E-NEWS: April 6 2004

In this edition we report on:

* steeles employment law debate
* Rolling up holiday pay
* Redundancy consultation
* Entitlement to commission payments

Employment Debate " Employment Law is Stifling British Business!"

steeles are hosting their annual employment law debate entitled Employment Law is Stifling British Business on April 29. The debate is to be chaired by Norman Lamb MP Liberal Democrat (North Norfolk), employment lawyer, a member of the Treasury Select Committee and consultant to Steeles Law. A specially convened panel of experts includes:

Simon Cheetham Employment Barrister
Kevin McNerney Legal Officer, Royal College of Nursing
Neil Clark Director of Human Resources Europe at APL Logistics
Alistair Hodge Employment Barrister, 5 Essex Court

Demand for places at the debate is expected to be high. Places are free but are on a first come, first served basis. Drinks and light refreshments will be provided. The debate will last from 5.30pm to 7pm and will be held at Broadway House, Tothill Street, London SW1H 9NQ .

Anyone interested in attending should contact Karen McNeill on 0207 421 1720

Is rolling up holiday pay lawful?

In the case of Robinson-Steele v RD Services Ltd the Leeds Employment Tribunal have referred two questions relating to "rolling up" holiday pay to the European Court of Justice. The questions that have been referred to the ECJ relate to whether "rolling up" holiday pay is lawful under the Working Time Regulations.

The principle of "rolling up" holiday pay effectively means that an employee will not be paid any wages at the actual time they take their annual leave. It means instead, that employees are paid as part of their normal wage a specific sum which relates to holiday.

The referral to the European Court is a cause for concern for all employers as it was thought that the matter had finally been resolved in Marshalls Clay Products v Caulfield 2003 which was decided in the employer's favour. In Marshalls it stated that the practice of "rolling up" holiday pay is compliant with the Working Time Regulations as long as it is clearly stated in the employee's contract of employment and expressly agreed. Further, the specific amount or percentage that an employee is being paid for holiday should be identified.

However, the case of Robinson-Steele has taken the view that "rolling up" holiday pay has the effect of limiting the Working Time Regulations, which is prohibited.

Until the position has been clarified by the European Court a question mark hangs over whether it is lawful to pay an employee "rolled up holiday pay". If it is determined that "rolling up holiday pay" contravenes the Directive, which all EU countries are supposed to follow then employers could be facing unlawful deductions from wages claims from employees dating back to the implementation of the Regulations in 1998. We will keep you informed of developments.

Consultation with employees in a redundancy situation

The European Commission is taking the UK Government to the European Court of Justice for its failure to enforce certain parts of the EU Working Time Directive, regarding ‘rest periods’ and ‘undeclared working time’.

The Commission alleges that workers are not taking the tea breaks to which they are legally entitled under the Directive, and unpaid overtime is not being included in the 48-hour maximum week.

With a non-binding vote of the European Parliament in favour of abandoning the 48 hour opt our provision and the pending review of the Working Time Directive from the European Commission due soon, working time looks to be one of the hot topics to watch in the coming months.

Consultation with employees in a redundancy situation

In the recent case of Securicor Omega Express Ltd v GMB 2004 the EAT had to consider whether an employer was in breach of S.188 by meeting with the affected employees' union after it had made the decision to close down two branches

Section 188(2) Trade Union and Labour Relations (Consolidation) Act 1992 ("the 1992 Act") requires an employer to consult employee representatives where it is proposing to dismiss as redundant 20 or more employees at one establishment. The consultation must begin at the earliest opportunity, and in any event where the employer is proposing to dismiss as redundant at least 10 but less than 100 employees at one establishment within a period of 30 days or less, at least 30 days before the first of those dismissals takes effect. The consultation must include discussing ways of avoiding the dismissals & reducing numbers of employees to be dismissed, and mitigating the consequences of the dismissals.

In this case Securicor decided in November 2001 to close two of its branches in the Midlands and to make redundancies at a third. A meeting was arranged with a senior GMB representative on 10th December 2001. It was then envisaged that there were to be 55 redundancies in total and that employees were to be selected for redundancy on a last in, first out basis.

Further discussions about voluntary redundancy and relocation were minuted, and copies of the minutes were sent to the union representatives. There were no voluntary redundancies and the number of compulsory redundancies was reduced. The dismissals took effect on 18th January 2002.

GMB argued that Securicor had failed to consult its representatives about the possibility of avoiding the dismissals and reducing the number of employees involved, so breaching the duty set out in the 1992 Act. The Employment Tribunal agreed with the GMB that the meeting of 10th December could not be regarded as a "consultation" meeting at all because all the relevant decisions had been made prior to the union's involvement. The tribunal made a protective award covering a period of 35 days.

Securicor successfully appealed.

The Employment Appeals Tribunal ("EAT") confirmed that consultation, in this context, must in general be fair and meaningful. Consultation should include discussion about possible ways of avoiding dismissals, reducing the numbers of dismissals and mitigating the consequences for those dismissed.

The December meeting fulfilled these criteria because it addressed the consequences of the closures and the associated redundancies, even though the fact of closure was taken as read. The EAT pointed out that the meeting had a successful outcome, significantly reducing the number of proposed redundancies.

To conclude, in considering the scope and timing of an employer's duty to consult employee representatives over proposed redundancies, such consultation can, depending on the facts, still be "fair and meaningful" even if it takes place after the employer's decision to dismiss has been taken.

Contracts of Employment - Entitlement to commission payments

steeles Employment department recently acted for Peninsula Business in a successful appeal to the EAT. In the case of Peninsula Business Services Ltd v Sweeney 2004 the EAT upheld a term in a signed written contract which provided that, upon leaving employment, an employee forfeited any right to commission earned but not yet due for payment.

Peninsula offered Mr. Sweeney a job as a sales executive, conditional upon his accepting it's standard terms of employment. PBS Ltd explained that commission would be paid in addition to a basic salary and that full details of the commission scheme would be provided separately. These were documents available for inspection at the company's office.Mr Sweeney duly accepted the offer of employment and signed copies of the documents, one of which contained a provision that employees would not be entitled to commission payments if they were no longer employed by the company on the date when those payments would normally have been made.

Mr. Sweeney resigned from the company in 2001 and his employment was terminated. He claimed payment of just over £21,000 from Peninsula by way of damages for breach of contract in respect of unpaid commission. The tribunal at first instance upheld the claim on the basis that the relevant section of the commission rules document had never in fact been incorporated into his actual contract of employment. Peninsula appealed to the EAT and won. The EAT acknowledged that certain aspects of the commission rules could be regarded as onerous and accepted that Mr. Sweeney had not been made aware of the their implications. However, it also held that the language of the agreement was clear. The onus was on Mr. Sweeney to read them carefully before signing, and the fact that he had signed them meant that they were incorporated into his contract of employment. He had not been misled. He had simply signed without first finding out how the company's commission policy operated.

The EAT also dismissed the tribunal's suggestion that the relevant terms were unfair, whether for the purposes of the Unfair Contract Terms Act 1977 or otherwise. The onerous commission penalty suffered by Mr. Sweeney on resignation did not arise under a contractual term involving an unlawful restraint of trade. There was no contractual restriction as to where he might work or what he might do after leaving Peninsula.

Having defeated Mr. Sweeney's claim for damages for breach of contract, the EAT extended the same principles to his argument that the non-payment of commission amounted to an unlawful deduction of the wages due to him under Employment Rights Act 1996 s.13. The commission rules document stipulated that post-resignation commission was not "properly payable" under the employment contract, so making section 13 irrelevant. The EAT concluded that the situation could not have been clearer from either point of view.

This bulletin is intended for general guidance only and should not be relied upon without detailed legal advice on your specific circumstances.

This article copyright © 2004 Steeles Law. All rights reserved.