October 16 2006 Employment Law Enews

Welcome to the latest employment law e-newsletter.

ECJ rules length of service pay differential is permitted

Employers will be relieved to learn of the recent decision handed down by the European Court of Justice in the case of Cadman v Health and Safety Executive. The ECJ has ruled that employers generally do not need to justify using length of service to determine pay, even where this results in a pay disparity between men and women employed in equal work or work of equal value.

Mrs Cadman was employed by the Health and Safety Executive (HSE) and was paid less than four male colleagues who were at the same grade but who had a longer period of service. Mrs Cadman brought a claim for equal pay, on the basis that using length of service as a criterion in awarding pay indirectly discriminated against women, since they were more likely to have a shorter period of service than men.

The employment tribunal upheld Mrs Cadman's claim but the EAT allowed the HSE's appeal. She then appealed to the Court of Appeal, who referred the case to the ECJ.

Back in May 2006, the Advocate General gave his opinion in advance of the Court's judgment that employers would have to justify pay awarded on the basis on length of service, which would have been very onerous for most employers. In the majority of cases, the ECJ decision follows the Advocate General's opinion. Unusually, however, the Court did not follow the Advocate General's opinion in this case.

The Court ruled that in most cases employers do not have to justify the use of a length of service criterion in their pay structure, even though this results in unequal pay between men and women. It applied an earlier judgment which had suggested that using such a criterion accords with the legitimate objective of rewarding experience. Length of service goes hand in hand with experience and experience generally enables a worker to perform better. However, it might still be open for the use of service as a criterion to be challenged in the case of unskilled or semi-skilled jobs that are mastered relatively quickly and where experience does not equate to improved performance.

It will be interesting to see whether the Courts will follow the same approach when considering pay differentials in the light of the new age discrimination legislation, which only expressly permits length of service up to five years to be taken into account in awarding benefits (including pay). Anything over five years must be justified and one of the examples of justification in the Age Regulations is "rewarding experience", so it might prove easier than it had been anticipated for employers to justify pay awards on the basis of service.

Enhanced Redundancy terms held to be contractual

The Court of Appeal has ruled in the case of Keeley v Fosroc International Limited that enhanced redundancy provisions contained in a staff handbook were contractual, even though parts of the handbook were procedural and therefore non-contractual.

The provision for enhanced redundancy payment was contained in a section of the handbook headed "employee benefits and rights". It stated that eligible employees (with two years' service) were entitled to an enhanced redundancy payment, but the handbook did not set out how such a payment was to be calculated. The employer therefore argued that the provision was too uncertain to amount to a contractual term, although it admitted that it used the same formula for all enhanced redundancy payments made to its employees.

The Court disagreed, finding that provision for redundancy (notwithstanding any statutory entitlement) is a widely accepted feature of an employee's remuneration package and therefore "apt" for incorporation into the contract of employment. According to Lord Justice Auld, this is the case even if the provision is couched in terms of information or explanation, or expressed in discretionary rather than contractual terms. The Court was satisfied that the enhanced redundancy payment was an express contractual term and so did not need to go on to consider whether the term had become contractual through "custom and practice".

The ruling suggests a presumption that enhanced redundancy terms are contractual when referred to in a staff handbook. It is likely that employers who include details of redundancy entitlement in a staff handbook will find it very difficult to rebut this presumption.

Age Discrimination - date set for challenge

The new age discrimination provisions have been in force for less than a month but a date has now been set for the first challenge to the Government's implementation of the legislation.

Heyday, the membership body backed by Age Concern, brought a High Court action in July 2006 challenging the default retirement age of 65, which it maintains is incompatible with the European Directive requiring the introduction of the new legislation. It has recently been announced that the hearing is due to take place on 6 December 2006. The Court will first consider whether the case merits a full hearing and will proceed immediately to hear the full case once it is satisfied there is a case to answer.

There have been criticisms of the new legislation from many sectors, who will now await the Court's decision with interest. We will keep you informed of any further developments.

Bullying at work - new research published

Research conducted by Portsmouth University into bullying in the workplace has been published as part of the Dignity at Work project, jointly funded by Amicus and the DTI.

Bullying in the workplace is estimated to cost UK employers over £2 billion per year in sick pay, staff turnover and loss of production. Despite this, only 2% of employers were found to have a zero-tolerance approach to bullying and over half of respondents to the survey consider bullying to be an issue in their organisation.

The recommendations resulting from this research include:

• Adopting a zero-tolerance approach
• Encouraging consultation with employees (in partnership with unions) on early intervention strategies
• Recognising that bullying is an organisational issue rather than just a problem between individuals
• Setting out clear anti-bullying and harassment policies and communicating these together with the business case for doing so
• Using the term 'bullying' to describe negative behaviours
• Training managers in mediation and conflict resolution skills
• Appointing a senior manager as 'anti-bullying champion', with managers leading by example.

The consequences of not addressing bullying in the workplace could be financially disastrous for companies faced with discrimination or personal injury claims as a result, when high levels of compensation can be awarded. Addressing the problem at an early stage therefore makes commercial sense and measures adopted by organisations to tackle the issue can also provide a good defence to any future claim.

Employment Law Update Workshop

As you are aware, employment law is a rapidly developing area and all the indications are that the relentless pace of development is set to continue. With this in mind, we will be running a morning briefing to be held on Tuesday 7 November at the Broadway House, Tothill Street, London SW1H 9NQ.

The emphasis of this briefing is very much on the practical implications of all the changes and what they mean for you and your business. This session will review a range of topics in which there have been recent developments, including the following:

• Maternity
• Transfer of Undertakings
• Victimisation
• Excessive Workloads
• Statutory Dismissal and Grievance Procedures
• Compromise Agreements
• Bullying

The briefing has a 9.00am for 9.30am start and should conclude no later than 1.00pm. The cost is £50.00 + VAT. To reserve your place please call 020 7421 1720 or BOOK ONLINE

If you are unable to come but would like further information about the work we do, please contact the team on lonemp@steeleslaw.co.uk Apart from regular briefings, we also carry out interactive in-house sessions designed for managers and HR professionals, which can be tailor made to suit your needs.

This article copyright © 2006 Steeles Law llp. All rights reserved.