A whopping £390,000+ worth of employment tribunal claims went entirely unpaid last year following the employers in question being placed in administration or being dissolved or liquidated. Experts have stated that these figures may indicate the continued struggle with ‘phoenixing’ businesses avoiding tribunal debts.
It was revealed, thanks to figures from the Department for Business, Energy and Industrial Strategy (BEIS) by People Management under a freedom of information (FOI) request, that 56 awards (worth a total of £394,505) were unpaid due to insolvency in 2017. This figure was broken down further, bringing to light that of the 56 unpaid awards two (worth £20,695) were unpaid due to administration, twenty six awards (worth £87,544) went unpaid due to dissolution and twenty eight awards (worth £286,267) were unpaid because of liquidation.
A company is placed in administration as a means of attempting to save it from insolvency. This involves control being handed over to an administrator, who will attempt to pay off, or reach a deal with, as many creditors as possible, as to reduce the company’s debts.
A company is liquidated when, as a means to pay off debts, its assets are sold off. This usually occurs after administration is unsuccessful. Finally, a company is dossolved once it is struck off the Companies House register.
The particular companies in question were not revealed, however the figures suggest that there is a continued issue of ‘phoenixing’, the unscrupulous practice of company owners avoiding tribunal awards or other penalties by making their business insolvent only to set up a very similar, new company afterwards.
Croner associate director, Paul Holcroft stated ““In the current climate, where we hear of town centres being depleted of their shops and pubs at an alarming rate, there will be very many genuine insolvency situations which mean tribunal awards go unpaid, however, with the possibility that ‘phoenixing’ is contributing to that number, employers may well be intentionally circumventing the system.”
“Without detailed analysis, it is difficult to tell which are genuine insolvencies and which aren’t, but anecdotal evidence from claimants has suggested that many insolvent ex-employers are now trading again.”
It’s clear that phoenixing is a common problem that continues to grow. However, the Taylor Review on Modern Working Practices, which was published in July 2017, called for the government to take further action against companies which dodged paying tribunal awards, and to establish a “naming-and-shaming” system for those who did not pay awards within a reasonable time period.
As stated on gov.uk, UK law allows directors, owners and employees of insolvent companies to set up brand new companies and carry on a similar business as long as the individuals involved aren’t personally bankrupt or disqualified from acting in the management of a limited company.
Vento Guidelines Updated
The Presidents of the Employment Tribunals (England & Wales) and (Scotland) have issued a joint Second Addendum to the Presidential Guidance originally Issued on 5 September 2017.
It contains the (now) annual update to the Vento guidelines, setting out the bands of awards for injury to feelings, adjusted for inflation.
The new bands are:-
• lower band (less serious cases): £900 to £8,800
• middle band: £8,800 to £26,300
• upper band (the most serious cases): £26,300 to £44,000
These updated figures apply to cases presented on or after 6 April 2019.
Modernisation of Tribunals
Sir Ernest Ryder’s plan for modernising the tribunal system has been published. The proposals include:
• introducing digital case files, to allow judges access to a digital case record and manage the case online
• having a library of relevant templates from which orders, notices, standard letters and documents can be produced
• digitally recording all proceedings in tribunals, to allow transcripts of proceedings to be produced where appropriate (which will mean parties won’t have to argue over their notes of evidence when appealing to the EAT)
Although not guaranteed, it is likely that these plans will be implemented over the coming 24 months.
Disciplinary Investigations
Thanks to Ed McFarlane of Deminos HR for preparing this case summary.
Must an employer postpone a disciplinary hearing pending the outcome of a police investigation into an employee?
No, in almost all circumstances, held the Court of Appeal in North West Anglia NHS Foundation Trust v Gregg.
The Claimant was a doctor facing disciplinary, regulatory and police enquiries after two patient deaths. He was suspended on full pay, a police investigation commenced and the Interim Orders Tribunal ‘IOT’ (a professional disciplinary body) temporarily suspended the doctor’s registration and withdrew his licence. Then the Trust sought to stop his pay. The doctor brought proceedings in the High Court.
The High Court granted an injunction preventing disciplinary proceedings pending the end of criminal proceedings, since continuing with the disciplinary process would breach the duty to maintain trust and confidence. The Court of Appeal overturned the injunction. Noting the ‘severe test’ for a breach of that implied term, the question was whether the conduct of the employer was calculated to destroy or seriously damage the relationship, and even if it was, whether there was reasonable and proper cause for that conduct. The Court warned against ‘micro-management’ by the court of an employer’s employment procedures. Furthermore, here the Trust was following its own contractually-binding disciplinary procedures; the doctor was himself contractually obliged to participate in the disciplinary process. Only a real danger of injustice would justify an injunction.
The High Court held that suspension had to be with pay during the IOT suspension, the Court of Appeal agreed. The starting point was the terms of the contract, interim suspension is now a feature of life for medical practitioners, if the contract intended suspension without pay during suspension, it would have said so (and didn’t). The doctor was ‘ready, willing and able’ to work, and the IOT suspension was involuntary, this would not permit unpaid suspension in all but exceptional circumstances, with general guidance at paras. 52-54.
The Court of Appeal also held that it would not have been wrong for the Trust, having started to investigate alleged misconduct, to ‘side-step’ the conduct disciplinary process by considering termination on the basis of the doctor losing his licence under the IOT suspension. The contract allowed for alternative grounds for termination, and starting one process didn’t prevent the Trust from relying on another.
Disability Discrimination
Can unfavourable treatment arise in consequence of a mistaken belief?
No, held the EAT in iForce v Wood.
The Claimant was a packer working at a fixed workstation. He suffered from a disability, osteoarthritis, which was exacerbated by damp and cold. When asked to move between benches she refused saying it would exacerbate her disability. She was issued with a warning which she said was unfavourable treatment arising in consequence of disability. A first instance the tribunal agreed.
The EAT disagreed. Whilst section 15 requires a broad approach, the test is an objective one requiring a connection between the treatment and disability. There need not be an immediate nexus between the ‘something’ and the disability but there must be some connection. Did the ‘something’ (the warning) arise from the disability? No, it arose from the Claimant’s mistaken belief that moving benches would worsen her condition. There could be no unfavourable treatment arising from a misplaced perception that was not established on the facts.
10 Must-Know Employment Law Facts
Employment Law covers many different aspects of employer responsibilities and employee rights, including contracts of employment, hours of work, Statutory Sick Pay and dismissal. Your employer should comply with employment law else they are at risk of employment tribunal claims. Let’s take a look at 20 key facts about employment law, that your employer should be abiding by:
Settlement Agreement or Employment Tribunal Claim?
If you believe you have received poor treatment in the workplace by your employer, or any other grounds for a claim , you will be faced with the choice of whether you could like to pursue an Employment Tribunal Claim or try to settle your claim, usually via a ‘settlement agreement’ contract. Lets break down the most important factors to consider when deciding which avenue to take.
What potential claims do you have, and how likely are those claims going to be successful?
The first step is to determine what potential claims you may actually have based on the circumstances of your case – have you been a victim of workplace harassment, discriminated against, victimised or unfairly dismissed? The nature of claims you choose to pursue will of course have a significant impact on your chances of success and the value of any Employment Tribunal Claim. You will also need sufficient evidence to reinforce the particular claim(s).
What outcome are you seeking from an Employment Tribunal Claim?
Generally speaking, if you are only pursuing an Employment Tribunal Claim to seek compensation (a financial payment), it is more likely that you will be able to settle your claim. If you are looking for another form of remedy however, then you might have to seek this through a successful claim in the Employment Tribunal (as it is normally difficult to persuade an employer to re-engage you through a settlement agreement).
Is settlement an option for you, or is an Employment Tribunal Claim a point of principle?
There is very little point in entering into a settlement agreement negotiation if you aren’t interested in a settlement. If you are strongly set on not settling from the get-go, then your time and effort is best focused on preparing your Employment Tribunal claim. On the other hand, if you are open to settlement, then it is best to approach the other party at an early stage to negotiate and agree upon the terms of the settlement.
What impacts could a claim have on you in the long term?
The public nature of an Employment Tribunal should be considered as early as possible. All Employment Tribunal judgements are now published online and the parties to the litigation will therefore want to think carefully about what impact any publicity could have on their careers or business.
How committed are you to the process an employment tribunal claim?
The process of an employment tribunal claim can be stressful and daunting. However, using a no win no fee employment solicitor like ourselves, your stress can be alleviated as we guide you through the entire process from initial assessment to making a claim.
‘Phoenixing’ a Continued Problem
A whopping £390,000+ worth of employment tribunal claims went entirely unpaid last year following the employers in question being placed in administration or being dissolved or liquidated. Experts have stated that these figures may indicate the continued struggle with ‘phoenixing’ businesses avoiding tribunal debts.
It was revealed, thanks to figures from the Department for Business, Energy and Industrial Strategy (BEIS) by People Management under a freedom of information (FOI) request, that 56 awards (worth a total of £394,505) were unpaid due to insolvency in 2017. This figure was broken down further, bringing to light that of the 56 unpaid awards two (worth £20,695) were unpaid due to administration, twenty six awards (worth £87,544) went unpaid due to dissolution and twenty eight awards (worth £286,267) were unpaid because of liquidation.
A company is placed in administration as a means of attempting to save it from insolvency. This involves control being handed over to an administrator, who will attempt to pay off, or reach a deal with, as many creditors as possible, as to reduce the company’s debts.
A company is liquidated when, as a means to pay off debts, its assets are sold off. This usually occurs after administration is unsuccessful. Finally, a company is dossolved once it is struck off the Companies House register.
The particular companies in question were not revealed, however the figures suggest that there is a continued issue of ‘phoenixing’, the unscrupulous practice of company owners avoiding tribunal awards or other penalties by making their business insolvent only to set up a very similar, new company afterwards.
Croner associate director, Paul Holcroft stated ““In the current climate, where we hear of town centres being depleted of their shops and pubs at an alarming rate, there will be very many genuine insolvency situations which mean tribunal awards go unpaid, however, with the possibility that ‘phoenixing’ is contributing to that number, employers may well be intentionally circumventing the system.”
“Without detailed analysis, it is difficult to tell which are genuine insolvencies and which aren’t, but anecdotal evidence from claimants has suggested that many insolvent ex-employers are now trading again.”
It’s clear that phoenixing is a common problem that continues to grow. However, the Taylor Review on Modern Working Practices, which was published in July 2017, called for the government to take further action against companies which dodged paying tribunal awards, and to establish a “naming-and-shaming” system for those who did not pay awards within a reasonable time period.
As stated on gov.uk, UK law allows directors, owners and employees of insolvent companies to set up brand new companies and carry on a similar business as long as the individuals involved aren’t personally bankrupt or disqualified from acting in the management of a limited company.
Brexit & UK Employment Law
Last week a 98 page White Paper was released that outlines the UK Government’s suggestion for the future relationship between the UK and EU. Also the post-Brexit status of the UK’s employment legislation derived from European Union law appears to be no longer in doubt. The document indicates that there tends to be no intention to repeal or amend equality or employment law, including a commitment to the “non-regression” of labour standards. This “Brexit Blueprint” also states that the European Court of Justic (ECJ) won’t have any further sway over the UK’s legal decisions, therefore bringing accountability of UK laws back to the UK.
The paper states that “existing workers’ rights enjoyed under EU law will continue to be available in UK law at the day of the withdrawal”, referring to the United Kingdom’s plan for their relationship with the EU in the future by suggesting that it will commit to a “non-regression of labour standards”. Therefore any UK employment laws which are based on EU law will remain unchanged after Brexit.
The blueprint offers a new framework where EU workers who are previously established can apply for ‘settled status’ and remain in the UK. Any Irish workers can remain in the UK indefinitely under ‘special status’ – Irish and UK citizens alike will be able to freely move between the UK and Ireland (the Common Travel Area). However without an agreement in place, EU and UK workers will no longer be able to freely move between each other’s countries without certain restrictions.
There has been an indication that there will be a commitment to a “mobility network”, so that EU and UK citizens can travel between their countries to work and study. However
Whilst the white paper supports the notion of there being ‘no automatic right’ to work in the UK, it does suggest that possible ‘reciprocal arrangements’ could take place that would mean businesses can relocate “talented staff” in particular situations.
Evidence about ‘protected conversations’ in an unfair dismissal case?
Yes, if the date of termination is in dispute, held the EAT in Basra v BJSS Limited.
Pre-termination discussions between employer and employee are protected under section 111A Employment Rights Act 1996 and cannot therefore usually be referred to by either party in an unfair dismissal claim, unless there has been “improper behaviour”. In Basra, however, the EAT held that there is an exception to this rule if the date of termination is in dispute.
The Claimant wrote an email to the Respondent in response to a without prejudice offer letter it had sent saying “today will be the last day at BJSS”. The Claimant then stopped attending work, and later brought a claim for unfair dismissal. BJSS argued the Claimant’s employment had ended by mutual termination and, in the alternative, the email was a resignation. The Claimant denied resigning and said he had been dismissed by BJSS at a later date. The tribunal, following Faithorn Farrell Timms LLP v Bailey, noted that s111A protection cannot be waived (unlike without prejudice negotiations) and excluded BJSS’s offer letter as protected under s111A ERA.
The EAT held that as the protection under s111A only applies to pre-termination negotiations, “the chronological line between what is, and what is not, admissible therefore lies on the point at which the contract is terminated”. The EAT went on to say that “where there is a dispute as to whether or not the contract was terminated on a particular date, the tribunal would not be in a position to say what evidence should be excluded until that dispute is determined”. Thus the tribunal needs to determine the termination date before applying s111A
EAT upholds finding of direct discrimination because of perceived disability
In Chief Constable of Norfolk v Coffey the EAT has upheld the decision of an employment tribunal that a police officer, who was turned down for a transfer to the Norfolk Constabulary because her hearing loss was marginally below the medical standard for police recruitment, had suffered direct discrimination because of a perceived disability. The Constabulary’s reason for refusing the transfer was the concern that the claimant would end up on restricted duties. This indicated that it perceived her to have a progressive condition which, by virtue of paragraph 8 of Schedule 1 to the Equality Act 2010, met the statutory definition of disability.
In 2011 C applied to the Wiltshire Constabulary to become a police constable. She attended a medical, at which it was discovered that she suffers from bilateral mild sensori-neural hearing loss with tinnitus. Although C’s hearing loss was marginally outside the range set down by the Home Office for police recruitment, the Wiltshire Constabulary arranged a practical functionality test which C duly passed before going on to work on front-line duties. In 2013 C applied to transfer to the Norfolk Constabulary. C attended a pre-employment health assessment, where the medical adviser noted that her hearing was ‘just outside the standards for recruitment strictly speaking’ but that she had undertaken an operational policing role with the Wiltshire Constabulary without any undue problems. He recommended that C undergo an ‘at work’ test, but this recommendation was not carried through by the Assistant Chief Inspector (ACI) who dealt with the application. Instead, the ACI declined C’s request to transfer on the basis that her hearing was below the acceptable and recognised standard, and that it would not be appropriate to step outside that standard given the risk of increasing the pool of officers on restricted duties.
C brought an employment tribunal claim for direct discrimination. It was not alleged that she actually had a disability; her case was that her hearing loss did not have, and was not likely to have, a substantial adverse effect on her ability to carry out day-to-day activities, including working activities. Instead, it was argued that she had been treated less favourably because she was perceived to have a disability, in the form of a progressive condition that could well develop to the point of having a substantial impact on her ability to carry out day-to-day activities. The tribunal considered that the only way to read the ACI’s comments about the risk of C ending up on restricted duties was that she perceived that C had a potential or actual disability which could lead to the Constabulary having to make adjustments to C’s role as a front-line police officer. Since this perception was the reason for refusing C’s transfer, the tribunal upheld the discrimination claim.
On appeal to the EAT, it was argued that the tribunal had erred both in respect of its finding that the ACI perceived C to be disabled and its finding that C had been treated less favourably because of that perception. On the former point, the EAT stressed that the question of whether a putative discriminator A perceives B to be disabled will not depend on whether A perceives B to be disabled as a matter of law. It will depend on whether A perceives B to have an impairment with the features which are set out in the legislation. Paragraph 8 of Schedule 1 to the EqA makes special provision in respect of progressive conditions. Where a person has a progressive condition that results in an impairment having an effect on his or her ability to carry out day-to-day activities, but the effect is not a substantial adverse effect, it will still be treated as such if it is likely that the condition will result in a substantial adverse effect in future. Although the ACI protested that she did not consider C disabled with the meaning of the EqA, her knowledge of the law was incomplete and did not include Paragraph 8 of Schedule 1. The reference to the risk of C being on restricted duties could only be read as the ACI perceiving that C had a progressive condition which could worsen. Thus, the tribunal had been entitled to find that she perceived her to be disabled.
Turning to whether the tribunal had been correct to find that there had been direct discrimination, the EAT accepted that a genuine difference in abilities will be a material difference between claimant and comparator. However, it saw no warrant for an employer’s flawed belief in a lack of ability to be a material difference. The tribunal was entitled to conclude that a person with the same abilities as C, whose condition the employer did not perceive to be likely to deteriorate so that he or she would require restricted duties, would not have been treated as C was. C had performed an active policing role in Wiltshire; she had been accepted at the interview stage; her rejection followed when the ACI ignored advice to rely on a practical assessment of C because, as the tribunal put it, she believed the C would become a liability to the force. The tribunal did not err in law in concluding that she had been subjected to direct discrimination.
Link to transcript: http://www.bailii.org/uk/cases/UKEAT/2017/0260_16_1912.html