Employment case law updates | July 2020

Employment case law updates | July 2020

Here we take a quick look at some significant employment law decisions from the last couple of months

Ferguson v Astrea Asset Management Ltd

Contract variations made because of a TUPE transfer are void, even if they are beneficial to the employees

The claimants were the directors of a company that managed properties on behalf of the owners under a management agreement. They were also the beneficial owners of the company’s holding company.

The owners gave notice to terminate the management agreement and appointed a new company to manage the properties. It was accepted that that involved a TUPE transfer from the original management company to the new provider. Shortly before the transfer, the claimants varied their own contracts to give themselves generous guaranteed bonuses and termination payments. When the transferee discovered this shortly before the transfer, it refused to allow some of the claimants to transfer and dismissed the others for gross misconduct.

The claimants tried to argue that the rules regarding changes being void only apply to changes which are adverse to the employee. However, it was held that, although these changes were beneficial to the claimants, they were void because they had been made by reason of the TUPE transfer.

What the ruling means for you

This case reiterates the position that any changes which are made to employment contracts by reason of the transfer, such as harmonisation of transferring employees’ contracts with your existing workforce are likely to be void, even if the changes are beneficial to the transferring employees.

Varnish v British Cycling Federation (t/a British Cycling)

Professional cyclist is not an employee or a worker

Jess Varnish is a professional cyclist who was selected for an elite training programme with British cycling. Ms Varnish entered into various athlete agreements with British Cycling, the most recent of which was signed on 16 November 2015.

Under the agreement, British Cycling agreed to develop a performance plan with Ms Varnish and to provide a package of services, benefits and other support to enable her to devote her time to training at the level required.

On 31 March 2016, Ms Varnish's relationship with British Cycling was terminated for performance reasons in accordance with the terms of the agreement. Ms Varnish commenced proceedings in the employment tribunal for claims including unfair dismissal and discrimination. However, British Cycling disputed that Ms Varnish had employee or worker status.

The tribunal considered whether the agreement accurately reflected the relationship between the parties and found that it did. Having established this, it considered whether Ms Varnish was an employee. The tribunal found that:

• There was no mutuality of obligation. The training that Ms Varnish did under the agreement did not amount to work for British Cycling; and
• The agreement required personal performance by Ms Varnish. However, since she was not provided with work by British Cycling, care needed to be taken with this concept. Ms Varnish was not personally performing work provided by British Cycling. In fact, she was personally performing a commitment to train in the hope of achieving success. This was not consistent with a contract of employment.

The tribunal also held that Ms Varnish was also not a worker because she was not personally performing work for British Cycling but was training in the hope that she would be selected to compete in international competitions. She was not undertaking to do or perform personally any services for British Cycling. If anything, the arrangement was a contract for services to be provided to Ms Varnish, rather than the other way around.

What the ruling means for you

Employment and worker status continues be in the news as the ways of working continually evolve. Whilst this case is extremely fact specific, in highlights the importance that in order to avoid any ambiguity, it is essential that clear contractual terms are agreed at the outset of any employment relationship and that any agreed terms truly reflect the intention of the parties.

Duchy Farm Kennels Limited v Graham William Steels

Breach of confidentiality clause did not entitle employer to cease settlement payments

The claimant, Mr Steels, settled his employment tribunal claim against his former employer, Duchy Farm Kennels, by way of a COT3 agreement. It was agreed that Duchy would pay the settlement payment of £15,500 in weekly instalments of £330. Read more dealing about employment disputes.

After paying £2,960, Duchy stopped further instalments on the basis that it was not obliged to do so, after it discovered that Mr Steels had breached the confidentiality clause by disclosing the fact, and the amount, of the settlement to another former colleague. Mr Steels issued county court proceedings to enforce the COT3 agreement.

The court found that disclosure of the fact and sum of settlement did not cause any commercial harm to Duchy, but they accepted that it created a risk that other employees might rely on the information as encouragement to bring claims against Duchy in the hope that they would obtain a settlement. If this ever transpired, Duchy would be able to bring a claim for damages by reference to the costs incurred in defending the proceedings.

That said, the confidentiality clause was not a condition of the contract, meaning any breach of it would not automatically give the other party a right to bring its contractual obligations to an end. Instead, it was an intermediate term. The breach did not go to the root of the contract, which would have entitled Duchy to treat itself as being discharged from any further obligation to pay instalments. The obligation to pay the instalments therefore continued, notwithstanding the breach.

What the ruling means for you

Confidentiality clauses are a common feature in any settlement and/or COT3 agreement, but this case highlights the fact that carefully drafted wording is essential and, if confidentiality is an important feature, this is made clear and specific provisions are made in the agreement on what happens if confidentiality is breached.

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If you have any queries about how the above case law may affect your business, contact a member of your local employment team.

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