Employment Update

July 29, 2014

Welcome to the latest edition of CFR’s Employment Update highlighting recent interesting employment law developments for employers.

We hope you find this useful and would invite you to send this email bulletin to friends and colleagues.

Michael Black, Employment Partner

WHO OWNS AN EMPLOYEE’S LINKEDIN ACCOUNT?

The recent case of Whitmar Publications Ltd V Gamage and Others [2013] provides a useful  indication of how the Courts approach the above question.

Mr Gamage, Ms Wright and Mr Crawley were all long-term senior employees of Whitmar Publications and resigned with the intention of setting up their own rival company, Earth Island.

Upon the resignation of the named employees it came to light that the rival company, Earth Island had been established prior to their resignation. Further, while the employees were still employed by Whitmar, it is alleged that they had:

• Solicited or attempted to solicit a number of Whitmar‟s clients and staff

• Used Whitmar‟s confidential information to create media packs for the rival company

• Used LinkedIn groups managed on behalf of Whitmar to market their new company,

• Stolen Whitmar‟s circulation and customer databases when they left.

When challenged regarding the use of the LinkedIn groups Ms Wright said that the groups were her own personal hobby and refused to reveal her username and password. Whitmar commenced proceedings against the named employees, claiming damages and seeking an injunction to prevent them from using confidential information gained during their employment.

The High Court upheld Whitmar‟s application for an injunction, pending a full trial. The High Court ruled that the information removed by the employees was sufficient to provide Earth Island with a competitive advantage. Ms Wright was also ordered to deliver up details to enable Whitmar to access and amend the LinkedIn databases.

This decision is thought to be the first time ramifications of the misuse of a company‟s LinkedIn account has resulted in a court order. Employees should be cautious, as a LinkedIn account, established in the course of their employment by a company, and used to market that company‟s activities, may be considered to be the company‟s property. Employers should also remember the dangers which can be involved when employees are allowed to use such an account to build and maintain business contacts online.

EMPLOYER NOT VICARIOUSLY LIABLE FOR EMPLOYEE’S ATTACK ON CUSTOMER

Under the law of vicarious liability, an employer may be held vicariously liable for the acts of an employee. The courts have recently considered this principle in the case of Mohamud v WM Morrison Supermarkets plc the Court of Appeal ruled that an employer was not vicariously liable for an employee‟s attack on a customer. There was nothing to show that the attack had a sufficiently close connection with the employment so as to enable a finding of vicarious liability. It was found that contact between a sales assistant and a customer is not sufficient in isolation to make an employer vicariously liable.

Mr Mohamud (M), who is of Somali descent, visited a petrol station kiosk at Morrison‟s supermarket. M asked an employee in the kiosk (K) if he could print off some documents on a USB stick. K allegedly replied in an abusive manner and made several racist comments. M left the premises but was followed by K, who then subjected him to a serious attack involving punches and kicks. The supervisor of the store managed to persuade K to go back inside the kiosk. The supervisor had previously instructed the employee not to follow M. M subsequently brought a claim against Morrison‟s, claiming that it was vicariously liable for K‟s actions.

A Recorder sitting in the Birmingham Civil Justice Centre dismissed M‟s claim, holding that although K had assaulted M, Morrison‟s was not vicariously liable for the actions of the employee. Theemployer and employee relationship between K and Morrison‟s plc was capable of giving rise to vicarious liability. However, the requirement in Lister v Hesley Hall Ltd that there must be a sufficiently close connection between the wrongdoing and the employment, so that it would be fair and just to hold the employer vicariously liable, was not met. K‟s actions were motivated purely by his own personal views and not by any actions of the employer. M decided to appeal the decision.

While Treacy LJ expressed his sympathy for M, he considered that the law is not yet at a stage where the mere fact of contact between a sales assistant and a customer, which is plainly authorised by an employer, is of itself sufficient to fix the employer with vicarious liability. As Lord Neuberger MR (as he then was) stated in the Court of Appeal in Maga v Archbishop of Birmingham (Brief 903), „the court should not be too ready to impose vicarious liability on a defendant. It is, after all, a type of liability for tort which involves no fault on the part of the defendant, and for that reason alone its application should be reasonably circumscribed‟. Employers have been held to be vicariously liable in similar cases where employees‟ duties include exercising authority and keeping order. Although the courts were sympathetic to the claimant, this was a case where the employee‟s conduct was beyond the scope of employment. Court therefore dismissed the appeal.

DEDUCTION FOR FAILURE TO SERVE NOTICE PERIOD WAS NOT A PENALTY CLAUSE (EAT)

In Yizhen Li v First Marine Solutions, the EAT considered whether a clause deducting a month’s salary for an employee’s failure to work their notice period was a penalty clause. Miss Li (L) was employed by First Marine Solutions Ltd (FMS). L was the principal engineer on a contract known as the Maersk contract. There was subsequently a disagreement between L and FMS which resulted in L resigning from her position and claiming constructive dismissal. The dispute centered on clause 12 of L‟s employment contract which provided:

“Either the Company or the Employee may terminate the Employee’s employment hereunder by notice in writing of not less than [one month] which may be from time to time adjusted… If an Employee leaves, without working the appropriate notice, the Company will deduct a sum equal in value to the salary payable for the shortfall in the period of notice”.

L handed in her notice stating that she had sufficient remaining holiday to remain off work for the one month notice period until this expired on 31 August 2012. FMS contended that L was required to work this one month notice period as she had already used up all her holiday entitlement. L refused to work this notice, believing she had outstanding holiday entitlement to utilize. FMS issued a letter which stated that L was owed £3,000 salary for the period to 18 July and £835.62 in expenses.

FMS made a deduction of one month’s salary (£5,000) under clause 12 for the shortfall in the notice period from the total amount payable to L. Subsequently, L informed FMS that she was prepared to work her notice from that day. However, FMS had already employed a consultant to carry out L‟s previous duties in relation to the Maersk contract. FMS replied to L stating that she no longer had the option to work the notice period.

The tribunal decided that clause 12 was not a penalty and was therefore enforceable. The sum of £5,000 was an honest pre-estimate of loss and not an “extravagant and unconscionable” sum as per the principles set out in Dunlop. In failing to work her one month’s notice, it was held that clause 12 applied in these circumstances. Under cover of their letter dated 19 July, FMS had paid all outstanding sums due and owing to L.

L appealed but the EAT upheld the tribunal’s decision that clause 12 was not a penalty and could therefore be imposed against L. The arguments hinged on whether the clause was a penalty and therefore unenforceable or a genuine pre-estimate of loss. However it is noteworthy to highlight the judge‟s concern that this case may set an unfortunate precedent as he was particularly concerned that neither party had explored the possibility that clause 12 was intended to permit the employer to reserve pay for the period of time not worked during notice.

This decision is a useful example of the legal test for penalty clauses in an employment context. Tribunals should consider both whether the provisions are penalty clauses and genuine pre estimates of loss but also whether the parties intended simply to entitle the employer to withhold pay for the period of notice which is not worked. The focus has shifted to the intention of the parties which is likely to be beneficial to employees as they are the party less likely to have a detailed understanding of the legal consequences of such a clause and are also the party disadvantaged by it. As highlighted by the EAT:

1) An employment contract should be construed with the particular circumstances i.e. whether the parties really intended that, if an employee left without working their full notice period, they should pay to the employer a sum equal to the pay due for the remainder of the period of notice.

2) An employer may not make a deduction unless there is an express provision permitting it. The employment contract should, therefore, set out the employee’s lack of entitlement to payment for any un-worked remainder of the notice period by providing for the employer to make a deduction from the final salary.

3) Clause 12 did not indicate that FMS had in mind the additional expenses of recruitment and replacement resulting from early termination. Tribunals must think carefully about whether the parties intended the clause to operate either as a genuine pre-estimate of loss, a penalty or as a provision that entitled the employer to withhold pay for the period of time not worked during notice.

DECEASED WORKERS ARE ENTITLED TO BE PAID IN LIEU OF UNTAKEN HOLIDAY

A popular topic at present in the employment sector is holiday pay. In May this year, the ECJ held that holiday pay must not be restricted to basic salary, but should include commission where that forms part of a worker’s normal remuneration. At the end of July, the EAT is due to hear Neal v Freightliner Ltd and Fulton and another v Bear Scotland Ltd to decide whether overtime pay must be included in calculation of holiday pay.

A further decision of interest is the Bollacke case in which the ECJ considered whether a deceased worker preserves their rights to pay in lieu of unclaimed holiday under the Working Time Directive. The ECJ has held, that if a worker has accumulated statutory annual leave entitlement at the time of their death, their estate is entitled to a payment in lieu in respect of the outstanding holiday leave. In such circumstances, the employment relationship terminates as a result of a worker’s death and as such, a payment in lieu is “essential to ensure the effectiveness of the entitlement to paid annual leave”.

Mr Bollacke was employed by K + K from 1998 but unfortunately became seriously ill in 2009. The illness meant that he was not able to work for several months and he died in November 2010. At the time of his death, Mr Bollacke had 140.5 days’ outstanding holiday leave. In January 2011, Mr Bollacke’s wife sought payment from K + K for her husband‟s outstanding holiday entitlement. K + K refused to issue payment and Mrs Bollacke brought a claim before a German court. This was rejected, and on appeal the matter was referred to the ECJ to interpret the requirements of the Directive.

The ECJ ruled that the Directive impedes national legislation from providing that workers’ entitlement to paid annual leave is unavailable when they die. The ECJ reiterated the concept that a worker’s entitlement to paid annual leave is a pivotal principle of European law and Member States can therefore not derogate from it. The ECJ also heavily relied on the decision of Schultz-Hoff v Deutsche Rentenversicherung Bund [2009] IRLR 214 in which it determined that in circumstances in which a worker cannot take holiday as the employment relationship has been terminated, the worker is entitled to a payment in lieu.

The ECJ went on to state that Directive prohibits national legislation or practice from stipulating that on termination of employment, no payment in lieu of outstanding holiday is to be paid to a worker who has been on sick leave for the whole or part of the leave year and/or the “carry-over period”.

Thus the ECJ decided that a worker’s death cannot infringe upon their right to a payment in lieu of untaken holiday. Where an employment relationship has ended because of a worker’s death, a payment in lieu is “essential to ensure the effectiveness of the entitlement to paid annual leave” as per the Directive. On a practical note, the ECJ also stated that receipt of the payment in lieu did not depend on the interested party making an application.

CHANGES TO RIGHT TO REQUEST FLEXIBLE WORKING

On 30 June changes came into force in Great Britain that extend the right to request flexible working. These changes are likely to follow in Northern Ireland at some point in the future and new provisions are currently being considered by the NI Assembly. At present, the right to flexible working hours can only be availed of by employees with children under 17, those with disabled children under 18 and those who act as a carer. However, from 30 June 2014 any employee in England and Wales will be able to make an application to work flexibly for any reason provided they have 26 weeks’ continuous service and have not made a flexible working request in the past 12 months. This is a notable change as now all employees who have the necessary period of service will have a right to request flexible working regardless of caring responsibilities.

The statutory procedure for consideration of flexible working requests has previously been deemed overly onerous and strict. This procedure will be replaced with a duty on employers to deal with requests in a „reasonable‟ manner. Whilst this change is beneficial to employers as it removes an administrative task, it does nevertheless introduce some uncertainty to the decision-making process.

In practical terms, it may be difficult to decipher what can be regarded as a „reasonable manner‟. Indeed the interpretation of „reasonable‟ may vary from employer to employer and it is likely that further guidance will be needed on this point. With this in mind, the government has provided guidance on how the concept of „reasonable‟ should be interpreted. A draft Code of Practice (the Code) and supplementary guidance (the Guidance) on handling requests to work flexibly has been published by ACAS. The Code will have statutory grounding and will be taken into account by employment tribunals when considering relevant cases.

The Code sets out the procedure that should be followed by an employer in the event of receiving a request. When an employer receives the request he should arrange to discuss it with the employee as soon as possible. The Employee should be given the option to be accompanied at a discussion by a work colleague or a trade union representative. It is vital the employer considers the request objectively, considering both the benefits to and needs of the employee in the context of the demands of the business. If the request is ultimately approved, the parties should consider the logistics and timeframe as to when the changes will be instigated.

Impact of the new regime

The legislation greatly strengthens the position of an employee making a flexible working hours request. A key change is the limited circumstances in which an employer can discard a flexible working request. An employer can not reject a request where such rejection would bring or lead to:

• additional costs;
• an effect on the ability to meet customer demand;
• inability to reorganise work among existing staff;
• inability to recruit new staff;
• a detrimental impact on quality;
• a detrimental impact on performance;
• insufficiency of work during period of work proposed by the employee; or
• planned structural changes.

It also states that all requests, including any appeals, must be considered and decided on within a period of three months from first receipt, unless an extension is agreed. The request can be treated as withdrawn if the employee, without good reason, fails to attend two consecutive meetings to discuss the request or an appeal.

Should an employer refuse a request based on one of the above reasons, he/she must give a reasoned explanation to the employee.

It is important to flag up to the reader that whilst the new legislation gives employees the right to request flexible working in terms of adjustments to working hours and locations, it does not give employees the right to work flexibly, a subtle but significant distinction. Requests for flexible working incorporates many aspects of employment contracts including job sharing, working from home, part time working and flexitime.

While the right to request flexible working will likely be extended to all employees in NI subject to service requirement, it remains unclear whether any amendment will be made to the current statutory procedure for consideration of such requests. It is likely new guidance will be issued by the LRA following legislative changes in this area. NI employers may want to consider preparing changes to their flexible working policies in view of the likelihood of similar changes coming into place here.

ZERO HOURS CONTRACTS

Both Vince Cable and Ed Miliband have publicly announced that they want to stamp out the use of zero hours contracts. However, the use of zero hours contracts can be beneficial for those looking for causal work to substitute their household income. However with companies such as Sports Direct hiring 20,000 of its 23,000 workers on zero hours contracts, it is not surprising that these contracts are coming under such scrutiny.

Employers who abuse the use of these contracts by obliging people to accept work, or not allowing them to take up other employment while under a zero hour contract run the risk of affording those under these contracts the rights of a full employee, even if it is not their intention to do so. It is important to note that for an individual to be considered an employee there must be an obligation on the employer to offer and on the employee to accept work. The employee must also be under an obligation to carry out the work personally, with the employer having a certain degree of control over the work carried out. Some workers will be able to argue that they do fall under the scope of an employee as their individual assignment amounts to a contract of employment or because work has been carried out under an “umbrella” contract.

The Claimants in the case of Pulse Healthcare Ltd v Carewatch Care Services Ltd were engaged as care workers on zero hours contracts. The contract did state that the employer was under no obligation to offer work while the employee was under no obligation to accept any work offered. Following a TUPE transfer, the new employer argued that this meant the claimants were not employees as there was no mutuality of obligation.

The EAT held that the zero-hours agreement did not reflect the reality of the working relationship. The Claimants in this case were part of a team which was established to deliver a care package to a specific person for an agreed amount of hours each week. All the claimants had worked significant hours on a regular basis over a number of years. Therefore the EAT held that they were employed on global contracts of employment.

In Drake v Ipsos Mori UK Ltd the EAT held that when deciding whether the necessary degree of mutuality existed, two questions needed to be addressed. First, was there a contract between the parties? Secondly, was it a contract of employment? The EAT held that the contract was could be held as an employment contract even though the company could take work away or the claimant could choose not to finish work, and a contract was in existence in this instance. Therefore an individual will be an employee if they can show the necessary ingredients of personal service and control.

While it is noted that zero hour contracts can be abused, the courts are not simply looking at the wording of such contracts. They are looking into the actual relationship and the regularity of the work offered and accepted in determining whether a worker is in fact an employee and is entitled to the rights attached to this.

 

The Employment Team

Please do not hesitate to contact any member of our Employment Team to discuss the Employment Update or any other employment law/HR matter.

Michael Black
Employment Director

T 028 9027 1312
E m.black@cfrlaw.co.uk

Michael has a wealth of expertise regarding employment and discrimination law, working with both the private and public sectors. The advice he provides ranges from all aspects of discrimination law, equal pay, breach of contract, restraint of trade and employee relations through to unfair dismissal, disciplinary issues, redundancy, executive severance packages, health and safety, TUPE, data protection and employment aspects of commercial transactions. Michael is a Chartered Member of the CIPD.

Aisling Byrne
Associate Solicitor

T 028 9027 1360
E a.byrne@cfrlaw.co.uk

Aisling joined our Employment Unit in 2001 and now handles wide-ranging employment and discrimination cases. Her approach has achieved successful conclusions and fulsome praise from clients representing both the public and private sector. Phrases like ‘professional support and guidance’, ‘good piece of work which clarified our
thinking’, ‘quick turnaround time’ show that Aisling’s style gets results.

Jonathan Simpson
Solicitor

T 028 9027 1304
E j.simpson@cfrlaw.co.uk

Jonathan provides advice and representation for both employers and employees on a broad range of employment law issues such as contracts, policies & procedures, redundancy situations, unfair dismissal, TUPE situations and discrimination, equality and diversity. Jonathan regularly provides advice to a number of public sector employers as well as many limited companies, educational bodies and charity organisations and always seeks to tailor his approach to meet each client’s particular needs.

For further details on our Employment practice please see our website www.cfrlaw.co.uk

Cleaver Fulton Rankin Solicitors, 50 Bedford Street, Belfast, BT2 7FW
T: 028 9024 3141, Fax: 028 9024 9096, www.cfrlaw.co.uk
All Island Law – A legal alliance MOP Dublin & CFR Belfast February 2015