8 The legal framework of employment

            Brenda Barrett

A manager with responsibilities for human resources cannot ignore the legal framework of employment. There is a great volume of employment law and it is both complex and subject to frequent change. This chapter can only outline the law sufficiently to alert managers to the circumstances in which they may need to seek expert advice. It must be understood that the broad rules set out here may be subject to qualifications which might modify their operation in particular situations.

8.1 The legal system in Britain

To understand employment law it is necessary to have some knowledge of the legal system. Strictly speaking, laws are enforceable only within the jurisdiction to which they apply and within the UK there are three distinct jurisdictions, namely, (a) England and Wales; (b) Scotland ((a) and (b) together make up Great Britain); and (c) Northern Ireland. However, as the three jurisdictions share one Parliament, and the Appellate Committee of the House of Lords is for most purposes the highest appeal court for each, there are few major regional differences. Moreover, the development of the European Union has already brought a high level of harmonisation of laws throughout the Member States.

Sources of law

Laws stem from two important sources: litigation and legislation.

Litigation: In former times this was the more important source of English law. Centuries ago judges decided disputes according to local custom; in time, through reporting of judgements, some customs became common to the whole country and provided the foundation of the ‘common law’ system whereby the decisions of the higher courts create precedents which are binding in future litigation. Today good reporting ensures that the majority of significant judicial decisions are published.

A number of cases are cited in this chapter so it may be helpful to explain the referencing system which lawyers employ to denote where a case can be found in a law library. For example, the citation Gascol Conversions Ltd v Mercer [1974] ICR 420 indicates that this case (which incidentally bears the names of those involved in the litigation) is reported at page 420 of Industrial Cases Reports for the year 1974. Other important modern series of reports are:

Managers may subscribe to IRLR: quality daily papers usually carry brief reports of the more important of the previous day’s hearings as part of their news service. The Times reports are available on the Internet.

The development of legal rules through decided cases has limitations since, on the one hand, it depends on the fortuitous occurrence of situations which provoke litigation and, on the other, the system of precedent can produce rules which cannot easily be adapted as society changes.

Legislation: Since the beginning of the twentieth century the UK Parliament has increasingly legislated to direct the development of the law although the foundations of modern employment law were laid in the nineteenth century. In the UK because legislation has developed pragmatically to deal piecemeal with defects in the law, there is no single Act of Parliament constituting a code in which all rules relating to employment are contained. Most of the legislation currently in force originated in the 1970s but such has been the pace of change that barely a year has passed without major amendments being made. The position has been somewhat simplified in the 1990s by two major consolidation statutes: the Trade Union and Labour Relations (Consolidation) Act 1992 (hereafter TULR(C) Act) and the Employment Rights Act 1996 (hereafter ER Act). The first of these brings together trade union law, including individual worker rights in relation to trade union membership and activities, and the latter replaces the Employment Protection (Consolidation) Act 1978.

Other major statutes which will be considered in some detail here are

Subordinate legislation: So complex has society become that Parliament has not for many years attempted to legislate in detail; the detail has been spelt out in regulations made subordinate to the framework legislation.

Codes of Practice: Statutes may also enable, or even direct that a Code of Practice be made to provide guidance as to a proper mode of conduct in given circumstances within the scope of the statute’s provisions. The Code of Practice is a regulatory device which enables legislation to be fleshed out without introducing the rigidity of subordinate legislation, for unlike statutes and regulations, compliance with Codes of Practice is not mandatory. Codes may be of evidential value in a court of law, and in reality it is very hard to justify why the relevant code has not been followed. There are a number of Codes of Practice relevant to employment law: a very important example is the Code of Practice on Disciplinary Practice and Procedures in Employment.

Europe: When the UK joined the European Community in 1973 it became immediately bound by the founding treaties, particularly the 1957 Treaty of Rome – cornerstone of the European Economic Community – (some Articles of this Treaty, such as Article 119 on equal pay, are very important to employment law) and by any laws made further to the Treaties.

The European Union (EU), since 1993, most frequently legislates by adopting Directives to further the purposes of the Treaties: a Directive is, as its name suggests, an instruction to the Member States. It requires them to implement its provisions, within a stated time. In the UK Directives are sometimes implemented in Acts of Parliament (e.g. the Sex Discrimination Act); sometimes by regulations made under an existing statute, e.g. the Framework Directive (89/391/EEC) to encourage improvements in the safety and health of workers at work, was implemented in Great Britain by the Management of Health and Safety at Work Regulations 1992, which were made under the Health and Safety at Work Act 1974. It is also possible for regulations to be made under the European Communities Act 1972, an Act of the UK Parliament passed to facilitate the UK’s entry into the European Community. The troublesome Transfer of Undertakings (Protection of Employment) Regulations 1981 were made in this way to implement the Acquired Rights Directive (77/187/EEC). The UK response to Directives is often to make separate provision for the various jurisdictions which make up the UK, e.g. the Sex Discrimination Act 1975 does not apply to Northern Ireland.

If experience proves that UK legislation has failed to capture the intention of the EC, further amending legislation may be necessary: thus the Equal Pay Act 1970 was amended by the Equal Pay (Amendment) Regulations 1983 to introduce the concept of work of equal value into the Act of 1970.

Interpretation: Words used in legislation often require interpretation: indeed, there is an Interpretation Act 1978, which interprets words frequently used in legislation, for example, ‘he’ used in a statute normally includes ‘she’ (a lawyer’s discriminatory practice employed in places in this chapter!). In spite of this Act much statutory interpretation is left to courts, and case law which develops in relation to an Act of Parliament can considerably influence the impact of the legislation; therefore the legal practitioner relies less on a Stationery Office copy of a statute than upon text books which incorporate subsequent judicial interpretations of that legislation. In recent years the interpretations of the European Court of Justice in litigation concerning other Member States have had an effect on the interpretation of UK laws.

Deregulation: In the 1990s the UK government has been committed to reducing the amount of detailed regulation, but it is proving difficult to reconcile this objective with the commitment of the EU to producing detailed rules in order to harmonise the law of the Member States.

Criminal and civil law

Rules of law fall into two main categories: criminal and civil.

Criminal law: This aims to regulate society, and imposes sanctions, such as fines and imprisonment, on those who do not observe the rules. Criminal cases are normally brought to court by the police (through the Crown Prosecution Service) or by a special enforcement agency such as the Health and Safety Executive’s inspectorate. Criminal law is enforced in England through the magistrates’ courts and the Crown Court. Minor criminal charges are tried summarily in magistrates’ courts; serious offences are tried upon indictment, before a jury, in a session of the Crown Court, but only after a preliminary enquiry has been conducted in a magistrates’ court to determine whether there is a case to answer. Appeal may lie from decisions of the Crown Court to the Court of Appeal, and thence to the House of Lords.

The criminal law plays a relatively unimportant role in employment matters, with the notable exception that breaches of occupational health and safety laws are usually criminal offences, but management will, no doubt, cooperate with the police should it appear that criminal offences, for example theft, have occurred at the workplace. Also, industrial disputes have a regrettable tendency to encourage violence; for example, picketing has often provoked police intervention with resultant criminal prosecutions. The rules invoked in such situations will normally be drawn from the general body of the law, rather than employment law.

Civil law: This is intended to give parties the opportunity to obtain redress from the person or organisation who has injured them. In England most civil disputes are determined in county courts, but cases which are very complex or involve a lot of money are tried at first instance (i.e. initially) in the High Court. Appeals go to the Court of Appeal and finally to the House of Lords. There are different courts in other parts of the UK.

European Court of Justice (ECJ): Where there appears to be a difference between UK and Community law the matter may be reviewed in the ECJ. The ECJ is empowered to hear references from national courts for interpretation of Community law (Article 177 of the Treaty of Rome and s.3(1) of the European Communities Act 1972): it is also concerned with actions alleging failures by Member States to fulfil the obligations of the Treaty of Rome (Article 170). The UK has been brought to account on several occasions, for example in Commission v United Kingdom (safeguarding of employees’ rights in the event of transfers of undertakings) [1994] ICR 664, the ECJ found the Transfer of Undertakings (Protection of Employment) Regulations to be deficient because they did not provide for consultation with employees where there was no relevant recognised trade union. Consequently, UK law was changed by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1995.

Even an industrial tribunal (see below) may refer a question to the ECJ for interpretation. However, the European Communities Act 1972 directs UK courts to interpret the laws before them in accordance with any relevant Community laws and so judges give a ‘purposive’ interpretation of UK statutes to give effect to EU law wherever possible (see Pickstone v Freemans PLC [1989] 3 WLR 265 – where the House of Lords granted a women’s equal pay claim even though there was a man employed on the same work).

The rights of the individual employee to apply to the court for interpretation of employment provisions are complex: they depend on the nature of the rule in dispute and whether the employee is in public or private employment. Article 119 (on equal pay) being unequivocal can be directly relied on by employees (see Marshall v Southampton & SW Hants AHA [1986] 2 WLR 780).

Industrial tribunals

Employees (and in some cases workers more generally) have, since the late 1960s, by statutes been granted rights (such as the right not to be unfairly dismissed) which are enforceable only through industrial tribunals. Such rights are additional to common law rights (such as those relating to wrongful dismissal) which were formerly, and remain even today, enforceable in county courts and the High Court. While these statutory rights are not themselves enforceable in common law courts, common law rules may influence the decision reached in cases concerning such rules. Tribunals are empowered by the Industrial Tribunals Extension of Jurisdiction (England and Wales) Order 1994 to hear most claims for common law damages which are outstanding on the termination of an employee’s contract of employment.

Appeals from an industrial tribunal lie on a matter of law to the Employment Appeal Tribunal (EAT) (a special court of High Court status); further appeal lies with the Court of Appeal and finally to the House of Lords. Since the higher appellate courts are common law courts they also tend, some believe wrongly, to infuse principles of common law into the statutory system and, unlike industrial tribunals, they (including the EAT) provide binding precedents on statutory interpretation.

Originally it was imagined that industrial tribunals would provide a swift and cheap resolution of employees’ complaints; so complainants are not entitled to legal aid. Experience has shown that issues can be complex and when cases are appealed it may be a long time before a dispute is finally resolved. The rules of operation of industrial tribunals are now largely contained in the Industrial Tribunals Act 1996. Industrial tribunals are likely to be renamed employment tribunals and alternative methods of dispute resolution may be introduced (Employment Rights (Dispute Resolution) Bill).

Advice, conciliation and arbitration

Legislation (currently the TULR(C) Act), has provided for an official Advisory, Conciliation and Arbitration Service (ACAS) to promote the improvement of industrial relations, and in particular to encourage the extension of collective bargaining. ACAS is empowered to provide, free of charge, advice to employers, employers’ associations, workers and trade unions on any matters concerned with industrial relations or employment policies. It may also publish general advice on these matters. In addition, it may issue Codes of Practice containing practical guidance to promote the improvement of industrial relations. Its most significant code is that on disciplinary practice and procedures. It is also empowered to inquire into any question relating to industrial relations generally, or in any particular industry or undertaking and (with certain safeguards) publish its findings.

ACAS’s mission is to improve the performance and effectiveness of organisations by providing an independent and impartial service to prevent and resolve disputes. Thus ACAS’s statutory functions include the provision of assistance in the settlement of workplace disputes. An ACAS conciliation officer will offer assistance (merely to facilitate a settlement) where any complaint has been filed with an industrial tribunal.

Parties to an agreement may always include in that agreement a provision that in the event of dispute they will ask a particular person, or institution, to arbitrate: even if the original agreement did not make provision for use of arbitration, the parties may elect to go to arbitration when a dispute has actually arisen. Arbitration has not traditionally featured strongly in UK employment law, though it may be used to determine a dispute which has arisen out of a collective agreement. Where there is a strike or one is threatened, ACAS may, at the request of one or more of the parties to the dispute, and with the consent of all, refer the matter to the Central Arbitration Committee (CAC).

It is possible, in theory, for disputes between an individual employee and employer to be resolved by arbitration but this has not been customary in the UK, though there has been some support for such systems to be used instead of the present statutory procedures involving industrial tribunals. However, as the law currently stands, this could only be done if there was a special dismissal procedure (see ER Act s. 110), otherwise any arrangement for arbitration would be likely to fall foul of the rule prohibiting persons from bringing proceedings before an industrial tribunal (ER Act s.203).

Collective and individual employment law

Common law considered the employment relationship as essentially an individual arrangement between employer and employee, creating personal, and non-assignable rights and duties for the parties to it (Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014). Today the ability of the parties to negotiate contractual terms is somewhat restricted by statutory controls: for example, the very rule as to the personal nature of the relationship has been largely undermined by the Transfer of Undertakings (Protection of Employment) Regulations 1981, which are intended to protect the employee from suffering termination of contract when the employer transfers the business to another employer (Regulation 4A entitles the employee to refuse transfer but 4B intends that in the event of refusal the employee will be treated as having voluntarily terminated the contract).

The significance of personal relationships in employment is also likely to be reduced where a trade union negotiates employment terms for a class of employees with an employer or its representative association. Individual contracts of employment may then incorporate collectively bargained terms. Any study of employment law has therefore to consider both the contractual relationship between the employer and employee and the relationship between the employer and trade union(s).

A third aspect is the relationship between the trade union and its individual members but this is beyond the scope of this chapter.

8.2 Individual employment law

The contract of employment at common law

Contract has played an important part in the development of English common law and there are many contractual rules which are applicable regardless of the context in, or the purposes for which, a contract has been formed; but, in addition to this general law, a number of specific rules have developed to govern that particular kind of contract known as a contract of employment. From 1970 onwards the contract of employment has been increasingly governed by statute, but arguably, in the recent past, legislation has for a number of reasons been less relevant and the role of common law has again become more prominent.

Identifying the contract of employment

It is important at the outset to distinguish a contract of employment from other contractual relationships, including other kinds of contracts for the performance of work, because both common law and statutes have distinguished the employee, i.e. the worker who has a contract of employment, and given such workers and their employers rights and duties which are at the core of employment law, and which distinguish employment from other commercial arrangements, like those for the provision of services or the sale of goods.

An employer who requires the outside of a building to be painted might negotiate in one of two ways for the performance of this work. He might either indicate the work to be done and ask another to quote a price for the job or, alternatively, he might ask someone to work for a certain wage until the task was completed. In this example the law would probably hold a contract arising out of the first arrangement to be a ‘contract for services’ because the parties to the contract might be regarded as contracting as separate business enterprises, so that the worker would be an independent contractor: the second arrangement would most probably be a ‘contract of service’, that is to say the worker would be held to be an employee and the relationship formed would be a contract of employment. The position in the first example would be unambiguous if the person tendering for the work were an employer of labour, or a person who had a large capital investment in plant whose use would significantly contribute to the performance of the task. Difficulties might arise in both situations if the worker engaged had only labour to offer but wished to be treated as ‘self-employed’ with an organisation separate from that of the employer. In such circumstances the law, rather than the contracting parties, would determine the nature of the contract and would tend to classify the arrangement as a contract of service, weighing the intention of the parties as only one of a number of relevant factors.

No single perfect test has been devised by the courts for the identification of the distinction between the two types of contract, in spite of the many cases which have been heard. One of the major problems is identifying a test which might be applied for whatever reason the contract might be under scrutiny. The worker’s status is relevant not only to determine the rights and duties contained in the contract, but also to determine the extent of the employer’s liability to third parties for injuries caused to them by the worker. It also determines assessment for income tax, though in recent years for some marginal situations, regulations have set out arrangements for payment of income tax independently of consideration of the type of contract under which work was performed. The Inland Revenue may thus have taken away one of the incentives for claiming self-employment status.

The courts have always held that the more the employer is able to control the activities of the worker, the more likely it is that that worker is an employee. However, there are many circumstances in which, although it is inappropriate for an employer to exercise any real control over a worker, there is no dispute that the worker is so ‘integrated’ into the employer’s organisation as to be an employee (servant). The courts therefore regard the ‘control test’ as only one factor in determining whether the contract is one of employment. The matter was analysed thus by Mackenna, J. in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497:

The contractual provisions will not be consistent with there being a contract of employment if the worker is taking the chance of making a profit and running the risk of making a loss out of the sale of labour rather than offering personal service for a wage which will be paid regularly whether or not there is profitable employment.

This chapter is concerned with the attributes of the contract of employment, since it remains the principal employment relationship. In particular, modern statutory regulation of employment, such as social security law and unfair dismissal law, is primarily concerned with the protection of the employee rather than the self-employed person.

Legally binding agreement

A contract of employment is (as Mackenna, J. reaffirmed) a legally binding agreement. It is created by agreement, and while it exists it imposes rights and duties on the parties to it. In due course it is terminated.

Formation of the contract of employment

No person (whether employer or worker) in the UK is under any legal obligation to enter into a contract of employment: in a free society there is neither a right nor a duty to work, and conversely there is neither a right nor a duty to employ labour; but parties who elect to make contracts enter into obligations that they will normally be bound by law to honour, incurring liability if they fail to do so. Thus if persons enter contracts which promise employment ‘starting 1st of next month’, but learn on or before that date that they are not required, they may sue for damages, even though they have not actually earned their pay by doing the work (Sarker v South Tees Acute Hospitals NHS Trust (1997), The Times 23 April). On the other hand, if a person performs a task without previously entering an agreement under which the other party promised to pay for the work, no claim for payment will be possible (Lampleigh v Braithwait [1616] 80 ER 155). It will be unlawful discrimination, if a person intending to contract, refuses to do so with a particular person on grounds of race, sex or on grounds of being, or not being, a trade union member.

There are certain situations in which, although the parties have made an agreement, they will not have entered into a legally binding contract:

Agreed terms of the contract

Terms may be incorporated into a contract in one of two ways: by express agreement and by implication.

Express terms: The common law allows the parties freedom to determine the terms on which they will form the contract, and the courts will not require them to observe terms which they have not expressly or impliedly incorporated into their contract, unless the matter is governed by statute. An agreement between employer and union as to the terms of a contract of employment will not become part of an individual’s contract of employment unless the collectively agreed terms have been expressly or impliedly so incorporated (see National Coal Board v Galley [1958] 1 WLR 16).

In the past, employment law contracts tended to be rather terse and the parties had a regrettable tendency not to make express provision for many of the situations which might reasonably be expected to arise. This problem is largely alleviated by statute, now so phrased as to comply with the Proof of an Employment Relationship Directive (91/533/EEC).

Implied terms: The courts are prepared to imply a term into a contract to give business efficacy to that contract, or because it is obvious to a bystander that it was the intention of the parties to include such a term. In addition, they will imply a term into an employment contract because it is usual for such a term to be implied in employment contracts generally, or because the term is one which it is customary to include in an employment contract with the particular employer or in the particular industry. A term which is completely contrary to what the parties have actually said, or may by their conduct be deemed to have intended, will never be implied. As a result of case law it has long been recognised that there are duties to be implied in a contract of employment on the part of both the employer and the employee.

The duties of an employer are:

In the absence of agreement there is no duty on an employer to provide an employee with a reference. An employer who does provide a reference must take care to give an accurate one, otherwise there may be liability to pay damages to the employee (if the reference is defamatory) or to either the recipient of the reference (Hedley Byrne & Co. v Heller & Partners Ltd [1964] AC 465) or the employee (Spring v Guardian Assurance Co. [1994] 3 All ER 129) where the reference is incorrect due to negligence. There might also be liability to compensate the employee if reference is made to ‘spent’ criminal offences (see Rehabilitation of Offenders Act 1974).

The duties of an employee are:

Breach of an implied term may lead to an action in a common law court for damages for breach of contract; in practice it is more likely to be evidence in either wrongful or unfair dismissal proceedings to justify or dispute the termination of the contractual relationship.

Statement of particulars of employment

Sections 1-7 of the ER Act require the employer to give the employee a written statement of particulars of employment not later than two months after the beginning of employment, and, if the contractual arrangements are subsequently changed, a new statement must be provided within a space of a month of the change. In essence the statement must give:

The statement is also required to include (except in small firms) a note specifying any disciplinary rules or referring to a document which specifies such rules. It must also identify a person to whom the employee can apply if dissatisfied with any disciplinary decision and a person to whom to apply for redress of any grievance, the manner in which any such application should be made, and what, if any, further steps are consequent upon that application.

These requirements encourage employers positively to address the matters set out above, though there is no need to make provision for every one of these matters. Unfortunately, while well-informed employers comply with the statute, there is no effective means of ensuring that all employers are aware of and meet their obligations. There is no penalty for failing to provide these particulars but an employee who has not received an appropriate statement may complain to an industrial tribunal (ER Act 1995 s.11; see also Mears v Safecar Security Ltd [1982] IRLR 183).

The Act does not affect the common law rule that a contract of employment may be created orally, and care should be taken to ensure that a document which is given with the intention of achieving a minimal compliance with the Act is not unintentionally elevated to the status of a written contract. An employer could give the statutory statement this status by giving it to an employee stating that it was that employee’s contract of employment (see Gascol Conversions Ltd v Mercer [1974] ICR 420).

Termination at common law

At common law a contract is usually terminated by performance; each party carries out the contractual obligations and the contractual relationship ends. It has always been exceptional for a contract of employment to be terminated by performance though it is possible to create employment of this description by employing a person on the agreement, preferably recorded in writing for clarification of statutory rights, that the contract is for a fixed term (see now ER Act ss.95 and 197) or for a specific task.

The great majority of employment contracts are made for an indefinite period and are, at common law, terminated by variation, notice, breach or frustration.

Variation: The parties may agree to alter the terms of the contract (thus terminating it) and make a new one to have immediate effect: this is a negotiation of no practical importance in employment since the law presumes the total employment period is one continuous contract (ER Act s.210). It used to be thought that if either of the parties did not agree to accept a contractual variation which the other sought to impose unilaterally, the contract would be terminated. Case law has indicated that it may be possible for the aggrieved party to resist the variation (see e.g. Rigby v Ferodo Ltd [1988] ICR 29) but this may not be of great assistance in saving the contract on its original terms, in the long run, since the other party could respond by giving notice to terminate it (see notice below and also unfair dismissal).

Notice: The contract will be terminated if either party gives notice of wishing to terminate and that notice duly expires; alternatively, the employment may sometimes be terminated forthwith by the employer giving wages in lieu of notice. It is now necessary to give at least the statutory period of notice (ER Act s.86). The employee who has been continuously employed for 1 month or more is required to give the employer 1 week’s notice. The employee’s entitlement varies in length in accordance with the period for which that employee has been continuously employed by that employer:

Now that an employee has statutory rights in relation to redundancy and unfair dismissal, it is unusual for an employer to be able to terminate by notice the contract of an employee with two or more years’ continuous employment without incurring further liability.

Breach: The contract will be terminated if one of the parties fails to fulfil the contractual obligations and the other party demonstrably regards this repudiatory conduct as a termination of the contract (see London Transport Executive v Clarke [1981] ICR 355). If the wrongful conduct is sufficiently serious for the injured party to be released from contractual obligations that party has no need to give notice to terminate the contract (ER Act s.86(6)).

The courts will not issue an order (i.e. specific performance) requiring the parties to continue an employment contract when one of them has indicated the wish to sever the relationship, but occasionally an injunction will be granted to prevent an employer carrying out an intention to terminate the contract, particularly if the employee concerned has had long and satisfactory service with that employer (Hill v CA Parsons & Co Ltd [1972] Ch 305).

Frustration: In certain rare circumstances a contract will be deemed to have terminated by operation of law because an event has occurred, beyond the control of the parties, which makes its further performance impossible or futile, always providing that this event is not one expressly provided for in the contract. Occasionally contracts of employment have been deemed to have been frustrated by outbreak of war, more frequently because of a long incapacitating illness (see Condor v Barron Knights Ltd [1966] 1 WLR 87) suffered by, or a prison sentence (see Hare v Murphy Bros. Ltd [1974] ICR 603) served by, the employee. The occurrence of the frustrating event immediately releases both parties from further contractual obligations. If an employee suffered a serious incapacitating accident it would seem that the relationship would be severed from the moment of the accident, but in the case of prolonged illness or imprisonment, the courts have not identified the exact time at which the relationship has ended and have in the past been content to hold that the contract has ceased to exist by the time that the employee seeks to return to work. Nowadays there is reluctance to see a case put outside the rules of unfair dismissal by an employer establishing that the contractual relationship was ended by frustration rather than by dismissal and judges have expressed the view that, if the contract is to be fairly terminated, the employer ought to note what has happened by formally dismissing the employee (see London Transport Executive v Clarke (see above)). Since the Disability Discrimination Act 1995 s.6, placed a duty on employers to make reasonable adjustments to accommodate a disabled employee, it may be more difficult for an employer to claim that an employee’s accident or illness has frustrated the contract.

Common law rights and remedies

If loss is suffered because the contract of employment is either broken or wrongfully terminated, an action for damages will lie in either a county court or the High Court but since 1994 industrial tribunals have some jurisdiction to deal with common law issues (see above). A common law action for wrongful dismissal may be attractive to the manager with an exceptional contractual entitlement to notice; but for most employees, since dismissal with notice is lawful, and damages will be limited to the sum, if any, due to compensate for an inadequate period of notice, and loss of fringe benefits, the common law provides little satisfaction (see Addis v Gramophone Co [1909] AC 488). The Court of Appeal has held that where a contract provides for wages in lieu of notice, the employee is entitled to payment for the full notice period: there should be no deduction in respect of earnings in the notice period (Abrahams v Performing Rights Society Ltd [1995]).

The unsatisfactory common law led to statutory reforms in the 1960s and 1970s to give employees protection against redundancy and unfair dismissal. However, the adequacy of these statutory remedies is questionable: they are dependent on the employee concerned having 2 years’ continuous employment before dismissal, and they are of little satisfaction in times of depression when alternative employment is hard to find. For these reasons there has been something of a revival of the use of common law courts both as a means of establishing contractual rights (e.g. R v BBC, ex p Lavelle [1983] IRLR 404) and as a means of preventing or postponing dismissal (Hill v Parsons, see above).

8.3 Statutory protection

Since the nineteenth century, but increasingly after 1970, legislation has provided workers, particularly employees, with protection during the performance of their work and in relation to the termination of that employment. Some of these statutory provisions have already been identified (e.g. the right to receive particulars of employment) but in the following sections the most important of the remainder will be indicated.

Equality of opportunity

The common law rules of contract are based on the assumption that the contractual parties have equality of bargaining power; they therefore proved unhelpful to minority groups whose bargaining power was weak. Women and racial minorities are especially vulnerable and it has proved necessary to legislate to make it unlawful to discriminate against a person on sexual (Equal Pay Act 1970 and Sex Discrimination Acts 1975 and 1986) or racial grounds (Race Relations Act 1976). The legislation, which (Equal Pay Act apart) is not confined to employment issues, has the positive objective of achieving equal opportunities, and the sex discrimination legislation, while predominantly concerned with eliminating discrimination against women, also outlaws discrimination against men. The sex discrimination and equal pay statutes are intended to implement the EU requirements for equal opportunities.

In addition, a variety of provisions have addressed employment-related discrimination against persons on grounds of trade union membership and activities, or because of their other roles and activities at the workplace. In relation to trade union membership (or non-membership), it is unlawful to refuse employment (TULR(C) Act s. 137), or to take action short of dismissal (s.146), or to dismiss an employee (s.152). In the case of employees the statute expressly states that the discrimination must not be on account either of membership/non-membership or union-related activities. Similar protection against discrimination during employment, or by dismissal, are granted to safety and other employee representatives, employees refusing Sunday work and employee trustees of occupational pension schemes. Recently the Disability Discrimination Act 1995 has addressed disability on grounds of physical or mental impairment. It remains lawful to discriminate on grounds which are not expressly prohibited, notably on grounds of age, unless such discrimination in fact amounts to sex discrimination (e.g. Price v Civil Service Commission [1978] ICR 27; James v Eastleigh Borough Council [1990] 2 AC 751).

The nature of discrimination: Sexual or racial discrimination may be direct or indirect. Direct discrimination is treating a person less favourably than another on grounds of sex or race. Indirect discrimination occurs when a person applies to one person the same requirement or condition which he applied to another but:

Mostly direct discrimination is easily recognised but surprisingly in James v Eastleigh (see page 139) it was found to be direct discrimination to charge a 60-year-old man to use a swimming pool, whereas a woman could enter free at this age: this was so even though the apparent discrimination was a reflection of the age at which the old age pension became available.

Indirect discrimination sometimes occurs through practices which are so deeply embedded in culture and tradition that their discriminatory character is hard to recognise. It might, for example, be indirect discrimination to offer employment or promotion opportunities only to persons with a record of continuous full-time employment if it were established that only white men could comply with this requirement (see Price v Civil Service Commission, page 139). Indirect discrimination may be exonerated if it is established that there is a justification, but the courts are not sympathetic to explanations related merely to matters of practice or convenience (see Steel v Union of Post Office Workers [1978] ICR 181).

Discrimination in employment: Legislation makes discrimination unlawful in a number of specific situations related to the formation and execution of the contract of employment. It is unlawful for an employer to discriminate in the arrangements made for the purpose of determining who should be offered employment. This very wide provision could cover placing and wording of advertisements, the contents of application forms, and the procedure of selecting for interview.

It is unlawful to discriminate in the terms on which employment is offered or by refusing or deliberately omitting to offer employment. It is also unlawful to discriminate in respect of access to opportunities for promotion, transfer or training, or to any other benefits, facilities or services, or by refusing, or deliberately omitting, to afford access to them. It is unlawful to discriminate by dismissing or subjecting a person to any other detriment.

Discrimination in the matters outlined may be lawful if sex or race, as the case may be, is a ‘genuine occupational qualification’. Each Act includes a list of circumstances in which exceptionally discrimination may be allowed, as, for example, where the job involves participation in a dramatic performance and a particular type of person is required for reasons of authenticity.

Harassment (including harassment on grounds of sexual orientation) may amount to unlawful sex discrimination but dress codes may be lawful if circumstances require them, provided comparable rules are imposed for both sexes. In the recent past dismissal in relation to childbirth has been contested under both UK and EU laws (see Webb v Emo Air Cargo (UK) Ltd [1994] IRLR 482) but this form of discrimination may occur less in future, given it is now unlawful to dismiss a person merely on grounds of pregnancy.

It is also unlawful to discriminate in relation to pay. The Equal Pay Act 1970 deals with inequality between the sexes, a broadly similar provision to be found in the Race Relations Act 1976. The 1970 Act had the broad objective that where men and women were doing the same work, they should receive equal pay, but the enactment of a statutory formula to achieve this objective proved difficult and the original Act was revised.

Under the present law the terms of a woman’s contract are deemed to include an ‘equality clause’ which relates to both pay and other contractual terms so that it is not, for example, lawful to require a woman to work longer hours for the same pay as her male colleagues receive. The equality clause applies:

In spite of the restriction in (c), the House of Lords has allowed an equal value claim to be made even though there was a man employed on like work: in the view of the House, to have decided otherwise would have defeated the objectives of Article 119 of the Treaty of Rome (Pickstone v.Freemans PLC [1988] IRLR 357). Certainly, any other decision would have invited employers to suppress wage rates by ensuring that there was at least a minimal representation of both sexes on the payroll.

An employer may avoid the requirements of the equality clause by proving that a variation in pay is genuinely due to a material factor (gmf) which is not the difference of sex. It is controversial how far ‘market forces’ can be used in this context. In Rainey v Greater Glasgow Health Board [1987] AC 224 the House of Lords was prepared to allow this as a lawful explanation of the lower pay rate for women as compared to men. But in Enderby v Frenchay HA [1994] 1 All ER 495, the European Court held that the burden was on the employer to justify the lower pay of the women and did not accept that it was a sufficient justification that the rates were determined in collective bargaining. In Ratcliffe v N. Yorks CC [1995] IRLR 439, the House of Lords found for dinner ladies who had been dismissed and re-engaged at lower rates in order to enable their employer to tender competitively.

Matters of sex discrimination and equal pay are often difficult to distinguish but they are areas in which there has frequently been reference to the European law and in these circumstances it is especially important to identify the basis of the complaint, for if it can be based on Article 119 of the Treaty (equal pay), the claimant can rely on direct enforcement of the decision regardless of whether the employer is in the public or private sector (see Jenkins v Kingsgate [1981] ICR 715). Claims concerned with inequality in age of retirement (Marshall v Southampton & SW Hants AHA [1986] IRLR 140) and pensionable age (Barber v Guardian Royal Exchange [1990] ICR 616) have been found to be equal pay claims within Article 119.

Equal pay and sex discrimination claims are presented by way of complaint to an industrial tribunal. ‘Equal value’ claims are subject to a complex procedure, under which an independent expert is appointed to investigate the claim. Hearings therefore tend to be protracted, but interesting comparisons have been pursued (see e.g. Hayward v Cammell Laird Shipbuilders Ltd [1988] IRLR 257 – comparison between a female cook and male shipyard workers). The impact of the Act generally is limited in that there is no provision for class actions, so claims are made only for individual, rather than groups of, workers. However, where the provisions of a collective agreement stipulate different contractual terms for employees according to sex, either party to the agreement may refer it to the CAC which has powers to direct that the agreement may be suitably amended. The Equal Opportunities Commission has now introduced a Code of Practice guiding employers in the implementation of equal value.

Both the Race Relations and the Sex Discrimination Acts contain provisions making it unlawful for bodies other than the employer to discriminate; in particular it is made unlawful for a trade union to discriminate in relation to membership.

The Commissions: Under each principal Act there is established a Commission which is charged with working towards the elimination of discrimination; for this purpose it is empowered to investigate where discriminatory practices appear to exist and to serve a ‘non-discrimination notice’ on any person whom the Commission is satisfied is committing, or has committed, unlawful discrimination. The notice requires the person on whom it is served to refrain from the discrimination and may require positive action to rectify the situation. If the notice is not complied with, the Commission may apply to a county court for an injunction: breach of such a court order would be contempt of court and could result, in the last resort, in imprisonment. The Commissions have used their powers to issue Codes of Practice relevant to employment.

Enforcement: The major responsibility for ensuring that unlawful discrimination is subject to legal process rests with the individuals who have suffered discrimination. It is frequently difficult for a complainant to obtain the information on which to base a complaint so the legislation has authorised a form by which the aggrieved person may question the respondent’s reasons for acting as alleged. Not only will the answers thus received help to determine whether a complaint should be made, but the document may constitute evidence at the hearing of a complaint. The Commission may assist a claimant, when a case is complex or involves an important matter of principle.

Positive discrimination and quotas: UK law, like EU law (see Kalanke v Frei Hansestadt Bremen [1995]) does not generally favour positive discrimination and has little sympathy for quotas. It does not permit a person to refute an allegation of discrimination by demonstrating operation of a ‘quota system’, but the production of employment records which showed a reasonable distribution of men and women and of racial groups might be evidence of lack of intention to discriminate in a particular case. Such evidence might be valuable in cases of indirect discrimination. These records are also likely to be valuable aids to management monitoring performance and evaluating policies (see recommendations of Equal Opportunities Commission’s Code of Practice).

The Disability Discrimination Act 1995: This came into effect in January 1997, with the objective of protecting anyone with a physical or mental impairment which has a substantial and long-term effect (i.e. for at least twelve months or is terminal) on ability to carry out normal day-to-day activities. The Act is by no means a mirror image of the sex and race discrimination legislation: it does not expressly address indirect discrimination but does allow justification of direct discrimination. It prohibits discrimination in recruitment, promotions, transfer, benefits, dismissal and ‘any other detriments’. Employment-related claims lie in industrial tribunals. The effectiveness of the Act depends on regulations and codes of practice now being introduced to spell out its framework provisions such as Guidance on matters to be taken into account in determining questions relating to the definition of disability and Code of Practice for the elimination of discrimination in the field of employment against disabled persons or persons who have had a disability. A National Disability Council will advise the government.

Other major statutory rights during employment

The 1970s saw the introduction of a statutory floor of rights for employees during the course of their employment. In the years since, sometimes as a result of EU Directives, these rights have been further developed and amended. It is only possible to refer to them briefly here.

Terms relating to wages: These terms are as follows:

Time off from work: These terms are as follows:

Pregnancy and childbirth: Rights in pregnancy and childbirth have been considerably strengthened following the EC’s Protection of Pregnant Workers Directive (92/85/EC), but the UK was not involved when the Parental Leave Directive was initially discussed by the other 14 Member States.

The ER Act provides that a woman may not be dismissed on grounds of pregnancy (s.99) and one who is suspended from employment on maternity grounds is entitled to remuneration (s.66). A woman absent from work on maternity leave is entitled to the terms and conditions of employment — except remuneration — which would have been applicable if she had not been absent (e.g. she maintains her seniority) (s.71). She is entitled to at least 14 weeks’ maternity leave (s.73), but she may not return to work until two weeks after the birth and, if necessary, leave will be extended to cover this. Maternity leave may begin as early as the 29th week of the pregnancy but will begin on the first day after the beginning of the 6th week before the expected week of childbirth (ewc) on which she is absent from work because of the pregnancy. Entitlement to leave depends on notification to the employer, not less than 21 days before the intended start of the leave, and the employer may request a medical certificate (ss.74/75). An employee who has 2 years’ continuous employment by the beginning of the 11th week before the expected week of childbirth, has the right to return to work after the end of her maternity leave and up to 29 weeks after the childbirth, provided that she informs her employer at the same time when she informs him of the intention to take maternity leave (s.79), and complies with the other statutory requirements as to re-affirming her intention after the birth of the child.

Pay entitlement during maternity leave depends partly on statutory provisions and partly on the contract. Regulations provide that a woman who has 26 weeks’ continuous service by the 15th week before the ewc, who has had average earnings above the threshold for payment of National Insurance contributions for the 8 weeks ending with the qualifying week and (unless not reasonably practicable) given 21 days’ notice that she intends to stop work because of pregnancy, is entitled to 18 weeks’ statutory maternity pay: 6 weeks at 90 per cent of normal earnings, 12 weeks at sick pay rate. Her contract may give her a further entitlement related to her salary.

Occupational health and safety

The law has two roles in respect of occupational health and safety: it provides compensation for victims of industrial accidents and diseases and it provides operational standards with the objective of eliminating from the working environment the hazards which may cause accidents and ill-health.

Compensation: An injured person (quite apart from claiming social security benefits) may bring an action for damages, claiming both for loss of income and for ‘non-pecuniary’ loss such as pain and suffering. This is equally true whether the accident occurs at the workplace or elsewhere, even in the victim’s home. However, persons who suffer injury while at work, or as a result of work activities, were in practice more likely to succeed in their claims than were other categories of litigants; today the organisation’s responsibility to members of the public is virtually the same as to its employees (Margereson and Hancock v JW Roberts Ltd [1996]), though historically the employer owed a special responsibility to employees, based on an implied term in their contract. The desirability of employers providing compensation for injuries to their employees, where the employer is legally responsible, is recognised by the Employers’ Liability (Compulsory Insurance) Act 1969: it requires the employer to be insured against liability for such accidents if they arise out of and in the course of the employee’s employment.

To succeed in a claim for damages the plaintiff (victim) must prove either that the defendant has committed the tort of negligence or that he has broken a statutory duty.

Negligence When claiming in negligence the plaintiff must prove that the defendant owed a duty of care; that this duty was broken by negligent conduct; and that this breach caused the injury.

The courts today take a liberal view as to the existence of duty situations and few claims for personal injury fail because the plaintiff cannot establish the defendant’s duty to take care. Thus the plaintiff’s decision as to who to sue is largely determined by considering which of a range of possible defendants is likely to be able to pay any damages awarded, and what evidence there is of negligent conduct causing the injury. For the employee, the employer is likely to be the most attractive defendant, both because of the insurance requirement and because litigation has spelt out that employers must provide their employees with a safe system of work, including safe plant and equipment, a safe working place and instruction and training. Where the employer is a small sub-contractor, the plaintiff may prefer to sue a more substantial organisation, such as a head contractor, in the justifiable belief that the courts expect a high standard of care from large organisations.

Breach of statutory duty Sometimes a plaintiff can identify a statutory duty imposed upon a person (usually an employer) for the protection of persons such as the plaintiff, and show that this duty has been broken and that its breach has caused the plaintiff to suffer the alleged injury. The rules governing such claims are complex, but these actions have become less usual with the development of the tort of negligence and because modern statutory provisions lend themselves less to this form of litigation than did the legislation which pre-dated the Health and Safety at Work Act 1974.

Vicarious liability An employer is liable (even if not personally at fault) for the injuries caused by the wrongful acts of his employees in the course of their employment. So if one employee injures another (or a member of the public) by negligent conduct, the victim may claim damages from the employer (see Mersey Docks & Harbour Board v Coggins & Griffiths (Liverpool) Ltd and McFarlane [1947] AC 1).

Prevention: It is recognised that it is better to avoid industrial accidents and work-related ill-health than to compensate for them; so statutory codes have established standards for the workplace and special inspectors are appointed with powers to enter premises to investigate whether these standards are being observed. These statutory duties are enforced in the criminal courts. There were by 1970 more than 30 statutes concerned with safety at the workplace, perhaps the best known of which was the Factories Act 1961; in addition there were more than 500 regulations.

The Health and Safety at Work etc. Act 1974 was a reforming Act. It was an enabling, or framework Act with the objectives of securing the health, safety and welfare of all persons at work and of protecting the public against risk arising out of the activities of persons at work. This legislation has now been underpinned by a number of sets of Regulations, many of them to implement Directives adopted under Article 118A of the Treaty of Rome. It will be noted that the Act extends protection to workers generally rather than just to employees: there is often some room for dispute whether EC Directives which do not usually use the word ‘employee’ are looking beyond the narrow interpretation of the employment relationship.

The 1974 Act set up the Health and Safety Commission and gave it a general responsibility for occupational health and safety. The tasks of inspection and enforcement were entrusted to the Health and Safety Executive and the inspectorates were brought under the control of the Executive. Many offences became triable upon indictment, and, in addition, the inspectorate was given new powers of enforcement through improvement and prohibition notices.

Improvement notices are orders from inspectors requiring persons upon whom they are served to carry out specific tasks to comply with their statutory duties. A prohibition notice is an order that a certain activity shall cease, on the grounds that it involves a risk of personal injury. It is a criminal offence to fail to comply with an order but the validity of the order may be disputed in an industrial tribunal.

General duties: The general duties contained in the 1974 Act (ss.2–9) aim to establish safe systems of work, and for this purpose they identify, and impose duties upon, those involved in the work activity. They are very broad but are of a high standard; for the most part they impose absolute liability for unsafe situations unless the accused can prove that it was not reasonably practicable to do more to achieve safety (e.g. R v British Steel PLC [1995] 1 WLR 1356).

Regulations may be made to create specific standards in respect of specific situations but although important regulations have been made, many incorporating EU standards (e.g. Control of Substances Hazardous to Health Regulations 1994), it seems unlikely that the general duties will ever be fully discharged by observing all the relevant regulations, since they encompass the total operational system.

It is fundamental to compliance with the 1974 Act that safety be seen as a matter of safe systems and related to the proper management of people. The principal responsibility for safety at the workplace falls upon employers and the Act requires them to do all that is reasonably practicable to ensure the health, safety and welfare at work of all their employees (s.2) and of other workers and the general public (s.3 e.g. R v Board of Trustees of the Science Museum [1993] 1 WLR 1171). The Act also places general duties on controllers of premises (s.4, see Mailer v Austin Rover Group PLC [1989] 2 All ER 1087) and those who supply articles and substances for use by people at work (s.6).

Section 7 imposes a duty upon employees while at work to take reasonable care for their own health and safety and that of other persons who may be affected by their acts or omissions at work and to cooperate with their employer and other persons to enable them to discharge their statutory obligations in respect of health and safety. EC Directives (reflected in British regulations) give some content to this duty, e.g. the Manual Handling Operations Regulations 1992, regulation 5 requires ‘Each employee while at work shall make full and proper use of any system of work provided for his use by his employer’.

Supplementary to, and in explanation of, the general duty imposed on the employer in s.2(1) of the Act, s.2(2) requires:

As part of his duty, the employer is also required to provide a written statement of his safety policy, and the organisation and arrangements for the time being in force for carrying out that policy and to bring this statement and any revision of it to the notice of all his employees. The arrangements which are set out should relate to the findings of the risk assessment which the employer is now required to make under the Management of Health and Safety at Work Regulations 1992.

Both the Act itself and regulations to comply with EC Directives (e.g. the Management of Health and Safety at Work Regulations and the Personal Protective Equipment at Work Regulations 1992) stress the need to provide instruction and training of workers. A relatively early decision of the Court of Appeal held that s.2(2)(c) obliged employers to provide information to sub-contractors’ men so that they did not endanger their own employees, and s.3(l) required them to provide information to the visiting workers for their own safety (R v Swan Hunter Shipbuilders and Telemeter Installations Ltd [1981] ICR 831). Subsequent cases have stressed the responsibility of employers to control the work of contractors and their employees (e.g. R v Associated Octel Ltd [1994] IRLR 540).

EC Directives require worker involvement in safety matters. The Safety Representatives and Safety Committees Regulations 1977 provide for recognised trade unions to appoint safety representatives. These regulations set out the functions of such representatives and the ways in which the employer is required to cooperate with them. Their principal functions are to carry out regular inspections of the workplace, to consult with the employer, to represent their constituents, to inspect documents and to receive information both from the employer and the inspectorate. They are also entitled to investigate accidents and must be consulted where changes are to be introduced at the workplace. Two safety representatives may require that the employer set up a safety committee, but there are no regulations as to the constitution and functions of such a committee. The regulations are not mandatory but represent a set of rights with which the employer with a recognised trade union may be required by the union to comply, in default of any alternative negotiated arrangements. Further regulations have now given slightly less generous rights to employees in workplaces where there is no recognised trade union.

The general duties may not be used in civil actions for compensation and they are enforceable in the criminal courts only by the inspectorate. Employers, the performance of whose duties to provide safe systems will often depend on the conduct of others, will need to rely on contractual arrangements to ensure that safety is maintained by these other people: under the contract of employment the employee whose conduct is unsafe may be disciplined; commercial contracts with other organisations may give the employer rights to monitor the conduct of these contractors and their workers; and purchase contracts may relate to the safety of the products to be supplied.

8.4 Statutory protection at dismissal

Unfair dismissal

Statutory provisions (now ER Act ss.94–135) give many employees the right not to be unfairly dismissed; the principal exceptions are most employees who have not the qualifying 2 years’ employment, and those who, at the time of dismissal are over retirement age.

There are no moral connotations in the term ‘unfair dismissal’; it has a statutory meaning and qualified employees are entitled to the statutory remedies even though their cases are without merit, but the complainant without merit may be denied compensation (see Devis & Sons Ltd v Atkins [1977] AC 931).

The employee who considers that (s)he has been unfairly dismissed may present a complaint to an industrial tribunal within three months of the effective date of termination of the employment, that is within three months of the last day on which the employment relationship subsisted (e.g. when working out notice, the date on which the notice to terminate expires). The general rules concerning effective date of termination might lead to hard cases (see Dixon v Stenor Ltd [1973] ICR 157), as for example where an employee is required to leave immediately and so reduce the qualifying period of service — in such cases employees are treated for the purpose of service as if they had worked out their notice.

The burden is on the employee to satisfy the tribunal that there has been dismissal, the burden then shifts to the employer to establish that the dismissal was for one of the reasons permitted by the statute. The statute provides (s.95(1)) that an employee shall be treated as dismissed if, but only if:

The Transfer of Undertakings (Protection of Employment) Regulations 1981 provide (subject to exceptions related to economic, technical or organisational reasons) that a transfer of an employing undertaking from one person to another shall not operate so as to terminate the contract of any person (with qualifying service) employed by the transferor immediately before the transfer. Any person whose contract is terminated (or has terms unilaterally altered) has a right to bring a claim of unfair dismissal against the transferee.

These regulations, and the Directive on which they are based, have been interpreted very broadly, so that they apply to most situations in which a business changes ownership (see Litster v Forth Dry Dock and Engineering Co Ltd [1989] ICR 341); they apply to most competitive tendering, and may cover the provision of labour-only contracts, such as cleaning or catering (for a full discussion see Dines and Ors v Initial Healthcare Services and Pall Mall Services Group Ltd [1994] IRLR 336) and can apply where only one service worker is involved (see Schmidt v Spar und Linkasse [1994] IRLR 302). An employee who is not aware of the identity of the transferee may be protected (MRS Environmental Services Ltd v Dyke and Another [1997]); but the Directive does not necessarily protect the workforce where a contract for services (e.g. cleaning) is transferred from one contractor to another (Süzen v Zehnacker Gebäudereinigung BmbH Krankenhausservice (Lebarten GmbH, partly joined) [1997] EC J).

An employee claiming that the employer’s conduct amounted to constructive dismissal will only succeed if the claim shows that the employer’s conduct was in breach of the contract: thus an employer is entitled to behave unreasonably if the contract gives an express right to do so, e.g. withhold pay as a disciplinary penalty (Western Excavating (ECC) Ltd v Sharp [1978] QB 761). An employee might claim to have been constructively dismissed if the employer attempted unilaterally to change the terms of the contract, e.g. reduce the wages.

It follows that there are a number of circumstances in which a contract of employment may come to an end without there being a dismissal within the statutory definition: for example, if a contract is terminated by a frustrating event, or because the employee gives notice to take up an appointment elsewhere.

Grounds for dismissal

In order to establish that a dismissal was fair, the employer must satisfy the tribunal that the reason for the dismissal was one of the permitted statutory reasons or some other substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held. The tribunal must also be satisfied that, having regard to equity and the substantial merits of the case, the employer acted reasonably in treating it as a sufficient reason for dismissing the employee.

The employer may support the dismissal by showing:

Unfair dismissal cases form a large part of the workload of industrial tribunals. While tribunal decisions are not binding precedents they have been frequently appealed and, as a result, the statutory provisions have been much interpreted by the courts.

The catch clause ‘other substantial reason’ has been interpreted generously in favour of the employer; dismissals in the interests of the business have been allowed, as for example where the employee was unacceptable to a major customer (Scott Packaging & Warehousing Co Ltd v Paterson [1978] IRLR 166) or the employee was unable to secure a fidelity bond (Moody v Telefusion Ltd [1978] IRLR 311).

Except in misconduct cases, an employer is unlikely to be able to justify a dismissal without considering finding alternative employment for the employee. Thus if an employee is incapable by reason of sickness or incompetence, the employer should consider whether there is less exacting employment suitable for this person (see Spencer v Paragon Wallpapers Ltd [1977] ICR 301); similarly, if the employee can no longer lawfully be employed in his/her present occupation, as might be the case where a vehicle driver became disqualified from driving, the employer should consider whether that person might be employed about the employer’s premises rather than on the road (see also Sutcliffe & Eaton Ltd v Pinney [1977] IRLR 349). A dismissal for redundancy may be unfair, for example where an employer has not observed procedures for selection (Polkey v AE Dayton Services Ltd [1987] IRLR 503).

Polkey’s case came as a salutary reminder that in dismissal cases the employer must have regard to procedural matters, giving proper warnings, carrying out necessary consultation and, in most instances, terminating with notice. Before dismissing for misconduct the employer must take care to ascertain the full facts, giving the employee the opportunity to tell his/her story (see Earl v Slater and Wheeler (Airlyne) Ltd [1973] 1 All ER 145). The employer should have regard to the ACAS Code of Practice on Disciplinary Practices and Procedures, for any organisation not observing it has to persuade a tribunal that it operates a satisfactory alternative system.

It is only in relatively rare cases of gross misconduct that a single act of misconduct will warrant dismissal and, even then, the employer ought initially to suspend the employee on full pay (unless the contract expressly allows suspension without pay: Western Excavating (ECC) Ltd v Sharp) and dismiss only if an investigation confirms that there has been serious misconduct. In less serious cases the wrongdoer should initially be warned, and dismissed only for repeated offences. An employee will have no claim if dismissed while taking part in unofficial industrial action and, in the case of official action, only if the employer has discriminated between employees in failing to dismiss (or by re-engaging) other employees in like position to the claimant (TULR(C) Act s.237).

Dismissal will automatically be unfair in some cases, including: where no reason is given; where dismissal or selection for redundancy occurs for reasons of trade union membership/non-membership and activities; for reasons of sex, race, pregnancy, or assertion of statutory rights. Worker representatives are also protected.

Remedies

When an industrial tribunal considers a complaint of unfair dismissal to be well founded it must explain to the complainant what order for reinstatement or re-engagement may be made and ask whether the complainant wishes the tribunal to make such an order. An order for reinstatement is an order that the employer is to treat the complainant as if there had been no dismissal; an order for re-engagement is an order that the complainant be engaged by the employer in employment comparable to that from which there was dismissal and the tribunal in making such an order is required specifically to state the terms on which re-engagement is to be effected.

Where reinstatement or re-engagement is not ordered (the usual position), or although ordered does not occur, the complainant (who is not above the age of retirement) will receive a monetary award. There are three elements in an award:

An employee who complains of being unfairly dismissed for being a worker representative, under ER Act, or for trade union matters under TULR(C) Act may apply to the tribunal, within 7 days of dismissal, for interim relief pending the full hearing. The tribunal will give an early hearing to the application and if it appears to be well grounded, will ask the employer to reinstate or re-engage the employee pending the hearing: if the employer is not prepared to assist, the tribunal must make an order for the continuation of the employee’s contract of employment until the full hearing.

Redundancy

The Redundancy Payments Act 1965 provided for severance payments to employees dismissed as redundant. The Act gave no security of employment, merely providing compensation. Subsequently, the wider and more generous provisions in respect of unfair dismissal have tended to overshadow the redundancy scheme, for the person who is made redundant is normally only entitled to the basic award outlined above. The statutory provisions are now in ER Act ss.135–154 and TULR(C) Act s.153. TULR(C) Act ss.188–198 (as amended in 1995 by regulations) provides for consultation with recognised trade unions and other workers about redundancies.

Entitlement: An employee is entitled to a redundancy payment if he has been continuously employed by his employer for two years since he reached the age of 18 and he is dismissed by that employer by reason of redundancy or is laid off or kept on short time. An employee who has reached retirement age or who might lawfully be dismissed for misconduct or other reasons (e.g. taking part in a strike or other industrial action) is not entitled to a redundancy payment.

The dismissal of a person is for redundancy when it is attributable wholly or mainly to:

For the purposes of this definition, the business of the employer and associated employers are treated as one.

The definition of dismissal is set out (s. 136) in the same words as are used in the context of unfair dismissal.

An employee is not entitled to a redundancy payment if his employer has made an offer (before the ending of the contract) to renew employment, or to re-engage under a new contract to take effect either immediately on the ending of employment or after an interval of not more than four weeks thereafter. If the employer makes such an offer and as to the terms and conditions of employment, would not differ from the corresponding provisions of the previous contract, or, though the terms do differ, the offer constitutes suitable employment, then an employee unreasonably refusing that offer is not entitled to a redundancy payment. Where the new contract differs from the previous one there is, however, additional to any contractual entitlement, a trial period of four weeks beginning with the date on which the employee starts work under the contract as renewed, and if the new contract is terminated within this period, the employee will retain such rights to redundancy as he had under the earlier contract.

Case law demonstrates that entitlement to a redundancy payment often depends on a very careful interpretation of the terms of the contract in order to determine how much flexibility it gives to the employer to change the circumstances of the employment in a redundancy situation, without changing the terms of the contract. There is no more right under statute than at common law for a party to make unilateral changes in the terms of the contract and in this context such changes will amount to dismissal (Marriott v Oxford and District Co-operative Society [1970] 1 QB 186). In some contracts it may not be possible to require the employee to move from one building to another in the same neighbourhood, or to work at the same place at a different time of day (but see Lesney Products & Co Ltd v Nolan [1977] ICR 235) while in others it may be possible to require working in another part of the country (see O’Brien v Associated Fire Alarms Ltd [1969] 1 All ER 93), or transfer from the day to the night shift, without varying the terms of the contract of employment. It must, however, be remembered that variation of contractual terms and redundancy are not by any means identical concepts: thus to ask an employee to change working hours may be a variation of that worker’s contract, but if the same number of employees is needed to carry out the same amount of work there will be no redundancy situation, though there might well be an unfair dismissal.

In these days of rapidly changing technology it may frequently be necessary to consider, when planning introduction of new plant and equipment, the extent to which the employer is entitled, within the contractual terms, to require the employee to change work methods (North Riding Garages v Butterwick [1967] 2 QB 56) but courts do expect employees to adapt to change (Cresswell v Board of Inland Revenue [1984] IRLR 190).

Consultation

In compliance with EU law it is necessary for an employer to consult with employee representatives when proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. The consultation must take place in good time and in any event where the employer is proposing to dismiss 100 or more employees, at least 90 days (otherwise at least 30 days) before the first dismissal. The employee representatives may be those elected by the employees or, where there is a recognised trade union, they may be representatives of that trade union. The consultation must include discussion about ways of avoiding the dismissals, reducing the number of employees to be dismissed and mitigating the consequences of dismissals, and shall be undertaken by the employer with a view to reaching agreement with the representatives.

If an employer fails to comply with these requirements the appropriate employee representatives may present a complaint to an industrial tribunal. The employer may escape a sanction if he can satisfy the tribunal that there were special circumstances which did not render it reasonably practicable for him to comply with the statutory provisions and that he had taken all such steps as were reasonably practicable in those circumstances. Where the tribunal finds a complaint well founded it must make a declaration to that effect and may also make a protective award. This is an order that the employer pay remuneration for a protected period to those employees described in the award, who have been dismissed or whom it is proposed to dismiss as redundant. The award will be for a period specified by the tribunal but may in no case exceed 90 days.

8.5 Trade unions, collective agreements and trade disputes

Trade unions

TULR(C) Act s.1(1) defines a trade union as an organisation:

There is no special procedure for creating a trade union. However, many statutory provisions refer to independent and/or recognised trade unions. To establish its independence the union must first be placed on the Certification Officer’s list of trade unions and then make a further application for a certificate that it is independent. Whether it is deemed independent will depend upon whether, in the view of the Certification Officer, the trade union is one which:

A union is recognised when it has recognition by an employer to any extent for the purpose of collective bargaining (TULR(C) Act, s.178). Since there is no statutory procedure for recognition, a union may have difficulty in establishing that it is recognised.

Collective bargaining means negotiating for the purposes of reaching collective agreement. TULR(C) Act s.178 spells out the matters which the law recognises as matters for collective agreement. It does so using virtually the same words as are used in other sections of the Act (ss. 218 and 244) to define ‘trade dispute’.

Trade dispute is defined in s.244 as a dispute between workers and their employer which relates to one or more of the following:

Thus the definition covers both disputes of interest and disputes of right and both the content of the employment relationship and the procedures for negotiation.

Containment of trade disputes

The collective bargaining process is a sensitive one and liable to break down, either at the stage of negotiating new terms (disputes of interest) or subsequently when one or other party allegedly fails to honour the negotiated agreement (disputes of right). Additionally, disputes between individual workers and their employers may escalate into collective disputes, so it is not entirely accurate to associate industrial unrest solely with the collective bargaining process.

Breakdowns in industrial relations result in disruption at the workplace with either the workforce withdrawing labour (striking) or the employer refusing to allow workers to carry out their work (lockout). Disruptions of this nature, which may well involve large numbers of workers, can have serious consequences for the economy and may cause great inconvenience to the public at large, particularly if, as is often the case, the breakdown occurs in a public sector service industry.

It is for these reasons that much of employment law is concerned with trying to prevent the occurrence of trade disputes. Statutory mechanisms for this include:

The legislative machinery for assisting industrial relations and individual employment rights have already been outlined.

8.6 Worker involvement

UK governments of the 1970s held the view that industrial harmony could best be promoted by encouraging recognition by employers of trade unions and much of the legislation of that time gave rights to recognised trade unions. Important provisions concerned disclosure of information, safety representatives (see the Safety Representatives and Safety Committees Regulations 1977) and consultation in relation to redundancies and transfer of undertakings. Subsequent events, including amendments to legislation, have very much reduced the power of trade unions and so the legislation became much less effective.

In the meantime the EU adopted Directives which require worker participation in addressing the specific issues to which they relate. These Directives assume, but do not require, the European model of worker participation through Works Councils. It became clear that the UK system of giving participation rights only to recognised trade unions did not meet the requirement of the Directives. As has been noted, the ECJ has declared this in respect of the transfer of undertakings and those regulations (and the statutory provisions on redundancy) were, following the ECJ rulings, altered in amending regulations. Similarly, the requirements on the Framework Directive on health and safety have led to new regulations to provide for safety representatives where there is no recognised trade union (the Health and Safety (Consultation with Employees) Regulations 1996). It remains questionable whether these regulations meet the expectations of the EU: the revised redundancy and transfer of undertakings provide for consultation only where at least 20 employees are to be made redundant and the new safety regulations are less favourable than are the 1977 regulations, which continue to apply where there is a recognised trade union.

Most controversial was the UK’s disassociation from the Directive on the Establishment of a European Works Council (994/45/EC) which was adopted under the Social Protocol Agreement operated by the other Member States following the UK refusal to accept the Social Charter. The main provision of this requires organisations which have over 1000 employees working in the EU, with 150 in each of two or more Member States, to establish a European level information and consultation procedure (or European Works Council). In practice many UK-based organisations operating in other Member States had decided to institute a European Works Council and include UK employees in its operations before the Labour Government was returned to power.

The 20-year-old provision for disclosure by an employer of information relevant to collective bargaining at the request of the representatives of trade unions it recognises remains in force (TULR(C) Act ss. 181–187). Disclosure must be of all such information relating to the employer’s undertaking as is in its possession (subject to certain exceptions) for the purposes of all stages of collective bargaining, which is both information without which the trade union representative would be to a material extent impeded in bargaining, and information which it would be in accordance with good industrial relations practice that they should receive.

A recognised trade union which has not received information to which it is entitled may complain to CAC, which may, if other means of settlement fail, make an award that the employer must observe the terms and conditions specified.

8.7 Liability for strikes

Common law gave trade unions no special rights to organise labour, and it proved very difficult for labour to be withdrawn by employees without liability being incurred by them in either contract or tort: in contract, liability was attached to individuals for breach of their personal contracts of employment; in tort, there might be liability for conspiracy or for interfering with, or inducing the breach of, the contracts of other persons. Moreover, since normally the trade union could not itself be sued, individual members and officers of the union were brought to court, to meet claims for damages, or, much more frequently, to be served with an injunction whose intent was to produce a return of the strikers to work.

This century there have been numerous Acts of Parliament modifying the common law to adjust the balance of power between labour and capital. Judges have had the invidious task of interpreting statutes and applying them to particular strike situations. Successive governments of left or right have amended the legislation to redress what they have perceived as imbalances of power inherent in then existing legislation passed, and judicial interpretations of it. Since 1979 Conservative governments have radically changed trade union law, removing the immunity of the trade union itself from liability, laying down rules for the internal management of unions, and setting out procedures which must be followed before industrial action takes place.

The statutory rules now set out the framework for liability for both persons and trade unions. A person is given immunity from liability for an act done in contemplation or furtherance of a trade dispute (the so-called ‘golden formula’, which, over the years has itself been much interpreted) ‘on the ground only’:

There are special rules relating to picketing (which must normally only be carried out by a limited number of persons at their own place of work), and picketing in circumstances not allowed by the statute may result in civil liability (TULR(C) Act ss.219 and 220). Picketing which involves any violence is likely to incur criminal penalties.

For a trade union the rule is that: ‘An act done by a trade union to induce a person to take part, or continue to take part, in industrial action is not protected unless the industrial action has the support of a ballot’ (TULR(C) Act s.226). This simple statement is fraught with problems. First, the rules for the conduct of the ballot are complex: everyone entitled must have the opportunity to vote (raising questions about the accuracy of the register of members), and any action taken as a result of the ballot, must be called by the person specified in the ballot, strictly in accordance with the proposition voted on, and started within the statutory time limit (4 weeks) of the ballot. The voting paper must bear the words ‘If you take part in a strike or other industrial action, you may be in breach of your contract of employment.’

There remains the question of whether in any particular circumstances the act of a trade union official is the act of the trade union itself (i.e. is the official the agent of the union?): this can be of crucial importance if the union is to avoid liability for unofficial action (see Heaton’s Transport (St Helen’s) v TGWU [1973] AC 15).

A controversial issue is whether ‘secondary action’ should be permissible in the course of a trade dispute (i.e. interference with the commercial activities of an organisation by persons other than the workers who are involved in the trade dispute, or actions by the strikers against persons other than their own employer). The present position (TULR(C) Act s.224) is that such action is not protected, unless (exceptionally) the action is lawful picketing. Section 224 confirms, indeed may go beyond, cases such as Express Newspapers v McShane [1980] AC 672, where journalists employed by provincial newspapers went on strike, causing their employers to obtain copy from the Press Association and leading to those journalists who were both NUJ members and employed by national newspapers being told to boycott Press Association copy. The Court of Appeal (the House of Lords took a different view) found the involvement of national newspapers to be so remote from the strike as to be unlawful secondary action.

While there have been relatively few strikes in recent years, it would be rash to conclude that this is due to the law: it could be at least as much to do with other factors such as changes in the nature, and availability of, employment and the associated reduction in trade union power.

The legislation is still superimposed on the general common law rules for civil liability and not the least of the problems is still the lack of clarity in the common law.

8.8 Conclusions

Anyone who has followed the analysis in this chapter will appreciate the warning in its first paragraph as to the complexity of employment law; particularly since English law has had EU law superimposed on it. As far as reasonably possible, references to sources have been cited, but even in these situations it should not be assumed that the material printed here is an exact citation: often, in the interests of brevity, it has been necessary to paraphrase, and this, of course, may be at the expense of complete accuracy. Those who need the accuracy of the fine detail should refer to the source itself.

8.9 Further reading

Textbooks

Barrett B, Howells R. Cases and materials on occupational health and safety law. London: Cavendish Publishing Limited, 1995.

Kidner R. Statutes on employment law. London: Blackstone, 1996.

Lewis D. Essentials of employment law. London: IDP, 1996.

Selwyn N. Employment law. London: Butterworths, 1996.

Smith I, Wood J. Industrial law. London: Butterworths, 1996.

Sweet & Maxwell’s Employment law manual. London: Sweet & Maxwell (ongoing loose leaf).

Journals

Industrial Law Journal, Oxford University Press.

Industrial Relations Law Bulletin, Industrial Relations Service.