Employment Law E-Bulletin

Cases

Morrish v NTL Group

A PILON (payment in lieu of notice) clause enables employers to lawfully terminate a contract with an employee without giving notice. This can be achieved by paying the employee a proportion of his salary and emoluments that would be available were the period of notice observed. Whilst it can be commonplace to have an express clause in a contract for payment in lieu of notice, the question of whether such a clause can be implied was raised in the case of Morrish v NTL Group.

Under his employment agreement Mr Morrish was to hold the position of Financial Director and Company Director for 3 years and would continue to thereafter until either party with 12 months notice terminated the contract. Mr Morrish’s position was however made redundant by his employers without this notice.

His employers claimed that an implied PILON clause existed which gave them another method of dismissing Mr Morrish – payment of 12 months salary and emoluments. However under such a scheme Mr Morrish would not (inter alia) have the opportunity to receive Executive bonus pay from 2004 that would be available were a 12-month period of notice observed. His employers, alongside the PILON clause had made representations that they were willing to also make additional payments for loss of contractual benefits, however the matter in question was whether or not the employers could legally adopt such a position.

It was held that since a clause in the agreement for his employment had the express term that a 12 month period shall be observed, this express term had supremacy over any implied term; the existence of which may only be necessitated where there is no express clause protecting the employee. Since the implied PILON clause would be an exclusion or limitation clause, it would also have been unrealistic that such implied terms should be governed less harshly than such terms expressly made. Whilst doubt was cast on the ability for such an implied clauses to exist in the 21st century, no express judgement on the matter was made other than the expression of strong reservations against such clauses. Mr Morrish received pecuniary remedy; the level of remoteness being that which he would have received was he given the 12-month period of notice.

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Kuzel v Roche Products Ltd

After a claim of unfair dismissal it would be customary for the employer to refute the claim by showing that the dismissal was vindicated under s.98 (1) and (2) of the Employment Rights Act 1996. However in the case of Kuzel v Roche Products Ltd this approach was not taken. The claim was that the employee had been unfairly dismissed as a result of disclosing protected information (s.103A). The tribunal rejected the employer’s reason for the dismissal. However unlike a standard discrimination case the tribunal did not automatically accept the employee's claim for unfair dismissal. This was because it was an issue concerning a protected disclosure (and the fact that such an issue is dealt with under different legislation) the tribunal considered other reasons for the unfair dismissal. The employee must first show that there is a reason to doubt his employer’s reason for dismissal. The employer must then attempt to prove his reason. If this is unsuccessful the employer has the opportunity to disprove the employee’s S.103A (protected disclosures) reason. If this is unsuccessful then the employee has proved that the dismissal was for the s.103A reason.

The Employment Appeal Tribunal was keen to state that simply because the protection afforded to whistleblowers under s.103 of the Employment Rights Act 1996 is protection against a form of discrimination, it cannot be assumed that the same burden of proof which applied to discrimination cases can be applied to the provisions regarding protected disclosures.

The key differences are that in a discrimination case all that must be shown to place the burden of proof on the employer is that, for instance, religion was contributory to the detriment which was suffered. In a whistleblower case it must be shown that the protected disclosure was the reason (or at least one of the main reasons) for the detriment. Furthermore, whereas the statutory protection afforded to a whistleblower is tiered depending on the extent of the detriment (i.e. harassment or dismissal), the protection for discrimination is not. Finally, damages for injury to feeling are available for discrimination cases.

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Gab Robins (UK) Ltd v Triggs

Two issues were raised concerning the treatment of an unfair constructive dismissal claim where the employee took action after a ‘final straw’ incident in the case of Gab Robins (UK) Ltd v Triggs; The first relating to the necessity of following the proper grievance procedure and the second to the awarding of compensation for future loss of earnings.

Following a claim for unfair dismissal where the handling of the employee’s grievance is the only reason for the constructive dismissal (not a ‘final straw’ situation) the tribunal must ascertain whether the employers response to the grievance fell with in the reasonable responses (s.98(4) of the Employment Rights Act 1996). However in such a case where the employer’s handling of the grievance was the final straw at the head of cumulative reasons, this process did not have to be followed.

The practical significance of this for employers is that an acceptable ‘final straw’ reason for an employee claiming unfair constructive dismissal may be different to the original grievance lodged. However this case did also show that the act must in some way contribute to the breach of the implied term of trust and confidence.

The second issue raised regarded compensation. The governing legislation – s.123(1) ERA – states that a just and equitable amount shall be awarded by the tribunal with regard to the loss from the ‘consequence of the dismissal’. The complainant had been on sick leave for 5 months before her constructive dismissal, and it was therefore argued that the constructive dismissal did not cause the complainant future loss of earnings. Rejecting the approach the EAT highlighted that this would be the case were the employee actually dismissed. In a case of constructive dismissal a repudiatory breach is made by the employer and then accepted by the employer. Here the breach came before the sick leave and the sickness could therefore be argued as a result of the breach. Therefore an award was made for full loss of earnings. It is of note that the significant date when considering an award for loss of earnings from constructive dismissal is from the instant of the breach, not the date of dismissal.

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For further information on these cases or any other employment law issue contact the employment law solicitors at Burnetts on 01228 552222.

August 2007