Park Cakes Limited v Shumba and Others (2013)

In this month’s E-News, we consider whether a practice of making enhanced redundancy payments can amount to an entitlement to a contractual payment; whether overtime payments should be included when calculating a workers’ holiday pay and finally, whether a dismissal for gross misconduct will automatically be within the band of reasonable responses.

Park Cakes Limited v Shumba and Others (2013)

The four Claimants’ were TUPE transferred from Northern Foods to Park Cakes Limited in 2007. In 2009, they were dismissed for redundancy and brought claims for enhanced redundancy payments, on the basis that these payments had been made in the past. Despite the fact that their written contracts made no reference to enhanced payments, the employees relied on a group-wide policy of paying enhanced redundancy terms, which had been introduced by their previous employer, Northern Foods.

The Tribunal determined that there was no implied right to enhanced payments based on custom and practice, as the redundancy policy had not been drawn to the Claimants’ attention or applied “without exception” in the past.

The Claimants appealed to the Employment Appeal Tribunal (EAT), which allowed the appeal and remitted the case to a fresh Tribunal. Park Cakes appealed the EAT’s decision however, the Court of Appeal (CoA) agreed with the EAT and the remitted the case to a different Tribunal.

The CoA was critical of the Tribunal’s failure to consider the extent to which the redundancy policy may have come to the attention of the workforce generally, rather than specifically being drawn to their attention. The CoA noted that the Tribunal had failed to consider the effect of such a policy being available on request and provided a clear indication that a practice of making enhanced redundancy payments could still amount to an obligation where it had come to the attention of an employee.

This case will be considered further by a fresh Tribunal, but the CoA provided some useful guidance for employers in relation to the implication of terms into employment contracts by custom and practice. It confirmed that the Courts will look at the employer’s conduct objectively and whether it conveyed to the employee that it intended to be bound by the term. Employers should be aware that the terms of any policies that come to the attention of the workforce generally may be implied into their contracts. Further, employers should avoid the blanket application of such terms and ensure that employees appreciate that these terms will not automatically be implied into their contracts, simply because they have been implied into other employees’ contracts in the past.

Neal v Freightliner Ltd

Neal was employed by Freightliner as a “multi-skilled operative”. His contract specified a 35-hour week, made up of 7-hour shifts. The contract also stated that he “may be required to work overtime when necessary”. In practice, Neal tended to work 8.5 – 9 hour shifts, with occasional 12-hour shifts. He received a premium for time worked in addition to the contractual 7-hour shifts.

On the basis that the additional hours worked were voluntary, Freightliner calculated his holiday pay with reference to his 35-hour basic salary only, with overtime disregarded. Neal brought claims under the Employment Rights Act 1996 (ERA) and the Working Time Regulations 1998 (WTR) arguing that, following the judgment of the European Court of Justice (ECJ) in Williams and others v British Airways plc [2011], he was entitled to have his overtime calculated towards his holiday pay.

Under Regulation 16 WTR and s.234 ERA, holiday pay is calculated by reference to a worker’s “normal working hours” i.e. the fixed number of hours he has to work before receiving overtime. Further, s.223(3) provides that overtime paid at a higher rate should be reduced to the level of basic pay, also reducing the worker’s holiday pay. However, in Williams, the ECJ considered that holiday pay should correspond with a worker’s “normal remuneration”, including payments that are “intrinsically linked to the performance of the tasks” that they are required to carry out under their contracts.

In Neal, the Employment Judge held that it followed from Williams that a worker may be entitled to receive holiday pay in excess of his basic salary, if it can be shown that the payments are intrinsically linked to tasks that the worker is ordinarily required to carry out under the contract. The judge decided that the WTR could be interpreted purposively to give effect to the Working Time Directive and that words could be added to Regulation 16 so as to exclude sections 223(3) and 234 and ensure that holiday pay corresponds with a worker’s “normal remuneration”.

In practice, this case demonstrates that employers need to consider what hours their employees actually work and the payments they receive, rather than basing holiday pay calculations on contractual hours only. If overtime and shift premium payments are intrinsically linked to the performance of the employment contract, then they should be included when calculating holiday pay. Failure to include overtime payments in holiday pay calculations could result in employees bringing claims for breach of contract; unlawful deduction of wages under ERA and claims under the WTR. Further, employees may be entitled to back dated holiday pay going back six years.

Brito-Babapulle v Ealing Hospital NHS Trust

In this case, the EAT considered whether a tribunal had been mistaken to find that a dismissal for gross misconduct would inevitably fall within the band of reasonable responses.

The Claimant was a consultant at Ealing Hospital and her contract allowed her to hold sessions with private patients. Whilst on sick leave from the NHS, the Claimant continued to see private patients, despite being notified that she should not do so.

The Claimant was summarily dismissed for gross misconduct and the Tribunal found that the dismissal was fair, on the basis that “once gross misconduct is found, dismissal must always fall within the range of reasonable responses”.

The Claimant appealed to the EAT, who allowed the appeal and remitted the case to the same tribunal. Whilst the EAT acknowledged that claiming sick pay whilst working elsewhere would almost inevitably result in dismissal, it found that the Tribunal had erred in finding that this meant that the dismissal was therefore within the band of reasonable responses. The EAT warned that such a jump would leave no room to consider mitigating factors, such as the employee’s long service or unblemished record, which might result in the dismissal being unreasonable.

This case highlights that employers still need to consider whether there are any mitigating circumstances when deciding on the appropriate sanction in gross misconduct cases.


Disclaimer

This briefing is for guidance purposes only. RadcliffesLeBrasseur 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.