Welcome to the fourth edition of The Employment Edit – a summary of the most important recent cases and news affecting employers in the UK. We hope you find this newsletter helpful and informative. In this edition we look at:

• how the dismissal of a whistleblower for the manner in which protected disclosures were made was not automatically unfair
• the latest developments in fire and rehire
• liability for income protection cover where the employment contract is more generous than the underlying insurance cover
• how stopping PHI benefits at age 65 is not (necessarily) discriminatory
• whether grievance investigation reports are considered privileged
• the latest Acas advice on staff suspensions from work
• proposals to give employees paid leave for neonatal care
• “sunsetting” EU derived legislation

If you have any questions or would like to discuss any of the issues addressed in this edition further, please contact any of the lawyers listed at the end of this newsletter.

Dismissal of whistleblower for the manner in which protected disclosures were made was not automatically unfair

In Kong v Gulf International Bank (UK) Limited, the Court of Appeal (CA) upheld the decision of the Employment Appeal Tribunal (EAT) that the reason why a whistleblower, Ms Kong, was dismissed was not the fact that she had made protected disclosures, but because of the manner in which she had made the disclosures. Her disclosures had involved a verbal and personal attack on a senior colleague which demonstrated insensitivity and a lack of emotional intelligence.

Ms Kong was Head of Financial Audit and made a protected disclosure about the suitability of a legal document relating to a new product. The Head of Legal (Ms H) disagreed with Ms Kong’s view, which resulted in a heated discussion followed by an exchange of emails. Ms H was upset and complained to the Head of HR and the CEO, who dismissed Ms Kong. The CA held that in this case it was possible to separate the making of a protected disclosure from the manner in which it was made. If this were not permissible, whistleblowers would have immunity for any offensive, abusive or irresponsible conduct by virtue of the fact that such conduct was related to whistleblowing. The CA did, however, acknowledge that whistleblowing, by its nature, is likely to be unwelcome and cause upset. Accordingly, courts and tribunals should generally be slow to find that the manner in which a disclosure is made is separate from the disclosure itself.

Takeaway: This is a helpful decision for employers as it underlines the point that the dismissal of a whistleblower will not be automatically unfair unless the sole or principal reason for the dismissal is the individual’s protected disclosure(s). Nonetheless the issue it addresses should still be approached with caution. In this case the employer had dealt with the conduct issue and the individual’s whistleblowing complaint separately, and was able successfully to establish that the whistleblowing and the dismissal were not sufficiently linked. Each case will turn on its facts, and careful consideration of the full circumstances will be necessary before an employer can be comfortable that dismissing a whistleblower will not lead to a successful claim.

Court of Appeal overturns injunction preventing employer from using fire and rehire to change terms and conditions of employment

In USDAW and others v Tesco, the Court of Appeal (CA) overturned the High Court’s (HCt) decision granting an injunction to prevent Tesco from firing and rehiring employees to remove a contractual entitlement to a specific element of their pay called Retained Pay.

The CA disagreed with the HCt’s finding that it was an implied term of the employees’ contracts that Tesco could not terminate their contracts in order to remove or reduce the Retained Pay, and that an injunction was necessary to prohibit Tesco from implementing those dismissals. A term can only be implied into employment contracts where this is objectively necessary in order to give the contract commercial or practical coherence (business efficacy) or where the need for the term is “so obvious that it goes without saying.” The CA concluded that this was not the case here. There was no evidence to suggest that Tesco and the employees had intended that the Retained Pay would be payable until normal retirement age or closure of the business site, or that the employees’ contracts could not be terminated in the normal way, for example in situations of redundancy or gross misconduct. In any event, the appropriate remedy for wrongful dismissal is almost invariably financial. It was not appropriate to grant an injunction preventing a private sector employer from dismissing an employee for an indefinite period.

The UK Government has indicated that it does not intend to legislate to make the practice of “fire and rehire” unlawful, following a number of recent high-profile cases, including this one. However, in March 2022, the Government announced that a new Statutory Code of Practice (the Code) will be published on the use of fire and rehire to bring about changes to employees’ terms and conditions. The Code will detail how businesses must hold fair, transparent and meaningful consultations on proposed changes to employment terms and will include practical steps that employers should follow. It is likely that in relevant cases, Employment Tribunals will be required to consider the Code and will have the power to uplift compensation awarded to employees by up to 25 percent where the Code applies, and an employer has unreasonably failed to follow it. There is currently no indication of when the draft Code will be published.

Takeaway: Even though its particular facts were very specific – in terms of the drafting of the documentation in question – this is a helpful decision for employers, confirming that “fire and rehire” is an option open to employers who seek for business reasons to change terms and conditions of employment. That said it remains crucial to approach any exercise seeking to change employees’ terms and conditions of employment very carefully in the light of the potential for damage to employee relations, negative publicity and claims of unfair dismissal if fire and rehire is deployed because an agreement cannot be reached. Fire and rehire should therefore generally only be used as a last resort where attempts to introduce changes through consultation and agreement with employees or their representatives have failed. It is also important that employers do not overlook the obligation to conduct collective consultation if they propose to make changes to employees’ terms and conditions which affect 20 or more employees.

Employer must maintain level of income protection cover set out in the employment contract

In Amdocs Systems Group Ltd v Langton the Court of Appeal (CA) upheld the Employment Appeal Tribunal (EAT) decision that in some circumstances employers may not be able limit their liability to pay income protection to the level of cover provided by the relevant insurance policy. In this case, the employee’s contract provided for an annual “escalator” which would increase benefits by 5 percent each year.

At the time when the employee became incapacitated and started to receive income protection, the employer had in place a different insurance policy which did not include such an escalator. The CA found that the employer was nonetheless contractually liable to pay the increased amounts. This was despite the fact that the employee’s contract stated that the employee’s payments were subject to the terms of the insurance policy. The CA found that, even if the terms of the then current insurance policy were relevant, the policy in place at the time the employee had entered into his contract governed the situation. (The terms of this policy were not available and were not produced by the employer). Furthermore, the CA agreed with the EAT that any limitation on the individual’s entitlements must, in order to be effective, be unambiguously and expressly communicated to the employee.

Takeaway: This decision serves as a reminder to employers to ensure that contractual terms relating to insured benefits such as income protection or permanent health insurance are carefully worded. If the employee’s contract does not make it explicitly clear that the employer is entitled to vary those benefits from time to time or that cover is limited to the amount received from the insurer, the employer risks having to fund any shortfalls itself. Even if there is such clear language in the employment contract, any proposed change to benefits must be very clearly communicated to the employees concerned.

Stopping PHI benefits at age 65 is not (necessarily) discriminatory

In Pelter v Buro Four Project Services Ltd the Employment Appeal Tribunal (EAT) upheld the decision of the Employment Tribunal (ET) that the cessation of Permanent Health Insurance (PHI) payments at age 65 did not amount to age discrimination.

The EAT agreed that the employer had fulfilled its contractual obligation to provide access to PHI, which it had done in a non-discriminatory manner.

The individual’s contract made it clear that access to the relevant PHI cover was subject to the rules of the relevant insurance scheme. Once the individual had been accepted onto cover by the PHI insurer, the employee’s entitlement to PHI had crystallised – payments under the scheme were then a matter for the insurer (not least because it would have been impossible for the employer to put in place alternative cover once the employee’s incapacity had commenced). Since it was the insurer’s decision to cease payments at age 65 in accordance with the terms of the policy, and not the claimant’s employer, the employee’s age discrimination claim against the employer failed. Furthermore, even if the employee might have had grounds to bring an age discrimination claim against his employer, the EAT agreed that it would have been lawful for the employer to cease payment of the PHI benefits at the age of 65 as this is permitted under the Equality Act 2010 (EqA). The relevant provision at the time provided that an employer could justify a decision to cease an insurance benefit at the age of 65 – and that such a decision would therefore not amount to direct age discrimination. Since the events of Mr Pelter’s case, the relevant EqA provision has been updated and now refers more generally to the state retirement age, which is currently 66 and is due to increase further from May 2026.

Takeaway: This is a helpful case for employers, confirming that, provided that an employer’s contractual obligation to provide insurance benefits is carefully drafted, claims of age discrimination challenging the cessation of cover at a specified age may fail. That said, it is important that contractual language and the extent of insurance protection are kept carefully under review.

First draft of grievance investigation report was not privileged and had to be disclosed in Employment Tribunal proceedings

In University of Dundee v Chakraborty the Employment Appeal Tribunal (EAT) found that the employer was required to disclose the first version of a grievance investigation report in Employment Tribunal proceedings, and that this version of the report did not retrospectively attract legal professional privilege because it had been subsequently reviewed by lawyers.

Mr Chakraborty had raised a grievance against his line manager which included allegations of harassment, bullying, discrimination, and racial abuse. The report was written by a member of the university’s academic staff following an investigation into Mr Chakraborty’s grievance. The first version of the report was reviewed by external legal advisers and, as a result of their advice, changes were made to the report. The author of the report also made further changes. When Mr Chakraborty subsequently brought Employment Tribunal proceedings, the university disclosed the amended report which had a note on it stating that it had been amended and reissued following independent legal advice. Mr Chakraborty sought an order for disclosure of the first version of the report.

The EAT rejected the university’s submission that disclosure should not be ordered on the basis that, if the first version of the report were disclosed, it could be compared to the amended version, and it would be possible then to infer what advice the university’s legal advisers had given. The EAT considered that the first version of the report was not privileged and there was no principle of law which would permit the document to attract legal privilege retrospectively. In any event, the independent investigator had also made some amendments to the report, and it would not be clear from any comparison of the two versions whether changes had been made following legal advice, or by the investigator for unconnected reasons.

Takeaway: This case is a reminder to employers that grievance investigation reports do not usually attract privilege and will usually be disclosable in Employment Tribunal proceedings. The difficulty for the employer in this case was that it issued the report, (which was not privileged and therefore disclosable) before seeking legal advice, and then issued a second, updated version of the report. Employers should take particular care over the engagement of internal and external counsel, their role in advising on a grievance or other investigation process, and the timetable for finalising and issuing a report.

New Acas advice on staff suspensions from work

Acas has published new advice (available here and here) for employers on how to consider and handle staff suspensions from work. This guidance is not legally binding but is nonetheless relevant as employees may try to rely on its provisions in grievances and Employment Tribunal claims.

The Acas advice confirms the obvious points that suspension may be an appropriate step where an employer is undertaking an investigation into allegations of serious wrongdoing, including situations where external agencies are also involved, such as the police or a regulatory body. It may also be appropriate to protect an employee’s health and safety in a medical or pregnancy situation.

The Acas advice also notes that:

• suspension should not be automatic and should be carefully considered on a case by case basis (e.g. if there is a risk of damage to the business, or a risk that witnesses may be influenced, or evidence damaged);
• suspension should be a last resort after other less serious options have been considered (e.g. working from home or adjusting the employee’s working arrangements);
• suspension can have a detrimental effect on an employee’s mental health and employers should therefore offer appropriate support (for example allowing companions to attend meetings, keeping the suspension period to a minimum, maintaining confidentiality and keeping the employee well informed);
• suspension should ordinarily be on full pay and benefits; and
• the employee should be informed that the suspension is not a disciplinary sanction and does not mean that they have done anything wrong.

Takeaway: Acas guidance reflects the best practice many employers will already apply in considering suspension. The ability to suspend an employee in a disciplinary situation can be a useful tool for employers, but there can be serious consequences if suspension is not handled carefully or is clearly not justifiable. Careful consideration should be given before any suspension is implemented to ensure that the risks of successful claims for constructive unfair dismissal are mitigated.

Proposed paid leave for neonatal care

In July 2022, the UK Government gave its backing to proposed legislation which would introduce a right for employees to take up to 12 weeks’ paid leave if their baby requires specialist hospital care following birth. The right would be available in addition to existing parental leave rights such as maternity and paternity leave and would be available where a baby requires hospital treatment for seven continuous days or more within 28 days of birth.

The Government first announced its intention to introduce a right to paid leave for neonatal care in March 2020. It remains to be seen whether this proposal will survive the change of UK prime minister in September 2022.

Government Bill to review and “sunset” EU derived legislation

On 22 September 2022, the UK Government published the Retained EU Law (Revocation and Reform) Bill (the Bill) which, in broad terms, proposes that retained EU law will no longer need to be interpreted in line with underlying EU law, and will be revoked at the end of 2023 unless expressly retained. EU-derived law which applied in the UK was preserved and retained by the European Union (Withdrawal) Act 2018 as at 31 December 2020, which was the end of the Brexit transition period. The Bill will potentially affect some key pieces of employment-related legislation derived from EU law such as the Working Time Regulations 1998 and the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).The Bill does not, however, affect primary Acts of Parliament, so the Equality Act 2010 which contains the framework for anti-discrimination law in the UK would not be affected.

If this Bill were to become law, the impact on employment rights in the UK could be dramatic unless steps are taken to preserve existing law that will otherwise fall away. That said, the UK-EU Trade and Co-operation Agreement concluded on 31 December 2020 includes reciprocal commitments not to reduce the level of protection for workers as part of level playing field provisions. This may in practice limit the extent to which the UK Government diverges from current levels of employment protection, because to do so would risk the EU applying trade sanctions to the UK. We will be monitoring the Bill’s progress closely and provide further updates in due course.