The end of the affair – dealing with the termination of the employment relationship 30 May 2007

1. The end of the affair – dealing with the termination of the employment relationship 30 May 2007 Shazia Ali- Webber – Mills & Reeve Arzu Ozel – Mills & Reeve

2. Implementing Dismissals • Overview • Unfair dismissal • Employments Right Act 1996 – six reasons for dismissal • General Reasonableness • Substantive Fairness – Was it reasonable to dismiss

3. Unfair Dismissal • Statutory Procedure • Letter-Basis of the Decision • Meeting • Appeal • Gibbons Report • Contractual Procedure (no less favourable)

4. Unfair Dismissal • General Fairness • Section 98 ERA 1996 • Did the employer act reasonably in dismissing • In all the circumstances • Including the employer’s size and administrative resources • To be determined in accordance with ‘equity and the substantial merits of the case’

5. Conduct Full investigation Staged warnings unless gross misconduct British Home Stores Redundancy Warning in good time Objective selection criteria Consultation Requirements of procedural fairness

6. Requirements of procedural fairness • Capability • Performance • Set reasonable targets • Over a reasonable period • Monitor • Give staged warnings • Sickness • Long term or short term (DDA) • Medical evidence • Balance between needs of the organisation and effect of dismissal on employee

7. Requirements of procedural fairness • Identifying the reason for dismissal • Right to be accompanied • Appeals • Trust and confidence

8. Consequences of being ‘unfair’ • Does following a fair procedure matter? • Provision for uplifting awards where there has been non-compliance between 10 – 50% • Automatic unfair dismissal • Company procedures

9. But Must We Follow The Process? • The ‘without prejudice’ meeting • When to hold it • At an early stage? • After procedure implemented? • After procedure completed? • The ‘doing a deal’ problem • Valuation of settlement • References • Announcement • Dignity

10. Valuing a settlement and compromise agreements 30 May 2007 Shazia Ali- Webber Mills & Reeve

11. Introduction-Compromise Agreements Valuing a settlement, the need for and essential terms of a compromise agreement

12. Valuing the settlement • How much will it cost? • Value of benefits under contract of employment • Potential awards in tribunal

13. Valuing contractual claims • Consider all terms • Loss of salary and benefits for notice period • Is there a PILON? • Bonuses • Share options • Contractual disciplinary and dismissal procedures • Contractual redundancy pay • Holiday entitlement, outstanding salary, expenses etc

14. Valuing statutory claims (1) • Complex and imprecise science; • Overlapping claims? • Consider both: • Value of claim; and • Chance of success.

15. Valuing statutory claims (2) • Loss of earnings: • Expressed in terms of a number of weeks’ or months’ pay; • Assessment depends on type of claim; • Depends on industry and job market and likelihood of getting another job. • Cap on unfair dismissal compensation: • Compensatory award currently capped at £60,600 • Basic award currently capped at £9,300 • Uplifts for failure to comply with statutory minimum procedures. Cont…

16. Valuing statutory claims (3) • Uncapped compensation for discrimination • Injury to feelings, aggravated, exemplary damages • Other common claims might include: • Equal pay; • Statutory redundancy compensation; • Personal injury damages; • Protective awards.

17. Other considerations • Non-monetary benefits: • Agreed reference; • Outplacement counselling or training. • Saving management time • Saving legal expense • Preserving confidentiality • Maintaining restrictive covenants.

18. COT3 • Usually used once a claim has been filed • Fixed conciliation periods for most claims • ACAS aims to assist parties reach agreement before an ET hearing • No need for employee to have legal advice • Wording relatively straightforward • Can extinguish statutory claims Cont…

19. COT3 continued… • Only for ACAS conciliated settlements – not rubber-stamping • Usually only used where proceedings have begun or notice has been given, or employee forced to resign • Not often appropriate for complex settlements.

20. Requirements of a compromise agreement • Must be in writing • It must relate to particular proceedings • The individual must have received advice from an independent adviser about the terms and effect of the agreement • The adviser must be covered by either a contract of insurance or an indemnity for members of a professional body • It must identify the adviser • It must state that the conditions regulating compromise agreements have been satisfied.

21. “Particular proceedings” • Hinton v University of East London (2005) • General waiver can dispose of contractual claims. • Statutory claims whether actual or potential must be clearly identified – general waiver not enough. • Generic description - “unfair dismissal” or reference to the section of the statute is required. • If claim already started – give brief factual and legal description of claim.

22. Claims the employee is not aware of? • Hilton Hotels v McNaughton [2005] • Equal Pay Act referred to but employee not aware of possible claim. • Compromise agreement only said it settled claims the employee believed she had. She could bring the equal pay claim. • Words must be absolute and unequivocal in order to compromise a claim of which the employee was unaware.

23. Common clauses • Settlement amounts • Tax • Compromised claims • Confidentiality and restrictions • No “bad-mouthing” clauses • Agreed references • Warranty that there are no other claims • Employer’s contribution to legal costs • “Clawback”

24. Practical tips • Consider whether necessary • Do your homework – check the contract • Set your parameters • Timing • Without prejudice • Keep the upper hand

25. Discretionary bonuses Arzu Ozel – Mills & Reeve 30 May 2007

26. Discretionary bonuses: How discretionary are they? • Depends on clause within the employee’s contract of employment • Custom and Practice • Employee may not receive the amount they expect • Employer may refuse to pay

27. Discretionary bonuses continued… • Gross misconduct – no requirement to pay a discretionary bonus • Payment in lieu of notice (PILON) • If employer elects to pay employee PILON • No PILON in employee’s contract

28. Recent case law • Horkulak –v- Cantor Fitzgerald International [2004] EWCA • Employee entitled to “fair and rational assessment of his entitlement” • Employer is obliged to exercise its discretion in good faith

29. Recent case law continued… • Commerzbank AG –v- Keen [2006] • Burden of proof is on employee to show that employer’s decision is “irrational” or “perverse” • Employee entitled to know reasons behind discretionary bonus award • Employee is not dealing with his employers “as a consumer”

30. Final thoughts • Employer cannot unreasonably withhold payment of a discretionary bonus • Employee entitled to know reasons behind their discretionary bonus award • Employers should ensure that any reasons given are market based • Aim to have frank and open discussions with employees

31. Discrimination case law 30 May 2007 Shazia Ali-Webber – Mills & Reeve Arzu Ozel – Mills & Reeve

32. Religion or Belief: legislation • Extension to goods and services: April 2007 • Widening of definition of religion or belief: agnostics and atheists covered • Will political extremists – eg the BNP – now be covered?

33. Religion or Belief: cases • Azmi v Kirkless Metropolitan Borough Council 2007 • Mrs Azmi told to remove veil whilst teaching • Is clothing ban direct or indirect discrimination? • Is it justified? • What steps to take before imposing a clothing ban? • The Sunday observance and Sikh turban cases

34. Sexual Orientation • Extension to goods and services: April 2007 • Recent cases • Ditton v CP Publishing Limited 2007 • Other recent claims • More education and training needed?

35. Sex Discrimination • Sex Discrimination Act 1975 • The burden of proof • Claimant has to prove: • They were treated differently by employer • Treatment could have been as result of sex discrimination • Burden of proof shifts to employer

36. Sex Discrimination: case law • Madrassy –v- Nomura International Plc [2007] • Ms Madrassy employed as senior banker • Went on maternity leave • Restructuring at Nomura led to redundancies • She was dismissed in November 2001 on grounds of redundancy • Did she succeed in shifting the burden of proof?

37. Age Discrimination • Employment Equality (Age) Regulations 2006 • Came into force October 2006 • No decided cases in UK yet • Irish case: Cunningham –v- BMS Sales Ltd [2007] • ACAS’ advice to employers

38. Wake up – it’s over! • Well, not quite – any questions?

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