#42 - Job Security - Labour Law

Labour Law Reading 4: Job Security

General

(See lecture notes)

Anne Davies, ‘Judicial Self-Restraint in Labour Law,’ (2009) 38 ILJ 278:

• Freedland established the influence of public law on Labour law

• She looks at how reasonableness and public law and deference are used in public law (Wednesbury, HR, etc)

• Reasonableness test is used in unfair dismissal cases, while proportionality is used in discrimination cases where there is a justification defence (i.e. ID). However Labour law also involves other standards that come from statutory interpretation.

• In theory there ought to be less deference in labour law than public law, since parliament has explicitly sanctioned the courts to scrutinise managerial decisions, whereas JR etc has come from the courts’ own jurisprudence, and therefore has to contend with parliamentary supremacy. However deference arises because (1) the courts may have an impact on TPs to a dispute who are not formally represented e.g. trade unions; (2) the courts dont have managerial expertise i.e. can’t tell businessmen how to successfully run their companies (though the tribunals have expert lay members).; (3) related to the last point, administrators are trying to act in the public interest, which courts can to an extent assess, whereas employers are seeking to make a profit, which it is harder for the court to assess, and may conflict with how well it treats its employees.

• The fact that only responses outside the ‘band’ of reasonable ones is v deferential: only extreme cases may be reviewed. Also the ‘reasonable and proper cause’ defence to breach of the term of mutual trust and respect (as identified by Hale LJ in Gogay) has been used by tribunals as a further way of deferring to employers when they do breach the term (she give some examples).

• Court in Pay only applied proportionality in a loose and deferential way. ECtHR dealt with a lit more fully, it didn’t subject the employer’s object to detailed scrutiny- Why was maintaining the institution’s reputation a legitimate aim?

Collins, Ewing and McColgan, Chapters 5, 10.2 and 10.5

• When an employee terminates a contract he imposes on the employer the costs of recruiting someone else and training them. However when an employer ends the employment he removes the employee’s main source of income and long term opportunities (promotion, higher pay etc). Although employees have more at stake, the power to fire someone is necessary to keep the workforce disciplined. Nevertheless some protections against it are provided.

• Common law protection of jobs (wrongful dismissal i.e. suing on the contract) would confer a level of job security that varied depending on the size of damages awarded. Low damages wouldn’t provide much deterrent to employer not to breach the contract.

• Damages depends on the term in question:

  • Periods of mandatory notice are implied by s.86 ERA 1996 which vary with seniority. Breach of this leads to an award of damages for normal weekly hours (or average hours where work patterns aren’t fixed). In narrow circumstances there may be a justification defence to a claim for breach of the notice terms.

  • Where the contract explicitly states the procedure to be used in firing someone, and this is breached, damages are net wages payable during the period over which the contractual procedure would have taken place

  • Several methods have been suggested for calculating damages for breach of a substantive term of a contract (e.g. no sacking except for good cause): Australian approach (supported by Ewing) is to award all wages due until the date when the contract could have been lawfully terminated. Another is to say that since the employer has made a repudiatory breach, the employee’s suing implies acceptance of that breach, so that all that is due is the wages payable in the period from breach to acceptance. A third way is to say that job security has an economic value (normally wages are reduced to accommodate substantive conditions on firing) so that this value should be the level of damages owed. NB court’s developing/uncertain attitude to implied substantive terms.

  • It is hard to get an injunction against employer terminating contract. It requires that damages are an inadequate remedy and that there is still trust and confidence. However they have increasingly been awarded at the pre-trial stage.

    • Statutory claims for unfair dismissal are made under ERA. One key issue is whether there is dismissal or mere resignation. Constructive dismissal is relevant where such a question is asked. Sometimes employers may argue that a contract has been frustrated rather than that there was a dismissal. It has been accepted by courts on occasion. Although the statutory language is mandatory, there are ways of contracting out of it e.g. by agreeing financial settlements to terminate the contract. NB statutory right only available to employees.

    • There’s a one year qualifying period to obtain the right not to be unfairly dismissed (s.108 ERA), though there are some exceptions e.g. on grounds of trade union membership or pregnancy. This can exclude temps/seasonal workers, though the qualification is not invoked where P is absent for a week of work due to sickness/injury, temporary cessation of work, or under some arrangement that regards P as still being in employment (s.212 ERA)

    • Parties can submit to ACAS for binding arbitration

    • Epstein and the neo-classicists argue for the removal of all unfair dismissal laws: They say that contracts represent an efficient transaction (parties being rational welfare maximisers). If a contract doesn’t contain an unfair dismissal clause it’s because it isn’t an efficient outcome- rather workers opt for other benefits (e.g. higher salaries). In addition, employers won’t get rid of productive employees (esp. because of the bad reputation this will get them and cost of recruiting and training replacements). Countering this others (e.g. Mundlack) have said that this doesn’t work because

      • Employees can’t predict how employers will use their disciplinary procedures and therefore aren’t in a position to negotiate an efficient trade off between job security and other benefits.

      • Often it will only be at a stage well after the original contract is signed (promotion, pay rises etc) that sacking a person represents a significant cost saving, so that by that point the contract doesn’t necessarily any longer represent an efficient outcome.

    • The courts often insist strongly on procedural fairness. This may be because: it represents a lesser interference with managerial discretion than substantive review, it can uphold efficient personnel policies, or that the courts are simply applying familiar standards of admin law e.g. natural justice.

    • Re substantive fairness, the court looks at whether a response was within the range of reasonable responses, though this standard may have to be intensified where ECHR rights are involved e.g. freedom of speech.

    • Compensation can be reduced due to contributory fault (s.123(6) ERA).

    • Uncertainty in the current legislation makes it v hard to sack employees lest they could bring a claim.

    • On e of the aims of dismissal legislation is to avoid breakdown in industrial relations (strikes etc).

Pitt, ‘Justice in Dismissal: A reply to Hugh Collins’, (1993) 22 ILJ 251:

• Collins argues that the principle underlying unfair dismissal law (and also the principle that should guide reform and expansion of unfair dismissal) is the promotion of individual dignity and autonomy, through rights of equal respect and concern, that Dworkin highlights. Sometimes this will override general welfare considerations but does not go so far as treating a job like property (i.e. he is NOT arguing that an employee has ownership of a job). NB he uses the Dowrkinian interpretive approach i.e. finding the best interpretation of the law that fits. This gets him into trouble as often his approach simply does not fit with the law.

  • As evidence he points to the fact that dismissal for unalterable characteristics, such as race and gender are unfair, which promotes the idea of treating individuals with dignity as opposed to merely part of a group. True, but what about other unalterable characteristics that are NOT protected characteristics e.g. age, sexuality, or social origin.- Pitt

  • He says that requiring fair procedure and good cause means that when a person is dismissed he is not dismissed in an undignified manner: There is nothing undignified about being respectfully dismissed for a valid reason. Wrong: Following legislative changes in response to Polkey (see below) fair procedure is no longer so central to unfair dismissal law. –Pitt

  • Autonomy, even in the Raz-ian sense that Collins uses (that the state should intervene so as to give people access to the worthwhile experiences of life) does not seem to form part of labour law e.g. no right to flexible working where business efficiency is unaffected, while govt has dropped the goal of full employment, which is a pre-requisite to real autonomy (and choice) in labour law.

• Collins says there are 3 categories of dismissals: Those that occur on the grounds of discipline (e.g. misconduct, incompetence, illness(!) etc); economic reasons (i.e. redundancy/restructuring); those that involve civil liberties or individual rights (e.g. membership of a union, pregnancy etc)

  • He says that a dismissal is justified under category 1 because the person is at fault. This is dubious (illness or stupidity are not fault-worthy) and Collins concedes that there is little to do with individual dignity here. However...