Employment Law Update - January 2012

25-Jan-2012 Our employment solicitors bring you the latest developments in employment law. If you would like more information on these developments or to discuss how they may impact on you contact Sally Bird.

Unfair dismissal qualifying period - update

The Department for Business, Innovation and Skills has confirmed that when the new two year qualifying period for unfair dismissal claims is implemented on 6 April 2012, it will only apply to employees whose employment begins on or after 6 April 2012. For those whose employment started prior to that date, the current one year qualifying period will apply.

Newsgroup Newspapers Limited not liable for Andrew Coulson’s legal fees relating to his arrest

The implosion of the News of the World and the subsequent fall out continues to generate headlines and interest for lawyers and the general public alike. In December 2011, the High Court handed down a Judgment confirming that Newsgroup Newspapers Limited (the owners of the News of the World) were not contractually obliged to pay the legal expenses incurred by its former editor, Andrew Coulson, in the defence of a criminal investigation into actions which were alleged to have taken place when he was employed between 2003 and 2007.When his employment ended, he entered into a Compromise Agreement which provided for reimbursement of legal expenses “which arise from his having to defend over a period any administrative regulatory judicial or quasi-judicial proceedings as a result of his having been Editor of the News of the World”.

In July 2011, Mr Coulson was arrested by the Metropolitan Police and interviewed under caution in connection with allegations of phone hacking and making unlawful payments to police officers. He denied the criminal allegations against him and was bailed without charge until October 2011.

Prior to his arrest, Mr Coulson had retained lawyers since February 2011 following the announcement by the Metropolitan Police in January 2011 that it would open a fresh investigation into phone hacking. Newsgroup Newspapers Limited had paid Mr Coulson’s legal fees under the terms of the Compromise Agreement for the work undertaken by his lawyers from that point up to 23 August 2011. At this stage the CEO of Newsgroup Newspapers Limited wrote to Mr Coulson to advise that whilst it would pay his reasonable expenses in accordance with the Compromise Agreement in respect of the Levenson inquiry and Select Committee Investigations, it would not provide any assistance towards costs and expenses incurred by him in defence of or appearance in any criminal proceedings.

Following this Mr Coulson instituted proceedings in the High Court to enforce payment of his professional costs including those in relation to the criminal inquiry.

The High Court Judge held that although the indemnity relating to legal costs was wide ranging, the reference in the indemnity to “Editor” must be to someone performing the lawful duties of Editor and that it could not have been intended that activity outside the scope of an Editor’s lawful responsibilities would be covered by the indemnity. The Judge observed that Mr Coulson had neither been charged by the police nor had he attended Court to answer a charge and as such there were no proceedings on foot to trigger the indemnity.

The Judge’s decision on the scope of the indemnity does not seem to recognise that an employee may be wrongly or falsely accused of an unlawful act that, if proven, would fall outside the scope of their lawful responsibilities. Based on the Judge’s reasoning an employee in that situation would not be entitled to the benefit of an indemnity drafted in the above terms.

Although the circumstances of this case are not exactly commonplace, it is not uncommon for an employee to be accused of unlawful acts (e.g. discrimination/harassment) which if proven would fall outside their lawful responsibilities and activities. In light of this case, the well advised employee will require a very specific and tightly drafted indemnity. Equally, employers would be well advised to spell out exactly what will not be covered by an indemnity.

Supply of goods exclusion – TUPE 2006

A recent TUPE decision in the EAT case of Pannu v Geo W King Ltd concerned the application of the exclusion in TUPE 2006 which provides that there cannot be a service provision change if the activity that forms the basis of the contract is the supply of goods rather than the supply of services.

In this case, the Claimants were all employed by Geo W King Limited on an assembly line, producing parts for IBC Vehicles Limited. IBC also paid for the components that the employees were assembling. When Geo W King Limited began experiencing financial difficulties, IBC awarded the contract to another provider.

The employees of Geo W King Limited asserted that their employment should have transferred to the new contractor. The Tribunal did not agree and stated that even though the employees were engaged in the assembly of components paid for by IBC and checking the assembled parts for safety, they were not providing “services”. The contract between IBC and Geo W King Limited was still wholly or mainly a supply of goods and as such exempted from the service provision change provisions in TUPE.

If any of these developments in employment legislation and case law raise concern for you or your business contact Sally Bird

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