Dismissal of an employee in receipt of Permanent Health Insurance
In this month’s e-news we consider whether an employer is in breach of the implied duty of trust and confidence, if it dismisses an employee receiving permanent health insurance benefits, whether a twelve month contract to transport school children was a “single specific event” or a “task of short term duration” thereby excluding the application of TUPE; and whether the failure to consult in a redundancy situation amounts to a fair dismissal. We also consider the Government’s consultation in relation to parental leave and flexible working.
Dismissal of an employee in receipt of Permanent Health Insurance
You may recall that the case of Aspden v Webbs Poultry and Meat (Holdings) Group Limited, stated that where employees who were wholly incapacitated from working because of sickness or injury and were entitled to Permanent Health Insurance (PHI) benefits, would receive three quarters of their salary until death or retirement, provided only that they remained in the company’s employment. When the employer terminated Mr Aspden’s employment during a period of incapacity but before Mr Aspden became eligible for PHI, the High Court held that there was an implied contractual term to the effect that the employer would not terminate the contract while the employee was incapacitated for work and he qualified for benefits under the policy, except in the event of gross misconduct justifying summary dismissal.
What however is the position where an employer terminates the contract of employment of an employee who is actually in receipt of PHI. This was considered in the recent case of Lloyd v BCQ Limited.
Mr Lloyd was employed by BCQ Limited from 1978 as a Works Director. In May 2007 after suffering an injury he went on long-term sick leave until his dismissal on 31 May 2011. Mr Lloyd brought a number of claims including a claim for breach of contract in respect of PHI. The Employment Appeal Tribunal held that the fact that the Claimant’s contract of employment did not expressly refer to his entitlement to PHI cover, the Claimant had no contractual right for the continuation of this cover. Secondly the existence of BCQ’s express right to terminate the employment in circumstances of incapacity meant that there was no implied term to the contrary. This decision suggests that employers could seek to overcome the risks associated when terminating an employee’s employment, who may be eligible for or actually in receipt of PHI, by including a clause in the employment contract which gives them the express right to terminate for incapacity despite being in receipt of PHI.
What does “single specific event or task of short-term duration” mean?
In the case of Liddle’s Coaches v Cook and Others, the Employment Appeal Tribunal considered this point specifically. The Transfer of Undertakings (Protection of Employment) Regulations 2006 apply where there is a “relevant transfer”. A “relevant transfer” can be a service provision change, and for TUPE to apply the client must do one of the following:-
a) Cease to carry on activities on its own behalf and assign to a contractor.
b) Reassign activities from one contractor to another.
c) Bring activities previously carried out by a contractor in-house.
In addition, the client must intend that the relevant activities will be carried out by or “other than in connection with a single specific event or a task of short-term duration”.
Mr Cook was a driver for Liddle’s Coaches which provided school transport services for the local authority. In August 2010 East Ayrshire Council awarded Liddle’s five contracts to transport children who had to be temporarily assigned from Gargieston Primary School to other schools. The contracts were granted for one year. Before the contracts ended, the Local Authority tendered to provide a similar service for an additional year. Liddle’s secured one of the contracts and Abbey Coaches Limited (Abbey) secured three. Liddle’s argued that Mr Cook’s employment would transfer to Abbey under TUPE and therefore terminated his contract. Abbey, however, disagreed and declined to take Mr Cook on. Mr Cook brought unfair dismissal proceedings in the Employment Tribunal against Liddle’s and Abbey. The Employment Tribunal upheld Mr Cook’s claim against Liddle’s finding that his employment had not transferred to Abbey under TUPE as the parties agreed that the rebuilding of the school was a specific event particularly given that local authorities normally have contracts with coaches for between three and five years, and the contract in this case was sufficiently short-term. Liddle’s appealed to the Employment Appeal Tribunal. The Employment Appeal Tribunal held that it could either be a single specific event or a task of short term duration. The Employment Appeal Tribunal found the building of the school was a task of short term duration and therefore upheld the Employment Tribunal’s decision.
Can a failure to consult amount to a fair dismissal?
We look at the interesting decision in the case of Ashby v JJB Sports PLC which held that a dismissal on the grounds of redundancy was fair despite the fact that was no consultation.
The two hurdles that need to be overcome when considering whether a dismissal is fair is:-
a) whether there is a fair reason for dismissal; redundancy is deemed to be a fair reason; and
b) whether a fair process has been followed, which includes where appropriate consultation.
A dismissal on the grounds of redundancy is generally held to be unfair if no consultation with the employee has taken place. However, in the case of Polkey v AE Dayton and Services Limited it was recognised that there may be “exceptional cases” in which the absence of consultation would not render the dismissal unfair since it would have been “utterly futile” to consult with the employee. In practice this defence is rarely relied upon save where the question of remedies is being considered.
Mr Ashby was employed for ten years by JJB Sports Limited as a Payroll Manager. He then became head of Human Resources and Payroll. On or about 2010, he became Associate Director. In 2010 there was a sharp decline in revenue, the new Chief Executive decided to implement fundamental changes across the business and created an operating board made of four executive roles, one of which was HR. This was a senior role to that of Mr Ashley’s role of Associate Director. As part of the reorganisation it was decided that JJB’s Payroll Manager could undertake Mr Ashby’s payroll responsibilities and the other administrative tasks could be undertaken by the Operations Director. Mr Ashby was not consulted about the new structure but was informed of it in a meeting on 7 July 2010 when he was dismissed for redundancy.
The Employment Tribunal held that the dismissal was fair and that this case fell within the narrow category of cases identified in Polkey in which consultation would have been “utterly futile”. Mr Ashby appealed. The Employment Appeal Tribunal (EAT) dismissed the appeal. The EAT endorsed the Tribunal’s view that JJB was taking highly sensitive commercial decision for the future of the company involving reorganisation at a high level and it was not unreasonable for the Respondent not to tell the Claimant of its plans.
This is clearly a surprising decision and, whilst this case may suggest that consultation can be dispensed with in reorganisations, care should be taken. We suggest where possible some form of consultation should be undertaken before a decision is taken to dismiss.
In the News
In this month’s News, we look at the Government’s proposed consultation in modern workplaces.
Flexible Parental Leave
The Government announced a new system of statutory parental rights to be introduced in 2015. This is designed to allow parents to choose how best to balance their work and childcare responsibilities. Parents will be able to share the statutory maternity leave and pay that is currently only available to mothers. It is proposed that statutory parental leave can be taken either by each parent consecutively, or by both parents concurrently, as long as the combined amounts of leave does not exceed the amount (50 weeks) which is jointly available to the couple. Similar rules will apply to statutory parental pay (39 weeks), which will be available as an alternative to statutory maternity pay. Additional maternity leave and additional paternity pay will be abolished and there will be no extensions to current statutory and paternity rights.
There is also a proposal that the entitlement to unpaid parental leave will be extended from 13 to 18 weeks for each child from March 2013. Furthermore, it is proposed that from 2015, each parent will be able to exercise this right for children up to the age of 18.
The Government has also announced a decision to proceed with the extension of the right to request flexible working. The right will become available to all employees from 2014, provided they have 26 weeks continuous service. The current statutory procedure will be replaced with a duty on employers to deal with requests reasonably, and a statutory code of practice will be issued to give guidance as to how this will work in practice. Guidance will also be issued on how employers should priorities conflicting requests received from different employees.
This will mean that from 2014, all employees, irrespective of whether they have caring responsibilities, will have a right to request to work flexibly.
Please contact Sejal Raja if you have any questions in relation to this article.
t: 020 7227 7410
This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.