Be Aware – August 2023

High Court quashes Regulations allowing workers on strike to be replaced by agency workers

In R (on the application of ASLEF and ors) v Secretary of State for Business and Trade, the High Court has upheld a judicial review to the revocation of Reg 7 of the Conduct of Employment Agencies and Employment Businesses Regulations 2003, which prohibited employment businesses from supplying temporary workers to cover the work of those taking part in official industrial action.

The Court found that The Secretary of State failed to comply with his duty under S.12(2) of the Employment Agencies Act 1973 to undertake consultation before making the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2022, which effected the revocation. The High Court accordingly quashed the 2022 Regulations.

Until 21 July 2022, Reg 7 of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 prohibited employment businesses from supplying employers with temporary workers to perform the duties normally performed by workers taking part in official industrial action, or the duties normally performed by any other worker who had been assigned to cover for such a worker. A consultation on revoking  Reg 7 was commenced in July 2015, soon after the Government came to power. The majority of the responses did not favour this change in the law and, although there was no formal response to the consultation, the Government decided not to go ahead.

In June 2022, and in the context of industrial action in the rail sector and other anticipated industrial action, the Government decided, that Reg 7 would be revoked without further public consultation. The change was made by the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2022, which came into force on 21 July 2022. Thirteen trade unions brought a judicial review challenge to the Government’s decision.

The High Court upheld the challenge on the consultation ground. It held that the purposes of the consultation duty under S.12(2) of the 1973 Act include enhancing the quality of the Secretary of State’s decisions by requiring him to take into account the views and evidence of those who are likely to be well informed, and reassuring Parliament that the case for the measure has been tested with interested parties in the sector, whose views and interests have been taken into consideration in drafting. In the Court’s view, Parliament could not have intended that S.12(2) would be satisfied provided that there was consultation at some point before the making of any regulations, regardless of how long before the decision or any other issues as to the quality of the consultation relied on or as to its relevance at the time of the decision. The quality of ‘consultation’ in this context must be guided by common law principles, and the Court had to ask whether the Secretary of State’s approach to the consultation was so unfair as to be unlawful.

Holiday Pay on Termination

When an employee leaves employment without taking all their accrued annual leave, they will be entitled to a payment in lieu of the untaken leave. Can an employee contract to receive  less holiday pay on termination then they would have received had they been working?

No, held EAT in Connor v Chief Constable of West Yorkshire Police.

In Connor v Chief Constable of the South Yorkshire Police, Mr. Connor had been employed for over 18 years before his dismissal. During that time, he had worked the same hours each week. Whilst he was working, his holiday pay was calculated as the equivalent of what he would have earned during a week’s work when he took a week’s holiday. However, his contract included a clause that where he was dismissed any holiday pay entitlement was calculated as 1/365th annual salary. This calculation resulted in him receiving less holiday pay then he would have received had he been working.

The WTR permits the calculation of payment for accrued but untaken leave to be determined by a ‘relevant agreement’, so the question before the court was can a ‘relevant agreement’ result in less pay to the employee.

On first hearing the case the tribunal held that the 1/365th calculation was a valid ‘relevant agreement’ under Regulation 14(3) and that the Claimant had suffered no unlawful deduction. This was appealed by Mr Connor.

The EAT disagreed. The EAT has clarified the legal position and held that a relevant agreement cannot put the employee in a worse position financially than they would have been in if they had taken the leave during their employment and been paid for it as required by law. Only a term which provides a formula for calculation which is in keeping with the rights provided for in law will be valid.

In Conclusion

The issue here is that Mr Connor appears to have worked regular overtime, such that his average daily wage was not 1/365^th of his annual salary. This case highlights that employers will have to take care  when calculating payment in lieu of holiday to ensure the correct figures are used.                                      

Transfer of Undertakings (Protection from Employment) Regulations 2006 with an asset purchase

“We are looking to purchase the trade and assets of another existing business. As we are not interested in purchasing the Company itself, what is our liability to the employees currently employed in that business?”

Although you are only looking to purchase trade and assets, the purchase may still fall under the TUPE Regulations 2006.

The TUPE Regulations are an important part of UK labour law. When they apply can be complicated, but where they apply, they protect employees whose business is being transferred to another business. Failure to consider them can lead to significant financial penalties of the businesses concerned.

When do they apply?

A relevant transfer can occur when a business or part of a business (an or undertaking) is transferred from one employer to a new employer as a going concern i.e. there is a transfer of an economic entity which retains its identity after the transfer.

An ‘economic entity’ means an organised group of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.    In deciding whether there has been a relevant business transfer, the crucial question is whether or not there is a transfer of an economic entity which retains its identity after the transfer and is carried on by the transferee.  In answering that question, all the factual circumstances will be considered, including:

• The type of business;
• Whether tangible assets such as premises, assets and equipment are transferred – although a relevant transfer may still take place even where no property is transferred to the transferee by the transferor;
• Whether intangible assets such as goodwill and customer lists are transferred;
• Whether the majority of employees are taken over by the transferee and, if not, the motive of the transferee in not taking them on;
• The degree of similarity between the activities carried on before and after the transfer; and
• Whether there has been any break in the performance of the activities.

Whether TUPE applies to a particular business transfer is not a simple question to answer since each case will turn on its own facts and ultimately, it will be a matter for an employment tribunal to decide if there is a disagreement between the parties.

TUPE does not apply to:

• The transfer of shares in a company.  This is because when a company’s shares are sold to new shareholders, there is no transfer of the business – the same company continues to be the employer.  In short, for TUPE to apply, the identity of the employer must change.
• The transfer of empty premises or assets only (for example, the sale of office equipment alone would not be covered, however, the sale of a business as a going concern which includes the equipment would be covered).
• The situation where a client buys in services from a contractor in connection with a single specific event or task of short-term duration i.e. a one-off contract rather than the two parties entering into an ongoing relationship for the provision of the service.  There is no statutory definition of what exactly constitutes ‘short-term duration’.
• Arrangements between client and contractor which are wholly or mainly for the supply of goods for the client’s use.

If your purchase involves a going concern, then the safer legal approach is to assume TUPE does apply and look to inform and consult in the usual way.  If you expect to re-employ the staff, then it would be prudent to proceed under TUPE.

Customer Supplied Parts

“A customer has asked me to fit parts that he has supplied. I told him at the time that I was not responsible if they failed but there is now a problem and he is saying it is my fault.”

Whilst it can be common for customers to supply parts when things go wrong it can be difficult to untangle who is liable for what.

Where your client is a consumer, you cannot avoid the statutory liability for either the service you provide or the parts supplied. Any parts must be of a satisfactory quality taking into consideration common issues such as your description and the price paid. Any diagnostic work, advice and fitting of parts must be carried out with a reasonable level of care and skill. A failure on any of these issues will result in you being liable for any losses reasonably sustained.

As you have not supplied the part then if the part has failed the starting point should be that there is no liability. If it has failed due to the fitting, then you are liable and establishing which can be difficult.

To make matters easy you need to ensure that the customer is clearly advised that you are not warranting the part before the work commences and that you clearly explain what will happen if the part fails. Ideally this should be clearly marked on any invoice.

Any failure should be investigated. You can require the customer to prove what has happened. However, you should consider whether you will be happy to accept anyone else’s opinion. Where appropriate consider whether an independent engineer should be used.

If you cannot agree who is liable consider referring the matter to the National Conciliation Service. This is a free and independent dispute resolution service provided to RMI members and their customers. They can be contacted on 01788 538317 and more details can be found on the RMI website at http://www.rmif.co.uk/consumers/why-use-an-rmi-member/

General Note

Don’t forget, this advice is general in nature and will need to be tailored to any one particular situation. As an RMI member you have access to the RMI Legal advice line, as well as a number of industry experts for your assistance. Should you find yourself in the situation above, contact us at any stage for advice and assistance as appropriate.

Motor Industry Legal Services

Motor Industry Legal Services (MILS) provides fully comprehensive legal advice and representation to UK motor retailers for one annual fee. It is the only law firm in the UK which specialises in motor law and motor trade law. MILS currently advises over 1,000 individual businesses within the sector as well as the Retail Motor Industry Federation (RMI) and its members.