February 11 Employment Law Enews

Welcome to the latest edition of our Employment Enews from Steeles Law. In this edition we focus on the issues of holiday pay, sick pay, disability and age discrimination.

HOLIDAY PAY AND SICK LEAVE

The case of Stringer and others v HM Revenue and Customs (formerly the Ainsworth case) was referred by the House of Lords to the European Court of Justice (ECJ) for determination in December 2006. The case concerns the issue of whether workers who are absent due to sickness are entitled to accrue (and take) paid annual leave.

The Court of Appeal had decided that:

• Workers cannot elect to take annual leave during a period when they are absent on sick leave.
• A worker who has been absent for the whole of the employer's holiday year does not accrue annual leave and has no entitlement to be paid in lieu of holiday on termination.

The Advocate General has now given her opinion of the case, in advance of the final judgment of the ECJ. An Advocate General's Opinion is influential on the Court and in the majority of cases (but not all), the Court's decision follows the Opinion.

The Advocate General's view is that workers who are absent on sick leave continue to accrue annual leave under the Working Time Directive. However, she agrees with the Court of Appeal that a worker should not be permitted to take, and receive payment for, annual leave during a period when he or she is absent through illness. In addition, in the Advocate General's view a worker is entitled to a payment in lieu of leave that has accrued but not been taken during a period of sickness absence (whether such absence is for the whole or for part of the holiday year). This should be paid at the employee's normal rate of pay and not at the rate of any sick pay he or she is receiving.

We are likely to have to wait another six months or so before a final decision is handed down by the ECJ. In the meantime, any cases that have been lodged with employment tribunals concerning this issue have been stayed, pending the outcome of this case. Employers who are in the process of terminating the employment of individuals who have been absent on sick leave are not yet obliged to pay in lieu of untaken holiday, but are more likely now to face a claim for an equivalent amount on the strength of the Advocate General's Opinion.

RECURRENCE OF A DISABILITY

The Court of Appeal has recently confirmed in the case of McDougall v Richmond Adult Community College that the likelihood of a disability recurring must be assessed at the date of the act of alleged discrimination, and not taking into account events taking place after that date.

Facts

Ms McDougall was offered a job by the College which was subsequently withdrawn when the College could not obtain medical clearance due to her history of mental illness. Ms McDougall brought a claim for disability discrimination and then suffered a serious relapse in her mental health.

The College disputed that she was disabled within the meaning of the Disability Discrimination Act 1995, and the tribunal agreed that whilst Ms McDougall suffered from a mental impairment, her impairment had neither a "substantial" nor "long term" adverse effect on her ability to carry out normal day to day activities. The tribunal further held that at the date of the alleged discrimination (when the job offer was withdrawn) the impairment was not likely to recur.

On appeal to the EAT, Ms McDougall argued that the tribunal should have assessed the likelihood of the impairment recurring on the basis of facts known at the date of the hearing, taking into account her relapse. The EAT agreed and upheld the appeal, finding that she was disabled and allowing her case to proceed.

Held

The Court of Appeal has now allowed the College's appeal and held that the likelihood of recurrence must be judged on the basis of the evidence available at the time of the act complained of. On this basis, Ms McDougall was not disabled and could not pursue her claim.

Comment

This case will provide some degree of certainty for employers, who will only need to consider the chances of recurrence at the date of the decision in question. However, this still involves an element of prediction that should ideally involve expert medical opinion, and for this reason it is often best to assume that an individual is disabled where the prognosis is uncertain, particularly in respect of individuals with a mental impairment.

RETIREMENT OF PARTNER WAS NOT AGE DISCRIMINATION

An employment tribunal has recently ruled in the case of Seldon v Clarkson, Wright and Jakes that the compulsory retirement of a partner from a firm of solicitors at the age of 65 did not amount to unlawful age discrimination. This is one of the first tribunal decisions to deal with this point.

Facts

Mr Seldon had been a partner of the firm since 1972, and had been both its Senior and Managing Partner some years prior to his departure. Due to financial pressures he had hoped to carry out some consultancy work for the partnership after his retirement, but the firm decided it had no business need for this work. The partnership deed provided for compulsory retirement at 65, and Mr Seldon sought to challenge this on the basis it discriminated against him on the grounds of his age. Whilst employees can generally be forced to retire at the age of 65 provided the statutory retirement procedure is followed, the default retirement age does not apply to partners. The partnership in this case accepted that the compulsory retirement age discriminated on the grounds of age, but sought to defend the claim on the basis the retirement age was objectively justified. Both direct and indirect age discrimination can potentially be justifiable, unlike other forms of discrimination in which only indirect discrimination is capable of justification.

Held

The tribunal accepted some (but not all) of the firm's reasons for enforcing the retirement age, which meant they were satisfied it was objectively justified.

The tribunal took into account the application of the retirement age to all partners, the fact that Mr Seldon had made no attempt to remove the compulsory retirement age (whether before or after the introduction of the age discrimination legislation), and the need for the firm to be able to offer advancement to solicitors. In particular, the tribunal took into account the "congenial and supportive" culture of the firm and that by having a compulsory retirement age it avoided the need to confront or expel partners who were underperforming towards the end of their careers. The firm gave evidence that partners were expected to "coast" to a certain extent when nearing retirement, and by abolishing the retirement age there may have been a greater need to performance manage some partners.

Comment

A decision of an employment tribunal is not binding on other tribunals, so this case cannot be relied upon to demonstrate a general approach to the issue of justification. However, it provides a good illustration of the way tribunals are likely to tackle similar cases. If the ongoing Heyday challenge to the default retirement age for employees is successful, it might be that employers will also need to consider the issue of justification when enforcing the retirement of employees. Before then we should at least have some decisions from the EAT dealing with the question of what amounts to justification, which will provide a firmer basis for employers to rely upon.

Recruiting Foreign Nationals and the Points Based System FREE SEMINAR Steeles Law in association with HSBC and Blick Rothenberg Accountants London 5 March

click http://www.steeleslaw.co.uk/seminars.aspx

During 2008 radical changes are being introduced that will affect all aspects of business immigration. The Home Office is to introduce new civil penalties for illegal workers as well as rolling out a new "points based" system that will affect 80 of the existing work and study immigration categories. The new points based system will comprise a 5 tier structure and will have a significant impact on companies proposing to make new work permit applications and/or extension applications. Under the new system companies will also need to apply to be licensed. The recently published draft legislation on the future tax treatment of non-UK domiciled individuals will also mean vast changes. Blick Rothenberg, who specialise in this area, will take you through the proposals and explain how they will affect foreign nationals coming to work in the UK. This breakfast seminar is brought to you by Steeles Law, Blick Rothenberg Chartered Accountants and HSBC plc. It is designed as an update for all companies involved in recruitment of staff from overseas on the latest legal regulations both imposed and proposed, as well as the corresponding tax issues.

This article copyright © 2008 Steeles Law llp. All rights reserved.