September 4 2006 Employment Law Enews

Welcome to the latest employment law e-newsletter.

Mutuality of Obligation in Employment Contracts

The EAT has last week overturned the original decision in ABC News Intercontinental Inc v Gizbert (2006) and at the same time, neatly circumvented the requirement for mutuality of obligation in an employment contract.

Mr Gizbert, a foreign news correspondent, covered international news stories for ABC News Intercontinental ("ABC") (including dispatches from war zones around the World). In 1997 he started to decline war zone assignments due to the risk involved and in light of his growing family. With this in mind, in the Summer of 2002, ABC and Mr Gizbert renegotiated his contract to allow him to work on a freelance basis.

The new contract guaranteed Mr Gizbert a minimum of 100 days work per annum with ABC, at a rate of $1,000 per day. Importantly, the contract reserved for Mr Gizbert the right to decline any assignment, which was offered by ABC and, other than the contractual entitlement to 100 days per year, allowed ABC not to offer Mr Gizbert any further work.

Despite the contract being renewed for a further year in 2003, and despite the fact that Mr Gizbert had worked 236 and 172 days in 2002 and 2003 respectively, following a series of budget cuts made by ABC in 2004, Mr Gizbert's employment was terminated.

At the original Tribunal, it had been ruled that Mr Gizbert was unfairly dismissed for refusing to cover war zones, finding that Mr Gizbert was covered by UK health and safety protection, which were found to apply to journalists employed in the UK but assigned to war zones abroad.

The EAT however has now overruled this decision and come to the conclusion that where an employer is obliged to offer a minimum amount of work, but the employee is not obliged to accept, the requisite mutuality of obligation required in order for the contract of employment to be legally binding (and for an individual to claim unfair dismissal under that contract) does not exist.

As ABC operated a voluntary war zones policy under which Mr Gizbert was not obliged to accept any work in any such area there was no mutuality of obligation and there was not accordingly a contract of employment. Furthermore, the EAT stated that the termination of engagement by ABC was not an automatically unfair dismissal as it only related to the "raising of the health and safety issue rather than the safety of Mr Gizbert".

The EAT however wished to reach a decision which was fair on the facts of the case, and side-stepped their own finding that there had been no mutuality of obligation. Instead, the EAT found that there was an implied obligation because ABC were obliged to provide 100 days of work and that whilst Mr Gizbert had the right to decide whether to accept or refuse the assignments he was obliged to consider this "in good faith", and that, in reality, his freedom to reject assignments was limited. Therefore the EAT found that Mr Gizbert did have the necessary mutuality and continuity of employment to bring an unfair dismissal claim.

The case has now been remitted to the Tribunal to determine whether the dismissal was fair or unfair, and to accordingly reassess the compensation awarded depending upon any subsequent findings.

Top-10 Reasons for an Employers' failure to Pay National Minimum Wage

HM Revenue & Customs have published a report detailing the top ten reasons given to HMRC enforcement teams, by employers, for failure to pay the national minimum wage.

The published list is a shocking illustration of employers' attitudes and includes excuses such as failure to speak English, employees over the age of 65 and where the employee was disabled.

In addition, some employers believed their employees were a "total waste of space" and did not think their staff were worth the minimum wage entitlement. In addition, one employer argued that the sum of the employee's wages plus benefits totalled the national minimum wage.

In a statement issued by Dawn Primarolo, the Paymaster General, it was acknowledged that although the "majority of employers are honest and scrupulous.there are still some rogue employers out there willing to flout the law".

As from 1 October 2006, the national minimum wage is to increase from £5.05 to £5.35 per hour to workers over the age of 22, and from £4.25 to £4.45 for 18 to 21 year olds.

It seems unfathomable that employers are ignorant enough to believe their reasons are justified or alternatively whether they think the reasons provided will allow them to evade the law. In any event, it appears that the HM Revenue & Customs certainly have their work cut out in trying to decrease the amount of unpaid salaries, which was reported as being £3.3m for the period of August 2005 to July 2006 alone.

The full top-10:

1. He doesn't deserve it - he's a total waste of space;
2. But she only wanted £3 an hour (editors note - my personal favourite!);
3. I didn't think the workers were worth NMW;
4. I didn't think it applied to small employers;
5. He's disabled;
6. They can't cope on their own and it's more than they would get in their own country;
7. She's on benefits - if you add those to her pay, it totals the NMW;
8. He's over 65, so the national minimum wage doesn't apply;
9. The workers can't speak English; and
10. I only took him on as a favour.

Employment Law Update Breakfast Briefing

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 breakfast briefing to be held on Wednesday 25 October 2006 at the Norwich City Football Club.

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 will take place from 7.45am and should conclude no later than 10.00am. The cost is £50.00 + VAT and includes a full English and continental breakfast. To reserve your place please call 01603 598000 or BOOK ONLINE.

If you are unable to come but would like further information about the work we do, please contact the team on noremp@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.