Two individual directors have been held personally liable for the unfair sacking of a whistleblower for the first time, in a case that will send shockwaves through boardrooms.

Appeal judges have upheld a record-breaking £2m award to the former chief executive of International Petroleum (IPL), Alexander Osipov, who was sacked in October 2014 on the grounds of lack of trust and confidence.

Osipov brought proceedings in the UK employment tribunal (IPL is based in Australia, but listed on the London Stock Exchange) for unfair dismissal and four counts of victimisation including for whistleblowing. The four co-defendants included two non-executive directors of the company: Frank Timis, the majority shareholder, and Anthony Sage, IPL’s chairman.

In 2016 an employment tribunal ruled that Osipov had been unfairly dismissed, primarily for making protected disclosures under whistleblowing legislation.

He was awarded compensation for unfair dismissal, injury to feelings and unpaid salary. The employment appeal tribunal (EAT) upheld the initial ruling and awarded the claimant £1,744,575.56 (now recalculated to be £2,003,972.35).

The second of two judgments made by the ET found Timis and Sage jointly liable for the award to Osipov. The two directors took this ruling to the Court of Appeal which has now upheld the original tribunal and EAT decisions.

The dismissal of Osipov in 2014 came at the culmination of a series of disagreements between the chief executive, Timis and Sage and other senior employees over IPL’s operations and the award of contracts in Niger, during which Osipov had become excluded from decision-making.

He was then dismissed without a notice period, and IPL claimed that because it only had a very small HR department it was unable to follow the correct dismissal procedures.

Osipov told the ET that his concern was good corporate governance and the need to avoid suggestions of bribery and corruption, which had blighted businesses in Niger. He also voiced concerns over the holding of data that may have breached Niger’s petroleum code.

The case is particularly notable because it has confirmed that individual directors taking the decision to dismiss someone for making a protected disclosure under whistleblowing legislation can be held personally liable.

The case is an important reminder for decision-makers to think more carefully than ever before about giving instructions to dismiss an employee for whistleblowing.

It’s vital that employers identify any potential whistleblower complaint at an early stage and isolate complaints from any other processes involving the whistleblowing employee, such as a performance or grievance process.

It’s advisable for employers to provide relevant training on whistleblowing to their staff, in particular line managers, decision-makers and those involved in internal HR procedures.  Especially when those who take the decisions can be held personally responsible if they are Directors.

A whistleblower is a worker who reports certain types of wrongdoing. The wrongdoing they disclose must be in the public interest. This means it must affect others, e.g. the general public.

Whistleblowers are protected by law – they shouldn’t be treated unfairly or lose their job because they ‘blow the whistle’.

Concerns can be raised at any time about an incident that happened in the past, is happening now, or is believed will happen in the near future.

A confidentiality clause or ‘gagging clause’ in a settlement agreement isn’t valid if you’re a whistleblower.

Complaints that count as whistleblowing are as follows:

 

  • a criminal offence, e.g. fraud
  • someone’s health and safety is in danger
  • risk or actual damage to the environment
  • a miscarriage of justice
  • the company is breaking the law, e.g. doesn’t have the right insurance
  • you believe someone is covering up wrongdoing

At Solve. we can provide training on whistleblowing procedures and assist in cases of whistleblowing.

A recent employment tribunal ruling is a useful reminder of the special protection afforded to pregnant employees facing redundancy.

In early 2016, the British Museum began a 5-year scheme to train Iraqi archaeologists on excavation techniques and site-management best practice. Ms Niki Savvides was hired for the role of training co-ordinator, initially on a one-year, fixed-term contract, with the expectation that her role would continue for the duration of the project. Towards the end of the first year, she informed the Museum that she was pregnant. Talks commenced with the Museum to secure maternity cover but soon afterwards she was informed that the emphasis of the role had changed, that a new post was to be created and that she was being made redundant. The role was then advertised externally and Miss Savvides applied. Unable to attend the interview due to pregnancy-related illness, the Museum withdrew her application.

In Savvides v The Trustees of the British Museum, Ms Savvides contended that the new role of project co-ordinator was similar enough to her current role that it should have been offered to her without having to apply when it was advertised externally. She claimed for automatic unfair dismissal and discrimination on the grounds of pregnancy.

A tribunal agreed and found in her favour. It held that the role change meant the Museum did in fact have a genuine redundancy situation, but as Ms Savvides had the requisite skills for the new role she should have been offered the job. Accordingly, the dismissal was automatically unfair.

In addition, the tribunal found that by withdrawing Ms Savvide’s application when she was unable to attend the interview due to the pregnancy-related illness, the Museum had discriminated against her and awarded an undisclosed financial settlement.

A spokeswoman for the British Museum said: “The British Museum values its employees highly and takes its responsibilities as an equal opportunities employer seriously; we aim to create a family friendly environment for all employees, through enhanced packages and flexibility and by consulting regularly with staff and representatives.

“The employment tribunal considered a case regarding the law on pregnancy discrimination, and came to its decision based on legal technicalities that were specific to this case.”

Notes to employers facing redundancies affecting staff who are pregnant, or on maternity leave.

Genuine redundancy situations do not mean that employers can lawfully dismiss pregnant employees or staff already on maternity leave. It is important to understand and correctly apply the law, most notably Regulation 10 of the Maternity and Parental Leave Regulations 1999 (MPLR) which covers the employees mentioned above.

In brief, Regulations 10 states: “This regulation applies where, during an employee’s ordinary or additional maternity leave period, it is not practicable by reason of redundancy for her employer to continue to employ her…Where there is a suitable available vacancy, the employee is entitled to be offered… alternative employment…”

Essentially an employee selected for redundancy whilst pregnant or on maternity leave, must be offered a suitable alternative role, if her employer has one. Furthermore, this employee should be offered the role in preference to other at-risk employees, even if the other employees were better suited for the role. Without adhering to the legal provisions of suitable alternative arrangements as set out in Regulation 10, any dismissal is automatically unfair and does not need a minimum length of service (normally two years) to recover unfair dismissal losses.

Additionally it is unlawful, due to Section 18 of the Equality Act 2010, for an employee to be treated unfavourably because of her pregnancy or maternity or any illness suffered due to the pregnancy. For a Section 18 claim, no comparator needs to be identified, making proving the case at tribunal easier. Compensation would then be payable for actual loss of earnings (capped), and also for injury to feelings (uncapped).

To be confident of compliance with the regulations, an employer who does not offer any alternative role should be able to show exactly why the new role is not suitable, ensuring that the failure to offer an alternative role is not due to the employee being on maternity leave.

On 6th April 2018, and again on 6th April 2019, the rate for the minimum contribution to Workplace Pensions from both employees and employers is increasing.

All employers, with employees in a work place pension scheme, must take action to ensure at least the minimum amounts are being paid into their pension scheme.

This applies to you whether you set up a pension scheme for automatic enrolment or you decided to use an existing scheme.

If you’re using a defined benefits pension scheme then the increases do not apply.

Up to 5th April 2018
Employer minimum contribution 1%
Employee minimum contribution 1%
Total minimum contribution 2%

6th April 2018 – 5th April 2019
Employer minimum contribution 2%
Employee minimum contribution 3%
Total minimum contribution 5%

6th April 2019 – onwards
Employer minimum contribution 3%
Employee minimum contribution 5%
Total minimum contribution 8%

As an employer you can make the decision to move straight to the 6th April 2019 minimum rates from April 2018 if you wish to eliminate the need to make two changes.

By law a total minimum amount of contributions must be paid into the scheme.  You as the employer must make a minimum contribution towards this amount and your employee must make up the difference.  If you decide to cover the total minimum contribution required, your employee won’t need to pay anything.

This is not a change to pension scheme rules which requires legislative communications but we would recommend as good practice that you advise your employees in advance of the expected change to prepare them for the increase in their own pension contributions and your own pension provider should be able to help with this. With the contribution rate for employees tripling this will have a material impact on net pay for many.

If you offer a salary sacrifice we would advise you review communications issued and seek advice from your pension provider regarding any changes you may need to share with your employees.

There are also changes coming for the Auto Enrolment threshold rates:

  • Earnings trigger is to remain at £10,000 per annum.
  • Lower qualifying earnings will rise from £5,876 to £6,032 per annum.
  • Upper qualifying earnings will increase from £45,000 to £46,350 per annum.

In addition, ensure your contracts of employment and/or employee handbook reflect your new contribution rates and we can help with this.

Fixed term contracts can be effective when used properly and fairly, for example if a business has a specific project that has a limited time period then a fixed term contract would be a good option but it’s important to be mindful of the risks involved when it comes to terminating a fixed term contract.

Employees who are on a fixed term contract have the same legal rights as permanent staff.  There is also the Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 to take into account when considering terminating an employee.  So it is not as straight forward as simply terminating once the contract has reached its end date and failing to take into account the risks involved can prove very costly.

When an employee is nearing the end of a fixed term contract take the following points into consideration:

  1. The need to understand, if any, what notice provisions are included in the contract.  Once you know this, you can determine when to start discussing terminating or renewing the contract with the employee.  Depending on how the contract of employment is written, some fixed term contracts may expire automatically on the expiry date or completion of a task but this would need to be specified in the contract.
  2. If there is a requirement to serve notice before the expiry date, failing to do so may entitle the employee to a payment in lieu of notice or an extension to the contract.
  3. If looking to terminate the contract early (with the exception of a gross misconduct dismissal) then it’s important to have a break clause otherwise this could prove costly as the employee may be able to make a claim for loss of earnings for the remainder of the term.
  4. By law, the non-renewal of a fixed-term contract amounts to a dismissal. Even where employment continues past the end of the term, there may still be a dismissal if the terms and conditions are different from the original contract, even if the employee has accepted the new terms.
  5. If an employee has two or more years’ continuous service you can only terminate if you can show one of the five potentially fair reasons for dismissal (conduct, capability, redundancy, illegality/contravention of statutory duty or some other substantial reason).
  6. If using redundancy for the reason for non-renewal consideration will need to be given to the pool for redundancy as well as the availability of alternative employment.  The employee may also be entitled to a statutory redundancy payment.
  7. If a fixed term contract has been used to cover the absence of a permanent employee, the fixed term employee will not be made redundant upon the return of the permanent employee.  In this case you would need to rely on the ‘some other substantial reason’ (SOSR).

In order to reduce the risks it’s important to have clearly written clauses within a fixed term contract and to monitor the operation of a fixed term contract.  It’s good practice to diarise the expiry dates of fixed term contracts so that decisions can be made in good time as to whether a contract is to be renewed or terminated.

For help and guidance on fixed term contracts speak to us at Solve.

Employer Right to Work Checks

It has been confirmed by the Employment Appeal Tribunal that the drivers for the transport company Uber are not ‘self-employed’ and are in fact workers by the Company.  Uber operates a digital platform to provide transport services, whereby, drivers sign up online and are connected with customers through a mobile phone app.  Uber had argued that it is no different to the ‘traditional’ cab company and they acted as the ‘agent’ for the drivers and not the employer and maintained that they did not control when and how drivers work.

According to Uber, their guidelines for drivers as to how work should be done are ‘recommendations’ and not obligations, they also argued that there is no obligation on the drivers to perform work for instance they were not obliged to switch on the app or accept driving jobs once the app is switched on as well as the drivers bearing the financial risk of the transaction, Uber can choose to absorb the loss if a customer refuses to pay, but is not obliged to do so.

The EAT rejected these submissions and upheld the decision of the employment tribunal that the drivers are engaged as workers by the company, when the drivers were driving, they are a worker and that is their working time

The reality of the situation was that the drivers are subject to significant control by the business.

It was less certain that the drivers were workers when the app was on and they were waiting for a job to be allocated (as they could in theory be working for multiple companies during this time).  However, the EAT accepted that the tribunal was entitled to decide that the drivers were also working during this period particularly because there was an obligation on drivers to accept 80% of the jobs offered whilst the app is on.  The decision suggests that, whether an individual is a worker during these interim periods will depend on the particular facts of the case and the operating model used by each organisation.

What does this mean for me?

Whether an individual is self-employed or is a worker is fundamental, as worker is entitled to various employment-related benefits such as paid holidays, rest breaks, the national minimum/living wage, auto-enrolled to a qualifying pension scheme, and not to be detrimentally treated for whistleblowing.

This Judgment is very clear, what a Company says in their documents will not determine the status of an individual and in fact the starting point is the reality of that working arrangements.  An Employment Tribunal will look at what you do, the rules and requirements you impose, and the arrangements you have in place, these are some key attributes that will determine the status of your workers / contractors.

If you are at all concerned about the status of those you engage, you should take advice on the reality of the entire relationship.

Employment Law

Employment Law

You may have heard the term employment status on the news at the end of October 2016 in relation to Uber drivers.  This has prompted many business owners to think about the status of the people they engage.

1.     What is Employment Status?

  • Employment status looks at the nature of the relationship between an employer and the people that work for that company / provide services to that company.
  • Employment status looks at how bound and obliged the 2 parties are to each other and defines the employment status accordingly.

 

2.     What are the key categories?

The key categories when looking at employment status are:

  • Self employed
  • Workers
  • Employees

The Uber drivers were found to be ‘workers’ and not self employed

 

3.     Why is Employment Status important ?

Employment status is important because it determines employment rights

(Self-employed have the least rights, employees have the most rights)

  • Independent contractors – the truly self-employed have very few rights in relation to their work; for example, they have no entitlement to be paid minimum wage, holiday pay or sick pay.
  • Workers have various employment rights such as the right to minimum wage, paid holiday, appropriate daily rest breaks,
  • Employees have all the employment rights that workers have but have some additional protections including (subject to length of service) the right to: bring an unfair dismissal claim; request flexible working; statutory maternity pay; redundancy pay; and to a minimum notice period.

The HMRC website has an employment status indicator that you can use to look at how the Inland Revenue view employment status with respect to the paying of taxes.

 

4.     Surely if I agree with someone that they are self-employed and they are happy with that, then that is okay

  • That might sound okay and work out okay at the start of the relationship, however if the person is truly a worker or truly an employee attaching the label of self-employed to them doesn’t make them self-employed.
  • Furthermore it is always a good idea to look at a relationship – not when things are going well – but when things are not going so well. For instance when you want to part company with the person – if they are not self-employed then parting company with them may not be as easy as it would be if they were truly self employed
  • When determining employment status a  court will look at the reality of the situation – they will look at what happens in practice
  • A court will look at the detail of the relationship with a fine tooth comb

 

5.     How do I work out what someone’s employment status is?

To work out someone’s employment status there are many different tests but here are a few key areas to look at:

  • One of the most important things to consider is ‘mutuality of obligation’ – does mutuality of obligation exist between the company and the person?  If there is mutuality of obligation then that points towards the person being an employee. If there is a lack of mutuality of obligation then that points towards the employment relationship being looser and therefore the person could very well be a worker or self-employed.
  • It is worth looking at control also. How much control do you have over the person?
  • In the Uber case the court looked at the amount of control the employer had over the drivers. The court looked at the substance of the relationship between employer and driver – not the language of the documentation issued to the drivers – again just because you call someone self-employed does not make them so
  • The Uber situation isn’t new law – it was a case of applying old law to a set of modern circumstances.

 

6.      So once I have worked out employment status for each person then I don’t need to bother checking it again?

  • That is a very good question.   It is worth being aware that some employment relationships develop over time and can mutate/change into something different. For instance – someone may start off as a casual worker but over time there becomes a mutuality of obligation that makes them move from being a casual worker to actually being an employee.

For more information and advice please visit out Employment Law section or simply Contact us