Employment Review - July 2008
In this month’s update (produced by Rena Magdani, pictured) we consider what is potentially one of the most important disability discrimination cases of recent years. We also consider further case law on the application of the statutory dispute resolution procedures, a high court decision that clarifies when the right to place an employee on garden leave can be implied in the absence of an express contractual term and details of a proposed review of ‘no win no fee’ arrangements.
House of Lords decision could signal new approach to disability discrimination claims
More guidance on the statutory dispute resolution procedure
Implied garden leave clause possible
No win no fee review to be undertaken
No reprieve for 88 second late claimant
Recent Work
The Employment Team
House of Lords decision could signal new approach to disability discrimination claims
The law in relation to the appropriate person with whom a disabled person should be compared in disability discrimination cases in the employment context has been settled for nearly a decade, following the leading case of Clark v Novacold in 1999. However, the settled assumption has now been called into doubt following a new House of Lords decision in the context of a housing case.
Mr Malcolm had a secure tenancy of a property from Lewisham Council. Mr Malcolm suffered from schizophrenia and, during a period in which he was not taking his medication, Mr Malcolm sub-let the property. The sub-letting was prohibited and the Council commenced proceedings to regain possession of the property from him. Mr Malcolm argued that the breach of the terms of his tenancy had been caused by his schizophrenia, which he contended was a disability for the purposes of the Disability Discrimination Act 1995 (”DDA”), and therefore the Council’s possession action was discriminatory.
At first instance, Mr Malcolm’s arguments failed at the first hurdle as the Court did not accept that Mr Malcolm’s schizophrenia was a disability within the meaning of section 1 of the DDA, this being “a physical or mental impairment which has a substantial and long-term adverse affect on his ability to carry out normal day-to-day activities”. The decision was overturned by the Court of Appeal who found that Mr Malcolm was disabled within the meaning of the DDA and that Mr Malcolm had been discriminated against.
The Council subsequently appealed to the House of Lords, whose decision was handed down on 25th June 2008. The main issues to be considered by the House were:
1. Was Mr Malcolm a disabled person at the relevant time?
2. What was the treatment Mr Malcolm was complaining of?
3. What was the reason for that treatment?
4. Did the reason relate to Mr Malcolm’s disability and was the Council’s knowledge or lack of knowledge of his disability a relevant factor in determining this?
5. Was it less favourable treatment than the treatment of others to whom the reason did not apply?
The first 3 of these questions were straightforward. The House held that Mr Malcolm’s schizophrenia did constitute a disability within the meaning of the DDA. The treatment complained of was the possession proceedings and the reason for the treatment was the prohibited subletting.
The more interesting issues arise from questions 4 and 5. With regard to whether the reason for the treatment, in this case the prohibited subletting, was related to Mr Malcolm’s disability. The House of Lords held that there would have to be some connection, not necessarily close, between the reason and the disability. This means it would have to be possible to say the Council had either known or ought to have known about the disability. As the Council in this case were not aware of Mr Malcolm’s schizophrenia, it was decided that the reason for the treatment could not be held to relate to his disability. Mr Malcolm’s claim therefore failed at this stage but the House of Lords went on to consider question 5 in any event.
To answer question 5, they had to decide who Mr Malcolm should be compared with to ascertain whether he had been treated less favourably. The recognised comparator in the employment context, following Clark v Novacold, is a person to whom the reason for the treatment does not apply - in this case, meaning someone who has not sub-let. Someone who has not sub-let would not have possession proceedings brought against them so less favourable treatment would be made out. This is a wide interpretation which means that discrimination will almost always be made out. Taking the example in the Novacold case itself, the claimant was dismissed for being absent from work. The correct comparator was found to be someone who had not
been absent from work. Someone who had not been absent from work would not have been dismissed and therefore there was less
favourable treatment.
The competing view is that the comparator should be a person for whom the reason relating to the disabled person’s disability does not apply - this is a much narrower approach as in this case the comparator would be a non-disabled person who sub-let. This person would have possession proceedings brought against them, so there is no less favourable treatment. Applying this to the Novacold example, the comparator would be someone who was absent from work but for a reason other than disability. Such a person would also be dismissed so again, there is no less favourable treatment.
By a majority of 4 to 1 (Baroness Hale dissenting), the House of Lords found that the narrower approach to comparators was the correct one and that Novacold had been wrongly decided. The correct comparator in this case was a non-disabled person who had sub-let. As they would have been treated in the same way as Mr Malcolm, there was no less favourable treatment.
So, why is this case so important in the context of employment claims? Firstly, although Mr Malcolm was seeking protection under section 22 of the DDA which deals with discrimination in the housing context, the wording of that clause mirrors that in section 3(A) which deals with discrimination in the employment field. In addition, the House specifically referred to the employment case law and, with the exception of Baroness Hale, found that Clark v Novacold, the leading employment case on comparators, had been wrongly decided. Therefore, the decision of the House may be transferrable to employment claims, which means the following principles may be applied:
• An employer can only be liable for discrimination if they know, or ought to know, that the individual is disabled.
• The question of whether the reason for the treatment relates to the disability will be construed narrowly and take into account what was in the mind of the employer at the time. Taking this to its natural conclusion, it may be possible to say that if an employer dismisses someone who has been absent for a year, the reason for the dismissal is the absence from work, not the underlying disability which has caused the absence.
• The correct comparator is one to whom the reason applies (i.e. the absence) but the disability does not. This makes it far less likely that less favourable treatment will be made out.
All of the above point to a potential shift in disability discrimination cases, with claimants finding it far harder to succeed. Whilst on the surface this is good news for employers, we will need to await further case law to see if and how this case is applied in the employment context. It is possible that claimants will argue that Malcolm should not apply in employment cases, because the House was only required to make a finding in relation to the housing provisions of the DDA which, whilst largely the same as the employment provisions, do have a different test for justifying less favourable treatment. Whether these arguments will succeed remains to be seen.
London Borough of Lewisham v Malcolm [2008] UKHL 43
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More guidance on the statutory dispute resolution procedures
Despite their days being numbered, we are still getting case law through on the interpretation and application of the statutory dispute resolution procedures. This month there have been two interesting cases, one dealing with the dismissal procedure and the other dealing with the grievance procedure.
The case of Yorkshire Housing v Swanson considered the delay provisions in the statutory dismissal procedures. Mrs Swanson had been summarily dismissed for gross misconduct on 14th July 2005, some 5 months after her initial disciplinary hearing on 17th February 2005. One of the points to be considered by the EAT was whether Mrs Swanson’s dismissal, which was found to be unfair by the Employment Tribunal, should have been found to be automatically unfair due to her employer’s unreasonable delay in completing the statutory dismissal procedure.
It is a general requirement under the statutory dismissal procedures for each step and action to be taken without unreasonable delay, athough what constitutes an unreasonable delay is not expanded upon. The Regulations state that a dismissal will be automatically unfair and compensation uplifted where the statutory procedures have not been completed. It was therefore argued by the employer that, even where there had been a delay, it could not be said that the procedure had not been completed. The EAT disagreed and said that, in the context of the Regulations, ‘non completion’ meant the employer’s failure to comply with the requirements of the statutory procedures, including the delay provisions. Therefore, the unreasonable delay did constitute non completion and the dismissal was automatically unfair.
The employer has been given leave to appeal to the Court of Appeal on this point but in the interim employers should ensure that all disciplinary and dismissal procedures are dealt with promptly to avoid any suggestion of unreasonable delay.
The case of Procek v Oakford Farms Ltd deals with what constitutes a grievance for the purposes of the statutory grievance procedures. In this case Mr Procek wrote to his employer complaining of race discrimination. However, in his letter Mr Procek clearly stated that his grievance was informal and that, if his issues were not dealt with, he would lodge a formal statutory grievance under the 2004 Regulations. The employer rejected the grievance and Mr Procek proceeded to lodge a complaint at the Employment Tribunal.
The Employment Tribunal held that they did not have jurisdiction to hear Mr Procek’s claim because he had not raised a statutory grievance. The Employment Judge accepted the employer’s argument that they were entitled to conclude that Mr Procek’s grievance was not a statutory grievance because it expressly stated that it was not. However, the EAT disagreed and held that the statutory grievance procedure had been complied with. The EAT adopted the more informal approach to grievances used in previous cases and the wording of the Regulations themselves, which only state that the grievance needs to be set out in writing and sent to the employer.
At first glance this judgement seems very unfair to employers, who may find themselves dealing with a statutory grievance but not be aware that they are and therefore may not fully comply with all of the statutory requirements, such as offering a right of appeal. Such non-compliance could lead to an uplift in compensation for the employee. However, as pointed out by the EAT, tribunals do have a discretion not to award any uplift for a failure to comply with a statutory procedure where it is not just and equitable to do so. This may be the kind of situation where such discretion is exercised.
The message for employers following this decision is to treat any written complaint from an employee as a statutory grievance and to follow the 3 step procedure accordingly (letter, meeting, appeal), regardless of any indication from the employee that their complaint is informal. Whilst time-consuming, this will protect employers in the event that Tribunal proceedings are brought.
Yorkshire Housing Ltd v Swanson
UKEAT/0057/07/JOJ
Procek v Oakford Farms Ltd
UKEAT/0049/08/DA
Implied garden leave clause possible
The concept of putting senior or key employees on garden leave during any period of notice has been a familiar one for many years. Employers with a contractual right to place employees on garden leave can exercise this right to protect their business where an employee is going to a competitor or could disrupt key relationships with customers or suppliers.
But what happens where there is no contractual right to place an employee on garden leave? This was the situation SG & R found themselves in when 2 directors gave 3 months’ notice to terminate their contracts.
Shortly after notice was given, SG & R found evidence that the directors had been removing confidential information which they were passing on to their new employer, a competitor. This information included active projects they were working on, as well as client and employee lists. There was evidence that the directors went about this in such a way as to cause as much damage as possible to SG & R, calling the removal of information ‘Project Chaos’ in emails between themselves. On discovery of this conduct SG & R placed the directors on garden leave, notwithstanding the fact that there was no contractual right to do so. The directors wrote to SG & R confirming that they were resigning with immediate effect due to SG & R breaching their right to work. The right to work is an implied term of most contracts of employment and will almost always be implied where employees have specialised skills and knowledge which would be reduced through lack of use.
SG & R sought an injunction from the High Court to force the directors to remain on garden leave. The Court found that the directors did have an implied contractual right to be provided with work, but that the right was subject to them having not previously breached their contract in such a way as to demonstrate that they were not willing to work.
In this case, due to the directors’ conduct, the Court found that they had “exhibited behaviour which demonstrates that they are not ready and willing to work in accordance with their contract of employment”. As such, the Court held that the directors were still employed by SG & R and should serve out the remainder of their notice on garden leave.
This case is a useful one for employers who, on finding evidence of misconduct during an employee’s notice period, wish to put them on garden leave without having a contractual right to do so. However, this is by no means a guarantee. A lot was made in this case of the directors’ hostility towards their employer; lesser instances of misconduct may not go far enough to qualify an employee’s right to be provided with work. It is far better to ensure that an appropriately worded garden leave clause is included in the contracts of all senior employees. This not only gives employers a greater level of certainty, but always means that the clause can specifically set out what an employee can or can not do whilst on garden leave. Garden leave clauses can also be drafted to complement any restrictive covenants in the contract.
If you think a review of your contracts of employment may be beneficial to ensure you are provided with the maximum protection possible in the event of an employee giving notice, please contact a member of our team.
SG & R Valuation Service Co v Boudrais
and ors [2008] EWHC 1340 (QB)
No win no fee review to be undertaken
The Ministry of Justice has announced a review by senior academics of no win no fee arrangements in England and Wales. The professors, from Cardiff School of Law, Nottingham University and the University of Surrey, will be reviewing these types of arrangements in the employment, personal injury and defamation arenas.
When announcing the review Justice Minister Bridget Prentice said “No win no fee arrangements are vital in helping to give the public a voice in courts. However, we are aware of growing concerns that they may not always be operating in the interests of access to justice”.
The report, expected in the autumn, will include an assessment of the outcome and quality of the work provided under these types of arrangements, an analysis of the nature of the available funding arrangements and will seek to identify the unmet needs of those seeking to bring claims.
No reprieve for 88 second late claimant
You may remember the case of Beasley v National Grid, which we reported on in our March Review.
This was the case where a Claimant was struck out for submitting his Claim 88 seconds after the deadline. Not to be deterred, the Claimant appealed to the Court of Appeal who has now upheld the Tribunal’s decision. The Court of Appeal commented that “there is no grey area for complaints which are only a bit out of a time”.
This should serve as a further reminder that Tribunal time limits need to be strictly adhered to. For an unfair dismissal complaint, the time limit is 3 months from the effective date of termination.
Beasley v National Grid
[2008] EWCA 742 (Civ).
• Obtaining an Order from the Charities Commission for the appointment of a new chief executive of our client
• Providing training on TUPE to our client’s HR department and commercial managers
• Providing training to local authority clients on advocacy in the employment tribunal
• Advising on the doctrine of frustration where employees have not been attending work for substantial periods of time.
We now have 14 lawyers in our Employment Team, including 7 partners and 7 solicitors, over our range of offices:
Nottingham
David Potter, Partner & Head of Employment
+44 (0)115 936 9389
david.potter@freethcartwright.co.uk
Richard Bullock, Partner
+44 (0)115 936 9396
richard.bullock@freethcartwright.co.uk
Joanne Kay, Partner
+44 (0)115 936 9383
joanne.kay@freethcartwright.co.uk
Matt McBride, Senior Associate
+44 (0)115 936 9405
matthew.mcbride@freethcartwright.co.uk
Victoria Lang, Associate
+44 (0)115 934 3957
victoria.lang@freethcartwright.co.uk
Sarah Gonem, Solicitor
+44 (0)115 935 0622
sarah.gonem@freethcartwright.co.uk
Birmingham
Vanessa DiCuffa, Senior Associate
+44 (0)845 634 2584
vanessa.dicuffa@freethcartwright.co.uk
Leicester
Julian Middleton, Employment Partner
& Managing Partner of Leicester Office
+44 (0)116 248 1115
julian.middleton@freethcartwright.co.uk
Rena Magdani, Partner
+44 (0)116 248 1140
rena.magdani@freethcartwright.co.uk
Mike Cummins, Partner
+44 (0)116 248 1172
mike.cummins@freethcartwright.co.uk
Kay Greig, Solicitor
+44 (0)116 248 1171
kay.greig@freethcartwright.co.uk
Manchester
Patricia Jones, Partner
+44 (0)845 634 2561
pat.jones@freethcartwright.co.uk
Michael Wright, Senior Solicitor
+44 (0)845 634 2563
michael.wright@freethcartwright.co.uk
Hanif Lula, Solicitor
+44 (0)845 634 2547
hanif.lula@freethcartwright.co.uk.
This update is only a summary of the law in force at the present time and is not exhaustive, nor does it contain definitive advice. Specialist advice should be sought from a member of the Freeth Cartwright Employment Team in relation to any queries that may arise.