statute does not prevent either party from waiving the right to notice, affect the rights of either party to terminate the contract as a result of the conduct of the other or prevent a party from accepting payment in lieu of notice.
Notes: [s86(2) ERA 1996] [S86(3)(6) ERA 1996]A party to a contract of employment is discharged by a repudiatory breach, that is a breach which:
i) the parties regard as vital,
ii) is so serious in its consequences as effectively to deprive the other party of what he had contracted for, or
iii) shows that the other party no longer intends to be bound by one or more of the essential terms of the contract. The repudiatory breach may be made up of a series of small breaches.
The general view of common law is that dismissal with proper notice is lawful except in the rare event that procedural provisions for termination are built into the contract (Tomlinson v LM & S Railway [1944] 1 All ER 537). There are some cases in which a dismissal without notice may be lawful at common law, the general test being "whether the conduct complained of is such as to show the servant to have disregarded the essential conditions of the contract of service" (Laws v London Chronicle (Indicator Newspapers) Ltd [1959] I WLR 698). Summary dismissal has been held justified in cases of a strike, dishonesty, a series of incidents of intoxication, gross negligence or wilful disobedience to orders. Official receivers should be aware of the possibility of a challenge to the dismissal of an office holder by an application for judicial review.
76.19 Continuity of employment
Statutory continuity of employment is centrally important to most statutory employment protection rights including redundancy pay, maternity pay and unfair dismissal. It is vital in determining whether the employee has served the appropriate qualifying period and, if so, what is the appropriate amount of award or payment due. Continuity is extensively defined in Part XIV, Chapter 1 of the Employment Rights Act 1996. The aim of the statute is to overcome the common law rule that every change of term was a new contract which would artificially restrict employee rights; there is a special continuity regime for statutory maternity pay. Continuity is preserved even though, during an employee's service, the duties required by his contract and other incidental terms may vary. The units for measuring continuity are calendar months and years and the period of continuity begins on the day the employee starts work. Where an employee successfully claims to have been unfairly dismissed and is reinstated by his employer, a successor employer or associated employer, his continuity is preserved and he can include the time in between dismissal and reinstatement.
There are five important rules for maintaining continuity when an employee works in sequence for different employers. The periods are considered continuous where:
76.21 Transfer of undertakings
Employees achieve an automatic continuation of the contract of employment on a transfer which falls within the scope of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981 No 1794) as amended by The Collective Redundancies and Transfer of Undertakings(Protection of Employment)(Amendment) Regulations 1995 (SI 1995 No 2587). The Regulations preserve employees' terms and conditions when a business or undertaking, or part of one, is transferred to a new employer. The regulations provide that employees employed by the previous employer when he changes hands automatically become the employees of the new employer on the same terms and conditions. Therefore employees' continuity of employment is preserved as are their terms and conditions of employment under contracts of employment (except for occupational pension rights).
The regulations apply when an undertaking or part of an undertaking is transferred from one employer to another. Some examples of transfers are:
The regulations apply regardless of the size of the transferred undertaking (i.e. large or small business) and apply equally to public or private sector undertakings. The regulations do not apply to transfers by share take over, transfers of assets only or transfers of undertakings situated outside the United Kingdom. The new employer takes over the contracts of employment of all employees who were employed in the undertaking immediately before the transfer or who would have been so employed if they had not been unfairly dismissed for a reason connected with the transfer. The new employer takes over all rights and obligations arising from the contracts of employment but the Regulations do not oblige the new employer to continue an occupational pension scheme. Neither the new employer nor the previous employer may fairly dismiss an employee because of the transfer or a reason connected with it unless the dismissal is necessary for an economic, technical or organisational reason entailing changes in the work force. If there is no such reason, the dismissal will be unfair. The new employer may not unilaterally worsen the terms and conditions of employment of any transferred employee. An employee claiming to have been unfairly dismissed because of a transfer has the right to complain to an industrial tribunal. Employees who are transferred and find that there has been a fundamental change for the worse in their terms and conditions of employment as a result of the transfer have the right to terminate their contract and claim unfair dismissal before an industrial tribunal. If the dismissal is considered fair employees may still be entitled to a redundancy payment.
The onus of proof is on the employer to establish on the balance of probabilities the reason for dismissal; if the employer cannot prove any reason for dismissal the dismissal is automatically unfair (Adams v Derby City Council [1986] IRLR 163).
Statute divides the reasons for dismissal into three categories :
Potentially fair: this is the most important category demanding an analysis of the overall fairness of the dismissal. Whilst they are necessary ,they are not sufficient conditions for showing a dismissal was fair. Those specified in section 98 of the Employment Rights Act 1996 are:
a reason relating to the capability or qualification of the employee for performing the work which he was employed by the employer to do,
a reason related to the conduct of the employee,
redundancy,
that the employee could not continue to work in his position without contravention by him or his employer of a duty or restriction imposed by or under an enactment.
Automatically fair :
where the decision was taken "for the purpose of safeguarding national security" and a certificate signed by or on behalf of a minister is conclusive evidence of this fact (Council of Civil Service Unions v Minister for the Civil Service [1985] IRLR 28).
dismissal whilst taking part in a strike or other industrial action when all strikers are sacked or in the case of unofficial action even though there is selection amongst those dismissed and those retained.
Automatically unfair reasons include :
dismissal of a woman because she is pregnant or another connected reason,
dismissal for trade union membership or activities or because of refusal to join a trade union,
dismissal because of a conviction which is spent under the Rehabilitation of Offenders Act 1974,
dismissal for assertion of a statutory right
As referred to in paragraph 76.15 above, the general view of the common law is that a dismissal with proper notice is lawful except in the rare event that procedural provisions for termination are built into the contract. When there is a procedure for dismissal in an employment not covered by statute at all, employers must comply with that procedure for the dismissal to be valid. Employees who have been dismissed and have completed at least two years' continuous employment before the effective date of termination are entitled to receive from their employer on request a written statement of reasons for dismissal within fourteen days. Summary dismissal has been held justified in cases of a strike, dishonesty, a series of intoxication, gross negligence or wilful disobedience to orders such as refusal to attend meetings. For the summary dismissal to be considered reasonable, an employer should follow whatever internal procedures are applicable, conduct some form of investigation and give the employee an opportunity to make representations before deciding on a course of action. It is likely that any summary action and particularly dismissal will be held unfair (see Henderson v Granville Tours Ltd [1982] and Harris and Shepherd v Courage (Eastern) Ltd [1981]). However, it is accepted that gross misconduct which amounts to conduct so serious that a single incident can result in dismissal.
An action at common law for wrongful dismissal may be based upon two sorts of termination of employment:
The potential remedies for wrongful dismissal are specific performance and injunction, declaration, prerogative orders and damages. Damages are the normal remedy for breach of contract and the usual measure is the wages and benefits the employee would have earned if due notice had been given; this is quite different to unfair dismissal compensation. From the amount of damages will be deducted sums to take account of mitigation, taxation and benefits received.
Unfair dismissal was a completely new concept when introduced in the Industrial Relations Act 1971 and is different from common law wrongful dismissal. It is more important in practice. Section 94 of the Employment Rights Act 1996 states that, subject to exceptions, "an employee has the right not to be unfairly dismissed by his employer". One of the main aims of the unfair dismissal provisions is to give employees a hearing of their grievances on their merits. The employee's eligibility and dismissal need to be established and thereafter the employer must prove the reason or principal reason for the dismissal and it must have been fair for the employer to treat the reason he has given as a reason to dismiss. These reasons are automatically unfair: discrimination, union membership or activity or pregnancy. An employee may be entitled to resign in reaction to his employer's behaviour and yet claim to have been dismissed and this constitutes constructive dismissal. The law relating to unfair dismissal is complex and of necessity only a brief outline is given here.
Before making a complaint to an industrial tribunal, employees should seek to resolve the dispute by mutual agreement with the employer, employers and employees may also seek advice from a conciliation officer of the Advisory, Conciliation and Arbitration Service (ACAS). Where any statutory rights are denied or infringed, employees may seek a remedy by making a complaint to an industrial tribunal. Employees who believe that they have been unfairly dismissed may seek remedy by complaining to an industrial tribunal. Employees have the right to complain to an industrial tribunal if they are dismissed or selected for redundancy (when others in similar circumstances are not selected). In most circumstances employees must have two years' continuous service in order to make a complaint of unfair dismissal to an industrial tribunal (see paragraph 76.14 regarding validity of this requirement) but the two year qualifying period is not always necessary. The period is reduced to one month where an employee is dismissed on medical grounds in consequence of certain health and safety requirements and there is no length of service requirement where the dismissal was for an automatically unfair reason. An employee wishing to make a complaint should obtain an application form from an Employment Service Jobcentre and a leaflet explaining the procedure. A complaint of unfair dismissal must be received by an industrial tribunal within three months of the effective date of termination of the employment (usually the date of leaving the job) unless the tribunal considers this was not reasonably practicable. A full tribunal or a chairman sitting alone may conduct a pre-hearing review of a case in advance of the full tribunal hearing. If conciliation is not possible or fails, the employment tribunal will hear the case; each tribunal normally consists of a legally qualified chairman and two lay members. Industrial hearings are conducted informally and parties may present their own case or may be represented. In cases where the written statement of employment is disputed, the tribunal will determine what the correct particulars should be. In other cases where an employer has not complied with statutory provisions, the tribunal may make an award of compensation to be paid by the employer to the employee. Before hearing the complaint, the tribunal will need to establish that a dismissal has taken place; once this is established, it is for the employer to show that the dismissal was "fair" i.e. for one of the reasons specified in the legislation. When the tribunal has established the reason for dismissal, it must then decide whether in the circumstances the employer acted reasonably in treating that reason as a sufficient reason for dismissal. In cases of unfair dismissal, the employment tribunal will order one of three possible remedies, reinstatement, re-engagement or compensation. Orders for reinstatement or re-engagement normally include an award of compensation for the loss of earnings. A compensatory award will be reduced if the tribunal finds that the employee was partly to blame for the dismissal or because the employee did not mitigate his or her loss e.g. by failing to make reasonable efforts to obtain another job. Where a tribunal finds that one of the parties at a hearing has acted vexatiously, abusively or otherwise unreasonably in bringing or conducting a case, it has the power to award costs against that party.
The Redundancy Payments Act 1965 gave employees who lost their jobs in certain circumstances a right to receive a payment from their employers regardless of whether or not they had found new employment. The law is substantially consolidated in the Employment Rights Act 1996. Normally the employee's job must have "disappeared", it is not redundancy if the employer immediately engages a direct replacement, though it will not matter if the employer is recruiting more workers of a different type. An employee has three basic statutory rights:
The amount of the payment is related to the employee's age, length of continuous service with the employer and weekly pay up to a maximum as set by the Government and reviewed each year. In order to qualify for a redundancy payment a person must have been employed for the requisite period. The qualifying period is 2 years to claim to have been dismissed by reason of redundancy.
Self employed persons or members of a partnership do not qualify. Directors of a company may be employees if they work in an executive or other capacity under a contract of employment but not if they only deal with company policy and attend board meetings. The employer must also give the employee a written statement showing how the payment has been calculated. Employees who have not completed 2 years continuous service or who have reached the normal retiring age or who have reached the age of 65 have no entitlement to a redundancy payment. Service under the age of 18 does not count and the maximum length of service used in calculating redundancy payments is 20 years. The redundant employee may not be entitled to a payment if a new job is offered with the same employer, an associated employer or a successor employer who takes over the business, provided the new job is offered before the old employment contract expires and starts within four weeks of that expiry. If a employer fails to make the redundancy payment and the employee has taken all reasonable steps to recover payment or the employer has serious cash flow problems and is unable to make the payment, the Redundancy Payments Service (RPS) may be able to make the payment and the employer will be expected to pay back the amount owed as soon as possible, if necessary in instalments. If the employer was sole proprietor of a business which ceased to trade as a result of his or her death, the employer's personal representative is personally liable for any redundancy payments due, unless the representative carries on the business and offers acceptable new jobs to start within 8 weeks to the employees. If an employee dies before receiving any redundancy payment due, it should be paid to his or her personal representative. There are special provisions regarding employees who die while under notice of redundancy or having been given inadequate notice; further information on these points can be obtained from the Redundancy Payments Service. The employee does not pay income tax on a statutory redundancy payment, but the employer may set it against tax as a business expense. Any dispute about whether or not a redundancy payment is due or about the amount payable can be determined by an industrial tribunal.
Notes: [SI 1995 No 31]
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