The Reorganization of the Business - Essay Example

Employment Law Question Reorganisation of the Business The reorganisation of the business must comply with the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). The TUPE regulations apply to dismissals and redundancies in transfer and outsourcing situations. In this regard, where services are transferred in situations such as sub-contracting and outsourcing, where the an employee’s terms and conditions are changed, TUPE will apply.1 The 2006 Regulations also apply to situations in which employees are permitted to agree to reorganization changes in employment terms and conditions.2 It is important that businesses in the process of reorganization work within the permitted parameters of TUPE otherwise, there are significant opportunities for litigation arising out of employee complaints.3 While the managers are purporting to simply reorganize the business, this organization involves changes that are consistent with the definition of transfer of undertaking within the meaning of TUPE. Regulation 3(b) provides that TUPE applies to situations in which service provisions are changed.4 Therefore subcontracting and outsourcing will apply as they are situations in which service provisions are changed. In fact it was held in Fairhurst Ward Abbotts Limited v Botes Building Limited and others that where a contract for maintenance was split between two entities, it amounted to a transfer within the meaning of TUPE.5 Therefore even if the subcontracting only transfers out a part of the service, it would be considered a transfer of undertakings under TUPE. There are legal consequences for the business since the subcontracting and outsourcing is covered by TUPE. Regulation 7 of TUPE provides that where a transfer within the meaning of TUPE has the effect of terminating the services of an employee, that termination will be treated as unfair dismissal, unless the transfer is for an “economic, technical or organizational reason entailing changes in the workforce.”6 The effect of Regulation 7 of TUPE is to ensure that the rights of employees are protected in cases where undertakings effecting their employment are transferred.7 It therefore follows that if an employee’s job is lost to outsourcing or subcontracting, that loss is automatically unfair dismissal. Subcontractors and others to whom services from the business are outsourced may be reluctant to take on these contracts and jobs since there is a risk of litigation for unfair dismissal. In fact, the business will also be liable for unfair dismissal. Managers will also have to be careful with how reorganization impacts the jobs of employees who will not lose their jobs to outsourcing or subcontracting. For instance, in an employee becomes redundant, it is possible that the redundancy will amount to unfair dismissal.8 The relevant statutory definition of dismissal on the ground of redundancy is: The fact that the requirements of that business – (i) For employees to carry out work of a particular kind, or (ii) For employees to carry out work of a particular kind in the place where the employee was employed by the employer, Have ceased or diminished or are expected to cease or diminish.9 In Safeway Stores Plc v Burrell, when the employer reorganized a petrol station, the position of manager was removed and substituted by a controller earning a lower salary. The manager did not want to take the lower paying job and was subsequently dismissed and received redundancy damages. The manager claimed unfair dismissal on the grounds that his duties were not diminished, but were allocated to another employee. Although the Employment Tribunal agreed with the manager, the Employment Appeals Tribunal (EAT) did not. The EAT ruled that while the employee was made redundant since his position had been diminished, the dismissal was fair. This is because the court was satisfied that the employer’s business requirements had either ceased to exist or was diminished or was expected to change in this regard.10 It is therefore necessary to ensure that in the reorganization of the business, the diminishing of employee positions is demonstratively necessary and corresponds with the business requirements. Moreover, if the reorganization involves a change in the types of business that was undertaken when employees were hired, the change in the type of business will amount to redundancy.11 For example in Hindle v Percival Boats, an employee was initially hired as a boat builder. However his employer changed the boat building from wood to fibreglass and the employee had difficulties adjusting to the fibreglass methods. However, the court ruled that the employee was not redundant since the employer had not ceased to carry on the business for which the employee was hired. The employer was still building boats. Therefore the employee was not redundant.12 It therefore follows that ways of doing business may change provided it does not amount to a new type of business altogether in order to avoid a claim of unfair dismissal on the grounds of dismissal unless of course, the employer can demonstrate a strong economic reason for changing the type of business conducted.13 Plans to move some of the employees may also amount to redundancy if the employee does not have a mobility clause in his or her contract.14 Redundancy occurs when the employee’s place of employee changes.15 However, even where an employee has a mobility clause in his or her contract, if the employee is required to make a move that is considered unreasonable and refuses to make the move, the employee can be entitled to redundancy compensation.16 In this regard, in making the decision to move some of the employees it will be important to ensure that those employees moving have mobility clauses in their contracts and even then, it is important that the move is not unreasonable. In the reorganisation of the business it may also be necessary to modify the terms and conditions of the employee contracts so as to ensure that they are consistent with the business once it is reorganised. However, unilateral modification of the employment contract that does not favour the employee will leave the business vulnerable to a claim for constructive dismissal.17 It is therefore best for management to at least attempt to obtain the employees’ consent prior to modifying the terms of the contract. An employee also has the option to agree to the new contract but reserve the right to claim constructive dismissal under the old contract on the grounds that the new contract terminates the old contract.18 Question 2: Bullying In addition to regulating the labour market, safety in the workplace and employee/employer relationships, labour law can also have a “moral dimension”.19 In this regard, labour law deals with issues such as human rights protections and bullying in the workplace.20 Although there are no statutes that specifically deal with bullying in the workplace, legal protection is available.21 There is a statutory provision against harassment in the workplace. Harassment occurs when another’s dignity is violated, or there is intimidation, hostility, degradation, humiliation or the environment is offensive for the victim.22 However, the harassment must relate to a “protected characteristic” which includes race, disability, religion, gender, or sexual orientation.23 It would appear that only one employee’s claim falls within the statutory definition of harassment under Section 26. This employee claims to have been bullied on account of his nationality. The other two employees can still make claims under Section 40 of the Equality Act which applies to cases that do not have the protected characteristics listed in Section 26. In the regard, a claim for harassment can be made if the harassment occurred on at least two occasions and it does not have to be perpetrated by the same person or persons.24 In each of the three cases of bullying, the case law will apply. It was held in Wigan Borough Council v Davies that: There is an implied term in contracts of employment that the employer will provide reasonable support to ensure that the employee can carry out his/her duties without harassment or disruption by fellow workers; and where an employer has an obligation to take reasonable steps to achieve something and takes few or no steps, the onus of proving what steps would have been reasonable is on the employer.25 It therefore follows that in each of the three instances of bullying, the employer had a duty to put a stop to the bullying and in failing to do so, the employer has breached an implied contractual term to provide a safe and supportive workplace enabling the employee to carry out his/her duties. The employer may only escape liability if the employer can show that he or she was unaware of the bullying and if the employer was aware of the bullying had taken reasonable steps to prevent it. Otherwise, the employee is vicariously liable for the damages associated with the bullying and the employees are free to claim constructive dismissal.26 The duty to prevent bullying was reiterated by the House of Lords in Waters v Commissioner of Metropolitan Police. In Waters, the House of Lords ruled that employers have a common law duty to ensure that their employees are taken care of while on the employer’s time and that duty included a duty to prevent abusive treatment and/or bullying.27 However, the House of Lords cautioned that, not every act of ill-treatment will amount to a cause of action. Employees must expect and “accept some degree of unpleasantness from fellow workers.”28 However, the case for discussion reveals that the bullying goes beyond the threshold of unpleasantness as each of the complainants have suffered significantly and are now under medical care and medication as a means of recovering from the effects of the bullying. It can also be argued that if the bullying was severe enough to require medical treatment and medication, the employers ought to have known about it. The House of Lords ruled that it was enough for the facts to demonstrate that the employers ought to have known of the bullying and in such circumstances they would be liable for the bullying if they did not take reasonable steps to prevent it.29 It can also be assumed that since the employees are now taking medication, that the employer did not take any steps to prevent it, unless they have no control over their workplace. The question may be whether or not the reactions of the employees claiming harassment/bullying is reasonable. It can be argued that since three different employees suffered the same degree of illness, the reaction was reasonable. It is highly unlikely that three different people would suffer exactly the same ill-effects and that those reactions would be unreasonable. The victim how was bullied because of his/her nationality, having suffered medical consequences is at liberty to claim to seek compensatory damages before the Employment tribunal. However, once the claim is made, that victim will not be able to pursue a separate claim against the employer in respect of damages for harassment in the workplace.30 The remaining two employees can claim damages for both physical and psychiatry injury incurred as a result of the harassment/bullying.31 In the final analysis, the employer is at risk of being liable for both constructive dismissal and negligence. It is therefore important that employers take complaints of bullying or any other form of victimisation in the workplace very seriously since, the courts will only look at whether or not the employer ought to have known that there was bullying in the workplace. Thus the courts will merely assess the facts based on whether or not on a balance of probabilities the employer ought to have been aware of the bullying. It is therefore important to always have a sound anti-bullying policy that is clearly communicated to workers. Other measures should be implemented to supplement the policy. This might include anti-bulling training and disciplinary policies. In no circumstances, should a complaint be ignored or brushed aside as harmless. If an employer chooses to ignore a complaint and the victim is later harmed by the same conduct complained of, the employer may be liable for the physical and/or psychiatric harm suffered. It is therefore important to investigate all complaints and to take preventative steps. Question 3: Disciplinary Action In deciding what steps to take in disciplining the employee suspected of coming to work under the influence of drugs, the ACAS Code of Practice of Disciplinary and Grievance Procedures is a good place to start. Although the ACAS Code “does not have the force of law...it will weigh heavily against the employer if not followed”.32Employer may refuse to follow the code only where if the employee’s performance is excessively inadequate or should the employee make a mistake the consequences “would be grave” and therefore a warning “may not be necessary”.33 According to ACAS Code, employers should attempt to “take informal action” if it is possible to do so.34This is particularly important in small organizations where infractions can be handled quietly and quickly. In such a case a “quite word” of caution may suffice.35 In this regard, it may be sufficient to call the employee in and warn him that it is suspected that he is coming to work under the influence of illegal drugs and that it would be appreciated if would do something to alter this perception. If the problem persists, it may be necessary to take formal disciplinary action. Employment tribunals will typically have regard to the size of the organization and its resources when considering the extent to which the firm followed a fair and reasonable formal disciplinary procedure.36 In this regard, it is generally accepted that a fair formal disciplinary procedure includes two way communications between the employer and the employee in question. All meetings and investigations should be dealt with confidentially and quickly and all decisions and outcomes should be given without undue delay. All employees should be dealt with in a consistent manner to avoid claims of discrimination.37 At all times, employers should ensure that the employee in question is informed of the nature of the issue and the grounds for implementing disciplinary procedures. In all cases the employee should have an opportunity to respond to the allegations before a decision is made.38 It was held in Strouthos v London Underground that in disciplinary proceedings the employee under investigation is entitled to have the complaint against him or her stated in clear and concise terms. In any event, no employee should be found guilty of any charge if he or she was not previously inform of the nature of the problem. In other words, the employee is entitled to know the nature of the complaint against him/her. 39 It was held in Spink v Express Foods Limited that: It is a fundamental part of a fair disciplinary procedure that an employee know the case against him. Fairness requires that someone accused should know the case to be met; should hear or be told the important parts of the evidence in support of that case; should have an opportunity to criticise or dispute that evidence and to adduce his own evidence and argue his case.40 A three phase test was established in British Home Store v Bruchell. The test applies only after the employer has an authentic belief that the employee is guilty of some form of misconduct and this belief must be based on reasonable suspicion after conducting a reasonable investigation depending on the circumstances.41It is difficult to know what would be a reasonable suspicion in the case of an employee who appears to be using illegal drugs. It may be the employee’s dress and the manner in which he comes into work and performs his duties. For instance it may be that the employee is always late and dishevelled. In such a case it may not be possible to take the investigation much farther. The next step in the investigation would be to speak directly to the employee and ask him or her if there is a problem. According to the Bruchell test, the employer must have an authentic belief that there is a problem with the employee. Secondly, there are reasonable grounds upon which the belief is formed. Thirdly, the employer must have conducted an investigation in a manner that was reasonable in the circumstances of the case.42 These steps are entirely important in order to avoid a claim of unfair dismissal in the event the employee is dismissed as a result of his reporting to the workplace under the influence of illegal drugs. It was held in Sainsburys Supermarket v Hitt that the requirement for a fair disciplinary procedure is necessary for two reasons: to determine “whether it was procedurally or substantively fair or unfair for an” employee to be dismissed, and “for the purpose of determining whether investigations carried out by the employer were reasonable in all the circumstances”.43 In taking disciplinary action against the employee suspected of coming to work while under the influence of illegal drugs it is best to keep in mind that the employer is bound by the implied term that employer must not act in ways that may destroy the mutual trust and confidence between the employer and the employee, unless there are reasonable grounds to do so. It was held in Morrow v Safeway Stores that: Conduct that amounts to a breach of the implied term of trust and confidence will mean that there has been a fundamental or repudiatory breach going to the root of the contract.44 In the final analysis, in taking disciplinary action against the employee suspected of coming to work under the influence of illegal drugs, the organization must proceed fairly and promptly. The employee must not only be given the precise nature and basis of the allegation, but must also have an opportunity to respond to the allegation. The employer has too much to lose in cases where there are legitimate grounds for suspecting misconduct and reasonably grounds for the dismissal. For example, the employee may very well be taking illegal drugs and may deserve termination. However, the employer can face a claim for unfair dismissal if the employee is not given a fair and reasonable disciplinary procedure. Bibliography Works Cited ACAS. Discipline and Grievances at Work: The ACAS Guide, 4. http://www.acas.org.uk/CHttpHandler.ashx?id=1043 (Retrieved 15 February, 2013). Bass Leisure Ltd. v Thomas [1994] IRLR 104. British Home Store v Bruchell 1980 ICR 303. Daniels, K. (2012). Employment Law: An Introduction for Human Resource and Business Students. 3rd Ed. London, UK: Chartered Institute of Personnel and Development. Employment Rights Act 1996. Equality Act 2010. Fairhurst Ward Abbotts Limited v Botes Building Limited [2004]IRLR 305. Hindle v Percival Boats [1969] WLR 174. Hogg v Dover College [1990]ICR 39. Johnson, N.C. and Williams, K. (2007). “Transferring Employment Between the Public and Private Sectors in the United Kingdom: Acquired Rights and Revising TUPE.” International Journal of Comparative Labour Law and Industrial Relations, Vol. 23(2): 285-304. Lewis, D.; Sargeant, M. and Schwab, B. (2011). Essentials of Employment Law. 11th Ed. London, UK: Chartered Institute of Personnel and Development. McMullen, J. (June 2006). “An Analysis of the Transfer of Undertakings (Protection of Employment) Regulations 2006.” Industrial Law Journal, Vol. 35(2): 113-139. Morrow v Safeway Stores [2002] IRLR 9. Sainsburys Supermarket v Hitt [2002] EWCA Civ 1588. Scrope, H. and Barnett, D. (2008). Employment Law Handbook, London, UK: The Law Society. Sheriff v Klyne Tugs (Lowestoft) Ltd. [1999] ICR 1170. Spaceright Europe Limited v Baillavoine & Another [2011] EWCA Civ 1565. Spink v Express Foods Limited [1990] IRLR 320. Strouthos v London Underground [2004] IRLR 636. Transfer of Undertakings (Protection of Employment) Regulations 2006. Waters v Commissioner of Metropolitan Police [2000] ICR 1064. Wigan Borough Council v Davies [1979]ICR 411. Wiley, B. (2009). Employment Law in Context: An Introduction for HR Professionals. 3rd Ed. Harlow: Pearson Education. Works Consulted Brewer, M. and Youngs, A. (2007). TUPE Transfers 2007: Rights and Responsibilities Special Report. 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