Employment Law E-Bulletin

Cases: June 2008

Changing Terms and Conditions

The recent decision in Martland v Cooperative Insurance Society Ltd reinforces that when an employer is forced to terminate and re-engage employees because there is no agreement to a change in terms and conditions, this will generally not amount to a redundancy but is a dismissal for some other substantial reason.

The facts of the case are that Mr Martland and his colleagues were financial advisers responsible for finding and servicing clients who obtained insurance from the Cooperative Group.  In 2005, following of a review of operations, the Cooperative Group tried to make changes to their terms of employment, the changes of reduced contact with clients, and introduced more intensive management scrutiny together with a shift from servicing to selling.

When they were unable to reach agreement with the union, the Cooperative, who viewed these changes as essential, decided to terminate the employment of the financial advisers but to offer re-engagement on the new terms.

Mr Martland and his colleagues brought claims for redundancy claiming that there had been a reduction in the need for employees to do work of a particular kind i.e. work under their terms and conditions.  The Tribunal rejected this analysis finding that the job was still essentially the same despite substantial changes to the terms and conditions of employment as the employees were insurance salesmen before and after the change though the employees might regard their original work as being more rewarding, the fact that the new operation system would make it less palatable to them did not mean that they were redundant. 

The EAT has now upheld this decision.  It has reinforced the point that changing the way in which an employee works is not the same as implementing a change in the kind of work that employee does so as to bring the termination within the meaning of redundancy in the Employment Rights Act 1996.  As the particular kind of work which the employees were carrying out had not been altered, the EAT confirmed that the employees could not be redundant but that they had been dismissed for some other substantial reason, namely their refusal to agree to the new terms and conditions.

This case is both good news and a warning: the good news is that redundancy pay and procedures aren’t required in these circumstances.  The warning is that employers are at risk if they use the redundancy argument to make a tax free payment when substantially changing terms and conditions.  It is not a redundancy if the work is of the same kind before and after so the payment should be taxed.

Refusing a suitable alternative vacancy

The recent case of Commission for Healthcare Audit and Inspection v Ward addresses the issue of what happens when an employee who is facing redundancy is offered an alternative vacancy but refuses it.

Under section 141 of the Employment Rights Act 1996, an employee who unreasonably refuses an offer of suitable alternative employment in a redundancy scenario is not entitled to statutory redundancy pay.  However, the suitability of an offer of alternative employment must be judged objectively.

In this case, Ms Ward’s role had been identified as redundant during a restructuring exercise at the Commission in 2006.  Ms Ward had faced redundancy 2 years earlier but had survived this process.  Nevertheless, Ms Ward was disillusioned with the Commission’s approach to redundancy and felt that the Commission was deliberately making things difficult for her in that she was invited to meetings to discuss the alternative roles on offer but was then told that discussions could not take place until the Commission had taken legal advice.

Ms Ward was eventually offered two potential roles.  However, she had drafted the job descriptions for both posts herself and considered them to be unsuitable because of what she perceived to be the loss in status arising from a reduced team and budget and worse career prospects.

The original tribunal hearing the case made a finding of fact that the jobs offered to Ms Ward were suitable alternative vacancies.  However, they decided that Ms Ward had not unreasonably refused these roles.  The Commission appealed but the EAT has upheld the tribunal’s decision finding that a role can be suitable but reasonably refused.  It was stressed in this case that the roles offered were only marginally suitable because the content of the proposed post was over 60% different from the old post and the EAT specifically mentioned that where a new job is overwhelmingly suitable it will be easier for the employer to show that the employee’s refusal of that offer is unreasonable.  However, in circumstances such as these, where the job could have been seen as suitable but was not plainly suitable, the employee was not being unreasonable in refusing it.

The lesson to be drawn from the above case is that whilst offering suitable alternative vacancies can be a useful tool in avoiding having to make redundancy payments, the suitability or otherwise of the role is to be judged objectively and an employer denying payment on these grounds runs the risk that a tribunal will not agree with their assessment.  Even if the tribunal agrees that the vacancy is suitable, an employee may still be entitled to refuse the vacancy provided their refusal is not unreasonable.  To guard against this, good communication from the employer, a solid and fair redundancy procedure and trying to address perceptions of alternative job offers will be key.

Reasonable Investigations

You may recall that back in March we highlighted the case of Millbrook Proving Ground Ltd v Jefferson which stressed that an investigation into misconduct did not have to be exhaustive.  The case of Carlsberg UK Ltd v Cramp and Rabbitt reinforces this position but reminds employers that their investigations must be reasonable in the circumstances.

The facts of the case were that Carlsberg dismissed Mr Cramp and Mr Rabbitt, two of its delivery men, after a customer reported that some barrels of beer had been missing from their delivery.  Two Carlsberg senior managers investigated the matter by searching Mr Cramp and Mr Rabbitt’s lorry and searching the other lorries at the depot as soon as the matter was reported.  When the barrels were not found, Mr Cramp and Mr Rabbitt were suspended and ultimately dismissed.

The Tribunal decided that, because it was dark at the time of the search, the search had been inadequate and that therefore the investigation was flawed.  However, the EAT has found that this was an error in law as the Tribunal were substituting their own view as to what was an adequate investigation rather than considering whether the investigation undertaken by Carlsberg fell within the range of reasonable responses.  The EAT confirmed in this case that the Tribunal’s role is to assess whether the investigation into the suspected misconduct was reasonable in all the circumstances. The Tribunal is not entitled to decide that it was unreasonable purely on the grounds that they would have done something differently.

Although this case was decided on its specific facts, employers can take comfort from the EAT’s repeated assertion in that the investigation into a misconduct incident does not have to be perfect.  The investigation may only have to be reasonable in the circumstances but this will almost always involve the employer doing as much as they can and taking care to ensure that they have looked carefully at every aspect of the case.

For further information contact Burnetts' employment law team on 01228 552222.

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June 08