Employment Law Watch

NLRB'S "Quickie Election" Rules Invalidated

Joel S. Barras — Tue, 15 May 2012 12:44:11 +0000

The United States District Court for the District of Columbia voided the NLRB’s so-called “quickie election” rules because the NLRB lacked the quorum necessary when it adopted its Amended Election Rules to expedite the current union election process. See Chamber of Commerce, et al v. NLRB. Our more in-depth analysis of those amended rules is in our earlier post at here. As noted there, the United States Chamber of Commerce and several trade organizations sought to invalidate the rules on several legal grounds, including lack of quorum.

In the Court’s decision, Judge James Boasberg ruled that Republican Brian Hayes’ refusal to participate in the final vote to adopt the new Rules, despite still holding office and participating in earlier steps of the rulemaking process, did not count toward the three-Member quorum required for formal NLRB action. In what undoubtedly will be the most quoted line from his decision, Judge Boasberg remarked, “According to Woody Allen, 80 percent of life is just showing up. When it comes to satisfying a quorum requirement, though, showing up is even more important than that.” Judge Boasberg. declining to address other Chamber arguments, relied exclusively on the Board’s lack of a quorum to invalidate the Rules.

We anticipate the Board will seek an emergency appeal of the Court’s ruling and/or revote to adopt the new Rules. With Member Harper no longer in office, the current makeup of the Board is likely to adopt the Rules with the necessary quorum, and without opposition.

UPDATE: In response to the Court's decision, the Board temporarily suspended the implementation of its quickie election rules. Acting General Counsel Lafe Solomon instructed the Board's regional offices to revert to their previous election practices effective immediately.

UK Supreme Court rules on two important age discrimination cases

Ruth Bonino — Tue, 08 May 2012 15:05:57 +0000

This post was written by Joanna Powis and Ruth Bonino.

Following abolition of the national default retirement age of 65 last year, the Government left open the possibility for employers to introduce their own “employer justified retirement age” provided the age set was capable of being objectively justified in order to meet the employer’s legitimate aims for introducing this policy. A recent decision of the Supreme Court in Seldon v Clarkson Wright and Jakes (A Partnership) indicates that although it may be technically possible to justify a retirement age, an employer will be taking a big risk in attempting to do so (the Seldon case concerned a partnership but the same principles will apply in an employment case). In another decision heard at the same time, Homer v Chief Constable of West Yorkshire Police, the Supreme Court considered whether an employer’s policy of restricting promotion to employees with a law degree was justified indirect age discrimination against an employee who didn’t have a law degree and didn’t have the time to obtain one before retirement.

Seldon and the difficulties faced by employers in justifying a mandatory retirement rules

Mr Seldon, a partner in the firm Clarkson, Wright and Jakes, brought a claim against the firm for age discrimination when he was forced to retire on reaching the compulsory retirement age of 65 under the partnership deed. The long running question in Seldon was whether this compulsory retirement age of 65 was justified as a proportionate means of achieving a legitimate aim. In light of the abolition of the default retirement age, the principles set down in this case now have a significantly wider application to the working population.

The Supreme Court found that the tests for justifying direct and indirect age discrimination are different. In order to justify direct age discrimination, the aims of the measure must have social policy objectives rather than purely individual reasons particular to the employer’s situation, such as cost reduction or improving competitiveness.

It will therefore be necessary for employers wishing to justify an act of age discrimination to consider whether the aim underlying that act is consistent with social policy aims. The Supreme Court held that the aims put forward by the partnership, namely ensuring staff retention by making partnership opportunities available to associates, facilitating workforce planning by having a realistic expectation of when vacancies will arise and limiting the need to expel partners by performance management were consistent with social policy aims and therefore justified. Each aim fell within categories of social policy objectives approved by the European Court; the first two in the category of inter-generational fairness and the third in the more controversial category of dignity. It did not matter that the aims were also in the firm’s best interests as they were, when viewed objectively, directly related to what is regarded as legitimate social policy.

Perhaps more importantly, the Supreme Court clarified that employers must prove any aim relied upon is legitimate in the particular circumstances of their business. For example, a business that has no problem recruiting young employees but finds it difficult to retain an older workforce will find it much more difficult to rely on a legitimate aim of maintaining a balanced workforce on the basis for compulsory retirement of the older workers. Similarly, where performance management is routinely carried out by a business against objective criteria (e.g. financial statistics) and employees are routinely performance managed out of the business on this basis, it will be difficult to rely on the aim of limiting the need to expel partners by way of performance management (the “dignity” aim).

On the upside for employers, the Supreme Court decided that it will normally be sufficient to justify a particular rule which applies to the whole workforce or a section of it, for example a mandatory retirement age, rather than having to justify the application of the rule to a particular person’s circumstances. The Supreme Court also said it doesn’t matter if the employer has not considered the rationale for a measure when it is first adopted. The Courts will consider justification at the time the difference in treatment is applied to the person who brings the complaint. This does not mean, of course, that if circumstances change over time, a rule which may have been justified once may, at a later date, fail to be valid at a later date. The Tribunal will need to enquire into the reason to maintain the particular measure in question.

The question of whether the mandatory retirement age of 65 in this case was a proportionate means of achieving the legitimate social policy objectives of the partnership will now be reconsidered by the Tribunal. The Tribunal will need to focus on the particular business concerned and whether any other, less discriminatory, measures would have met the same objectives. The Supreme Court felt that the fact that there had been a national default retirement age in place for employees at the time of this case, although not directly applicable to Mr Seldon, may impact on whether the measure was proportionate. Of course, this argument will no longer be available to employers since the abolition of the default retirement age.

Homer and the question of the requirement to obtain a law degree was indirectly age discriminatory

A second case considered by the Supreme Court involved issues of indirect age discrimination and justification. In this case, Mr Homer, a Detective Inspector with the West Yorkshire Police, brought a claim for indirect age discrimination against his employers because a new policy designed to encourage the recruitment and retention of top quality staff, required him to have a law degree in order to keep his top pay grade. He argued that this new requirement treated him less favourably than other younger employees because there was insufficient time for him to obtain that law degree before his normal retirement age of 65, and he would therefore never be able to reach the top of his grade.

Early in 2010, the Court of Appeal held that this was not age discrimination: what had put Mr Homer at a disadvantage was not his age but his impending retirement. The Supreme Court disagreed, holding that a requirement which worked to the comparative disadvantage of a person approaching compulsory retirement age is indirectly discriminatory on grounds of age. The reason for this disadvantage was that people in Mr Homer’s age group did not have time to acquire a law degree; and the reason why they did not have time was that they were soon to reach the age of retirement.

The Supreme Court said that the aims of facilitating the recruitment and retention of staff of appropriate calibre within the police were legitimate aims which might justify the age discriminatory impact of the new grading structure. However, it is necessary to distinguish the aim of recruitment from the aim of retention. It was clearly important to retain the skills and expertise of its existing highly valued staff, including Mr Homer, which meant that it was necessary to distinguish between the justification of the criteria for recruitment (where new recruits stand to benefit from the opportunity of career progression), and the justification of the criteria for promotion to the next threshold up for existing staff who were recruited under a different system, and who may or may not be motivated to stay by such an incentive.

Since the Tribunal had not considered the question of justification properly, the Supreme Court sent the case back to the Tribunal to decide this point. In particular, the Court said that the Tribunal must approach the question of justification as follows:

For a measure to be justified, the measure must be a proportionate means of achieving a legitimate aim. To be proportionate, it has to be both an appropriate means of achieving a legitimate aim and (reasonably) necessary in order to do so. The terms appropriate and necessary are not synonymous and interchangeable.

Is a requirement for existing employees to have a law degree before they can achieve the top of their grade appropriate to the separate aims of recruiting and retaining new staff or retaining existing staff in the organisation?

Since the main impact of the new grading structure on Mr Homer (and others in his position) was to deny them the top salary (and therefore less final salary for pension purposes), was the requirement for a law degree reasonably necessary, in their particular case, in order to achieve the legitimate aim of the scheme? The answer to this may depend on what other less discriminatory measures are available. It is the requirement to have a law degree itself that must be justified, rather than its discriminatory effect? Part of the assessment of whether the criterion can be justified requires a comparison between the impact of that requirement upon the affected group, as against the importance of the aim to the employer.

What do these decisions mean for employers?

Direct age discrimination and employer justified retirement ages

Although Mr Seldon lost his appeal, this is by no means the end of the road for him. To the firm’s benefit, the Supreme Court confirmed that its aims in retiring Mr Seldon were legitimate. These were facilitating workforce planning, promoting intergenerational fairness and preserving dignity of older workers by limiting the need to expel them by way of performance management. However, the Employment Tribunal must now decide whether having a retirement age of 65 in Mr Seldon’s particular case was a proportionate means of achieving these aims. Strong hints were given by the Supreme Court that the firm’s actions were proportionate because there was a national default retirement age of 65 at the time of his retirement.

The Court’s ruling therefore confirms that an employer may potentially be able to introduce its own default retirement age but the fact that there is now no national default retirement age means it will take a very brave employer to introduce such a default age. Those who do wish to take the plunge should note that whether having a set retirement age is justified will depend on the particular aims of the employer, whether a set retirement age is an appropriate and necessary way of achieving those aims and whether there is a less discriminatory method of achieving those aims. In the absence of a national default retirement age, it is difficult to see how an employer could ever argue that drawing the line at any particular age is appropriate or necessary, except possibly, in the case of some statutory requirements such as a health and safety requirement relating to the particular job.

Assessing whether a measure, criterion or practice is age discriminatory

Unlike Mr Seldon, Mr Homer won his appeal. Like Seldon, however, the case now has to be reconsidered by an Employment Tribunal on the question of justification. The Supreme Court decided in favour of Mr Homer, confirming that the requirement for him to obtain a degree was indeed related to age and not just his impending retirement. This seems a sensible conclusion as “retirement age” and “age” are clearly inextricably linked.

It is worth pointing that the application of this particular aspect of the decision is diminished by the fact that there is no longer a default retirement age. Therefore, an employee in Mr Homer’s position today would find difficulty arguing he has been put at a disadvantage compared to younger workers because he would, in theory, be able to complete a degree (there being no actual barriers in terms of the retirement age to prevent him from doing so in time to benefit from the degree). Today, Mr Homer would have to run a different argument, i.e. that someone of his age is less likely to hold a degree and so any rule which requires a degree for promotion to the next level is likely to put people in his age group at a disadvantage compared to younger workers.

The wider relevance of this decision to employers is to highlight the need to examine carefully any new rule or criterion, which although apparently age neutral, has, or arguably might have, an adverse impact upon people of a particular age. Employers should be prepared to justify any such rule, both on its introduction and on an on-going basis. The impact of the rule should therefore be kept under review periodically. HR should ensure that a detailed business plan is drawn up to examine each individual’s aim (such as encouraging recruitment, recruitment of staff etc) in relation to its own business experiences. The plan might consider whether any group is disadvantaged and whether there are any less discriminatory ways of achieving those aims. This may involve considering “grandfather clauses” which preserve the existing status of seniority, with attendant benefits, of existing employees.

Another Employer Victory in California: Attorney's Fees for Meal and Rest Period Claims Not Recoverable in California

Jean F. Kuei — Thu, 03 May 2012 19:56:19 +0000

On the heels of its long-awaited decision in Brinker v. Superior Court (Hohnbaum), No. S166350, the California Supreme Court this week issued another important wage and hour decision that favors employers. In Kirby v. Immoos Fire Protection, Inc. (Liu), No. S185827, the court ruled that neither employees nor employers can recover attorney's fees as prevailing parties on claims for meal and rest period violations. This is a key victory for California employers that routinely are subject to “one-way” statutes requiring them to pay attorneys’ fees to prevailing plaintiffs, but rarely, if ever, permitting employers to obtain such fees when they prevail.

Kirby’s Key Points:

Neither California Labor Code Section 1194 (on minimum wage and overtime) nor Section 218.5 (on nonpayment of wages, fringe benefits, and health/welfare or pension fund contributions) authorizes attorney's fees to a party that prevails on a meal or rest break claim.

“The most plausible inference to be drawn from [the legislative] history is that the Legislature intended section 226.7 [meal and rest break] claims to be governed by the default American rule that each side must cover its own attorney’s fees.”

What Kirby Means for Employers:

Look for a possible, if not probable, decrease in lawsuits claiming meal and rest period violations.

Brace for the possibility that the California Legislature will respond to Kirby by implementing a fee-shifting provision to permit attorney's fees for violations of Section 226.7 claims.

Make sure to provide all non-exempt employees with 30-minute, unpaid, off-duty meal periods, as well as 10 minutes of rest for every four hours of work or major fraction (meaning two or more hours) – breaks that are uninterrupted and relieve employees of all work tasks.

NLRB Continues To Oppose Arbitration Policies That "Chill" Employee Class Actions

Joel S. Barras — Wed, 02 May 2012 01:18:48 +0000

The General Counsel for the National Labor Relations Board ("Board") issued a complaint yesterday alleging that 24 Hour Fitness USA, Inc., violated the National Labor Relations Act ("NLRA") by insisting that all employment-related disputes be resolved through individual arbitration. The employer, which operates fitness centers nationwide, requires its non-union workforce, as a precondition of hire, to sign written waivers surrendering any right to pursue collective or class action lawsuits or arbitrations against the Company. Employees may later opt-out of this waiver, but only by submitting a Company-created form within 30 days of their signing the original release.

According to the Board, this "one time only" limited opt-out provision is insufficient to circumvent the Board's prior ruling in D.R. Horton, Inc., 357 N.L.R.B. No. 184 (January 3, 2012) that a mandatory arbitration agreement that prohibits employees from filing or participating in joint, class, or collective employment-related claims in any arbitral or judicial forum violates NLRA Section 8(a)(1). The Board considers 24 Hour Fitness’ process as illegally coercive because employees would be understandably reluctant at and within 30 days of hire to alert their new employer of their interest in one day filing or participating in a class action lawsuit or arbitration against the employer.

Scheduled before an Administrative Law Judge is a June 11, 2012 hearing that seeks an order prohibiting the employer from maintaining and enforcing that portion of the policy that "gives up" collective and class action participation and relief .

Transgender Protection Under Title VII Announced by EEOC

Rania Afram — Mon, 30 Apr 2012 16:42:13 +0000

This post was written by Rania Afram and Eugene K. Connors.

In an April 20, 2012 decision, the Equal Employment Opportunity Commission (“EEOC”) solidified its intended protection of transgender employees under Title VII of the Civil Rights Act of 1964. The EEOC made it clear that an employer that discriminates against an employee or applicant on the basis of that person’s gender identity violates Title VII’s sex discrimination prohibitions. Because transgender people lack protection from adverse employment decisions in 34 states, this EEOC decision is a watershed moment for the transgender community. It also highlights the broad range of protected categories that could subject employers to more liability for discrimination.

This decision involved a transgender woman allegedly denied employment by the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”) after the ATF had learned of her gender transition. The then-male applicant, a veteran police detective with a military and law enforcement background, had applied for the job of ballistics technician, a forensic science technician who collects and identifies physical evidence related to criminal investigations. Certified and trained on the ATF ballistics computer system, she was on the cusp of hire, pending a background investigation. After she disclosed that she was transitioning from male to female, the ATF told her that the position was no longer available, but she later learned that it had hired someone else for the position.

The woman, represented by the Transgender Law Center, filed a formal equal employment opportunity complaint with the ATF. It alleged illegal discrimination based on “gender identity” and “sex stereotyping.” The ATF, in effect, responded by asserting that Title VII did not apply to transgender employees. On appeal to the EEOC, the Commission stated: “[T]he Commission hereby clarifies that claims of discrimination based on transgender status, also referred to as claims of discrimination based on gender identity, are cognizable under Title VII’s sex discrimination prohibition . . .”

This decision’s clear message to both public (government) and private employers is that Title VII protects applicants and employees who may not “fit” social or cultural gender-based norms, from employment discrimination based on each person’s identity, behavior, or appearance. Put simply, Title VII extends beyond protecting employees from adverse employment discrimination based on non-job-related factors such as race or national original to gender, meaning, in the EEOC’s words, to the “cultural and social aspects associated with masculinity and femininity,” that includes transgender status.

The implications of this decision go beyond hiring “into” the workplace. Workplace issues include an employer’s need to insulate transgender employees from ostracism and ridicule, and to balance employee interests in general on everyday issues such as restroom access and use. At a minimum, this will require sensitivity training of all employees (including management) on a repeating basis.

More information on Reed Smith's Discrimination practice can be found here.

EEOC "New" Guidance on Arrest and Conviction Records

Sara A. Begley — Thu, 26 Apr 2012 15:28:20 +0000

The "new" guidance -- accessible at http://www.eeoc.gov/laws/guidance/qa_arrest_conviction.cfm -- reinforces longstanding EEOC policy prohibiting employers from using arrest and conviction records to exclude individuals from employment. More recently, the EEOC has expanded enforcement efforts to include prohibitions on employer policies that exclude candidates from employment because of criminal history, arrests, and convictions. That is because such policies adversely affect or have a "disparate impact" on minority populations that have statistically higher arrest and conviction rates. The disparate impact analysis has long been used to combat race discrimination in the workplace. The "takeaway" messages for employers are in the EEOC's specific recommendations and stated limitations on how and when criminal background information can be used. Starters are that it must be a conviction, not an arrest, and the conviction must be for an offense related to the job in question, often a tough analysis for employers. The conviction must be relatively recent in time and be of a sufficient gravity to create legitimate concern by the employer.

There are also specific recommendations on how employers should use background check information . See at http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm. One EEOC recommendation is that employers should not use policies with blanket exclusions based on criminal records, and that applications should no longer include requests for criminal history. The EEOC further recommends that employers meet with candidates and give them the opportunity to explain or refute the findings of the background check. While the guidelines are not regulations, they send a clear message to employers on where the EEOC will be focusing its investigation and enforcement efforts. It also creates a cumbersome, time-consuming process for employers to evaluate criminal background records in possible, if not probable, conflict with policies to protect the security of employees, customers, and the business as a whole. Such policies, at a minimum, grow out of an employer's duty under laws such as the Occupational Safety and Health Act (OSHA) to provide employees with a safe workplace.

Back from the Brink: California Employers Finally Get Clarity on Meal/Rest Breaks

Lisa M. Carvalho — Wed, 25 Apr 2012 18:28:54 +0000

This post was written by Lisa M. Carvalho and Seth C. Carmack .

On April 12, 2012, the California Supreme Court issued its long-awaited decision in Brinker Restaurant Corporation v. Superior Ct. (Hohnbaum), No. S166350. The decision clarified several important issues regarding California employers’ obligations in connection with meal and rest breaks for non-exempt employees. It also offered guidance regarding the certification of meal and rest period wage and hour class actions.

Brinker’s Key Points:

• In general, an employer must provide a non-exempt employee with the opportunity to take a 30-minute, unpaid, off-duty meal period, during which the employee is “relieved of all duty.” However, the employer “need not ensure that the employee does no work.” If an employee is provided a lawful off-duty meal period but still works during it, an employer would not responsible for paying the employee premium pay (an extra hour’s pay) for the meal period, but would be responsible for paying straight time pay for the actual work performed if the employer knew or reasonably should have known that the employee was working during the meal period.

• An employer need not provide a second meal period solely because the employee has worked for more than five hours since the first meal period. Rather, an employer must provide a first meal period after no more than 5 hours of work and a second meal period after no more than 10 hours of work.

• An employer must provide a non-exempt employee at least 10 minutes of paid rest for every four hours of work or a “major fraction.” A “major fraction” of four hours is more than two hours, though there is no obligation to provide a rest break for a scheduled shift of less than 3 1/2 hours. An employee therefore is entitled a paid 10 minute rest break for each shift of more than 3 1/2 hours, scheduled as close to the middle of that shift as is “practicable.” For lengthier shifts, employers must provide 10 minutes of paid rest for shifts of 3-1/2 to 6 six hours, 20 minutes for shifts ranging from 6 hours to 10 hours, and 30 minutes for shifts of 10 hours to 14 hours.

• Meal and rest period claims remain susceptible to class action treatment under certain circumstances. Courts are not always required to resolve legal or factual issues to determine whether class certification is proper, but must resolve legal or factual issues that are necessary to such a determination.

What Brinker Means for Employers:

Employers need to review their policies and procedures to ensure compliance with Brinker’s standards. Suggestions:

• Publish a meal/rest break policy that recites Brinker’s express timing rules and makes clear that all meal periods are duty-free, unless on-duty meal periods are permissible under the relevant Wage Order and are supported by all required documentation.

• Caution managers and supervisors never to interfere with employee rights to take rest breaks and meal periods. Always relieve employees of all duties, and never pressure employees into “giving up” their rest breaks or meal periods.

• Require employees to record their meal periods and report any failure to receive a reasonable opportunity for an uninterrupted meal period.

• Double-check that employees receive pay for actual time spent working during meal periods, including asking employees to report any concerns or questions.

• Monitor, subject to satisfaction of any privacy and bargaining obligations, to ensure policy compliance by all employees, managers and supervisors.

More information on Reed Smith's Wage and Hour Practice is available here.

London Olympic and Paralympic Games 2012: Employee Considerations

Ruth Bonino — Wed, 25 Apr 2012 12:49:49 +0000

This post was written by Ed Hunter and Ruth Bonino.

The London 2012 Olympics and Paralympics Games are just around the corner! The Olympic Games take place from 27 July to 12 August 2012 and the Paralympic Games from 29 August to 9 September 2012.

This briefing contains guidance on the issues employers are likely to face as a result of employees who have volunteered at the Games, and those wishing to attend events as spectators or follow the Games at work. Due to the unique circumstances of the event it is important for employers to have clear policies in place well before the Games, and for the policies to be communicated effectively to all staff.

Volunteering at the Games

The selection process for volunteers for the Olympic and Paralympic Games is well under way, with offers currently being made to successful applicants. Volunteers are expected to attend a minimum of three training sessions prior to the Games and ten volunteer event days during the Games as part of their commitment to the programme. Therefore employers need to start thinking about how to manage requests for time off for such training and event days.

Employers are not legally obliged to give employees time off for volunteering. However, many employers recognise the benefits to their business of allowing employees to engage in volunteer programmes during working hours, in terms of personal development, morale boosting and contribution to the community. Some employers therefore give employees an agreed quota of paid leave per year in order to volunteer.

Ultimately, it is up to the employer to decide whether volunteers will be required to take annual leave in order to carry out their role, or whether they will be offered the opportunity of taking special paid or unpaid leave. Where employers are unable to accommodate requests for time off, employees should be made aware of this as soon as possible. In this situation, unless the employment contract provides otherwise, the employer is entitled to turn down the employee’s request provided the employee is given as many days’ notice as the length of the requested leave.

Alternatively, employers may wish to offer employees the opportunity to work flexible hours or to make up lost time at a later date. Any special arrangements to enable employees to volunteer for the Games must be established and implemented in a fair, consistent and non-discriminatory manner, so as to avoid discrimination, victimisation or constructive unfair dismissal claims.

Benefits of a special annual leave policy

Many employers will face a larger than normal number of requests for annual leave from employees wishing to attend or watch events or from employees wishing to get away from the crowds and travel disruption. Despite the staffing pressures that employees’ absences may put on businesses, holiday requests must be handled consistently, fairly and within the appropriate time frame.

Depending on the particular staffing needs of their business, employers may wish to issue a special holiday policy for the Olympic period. This is particularly important for businesses which have limited capacity for flexibility in this respect. Competing requests for leave during the Games could be dealt with on a "first come, first served" basis, by way of a lottery or on any other non-discriminatory basis. The policy should be clear, fair and transparent and staff should be informed of the policy at the earliest opportunity.

Where normal holiday procedures are to apply, employers should review their existing policy and ensure that it covers the procedures for approving annual leave and for dealing with multiple requests for the same period. Staff should be reminded of the procedures, and how they can access the policy, in the months leading up to the Games. In addition, where there is likely to be difficulty approving multiple requests, it may be sensible to inform employees of this, in order to give them sufficient time to consider their options and to manage expectations.

Employers may wish to set a date by which all requests for holiday over the Olympic period should be submitted. This may help to ensure that requests are dealt with consistently, minimising the risk of claims of unfair or discriminatory treatment from employees who are not granted leave. Setting up a designated email account for dealing with these requests and other related issues may help to coordinate this process.

To reduce the likelihood of those employees who are refused requests for holiday failing to turn up for work, employers may choose to remind staff of their absence notification procedures and that any unauthorised absence will be regarded as misconduct. In the event of an unauthorised absenteeism during the Games, the usual disciplinary procedures should be followed. Employers should be careful not to jump to conclusions if an employee arrives late to work or calls in sick. In all cases a proper investigation should be conducted.

Flexible working

Although there is no general statutory right to request flexible working, many employers may consider accepting requests for flexitime or other changes to working patterns from employees wishing to attend the games, volunteer or avoid travel disruption. In some cases employers may need to offer flexible working in order to comply with requests from Transport for London to reduce their headcount during the Olympic period. This is only likely to be an issue for large employers based in critical areas in central London.

If staff are permitted to work from home during the Games it is important to ensure that they have access to the necessary facilities and resources at home. Remote access to IT systems is likely to be severely affected by abnormal usage levels, therefore some employers may need to “top up” the capacity of their remote servers to deal with the additional demand. This can be arranged on a temporary basis.

If flexible working is introduced, it should be formalised to ensure that staff are aware of their responsibilities during this period, and to reduce the likelihood of employees using the opportunity for flexible working as a means of watching or attending events, when they are supposed to be working. The policy should be communicated in good time and in a way that is easily accessible to all employees – for example, through the staff intranet.

Watching and following the Games at work

Many employees will want to watch or follow Olympic events during working hours. This can lead to problems with computer systems if large numbers of staff are simultaneously streaming live coverage, and despite possibly lifting staff morale, it may lead to a fall in productivity.

Employers may wish to provide facilities, such as a projector screen, televisions and/or radios, for employees to view or listen to events in communal areas during the working day. This will also provide opportunities for impromptu social meetings which may help to boost team morale, and employees may be less prone to breaching the rules at other times. However, employers should have a clear policy on what is permissible in terms of employees viewing and following coverage at work, and the consequences of breaching the policy. It would be sensible for such a policy to set out the employer’s expectations and requirements in this regard, emphasising that this is a privilege and not a right and that the work will need to be done.

California's "Wage Theft Protection Act" -- Labor Commissioner Tries Again With an Updated Notice Template and FAQs

Lisa M. Carvalho — Wed, 18 Apr 2012 18:56:41 +0000

California's new Wage Theft Protection Act of 2011 (Labor Code Section 2810.5, effective January 1, 2012), requires employers to provide most new non-overtime-exempt employees with a written notice that contains specified information regarding, among others, wage rate, payday, employer name and address, workers' compensation insurance carrier information, and other information added by the Labor Commissioner as it may deem necessary

On April 12, 2012, the Labor Commissioner updated its FAQs on the new law, and also revised the notice template for employer use. The revised notice template provides much-needed clarification to the confusing "written agreement" question that had appeared on the original notice template, and had employers worried that the question could create ambiguity as to whether the employment was at will. The new notice template reads, "Does a written agreement exist providing the rate(s) of pay?" and eliminates this confusion.

Our previous blog entries on this topic can be found here and here.

Employers can access the Labor Commissioner's updated notice template and revised FAQ's at http://www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act_of_2011.html.

UPDATE to D.C. Circuit Litigation Over NLRB Posting Rule: D.C. Circuit Halts Implementation Pending Appeal

William Bevan III — Tue, 17 Apr 2012 16:35:52 +0000

This post was written by Valerie M. Eifert and William Bevan, III.

The District of Columbia Circuit Court of Appeals granted a motion for an injunction pending appeal filed by national trade associations challenging the NLRB Posting Rule that requires all employers covered by the National Labor Relations Act to post a notice informing employees of their rights under the Act. In granting the motion to enjoin the implementation of the rule pending appeal, the Circuit Court noted that the Board earlier agreed to postpone operation of the rule during the district court proceedings. The Circuit Court also found that the district court's decision to uphold the posting rule while depriving the Board of its primary enforcement mechanism against noncompliance creates uncertainty regarding the application of the rule and counsels in favor of granting the request for an injunction. The Circuit Court has expedited the appeal, requiring all briefing to be concluded by June 29, 2012 and oral argument to be held in September, 2012.

A copy of the order can be found here:

For more information and analysis on the district court's decision, check out our earlier blog posts on the rule: http://www.employmentlawwatch.com/2012/03/articles/employment-us/nlrb-posting-requirement-upheld-but-enforcement-limited/

Accessing Facebook Through Employers: Is The Juice Worth The Squeeze?

Rania Afram — Tue, 10 Apr 2012 00:01:27 +0000

Employers are becoming more aware of the impact of Facebook and the type of information it can reveal. Some employers use Facebook to find background or character information about their employees or job applicants. Other employers use Facebook to find out whether employees have disclosed information about the employer’s business. Some employers are taking it a step further by requesting that job applicants and/or current employees disclose their Facebook user name and password. Other employers are asking applicants and/or employees to "friend" its human resource manager or log into a company computer during interviews to view their Facebook content.

This forced friendship has raised critical concerns over the legality of such a practice. Disclosure of personal account information could invade an employee or job applicant’s right to privacy. In some states, like California, for example, the right to privacy is strongly recognized by the California Constitution, leaving little room for California employers to justify the need for an employee’s Facebook information. Because California courts apply a "balancing test" to evaluate the need for private information against the reasonable expectation of privacy, it may be difficult for California employers to advocate for the disclosure of such information, unless there is a compelling need.

This practice has also raised concern over the likelihood of greater discrimination lawsuits against employers. Employers could be held liable for discriminating against employees or job applicants based on seeing their Facebook information revealing a protected class, such as their age, religious affiliation, or sexual orientation. Some employers may be accused of not hiring a job applicant based on that protected class or taking adverse action against an employee based on that information.

On the flip side, some employers justify the importance of access to Facebook information, for example, as part of their duty to thoroughly investigate internal complaints that may trigger the disclosure of information contained on an employee’s Facebook page. If, for example, an employee is accused of disclosing confidential company information and/or disparaging the company on Facebook, employers may be compelled to gain access to an employee’s Facebook account in order to substantiate or invalidate the complaint and fulfill their obligation to investigate. However, because the right to privacy is highly regarded, especially in California, employers may have to overcome tough hurdles to justify the need to access Facebook information to support the position that it can be a vital part of an internal investigation.

These concerns have triggered proposed legislation in California and other states like Maryland, Massachusetts and Connecticut. In California, a state senator is introducing legislation that would prohibit companies in California from soliciting Facebook passwords from current employees or job applicants. The state measure would also bar employers from requiring access to employees’ and applicants’ social media content, and prevent employers from requiring log-ins or printouts of that content for their review. In Maryland, a similar bill is also being proposed after a government agency requested its job applicants to browse through their own Facebook accounts with an interviewer present. In Massachusetts, a state representative filed a similar bill that covers personal e-mail in addition to social media, which would bar employers from "friending" a job applicant to view protected Facebook profiles. In Connecticut, a senator is writing a similar bill that would bar employers from asking job applicants for their Facebook or other social media passwords. Some are, in fact, seeking guidance from the Equal Employment Opportunity Commission and U.S. Department of Justice to address whether this practice would violate any privacy, fraud or anti-discrimination laws.

Employers who request Facebook information will have to face some real challenges, especially in states like California. Employers must be careful about how they selectively ask for information, ensure that the information they are seeking is absolutely critical, establish that there may be no alternative source for the information and further implement a clear and practical social media policy that is enforced in a uniform and non-discriminatory manner. Employers must weigh the advantages of being a Facebook "friend" to the potential problems that could arise by seeking access to an employee’s Facebook information. Because this forced friendship may open the door to privacy and/or discrimination concerns, employers must be cautious about implementing a practice requiring such disclosure. Otherwise, employers may be forcing a friendship that may create more exposure to liability than it is worth.

What's Coming Up in UK Employment Law in April?

Ruth Bonino — Tue, 03 Apr 2012 12:55:48 +0000

This post was written by Fiona McFarlane and Ruth Bonino.

It is that time of year again when the UK Government brings into force legislative changes relating to employment law. In this update we highlight the changes taking place in April 2012 and consider the impact these might have for employers.

Qualifying Period for Unfair Dismissal

The qualifying period for ordinary unfair dismissal claims (and the right to written reasons for dismissal) will increase from one to two years for those employees whose continuous employment with an employer begins on or after 6 April 2012. Employees who were employed before 6 April 2012 will still only need one year’s continuous employment before they can bring an ordinary unfair dismissal claim. (Unfair Dismissal and Statement of Reasons for Dismissal (Variation of Qualifying Period) Order 2012).

Whilst there is nothing for you to do in relation to this change itself, you should be aware that any employees employed before the deadline will still be subject to the existing regime and could therefore claim unfair dismissal protection after one year’s service. You should keep a note of the start dates of employees’ employment to ensure you know which category each employee falls into. For our views on the implications of this change, see our previous blog – Impact of UK Government’s plan to increase the unfair dismissal qualifying period.

Employment Judges to sit alone on Unfair Dismissal Hearings

From 6 April, unless the Employment Judge indicates otherwise, all unfair dismissal cases heard on or after 6 April, will be heard by a single Employment Judge, without any lay members. This decision will be reviewed in a year’s time. (The Employment Tribunals Act 1996 (Tribunal Composition) Order 2012 amends section 4(3) Employment Tribunal Act 1996).

Since unfair dismissal was introduced in 1971, Tribunals deciding such cases have always comprised a chairman and two lay members, one from industry and from a trade union background. The change to an Employment Judge alone will save the extra cost of employing the lay members but, more significantly, it is intended also to speed up the Tribunal process and shorten the waiting time for part-heard cases. Cases which include discrimination issues will continue to be heard by a full panel.

Definition of ‘independent adviser’ clarified

From 6 April the so-called drafting error in section 47 Equality Act 2010 will be corrected by an amendment which clarifies the term ‘independent adviser’ for the purposes of a compromise agreement. (The Equality Act 2010 (Amendment Order) 2012).

One of the requirements for a valid and enforceable compromise agreement is that the employee signing the agreement must have had advice from an independent adviser about the terms and effect of the agreement before signing it. Section 147(5) of the Equality Act 2010 states that the independent adviser must not be someone who is representing one of the parties in the claim. Confusion arose, therefore, as to whether the employee’s representative would qualify as an independent adviser whilst they were representing them in the claim. If the employee’s adviser was not considered independent, another party would need to be engaged. Section 147 as amended makes clear that the employee’s representative will be classified as an independent adviser under the Act.

With the amendment in place, employers can now rely on properly drafted compromise agreements to settle Equality Act claims. Any additional measures which have been put in place to alleviate any previous risk that such agreements were unenforceable can therefore be dispensed with.

Changes to Tribunal Procedure

As of 6 April, the Employment Tribunals (Constitution and Rules of Procedure)(Amendment) Regulations 2012 come into force. These amend the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004. The new rules apply to all cases submitted to an employment tribunal on or after 6 April 2012.

(a) Deposit Orders

Where a Tribunal considers that a party’s claim has little prospect of success, they will be able to order that party to pay up to £1000 into court as security for the claim. Currently, the maximum amount that a party can be required to deposit into court is £500.

(b) Costs Award

The maximum costs award that a Tribunal will able to make will be £20,000. This is an increase from the current maximum of £10,000. This maximum will apply only to the costs orders applied by the Tribunal but it will still be possible to refer the costs hearing to the County Court for a detailed assessment, in which case this maximum will not apply.

(c) Witness Statements

Unless the Tribunal directs otherwise, witness statements presented to a Tribunal will stand as the witness’ evidence in chief. This means that the witness statement will be taken as read.

(d) Witness Expenses

State funded expenses for witnesses at hearings will be withdrawn. Nevertheless, the power of the Tribunal to direct parties to bear the expenses of any witness will remain.

These are points to be aware of when attending Tribunal hearings and/or considering strategy.

Abolition of Contracting Out for Defined Contribution Pension Schemes

Defined contribution (money purchase) pension schemes will no longer be able to be used to contract out of the Second State Pension on a protected rights basis from 6th April 2012. Broadly, all direct contribution contracting-out certificates will be cancelled and scheme members will be contracted back into the Second State Pension with effect from this date (section 106 Pensions Act 2008 and related secondary legislation).

Pension scheme trustees have an obligation to inform members as soon as practicable, and in any event within one month of 6th April 2012 that the scheme is no longer a money purchase contracted-out scheme, and to then provide the member as soon as practicable, and in any event within four months of 6th April 2012 with prescribed information in relation to this change.

Employers with employees who are contracted out by reference to a defined contribution scheme may also have a similar obligation under the Employment Rights Act. If you currently operate a contracted-out defined contribution pension scheme please let us know and we can advise further on the implications of this change and what needs to be done in practice.

RIDDOR reporting time limits increase

Where an employee is unable to do their job because of an accident sustained at work the employer is required, by the Reporting on Injuries, Diseases and Dangerous Occurrences Regulations 1995 (RIDDOR), to report the injury to the relevant enforcing authority within a set period.

As from 6 April, the period of incapacity of the employee which triggers the employer’s duty to make such a report will increase from 3 consecutive days to 7 consecutive days. In addition to this, the period for the report to be made by the employer will increase from 10 to 15 days.

You should be aware that you will only be required to make a report to the relevant authority under RIDDOR once an employee has been absent because of an injury sustained at work for 7 consecutive days. You should also be aware that the length of time you have to make such a report will increase. However, this should not affect the policy currently in place and you should make any such report as soon as possible to ensure that you are within the time limit.

Increased statutory rates

(a) Maternity/ Paternity/ Adoption Pay Increase

Maternity, paternity and adoption pay will increase from £128.73 a week to £135.45 per week from 1 April. The weekly earnings threshold for the payments will also rise from £102 to £107.

(b) Statutory Sick Pay Increase

Statutory sick pay will increase from £81.60 to £85.85 per week from 6 April. The weekly earnings threshold will also increase from £102 to £107.

(c) Maternity Allowance Increase

Maternity allowance will increase from £124.88 to £135.45 from 9 April. The weekly earnings threshold will remain at £30.

TUPE: Service Provision Changes and what activities transfer

Eleanor Winslet — Mon, 02 Apr 2012 14:22:08 +0000

The Employment Appeal Tribunal (EAT) has held in Johnson Controls v Campbell and Anor that there was no service provision change under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) where a centralised taxi booking service was brought back in-house by the client. Although the client was still undertaking the activity of booking taxis, there was no “centralised service” in place following the transfer. As a result, there was held to be an essentially different activity in place and TUPE did not apply.

This case follows another recent decision in Nottinghamshire Healthcare NHS Trust v Hamshaw and others which held that where care services transferred from the Trust to new providers there was not a service provision change because the services were not fundamentally or essentially the same, owing to the methods used to provide them.

What happened in this case?

Mr Campbell worked for Johnson Controls providing a taxi administration service for the United Kingdom Atomic Energy Authority (“UKAEA”). His work included taking bookings from members of staff of UKAEA, advising on the timings for journeys, reviewing booking data, combining journeys, checking invoices and dealing with queries. In 2010, UKAEA decided to cut costs and terminate its contract with Johnson Controls, choosing instead to use secretaries employed by UKAEA to book taxis directly with taxi firms.

Mr Campbell brought a claim in the Employment Tribunal for unfair dismissal and a redundancy payment on the basis that there had been a TUPE transfer (by virtue of a service provision change) when (as he claimed) the taxi administration service was transferred from Johnson Controls to UKAEA. The main issue for the Tribunal to determine was to decide whether there had been a service provision change within the meaning of regulation 3(1)(b)(iii) TUPE (contracting-in) which provides that such a change will occur where:

there is an organised group of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client;
the client intends that the activities will, following the service provision change, be carried out by the client itself other than in connection with a single specific event or task of short-term duration; and
the activities concerned do not consist wholly or mainly of the supply of goods for the client’s case.

For this purpose, the Tribunal reviewed the relevant case law which made clear that the Tribunal must identify the relevant activities carried on by the original contractor and then decide whether the activities carried on by the transferee of the activities (i.e. the subsequent contractor or the client, where activities move in house) are fundamentally or essentially the same as those carried on by the original contractor.

The Tribunal decided on the evidence that the centralised taxi administration service provided by Johnson Controls was not continued by UKAEA in-house. This was “an important component in coming to the conclusion that it [was] not essentially the same activity as that performed by [Mr Campbell] prior to [the conclusion of the contract]”. It was also relevant that the tasks performed by the secretaries were effectively the same following the termination of the relationship with Johnson Controls than they had been during the relationship – the only difference was that, under the new arrangement, the secretaries telephoned the taxi companies direct rather than going through the intermediary, Johnson Controls. However, the Tribunal concluded it would be wrong to consider the secretaries provided the same service as before since Johnson Controls provided a central co-ordinated service (which, for example, allowed for taxi sharing and a point for administration) which no longer existed following the transfer.

The EAT upheld the Tribunal’s decision and held that:

· it was for the Tribunal to identify the relevant “activity” and whether this had transferred – this was to be approached “holistically” rather than simply by adding up the tasks undertaken pre and post transfer;

· the Tribunal had taken this approach and had identified that the central and co-ordinated nature of the service provided by Johnson Controls (which did not continue after their provision of services ceased) was an “important feature”, which the EAT felt was appropriate.

What does this decision mean for employers?

In the current economic environment, we are likely to see employers bringing more services back in-house to save costs, so similar scenarios to the Johnson Controls case are likely to arise more frequently. This case suggests that the Tribunals will look very closely at the nature of the services provided and take a “holistic approach” when determining whether an activity will transfer, rather than purely looking at tasks performed in relation to a particular service. Transferors should be aware that there is a risk even seemingly minor changes to the method of the provision of activities by the transferee might mean that there is no service provision change and TUPE does not apply, in which case the transferor is left with the responsibility (and corresponding liabilities) for making redundancies in these situations.

'Costs plus' approach to justifying discrimination in the UK endorsed by the Court of Appeal

Laura H. Juillet — Tue, 27 Mar 2012 21:22:30 +0000

The Court of Appeal in Woodcock v North Cumbria Primary Care Trust has ruled that the savings of costs alone will not, without more, amount to a legitimate aim so as to justify discrimination. In this case, Mr Woodcock was dismissed by reason of redundancy just before his 50th birthday in order to avoid his qualifying for significant enhanced early retirement terms. The Court of Appeal (CA) held that this treatment amounted to discrimination by reason of age but was justified since the legitimate aim of dismissing him was to give effect to his redundancy and to save costs. The aim of the dismissal at that particular age was not purely to save costs and so was justifiable.

What happened in this case?

As set out in more detail in our previous blog regarding the findings of the Employment Appeal Tribunal (EAT) in this case, the Trust dismissed Mr Woodcock by reason of redundancy. However, the Trust did not carry out a full consultation process so that the 12-month notice of dismissal could be given so as to expire before Mr Woodcock’s 50^th birthday (thus avoiding significant enhanced early retirement terms at a huge cost to the Trust).

Mr Woodcock claimed that this treatment constituted unjustified age discrimination. The Tribunal found (and the EAT and the CA agreed) that such treatment was, on the face of it, discriminatory on the grounds of age, and so the central question was whether the Trust’s actions were objectively justified, i.e. whether they were a ‘proportionate means of achieving a legitimate aim’.

Decisions of the Employment Tribunal and the EAT

The Tribunal found that the aim of the Trust in terminating Mr Woodcock’s employment was not of itself to save costs, but was to achieve the dismissal of a redundant employee. Part (not all) of this aim was to achieve this in a cost-effective manner. The EAT agreed that this satisfied the costs plus approach as set out in Cross v British Airways, and so ultimately found that the treatment was justified.

However, the EAT also raised concerns about the artificiality of such an approach, noting the strange situation where employers would be playing games of ‘find the other factor’, in order to be confident that certain actions could be justified.

This EAT decision therefore arguably left employers in quite a difficult situation – on the one hand the EAT was formally following the costs plus approach, yet at the same time (as an aside) was experiencing misgivings as to the desirability and logic of such an approach. Further EAT decisions did not provide the clarity that employers were looking for either: for example, the case of Cordell (discussed here in our previous blog) did seem to indicate that cost alone might be sufficient, but also seemingly gave the Tribunals wide discretion to decide what will be ‘right and just’. This is why the Court of Appeal judgment in Woodcock was so keenly anticipated.

The Court of Appeal decision

The CA considered the line of authorities both in the UK and European Court, and concluded that the real question must always boil down to whether the treatment amounted to a ‘proportional means of achieving a legitimate aim’.

The Court agreed with the guidance of the European Court and held that the saving or avoidance of costs will not, without more, amount to the achieving of a legitimate aim. On the facts in question, the CA found that the aim of the treatment was not cost alone; it agreed with the Tribunal and EAT that the (legitimate) aim of dismissing Mr Woodcock before his 49^th birthday was genuinely to give effect to the redundancy decision, and a legitimate part of that aim was to save the Trust significant costs.

What does this mean for employers?

The ‘costs plus’ approach to justifying discrimination means that costs alone will not justify discrimination, but costs plus another factor may do so. The EAT in Woodcock, back in November 2010, cast doubt on this ‘costs plus’ approach. As explained above, the EAT did not go so far as to depart completely from such an approach, however, and found on the facts that the treatment of Mr Woodcock by the Trust was in fact justified on grounds other than cost.

When Mr Woodcock appealed the EAT’s decision to the CA, employers eagerly awaited an answer to the question: would this judgment spell the end for the ‘artificial game playing’ that was inherent in the ‘cost plus’ approach?

Unfortunately for employers, the answer is no. The CA, although in agreement with the Employment Tribunal and the EAT that any discrimination in this case could, on the facts, be objectively justified, it did not hold that cost alone would be sufficient to justify discrimination.

On the bright side, employers can take comfort that we now have clear guidance on the issue of costs plus – even if it is not the guidance they were hoping for! For now (and this case does not look set to be appealed further) the costs plus approach remains, and employers should be careful before taking any discriminatory action for which their only justification is cost.

For the time being at least, the ‘artificial game playing’ of ‘find the other factor’ looks set to continue. How easy this might be will depend on the facts of each particular case. Take the example of ceasing to provide certain benefits at a particular age: while the most obvious (and no doubt the genuine) aim would be to save costs, this would not be sufficient on its own to constitute a legitimate aim. Employers would be advised to ‘find the other factor’, and so might seek to argue that the legitimate aim is in fact, for example, avoiding redundancies or liquidation of the company which might otherwise be required. The current judgment of the Court of Appeal unfortunately provides little guidance on whether such arguments would succeed, or whether Tribunals will see such arguments as merely a matter of semantics, but until such guidance is provided employers have little alternative but to play such ‘games’.

Service provision changes: Relocation because of TUPE transfer was a substantial change to employees' material detriment

Thomas Ince — Tue, 27 Mar 2012 15:26:07 +0000

This post was written by Thomas Ince and Ed Hunter.

In Abellio London Ltd (Formerly Travel London Ltd) v Musse and others UKEAT 0283/11 and 0631/11, the Employment Appeal Tribunal (“EAT”) ruled that a relocation of six miles within central London which resulted in the employees having to travel an extra one to two hours to work following a service provision change amounted to a substantial change to employees’ working conditions to their material detriment entitling them to resign under regulation 4(9) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”). As regulation 4(9) of TUPE deems an employee’s resignation to be a “dismissal” where it is in response to such a change, the employees concerned were entitled to claim automatic unfair dismissal and liability for their dismissals passed to the transferee. Since it would not have mattered had the contracts of employment contained valid mobility clauses, the decision is not good news for transferees in TUPE transfer situations. The decision sets a very low hurdle for employees to overcome in order to be able to resign in reliance on regulation 4(9) of TUPE. Transferees will need to consider the extent of this risk when negotiating transfer provisions with the transferor, and, if necessary, seek indemnity protection.

What happened in this case?

Five bus drivers were employed by CentreWest on the 414 bus route, operating out of a depot in Westbourne Park, West London. When the operation of that bus route was transferred from CentreWest to Abellio, it was intended to operate the bus route out of Battersea, six miles away. The bus drivers objected to the transfer and resigned on the day of the transfer on the basis that their working day would increase by between one to two hours. The employees brought various Employment Tribunal claims against CentreWest and Abellio.

Substantial change in working conditions

The Tribunal first assessed whether the relocation amounted to a substantial change in working conditions to the material detriment of each employee, for the purposes of regulation 4(9). The test forwhether or not there is a “substantial change” in working conditions is a question of fact and will depend on the nature, as well as the degree, of change (Tapere v South London and Maudsley NHS Trust (2009) IRLR 972 ). The test for “material detriment” is subjective: the impact of the change in working conditions should be assessed from the employee’s point of view. If, applying these tests, the relocation amounted to a substantial change in working conditions to the material detriment of the employees, they could resign and claim that they had been dismissed under regulation 4(9).

The Tribunal ruled that the six mile relocation was a “substantial change”, bearing in mind the travel conditions involved in moving from North to South of the river. Further, from the employees’ perspective, the relocation was detrimental, and it was reasonable for the employees to regard it as such. Therefore the claimants had been dismissed at the point at which they resigned, and were entitled to claim unfair dismissal. As the claimants were dismissed because of the transfer, or a transfer-related reason (relocation), which was not an economic technical or organisational reason entailing changes in the workforce (ETO) they were deemed to be automatically unfairly dismissed under regulation 7(1) of TUPE. The EAT agreed with the Tribunal’s findings and upheld the employees’ claims of unfair dismissal.

Repudiatory breach of contract

Second, the Tribunal considered whether the relocation amounted to a repudiatory breach of the employees’ contracts which would entitle them to resign and claim constructive dismissal under regulation 4(11) and generally. The employees’ employment contract provided that CentreWest would endeavour to accommodate the employees’ preferred location but reserved the right to require them to work at a different location, as specified by CentreWest in a separate document. The contract also provided that CentreWest had the right, after consultation, to vary the terms of the contract, except where a variation would diminish statutory entitlement. The Tribunal found that the requirement to relocate was not permitted by the terms of the employees’ employment contract as the location of the new depot was not specified on the list of alternative locations prescribed by CentreWest. Further, a letter notifying employees of the transfer did not amount to a valid variation of their employment contracts as CentreWest could not vary the terms to include one of Abellio’s depots before the date of the transfer. Consequently, the Tribunal ruled that the requirement to relocate amounted to a repudiatory breach and therefore, when the employees resigned in response to CentreWest’s breach, they had been constructively dismissed. The EAT deemed it unnecessary to rule on this point, since it had agreed with the Tribunal’s determination on the issue of substantial change under regulation 4(9).

What does this decision mean for employers?

In light of this decision, employers will need to be aware of the risk of claims for automatic unfair dismissal under regulation 4(9) of TUPE where the working conditions of employees are to change as a result of a TUPE transfer. Abellio offers some guidance to employers on the question of whether a change in working conditions is likely to be “substantial”. It is clear that where a relocation is within an urban setting it is more likely that the change will be deemed “substantial” since the employees’ journeys to and from work are likely to be significantly affected. However, the Tribunal noted that a relocation of six miles might not be considered “substantial” in a rural/suburban setting where employees are more likely to be able to drive to work. Employers should bear in mind that the factors affecting the analysis of a change may vary from employee to employee. Since the test for “material detriment” must be considered from the employee’s perspective, it will be difficult for employers to assess the impact of proposed changes across a workforce or grouping of employees. However, it would seem that a change which extends an employee’s working day by between one to two hours is likely to constitute a “material detriment”. The EAT’s reassertion of the subjective test for “material detriment” creates a further difficulty for employers. This suggests that it will be relatively easy for employees to satisfy the requirements for a regulation 4(9) claim following a TUPE transfer. Consequently, transferees will need to determine the extent of this potential risk when negotiating the terms of the transfer and should try to seek indemnity protection from the transferor in the transfer provisions.

Liability of transferor/transferee

As a separate issue, the EAT considered the effect of an employee’s right to object to a transfer under regulation 4(7) of TUPE on the liability of employers for claims in circumstances where an employee resigns in response to an anticipated substantial change in their working conditions to their material detriment (regulation 4(9)). Under TUPE, where an employee objects to a transfer, the employee’s contract of employment and the rights, duties and liabilities under it will not transfer to the transferee (regulation 4(7)). In this situation, the employee’s employment with the transferor is treated as terminated from the date of the transfer, but they are not deemed to have been dismissed, and therefore cannot bring claims for unfair dismissal against their employer. However, if an employee objects to a transfer and later resigns in reliance on a substantial change in working conditions, they are deemed to have been dismissed and, on a plain reading of TUPE, it would seem that the transferor remains liable for any unfair dismissal claims.

Although, in Abellio, there was factual uncertainty as to whether one of the claimants had objected to the transfer prior to resigning, the EAT held that, in event that the claimant had objected and later resigned in such circumstances, liability for their dismissal would transfer to the new employer. This conclusion does not appear correct to us and it remains to be seen whether the EAT’s decision on liability will be followed in future cases. However, employers may seek to make provision for this uncertainty through the use of indemnities in the transfer agreement.

Dealing with dismissal and compensated no fault dismissal for micro businesses

Ruth Bonino — Thu, 22 Mar 2012 14:34:04 +0000

The Government has recently issued a new “Call for Evidence”, Dealing with dismissal and “Compensated no fault dismissal” for micro businesses. The main aim of the paper is to gather evidence from businesses to establish what can be done to encourage small employers to recruit more employees, whilst at the same time ensuring some protection for employee rights. The paper also aims to gather evidence regarding the dismissal process, and in particular how well the 2009 Acas Code works in the case of dismissals for underperformance.

Small businesses

The Government’s paper looks at the Australian Small Business Fair Dismissal Code – a one page document which provides a very basic set of guidelines to follow when a business with fewer than 15 employees dismisses an employee for conduct or capability. Views are sought as to whether, as regards small businesses, a code such as this could replace the Acas Code which currently applies to all employers, irrespective of size, in relation to discipline and performance matters. The paper also seeks evidence on whether small businesses should be able to dismiss employees on a “no fault” basis, and instead that employees receive an automatic “compensation” payment, whatever the reason for dismissal. The Government is examining how other countries deal with dismissals in the case of small businesses. In Germany, for example, businesses employing 10 or fewer employees are exempted from unfair dismissal laws.

Whilst the immediate reaction of small employers will likely be to welcome such a change, the wider implications of no-fault dismissals must also be considered. It would appear that the proposal would effectively amount to giving such employers an exemption from unfair dismissal laws except if the dismissal is for a discriminatory reason, or in connection with whistleblowing or assertion of a statutory right. Could this inhibit small employers from taking on more staff if that means exceeding the maximum number of employees for “small businesses”? Since job security will be diminished, it may be harder for small employers to compete for the best talent. Further, without recourse to an unfair dismissal claim, there is a risk that an aggrieved employee will bring a discrimination claim or allege that the real reason for dismissal related to whistleblowing (whether or not this would have any substance at all). However, this risk could be addressed by strengthening the ability of the Employment Tribunal system to weed out unmeritorious claims.

Having acted for a number of small businesses and charities, our view is that a less complex code would be desirable, particularly for businesses with fewer than 10 employees. However, whether or not they should effectively be exempted from unfair dismissal laws is a more contentious issue. An area of controversy which is inherent in the Government’s proposals is the suggestion to compensate employees for no-fault dismissals. If the compensation is set too high, employers will remain discouraged from taking on staff. If too low, the employees will have virtually no dismissal rights. The Government asks for views on the appropriate compensation. Perhaps a compromise would be to increase the statutory minimum notice period by 2-4 weeks after the employee has 2 years’ continuous employment (ie the new minimum period of employment for unfair dismissal clauses for employees taken on after 5 April 2012), making sure that the legislation provides for employers to be free to pay in lieu of notice so that they not burdened with an employee they do not want.

A point which is unclear from the Government’s paper is whether small employers will be able to opt not to make a no-fault dismissal compensation payment on termination of employment in circumstances such as gross misconduct. It is unclear as yet, whether, if no compensation payment is made, the employee would be entitled to make an unfair dismissal claim, or would their remedy simply be for payment of the statutory no-fault dismissal compensation amount? It would seem sensible that small employers should not have to pay an employee compensation where it has followed a fair dismissal route in such circumstances but if this option is chosen, it also seems fair that the employee should have full recourse to usual unfair dismissal rights. It will be necessary for any legislation to define the concepts clearly and provide for this type of situation to be addressed.

Acas Code

The Government is also seeking views on the Acas Code, which was already substantially revised and reduced in length in 2009. As well as having a concern that it is not suitable for small businesses, the Government also considers that it may not deal adequately with cases of poor performance. The criticism is that the Code concentrates more on backward-looking actions (such as conducting investigations) which are more relevant to disciplinary issues, than what is to be done for the future.

Whilst there is no doubt that the abolition of the former statutory disciplinary and dismissal procedures was a beneficial step for employers and has simplified Employment Tribunal claims, we do not believe that the revision of the Acas Code has made much difference in the actual dismissal process. It would have been useful if it had been made absolutely clear that ill health dismissals were not covered by the Code. However, it is our experience that the Code does not hinder the performance management process and it would certainly not be helpful to make the Code any more complex or prescriptive.

Reed Smith will be responding to the Government Call for Evidence paper and for that purpose, we would be interested in hearing your views on the paper or, indeed, on any of the comments we have made above. Please feel free to send in your comments via our blog or to email direct by contacting Ruth Bonino (rbonino@reedsmith.com). Alternatively, you may wish to respond in person. The consultation closes on 8 June 2012.

Disciplinary action and suspension for misconduct: guidance from UK Court of Appeal

Tom Remington — Mon, 19 Mar 2012 13:12:22 +0000

The Court of Appeal decision in Crawford and another v Suffolk Mental Health Partnership NHS Trust [2012] EWCA Civ 138 provides guidance as to the procedural standards required in misconduct cases in which dismissal is likely to impact on the employee's ability to pursue his/her chosen career. The case also highlights the need to consider very carefully both the appropriateness of suspension during a disciplinary investigation and whether there are grounds for reporting matters to the police.

What happened in this case?

The Suffolk Mental Health Partnership NHS Trust (the Trust) dismissed two of its nurses for gross misconduct in connection with their handling of an 87 year old patient who suffered from dementia. A colleague reported witnessing them restraining the restless patient (with the help of two other health care workers) by securing him to a chair which was in turn tied to a table. The same colleague had raised similar concerns about the same patient's treatment by different members of staff when he had been agitated during the preceding day shift.

Following the report, the nurses were suspended pending a disciplinary investigation. Shortly afterwards, the Trust's Vulnerable Adult Protection Committee took the decision to alert the police to the incident. After the police informed the Trust that no action would be taken, the Trust continued with its own investigation which recommended disciplinary action.

At the disciplinary hearing, the nurses accepted that they had tied the patient's chair to the table but did not accept that they had tied the patient to the chair or that their actions were inappropriate. In reaching a decision, an experiment was conducted to test whether the explanation put forward, that a sheet had been wrapped around the patient to make him feel like he was in bed (rather than his being tied to the chair), was credible. The manager conducting the hearing concluded that it was not, although the nurses were not given the opportunity to comment on the experiment and were not even informed that it was being undertaken.

The nurses were dismissed for assault, negligence and professional misconduct under the Trust's disciplinary procedures. The nurses appealed internally, however the appeal panel supported the original findings, in what amounted to a review rather than a complete rehearing of the case.

The Employment Tribunal concluded that the Trust had unfairly dismissed the nurses. It identified a number of errors in the disciplinary process followed by the Trust which rendered the dismissals procedurally unfair, particularly in circumstances where the outcome of the process was likely to impact on their ability to pursue a career in nursing. The key criticisms were the failure of the Trust to (i) give the nurses the opportunity to be present at and comment on the “chair experiment” and (ii) obtain and have reference to the first written statement provided by the colleague who witnessed the event giving rise to the allegations (which differed from her subsequent evidence to the disciplinary hearings).

The Tribunal also decided that no reasonable employer could have concluded that the patient had been tied to the chair (bearing in mind that this would mean siding with the one witness rather than the two nurses and two healthcare workers) and that the Trust had failed to take into account the relevant context (i.e. the fact that the patient had also been very agitated on the day shift and no harm was done to the patient).

The Employment Appeal Tribunal (EAT) overturned the Tribunal's decision, and the nurses appealed to the Court of Appeal (CA).

The Court of Appeal

The CA upheld most of the Tribunal's findings, including that there had been a procedurally unfair dismissal.

Procedural defects in disciplinary procedure made dismissals unfair

The CA found that the Tribunal was right to take the view that the procedures followed by the Trust had needed to be particularly rigorous in view of the importance of the process to the nurses' careers. With this in mind, the CA found that the Tribunal had been entitled to find that the procedural defects were fatal to that process and that it did not substitute its own view, but instead had justifiably concluded that no reasonable employer would have acted as the Trust did. This alone was sufficient to render the nurses' dismissals unfair and the fact that the nurses did not appeal internally against the procedural defects did not excuse the defects.

The CA did find that the Tribunal overstepped the mark in concluding that no reasonable employer could have concluded that the patient had been tied to the chair. This meant that it was necessary for the Tribunal to assess the likelihood of the nurses being fairly dismissed if a fair procedure had been followed, in order to assess whether it was appropriate to reduce the compensation awarded to them (a Polkey reduction). However, the CA made clear that, even if the patient had been tied to the chair, a decision to dismiss would still very likely be outside the band of reasonable responses an employer might have taken and therefore unfair (particularly given the nurses' length of service, the fact that no harm was done to the patient and that the nurses' actions were intended to protect the patient).

Informing the police

The CA was very disapproving of the decision to inform the police in circumstances where there was obvious justification for restraining the patient. The CA indicated that employers should only inform the police when, after very careful consideration, they hold a genuine and reasonable belief that a crime may have been committed.

Right to suspend

Although the case did not turn on the Trust's decision to suspend the nurses, the CA also took the opportunity to emphasise that suspension must not be a "knee jerk reaction" in cases of alleged misconduct. The CA indicated that the likelihood of the complaint being upheld, the risk of a repeat incident and the past record of the employee are all relevant factors in deciding whether it is appropriate to suspend. Other factors include the seriousness of the allegation and the risk that, by attending work, an employee might prejudice an investigation.

What does the case mean for employers?

Primarily, the case shows that very high procedural standards are expected when a disciplinary procedure could have career long implications for the employee. This could apply to many employees, even if their professions are not overseen by a regulatory body.

The case also highlights the fact that, although an internal appeal hearing can be an opportunity to put right any defects in the original decision, this does not mean that employees cannot challenge the fairness of their dismissal by referring to alleged procedural defects for the first time in Employment Tribunal litigation. Employers who have concerns about the procedure followed in a first instance disciplinary decision would therefore be well advised to consider a complete rehearing of the matter on appeal.

This decision could also be used by an employee to support an allegation that, by inappropriately reporting a matter to the police or suspending the employee without justification, their employer has fundamentally breached its implied obligation to maintain the relationship of mutual trust and confidence, thereby entitling the employee to resign and claim constructive dismissal. Accordingly, great care should be taken when deciding whether to suspend an employee or report a matter involving the employee to the police. In particular, it is recommended that before reporting a matter to the police, an employer should at least carry out some investigation including, if appropriate, speaking to the parties involved. Furthermore, employers should bear in mind that even when there is a contractual right to suspend in the employee’s contract of employment, this right must not be exercised capriciously or perversely, whatever the circumstances.

UK Court of Appeal refuses to uphold a barring order against a former employee

Ruth Bonino — Wed, 14 Mar 2012 12:39:12 +0000

This post was written by Ruth D. Bonino and Fiona McFarlane.

In Caterpillar Logistics Services (UK) Ltd v Huesca de Crean, an employee who had no restrictive covenant in her contract of employment prohibiting her working for a third party, could not be prevented from taking up employment with a client of her former employer on the grounds that she might breach a confidentiality agreement she had entered into with her former employer. Nor would the Court grant a “barring order” which would prohibit the employee from being involved in a commercial relationship between the employee’s former employer and its client.

What happened in this case?

Ms Huesca de Crean (Ms H) had been employed by Caterpillar Logistic Services UK Ltd (CLS) and heavily involved in the management of a relationship with one of CLS’s clients to whom CLS provided services under a 10 year Logistics Services Agreement (the “LSA”). Due to her role in CLS’s business, Ms H had access to a large amount of confidential information regarding the client, which included details of the client relationship and legal advice sought by CLS in relation to the LSA.

Ms H’s contract of employment with CLS included a confidentiality agreement in which she agreed “not [to] use any of such trade secrets of [sic] confidential information for myself or others, or divulge them to others, either during or after my employment”. There was, however, no restrictive covenant in the contract which prevented her from taking up any employment once the contract had ended.

Ms H subsequently accepted an offer of employment from the client. CLS became concerned that Ms H would breach the confidentiality agreement and expose confidential information to the client. CLS sought a “barring order” with the purpose of preventing Ms H from being involved with the commercial relationship with CLS or in any dealings under the LSA in her new role with the client. CLS also sought an injunction prohibiting her from using or disclosing confidential information in her employment with the client.

“Barring order”

The Court of Appeal (CA) considered the case of Prince Jefri Bolkiah v KPMG where the Court upheld a barring order to prevent accountants KPMG from acting as an expert for a party to a claim: KPMG had acted for the other party to the claim and therefore was in possession of confidential information about that party. The CA agreed with the reasoning in a recent Hong Kong case which examined the English law on the question whether an employee may be a fiduciary and which concluded that this type of barring order could be made to protect the solicitor/client relationship but it was not appropriate to extend this type of order to the employer/employee relationship. The CA said that, whilst as an employee, Ms H owes certain fiduciary duties to the employer, this did not make her a “fiduciary” in the sense that a solicitor is to their client. In the absence of post-termination restrictions in Ms H’s contract of employment, there was therefore no justification for making an order preventing Ms H from being involved in the LSA or otherwise in the commercial relationship with CLS in her new role with the client.

Injunction to restrict use of confidential information

Due to Ms H’s exemplary record, CLS had no grounds on which to allege that Ms H would be likely to breach the confidentiality agreement deliberately. In fact, Ms H had already provided an undertaking to CLS that she would not breach the terms of that confidentiality agreement. CLS had no arguable case that Ms H had breached, or intended to breach, or even that there was a real risk that she would breach the terms of the confidentiality agreement. Ms H had voluntarily given relevant undertakings that she would not breach its terms and thus the appeal was dismissed.

What this decision means for employers?

This case highlights the importance of having appropriate restrictive covenants in the contract of employment in order to prevent an employee working for a competitor where its confidential information might be misused. An employee cannot be regarded as a fiduciary in the same way that solicitors and some other professionals are in relation to their clients. The CA confirms that in the absence of an appropriate restrictive covenant in the contract of employment, the Court will not act to protect the confidential information of an employer, without reasonable grounds for believing that the information has been or may be deliberately leaked in breach of any contractual obligation of confidentiality. Where confidential information is protected by such an obligation, the Court will require the employer to prove an employee’s wrongdoing before it will intervene. On the other hand, where there is an appropriate restrictive covenant (such as non-solicitation of clients or non-compete), the Court will intervene and grant the employer an appropriate remedy (such as injunction prohibiting the employee from working for a competitor for a specified and reasonable period).

Another lesson to be learnt from this case is a reminder for employers to act quickly where there is the possibility that their confidential information may be leaked to a third party to ensure that any deadlines for service of a claim are met. Burton LJ, who prepared the key judgment, criticised the practice of postponing the service of Particulars of Claim until after an interim injunction had been dealt with. Employers should therefore be prepared to apply for injunctive relief whilst simultaneously preparing the Particulars of Claim for the main claim for service.

NLRB Posting Requirement Upheld, But Enforcement Limited

William Bevan III — Mon, 05 Mar 2012 20:57:44 +0000

This post was written by William Bevan, III and Joel S. Barras.

As we have discussed in earlier posts found here and here, several national trade associations challenged the NLRB’s Rule that requires all employers covered by the National Labor Relations Act to post a notice notifying employees of their rights under the Act. In response to those filings, a federal district court upheld the posting requirement, but struck down the Rule’s enforcement provisions that considered an employer’s failure to comply with the posting requirement an unfair labor practice. The court similarly struck down a provision within the Rule that extended the time an employee could file an unfair labor practice against an employer that failed to comply with the posting requirement.

In overturning the enforcement provisions, the court distinguished between an employer’s intentional refusal to post the notice with the hopes of interfering with its employees’ organizational efforts from an employer who simply failed to post the notice without any improper motive. As the court noted, “a mere unwillingness to help” is not equivalent to an attempt to obstruct. Instead, on a case-by-case basis, the NLRB may consider an employer’s “knowing and willful refusal to comply” with the notice-posting requirement as evidence of anti-union animus during a proceeding where the employer’s motive is relevant.

With regard to the tolling of the Section 10(b) statute of limitations, the court held that the Act “does not authorize the Board to enact a rule which permits it to toll the statute of limitations in any future unfair labor practice involving a job site where the notice was not posted" (emphasis added). The court concluded that Congress did not give the Board the authority to fill any gap it perceived in the statute of limitations as enacted by Congress in Section 10(b) of the Act.

Additionally, the court refused to consider the plaintiffs’ challenge to President Obama’s December 2011 recess appointment. The court ruled that the Rule was promulgated prior to the recess appointments and passed with a quorum of NLRB Members. As such, the court declined “this invitation to take up a political dispute that is not before it.”

It is likely that the trade associations will appeal this decision to the Court of Appeals. Unless and until appeal is successful in enjoining the Board from enforcing this Rule, employers will be required to post the 11-by-17-inch poster in a conspicuous location seen by all employees in the workplace by the April 30, 2012 deadline, when the rule takes effect, but the penalty for declining to do so is less clear now.

Service provision changes: UK EAT gives guidance on the meaning of an "organised grouping of employees"

Ruth Bonino — Thu, 01 Mar 2012 15:40:11 +0000

This post was written by Ruth Bonino and Ed Hunter.

In the case of Eddie Stobart v Moreman & Others the Employment Appeal Tribunal (EAT) has provided welcome guidance on the meaning of “organised grouping of employees” for the purposes of a “service provision change” under regulation 3(3)(a)(i) of the Transfer of Undertakings (Protection of Employees) Regulations 2006 (“TUPE”). A group of employees who happened to work mainly for a particular client because they worked the day shift were found not to comprise an “organised grouping of employees” for “service provision change” purposes under TUPE. The EAT held that, when assessing whether employees will transfer to a new contractor following a service provision change, it is necessary to identify the existence of an “organised grouping of employees” the principal purpose of which is to carry out the relevant activities on behalf of the client, before analysing whether employees are assigned to that group. There will only be an “organised grouping” where the employees in question are “organised” for the purposes of the provision of services to the relevant client.

What happened in this case?

Employment Tribunal proceedings were brought by 35 Claimants who were employed by Eddie Stobart Limited (“ES”) at a site in Nottinghamshire. ES provided warehousing and distribution services to two clients: Vion and Forza. For organisational reasons, ES’ day-shift employees worked principally on the Vion contract and night-shift employees worked principally on the Forza contract. On the closure of the site, FJG Logistics Limited (“FJG”) was awarded the Vion contract (day shift). ES considered the day shift employees and those who had spent more than 50% of their time on “Vion-related work” to be assigned to the Vion contract and therefore believed that they would transfer to the new service provider, FJG, following the change. FJG refused to accept that there was a service provision change, within regulation 3(3)(a)(i) of TUPE, and that therefore the employees identified by ES as being assigned to the Vion contract had transferred to them.

For there to be a service provision change under Regulation 3(3)(a)(i) TUPE, certain conditions must be met. As mentioned above, one of these is that there must be an “organised grouping of employees” the “principal purpose of which” is carrying out the relevant activities on behalf of the client.

The Claimants brought Employment Tribunal proceedings against ES and/or FJG. The Tribunal decided that there was no service provision change under TUPE because the Claimants were not an “organised grouping” of employees. They only spent the majority of their time on the Vion contract because of the way ES organised its shift patterns, not because they were organised into a team whose “principal purpose” was to carry out work for Vion.

ES appealed against the Tribunal’s decision but the EAT agreed with the Tribunal. The EAT ruled that the test in Regulation 3(3)(a)(i) TUPE does not say merely that employees should in their day-to-day work in fact (principally) carry out the activities in question: it says that carrying those activities should be the (principal) purpose of an organised grouping to which they belong. In other words, where the grouping is organised by reference to the requirements of the client in question (e.g. “the [Client A] team”), there will be an organised grouping which will transfer. Conversely, as in this case, where the employees are organised in relation to other circumstances such as shift patterns or working practices, but without any deliberate planning or intent, an employer is unlikely to be able to demonstrate that employees are grouped together and organised for the purpose of serving a particular client. Consequently the employees will remain with the original service provider.

What does this decision mean for employers?

The decision offers useful guidance to employers on where employees stand in TUPE service provision change situations. It is clear that, when attempting to determine the position of employees in relation to a prospective service provision change, employers will need to adopt a two-stage analysis; first, identifying the existence of a client-focused “organised grouping of employees; and second, assessing whether individual employees are wholly or mainly assigned to such a grouping.

In identifying the existence of an “organised grouping”, the fact that a group of employees works mostly for a particular client will not be decisive, unless the carrying out of that work for the client is the principal purpose of the grouping. Therefore, only when employees are clearly dedicated to carrying out the activities that are to transfer, can employers be confident that employees will “go with the work”. Where employees are organised into dedicated client teams, for example, “the [Client A] team”, it will be very difficult for a new service provider to argue that those employees should not transfer under TUPE. In many cases, a less explicit identification will suffice. This is not new but the case underlines that where there is no client-focused element of organisation to meet the client’s specific needs, the argument for the “organised grouping” may be weak or possibly non-existent.

Following this case, employers should benefit from a greater degree of certainty over the application of the TUPE service provision transfer test, but it does mean that in some cases service providers may be left with unwanted employees whom it had previously been expected would transfer on termination of the provider’s contract with the client, and unforeseen redundancy costs.