Employment Law Review - June 2020

Welcome to our June 2020 Employment Law Review

In this month's bulletin, we consider the case of B v Yodel Delivery Network Ltd, in which the European Court of Justice provided useful guidance on 'worker' status under the Working Time Directive. We also consider a number of cases including what constitutes the 'last straw' in constrictive dismissal claims, whether unofficial work undertaken prior to a formal start date counts towards a period of continuous employment and how an employee's breach of a generic confidentiality provision in a settlement agreement did not release the employer from making  payment under the agreement.

• B v Yodel Delivery Network Ltd
• The 'last straw' is not necessarily the last act of the employer for the purposes of a constructive dismissal claim
• 'Unofficial work' undertaken prior to the start of an employment contract does not count towards continuous service
• An employee's confidentiality breach did not release an employer from paying settlement sums
• How not to remedy a material breach of contract...

B v Yodel Delivery Network Ltd

This is one of a number of worker status cases which have been heard over recent years. The Claimant, 'B', is a parcel delivery courier and has worked exclusively for Yodel since July 2017. He is engaged on the basis of a courier services agreement, which stipulated that he was a self-employed independent contractor. He used his own vehicle to deliver the parcels and used his own mobile phone when communicating for the purpose of his job. The courier services agreement contained the following provisions:

• B was not required to perform the delivery personally, but could appoint a subcontractor or a substitute for the whole or part of the service provided. Yodel could veto the substitute if they did not have a level of skills and qualification which was at least equivalent to that required of a courier engaged by Yodel.
• B was free to deliver parcels for the benefit of third parties concurrently to providing services on behalf of Yodel.
• Yodel was not required to use the services of B, just as B was not required to accept any parcel for delivery. In addition, B could fix a maximum number of parcels which he was willing to deliver.
• The parcels must be delivered between 7.30 and 21.00; however B was free to decide, except for fixed-time deliveries, the time of delivery and the appropriate order and route to suit his personal convenience.
• In relation to remuneration, a fixed rate, which varied according to the place of delivery, was set for each parcel.

When B sought to bring claims under the Working Time Regulations 1998 (the Regulations), the question arose as to whether he was a 'worker' for the purposes of the Regulations and Working Time Directive 2003 (the Directive). Watford Tribunal decided to stay proceedings and refer several questions on the issue of 'worker' status to the Court of Justice of the European Union (CJEU) for preliminary ruling. CJEU Decision The ECJ noted that, although the Directive does not define 'worker', the Court has previously held that the concept has an autonomous meaning specific to EU law. The essential feature of an employment relationship is that for a period of time a person performs services for and under the direction of another in return for which he receives remuneration. The classification of an 'independent contractor' under national law does not prevent that person from being classified as an employee, within the meaning of EU law, if their independence is merely notional, thereby disguising the true employment relationship. This will be the case where a person, although hired as an 'independent contractor', acts under the direction of his employer in relation to his freedom to choose the time, place and content of his work, he does not share in the employer's commercial risks and, for the duration of that relationship, forms an integral part of that employer's undertaking. On the other hand, where the person has more discretion to choose the type of work and tasks to be done, the manner in which that work or those tasks are to be performed, the time and place of work, and freedom in the recruitment of his or her own staff, he is more likely to be classed as an 'independent contractor'. In this case, the Court took into account the existence of the Claimants contractual power of substitution, his ability to decide whether or not to accept work, his ability to work for others (including competitors), and his ability to fix his own hours of work, albeit within parameters set by Yodel. The Court indicated that the Claimant appeared to be working independently and that there did not appear to be a relationship of subordination between him and Yodel, suggesting that he did not have 'worker' status. However, it will be for Watford Tribunal to make the final determination. What this means for employers There is nothing ground breaking in the CJEU's decision, however, it provides further useful commentary on the issues that will be considered when looking at employment status and it reiterates the fact that a label in a contract will not be a determining factor. Link to Judgement

The 'last straw' is not necessarily the last act of the employer for the purposes of a constructive dismissal claim

The recent case of Williams v Alderman Davies Church in Wales Primary School provides further clarity on the test to be applied in constructive unfair dismissal cases.

The Facts

The Claimant was a teacher who worked at the Alderman Davies Church in Wales Primary School. The Respondent governing body of that school was, for the purposes of his claims, his employer. The timeline of events that led to the Claimant's resignation was as follows:

• In April 2015 the Claimant was suspended because of what he was told was a child protection matter. He was given no further information at that point. The Local Authority were informed, but it was decided that no further action would be taken by Social Services or the Police.
• In July 2015 the Claimant's suspension was lifted and he was allowed to return to school, but not to teaching duties, while the school proceeded with a disciplinary investigation.
• In October 2015 the Claimant was told that the child protection allegation was of his having manhandled a child, but he was still not told the identity of the child or of the person who had reported the allegation.
• In November 2015 the Claimant raised a grievance complaining about a number of aspects of the handling of the matter thus far. The disciplinary process was put on hold whilst some, although not all, of the matters raised by the grievance were investigated.
• In February 2016, the Claimant was re-suspended in relation to a separate allegation concerning a breach of the school's data protection policy, and a second disciplinary investigation began.
• The matters considered in the Claimant's grievance were not upheld and a grievance appeal in May 2016 was also unsuccessful. The Claimant understood that the disciplinary process would now recommence, and he sought further information for these purposes, including, again, the names of the child and of his accuser; but this was declined.
• On 13 June 2016 the Claimant wrote a letter complaining of this and of other aspects of his treatment up to that point, and asserting that he had lost all faith in his employer treating him properly.
• On 16 June 2016 the Claimant resigned effectively stating that the 'last straw' was the fact that his employer did not permit a member of staff who wanted to speak to him in relation to connected disciplinary proceedings against them for data protection issues, to have contact with the Claimant.

The Law

The leading test to be used when determining whether an employee has been constructively dismissed was established by the Court of Appeal in Kaur v Leeds Teaching Hospitals NHS Trust [2018] EWCA Civ 978, as follows:

1. What was the most recent act (or omission) on the part of the employer which the employee says caused, or triggered, their resignation?
2. Has the employee affirmed the contract since that act?
3. If not, was that act (or omission) by itself a repudiatory breach of contract?
4. If not, was it nevertheless a part of a course of conduct comprising several acts and omissions which, viewed cumulatively, amounted to a repudiatory breach of the implied term of trust and confidence?
5. Did the employee resign in response (or partly in response) to that breach?

The "last straw" doctrine

Under this doctrine, an employee can resign in response to a series of breaches of contract or a course of conduct by their employer which, taken cumulatively, amounts to a breach of the implied term of trust and confidence. It is called the last straw doctrine because often the final incident in the chain is in itself insubstantial, but is nonetheless sufficient to render the whole series of incidents as a breach of the implied term. The 'last straw', need not amount to a breach of contract of itself but it must contribute in some non-trivial way to the overall cumulative breach; it cannot be an entirely innocuous act or omission.

ET Decision

The first-instance Employment Tribunal found that the 'last straw' that the Claimant identified as triggering his resignation (i.e. the employer's refusal to allow a member of staff to contact him) was not unreasonable and so was 'innocuous'. Therefore, it found that, as it did not contribute to the previous actions of the employer, his constructive dismissal claim must fail.

EAT Decision

On appeal by the Claimant to the Employment Appeal Tribunal (EAT), the EAT disagreed with the first-instance decision and found that the Claimant had in fact been constructively dismissed. This was on the basis that the earlier actions of the employer had amounted to a fundamental breach of the implied term of trust and confidence, which the Claimant had not affirmed and which had contributed to his decision to resign. As these previous acts formed part of, or at least 'influenced' his decision to resign (albeit that the tipping point was the refusal of permission to be contacted by a colleague), this was sufficient to make out his constructive dismissal claim.

Comments

This case provides clarification and a gloss on the test established in the Kaur case cited above, as it essentially adds 2 additional questions between points 4 and 5 of the Kaur test, as follows:4a. If not, was there a previous act (or omission), or course of conduct, which amounted to a repudiatory breach of the implied term of trust and confidence?4b. If so, has the employee affirmed the contract since that act or course of conduct? It therefore appears that the test for constructive dismissal is wider than previously envisaged. Employers should be mindful of the risks associated with relying on innocuous 'last straw' acts as being a defense to constructive dismissal claims as, in such cases, tribunals are now more likely to look further back to determine whether the previous actions of the employer identified by the employee amount to a fundamental breach of contract. If so, and if those acts have not been affirmed by the employee and have contributed to their resignation, it would be possible for a successful constructive dismissal claim to be made out.Link to Judgement

'Unofficial work' undertaken prior to the start of an employment contract does not count towards continuous service

The Employment Appeal Tribunal (EAT) has held in the case of Mr R O'Sullivan v DSM Demolition Limited UKEAT/0257/19/VP that unofficial work, which is undertaken prior to a formal start date, does not count towards a period of continuous employment. The Claimant, Mr O'Sullivan, brought a claim of unfair dismissal and disability discrimination against his employer, DSM Demolition Limited. In relation to his claim for unfair dismissal, Mr O'Sullivan required two years' continuous service to be eligible to bring the claim. Mr O'Sullivan's contract of employment stipulated a start date of 2 November 2015 (although it was not signed or sent to the Claimant) but Mr O'Sullivan had been paid in accordance with it. From this date, worksheets were completed and Mr O'Sullivan was put on the payroll.  However, Mr O'Sullivan had worked on site in the week of 26 October 2015, he had been paid cash in hand (which he had not complained about) and the employer's client had not been charged for this work. If Mr O'Sullivan's continuous service began on 26 October 2015 he would have the required 2 years' service to bring a claim for unfair dismissal and if his continuous service began on 2 November 2014 he would not. Under Section 211 (1) (a) of the Employment Rights Act 1996 continuous employment begins “with the day on which the employee starts work”, which means the start date of work under a contract of employment. The Tribunal concluded that the work completed by Mr O'Sullivan in the week commencing 26 October 2015 had been under an 'unofficial' arrangement (as a subcontractor/extra pair of hands) and was collateral to and not performed under the contract of employment. The EAT agreed that the Tribunal was entitled to come to this conclusion. This case provides a useful reminder of what factors the Tribunal will take into account when determining continuous service. Specifically, when considering this issue, employers should bear in mind the following factors when determining whether any work undertaken has been performed under the contract of employment or as collateral to that contract:

• Whether the employee undertook work prior to their start date in their contract of employment
• In what capacity they undertook such work
• How they were paid and if clients were charged for the work carried out

Link to Judgement 

An employee's confidentiality breach did not release an employer from paying settlement sums

The High Court in Duchy Farm Kennels Ltd v Steels has upheld the decision of the County Court in that a former employee's breach of a confidentiality clause in a settlement agreement, facilitated by ACAS, did not release the former employer of the obligation to pay the outstanding settlement sums. The reason being that the confidentiality clause was not a 'condition' of the agreement, such that any breach of it would not entitle the employer to bring the agreement to an end. Conversely, it was an 'intermediate term' and the breach of which was not sufficiently serious to be repudiatory.

What this means for employers

There are two way to establish that a breach of confidentiality might entitle an employer to be freed from any obligation to pay settlement sums. In the absence of these, an employer will be required to continue to pay otherwise it will find itself in breach of the agreement.Firstly, the agreement needs to expressly state that the confidentiality clause is a 'condition' of the agreement. Where there is a breach of a 'condition', the innocent party is entitled to bring the agreement to an end. In the absence of an express term, the court will consider whether, by implication, the confidentiality clause should have the effect of a condition. Such implication arguments have a high threshold and factors relevant to this include whether the confidentiality clause was generic in nature, whether confidentiality was the core intention of the agreement (rather than just financial) or was the agreement regarding sensitive allegations whereby confidentiality is the very essence of the benefit for the employer.Secondly, and where the confidentiality is an 'intermediate clause' (and not a 'condition') of the agreement, it would be necessary to show the breach was 'repudiatory' i.e. that was reasonable for the innocent party to hold the view that the party in breach no longer intended to be bound by the terms of the agreement. What may be repudiatory in one case may not be in another. This will depend on the circumstances and the nature of the breach, including the risk of financial loss and the seriousness of the consequences of the breach.Even where there is an express confidentiality clause, it is advisable for an employer to make a specific provision in the agreement for what will happen if there is a breach of confidentiality, for example, repayment by the employee.Link to Judgement

How not to remedy a material breach of contract...

In Bains v Arunvill Capital Ltd [2020] EWCA Civ 545, the Court of Appeal found that the Claimant had not successfully remedied his material breach of contract by writing to the Defendant to confirm his intention to fulfil his obligations. The Claimant was a Consultant and had entered into a consultancy agreement with the Defendant to provide services. The agreement confirmed that either party could terminate the contract in the event of a material breach which was not remedied within 21 days of service of a written notice requiring compliance. When the Claimant stopped providing services and confirmed that he did not intend to fulfil his obligations, the Defendant sent a written notice giving him 21 days to remedy the breach. Instead of providing the services during that time, the Claimant responded in writing to confirm that he intended to fulfil his obligations. He argued in Court that this written communication was sufficient to remedy any material breach, but the Court unanimously disagreed with him. It was not enough to write to the Defendant to confirm an intention to comply - the Court held that the Claimant should have provided the services within the 21-day period in order to remedy his material breach. Crucial factors in this case included:

• that the Claimant did not need the Defendant to do anything in order for the Defendant to provide his services - it was a freestanding duty;
• that the Claimant had actually stopped providing services - the breach was an 'actual state of affairs' and not just a theoretical threat to cease work;
• that no services were provided during the 21-day period;

This was undoubtedly a fair outcome, and one that may not surprise many. However, it is important to remember that the decision may have been different had the Claimant continued to provide services after sending his written intention to cease working as, in that situation, a subsequent letter confirming his intention to continue providing services would in most cases be sufficient to remedy any material breach. Link to Judgement