Dismissing an employee

Dismissing An Employee - be honest!

Our lead software lawyers are Imogen Finnegan and Helen Monson who are experts in all employment law matters.

Here is an interesting case - Rawlinson v Brightside Group Ltd [2017] UKEAT 0142_17_2111 (21 November 2017) - which highlights the risks to an employer of not being honest about the reasons behind the dismissal of an employee.

Dismissing an employee - the case facts

In December 2014 Brightside Group, an insurance business, employed Mr Rawlinson as their in-house lawyer – Brightside’s “Group Legal Counsel”.

Mr Rawlinson’s employment contract gave him a 3 month notice period.

Shortly after Mr Rawlinson’s engagement, Brightside appointed a new CEO – a Mr Wallin. Mr Wallin became concerned early on about Mr Rawlinson’s performance and started an internal investigation within the business. Mr Rawlinson was aware that the senior management considered certain matters needed to be addressed but detailed concerns were not raised with him.

The upshot of the internal investigation was that by the end of March Mr Wallin decided that Mr Rawlinson’s position was untenable for reasons of his performance. Without communicating this to Mr Rawlinson the company began contingency planning for how to deal with accessing legal advice following Mr Rawlinson’s departure. The intention was to give Mr Rawlinson his 3 months notice and make him work that period to try and ensure a smooth transition.

On 14 April Mr Rawlinson met with senior management but was not told about the intention to dismiss him. During that meeting, Mr Rawlinson asked whether any further feedback had been received about him and was told it had not.

By 5 May, nothing had been communicated to Mr Rawlinson and Mr Wallin was frustrated that little progress had been made in terms of contingency plans. He raised his concerns with the Company Secretary who, at a meeting with Mr Rawlinson on 14 May dismissed him, informing him that the company were going to take a different approach to sourcing legal advice in the future and would use external legal advice reporting into the CEO. Mr Rawlinson was told he was being given three months' notice and his dismissal would be confirmed in writing. He was deliberately not told that he was being dismissed due to concerns regarding his performance “to soften the blow”.

Mr Rawlinson was shocked by the decision to dismiss him and told the Company Secretary that, as Brightside were outsourcing the legal services to an external law firm, TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 2006) would apply meaning that he would become an employee of the law firm that the work was being outsourced to. Mr Rawlinson asked for the name of this law firm but the Company Secretary declined to comment because of course there was no law firm.

In response to the Company Secretary’s failure to provide the name of the law firm, Mr Rawlinson said that he considered Brightside to be in breach of contract and that he would therefore not work his notice period.

Mr Rawlinson brought various claims in the employment tribunal. He claimed that Brightside were in breach of TUPE for failing to inform and consult him on the outsourcing of the legal function and he also brought a claim for constructive wrongful dismissal, contending he resigned in response to a fundamental breach of contract, namely the implied obligation in every employment contract that the employer will not act so as to breach the duty of mutual trust and confidence that exists between the employer and the employee.

The employment tribunal rejected the TUPE claim finding that there was no relevant transfer.

The employment tribunal also found that the implied obligation on employers to maintain trust and confidence had not been breached stating that Brightside had not been obliged to give Mr Rawlinson a reason for the termination of his employment. Brightside was not legally required to give Mr Rawlinson feedback on his performance or to warn him of the intention to dismiss him.

Mr Rawlinson appealed the decision.

Dismissing an employee - the decision

The employment appeals tribunal found in favour of Mr Rawlinson. The tribunal concluded that in all but the most unusual of cases, the implied term (that an employer will not act so as to breach the duty of mutual trust and confidence that exists between the employer and the employee) had to import an obligation not to deliberately mislead. That did not necessarily place the employer under a duty to volunteer information but if the employer chose to volunteer information, it should do so in good faith.

Dismissing an employee - comments

If you are dismissing an employee, honesty is almost always the best policy. Perhaps Brightside thought they was doing Mr Rawlinson a service by not being candid about the real reasons for his dismissal. On the other hand, maybe Brightside were just trying to look after themselves. They wouldn’t have wanted a row with Mr Rawlinson – would you want to tell your in-house lawyer that you were dismissing him because he wasn’t up to his job? When looking at the case the appeals tribunal noted that Brightside had not been “entirely altruistic” – they had wanted Mr Rawlinson to work his notice period and to keep him on-side to help with an orderly hand-over.

Whatever the motivation, coming up with what Brightside thought was an inoffensive way to deal with Mr Rawlinson’s dismissal backfired. Mr Rawlinson thought that Brightside were being deliberately obstructive with him by failing to tell him the name of the outsourced law firm. As a result, he resigned immediately so there was no orderly 3 month hand-over and Brightside ended up in the employment tribunal.

Being honest with employees makes it less likely for the employer to trip up. It is worth bearing in mind that the “real” reasons for dismissal are likely to come out by the disclosure required if the employees makes a subject access request.

If you need any help dismissing an employee get in touch with Helen Monson or Imogen Finnegan.


Contract for Services EM Law

Contract for Services?

Does your business engage consultants?

In a recent case (Sprint Electric Ltd v Buyer's Dream Ltd and another [2018] EWHC 1924 (Ch), 30 July 2018) the High Court ruled that, despite the litigants entering into what was called a “contract for services”, the true nature of the relationship was that of employer/ employee.

Surprisingly, this was a great result for the employer – it meant that ownership in the intellectual property rights in the software that the employee had developed belonged automatically to the employer. Remember – in a true contract for services / consultancy arrangement – the consultant will own the intellectual property in the materials that he or she creates unless the contract says otherwise. Not so for employees.

But while Sprint Electric may be popping the champagne the case will serve as a worrying reminder to businesses that just because they’ve called a contract a “consultancy agreement” or a “contract for services” and included “proper” consultancy clauses in it, this doesn’t mean the court (or HMRC) will agree. Our lead contract for services lawyers are Imogen Finnegan and Helen Monson who are experts in all employment law matters.

Here is a reminder of some of the things that the courts will look at to assess whether a relationship is one of employer/employee or client/consultant:

Contract for services - Factors indicating employment status

• The company is required to provide the individual with regular work and the individual must make themselves available to do the work.

• The individual is required to provide the contract for services personally. Either there is no right to appoint a substitute or any right of appointment is subject to the company's approval.

• The company controls what the individual does, how they do it and when they do it. However, those holding senior, professional or skilled positions may retain significant control over how they carry out their work but still be employees. The individual may also be expected to conform to standards of, for example, behaviour expected of others within the same working environment.

• The individual is not normally free to enter a contract for services with other organisations without the express permission of the company. The individual may be subject to restrictive covenants in their contract.

• The length of the engagement is not determined (with the exception of fixed-term contract for services) and does not relate to the performance of a specific task.

• The individual is paid a fixed amount on a regular payment date irrespective of performance targets or completion of a specific task (however, note that commission workers may be employees). They may receive a pension, bonus, private medical insurance, company car or other benefit and be entitled to company sick pay.

• The individual is integrated into the company. For example, they perform services which are similar to or substantially the same as those performed by an employee, their name appears on the internal telephone directory, they have a company e-mail address, they have a company business card.

• The company provides the individual with the facilities and equipment required by them to carry out their job.

• The individual is paid even if there is not sufficient work to keep them fully occupied. The individual assumes no financial risk in working for the company.

• The individual is not responsible for payment of income tax and national insurance contributions (NICs) on their earnings.

Contract for services - Factors indicating self-employed status

• The company is not obliged to offer work on a regular or frequent basis and the individual has no obligation to accept any work that is offered.

• The individual has the ability to determine when and how they work and is not under the direct supervision of the company.

• The individual is not required to carry out the contract for services personally and has an unqualified right to appoint a substitute.

• The individual is free to provide their services to whomever they choose without operating exclusively for one organisation.

• The individual is engaged for a finite period to carry out a specific task or project.

• The individual is paid on completion of a specific task or project or on a commission-only basis. They are not entitled to participate in any benefit schemes and will not normally be paid overtime.

• The individual is not sufficiently integrated within the company to have a defined role and does not perform services similar to or substantially the same as those performed by an employee.

• The individual provides their own equipment and materials in order to perform the contract for services.

• The individual risks their own capital in the business and will be personally responsible for any losses arising from their work. They may be required to correct any unsatisfactory work in their own time and at their own expense. Conversely, they may have the opportunity to profit from the success of the project.

• The individual is responsible for payment of their own income tax and NICs on their earnings and is responsible for registering for VAT if the level of their supplies exceeds the relevant registration limit.

If you need any help putting a contract for services together or if you want your consultancy / contract for services arrangements reviewed get in touch with one of our lawyers at EM Law. Neil Williamson, Helen Monson and Imogen Finnegan are specialists in this area.


EM Law Rawlinson v Brightside

Employment Law Update: Rawlinson v Brightside Group Ltd – False Reason for Dismissal of Employee

Here are the facts:

In December 2014 Brightside Group, an insurance business, employed Mr Rawlinson as their in-house lawyer – Brightside’s “Group Legal Counsel”.

Mr Rawlinson’s employment contract gave him a 3 month notice period.

Shortly after Mr Rawlinson’s engagement, Brightside appointed a new CEO – a Mr Wallin. Mr Wallin became concerned early on about Mr Rawlinson’s performance and started an internal investigation within the business. Mr Rawlinson was aware that the senior management considered certain matters needed to be addressed but detailed concerns were not raised with him.

The upshot of the internal investigation was that by the end of March Mr Wallin decided that Mr Rawlinson’s position was untenable for reasons of his performance. Without communicating this to Mr Rawlinson the company began contingency planning for how to deal with accessing legal advice following Mr Rawlinson’s departure. The intention was to give Mr Rawlinson his 3 months notice and make him work that period to try and ensure a smooth transition.

On 14 April Mr Rawlinson met with senior management but was not told about the intention to dismiss him. During that meeting, Mr Rawlinson asked whether any further feedback had been received about him and was told it had not.

By 5 May, nothing had been communicated to Mr Rawlinson and Mr Wallin was frustrated that little progress had been made in terms of contingency plans. He raised his concerns with the Company Secretary who, at a meeting with Mr Rawlinson on 14 May dismissed him, informing him that the company were going to take a different approach to sourcing legal advice in the future and would use external legal advice reporting into the CEO. Mr Rawlinson was told he was being given three months' notice and his dismissal would be confirmed in writing. He was deliberately not told that he was being dismissed due to concerns regarding his performance “to soften the blow”.

Mr Rawlinson was shocked by the decision to dismiss him and told the Company Secretary that, as Brightside were outsourcing the legal services to an external law firm, TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 2006) would apply meaning that he would become an employee of the law firm that the work was being outsourced to. Mr Rawlinson asked for the name of this law firm but the Company Secretary declined to comment because of course there was no law firm.

In response to the Company Secretary’s failure to provide the name of the law firm, Mr Rawlinson said that he considered Brightside to be in breach of contract and that he would therefore not work his notice period.

Mr Rawlinson brought various claims in the employment tribunal. He claimed that Brightside were in breach of TUPE for failing to inform and consult him on the outsourcing of the legal function and he also brought a claim for constructive wrongful dismissal, contending he resigned in response to a fundamental breach of contract, namely the implied obligation in every employment contract that the employer will not act so as to breach the duty of mutual trust and confidence that exists between the employer and the employee.

The employment tribunal rejected the TUPE claim finding that there was no relevant transfer.

The employment tribunal also found that the implied obligation on employers to maintain trust and confidence had not been breached stating that Brightside had not been obliged to give Mr Rawlinson a reason for the termination of his employment. Brightside was not legally required to give Mr Rawlinson feedback on his performance or to warn him of the intention to dismiss him.

Mr Rawlinson appealed the decision.

Decision

The employment appeals tribunal found in favour of Mr Rawlinson. The tribunal concluded that in all but the most unusual of cases, the implied term (that an employer will not act so as to breach the duty of mutual trust and confidence that exists between the employer and the employee) had to import an obligation not to deliberately mislead. That did not necessarily place the employer under a duty to volunteer information but if the employer chose to volunteer information, it should do so in good faith.

Comment

Honesty is almost always the best policy. Perhaps Brightside thought they was doing Mr Rawlinson a service by not being candid about the real reasons for his dismissal. On the other hand, maybe Brightside were just trying to look after themselves. They wouldn’t have wanted a row with Mr Rawlinson – would you want to tell your in-house lawyer that you were dismissing him because he wasn’t up to his job? When looking at the case the appeals tribunal noted that Brightside had not been “entirely altruistic” – they had wanted Mr Rawlinson to work his notice period and to keep him on-side to help with an orderly hand-over.

Whatever the motivation, coming up with what Brightside thought was an inoffensive way to deal with Mr Rawlinson’s dismissal backfired. Mr Rawlinson thought that Brightside were being deliberately obstructive with him by failing to tell him the name of the outsourced law firm. As a result, he resigned immediately so there was no orderly 3 month hand-over and Brightside ended up in the employment tribunal.

Being honest with employees makes it less likely to trip the employer up. It is worth bearing in mind that the “real” reasons for dismissal are likely to come out by the disclosure required if the employees makes a subject access request.