Restrictive covenants clauses: consistency is the key

Restrictive covenants in employment contracts are a bit like lifejackets: it’s nice to have them there and you hope that they will fit you in an emergency but you would really prefer not to have to use them. That said, if the time comes and your employees are approached by a competitor in breach of those restrictions, you want to be able to put a stop to it.

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Mind the gap – a note for the statutory construction industry

And here is why we should be careful when construing employment law statutes about attaching too much importance to contrasts between different legislative provisions. I don’t pretend to have spotted this, so hats off to one reader who did and kindly dropped me a line about it.

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Mission Impossible? – Hospital’s obligations to cure dying relationship

Akinwunmi – v – Brighton and Sussex University Hospitals NHS Trust is the perfect example of when employment law reaches the limits of its usefulness in HR practice.

For a fuller description of the facts, see Chris Lynn’s blog http://www.employmentlawworldview.com/when-20-months-unauthorised-absence-is-still-an-unfair-dismissal/. For our purposes, however, Dr Akinwunmi fell out with five of his neurosurgeon colleagues over alleged discrimination, clinical malpractice, victimisation, breach of contract, intimidation, misrepresentation, whistleblowing, bullying and pretty much everything else in the grievance lexicon. There were reciprocal reports to the Police and the General Medical Counsel, all ultimately baseless, and the air was thick with mutual recriminations and toys flung out of prams all round.

It was quite apparent to the Trust, said the Employment Appeal Tribunal, that its Pituitary Unit was in crisis. Assorted internal investigations all confirmed that the working relationship between Akinwunmi and his colleagues was so poor as to pose (because that entailed a lot of people not talking to each other when they should) a potential hazard to patient safety. The only person to emerge from the Judgement with any credit at all (Akinwunmi included) was the Trust Manager who at a very early stage had suggested some management and diversity training within the team and then a follow-up mediation. Despite a further two years’ guerrilla warfare in the Unit, however, this had not been following up by the Trust. Akinwunmi said that working under such conditions represented a threat to his own health too, and so refused to return to work after an agreed three month career break for a further definitely non-agreed twenty months.

His resulting dismissal, even after twenty months’ unauthorised absence, was found unfair. Moreover, he was not even guilty of any contributory fault in that dismissal. How could that be?

The legal arguments (see Chris’ piece) revolved around the reasonableness of the dismissal – is it within the range of reasonable responses to dismiss an employee for failure to comply with a management request where he has reasonable grounds for refusing? But the practical question was different – where an employee refuses to come in because he fears harm to himself or others through working with people he believes are out to get him, what should the employer do either to mend those bridges or sever them cleanly?

Two factors separated this case from the norm – first, the Employment Tribunal found that Akinwunmi’s belief that his colleagues had behaved abysmally towards him was not just genuine but entirely well-founded. Second, it was accepted that dysfunctional relationships between the doctors in the Pituitary Unit did indeed constitute a threat to patients’ safety. Both those factors strengthened Akinwunmi’s hand very considerably. However, they didn’t affect the key point of the ET’s findings (upheld by the EAT), i.e. that it was incumbent on the employer to take proactive steps to address the problems it knew existed before it could reasonably expect Akinwunmi to return. The Trust did not discharge that burden simply by once or twice asking Akinwunmi what he thought. In particular, it could not insist that he came back as a pre-condition of dealing with his issues.

Lessons for employers

  1. The EAT considered that the Trust should have pushed the mediation proposal as hard as it could, accepting that it could not make it compulsory. Akinwunmi should perhaps have been consulted about alternative roles, and prompt conclusions should have been reached and communicated to him in relation to his complaints about his colleagues. In a case less clear-cut than this, it might prove possible to get the employee to change his mind about the attitude of his colleagues, or at least (if he won’t), to persuade the Tribunal that he should have done.
  2. As a practical question, we are left with the puzzle of what could actually have been done to resolve the situation. Even if Akinwunmi’s colleagues had been trained or warned before he came back, would that take away what they had done or persuade Akinwunmi that thereafter they thought better of him?   Clearly the answer is no. It was also accepted that in this case any mediation would have been very complex because of the number of individuals concerned and again the problem would be how far anyone involved could reasonably be expected to believe that whatever the other doctors said in that process, their daily attitude would be any different.
  3. It would therefore be easy to understand an argument on Akinwunmi’s part that things had gone too far to allow a return at all so long as his five colleagues remained in post. However, you are then pushed back on the principle that co-workers do not have to like each other so long as they can work together civilly and professionally. If the Trust had taken more proactive steps, Akinwunmi could have been put in a situation where whatever he felt about his colleagues and vice versa, and however genuine and reasonable those sentiments, he had no legally-legitimate reason for staying away from work. Then a failure to return would be a contributory fault matter.
  4. Of course if after a mediation and the undertaking of other management training, etc. the behavioural issues remained then it would be open to the Trust to find one party principally to blame and warn/dismiss on that basis. Alternatively it could conclude that whatever the original source of the problem, it had escalated to an untenable position for all concerned such that there was “some other substantial reason” for a dismissal anyway.
  5. So it may well be worth the employer relying less on the unauthorised nature of the absence as the basis for dismissal and more on the irresolvable conflict causing it or the refusal of one or other party to the dispute to engage in or comply with reasonable steps to address it.
  6. Keep in mind that absence on these grounds is unlikely to be found disability-related despite its duration http://www.employmentlawworldview.com/eat-stresses-line-between-disability-and-unhappiness-in-the-workplace/.

Comings and Goings at the NLRB

Updating our prior post, Marvin Kaplan was sworn in on August 10, 2017 as a National Labor Relations Board Member for a term ending on August 27, 2020.  He succeeds Harry I. Johnson III, who served on the Board from August 12, 2013 to August 27, 2015.  Mr. Kaplan was confirmed by the Senate on August 2, 2017.  Previous to his appointment to the NLRB, Mr. Kaplan served as Chief Counsel to the Chairman of the Occupational Safety and Health Review Commission, as counsel for the House Committee on Oversight Government Reform and as policy counsel for the House Committee on Education and the Workforce.  He also worked at the U.S. Department of Labor’s Office of Labor Management Standards and in private law firm practice.

Member Kaplan’s swearing in comes just days after Philip Miscimarra, Chairman of the National Labor Relations Board, announced that he would not accept reappoinment to his position, and instead will leave the agency when his current term expires in December 2017.  Despite being encouraged by the Trump administration to be reappointed, in a communication to NLRB personnel, Mr. Miscimarra cited his desire to be with family as playing an important role in his decision.  Mr. Miscimarra, a Republican, joined the Board in 2013 after having been nominated by former President Barack Obama.  He was named acting chairman in late January, shortly after the inauguration of President Donald Trump, and the designation was made permanent in April 2017.

When 20 months’ unauthorised absence is still an unfair dismissal

Where an employee is absent without leave, how long would it be before dismissal of that employee would be fair? Two weeks? One month? Six months? How about 20 months?

That is the question that was faced by the employer in the recent case of Brighton & Sussex University Hospitals NHS Trust v (1) Akinwunmi (2) Norris & 4 Ors. Akinwunmi was employed as a consultant neurosurgeon. Relations with colleagues were poor and tit for tat complaints were made every which way. Partly as a result of all this he took an unpaid employment break between November 2012 and February 2013.

Given this “toxic” environment, Akinwunmi was perhaps understandably reluctant to return to work and appealed the length of his employment break as he had actually wanted 6 months. When that was refused, he alleged discrimination. That didn’t get him anywhere either and so he simply did not return to work. Right up until he was finally dismissed for unauthorised absence in November 2014.

It would be unfair to the NHS Trust to suggest that nothing happened during the intervening period. A plethora of reports and investigations were prepared and undertaken by or at its request. However, what did not happen during this period was any real communication with Akinwunmi. One example given in the judgement was a report on his unauthorised absence dated January 2014 which was not sent to him until May. Suffice to say that it took the Employment Tribunal a whopping 713 paragraphs over 137 pages to rehearse the whole ghastly story.

Unsurprisingly, the Trust’s position was that it was a fair dismissal due to the 20 months of unauthorised absence. In return Akinwunmi argued that the employer had not engaged with him in order to allow a return to work and that the dismissal was unfair because it did not take into account his reasoning for not returning to work. Those reasons included the demonstrated potential adverse effect of the colleagues’ allegations against him not only on his health and safety but that of patients too.

The Tribunal accepted that the employer had a genuine belief that Akinwunmi’s unauthorised absence was misconduct and that it had reasonable grounds for that belief, and so the question that remained was whether dismissal was within the familiar band of reasonable responses. The Tribunal found it was not and therefore it was an unfair dismissal. Essentially it had been up to the employer to manage relationships in the department and to make arrangements for Akinwunmi to return to work. As it did not do so, it was reasonable for Akinwunmi to refuse to come back until issues were addressed.

That is not to say that if an employee acts reasonably in refusing a reasonable management request, any resulting dismissal will necessarily be unfair. If there is an impasse of this sort, something has to give. The issue here, however, was that the Trust’s failure to take any of the necessary steps to facilitate Akinwunmi’s return in the face of the hostility and ineptitude he had experienced made its request that he returned an unreasonable one. A dismissal for a reasonable failure to follow an unreasonable management instruction will almost always be unfair, as here.

On appeal, the EAT agreed with the Tribunal. The decision was not perverse and there had been no substitution of the Tribunal’s view for that of the employer. The Judge completed her judgement with both a concluding explanation and a moment of what passes for levity in legal circles. Responding to Counsel’s reference to the views of the “man on the Clapham omnibus” as the essence of reasonableness, she said, “Once he appreciated, from the vantage point of his historic mode of transport, that there was more (considerably more) to the history than the bald fact of a dismissal for 20 months’ unauthorised absence, and once he appreciated what that “more” was, any sense of amazement or outrage at the ET’s decision would vanish.”

Therein lies the lesson behind this case. While the attention-grabbing headline suggests that an employer could not fairly dismiss an employee even after 20 months AWOL, there was a Game of Thrones-esque saga beneath that headline which threw rather a different light on proceedings.

While unauthorised absence can often be a serious matter of misconduct, this case reminds employers that it is not solely ammunition for disciplinary processes. One has to question the reasoning behind the absence. If the reasoning is or could be work-related, as it was in this case, a Tribunal will expect an employer to have at least attempted to identify and address the issues. If it does not, then unless the employee is shown to be delusional about the alleged issues or unreasonable in some other way, it may be faced with a similar outcome to this one.

To end on a lighter note, I will leave you with another extract from the Judgement as evidence that not everything an Employment Judge hears is about law:

“SR was a prisoner who had put something up his own nose. It was thought this was a pencil and that it had been removed, but that turned out not to be so.” 

Just so many questions….

Employer pension contributions count towards the calculation of a week’s pay

I have done my best to make this case report sound interesting and I like to think that even the most casual review of it will show that I have, well, failed. However, it is still important, especially for those involved in collective redundancy or TUPE consultations.

Employers may need to revisit the potential cost of unfair dismissal and failure to inform and consult claims following last month’s Employment Appeal Tribunal decision in University of Sunderland v Drossou. This held that the calculation of a “week’s pay” under s.221(2) Employment Rights Act 1996 should include employer pension contributions, and not just be the basic pay.

The calculation of a week’s pay is relevant to unfair dismissal claims like Drossou as the maximum compensatory award is the lower of a fixed statutory amount (£80,541 since 1 April 2017) and 52 weeks’ pay, where “a week’s pay” is calculated in line with s.221(2). In the Employment Tribunal’s view, when calculating the latter limit, the employer’s pension contributions should be included because:

  • S.221(2) does not state that the amount payable by the employer has to be payable to the employee (i.e. it could be payable to a third party such as a pension provider); and
  • if you take the word back to its Latin origins, “remuneration” as used in s.221(2) means a reward in return for services. Employer pension contributions are no less a reward for service than basic pay. [Left unaddressed here is the question of why that argument would not extend to the cash value of other benefits like insurances, discounts or equity schemes provided as part of the employment relationship].

The EAT agreed with the Tribunal’s reasoning and, clearly having a little time on its hands, also drew a largely gratuitous distinction between s.221(2) and s.27(1) ERA (the definition of “wages”). Section 27(1) specifies that the sums must be payable “to the worker” whereas those words are absent from section 221(2), that omission implying (one would hope) a reasoned decision by the draftsmen that that section should not be construed as requiring payment solely to the employee. [We can debate at some other point whether it is sensible that decisions of this potential financial significance are made on the basis of what statutory provisions don’t say rather than what they do – the ERA has 245 sections covering a wide variety of topics and it is tempting to conclude that some omissions relative to other sections on other points are just omissions and do not necessarily signify any conscious thought process of that type. Anyway, another day].

Yes but so what?

This decision will affect employers facing unfair dismissal claims where the claimant’s base salary is below the current statutory cap for unfair dismissal compensation of £80,541, i.e. where the calculation of a week’s pay becomes relevant. It will also increase the basic award where the employee earns less than the statutory cap of £489/week and all other awards based on the s221 definition such as the 8 weeks’ pay for a flexible working rules breach, etc.

However, both the compensatory and basic unfair dismissal awards are capped, so the additional cash for ex-employees with salary/pension entitlement totals below those caps may be limited. Of potentially greater significance is the impact of this decision on protective awards. Employers which fail to inform and consult under TUPE or in a redundancy process under the Trade Union and Labour Relations (Consolidation) Act 1992 will also be affected by this decision. Depending on the number of affected employees, the generosity of the pension provision and the size of protective award made up to the 13 week maximum, the increases generated by this decision in the amounts payable in either circumstance could be substantial. If you take a 10% employer pension contribution and go down for the full 13 weeks, for example, that is well over an extra week’s salary per head.

Fifth Circuit Reins In NLRB After It Declares Basic Workplace Civility Policies Illegal

As we have reported to you in the past, workplace conduct policies have become a hotbed of trouble due to the NLRB’s recent focus on their potential for chilling union activity. In one such recent action, the NLRB attacked several employee handbook policies of employer T-Mobile USA, Inc./MetroPCS Communications, Inc. (MetroPCS is an affiliate of T-Mobile; both are referred to collectively herein as “T-Mobile”) because the Board found the policies inhibited employees’ legally-protected rights under the National Labor Relations Act (“NLRA”) to act together to improve the terms and conditions of their employment. T-Mobile appealed the NLRB’s decision as to four of these policies to the Fifth Circuit Court of Appeals; the NLRB cross-filed for enforcement of its decision. The Fifth Circuit refused to enforce the NLRB Order on three of the four T-Mobile handbook policies. Continue Reading

Senate Confirms Trump NLRB Nominee Marvin Kaplan; Delays Confirmation of William Emanuel

On June 19, we predicted that the Trump administration was expected to formally announce attorneys Marvin Kaplan and William Emanuel as candidates to fill the two vacant slots on the National Labor Relations Board. As predicted, President Trump did, in fact, nominate Messrs. Kaplan and Emanuel to the Board earlier this summer. The nominations went to a hearing in mid-July before the Senate Health, Education, Labor & Pensions Committee. As anticipated, the Senate committee recommended the confirmation of both candidates.

Yesterday, the full Senate voted 50-48 (with all Senate Democrats voting to block the confirmation) to approve Mr. Kaplan’s nomination. Mr. Kaplan most recently served as counsel to the Commissioner of the independent Occupational Safety and Health Review Commission. He previously served as the Republican workforce policy counsel for the House Education and the Workforce Committee.

The Senate has not yet decided when it will hold a vote on Mr. Emanuel’s nomination. Mr. Emanuel was nominated to the Board on June 28, nine days after President Trump nominated Mr. Kaplan for the post. If Mr. Emanuel is confirmed, he will join Mr. Kaplan and current Board member Philip Miscimarra to restore a Republican majority on the Board for the first time in nearly nine years. If that happens, the Board’s decisions are expect to significantly shift in a more employer-friendly direction from those issued during the Obama administration, such as those relating to workplace rules and policies, joint employer liability, and appropriate bargaining unit determinations. We will continue to update you after the Senate votes on Mr. Emanuel’s nomination.

UK Employment Appeal Tribunal confirms that statutory holiday pay should include voluntary overtime

One of the last remaining pieces in the jigsaw of what constitutes “normal pay” for the purpose of calculating statutory holiday pay was slotted into place by the Employment Appeal Tribunal on Monday when it confirmed that such calculations should include voluntary overtime.

Willetts and Others v. Dudley Metropolitan Borough Council is a claim for unlawful deductions from wages by five lead claimants in respect of 56 employees. The Employment Tribunal (see “Holiday Pay in the UK − the great unanswered question”) had previously found that “regular” voluntary overtime should be considered as part of a week’s pay for most of the lead claimants for the purpose of calculating statutory holiday pay. In its view, the payments were paid (for those individuals) with “sufficient regularity” to be considered a part of their normal remuneration.

Dudley MBC unsuccessfully appealed the decision to the EAT. The EAT rejected its suggested exclusion of payments for voluntary overtime work as an “excessively narrow interpretation” of normal pay, which could give rise to a “fragmenting of pay into different components to minimise levels of holiday pay”. In the EAT’s view, that would increase the risk of a worker suffering a financial disadvantage that might deter him from exercising the right to take leave, contrary to the underlying objective of the Working Time Directive. [As we know, the argument that it cannot have been a disincentive because the worker still took the holiday is not a runner here].

The European and UK courts have already established that non-guaranteed overtime and commission payments should be included when calculating pay for the EU Working Time Directive-derived four-week minimum holiday leave. It will come as no surprise to many that a similar approach has now been confirmed in relation to voluntary overtime. But that still leaves the question of exactly how you assess normal pay – what is “sufficient regularity” for these purposes? The EAT noted that whether a payment is “normal” is a question of fact and degree. It concluded that “a payment is normally made if paid over a sufficient period of time on a regular basis, say for one week each month or one week in every five weeks, even if it is not paid more frequently or even each week”. With respect to the EAT, however, being told that this is all a question of “fact and degree” is hardly helpful when you are inputting the payroll.

When faced with a claim in relation to what constitutes “normal pay” for the purposes of calculating statutory holiday pay, we would continue to advise employers to ask their Tribunal to consider the underlying question: “Has the employee been put at a financial disadvantage through going on the holiday for which the underpayment is claimed?” If he cannot get past that, we would say that issues of what constitutes normal pay, etc., should not arise. So take the EAT’s suggestion above that overtime will be sufficiently regular if it is worked, “say, one week each month”. If the employee takes leave in one of the other weeks that month, it is surely not logically correct to say that he should receive any allowance in respect of overtime he would clearly not have worked anyway. It might well be “normal pay” but that does not mean that the employee has lost it. What if the employee had worked consistent voluntary overtime over a few months to cope with a bulge in demand, but then took leave at a time after that bulge had subsided such that overtime was no longer required? Again, however regular the extra work before the holiday, it would seem to offend justice that the employer has to pay some allowance in respect of it for a time when no loss was suffered through the taking of the leave afterwards.

These are extreme cases and most will not be so clear cut, either as to regularity or amount, but for everybody’s sake there must be a line drawn somewhere. Otherwise there are simply too many moving parts for the employer to keep an eye on if it is to do anything but roll over altogether and wrap up even the most occasional or sporadic overtime earnings too. My view remains that the line in question is the establishment of loss – if you can show on a balance of probabilities that you would have done £X amount of voluntary overtime over the period you were away, it’s yours, but if you can’t, you should not expect me to pay you for not doing overtime you wouldn’t have done anyway.

It is also worth remembering that there is a two-year backstop period that applies to most unlawful deduction from wages claims, meaning that a Tribunal can only look back two years from the date of the complaint when considering unlawful deductions. The EAT also confirmed its May 2017 Bear Scotland decision that any gap of three months or more between unpaid EU Working Time Directive holiday leave breaks the series of deductions for the purposes of a claim in the Tribunal.

We have a national “Holiday Pay Taskforce” comprising some of the leading experts on this subject. If you would like to discuss any questions relating to holiday pay and the practical significance of what it means to your business, please speak to me or your usual contact in the Labour & Employment team.

Sow the wind, reap the hurricane for UK Government in Tribunal fee fiasco

There was a great deal of entirely unfair schadenfreude directed at the Government last month over its abject failure to justify the Employment Tribunal fees regime in front of the Supreme Court. After all, apart from the report of its own Justice Committee, the views of everyone else from both sides of industry and all the statistics telling it consistently since 2013 that the fees were a deterrent to access to justice and were not weeding out weak claims, just little ones, how could it have known?

So now the fees have gone and already my inbox is filling up with desperate fliers from locum agencies heralding a “claims avalanche” and a surge in Tribunal case numbers back to pre-2013 levels.

They may be right, in which case the Tribunal infrastructure will shortly collapse unless urgent steps are taken now to rebuild the legal and non-legal staff complement so expensively shed since 2013 and to replace the premises vacated and merged into Combined Court Centres through under-use. This defeat will cost the Government far more than just the £32 million of fees which it is reported that it will now need to repay (ironically, in some cases presumably to the “bad” employers who were ordered to meet them as part of the compensation awarded).

Equally, those agencies may be wrong. This Court decision has no impact on the operation of the Acas Early Conciliation process which was introduced at about the same time. The 2016-17 annual report from Acas, out yesterday, shows that there were some 92,000 applications for Conciliation last year of which scarcely 6% were ruled upon by the Tribunal. Since 2013 the benefits of workplace mediation have also become a little better known and, for better or worse, it has become more apparent that you can lose your job and not necessarily need to do anything legal about it.

In addition, the Government may now try to salvage some shred of credibility in this respect by developing a replacement fee structure, but that approach would be misguided for at least three reasons. First, who is to say that any particular reduced level of fees would not be vulnerable to a similar challenge? Second, more prosaically, the lower the level of fees the less it becomes worth the administrative costs required to operate the collection system. Third, part of the Government’s purpose in introducing the fees in the first place was to weed out frivolous and vexatious claims, and any reduced fee level would have even less deterrent value in that respect than the current framework, i.e. none.

It has been suggested that the Government might impose a fee on the employer at the point where it lodges its defence. Really? So I have to pay for the privilege of being sued and if I win, then what? Does the Tribunal give me the money back, do I have to pursue the Claimant for it or do I just have to write it off as a cost of being in business and settle the next one irrespective of how malicious and baseless it may be (so encouraging exactly the sort of claim the fee regime was designed to inhibit)? Come on, BEIS/Treasury/Ministry of Justice, you have to be able to do better than that.

The way to deter frivolous and vexatious claims (and defences) requires no expensive or politically-charged changes in law and is the same as it has always been – to give Employment Judges more encouragement and freer rein to exercise their existing powers to make deposit orders and/or award costs against those acting unreasonably in the bringing or conduct of Tribunal proceedings. At present it is possible to behave fairly heinously in the conduct of Tribunal proceedings without effective sanction apart from (at worst) losing the case. There is decided authority, for example, that even overt lying in the Employment Tribunal will not necessarily lead to a costs order unless there was some connection between the lie and the costs incurred by the other party. However, if you bring claims or defend them without reasonable grounds to do so or if you behave dishonestly or obstructively then you should be put in a position where you realistically (rather than theoretically) have something to lose if you continue. That measure does not have to be fee-based.

Lessons for employers

Anyway, back to the avalanche. One obvious question here is how much of that would be made up of people who didn’t claim unfair dismissal in 2013-17, argue that the fee regime made it not reasonably practicable for them to do so and say that they should therefore be entitled to have a go now. After all, the Supreme Court has just accepted that fees have been a deterrent, hasn’t it?

This is a superficially attractive argument but not generally one for employers to fear. “Reasonable practicability” for those purposes means that the employee could not have brought the claim at any earlier point. As a result, not only does he have to show that he didn’t have the readies in the three months post-dismissal, but also that the fee remission scheme didn’t help (that part won’t be difficult) and that this has remained the position ever since. If he has found alternative employment since his dismissal then it was practicable for him to claim at that time notwithstanding the fee regime, and so he would now be out of time. For a discrimination claim, the question for the ET would be whether it was just and equitable to allow a claim now in respect of matters potentially up four years old. That would overlay the fee question above with consideration of the adverse impact of such a claim on the poor employer whose witnesses may long have forgotten, left or died. Again, a pretty tough one to get off the ground in the vast majority of cases.

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