Court by the tide of change from Europe

2nd December 1994 at 00:00
John Hall and David Hetherington explain how EC legislation has strengthened the rights of college workers, particularly those of women.

In 1974, Lord Denning, Master of the Rolls, made a prophesy of Delphic significance. Commenting on the impact of European law on UK domestic legislation - still a novel idea for most people in the 1970s - he likened the Treaty of Rome to ". . . an incoming tide. It flows into the estuaries and up the rivers. It cannot be held back".

Perhaps Denning's roots in rural Hampshire and his love for the gently flowing River Test triggered the idea and gave him the detachment to look into the future with such perception. Anyway,the prophesy has now been fulfilled. Twenty years on, the gentle waves that washed the beaches of labour law in 1974 have become the mighty breakers which pound remorselessly the coastline of UK domestic law, changing its configuration in ways which few people could have anticipated.

The effects of European law are now being felt by colleges, which are having to cope with the new law and regulations flowing from the 1992 reforms. Over the past 12 months the advancing European tide has made five major incursions into college management of staff.

Part-time workers An important UK labour breakwater to collapse under pressure from Brussels was the law regulating the rights of part-time workers. In the case of R v Secretary of State for Employment, ex parte Equal Opportunities Commission, the House of Lords made the momentous decision that UK legislation excluding many part-timers from the rights to statutory redundancy payments and to complain of unfair dismissal is incompatible with European Community law.

Under UK statute law, an employee does not have such rights unless he or she has clocked up the requisite period of qualifying service. This was either two years' continuous employment if the employee worked for at least 16 hours a week, or five years' continuous employment if the employee worked between eight and 16 hours a week. Part-timers who worked for less than eight hours a week were largely unprotected by UK law - they never qualified for these rights.

Since most full-time workers are male and most part-time workers are female, the House of Lords found that the threshold of 16 "qualifying hours" indirectly discriminated against women. Consequently, their Lordships granted declarations to the effect that such thresholds breached European Community law in several important respects, which illustrates the broad sweep of European law.

First, the Lords held that UK law in relation to part-timers was incompatible with Article 119 of the Treaty of Rome. This requires member states to ensure that men and women receive equal pay for equal work. Next, they ruled that the UK fell foul of the Equal Pay Directive, which requires member states to introduce legislation implementing the right to equal pay for equal work. Finally, as if to underscore the Government's discomfiture, the House of Lords decided that the UK treatment of part-time workers contravened the Equal Treatment Directive, which requires member states to ensure that men and women are treated equally with respect to their working conditions, including the conditions governing dismissal.

As a result of the House of Lords' decision, the Government will have to remove the different "qualifying hours" thresholds applicable to part-time workers, so that all employees who have been continuously employed for two years will be entitled, regardless of the number of hours they work, to receive statutory redundancy payments and to complain of unfair dismissal. Although the amending legislation has not yet been enacted, employees in the education sector have already sought to exercise the rights established by the EOC decision. This is particularly the case in further education colleges, where many part-time lecturers are employed on fixed-term contracts terminating at the end of an academic year. The industrial tribunals have been deluged by proceedings brought by part-time lecturers whose expired fixed-term contracts have not been renewed. In other words, they have not been offered any work, or have only been offered work for fewer hours a week, for the following academic year.

Claims by part-time workers for redundancy pay can be brought directly under European Community law, since redundancy pay constitutes "pay" for the purposes of Article 119. The Employment Appeal Tribunal has ruled, in the case of Mediguard Services Limited v Thame, that the same is true in respect of claims for unfair dismissal compensation. Moreover, a Southampton industrial tribunal has recently decided that a complaint of unfair dismissal can be brought even if the employee worked for fewer than eight hours per week.

Discrimination Assuring equal opportunities is a vital part of every college's mission. The impact of European law on the upper limit of discrimination compensation - the second UK breakwater to submerge under the waves of Brussels - is therefore of great significance to colleges.

Until recently, the amount of compensation which could be awarded in respect of sex discrimination was limited by statute, the latest cap being Pounds 11,000. However, in Marshall v Southampton and South West Hampshire Regional Health Authority, the European Court of Justice held that such a limit, which bore no relation to the loss actually suffered, was inconsistent with European Community law. The Court also held that European Community law required the tribunal to have the power to award interest on compensation for sex discrimination in respect of periods prior to the tribunal's decision. These regulations came into force on November 22, 1993, and there have already been press reports of awards or settlements far in excess of the previous statutory limit.

Although not obligatory under European Community law, a similar measure was subsequently introduced in relation to compensation for racial discrimination, on the basis that it would have been illogical to treat sex and race cases differently. The Race Relations (Remedies) Act 1994 (effective on July 3), lifted the Pounds 11,000 maximum limit on compensation for racial discrimination and also gives tribunals the power to award interest.

Maternity The third major incursion by the European floodtide relates to pregnancy dismissals and maternity rights.

The European Court of Justice's decision in the case of Webb v EMO Air Cargo (UK) Limited shows that colleges must be especially careful when faced with the possibility of dismissing a pregnant employee. The case concerned the dismissal of a pregnant employee on the grounds that she was going to be temporarily unavailable for work. She had insufficient length of service to be eligible for maternity leave rights or to complain of unfair dismissal. The UK Courts took the view that the primary reason for dismissal was the anticipated absence, albeit that this was as a consequence of the pregnancy. But the European Court decided that a dismissal in these circumstances amounts to direct sex discrimination, contrary to the Equal Treatment Directive, even if a man who was going to be unavailable for the same period would also have been dismissed.

The Court held that, as pregnancy is a unique condition which obviously only affects women, it is not permissible to compare a woman who would be unavailable due to pregnancy to a man who would be unavailable due to illness.

Under the Trade Union Reform and Employment Rights Act 1993, an employee who has been dismissed on the grounds that she is pregnant can present a complaint of unfair dismissal, even though she may have less than two years' continuous service. Dismissal on such grounds is automatically unfair. In view of the European Court's decision in the Webb case, it is clear that most pregnancy dismissals will now amount to sex discrimination and therefore attract unlimited compensation.

On maternity rights, the Pregnant Workers' Directive has required the Government to introduce new legislation. New rights to maternity leave and pay have been created, regardless of length of service. These rights are now in force and run in tandem with the pre-existing rights for women with two years' service or more, further adding to the administrative burden.

Contracting Out No review of recent developments in European employment law would be complete without mentioning the Acquired Rights Directive, which was implemented in the UK (imperfectly at first) by the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE"). This continues to influence the development of UK labour law relating to the contracting out of services - especially, in the case of colleges, the contracting out of ancillary services such as catering and cleaning. The European Court of Justice, in the case of Schmidt, gave further guidance on the application of the Directive and, in particular, held that the decisive criterion for establishing whether there is a transfer for the purposes of the Directive is whether the undertaking in question retains its identity.

One of the most important factors which indicate this is whether the transferee is carrying out the same type of work as performed before the transfer. There does not have to be a transfer of assets. In the Schmidt case, the contracting out of cleaning services, which involved just one employee and no transfer of assets, was held to be covered by the Directive.

The Court of Appeal decided, in the case of Dines v Initial Healthcare Services and Pall Mall Services, that TUPE applied when a cleaning contract at a hospital came to an end and a new cleaning contract was awarded to a different contractor. Although no equipment passed between the two contractors, the Court said that there was a transfer, under TUPE, because both contractors were carrying on the same activity in the same place. Consequently, the cleaning staff were entitled to have their contracts of employment transferred, on the same terms and conditions, from the outgoing contractor to the incoming one.

Consultation Finally, the incoming tide of European law will compel colleges to reassess their consultation procedures. The European Court of Justice has decided that, in relation to consultation with employee representatives, parts of UK employment protection legislation are in breach of the Collective Redundancies Directive and the Acquired Rights Directive. UK legislation confines the obligation to consult employee representatives about collective redundancies or transfers of undertakings to those employers who recognise trade unions. As a result of this decision, the Government will now have to introduce amending legislation so that the consultation process is extended to any non-recognised trade unions which represent employees of a college. Moreover, in respect of employees not represented by trade unions, the Government will have to ensure that employers establish procedures for appointing employee representatives for the purpose of consulting them about redundancies or transfers of undertakings.

This will add to the procedural overload to which colleges are already subject, which make them vulnerable to legal action, including judicial review.

The combination of the changes relating to part-timers and those relating to consultation needs particularly careful watching by colleges. This is because the non-renewal on the same terms of fixed-term part-time contracts is likely to amount to redundancy in some circumstances, triggering the consultation requirements. Failure to consult could result in so-called "protective awards" being made against colleges by industrial tribunals. Protective awards can amount to up to 90 days' pay for each employee to whom the failure to consult applies.

In the light of John Major's opt-out from the Social Chapter of the Maastricht treaty, it might be tempting to imagine that the European tide had been stemmed, at least in relation to labour law. We would suggest that colleges should resist the temptation.

* John Hall and David Hetherington are partners in Eversheds Legal Services Ltd

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