“Words may be spoken or actions expressed in temper or in the heat of the moment or under extreme pressure (“being jostled into a decision”) and indeed the intellectual make-up of an employee may be relevant (see Barclay). These we refer to as special circumstances. Where special circumstances exist it may be unreasonable for an employer to assume a resignation and to accept it forthwith. A reasonable period of time should be allowed to lapse and if circumstances arise during that period which put the employer on notice that further enquiry is needed to see whether the resignation was really intended and can properly be assumed, then such enquiry is ignored at the employer’s risk.”

This authority has given us “heat of the moment” resignations and dismissals. Under the strict contract law position, an employee who bellows “that’s it, I quit” at his boss and stomps out of the factory, has resigned. Perhaps his boss yells back “good!” The employee could not then, according to contract law, cool off and change his mind. Not in employment law. The special circumstances mentioned above mean that in some cases resignation can be withdrawn – our angry employee might have bellowed “that’s it, I quit”, but during his drive home, knuckles white as a grips the steering wheel in rage, he may suddenly remember his mortgage, wife, children and re-think things. So he telephones his boss, explains he lost his temper, and that he is on his way back to work. He might well be successful in showing that his employment was revived by his change of heart.

This is a sensible rule, but has never come with hard and fast time limits attached. In Kwik-Fit Wood J described a reasonable period as “relatively short, a day or two”. A recent EAT case, Willoughby v C F Capital Plc [2010] UKEAT 0503_09_1307 has helpfully confirmed:

1. the doctrine applies equally to a heat of the moment dismissal as it does to a resignation [although it would seem clear that each would require a different assessment as to what was reasonable];
2. that a 14 day delay (even with Christmas in the middle) was far too long for special circumstances to exist.

James Medhurst has helpfully tied together an analysis of this case with the ruling of Roberts v West Coast Trains Ltd [2004] EWCA Civ 900, which gives the employer a right to unilaterally reinstate following an appeal, or even perhaps without one. This does, as he says, potentially alter the balance between employer and employee, as the former could always “cure” his heat of the moment dismissal by reinstating whereas the employee is stuck with his resignation.

It should always be remembered by employers that an offer of reinstatement, even if refused, can be tactically beneficial in reducing compensation to an employee who, it can be argued at the tribunal, has failed to mitigate his loss by taking up the offer.

Employers should note the cautionary tale of Mr & Mrs McVeigh, who appealed to the EAT on a tribunal’s determination that they personally were the employers of their dismissed employee Christine Livingstone. In the right circumstances bringing a claim against two real people can be preferable to proceeding against their small limited company. The question is one of assets available for enforcement, proprietors of businesses often have cars, houses, cottages in the Cotswolds and so on, whereas the limited company might own some desks and chairs.

Mr & Mrs McVeigh had incorporated their limited company, and no doubt their accountant, landlord and taxman respected the fact. However, they completely failed to identify it on any documentation, including the contract of employment, correspondence and payslips. The name of the company only finally surfaced on a P60 produced months late and after proceedings had started.

Lady Smith gives a good summary of whether the question of personality is fact, law, or both:

The question of whether or not a person is employed by A or B is essentially a question of law: who were the parties to the contract of employment? However, answering it will often involve the assessment and evaluation of fact. It is a matter of identifying what was agreed between whom at the commencement of the contract. There may be documentary evidence about that. There may be oral evidence about it. It may a matter of inference from documentary and/or oral evidence. If the parties’ relationship at the outset is recorded in a document then it will be a matter of construing that document (a question of law) and then considering whether there is any other evidence which shows that the parties’ intention at that time was not in fact as the document indicates it was. Thus, where there is evidence in addition to a documentary record of the initial contract, then it is a matter of considering the document and those other facts together (a mixed question of fact and law: Clifford) or it may, depending on the circumstances, be a pure question of fact.

Good HR practices can circumvent these problems, and by that I mean basic research and common sense rather than anything complicated or requiring specialist assistance. The full case can be found here: McVeigh & Anor v Livingstone [2009] UKEAT.

Sir Fred should not be counting on being £650,000 a year better off as a result of this because it’s not going to happen. The Prime Minister has said it’s not acceptable and therefore it will not be accepted. It might be enforceable in a court of law, this contract, but it’s not enforceable in the court of public opinion and that’s where the government steps in.

A video of the interview can be found here.

So what if the contract is legally binding? What if the parliament has to specially legislate to recover the money? At present the government cannot simply seize your money (or anything else) just because they want to. Lawful authority is needed. This isn’t merely an effect of new human rights legislation, it’s a fundamental part of English law. In the first-year law student case of Entick v Carrington (1765) 19 Howell’s State Trials 1030, it was said:

The great end, for which men entered into society, was to secure their property. That right is preserved sacred and incommunicable in all instances, where it has not been taken away or abridged by some public law for the good of the whole. The cases where this right of property is set aside by private law, are various. Distresses, executions, forfeitures, taxes etc are all of this description; wherein every man by common consent gives up that right, for the sake of justice and the general good.

This is one of the cornerstones of the British constitution – the executive can only do what the legislature has given it lawful authority to do. So Harriet Harman taking away Sir Fred Goodwin’s pension entitlement would be the modern equivalent of Lord Halifax, himself a Secretary of State, signing an unlawful warrant to seize Entick’s seditious newspaper articles.

So will they legislate? If parliament did pass such an Act, English law falls away as parliament is supreme. This is where European human rights would surely come into play. Article 1 to the First Protocol to the European Convention on Human Rights:

Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.

So any Act will need to be in ‘the public interest.’ Does anyone seriously expect that the European Courts will find that it is in the public interest to retrospectively void a lawful contract to recover an economically insignificant sum of money because it doesn’t seem particularly fair that he should receive it and the public are a bit cross? 

This was an exceptionally foolish time for the government to suddenly stick its heels in, because unless Sir Fred throws in the towel the government will lose, however much it sticks in the throat. And by the time the government do lose, it’ll have had all the factual (and probably embarassing) evidence heard in court, risked adverse findings of fact over Lord Myners’ role, been to Europe, had years’ worth of newspaper headlines against it, and spent many many times Sir Fred’s pension entitlement into the bargain.

The employment law lesson here is that the government committed a basic mistake – negotiate someone’s severance all at once, because afterwards is too late…

Finally, it’s worth quoting Sir Fred’s letter in full, because no-one else seems to be doing so and it gives him more dignity that you’d imagine, whatever you might think of him.

Dear Lord Myners,
You telephoned me yesterday and asked me to consider voluntarily taking a material reduction in my pension entitlement as a “gesture” to acknowledge the level of Government support being made to Royal Bank of Scotland (RBS).
You highlighted that the absence of such a gesture would give rise to significant adverse media comment.
I outlined to you my view of the matter, but as I had not been expecting your call and as you expressly requested me to do so, I undertook to reflect on the matter again.
You emphasised that I would need to provide you with an answer ahead of the publication of the Group’s annual report and financial statements sometime next week.
It came therefore as something of a surprise to find that both details of forthcoming 2008 financial statement disclosures relating to my pension and the substance of our telephone conversation had been placed in the public domain a few hours after we spoke.
In the circumstances, I feel that an earlier response to your request is necessary, and the purpose of this letter is to provide that.
Whilst my pension is the current focus of attention, there were a number of other aspects of my departure from RBS which need to be considered at the same time, particularly in the context of “gestures” and appropriate behaviour.
My contract of employment provided for a 12 month notice period, which I voluntarily waived in October of last year.
This amounted to a loss of 1 years’ (sic) salary, and I discussed this with you at the time, when you indicated that it was both an appropriate and sufficient recognition of the circumstances.
Subsequent to this, you approached the chairman of the group remuneration committee to suggest that I should waive certain share related awards which would otherwise have vested upon my leaving the group.
Whilst difficult to value with precision, these had a value equivalent to about 3 months’ salary at that time.
During these discussions, I am told that the topic of my pension was specifically raised with you by both the chairman of the group remuneration committee, and the group chairman, and you indicated that you were aware of my entitlement, and that no further “gestures” would be required.
On this basis, I agreed to waive my entitlement to the share related awards and proceeded to subscribe for my full allocation of shares in the ensuing share issue.
Like you, I believed that these gestures were appropriate in the circumstances, and sufficient, and revisiting the position today, I believe that they remain so.
I accept responsibility for that which I was responsible for, and recognise that my actions must be consistent with this.
I believe that they have been, and to voluntarily accept a reduction in a pension entitlement which has been built up over many years and in other employments in addition to RBS, is not warranted.
It is important to recognise that my pension arrangements have not fundamentally altered since I joined the group in 1998.
Whilst the quantum of the “pension pot” figure has increased, this is principally as a result of the assumption used last year about retiring at age 60 no longer being appropriate. The amount which I am due to receive as a pension continues to be calculated in a manner consistent with prior years.
Whilst I suspect that you will not now agree with it, I hope you can understand my rationale for declining your request to voluntarily reduce my pension entitlement.
In conclusion, since our private conversation yesterday is now in the public domain, I have no objection to the complete content of this letter being made public.
Yours sincerely,
Sir Fred Goodwin

The legal situation is much more complicated. A discretionary bonus is not subject to absolute and unfettered discretion. A line of cases ended at the Court of Appeal in Cantor Fitzgerald International v Horkulak [2004] EWCA Civ 1287, (recently applied in Small & Ors v The Boots Co Plc & Anor [2009] UKEAT, interestingly in relation to obligations on TUPE transferees), where it was held that:

“it is presumed to be the reasonable expectation and therefore the common intention of the parties that there should be a genuine and rational, as opposed to an empty or irrational, exercise of discretion.”

Potter LJ seemed to place particular emphasis on the bonus in that case being part of the overall remunerative structure – just like many of the bank employees.

Clearly in many cases the bank will be able to lawfully assess a discretionary bonus at nil pounds, especially where the employee concerned played some part in the downfall of the bank. But what about an employee who worked very hard and very successfully, in an area of the bank that wasn’t tainted by the surrounding collapse? Perhaps the wording or context of the discretionary bonus might even refer to individual performance. This class of employee is far from inconceivable, and might well have a good claim to receive a bonus as usual this year.

Lying on CVs can be costly, a material falsehood on a CV could well be a fair reason for subsequent dismissal, even if discovered a long time afterwards. What’s more a serious lie earning you a job you would not have otherwise obtained might well be a criminal offence under s.2 of the Fraud Act 2006 -which replaced the traditional offence under the Theft Act of obtaining a pecuniary advantage by deception.

Even more dramatically, you might be sued in a civil court for the money lost by your employer. At the moment Cheltenham Borough Council is treading new territory by bringing a £1 million claim against its former chief executive for alleged fraudulent or negligent misrepresentation. The local authority alleges that during its recruitment procedure Ms Laird answered questions on her medical history incorrectly, concealing her previous bouts of depression which ultimately led to an ill-health retirement payment of around £450,000. The case is currently being tried in the High Court – more news when it comes in, but I’m playing in my mind whether there are DDA issues here.

Link to Times article

By way of reminder, a maximum working week of 48 hours applies to European workers, unless they opt-out in writing. Employees cannot be compelled to opt-out, or treated less favourably if they do not. Britain has fiercely defended its citizens’ right to opt-out, a right chosen by very few other countries.

The idea of a maximum working week is anathema to many British workers, even those who would never approach the number of hours. Although other Europeans have long used it as a method of increasing employment levels, here it is seen by many as a socialist policy and even, gulp, a bit French. Simply on a tabloid-sniggering level, the British are no fans of French working practices.

The worse thing is that the perception of a Europe exceeding its remit in a way that dictates against contractual freedom will add fuel to the fire of Euro-scepticism already so rampant in the UK. The rapporteur appointed by the Parliament to report on the measure said that the vote was an opportunity to reconnect with citizens. Indeed: and on these shores it will have the opposite result. This is a great shame, as much of the good work and benefit done by the European institutions goes unnoticed and uncelebrated. Votes such as this, especially given the absolute failure by the EU to recognise that the rejection of the EU constitution was a statement on its failure to engage with its electorate, demonstrate the arrogant blindness of European legislators. Stephen Hughes, social policy spokesman of the European Parliament Socialist Group, speaks volumes as he talks of “our European nations making a great civilization”, “British citizens [being] allowed to enjoy the civilised standards of their fellow Europeans”, compared to “Korean conditions in our factories.” He imposes a social agenda imported from other countries onto a vocally unwilling public who would hold no truck with him at home. He is also disingenuous enough to say all this, then represent the move as health & safety legislation, despite a raft of existing laws which already prevent employers working their employees until they’re so tired injury results.

Freedom of contract is central to the common law system and British working sensibilities. There may be one or two more US readers of this post than usual (thanks to Charon and Blawg Review), and this level of state intervention would (I’m guessing, and would love to be told) be absolutely unacceptable there. To them, and to many British workers, this is the European Union at its worst, and could well be looked at in many years’ time as a first development in a move away from Europe for Britain. The huge promise for peace and prosperity presented by the European institutions could be thrown away on the back of social engineering by policitians who don’t even begin to recognise how utterly disengaged they are from their electorate.

I’m not a Euro-sceptic, and don’t usually use this blog as a soapbox, but some years ago I was talking to an MEP’s agent at a barbecue and asked him what it was an MEP actually does, day-to-day. He responded by taking offence, and the incident has rankled with me ever since. Europe is a Very Good Thing, but won’t last much longer over here if it doesn’t get very smart, very fast, to how it is perceived.

Sorry everyone for the rant, the blog will be back to dry and fusty law reporting soon.

Employers’ groups see the short-termist hire-and-fire nature of agency work as vital to many businesses’ flexibility and operation, whereas other groups are concerned over reports of widespread exploitation. Several attempts have been made to imply employment relationships into the traditional tripartite agency/employer/worker relationship, but they have failed. The Court of Appeal case of James leads the way, and has been applied robustly since.

Legislation is now moving to fill the gap, but only after a huge amount of negotiation at a domestic and European level. The government reached an agreement in May with the TUC and CBI that agency workers would gain equivalent rights to employees, but only after 12 weeks’ service. The problem was that rights for agency workers was an approaching storm in Europe as well, and the government managed to broker a deal where it said yes to the Agency Workers Directive, subject to the 12 week qualification, and (separately) the retention of the right of UK workers to opt out from the 48 hour working week. This latter exception for the UK – most of Europe having 48 hours as an unalterable maximum – is of great political sensitivity. The notion of a maximum working week is anathema to British employers, and I would say anecdotally many of its employees too. It just seems a bit, well, French. 

The agency worker directive presently exists only as European Law – the full copy is available here, and must be implemented by UK legislation. There is currently no word as to when this will happen.

Also, income support and incapacity benefit are merged and renamed Employment and Support Allowance. More details on those at the DWP here (including yet another extension of the term ‘customers’), and the full regulations concerning the SSP extension here.

This type of arrangement is common, and furthermore is very useful. Many care homes are too small to employ sufficient waking night staff to deal with all situations that might arise. Mrs Hughes was called out around twice each month. Relations must have soured however, as she raised a grievance. Her employer’s response was to pay her for the time she was working during the call outs. However, whether due to this grievance or a further deterioration in the relations, they served notice to quit from the flat. This was constructive dismissal, so closely were the flat occupation and employment relationship tied.

She also brought actions claiming that she should be entitled to National Minimum Wage for the on call periods (9pm to 8am), and breach of her Working Time Regulations entitlements to rest breaks every six hours, and daily rest breaks. She won on most points: it has been established since the ECJ cases of SIMAP and Jaeger (all about junior doctors) that if you’re required to be on the premises then it’s working time, even if you’re asleep. The NMW is only payable when you’re awake. For a similar decision with a hotel caretaker required to stay in the hotel on some nights, see this case.

The present case of Hughes v Jones & Anor [2008] UKEAT can be found here, and the law is certainly correctly interpreted, but it’s a shame that employing live-in on call staff is effectively rendered impossible by the WTR.

A link to the Practice Direction is here (pdf).