Heyday questions for ECJ now finalised

Since October 2006, we have reported on the progress of the Heyday challenge to the default retirement age under the Employment Equality (Age) Regulations 2006.  After sending Heyday's case to the European Court of Justice (ECJ) in December last year, the High Court has now finalised the questions to be referred.

Relating to the Equal Treatment Framework Directive, the questions cover the scope of the Directive and national retirement ages, and the test for justification of direct and indirect age discrimination. It is unlikely that the ECJ will hear the case before next year but watch this space...

Stress arising from conduct of investigation

The Court of Appeal has provided further guidance on stress at work claims, identifying the limits of such claims in relation to the conduct of an employer's procedures.

In Deadman v Bristol City Council, Mr Deadman claimed that the Council had mishandled its investigation into allegations of harassment made against him by another employee. The Council had failed to follow its own procedures correctly, in particular, the panel convened to hear the complaints made against Mr Deadman comprised only two, rather than three, members. Although the panel found against Mr Deadman, he challenged the decision and was successful in having that decision set aside. The question of a fresh investigation then arose and it was decided that since the complaint was still unresolved, a new panel should be convened to deal with it. This decision was communicated to Mr Deadman in a letter which was left on his desk for him to find out when he next came in to work. Mr Deadman found the investigation very worrying, consulted his doctors twice complaining of stress and was prescribed medication.

The High Court stated that the manner in which the Council had conducted the investigation and the manner in which it had informed Mr Deadman about the fresh investigation had involved breaches of his contract of employment and that those breaches were the cause of his illness.

However, the Court of Appeal overturned the High Court's decision, confirming that it was not a term of Mr Deadman's contract of employment that the Council would investigate complaints of harassment sensitively: the contractual term was that the Council would follow its published procedure in the investigation of any complaints of harassment. Whilst this was breached by the investigation panel having two, rather than three, members, it was not reasonably foreseeable that this would cause Mr Deadman sufficient stress to lead to psychiatric harm. Any damage flowing from this breach of contract was too remote to be recoverable.

Employer can fairly dismiss for ill-health capability even where it contributes to illness

The Court of Appeal has confirmed that an employer can fairly dismiss an employee for ill-health capability despite the fact that the employee's stress-related illness can be attributed to the conduct of the employer.

In McAdie v Royal Bank of Scotland, the Court of Appeal said it was in complete agreement with the judgment of the Employment Appeal Tribunal (EAT) in this case. Summarising previous case law on this issue, the EAT had confirmed that there must be cases where the fact that the employer is responsible for an employee's incapacity is, as a matter of common sense and common fairness, relevant to whether it is reasonable to dismiss that employee for  incapacity. It may, for example, be necessary in such cases to "go the extra mile" in finding alternative employment for such an employee, or to put up with a longer period of sickness absence than would otherwise be reasonable. However, it was also right that the fact an employer has caused the incapacity cannot preclude him forever from effecting a fair dismissal. If it were otherwise, an employer would be obliged to retain such employees on their books indefinitely.

It was therefore emphasised in this case that, whilst the cause of the employee's incapability is a relevant factor for the tribunal to consider when determining whether or not a dismissal is fair, the key issue is whether the employer acted reasonably in all the circumstances, which include the fact that the employer was responsible for the ill-health.

In this case, the employee had made it completely clear that, no matter what anybody said or did, she would not be returning to work and this was supported by medical evidence. There was therefore no alternative to dismissal. The situation may have been different if she had been willing to try again but she was not, leaving the employer with no alternative but to dismiss. Although the employer was responsible for the employee's ill-health, this was not a basis upon which it could be said that her dismissal was unfair.

Employers regularly struggle with the approach to adopt when dealing with such ill-health issues in the workplace, particularly where it can be said the employer caused the incapability. The case therefore provides welcome guidance, and the Court of Appeal has stated that the EAT's analysis of the case law in this area should be followed by both Employment Tribunals and the EAT itself.

Sex discrimination - justification for difference in treatment

The EAT has overturned a controversial tribunal decision that the GMB had subjected some of its female members to indirect sex discrimination when it reached a low back pay settlement in order to prioritise future pay protection for other staff, and had victimised them by failing to support their equal pay claims against their employer.

In GMB v Allen and others, the EAT held that the GMB's decision was justified as a proportionate means of achieving a legitimate aim, and therefore there had been no indirect sex discrimination. In addition, there was no evidential basis for the tribunal's finding that the GMB had victimised its female members by failing to provide them with support in their claims, particularly as, after the members had instructed solicitors, the GMB was not in a position to act for them in the same matter.

Compromise agreements and pension schemes

In late July, the High Court ruled that a clause in a compromise agreement committing an employer to use its best endeavours to pay pension benefits to an ex-employee must apply to all of the ex-employee's pension arrangements so, in this instance, to arrangements in both Iran and the UK.

In Tahmassebi v Persia International Bank plc, the claimant was employed by the defendant bank for over thirty years first in Tehran and then in its London branch.   His employment was terminated on the grounds of retirement and Mr Tahmassebi brought an unfair dismissal claim to the then Industrial Tribunal.  On the day of the scheduled hearing, the parties signed a hand-written compromise agreement to draw a line under Mr Tahmassebi's claim.  One clause of the agreement (clause 4) obliged the bank "to use its best endeavours to secure payment to Mr Tahmassebi of his lump sum pension payment and continuing pension payments" and it was around the interpretation of this clause that the later High Court proceedings revolved.

Mr Tahmassebi had, in fact, two pension arrangements.  One was an Iranian pension plan, which he had forgotten about.  The other was an English plan which was connected to the latter part of Mr Tahmassebi's employment with the bank at its London branch.  Mr Tahmassebi signed an English employment contract after his initial secondment to London under which his arrangements changed so that he was paid a salary in sterling and he became a member of the bank's English pension plan.  He later signed an amendment to his contract so that it became "subject to the current banking employment rules of (the) Islamic Republic of Iran ..."

The court accepted evidence that it is compulsory for employees to have a pension in Iran and full pension benefits are granted to those with thirty years of service.  Both employer and employee must make pension contributions and, in addition, the employer must pay a lump sum to an employee on retirement.  However, during the last fifteen years of his employment in London, Mr Tahmassebi made no pension contributions to his Iranian plan and none were payable to the English plan, but the bank continued employer contributions in respect of both. 

When Mr Tahmassebi had difficulty paying his mortgage instalments, which were also addressed in the compromise agreement, he issued proceedings in the High Court.  He alleged that the bank had failed to observe clause 4 of the compromise agreement and had not endeavoured to secure payment to him of the part of the lump sum and continuing monthly pension instalments relating to his Iranian pension, of which he had by now been reminded.  Questions also arose on whether or not Iranian pension law applied to the payments Mr Tahmassebi sought and if his Iranian pension entitlement could be calculated by reference to his English salary, as he asserted, which would increase its value.  Although it was held that Mr Tahmassebi's sterling salary could not be substituted for Iranian rials in the calculation of his Iranian pension, the judge found that clause 4 encompassed not only Mr Tahmassebi's English pension, but also his Iranian one. There was nothing in the compromise agreement that restricted it just to the English pension.  (The victory on this legal point meant very little, though, as the pension had retained its value and no compensation was ordered.)

The case demonstrates that care must be taken over drafting compromise agreements.  What would appear to be a straightforward clause dealing, in this instance, with the ex-employee's pension arrangements in fact extended to all such arrangements of the ex-employee.  It is important to be clear as to the exact rights or benefits that the compromise agreement is to cover, and ensure that they are clearly and unambiguously set out in the agreement. 

Employers failing to address diversity in the workplace 

Sixty per cent of employers do not have a diverse workforce or do not know if they do, according to reports of the recent poll by Monster, the recruitment company.

Despite the array of equality legislation in the UK, only four in ten of the 660 employers questioned said diversity was a "big priority" with almost the same number (36 per cent) saying it was not a priority at all.  A further 15 per cent were unsure.

Recent changes to maternity legislation prompts employers to think twice

The recent changes to maternity legislation, introduced from 1 April 2007 (which included the extension of paid statutory maternity pay from six to nine months and the removal of the qualifying length of service for additional maternity leave), are resulting in an increased reluctance to employ women, particularly among small and medium-sized businesses, according to independent research, commissioned by Citrix Online.

The research reveals that over half of employers believe the changes are making some managers think twice about recruiting women. Thirty per cent of employers in the survey thought it would be harder to retain talented women in the workforce and a further 26 per cent believed the latest changes would have a commercially negative impact.  The survey also uncovered widespread ignorance about the new maternity legislation, with 34 per cent of small and medium-sized businesses unaware of the recent changes. 

Management struggling with remote working

Managers are struggling to reinvent their working patterns to get the best from the growing number of remote workers, according to a new report commissioned by City & Guilds and the Institute of Leadership & Management.

Nearly three quarters (73 per cent) of managers say flexible working is common in their organisation, and 37 per cent of all managers now look after teams who are either entirely or predominantly based away from the office.

However, although the majority of managers are working with teams that include remote workers, nearly half of managers say they are unprepared for the supervision of remote teams, and only a quarter had received any training on how to manage such a team.