Case law - the ones to watch out for in the year ahead

We set out some of the areas in which we are likely to see significant case-law developments over the course of 2007.

New employment law is made as much by developments in case law as by employment legislation. Looking ahead over 2007, there are some individual cases listed that will, if they proceed to a hearing, give important new guidance to employers and employees. Although some may not proceed to judgment, and there will be others not mentioned that undoubtedly also have an impact, we consider the cases below to be some of the main ones to watch this year.

Discrimination

A number of high-profile sex and disability discrimination claims are due to be heard in 2007.

Victimisation

On 28 February/1 March 2007, the House of Lords, the UK's highest court, is due to hear the employees' appeal in St Helens Borough Council v Derbyshire and others. The case raises a serious issue concerning the right to bring a claim of victimisation under the anti-discrimination laws. For this reason, all three existing equality bodies, the Equal Opportunities Commission (EOC), the Commission for Racial Equality and the Disability Rights Commission (DRC), are intervening in the case as interested parties.

The appeal stems from the equal pay claims of catering staff employed by St Helens Borough Council. In 1998, more than 500 female catering staff brought equal pay claims against the respondent council, claiming that their work should be rated as equivalent to that of road sweepers, who were predominantly male, under the local authority job evaluation scheme. Most of the claimants agreed to settle their claims in return for a lump-sum payment. However, the remaining 39 claimants proceeded with their claims and a hearing was fixed for March 2001. Prior to the hearing, the council wrote two letters, one to all the catering staff and one to each of the remaining claimants, explaining that if their equal pay claims were successful, the cost would make the provision of school meals unviable. The council would have to cut back its schools catering service and, if it did so, only a small proportion of the current staff would be needed to provide the reduced service.

The employment tribunal held that this amounted to victimisation, which occurs where a person is treated less favourably because he or she has brought or been involved in a discrimination claim, or an allegation of discrimination, against the employer. This decision was upheld by the EAT, but overturned by the Court of Appeal.

In Chief Constable of West Yorkshire Police v Khan, it was held that, once proceedings have commenced between employer and employee, the employer is entitled to take steps to protect its position in the proceedings without laying itself open to a charge of victimisation by the claimant. In Khan, while defending a race discrimination claim, the employer had been asked to provide a job reference for the claimant and had declined to do so.

The issue to be decided by the House of Lords in St Helens is whether or not the employer's actions went beyond what was necessary to protect itself as a litigant.

Indirect sex discrimination

For a claim of indirect sex discrimination to succeed, under the original definition in the Sex Discrimination Act 1975 an employer discriminated against a woman if it applied to her a "requirement or condition" that it applied equally to a man, but the proportion of women who could comply with it was considerably smaller than the proportion of men who could. This was amended by the Sex Discrimination (Indirect Discrimination and Burden of Proof) Regulations 2001 (SI 2001/2260), which replaced the concept of a "requirement or condition" with a "provision, criterion or practice". The most recent definition was introduced by the Employment Equality (Sex Discrimination) Regulations 2005 (SI 2005/2467), and provides that a claimant must prove that a "provision, criterion or practice" that "puts or would put women at a particular disadvantage when compared with men" has been applied.

An appeal by the employer in British Airways plc v Starmer on the issue of precisely what amounts to a provision, criterion or practice is scheduled to be heard by the Court of Appeal on 17 March 2007.

Mrs Starmer was employed as a pilot by British Airways. After the birth of her first child, she made a flexible working request to be allowed to work 50% of full-time hours owing to her childcare responsibilities. British Airways refused her request because of: the burden of additional costs in training other pilots; its inability to reorganise her workload among the remaining employees; the detrimental effect it would have on quality and performance; and its inability to recruit the extra employees that would be required. Instead, it offered Mrs Starmer a contract variation to reduce her hours to 75% of full-time hours. Her complaint of indirect sex discrimination was upheld by the employment tribunal and by the EAT, before which the employer raised a new justification defence on the ground of health and safety, saying that to allow a relatively junior pilot, such as Mrs Starmer, to reduce her flying hours would compromise passenger safety.

The issues to be resolved by the Court of Appeal are as follows:

• What is capable of amounting to a provision, criterion or practice? In this case, the employer sought to argue that its requirement that Mrs Starmer work at least 75% of full hours was a discretionary management decision that did not apply to others, not a provision, criterion or practice. However, the employment tribunal accepted that the effect of the introduction of the 2001 Regulations must have been to afford an individual the same protection as she would have had previously. As a result, a "provision, criterion or practice" must be wide enough to encompass what had, prior to the introduction of the 2001 Regulations, been a "requirement or condition". It also found that, even if the decision was a discretionary one, this did not prevent it being a provision, criterion or practice, there being no need for a provision, criterion or practice to be applied universally. If the Court of Appeal upholds this decision, it will be significant because it will mean that a claimant will be able to rely on a one-of decision, which need apply only hypothetically to others, as being a provision, criterion or practice.
• What evidence is required to show disparate impact? The wording of the statutory requirement has been changed by the 2005 Regulations and this appeal will be an important test of the meaning of the new wording. The key difference is that the old wording relied on a statistical analysis of facts relating to particular women, whereas the new wording allows for a broader approach. The EAT in Starmer took into account general trends regarding the gender split of part-time workers, and an EOC report showing that far more women than men work part time and that childcare commitments are the key reason for women's part-time working. If the EAT decision is upheld, it will be very important for claimants in circumstances where there is a workplace ban on particular forms of working or where the claimant is the first to request a particular form of working, such that it would be impossible to gather any statistical evidence of disparate impact.
• The correct analysis of the justification defence. Before the EAT, the employer's justification defence was based on two sets of reasons: business reasons and passenger safety reasons. The EAT held that an employer's reasons should be considered carefully and not accepted uncritically. There had to be a weighing exercise between the detriment to the claimant and the hypothetical detriment to others. The employer could put forward retrospective reasons - in this case, the passenger-safety argument that was raised for the first time at the EAT hearing - but such reasons should be subject to "special scrutiny". The Court of Appeal must now say whether or not it agrees with this analysis of the wording of the 2005 Regulations.

Duty to make reasonable adjustments

The extent of an employer's duty to make "reasonable adjustments" under the Disability Discrimination Act 1995 (DDA) has been the subject of many reported cases in 2006.

On 31 January 2007, the appeal from Surrey County Council v Hay is due to be heard by the Court of Appeal. Mrs Hay was the driver of a mobile library van. After an operation, she began to suffer from a degenerative knee condition. Reports were obtained from two orthopaedic specialists and two occupational health specialists to the effect that she could no longer drive the van. She was offered another job that the council considered suitable, which she refused. The employment tribunal that originally heard her case considered that the employer had not carried out a formal risk assessment and for that reason had failed to fulfil its duty to make reasonable adjustments. The EAT disagreed, stating that the duty to make reasonable adjustments did not necessarily involve a formal risk assessment exercise. The employer had had enough medical evidence to assess the risks for itself, and the employee had been involved in the assessment exercise. The possible adjustments canvassed by the employment tribunal - that the van could be double-manned or replaced by a van with automatic transmission - had both been rejected on the ground of cost. A job-swap had been considered, but no obvious job acceptable to the employee had been found. In the EAT's view, the employer had fulfilled its statutory duty. There was no breach of the DDA and the employee's dismissal on the ground of incapacity was fair. The employee appealed to the Court of Appeal.

It is anticipated that the Court of Appeal will give guidance on the extent of the duty to make reasonable adjustments, including:

• does it include an antecedent duty on the employer to asses what adjustments can be made?
• is a formal risk assessment exercise necessary? and
• is a failure to consult with the employee of itself a breach of the duty?

Disability-related absence

How should employers' sick pay schemes deal with disability-related absence? This is a tricky question and one with which employers frequently have to deal in practice. In 2006, the issue came before the EAT in O'Hanlon v Commissioners for HM Revenue and Customs. The EAT confirmed a tribunal decision that there had been disability-related discrimination when a disabled employee who was of sick had her sick pay cut after 26 weeks' absence in line with the employer's sick pay policy. However, the EAT decided that it would not have been a "reasonable adjustment" under the DDA for the employer to have increased the level of sick pay in the employee's case, and her disability-related discrimination claim failed. The EAT said: "If a tribunal concludes that no reasonable adjustments are required we think it will be a relatively rare case for any disability-related discrimination not to be justified." The employee has appealed to the Court of Appeal, and the hearing is listed for 26 March 2007.

Discrimination by association

In July 2006, in Coleman v Attridge Law, the question arose for the first time as to whether or not an individual can bring a disability discrimination claim based not on his or her own disability, but on being the carer of a disabled person. The claimant was supported by the DRC. The tribunal has referred the case to the European Court of Justice (ECJ) for a preliminary ruling on whether or not the Equal Treatment Directive 2000/78/EC protects those who are treated less favourably or harassed on the ground of their association with a person who is disabled. The employer appealed against the tribunal's decision to refer this question to the ECJ, but the EAT has agreed with the tribunal chair that the DDA is capable, without distorting its wording, of interpretation in a manner consistent with an interpretation of the Directive that includes associative discrimination. The tribunal chair was entitled to conclude that, in order to determine the preliminary issue of whether or not the claimant could bring a claim of discrimination by association, it was first necessary to obtain the ECJ's opinion on the proper interpretation of the Directive, before deciding if the DDA should be construed in this way.

Work-related stress

The Court of Appeal is scheduled to hear an appeal from the High Court's decision in Daw v Intel Ltd. The case concerns the circumstances in which the courts will rule that an employer should reasonably have foreseen that pressure of work might cause an employee to suffer a breakdown. In the High Court, the employer was successful in arguing that the fact that the employee in question had, in the past, twice suffered from post-natal depression did not make her more vulnerable and therefore mean that the employer should have taken this into account when dealing with her. However, she had detailed her complaints of overwork in writing to the employer, which had failed to act on them, so the High Court held the employer responsible for her subsequent breakdown. It specifically said that the fact that the employer had a free counselling service, which the employee had used in the past but had chosen not to use on this occasion, did not mean that the employer could escape liability for her breakdown. It will be interesting to see if the Court of Appeal agrees.

National minimum wage

The Court of Appeal is also scheduled to hear an appeal in the case of Commissioners for HM Revenue and Customs v Leisure Employment Services Ltd. The national minimum wage enforcement team at the Revenue successfully argued before the EAT that sums deducted from the pay of workers living in employer-provided accommodation to offset the cost of utility bills did not count as part of their wages for the purposes of establishing if they were receiving the national minimum wage.

Equal pay

The case of Preston v Wolverhampton Hospital NHS Trust on the rights of part-time workers to claim access to pension benefits has left unresolved an issue on time limits that may be of more general interest and application. In Preston it was decided that, where an employee had had a series of part-time contracts with the same employer, provided that the employee had a "stable employment relationship" with the employer throughout the currency of the series of contracts, the six-month time limit for bringing an equal pay claim ran from the end of the last fixed-term contract. The EAT went on to decide that, where such a series of fixed-term contracts was replaced by a permanent contract, this broke the "stability" of the relationship and time would run from the end of the last fixed-term contract, meaning that an equal pay claim for backdated pension benefits would be out of time unless made within six months of the start of the permanent contract.

This is the position in which Ms Wilkes, the claimant in Wilkes v Dundee City Council, finds herself. Having been employed on a series of fixed-term contracts from 1968 to 1990, she was given a permanent contract for only the last two years of her employment, 1990 to 1992. She lodged her claim for backdated membership of the pension scheme in 1992 but, on the basis of the decision in Preston, her employer argued successfully before the tribunal that her claim to backdated benefits was time-barred. Her appeal is due to be heard by the EAT, before which she will argue that there was a link between the series of short-term contracts and the permanent contract and that the facts of her case are different from those in Preston.

Implied contractual terms

In Takacs v Barclays Services Jersey Ltd, the High Court recently allowed an employee's claim for unpaid bonus to proceed, even though it held that he could have no claim based on the wording of his contract.

Mr Takacs did not achieve his bonus targets for 2003 or 2004 and was dismissed on four weeks' notice at the end of 2004. Having struck out his primary breach of contract claim, the High Court has allowed him to proceed with alternative claims based on breach of implied terms or of the employer's duty of trust and confidence. The duty was established by the House of Lords in Malik and others v Bank of Credit and Commerce International SA (in compulsory liquidation), when employees of the failed bank argued that they were entitled to "stigma" damages because they were suffering in the job market as a result of having worked for an employer that had breached the implied duty of trust and confidence in its employees by running a dishonest and corrupt business. The duty was limited in Johnson v Unisys Ltd when the House of Lords held that there is no such duty when an employer is exercising its right to terminate an employee's contract. However, in cases such as Aspden v Webbs Poultry & Meat Group (Holdings) Ltd, the courts have acknowledged that an employer's power to terminate the employment is restricted where to do so would deprive the employee of the right to a benefit (in that case, benefits under a permanent health insurance scheme).

Mr Takacs has been allowed to proceed with three claims:

• breach of implied duty of trust and confidence. He argues that management restructuring had undermined his position and taken over the trade he was negotiating, forcing him out before it was complete, with the result that he was deprived of the opportunity to achieve his bonus;
• breach of an implied term that the employer would cooperate with him in fulfilling the bonus. The High Court held that it was not, as the employer argued, inherently incredible that it would not do so or would frustrate his efforts so that it did not have to pay out a bonus; and
• breach of an implied term not to terminate in order to avoid paying bonus.

The first two of these represent serious extensions of the current law of contract and could have important implications for employers running bonus schemes.

Other developments

Other developments that we can expect to come from employment case law in 2007 include the following.

• There are likely to be more cases brought under the Employment Equality (Religion or Belief) Regulations 2003 (SI 2003/1660). These will include the appeal to the EAT in the "veil case", Azmi v Kirklees Metropolitan Council, the council having succeeded at tribunal in its argument that it was justified in applying the provision, criterion or practice that Ms Azmi, a Muslim teaching assistant, should not wear her full veil while assisting in the classroom.
• On collective redundancies there is to be an appeal against the EAT decision in Transport and General Workers' Union v Brauer Coley Ltd (in administration) that a trade union is able to claim a protective award only for those individuals in respect of whom it is recognised.
• In London Metropolitan University v Sackur and others the employer has applied for permission to appeal on the vexed issues of how long an employer must wait post-transfer before any contract variation will no longer be "transfer related", and how a transferee is ever meant to achieve harmonisation of terms of all its workforce without falling foul of the TUPE legislation.
• In the equal pay sphere there are likely to be attempts to raise "serious doubts" about whether length of service is appropriate as a basis for determining pay. The ECJ decision in Cadman v Health and Safety Executive has left this a possibility, and Prospect, the union that supported Ms Cadman's claim, has said that it has more test cases "in the pipeline".

Case list

Aspden v Webbs Poultry & Meat Group (Holdings) Ltd [1996] IRLR 521
Attridge Law and S Law v Coleman EAT/0417/06
Azmi v Kirklees Metropolitan Council Case no.1801450/06
British Airways plc v Starmer [2005] IRLR 862
Cadman v Health and Safety Executive [2006] IRLR 969
Chief Constable of West Yorkshire Police v Khan [2001] IRLR 830
Coleman v Attridge Law [2006] ET/2303745/05
Commissioners for HM Revenue and Customs v Leisure Employment Services Ltd EAT/0106/06
Daw v Intel Ltd [2006] EWHR 1097 QB
Johnson v Unisys Ltd [2001] IRLR 279
London Metropolitan University v Sackur and others EAT/0286/06
Malik and others v Bank of Credit and Commerce International SA (in compulsory liquidation) [1997] IRLR 462
O'Hanlon v The Commissioners for HM Revenue and Customs [2006] IRLR 840
Preston v Wolverhampton Healthcare NHS Trust (No.3) [2004] IRLR 96
St Helens Metropolitan Borough Council v Derbyshire and others [2005] IRLR 801
Surrey County Council v Hay EAT/0710/05
Takacs v Barclays Services Jersey Ltd [2006] IRLR 877
Transport & General Workers' Union v Brauer Coley Ltd (in administration) EAT/0313/06
Wilkes v Dundee City Council