Our aim is to keep you up to date with key developments in employment law so that you can manage your business better. Please note that the Newsletter is for information only. It is not intended as legal advice and must not be read as such.

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Do we value our freedoms enough?

Let's consider two recent events: Wikileaks and student protests over tuition fees. Freedom of expression is something that Western democracies hold dear. But how far does this go? Does it apply to Wikileaks disseminating classified information through the internet all over the world? Freedom to protest is also something the Western world holds dear. But how far does this go? Does it apply to students and others protesting over tuition fees who deface public buildings and statues and who attack a car carrying Royals to a London theatre? Many of us would think both of these cross the line. There is no freedom without responsibility and the latter seems to be sorely lacking. The line between the two can be difficult to draw but if we as a society don't do it we could end up like Iran, China, Russia, Burma, Saudi Arabia and other countries in the world where the behaviour of Wikileaks and some of the protesters would get very short shrift indeed.

Equality Act 2010

Our September Newsletter summarised some of the changes to discrimination law in the Equality Act 2010. Most of the Act came into force on 1 October 2010. The Government has recently announced its decision on a couple of the provisions which did not do so.

• Compulsory gender pay audits will not be brought into force. This means that there will be no requirement for companies with 250 or more staff to report their gender pay gap as from 2013.
• Positive action on recruitment will be brought into force. This will allow employers selecting between two candidates who are otherwise equal - in other words who are in a tie-break situation - to choose the candidate from a group that is under-represented in their workforce.

No religion is entitled to preferential treatment

McFarlane (M), a committed Christian, was a counsellor for Relate Avon. He refused to counsel same-sex couples because he believed that sexual activity between such couples was contrary to God's law. Relate ultimately dismissed him for breaching their code of ethics and equal treatment policy and M brought claims of religious discrimination. These were dismissed by the employment tribunal and Employment Appeal Tribunal. He then applied for leave to appeal to the Court of Appeal (CA) who rejected his application - McFarlane v Relate Avon Ltd [2010] IRLR 872 EWCA.

M had submitted to the CA a witness statement from Lord Carey, the former Archbishop of Canterbury, in which Lord Cary called for M's case and others engaging religious rights to be heard before a specially constituted panel of 5 judges who had "a proven sensibility to religious issues". Lord Carey regarded the attitude of the tribunals and courts to same-sex unions as discriminatory and showing that the judges had a disparaging attitude to Christianity and its values.

The CA roundly rejected Lord Carey's views. They said that in a free constitution it was important to distinguish between (a) a person's right to hold and manifest their belief and (b) the substance and content of the belief itself. The former was protected by the law; the latter was not. The CA pointed out that we live in a society where people hold many different religious beliefs and it was not appropriate for the law to protect one of these in preference to any of the others. To do so would be to deny rights as citizens to people who did not share the religious belief and that was the road to an autocratic theocracy. A special court to hear religious cases, as Lord Carey had suggested, was not in the public interest.

Can you require an employee to stay at home during their notice period?

Unless there is a clause in the employee's contract permitting this (a garden leave clause) this can be breach of contract. If it is it means that clauses in the contract which are beneficial to the employer, such as restrictive covenants requiring the employee not to deal with or solicit clients/customers etc, are no longer enforceable.

However, as the Employment Appeal Tribunal (EAT) pointed out in Christie v Johnston Carmichael [2010] IRLR 1016 this is only so if the employee does actually have a right to work during their notice period.

Christie, a senior client relationship manager, was employed by JC in a generalist tax advisor role. Having gained membership of the Chartered Institute of Taxation, the training for which was funded by JC, Christie asked to do specialist tax work with a higher salary. JC had no such work for him at the Fraserburgh office but suggested he move to Aberdeen. Following a dispute with JC about not being allowed to take his clients with him to Aberdeen, Christie gave JC a letter headed "resignation due to constructive dismissal" in which he gave three months notice of his resignation. JC responded by putting him on garden leave for his three month notice period. Following various exchanges of correspondence the matter ended up in the employment tribunal. The tribunal dismissed Christie's constructive dismissal claim. So did the EAT.

One of the issues for the EAT was whether JC had been entitled to put Christie on garden leave in the absence of a garden leave clause in his contract. The EAT held that they were. This was because on the facts Christie's contract did not confer a right to work. His duties were not unique, he was relatively junior, and there was nothing to indicate that he would be de-skilled as a result of being on garden leave for three months.

Bonus clauses: make sure you spell out the entitlement conditions

It is common for bonus schemes to state that in order to receive a bonus the employee must be employed and not under notice on the date of payment. But what is the position if they do not?

In Rutherford v Seymour Pierce Ltd 2010 IDS Brief 909 the High Court (HC) was asked to imply a contractual term to this effect, there being no express term.

R was summarily dismissed from SP Ltd in November 2007 for poor performance. His contract stated "You will be eligible to participate in the company's discretionary bonus scheme. Any bonus payments or amendments made to the scheme are at the discretion of the company." Half of SP Ltd's bonus pool was distributed at the end of the first three quarters of their financial year which was on 13 September. The remainder was distributed three months later in the following December. When R was dismissed he had been paid bonus for the first three quarters but SP Ltd did not pay him the remainder as he had left employment during the last quarter.

R claimed that this was breach of contract. SP Ltd's defence was that it was an implied term of his contract that to be considered for a bonus the employee had to be employed and/or not under notice of termination of their employment (howsoever given) at the date of payment.

The HC rejected SP Ltd's argument. They said it was not necessary to imply such a term for the contract to work and it would be totally unreasonable to do so as it would give SP Ltd an unfettered right to dismiss to avoid paying the bonus. Furthermore, SP Ltd had not produced any evidence to substantiate their statement that such a clause was known to be standard practice in the City of London. Another "killer" for SP Ltd's argument was that they had subsequently amended their contracts to include an express term to state what they said the implied term already did.

The HC went on to decide that R was entitled to a bonus of £70,000 for the last quarter, there being no substantiated allegations of poor performance.

Another case of a bonus which the employer tried to get out of paying

This time the issue related to a bonus cap and the case is GX Networks Ltd v Greenland [2010] IRLR 991 EWCA. The moral of the story is that employers should take care with what they promise or they may by hoist by their own petard.

GX made and installed broadband hardware. G was a sales account manager. Her pay consisted of basic salary and commission. The commission arrangements were contractual. In early 2007 new commission arrangements were introduced relating to new business. These were divided into (1) performance commission for the achievement of targets. This could be up to 100% of base salary; and (2) over-performance commission payable on new business which exceeded the employee's target. This was three times that earned on sales within the target level. Targets were set by agreement between the employee and their manager and the company could adjust the targets at the end of each quarter. The employee had to submit a forecast of likely annual sales and keep these up to date on a monthly basis.

The employer had the power to cap the Q4 over-performance commission at 100% although such cases "will be by exception and require HR and Finance agreement."

In 2007, G exceeded her target by 205%. This meant that her over-performance bonus amounted to £163,503. GX decided, without discussing the matter with her, to cap this at 130%. G brought a claim for breach of contract.

The Court of Appeal (CA) agreed that GX were in breach of contract. The cap did not give GX unfettered discretion. Given the provisions for the calculation of commission here, an unfettered discretion would have made a nonsense of the scheme. Any provision restricting liability had to be strictly construed. The wording of the cap provision meant that the cap could only be applied in exceptional circumstances. Given that the only "exceptional" factor here was G's over-performance and that the scheme was designed to reward effort and success, her over-performance could not be described as an "exceptional" circumstance justifying capping. She was therefore entitled to receive her full commission.