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In Aslam and ors v Uber BV and ors, the London Central Employment Tribunal has held that drivers engaged by Uber are not self-employed contractors, but fall squarely within the legal definition of ‘worker’ under S.230(3)(b) of the Employment Rights Act 1996 (and equivalent definitions in the Working Time Regulations 1998 and the National Minimum Wage Act 1998) with the result that they are legally entitled to the national minimum wage, paid annual leave, and whistleblower protection. The tribunal’s judgment sets out a scathing critique of Uber’s submissions that it is a technology platform as opposed to a transport provider and that its drivers are self-employed contractors offering their services to passengers via the Uber app. In the tribunal’s view, any driver who has the app switched on, is within the territory in which he or she is authorised to work, and is able and willing to accept assignments is – for so long as those conditions are satisfied – working for Uber under a worker contract.

The tribunal highlighted that Uber runs an enterprise whose central function is the carrying of people in cars from one point to another and that it operates in part through a company that is regulated as a private hire vehicle operator, but that it resorts in its documentation to ‘fictions’, such as fake invoices that it generates on behalf of its drivers but that are never sent to passengers, and ‘twisted language’ in its contracts with drivers. The tribunal considered that the ‘remarkable lengths’ to which Uber had gone to compel agreement with its legal analysis merited ‘a degree of scepticism’. Moreover, the tribunal noted that in other correspondence, for example in submissions to the Greater London Authority Transport Scrutiny Committee, Uber had boasted of providing job opportunities and potentially generating tens of thousands of jobs in the UK, and paying its drivers on a commission basis. The tribunal also agreed with the findings of the North California District Court, in a similar case brought by Uber drivers in California, that ‘Uber does not simply sell software; it sells rides.’

In the tribunal’s view, the case put forward by Uber did not correspond with the practical reality. The notion that Uber in London was a mosaic of 30,000 small businesses linked by a common platform was ‘faintly ridiculous’. Save for a few individuals who operate more than one vehicle on their Uber account, each such business consisted of an individual with a car seeking to make a living by driving it. In addition, Uber’s case was dependent on the assertion in its terms and conditions that the driver enters into a contract with each passenger to provide the transportation service – but this would be absurd, since neither party knows the identity of the other, the route is set by Uber and the price is calculated by and paid to Uber. The tribunal therefore considered that the driver/passenger contract was a pure fiction.

With regard to the nature of the relationship between Uber and its drivers, the tribunal noted in particular that: the terms for passengers contradict themselves insofar as they state that Uber is the drivers’ agent but at the same time asserts ‘sole and absolute discretion’ to accept or decline bookings; Uber interviews and recruits drivers; Uber controls key information as to the passenger’s identity and intended destination and does not share this with drivers; Uber requires drivers to accept and/or not to cancel trips and enforces this requirement by logging off drivers who breach it; Uber sets the default route for each trip and the driver may face deductions from his or her fare if he or she departs from it; Uber fixes the fare and the driver cannot agree a higher sum with the passenger; Uber imposes conditions on drivers, instructing them on how to do their work and controlling them in the performance of their duties; Uber subjects drivers through its rating system to what is effectively a performance management/disciplinary procedure; Uber determines issues about rebates for passengers, sometimes without involving the driver affected; Uber used to operate a scheme guaranteeing minimum earnings for new drivers; Uber accepts the risk of loss, for example where a passenger soils a vehicle or in the case of fraud, which if the drivers were genuinely in business on their own account would fall on them; Uber handles passenger complaints; and Uber reserves the right unilaterally to amend drivers’ terms.

The tribunal concluded that the wording of S.230(3)(b) ERA was fully applicable to the drivers in the instant case and that the guidance in the principal authorities favoured its view, rather than that put forward by Uber. It considered that the problem stemmed from the unequal bargaining positions of the parties, noting that many Uber drivers do not have English as a first language and will not be accustomed to interpreting ‘dense legal documents couched in impenetrable prose’, which the tribunal considered simply misrepresented the true rights and obligations on both sides. However, the tribunal noted that nothing in its reasoning should be taken as doubting that Uber could have devised a business model that did not involve it employing drivers; it was simply that Uber’s chosen model failed to achieve that aim.

Uber has confirmed that it will be seeking to appeal the decision.

Link to judgment: https://www.judiciary.gov.uk/judgments/mr-y-aslam-mr-j-farrar-and-others-v-uber/

Settlement sum representing injury to feelings was taxable

In Moorthy v Commissioners for HM Revenue and Customs, the Tax and Chancery Chamber of the Upper Tribunal has held that a sum paid to an employee under a settlement agreement in respect of injury to feelings was not exempted from income tax under S.406 of the Income Tax (Earnings and Pensions) Act 2003. Although S.406 takes payments made in respect of injury to an employee outside the charge to tax, ‘injury’ in this context did not include injury to feelings. The EAT’s decisions to the opposite effect in Vince-Cain v Orthet Ltd (Brief 770) and Timothy James Consulting Ltd v Wilton 2015 ICR 764 were wrongly decided.

After M was made redundant by JE Ltd in March 2010 he brought proceedings for unfair dismissal and age discrimination. Following mediation, he reached a settlement agreement with JE Ltd under which it agreed to pay him ‘an ex gratia sum of £200,000 by way of compensation for loss of office and employment’. JE Ltd treated the first £30,000 as exempt from tax by virtue of S.403 ITEPA but deducted income tax at the basic rate from the remainder. When M completed his tax return he treated the whole sum as being tax free. HMRC disagreed and issued a closure notice. On appeal, the First-Tier Tribunal (FTT) found that the whole of the settlement sum had been paid in connection with the termination of M’s employment under S.401 ITEPA and so was chargeable to tax pursuant to S.403. M appealed against that decision to the Upper Tribunal. Among other things, he argued that the settlement sum was taken out of S.401 by S.406(b) ITEPA, which exempts from income taxation a payment or benefit made ‘on account of injury to’ an employee.

The Upper Tribunal dismissed the appeal. It agreed with the FTT that the entirety of the £200,000 settlement sum fell within S.401 as a payment made in connection with the termination of M’s employment. The section applies to payments made even where the termination was fair and lawful and includes non-pecuniary awards, such as damages for injury to feelings. Even if the sum paid might exceed the statutory maximum that could be awarded for unfair dismissal, that did not mean that the excess was unconnected with the termination of the employment.

As for the exemption in S.406, the Tribunal could not accept that, insofar as the sum represented damages for injury to feelings, it was a payment on account of ‘injury’. The meaning of ‘injury’ in S.406 ITEPA is context-specific. It could not be read as exempting all payments made by an employer in respect of an injury to an employee; rather, it was intended to apply to injuries that led to the termination of employment or to a change in duties or level of earnings. In so holding, the Tribunal stated that the EAT was wrong to decide that injury to feelings was covered by S.406 ITEPA in Vince-Cain v Orthet Ltd and Timothy James Consulting Ltd v Wilton. The obiter reasoning of the Chancery Division in Horner v Hasted (Inspector of Taxes) 1995 STC 766 was to be preferred.

Link to transcript: http://www.bailii.org/uk/cases/UKUT/TCC/2016/13.html

Monitoring Employees’ Use of the Internet

Is the right to respect for private life and correspondence breached if employers monitor employees’ personal communications at work? No, subject to reasonableness/proportionality, according to the European Court of Human Rights in Barbulescu v Romania. Mr Barbulescu was an engineer who used his business Yahoo Messenger account to send and receive personal messages with his fiancee and his brother, including messages about his health and sex life.  This was in breach of his employment contract.  His employer, discovering this accidentally, dismissed him.  Mr Barbulescu argued that the Rumanian courts should have excluded all evidence of his personal communications on the grounds it infringed his Convention rights to privacy.

In summary:

  • any dismissal of a zero hour contract employee is automatically unfair, if the principal reason is that s/he breached a contractual clause prohibiting him/her from working for another employer
  • no qualifying period is required to bring such an unfair dismissal claim; and,
  • it is also unlawful to submit a zero hour worker (note: worker not employee) to detriments if they work for another employer in breach of a clause prohibiting them from doing so.

The Exclusivity Terms in Zero Hour Contracts (Redress) Regulations 2015

In Cooper Contracting Ltd v Lindsey, the EAT has given a useful summary of the principles that tribunals should apply when considering whether a successful claimant’s compensation should be reduced to reflect failure to mitigate loss following unfair dismissal. Mr Justice Langstaff, President of the EAT, confirmed that it is not for the claimant to prove that he or she has mitigated his or her loss, the burden of proof is on the wrongdoer, and that it must be proved that the claimant acted unreasonably.

L worked as a carpenter for CC Ltd for 21 months until it dispensed with his services in December 2013. He claimed unfair dismissal. Although CC Ltd argued that L had worked for it on a self-employed basis, the tribunal found that he was in fact an employee and went on to uphold his claim. When it came to assessing compensation, the tribunal noted that, since his dismissal, L had chosen not to seek alternative employment but had been working as a self-employed tradesman. It found that this was a reasonable course of action and that it should not limit L’s compensation for loss up to the date of the hearing on the basis of failure to mitigate. However, it noted that there were other opportunities for employed work at higher remuneration, if L wished to look for them, and considered that this justified limiting his future loss to three months. CC Ltd appealed against the compensation award to the EAT. It argued, among other things, that the tribunal’s finding that better-paid alternative employment was available to L should have led to a finding that he had failed to mitigate his loss.

The EAT dismissed the appeal. Mr Justice Langstaff, President of the EAT, rejected the suggestion that the duty to mitigate is a duty to take all reasonable steps to lessen the loss. He went on to summarise the principles governing mitigation of loss as follows: (1) the burden of proof is on the wrongdoer – a claimant does not have to prove that he or she has mitigated his or loss; (2) the burden of proof is not neutral and if no evidence on the point is put before the tribunal by the wrongdoer then the tribunal has no obligation to find it; (3) what has to be proved is that the claimant acted unreasonably; (4) there is a difference between acting reasonably and not acting unreasonably; (5) what is reasonable or unreasonable is a matter of fact; (6) it is to be determined taking into account the views and wishes of the claimant as one of the circumstances, although it is the tribunal’s assessment of reasonableness and not the claimant’s that counts; (7) the tribunal is not to apply too demanding a standard to the victim; (8) the test may be summarised by saying that it is for the wrongdoer to show that the claimant acted unreasonably in failing to mitigate; and (9) in a case in which it may be perfectly reasonable for a claimant to have taken on a better paid job that fact does not necessarily satisfy the test. It will be important evidence that may assist the tribunal to conclude that the claimant has acted unreasonably but it is not in itself sufficient.

Applying these principles to the tribunal’s judgment, Langstaff P was satisfied that there was no error of law. The tribunal had given adequate reasoning for its finding that it was reasonable for L to re-enter the job market as a self-employed tradesman; and the decision to limit future loss to three months was within the tribunal’s ‘just and equitable’ discretion in the amount of compensation to be awarded under S.123 of the Employment Rights Act 1996.

http://www.bailii.org/uk/cases/UKEAT/2015/0184_15_2210.html

In MBNA Ltd v Jones, the EAT has overturned a tribunal’s finding of unfair dismissal on the basis of inconsistent treatment. The tribunal had not been entitled to find that there was an unreasonable disparity of treatment between an employee who was dismissed for punching a colleague at work event and the colleague who was given a final written warning for sending threatening texts to that employee after the work event had finished.

J was employed by MBNA Ltd, a bank, as a collections officer. On 8 November 2013, MBNA Ltd held an event at Chester Racecourse to celebrate its 20th anniversary. Staff were told that it was a work event and that normal procedures and guidelines with regard to conduct would apply. At the event, there were some incidents between J and a colleague, B, which onlookers described as ‘fun/banter’ but which culminated in J punching B in the face. After J had left the work event, B texted him seven times, threatening serious violence. However, there was no further incident between them. MBNA Ltd investigated the incidents and the same person, H, undertook disciplinary hearings in both J’s and B’s cases. He found that there had been no substantive provocation before J punched B and that the incident risked reputational damage to the company. H concluded that J should be dismissed for gross misconduct. As for B, H found that the text messages were of an extremely violent nature but that they were sent as an immediate response to J hitting B. Although he considered that this also amounted to gross misconduct, the appropriate penalty was a final written warning. J claimed unfair dismissal.

A tribunal upheld J’s claim. It reasoned that, had both J and B been dismissed for what were proven (and unarguable) acts of gross misconduct, then both dismissals would have been fair. However, it considered that there was an unreasonable inconsistency in treatment between J and B. In particular, the tribunal considered that H had not been entitled to conclude that the text messages sent by B were in ‘immediate response’ to J punching him; and that the ‘defence of provocation’ was applied differently to B. There was thus a disparity of treatment which rendered J’s dismissal unfair. MBNA Ltd appealed to the EAT.

The EAT allowed the appeal. It pointed out that, when considering a claim of unfair dismissal based on disparity, the tribunal must focus on the treatment of the employee bringing a claim – if it was reasonable for the employer to dismiss this employee, the mere fact that the employer was unduly lenient to another employee is neither here nor there. Following Hadjioannou v Coral Casinos Ltd 1981 IRLR 352, EAT, an employer’s decision made in a truly parallel case may support the argument that it was not reasonable to dismiss the employee, but it will be rare for the facts to be sufficiently similar. Here, the tribunal had erred by considering whether MBNA Ltd was unreasonably lenient in B’s case – it should have focused on its treatment of J. It also erred in finding that the ‘defence of provocation’ was applied inconsistently. The tribunal had apparently concluded that MBNA Ltd made different decisions in indistinguishable circumstances but this was not the correct legal test. The tribunal had permissibly found that J’s misconduct was sufficient to warrant dismissal. Applying the Hadjioannou test, it would have been perverse for it to treat a deliberate punch in the face at a work event as sufficiently similar to threats made by text thereafter. There was therefore no question of disparate treatment and so the conclusion had to be that the dismissal was fair. A finding of fair dismissal would therefore be substituted for the tribunal’s decision.

Link to transcript

In Williams v Leeds United Football Club, the High Court has held that an employer was entitled to summarily dismiss an employee, who was already serving 12 months’ notice of redundancy, when it discovered that, five years previously, he had forwarded a pornographic e-mail to a junior colleague and two external contacts. The employer was entitled to treat this conduct as a repudiation of the contract of employment, despite the fact that it was looking for a reason to justify immediate termination.

 

 

 

In Atkinson v Community Gateway Association the EAT has confirmed that an employee is not prevented from claiming constructive dismissal by the fact that he or she is in breach of contract at the time of the employer’s breach. Although there had been inconsistent authorities on this point, the Court of Session’s decision in McNeill v Aberdeen City Council embodied the proper approach under English law.

http://www.bailii.org/uk/cases/UKEAT/2014/0457_12_2108.html

The High Court has thrown out a claim by two former Investec traders for a combined total of more than £6m in bonuses from the company. Judge George Leggatt said: “I regard their claim that an oral agreement was made to use the ‘institutional market rate’ in calculating their bonuses as wholly incredible.” Andrew Brogden and Robert Reid have been ordered to pay Investec’s costs of more than £1.5m.

Financial Times, Page: 16  

The MoJ is looking to reemploy 2,000 prison officers who recently took voluntary redundancy, in response to the rising number of prisoners in Britain’s jails.

Former staff have received a letter, seen by the Observer, explaining that Her Majesty’s Prison Service Reserve has been set up to “respond to particular short-term pressures in prisons”, which “may be due to unforeseen increases in prisoner numbers or as a response to the operational pressures which surface from time to time”.

The MoJ has so far spent £50m on redundancy payments at an average cost of £35,000 per officer