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Employment update: 21 February 2012


United Kingdom

Employment update: 21 February 2012

In this issue:


Employee working in Libya can claim unfair dismissal

An increasing number of employees are required to work overseas, whether on a long-term or short-term basis. This has, unsurprisingly, given rise to various employment issues, most importantly whether such employees have UK employment rights. The Supreme Court has recently grappled with this issue, confirming that a British citizen who lived in England, but worked in Libya on a rotational basis, could bring a claim of unfair dismissal. Given the case law in this area, the Supreme Court has provided useful guidance on the complexities that can arise from internationally mobile employees.

In Ravat v Halliburton Manufacturing and Services Ltd, Mr Ravat was a British citizen living in England. He was employed by Halliburton Manufacturing and Services Ltd, a UK company based near Aberdeen, one of about 70 subsidiaries or associated companies of Halliburton Inc, a US corporation. From 2003, Mr Raya worked in Libya, on what was known as a commuter or rotational basis. He worked for 28 consecutive days in Libya, followed by 28 days at home in England. The work he carried out in Libya was for the benefit of a German subsidiary of Halliburton Inc. He received the same pay and pensions benefits as UK-based employees. He was paid in sterling into a UK bank account and paid UK tax and national insurance contributions on a PAYE basis. He reported on a daily basis to an operations manager based in Libya and, on policy and compliance issues, to a finance manager based in Cairo. Human resources issues were handled by the Aberdeen office.

Mr Ravat complained that he was unfairly dismissed. The complication was that, at the time of dismissal, he was working in Libya. The question was therefore whether the Employment Tribunal had jurisdiction to consider his complaint.

The Supreme Court held that Mr Ravat had a sufficiently strong connection with Great Britain and was entitled to claim unfair dismissal. The starting point is whether the employment relationship has a stronger connection with Great Britain than with the foreign country where the employee works. Although the general rule is that the place of employment is decisive, this is not an absolute rule. It is a question of fact and degree and a number of factors were relevant in this case. These included that Mr Ravat's home was in Great Britain, he was given the status of a commuter, the law of the contract was stated to be UK law, he was reassured by his employer that he would be protected by UK employment law and matters relating to the termination of his employment were handled in Aberdeen. This all fit into a pattern, which pointed strongly to British employment law as the system with which Mr Ravat's employment had the closest connection.

Refusal to offer voluntary redundancy was justified

The Employment Appeal Tribunal (EAT) has confirmed that an employer was justified in refusing to select employees aged between 50 and 54 for voluntary redundancy based on cost. There has been uncertainty for some time about the extent to which cost can be a factor in assessing justification and this decision is a useful example of how tribunals consider cost issues in such circumstances.

In HM Land Registry v Benson and others, HMLR needed to make significant reductions to the headcount and offered a scheme to encourage staff to leave by voluntary redundancy or early retirement, with enhanced benefits. Under the scheme, employees aged over 50 would be offered compulsory early retirement and those aged under 50 would be offered the opportunity to volunteer for compulsory early severance under the Civil Service Compensation Scheme. When staff were invited to apply, HMLR made it clear that the available budget was finite and that not all applications would be automatically selected. The main criterion for HMLR's selection process was based on how much it would cost to release an applicant i.e. HMLR would select those whom it would cost least to dismiss (the "cheapness criterion").

Six employees brought tribunal claims against HMLR. Five of them, all aged between 50 and 54, claimed that the application of the cheapness criterion indirectly discriminated against applicants in their age group. The other employee, Mrs McGlue, argued that she had been indirectly discriminated against on grounds of sex by HMLR's decision not to make offers to employees on a career break.

The Employment Tribunal upheld the claims. However, in respect of the five claimants, the EAT allowed the employer’s appeal. HMLR had legitimate aims. It was legitimate for HMLR to seek to break even year-on-year and to make redundancies in order to help it to do so where necessary. It was also legitimate for HMLR to impose a budget on the amount to be spent, even if that might mean that selection had to be made between applicants. Like any business, it was entitled to make decisions about the allocation of its resources. Imposing a maximum spend (in this case, the relevant budget was £12 million) did not make selection inevitable. If selection was necessary, it would not inherently involve adopting a method which had a disparate impact on particular age groups. Any discriminatory impact would be the result of the particular selection criterion chosen rather than the aim being pursued.

The EAT noted that an employer's decision about how to allocate its resources, specifically its financial resources, should constitute a real need (or "legitimate aim") – even if it could have afforded to make a different allocation with a lesser impact on the class of employee in question. The task of an employment tribunal is to accept the employer's legitimate decision as to the allocation of its resources as representing a real need but to balance it against the impact complained of. Although the cheapness criterion was disproportionately unfavourable to employees in the employees' age group, the Employment Tribunal had found that the HMLR had no real alternative in the circumstances. It is worth noting, however, that the EAT commented that it was not sure that this was an inevitable conclusion and, in other similar cases, the evidence might well produce a different result. It does not follow from this decision that the use of a similarly discriminatory criterion will necessarily be justified in other cases.

In relation to Mrs Glue, the EAT rejected HMLR's appeal against the Employment Tribunal's finding that its refusal to allow her to take voluntary redundancy because she was on a career break at the relevant time was indirectly discriminatory. Employees on career breaks remained employees under the Civil Service arrangements and since they had the right to return on reasonable notice, they could not be treated as definitively absent in the year under consideration. HMLR was entitled for the purpose of its exercise to adopt reasonable criteria to decide who did and did not count but the criteria was not fair because it did not allow employees on career breaks the chance to advance their return. The practice adopted could not be regarded as proportionate or relied on by way of justification.

Compromise Agreements - Equality Act 2010

The Equality Act 2010 (Amendment) Order has now been laid before Parliament, to rectify a drafting anomaly in section 147(5) of the Equality Act 2010 (the Act), which gave rise to some confusion as to how claims under the Act could be settled.

Section 147 of the Act sets out requirements which must be met to compromise claims validly under the Act. It provides that complainants must receive independent advice from an independent adviser. Section 147(5) excludes categories of people from the definition of "independent adviser" and, on the current drafting, appears to exclude someone who is advising an employee about a possible claim and/or the terms of a compromise agreement.

The Order amends the current drafting, so that a complainant's lawyer would not be precluded from being an independent adviser under the Act. The Order will come into force on 6 April 2012.

Modern Workplaces consultation - delayed response

The Department for Business, Innovation and Skills has announced that, due to ongoing discussions within Government, there will be a delay in publishing the Government's response to the Modern Workplaces consultation. The consultation covers a number of issues, including a proposed new system of flexible parental leave, the extension of the right to flexible working and changes to the Working Time Regulations due to recent cases on the interaction of annual leave and sick leave. The Government response is now due to be published in the spring of 2012.

Apprenticeships - new Government funding

There will be a new round of Government funding to support thousands of apprenticeships up to degree equivalent level.

Businesses and training providers can now bid for a share of £6m from the Higher Apprenticeship Fund, which will support the development of thousands of new Higher Apprenticeships in sectors including aerospace, energy and renewable technologies.

The Prime Minister also opened the bidding for the new Employer Ownership pilot, inviting employers in England to apply to access up to £250m of public investment and secure more control over how skills training is designed and delivered. Small firms will be offered an incentive of £1,500 to hire their first young apprentices. This is expected to support up to 40,000 new apprenticeships over the next year.

Retail apprenticeships - have your say

Although apprenticeships cover a range of sectors, there has been particular focus and interest in retail apprenticeships. Timed to coincide with the recent National Apprenticeship Week, we have released a short survey, to assess how retailers are responding to apprenticeship schemes and whether apprenticeships are a valuable tool for the retail sector. If you work in the retail sector and would like to have your say, please click here. 

Cash injection for employers to boost youth jobs

The Deputy Prime Minister is calling on businesses to sign up to the Government’s flagship £1bn Youth Contract so that they are ready to offer the jobs to young people in April.

Details have been announced of how employers can access cash to help cover the cost of taking on fresh talent through a ‘wage subsidy’. The subsidy will be paid to companies for taking on young unemployed people and is designed to cover costs such as National Insurance contributions.

The key details are as follows:

  • The wage subsidy will pay £2,275 to employers for every 18 to 24 year old unemployed person they employ from the Government's Work Programme.
  • It is open to all businesses, voluntary organisations and charities.
  • Payments for the majority of business will be made after the young person has been employed for 26 weeks.
  • For smaller enterprises these payments will be staggered, with the first payment after 8 weeks and the rest after 26 weeks. This recognises that smaller businesses need a boost to their cashflow to make the jobs viable.
  • The wage incentive will also be available for part time positions, with a rate of £1,137.50 if someone is employed between 16 and 29 hours.

Year of campaigning to protect interns

The TUC and the National Union of Students (NUS) have launched a new campaign calling for the fair treatment of interns.

The TUC and NUS are concerned that interns around the UK are being exploited through unpaid work. Unions fear that many employers have sought to take advantage of graduates' desperation to find work in the economic downturn and so see interns as a useful source of free labour. Others may be unaware that non-payment of interns is a breach of the law and of national minimum wage rules.

There will be a year of campaign activity for fairer and better internship, with the focus on highlighting interns' rights.

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