The employment law team at Norton Rose answer questions on workplace issuesRace Discrimination Q I provided a reference for anemployee after he left my company’s employment and he is intending to sue mefor race discrimination. Can he do this? A Section 4(2) of the RaceRelations Act 1976 (“RRA”) makes it unlawful for an employer todiscriminate against “a person employed by him”. The 1997 case ofAdekeye v Post Office decided that this phrase referred only to a personemployed at the time of the discriminatory act, not to a person who was nolonger an employee. However, Coote v Granada Hospitality Limited threw doubt upon this. BelindaCoote brought a sex discrimination claim against Granada, alleging that she hadbeen dismissed because of her pregnancy. Although this claim was settled,subsequently Ms Coote had difficulty finding employment and alleged thatGranada had failed to provide an employment agency with a reference. Ms Coote then brought proceedings claiming that this was a reaction to herprevious complaint and amounted to unlawful victimisation contrary to section 4of the Sex Discrimination Act 1975 (“SDA”). The European Court ofJustice ruled that the 1976 Equal Treatment Directive did protect formeremployees from retaliatory measures taken by the employer after the employmentrelationship had ended. Following that decision, the Employment Appeal Tribunal (“EAT”)decided that the SDA could be construed in such a way as to allow Ms Coote toproceed with her claim. As section 4(2) of the RRA is worded in a similar wayto the relevant section in the SDA, it was thought the law concerning an act ofdiscrimination which had taken place after the end of employment could bechanged. However, the recent case of D’Souza v London Borough of Lambeth(“Lambeth”) suggests otherwise. D’Souza had brought a successfulclaim of unfair dismissal and race discrimination having been summarilydismissed by Lambeth. The Employment Tribunal ordered his reinstatement but it was not practicablefor Lambeth to comply with the order. D’Souza subsequently presented anotherclaim to the Employment Tribunal alleging that Lambeth’s failure to reinstatehim was a further act of race discrimination. The Employment Tribunal followed the position as outlined in Adekeye v PostOffice, and rejected D’Souza’s claim on the basis that the RRA does not coverdiscrimination that occurs after the end of employment. The EAT felt compelledto follow that case as it was a Court of Appeal decision, however they did so”without relish”. The EAT said that the Court of Appeal may wish toreview the decision in the future, however the EAT could not change the law. In consequence, if your employee is threatening to sue for race rather thansex discrimination over a reference that was provided subsequent to thetermination of his employment (however terminated), at the moment he would notbe able to pursue the claim. Employers should be aware however that thesituation is likely to change in the future and carefully worded references alwaysmake sense. Paul Griffin PFI/PPP transactions Q Does TUPE apply to PFI/PPPtransactions? A Generally speaking, thesetransactions are structured in such a way that there is a change of employer,therefore attracting the operation of TUPE. Often, the principle difficultylies in identifying those individuals who will be caught by TUPE and ensuringthat excess employees do not transfer across. These transactions are made morecomplex by the presence of third party contractors whose employees are oftenengaged in the undertaking that is to be transferred to the private sector. If the location of the employee’s job changes on a PFI/PPP transaction thenproblems arise when the new location is a significant distance from the old. If(for example) hospital PFI transactions involve a new build, the private sectoremployer should be aware of the difficulties inherent in moving employees. Caselaw holds that a contractual mobility provision does not override a redundancysituation within the meaning of the Employment Rights Act 1996. Peter Talibart Compromise Agreement Q When making a severance paymentto an executive in a Compromise Agreement, when is it taxable and when is itfree of tax? A A severance payment (forloss of employment and whether a redundancy or not) is free of tax up to£30,000 if it comes within the exemptions set out in sections 148 and 188 ofthe Income and Corporation Taxes Act 1988. The key is that it is a genuine exgratia payment with no strings other than the obvious one of preventing afuture dispute. It used to be the case that you couldn’t agree a “genuine”severance payment in advance but the Inland Revenue is now more relaxed aboutthis and you can both anticipate the departure of an executive and agree thefuture level of a payment and still obtain the tax exemption, provided that thedeparting employee is not tied into consultancy arrangements or otherobligations in the compromise agreement itself. In order to retain the tax exemption employers should therefore take greatcare that the compromise agreement is not used as a vehicle for asking theemployee to enter into commitments that are not already anticipated in thecontract (for exanple, existing and ongoing restrictive covenants would bequite reasonable but new covenants would not). The tax exemption is not available in cases of early retirement and theInland Revenue does expect to see a clean break. At present the tax authoritieswill also, on the authority of EMI v Coldicott, refuse to treat any severancepayment as free of tax if there is a pay in lieu of notice in the individual’scontract of employment. This may change in the light of the recent Court ofAppeal case of Cerebus Software v Rowley. This is therefore a clear point to watch out for and if the severancepayment is taxable, an employer’s National Insurance contributions at some 11.9per cent is payable as well. Inland Revenue practice is that provided payment is made to an employeeafter the P45 is issued, then, in addition to the first £30,000 being paid freeof tax (for a genuine severance payment), the balance need only be taxed atbasic rate, leaving the employee to pay any marginal tax that is or may becomedue. This assists the employee’s cash flow and where the payment obligationarises in a new tax year and no alternative employment is obtained in theshort/ medium term, there may be no higher rate tax due. In addition to the first £30,000 being free of tax we would often advisecompanies and employees alike that, in appropriate cases, this threshold caneffectively be raised by the sensible use of pension enhancement, outplacementconsultants (tax free for employees with at least two years’ service) and thereimbursement of the employee’s legal fees (also a tax free benefit). Tim Russell Disability Discrimination Q I employ an individual whohas been diagnosed as suffering from ME – does that mean they are protected bythe Disability Discrimination Act 1995 (“DDA”)? A A person has a disabilityand can therefore claim protection under the DDA if he or she has a physical ormental impairment that has a substantial and long-term adverse effect on his orher ability to carry out normal day-to-day activities. A Code of Practice hasbeen issued by the Secretary of State to assist employers in putting the DDAinto practice in the workplace and this provides assistance on the definition. Although case law has shown that ME is a physical impairment for thepurposes of the DDA, an employee has to go on to demonstrate that the illnessitself has lasted or is likely to last more than 12 months (ie, the illness islong term) and that it affects the employee’s ability to carry out one or moreday to day activities. The Code of Practice identifies normal day-to-day activities as mobility,manual dexterity, physical coordination, continence, the ability to carry orotherwise move everyday objects, speech, hearing or eyesight, memory or abilityto concentrate, learn or understand and perception of the risk of physicaldanger. With ME, it is likely to affect such aspects of day-to-day activities asmobility and memory or ability to concentrate, although depending on theseriousness of the condition, there may be additional symptoms. But the factthat an employee has ME puts an employer on notice of a potential disabilityand best practice dictates that an employer treats the employee as if they areprotected by the DDA so as to mitigate against any problems. Nicola Philp Comments are closed. Questions and answersOn 1 May 2001 in Personnel Today Previous Article Next Article Related posts:No related photos.