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3 October 2013 0 Comments
Posted in Employment, Opinion

Zero hours contracts – dismissal still fair despite employer’s ignorance

Author headshot image Posted by , Partner

In a case which is quite topical regarding zero hours contracts, Docherty and another v SW Global Resourcing Limited is a decision from the Inner House of the Court of Session in Scotland. It held that a dismissal may still be fair where an employer takes action against an employee which amounts to dismissal without considering the legal consequences, or has a mistaken view of what those consequences might be. It was for the Tribunal to assess, on the evidence, whether the employer’s ignorance of the law was excusable and if it was, whether this was a decisive factor or whether it was outweighed by other issues.

In order to avoid redundancies and be able to offer more competitive tenders, the Respondent, informed the Claimants that their guaranteed minimum weekly salary would be abolished and that going forward, they would be employed on zero hours contracts under which the employer had no obligation to provide them with work. They were also told that if there was no work for 2 months they would be given their P45’s. They were given 12 weeks notice of the change and although the employer consulted on the removal of a guaranteed payment it did not consult on placing the Claimants on zero hours contracts and how this would change their employment status and cause them to lose their statutory rights. The Claimants all brought complaints of constructive unfair dismissal.

At Tribunal, it was held that the dismissals had not been for SOSR and even if they had been, the dismissals would not have been fair because no reasonable employer would have dismissed the Claimants for refusing to agree a variation to their contracts which removed a guaranteed payment and robbed them of their employment status and rights. On appeal however the EAT substituted a decision that the Claimants had been fairly dismissed for SOSR on the basis that the employer had good business reasons for the decision and had generally not appreciated the effect which the changes would have on their employment status. The Claimants all appealed to the Court of Session challenging the conclusion that the dismissals had been fair.

The Court of Session noted that deliberate conduct which constituted a material breach of contract would amount to a repudiation of that contract, but an employer could on occasions rely on a mistaken understanding of the law. It held that if an employer takes action against an employee which amounts to a dismissal and does so without considering the legal consequences, or has a mistaken view of what those consequences would be, the dismissal may nonetheless be fair. However the fact that the employer took the action in those circumstances will not, of itself, make the dismissal fair. The mistaken view of the law may simply be a factor to look at to determine the fairness of the dismissal. The Court of Session held that the Tribunal had not properly considered the employer’s ignorance of the law and whether this was excusable; and if it was, whether this was a major consideration or outweighed by other factors. The Court considered that the relevance of the employer’s ignorance of the legal implications of its actions would in part depend upon whether it had taken legal advice, which in turn would depend on its size and administrative resources. All that being said, however, the extent of change ought to have flagged up to the employer that it would be a problem for the employees, which it apparently did not. The Court of Session held that the EAT had not been entitled to substitute its own view on what was clearly a highly fact sensitive issue and remitted the case back to the Tribunal to determine whether the dismissals were fair.

Although this is probably a case which turns very much on its facts, it is nonetheless interesting that an employer can, in apparently total ignorance, take such drastic steps with its employees and potentially get away with it.

This legal update is provided for general information purposes only and should not be applied to specific circumstances without prior consultation with us.

For further details on any of the issues covered in this update please contact Gemma Ospedale, Partner in Employment on 020 7583 2222.

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