Employment Review - September 2018

Welcome to the September edition of Freeths’ Employment Law Update

This month we take a look at how a TUPE transfer can take place even after a 5 month break in activities and how a discriminatory reference can taint subsequent recruitment decision making. We also follow the law of vicarious liability as it continues to move in favour of the Claimant and how workers believe that employers are spying on them.

• Will a 5 month break in activities prevent a TUPE transfer taking place?In Colino Sigüenza v Ayuntamiento de Valladolid and others, the ECJ considered this very question.
• A discriminatory reference can result in a subsequent recruitment decision also being found to be discriminatory
• In South Warwickshire NHS Foundation Trust v Lee, the EAT highlight the importance of a balanced and accurate reference that reflect an accurate picture of the applicant.
• Acas have just released some new guidance on employment references
• Vicarious liability continues to evolve
• Workers believe bosses are spying on them
• More than half of UK workers believe that their bosses spy on them, according to the TUC’s report.

Will a 5 month break in activities prevent a TUPE transfer taking place?

In Colino Sigüenza v Ayuntamiento de Valladolid and others, the ECJ considered this very question.

Facts:

Mr Colino Sigüenza worked as a music teacher at a municipal music school in Valladolid, Spain. The running of the school was outsourced by Ayuntamiento de Valladolid, a Spanish public authority, to Musicos y Escuela SL ("Musicos"). Musicos took over the facilities, premises and resources and continued to operate the music school as a municipal music school. Until a sharp decline in pupil numbers diminished led to the school becoming unprofitable. As a consequence, Musicos  dismissed all the staff and closed the school in April 2013 and the company was subsequently put into administration.  The public authority who remained the owners of the school, terminated its contract with Musicos. Some five months later, the public authority awarded a new contract to In-pulso Sociedad Cooperative ("In-pulso") to operate the school. The school reopened in September 2013, using the same premises, instruments and resources but with an entirely different complement of staff.

Mr Siguenza together with a number of his collegaues brought unfair dismissal claims against the public authority, Musicos and In-Pulso. The court held that the 5 month break in activities meant that no TUPE transfer took place. Mr Siguenza appealed and a preliminary ruling was requested from the ECJ on whether a transfer had taken place, and, if so, whether the dismissals were for an economical, technical or organisational (ETO) reason.

The Advocate General (“AG”) gave his opinion in December 2017 and concluded that there had been no transfer of an undertaking. In the AG’s view, once the contract with Musicos came to an end there could no longer be an economic entity for the purposes of a relevant transfer. The AG also found that even if there had been a transfer there was no doubt that the dismissals were for economic reasons, Musicos having no longer been financially viable at the time of the dismissals.ECJ's consideration:The ECJ disagreed with the opinion of the AG. and held that the economic activity in question was the management of the school and it was the material resources such as musical instruments, facilities and premises that appeared to be essential to the conduct of the economic acitivity. It was described by the ECJ as an "asset reliant" case and therefore the fact the staff did not transfer did not preclude the existence of a transfer. The assets were owned by the public authority and had been used by Musicos and then transferred to In-pulso. The fact the school was temporarily closed and had no employees at the time of the transfer is a relevant factor, but not determinative, as to whether a TUPE transfer had taken place. In this case, the fact that 3 months of the closure occurred during the school holidays was also a relevant factor.

The ECJ concluded it was possible for a TUPE transfer to have taken place and remitted the case back to the Spanish courts to give their final determination. The ECJ did however agree with the Opinion of the AG on the issue of whether the dismissals were for an ETO reason.

Comment:

As this is a Spanish case, it was decided by reference to the Acquired Rights Directive ("ARD").  In the UK, this set of facts would likely give rise to be a service provision change, which does not exist under the ARD.

This decision is in line with previous cases decided here in the UK in which the EAT have held that there is nothing in TUPE which prevents a TUPE transfer taking place following a cessation of activities and it remains a fact sensitive issue which should be decided by reference to the purpose, nature and length of the cessation in each case.

A discriminatory reference can result in a subsequent recruitment decision also being found to be discriminatory

In South Warwickshire NHS Foundation Trust v Lee, the EAT highlight the importance of a balanced and accurate reference that reflect an accurate picture of the applicant.

Facts:

Mrs Lee was employed initially by Staffordshire and Stoke Trust (“Stoke”) as a nurse. During the course of her employment, she suffered with arthritis, which led to absences and issues at work. She decided to leave her employment with Stoke and take up fresh employment with a private healthcare provider (Ark). Within a short period she left, and was offered a role with South Warwickshire NHS Foundation Trust (the Trust). She was the only candidate for the position. The Trust looked to Mrs Lee’s previous employers for references, and both were returned unsatisfactory. As a consequence, the Trust decided to withdraw the job offer.

The reference provided by Ark was positive in some respects but also stated that the employee “found it difficult to keep up with the demands and pressures of community complex cases”. The reference provided by Stoke was a negative reference, which focused on the Claimant’s health issues and absences from work.Mrs Lee’s arthritis was a disability for the purposes of the Equality Act 2010. She considered both the provision of a negative reference from her previous employer and the withdrawal of the job with the Trust to be disability discrimination and subsequently brought claims in the Tribunal in this regard.

The Trust stated that it was Ark's reference that was the influencing reference in their decision to withdraw the job offer.

The ET needed to decide whether the discriminatory reference provided by Stoke was a factor in the Trust's decision-making. At ET, the Trust accepted that both references influenced the decision. The ET held that both the reference and the withdrawal of the job offer were unfavourable treatment, and were "something arising in consequence of" the Claimant’s disability. The Trust argued that in any event that there was a legitimate aim to recruit an employee who was capable in all respects of undertaking the requirements of the role and that their decision to withdraw the job offer was a proportionate means of achieving that legitimate aim. The ET did not agree that withdrawing the offer was a proportionate means of achieving a legitimate aim and felt that there were less discriminatory ways to achieve that legitimate aim such as a trial period or further enquiries being made of Occupational Health regarding possible reasonable adjustments. The Trust appealed.

Decision:

The EAT concluded that the ET had found that the decision to withdraw the job offer was based on both references and that the discriminatory reference from Stoke had more than a minor influence on that decision. Having reached that conclusion, the ET was right to say that the burden of proof shifted to the Trust to show that the withdrawal had nothing whatsoever to do with the withdrawal and it had failed to discharge that burden.The EAT also found that the ET had correctly dealt with Trust’s defence based on justification. The appeal was dismissed.

Comment:

This case serves as a useful reminder for employers to ensure they do not rely upon discriminatory references when recruiting. In addition, if an employer decides to give a reference for a departing employee, it needs to be fair and balanced and not discriminatory.

Acas have just released some new guidance on employment references.

You can access the guidance here: http://www.acas.org.uk/index.aspx?articleid=5072

Vicarious liability continues to evolve.

Barclays Bank v Various

Facts:

This case is the latest in a string of cases, which seem to expand the law of vicarious liability in an effort to compensate victims in a situation where they may otherwise find themselves without any recourse.In this case, Dr Bates, now deceased, had sexually assaulted hundreds of individuals whilst undertaking pre-employment medical checks on Barclays behalf between 1968 and 1984.

A group of claimants brought claims against the Bank arguing that the Bank should be vicariously liable for the conduct of Dr Bates.

The Bank sought to argue that Dr Bates was in fact an independent contractor and not an employee or in a situation ‘akin to employment’ and therefore it not be held to be vicarious liable He charged a set fee for each medical examination and would invoice the Bank accordingly. Further, during the relevant time period Dr Bates was also performing similar services for other organisations.

The High Court determined that there is a two stage test for vicarious liability – "was the relationship one of employment, or akin to employment, and was the tort sufficiently closely connected with the employment?"  The Court held that the first stage of the test was satisfied. It went on to determine that, as the claimants were only in close proximity to the doctor by reason of the examination that the bank required and the individuals had no choice in who carried out the pre-employment checks, the alleged sexual assaults were "inextricably interwoven" with the Doctors duties. As with other recent decisions relating to vicarious liability, , one of the factors taken into account, was whether the Bank, as employer, was more likely to have the means to compensate the victims and could be expected to have insured against that liability.

Decision:

The bank was held to be vicariously liable for the conduct of the doctor and the appeal against this decision was unsuccessful.

Comment:

The Court noted that changes in the structures of employment, and of contracts for the provision of services are widespread and that operations intrinsic to business enterprise are routinely performed by independent contractors, over long periods, accompanied by precise obligations and high levels of control. In the light of this decision, employers should review their use of independent contractors and insurance coverage.

Workers believe bosses are spying on them

More than half of UK workers believe that their bosses spy on them, according to the TUC’s report, "I'll be watching you". The report highlights that 56% of UK workers think that it is likely that they are being monitored at work, and 70% think that surveillance is likely to become more common in the future.

The report draws reference to recent headlines such as Amazon’s practice of wristbands that track warehouse workers, Uber being caught keeping a bit-too-close of an eye on its drivers, and sci-fi sounding software that tracks the emotions and “intensity” of staff.

No doubt, cases such as the Romanian Barburlescu case (that we reported on last year) which attracted headlines like ‘Bosses have green light to monitor private e-mails’ fuel this growing concern experienced by employees.

The report also highlights that two-thirds of workers (66 per cent) are concerned that workplace surveillance could be used in a discriminatory way if left unregulated.

Comment:

The GDPR and the new Data Protection Act 2018 place significant limits on surveillance and monitoring in the workplace, and the ICO now has the power to issue substantial fines (up to €20million or 4% of global annual turnover) should employers breach their data protection obligations. This demonstrates the need for employers to have written policies and procedures in place, so that they are able to evidence that they have thought about the reasons for monitoring staff and that they comply with the data protection principles for collecting, using and storing that data to reassure employees that any workplace surveillance is not used in a discriminatory way.