Unfair Dismissal: What’s it worth?

I remember the days when the compensation limits for unfair dismissal were nice round numbers. The compensatory award was set by Government as £8,000 (a while ago), £10,000 or £12,000. Then New Labour increased the limit to £50,000 and provided that from then on it should rise in line with inflation. Since then I’ve never been able to remember the limit off the top of my head. In fact I have just had to check that the current limit is £76,574. Back in 2013 a new complication was added with the result that the compensatory award was capped at the level of one year’s gross pay if that was lower than the specified maximum figure.

It’s now that time of year again and the Government has announced that the new maximum from 6 April will be £78, 335 (or one year’s pay if that is lower). The limit on a week’s pay – used in calculating statutory redundancy payments and the unfair dismissal ‘basic award’ – is also increasing from £464 to a princely £475.

Do we care? Those of us who advise employers sometimes succumb to the temptation to talk about the maximum figure as if it represents a typical or likely outcome. That may be good for business but the fact is that for the majority of unfair dismissal claimants the maximum award available is irrelevant. Overall we should pay less attention to the maximum amount that can be awarded for unfair dismissal and pay more attention to how much someone is actually likely to get. That is harder to judge, however, because there are just so many variables in play – only one of which is how much the claimant has lost.

The alternative reality of a Polkey deduction

There are several grounds on which the amount payable can be reduced. If the employee is guilty of misconduct then the Tribunal can make a deduction of up to 100% to reflect his or her contributory fault. Even if the claimant is blameless however, there is still the ‘Polkey deduction’ to consider. This is based on the seminal case of Polkey v AE Dayton Services Ltd which emphasised that unfair dismissal was not an ‘all or nothing’ claim. The compensatory award is based on the amount that is ‘just and equitable’ and the courts have taken the firm view that it is not just and equitable to compensate an employee for an unfair dismissal if the employee would still have been dismissed even if the employer had behaved reasonably. As a result Tribunals must assess the chances that an employee would have been dismissed in any event and apply that figure as a a reduction to the compensatory award.

Polkey deductions can be anything up to the whole value of an award and they make compensation for unfair dismissal very difficult to predict. The Tribunal essentially has to peer into an alternative universe where the employer has behaved reasonably and decide how much longer the employee would have remained employed. The Tribunal might decide that dismissal was inevitable and reduce compensation by 100%, or it might decide that there was a 25% chance of the employee being dismissed anyway and make that deduction. How the Tribunal arrives at the right figure is an art rather than a science – and the Tribunal is only expected to take a broad brush approach. On the same facts a Tribunal might make a Polkey deduction of 25%, 50% or 75% based on what it ‘feels’ would be a likely outcome. As long as it comes up with a plausible sounding explanation for its conclusion, there is really very little way to challenge the figure ultimately arrived at.

The modest reality of unfair dismissal claims

There are no statistics kept of the Polkey deductions made by Tribunals but there is little doubt that they are a major factor in keeping the level of awards in check. The latest figures for 2013-14 show a median unfair dismissal award of just £5,065 – but about a quarter of the awards (447 of them) were actually for less than £2,000. These are claims where the claimant won on the merits, but I’m sure that many would not have bothered to bring the claim at all if they had known how little they would be awarded in compensation. I know everyone says ‘its not about the money’ – but I rather think it should be.

We have to be careful not to place too much reliance on the official statistics. The awards that are recorded are atypical because most cases settle before they get to that stage. So it was very interesting to see some recent research that shed some light on the level of Acas conciliated settlements. The research was actually about whether employers pay up when a case has been settled (it seems that they do – which is nice) but as part of that the researchers recorded the level of settlements they were looking at. The median settlement for unfair dismissal cases (on an admittedly small sample) was just £4,360. We don’t know how those settlements were arrived at. Many will certainly be ‘nuisance’ settlements where the employer would probably have won the case anyway. Nevertheless the modest level of settlements recorded does show that concentrating on the maximum award gives a false impression of how the law of unfair dismissal works in practice.

Anyone who tells their clients about the increase in the maximum award without putting that news in the clear context of what awards are made in practice (you know who you are) is just misleading them. Unless the claimant in question was highly paid, in which case the maximum award may represent just a few months’  worth of loss, the cases in which the statutory maximum actually comes into play are likely to be few and far between.

Posted in Compensation and Remedies, Early conciliation, Uncategorized, Unfair Dismissal | Tagged , , , , | 3 Comments

Docking wages for toilet breaks: the real scandal

In the folk song ‘Drill ye Tarriers Drill’ Big Jim Goff is blown into the air by a workplace explosion and when he queries why his next wage packet is a dollar short he is told ‘you were docked for the time you were up in the sky’. We used to sing that song in primary school, so the issue of unlawful deductions from wages has been on my mind since I was about 7.

The song came to my mind this week when I saw (hat tip to Canter, Levin and Berg) the BBC News story headlined ‘Toilet breaks are a worker’s right, minister tells MPs’. The BBC reported:

Workers have a right to toilet breaks, a UK government minister has confirmed, after a Welsh MP raised the case of a man who had his pay docked.

This intrigued me because nothing in UK employment law gives a specific right for workers to take toilet breaks. I thought it was worth looking up exactly what the Minister said:

This from Hansard 20 November Column 411:

18. Mrs Madeleine Moon (Bridgend) (Lab): What steps he is taking to prevent employers deducting money from staff salaries for toilet breaks. [906152]

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson): The Government would strongly encourage all employers, as a matter of good management practice, not to make deductions in pay for necessary and unavoidable interruptions to work. Employers who do not pay for toilet breaks may find themselves in breach of the Equality Act 2010 or of individual employment contracts.

Mrs Moon: I thank the Minister for that reply. A young constituent of mine was alerted, having just been sent details of his salary to his mobile phone. He was not told what the deductions were for. When he inquired, he was told they were for toilet breaks. The company tells me it makes ad hoc deductions for breaks away from the work station. Does the Minister agree that this is unacceptable, and if ad hoc deductions are made, they must be detailed and explained?

Jo Swinson: Absolutely: workers have rights to rest breaks, which there is a requirement for under law, and if deductions are made from pay, they have to be very clearly outlined—and if they take somebody below the national minimum wage, the employer could find themselves in breach of that law. I very much encourage the hon. Lady’s constituent to seek advice from the pay and work rights helpline on 0800 917 2368, and I am very happy that she has raised this issue and awareness of it in the House.

So actually the BBC story overstates it. The minister did not say that workers were entitled to toilet breaks, even unpaid ones. She said that employers should be encouraged as a matter of good practice not to make deductions for ‘necessary and unavoidable’ interruptions in work. But that is just good practice – being nice. It is nothing to do with a worker’s rights. However she also made some employment law points that are worth looking at.

1.’Employers who do not pay for toilet breaks may find themselves in breach of the Equality Act 2010…’

Well it’s difficult to see how. I think that we can all get behind the idea that if an employer makes deduction when women take toilet breaks – but not when men do – then that would be discrimination. But I think on balance it is fair to assume that the employer in question makes deductions for toilet breaks for all staff regardless of race sex or any other protected characteristic. The practice cannot therefore be direct discrimination.

Could it be pregnancy discrimination? I don’t think so. Pregnant women may need to urinate more frequently but failing to pay for a toilet break is surely not treating a woman less favourably ‘because of the pregnancy’ or even ‘because of an illness suffered by her as a result of it’ as required by s.18 of the Equality Act.

Indirect discrimination is not available in relation to pregnancy and maternity so the fact that a greater proportion of pregnant workers would be disadvantaged by the policy does not alter things. Nor do I see an indirect discrimination claim in relation to sex. It is true that all pregnant people are women, but most women are not pregnant. Besides, lots of men have an enlarged prostate.

There may be a disability claim of course, but even assuming a worker has a disability leading to bladder problems  I’m not sure the cases support the requirement for paid breaks to be provided. In any event, we are drifting far from the general right to paid toilet breaks here. Basically, I don’t think the Equality Act angle works.

2.‘…or of individual employment contracts’

Well yes. if your contract gives you a right to paid toilet breaks then failing to provide them will be a breach of contract. But what about those employers who are cunning enough not to give a contractual right to paid toilet breaks? It certainly isn’t a contractual term that could be implied.

3 ‘workers have rights to rest breaks, which there is a requirement for under law’

Indeed they do. In any day in which a worker works over six hours he or she is entitled to a 20 minute rest break. This is required by the Working Time Directive and implemented by Regulation 12 of the Working Time Regulations 1998.

Trouble is, the entitlement is to an unpaid rest break. There are no provisions for paid breaks under the Regulations.

4 ‘if [deductions] take somebody below the national minimum wage, the employer could find themselves in breach of that law.’

Perhaps. However, hourly paid workers are not entitled to to paid breaks as long as they are paid the NMW for each hour of actual work. Salaried hours work does not include hours when the worker is ‘absent’ so there might be some leeway for the employer there. It really depends on how near the legal threshold the worker’s basic salary is and whether that is affected by deductions for toilet breaks. In any event this doesn’t amount to a right to paid toilet breaks as such.

5 ‘if deductions are made from pay, they have to be very clearly outlined’

I deal with this point last because it is the best point. The real legal issue in dealing with deductions from pay for taking toilet breaks are the provisions in Part II of the Employment Rights Act dealing with unlawful deductions from wages. The key provision is S.13:

13 Right not to suffer unauthorised deductions.

(1)An employer shall not make a deduction from wages of a worker employed by him unless—
(a)the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker’s contract, or
(b)the worker has previously signified in writing his agreement or consent to the making of the deduction.

The question Mrs Moon needs to ask her constituent is whether the deductions from wages are authorised by the contract. Another potential issue is whether the constituent was given an accurate payslip but there is not much point in pushing that issue however as there is no compensation available – just a declaration from the Tribunal.

My Answer

So on balance I would not answer the MP’s question in the same way as the Minister did. Were I advising her, this is the version I would have drafted.

There is no general right to paid toilet breaks under UK employment law. If the hon Lady’s constituent has had deductions made from his wages then the question is whether such deductions are authorised under the contract. If they are properly authorised then the employer is acting lawfully, however unfair that may seem. If they are not, then her constituent would be entitled to recover the amount unlawfully deducted by making a Tribunal claim.

Before making such a claim, however, he must first contact Acas to give them an opportunity to seek to conciliate a settlement. If that process fails (it normally takes 4 weeks) he will be issued with a certificate giving him a reference number that he must quote when making his claim. To recover the sum of £50 deducted from his wages he will have to pay a fee of £160. Should the matter reach a Tribunal he will have to pay a hearing fee of £230. If he succeeds in his claim the Tribunal is likely to order the employer to reimburse him for the £390 he will have spent in fees as well as the £50 he is due.

Should the employer refuse to pay this sum, he will be able to enforce it through the County Court system. A further fee of £50 will be payable and added to the total amount owed by the employer.

It may seem bizarre to the hon Lady that her constituent may need to spend so much to recover so little. All I can say is that the issue of Tribunal fees is the responsibility of the Ministry of Justice.

I’m not sure that the Minister would be happy with that reply.

The real scandal

The reason I wanted to write a (rather long) post on a £50 deduction from the wages of an employee in a call centre is that these employment rights really matter. They are low value in the scheme of things but £50 out of somebody’s salary can be the difference between making ends meet and becoming trapped with a payday loan. Employees in these cases cannot afford to risk £390 to recover £50. The ET fee regime has rendered the provisions on unlawful deductions from wages largely meaningless for the very employees who most needs the law’s protection. That, in my view, is a bigger scandal than the deductions themselves.

Posted in Wages | Tagged , , , , , | 16 Comments

New figures on Acas early conciliation

As we all try to assess the continuing impact of the Employment Tribunal fee regime – see the Hard Labour Blog for some excellent analysis of that – Acas have published the latest figures on their early conciliation scheme.

Acas have always offered conciliation in Employment Tribunal cases and a very good service it is too. However since May this year, potential claimants have been forced to contact Acas before even initiating a claim. Attempts at conciliation are then made which lead either to a binding settlement (called a COT3) or to the potential claimant being given a certificate which allows him or her to take the claim on to an Employment Tribunal.

Acas is doing its best to sound pleased by the latest figures which show them being contacted just over 37,000 times in the first six months of the scheme being operational. Acas notes that very few parties refuse to participate in the process, but then report that in between April and June just 18% of the contacts made result in a COT3 settlement. In other words, in the first three months of the scheme (we aren’t given the six month figure), early conciliation has removed just 3046 claims from the system.

I’m not too surprised by that. If I were an employer I would be unlikely to settle a case without seeing the claim put in writing so that I can properly assess the likely outcome and then seeing if the employee is able or keen enough to pursue it by paying the ET fee.

A majority of claims do not proceed

What is particularly interesting about these figures is that Acas is reporting what proportion of the contacts made between April and June this year went on to become Employment Tribunal claims by the end of October.  A total of 4,198 claims went on to the Tribunal – 28 per cent of the total contacts made. However, 9,918 of the cases did not progress to a Tribunal claim. That is 58 per cent of the total claims notified in that period.

That is not a healthy figure. It suggests that a clear majority of those who contact Acas because they think they have a claim against their employer that is worth pursuing do not, in the end, pursue it.

Now it may be that those cases were doomed to fail in any event. Perhaps after discussing the case with Acas or hearing the employer’s response to their claim, those individuals realised that they were going to lose in the Tribunal and decided not to proceed. If that is what is happening then that is a good thing. But if that really is the explanation then we will inevitably see a marked increase in the success rate of the claims that are brought before the Tribunal. If the weak cases are being weeded out by early conciliation then it follows that it is the stronger cases that remain.

I very much doubt that future ET statistics will show that happening. To believe that the claims that are not progressing to Tribunal are mainly weak cases that should never have been brought in the first place you have to really want that to be true. Common sense tells us that the dramatic fall in cases that we have seen over the past year cannot possibly be explained merely by employees realising that they don’t have a valid claim. The fee regime is protecting employers who behave unfairly, discriminate against employees, or who fail to pay them what they are owed.

Our employment law system is broken – and these new figures from Acas  support that view.


NB: first version of this post referred to 3046 COT3 settlements in the first six months of the scheme when the figure only refers to the first quarter. Thanks to Richard Dunstan (Wonkypolicywonk) for spotting the error.

Posted in Early conciliation | 4 Comments

The Great Northern Ireland Bake-off

The Equality Commission of Northern Ireland is threatening to take action against a bakery that refused to bake a Sesame Street themed cake with a pro-gay marriage slogan. This has the potential to turn into one of those conscience v equality debates that are always so uplifting and productive and a catholic priest has already threatened to disengage from groups representing the gay community unless they acknowledge the bakery’s right to freedom of expression.

This is the sort of story where your initial reaction can be conditioned by your political / religious / philosophical standpoint. I want to get away from that and take as objective a look as possible  at whether what has happened can actually be discrimination.

So at the outset I should say that I am very much in favour of equal marriage. I have no religious affiliation, but I am a big fan of Sesame street and I think that Bert and Ernie make a lovely couple. I know the programme’s makers have rubbished the idea that they have any sort of sexual relationship, and it seems to me that Ernie is more interested in his rubber duckie than Bert = but I for one would be delighted if they decided to tie the knot.

So in the argument between a bakery and  customer over the decorating a a cake so that it has a pro-gay marriage message, all my natural sympathies are with the customer. But that does not mean that what the bakery did was illegal. The Equality Commission for Northern Ireland however seem convinced that it is – so lets try to pick that apart.

Is it discriminatory for the bakery to refuse to make this cake?

If a baker refuses to bake a cake for a gay customer then of course that is direct discrimination on the grounds of sexual orientation – but I don’t see any suggestion of that here. The baker would refuse to bake this cake whatever the sexual orientation of the customer. The more subtle question is whether the refusal to bake the cake can still be seen as being on the ‘grounds of’ sexual orientation in some wider sense. But how can it be? The baker’s objection is to the decoration of the cake and the decoration is not specifically about sexual orientation. An objection to gay marriage is not in itself an objection to sexual orientation. I just don’t see how refusing to bake this cake in the circumstances described can amount to direct discrimination on the grounds of sexual orientation.

For completeness we should also consider indirect discrimination. But I really think this isn’t an indirect discrimination sort of case. Nevertheless suppose we say that the baker is applying a “provision criterion or practice” of refusing to make cakes promoting gay marriage. Does that cause a particular disadvantage to gay people? Unfortunately I have no statistical data on how many gay people are in the market for cakes decorated with a pro-gay marriage design. I suspect that even among the more politically active sections of the gay community are not greatly disadvantaged by having a limited choice of baker when they want to order cakes decorated in this way.

Even if you could show the requisite disadvantage there would then be the question of justification. Does the baker have a legitimate aim in not baking the cake? I think being true to their religious principles probably fits the bill. As for proportionality we weight the discriminatory impact against the needs of the baker to achieve that aim. I think the fact that they were able to get the cake from a different baker helps show that the disadvantage was not that great. I would think the justification argument would stand a good chance.

Political belief in Northern Ireland

That covers sexual orientation discrimination – but we must also consider discrimination based on political belief. In Northern Ireland this is covered by the Fair Employment and Treatment Order from 1998. Note that this covers religious belief and political belief – we do not have to worry about whether a belief is ‘philosophical’ as we do in GB.

Support for gay marriage is certainly a political opinion, but the baker’s refusal to make the cake was not on the grounds of the political opinion of the customer or any other person. The baker simply refused to make a product that expressed a political opinion he strongly disagreed with.  Is that enough? I generally only argue human rights as a last resort, but surely there is a freedom of expression point here?

This is not like the Bull v Hall  cases where hotel owners refused to allow gay couples to occupy rooms available to the public at large.  In this case a business owner is simply refusing to make a particular product that he finds distasteful. Surely he must be allowed to do that?

I accept of course that we need to bear in mind the different context applying to political belief in Northern Ireland. I don’t hold myself out as an expert on the Fair Employment and Treatment regime, so I pose the following question quite genuinely – could a printer from a nationalist background refuse to print union jack posters with the slogan “God Save the Queen”? If anyone knows whether this sort of issue has been dealt with by previous case law in Northern Ireland, I’d be really interested to hear about it.

If the issue of whether you can force a service provider to produce something conflicting with its religious beliefs hasn’t been dealt with before, then I’m not sure that the Bert and Ernie cake is quite the test case I would go for.

Not every bad thing has to be unlawful

On the whole however, I think that any legal action against the bakery faces some serious obstacles. So why is the Equality Commission for Northern Ireland coming on so strong? It seems they have written a detailed letter to the bakery setting out the basis for their claim. I have not seen that – though I would certainly like to.

I do not dismiss any discrimination lightly. I imagine that it was very upsetting for these customers to have been turned away when they tried to get their cake made. I am on their side and strongly disagree with the decision the baker took. But just because I think the baker was wrong does not mean that what they did amounted to discrimination. On balance I think I would advise the Commission to let this one go.

This post was brought to you today by the letters N and I – and by the number 2.

Posted in Fair Employment, Religion in the workplace, Sexual Orientation | Tagged , , , , | 7 Comments

Why holiday pay has to include overtime

What has struck me most about some of the commentary on the EAT decision in Bear Scotland Ltd v Fulton (and other cases) on overtime and holiday pay has been the way in which it is assumed that the exclusion of overtime from holiday pay is perfectly natural and logical and its inclusion is a surprising and strange requirement imposed by Europe. Take this comment from Adam Marshall of the British Chambers of Commerce, as quoted in the Telegraph:

“This expanded definition of ‘pay’ is so ludicrous that the government itself has argued against it. No business should have to pay more than base salary during holiday periods, unless they elect to do so,”

Or look at what the Independent quotes John Cridland of the CBI as saying:

“This is a real blow to UK businesses now facing the prospect of punitive costs possibly running into billions of pounds – not all will survive, which could mean significant job losses.”

Punitive? As in ‘inflicted or intended as punishment’? Really?

The truth is that it is the exclusion of overtime that is difficult to justify rather than its inclusion. The problem has been caused by the way in which the Working Time Regulations adopted a definition of a ‘week’s pay’ that was never designed to be used in this context.

Government lawyers do not like reinventing the wheel. So when faced with having to include a right to paid annual leave in the Working Time Regulations 1998 they were happy to use the existing definition of a week’s pay set out in the Employment Rights Act 1996.  For those who haven’t already had to – have a go at actually reading those provisions. The meaning doesn’t exactly leap out at you does it? The drafting is hardly a model of simplicity and clarity.

‘Week’s pay’ – a potted history

This definition has been through the mill a few times. The current version is derived from the Employment Protection (Consolidation) Act 1978, which in turn took it from the Employment Protection Act 1975 (schedule 4 for the enthusiasts amongst you). However it has its origins in the Contracts of Employment Act 1963, which first introduced a right to a minimum period of notice. Schedule 2 of the Act provided that an employee was entitled to be paid during the notice period if he or she was off sick, not provided with work or absent on contractual leave.

The schedule divided employees up into those with and those without ‘normal working hours’. Those without were entitled to be paid based on a 12 week average and those with normal working hours were paid the amount they would have received had they worked those hours (with another averaging provision for piece workers). That is pretty much the same method of calculation we find in the Employment Rights Act today

Paragraph 1 of the schedule  specified that those who earned overtime pay when employed for more than a fixed number of hours in a week were to be treated as having normal working hours. It then provided that those normal hours should be taken as excluding hours of overtime unless they were actually part of the minimum number of hours the employee was required to work. The effect of that was to ensure that an employee who had been dismissed or had resigned  – and was in his or her period of minimum statutory notice – would only be paid basic pay, excluding overtime, in any week when he or she was not offered work, was absent, or was taking contractual leave.

Paragraph 1 is now to be found, with only minor amendments, in s.234 of the Employment Rights Act 1996. When the Government used the existing definition of a week’s pay when implementing the Working Time Regulations, therefore, it also incorporated this provision, designed to be used only as the employment relationship was ending.

The exclusion of overtime when calculating holiday pay is therefore based on an archaic definition of a week’s pay which was intended to apply to a completely different set of circumstances more than half a century ago. While it makes perfect sense to limit the pay of an employee who has already been given notice and is not working, it makes very little sense to apply the same limitation to holiday pay while the relationship is alive and ongoing.

No point acting all surprised about it

But even if you don’t accept that, it is the Government’s job to implement directives properly and the need to amend the law has been apparent since the Williams v British Airways decision in 2011. In fact we can probably say that the need to reexamine the definition of a week’s pay was made clear by the ECJ in the Robinson Steele case back in 2006 where the court said:

49. The holiday pay required by Article 7(1) of the directive is intended to enable the worker actually to take the leave to which he is entitled.

50 The term ‘paid annual leave’ in that provision means that, for the duration of annual leave within the meaning of the directive, remuneration must be maintained. In other words, workers must receive their normal remuneration for that period of rest.

By any sensible definition, if an employee normally receives basic pay plus overtime then his or her normal remuneration  must include overtime.  As Mr Justice Langstaff says in the Bear Scotland case:

44. Despite the subtlety of many of the arguments, the essential points seem relatively simple to me. “Normal Pay” is that which is normally received.


So there is nothing ludicrous in the EAT deciding that overtime needs to be included in the calculation of holiday pay. Employers should instead be grateful that the EAT found such a creative way to prevent employees who have been underpaid in terms of holiday pay for the past 16 years from claiming back pay (that’s a whole other article). What would be ludicrous however would be to leave the current definition of a week’s pay in place and just expect employers to read up on the case law.

Vince Cable, it seems, has set up a task force to look at how to limit the impact of the decision. There isn’t much that can be done to be honest. I know hardly anyone who thinks that the EAT was actually wrong in the way in which it interpreted the directive and an appeal on that point is highly unlikely to succeed. Short of renouncing the Working Time Directive and leaving the EU altogether (that’s an issue for next year) we are stuck with including overtime in holiday pay. What the task force can usefully do, however, is look at a new definition of a week’s pay that can be clearly understood and which complies with the directive. How hard can that be?



Posted in EU law, Working Time and Annual leave | Tagged , , , , , , , , | 11 Comments

ACAS early conciliation – first results

Acas has published its first figures on the operation of the early conciliation scheme that came into effect in April this year. The figures they have released cover the period of 6th April 2014 – 30 June 2014 and show that Acas received 17,145 notifications in that period, all but 540 of those coming from the employee rather than the employer.

Acas says that the notifications came in at about 1,000 a week during the run in month of April and that this figure went up to 1,600 once notification became mandatory in May. This is. says Acas ‘in line with the numbers of notificatons we expected to receive’.

The test, of course, is not how many people contact Acas, but whether that contact results in settlements that avoid the need to go to Tribunal. Acas is encouraged that only 7 per cent of employees (1,122) and just 9 per cent of employers (1,483) rejected the offer of conciliation. But of course most parties will want to hear what offer the other side will make before deciding what to do. What matters is how many settlements are reached.

These are still early days, as Acas recognises, but these first figures show that in the period covered, 11,355 cases reached the end of their early conciliation period (usually one month). Of those 1,873 cases ended with a settlement – that is 16.5 per cent.

The next question to answer is a difficult one. Is that a big number? Acas gives no indication of whether a settlement of 16.5 per cent is regarded as encouraging or disappointing. There is obviously still a long way to go before we understand exactly what the impact of early conciliation has been. At this stage, I would make a couple of observations.

Firstly, we have no information about the level of the settlements or how many of the employees had legal advice. There is a concern that potential claimants have not had proper advice about the strength of their claim or the amount that they are likely to receive if successful. Reaching a settlement is good – but not if employees are being rushed into doing a bad deal.  If an employer proposes a settlement agreement that needs to be signed off by the employee’s legal adviser – but there is no such protection in relation to early conciliation and Acas obviously can’t advise the parties on whether a proposed settlement is a good one or not.

Secondly we need to remember that conciliation is not a new service. Acas has always conciliated in individual employment disputes and a high proportion of cases have always been settled in this way. It is not clear what savings – if any – are made by the parties who have settled at the early conciliation stage. Would they have settled anyway, and, if so at what point? Early conciliation is fine if it suits the parties. The controversy in the scheme is that the employee must contact Acas before bringing an ET claim.

I am hugely supportive of the Acas conciliation service as a whole – but remain deeply sceptical about the value of this compulsory early conciliation scheme.  What we have not seen yet are  cases where a dispute arises about time limits or whether an employee’s notification to Acas properly related to the claim that is subsequently brought. When those cases start coming through – and they will – then I think the rule on contacting Acas before bringing an ET claim will be seen as an overly complicated and unnecessary requirement.


Posted in Early conciliation | Tagged , | 5 Comments

Why did Haringey pay Sharon Shoesmith so much?

It is being widely reported that the accounts published by Haringey Council reveal the amount that was paid to Sharon Shoesmith to settle her legal challenge to the decision to sack her back in December 2008 (note to the press: it was not an unfair dismissal claim; it was a judicial review).

I wrote about the case here when the fact of the settlement was first announced. At that time I had no idea what the level of the settlement would be. I thought it might be more than she would have got for an unfair dismissal claim but I completely took it for granted that it was a much lower figure than the £600,000 that had been suggested. Wrong again.

Because surely, that £600,000 was right at the top end of what the court could award? It represented full back pay for the years that had passed since her dismissal. When you settle a case you do so because there is a reasonable chance that the settlement might turn out to be a better deal for you than if you let it go all the way. But I really don’t see how that can be the case here.

Shoesmith’s argument would be that the circumstances of her dismissal rendered her practically unemployable. She lost a six figure salary and cannot recoup her loss by getting another job. She  relied on the case McLaughlin v Governor of the Cayman Islands – a case from the Judicial Committee of the Privy Council (broadly equivalent to a Supreme Court decision, but not technically binding)  in which Lord Bingham said:

“It is a settled principle of law that if a public authority purports to dismiss the holder of a public office in excess of its powers, or in breach of natural justice, or unlawfully (categories which overlap), the dismissal is, as between the public authority and the office-holder, null, void and without legal effect, at any rate once a court of competent jurisdiction so declares or orders. Thus the office-holder remains in office, entitled to the remuneration attaching to such office, so long as he remains ready, willing and able to render the service required of him, until his tenure of office is lawfully brought to an end by resignation or lawful dismissal.”

That approach would indeed suggest full back-pay for Shoesmith, running from her purported dismissal in 2008.  But Haringey had an argument too.  They could have argued that whatever procedure had been followed, the fact was that Shoesmith was unlikely to have remained in post for much longer. The sheer scale of the public outcry would have made her continued employment untenable and on that basis paying her full back-pay would be excessive. The Court of Appeal in giving its judgement accepted that the issue of compensation was not a straightforward. Two of the judges seemed to think that Haringey could have protected its position simply by giving Shoesmith contractual notice. Maurice Kay LJ said:

I am satisfied that the relief to which Ms Shoesmith is entitled should include a formulation which extends to compensation… It seems to me that the outer limits are, at the low end of the scale, a sum equivalent to three months’ salary and pension contributions (reflecting the contractual notice period) and, at the high end of the scale, a McLaughlin-type order. In the last resort, I would remit the case to the Administrative Court for this remaining issue to be resolved.

So this was not a case where the writing was on the wall and it was just a question of Haringey biting the bullet and paying up. There was a genuine issue to try – and the outcome was not a foregone conclusion. Haringey must have thought so too, for a while, because the Court of Appeal decision was given in May 2011 and the deal was not reached until October 2013 – just before the hearing on remedy was due to start. By that time most of the preparation would have been done. Why would Haringey settle at the very top end of the scale just before the hearing?

My assumption was that Shoesmith indicated before the hearing that she would accept far less than a McCloughlin-style order for full back pay and that was why Haringey was prepared to risk the bad press it would receive for reaching a settlement. However, if the press reports about the amount are correct then it seems that it was Haringey that bottled it.

I simply don’t get it.  Having come so far, surely the better option would have been to take a chance on the remedy hearing. It couldn’t have resulted in an award much higher than the amount paid in secret and Haringey would at least have been able to day that they were only paying out the amount ordered by the Court. What’s more, there would have been a reasonable chance that the amount awarded would be considerably less than full back pay.

If I were a resident of Haringey I would want someone to explain to me exactly why they spent two years preparing for a remedies hearing before simply surrendering before kick-off. It does seem like somebody somewhere has blundered.

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