Hello again and Happy New Year to you all; we hope you had a wonderful break. Welcome back to our case of the week and our first for 2024! We are starting off the year with a case that looks at contractual clauses limiting the financial liability of the employer on termination of employment.
For those of you that missed our December 2023 newsletter you can find it here. Our final newsletter of the year took a short look at the upcoming changes to the Equality Act, discriminatory hiring practices and a TV blunder involving a BBC news presenter swearing at millions of people!
SPI Spirits (UK) Limited produces, markets and sells wines and spirits internationally and has over 2000 employees. The second respondent and agent of the company, Yuri Shefler, is the majority shareholder and made all decisions about the claimant’s employment. The claimant, Mr Zabelin, was employed from 1st March 2017 as Group Chief Investment Officer and was on a yearly net salary of £180,000!
In March 2020, the claimant was asked by the company’s Chief HR Officer to agree to a 30% pay cut for three months, from April to June because of the impact of the pandemic; the claimant agreed. June came around and the Chief HR Officer emailed the claimant, “As we have entered June now, after analysing the current situation, regrettably I have to inform you, that this measure will be continued at least until September 1st.” The claimant challenged the extension of the pay cut and stated such measures needed both sides to agree.
During a telephone conversation on 8 June 2020, between the claimant and second respondent, it was also disputed whether the claimant was owed his 2019 bonus; the second respondent arguing under what circumstances and scope of work amounted to payment of a discretionary bonus. When the claimant argued this was not what his contract said, the second respondent said, ‘then sign a resignation letter if you don’t agree’. When asked why he should sign a resignation letter, the agent said ‘forget about everything, I am firing you’ and hung up the phone.
The tribunal found the conduct of the second respondent towards the claimant amounted to a detriment because he had made protected disclosures, for which both respondents were co-liable. It also found that, at the end of the conversation, the second respondent dismissed the claimant for the principal reason of having made protected disclosures, which amounted to further detrimental treatment by the second respondent and automatic unfair dismissal by the first respondent.
The claimant’s protected disclosures were refined to the following:-
- By imposing a unilateral pay cut and changes to the bonus allocation would be a breach of contract.
- The pay cut created a toxic environment, was bullying in nature and would affect staff welfare such as mental health, motivation and morale.
- The company was not being transparent and using the pandemic as an excuse to make adverse decisions against staff.
The tribunal made several awards of compensation against the respondents for the detriment suffered by the claimant as well as an award for unfair dismissal. However, the respondents relied upon clauses in Mr Zabelin’s contract that limited the amount of compensation he may receive upon dismissal to £270,000 net.
The respondents accepted that the relevant clauses could not legally cap the tribunal’s awards, but argued the clauses had been freely negotiated and should be taken into account by the tribunal when deciding the amount of compensation to award. The tribunal found the clauses did not have the meaning for which the respondents asserted and, even if they did, they were an unenforceable cap on what the tribunal could award.
The tribunal uplifted its awards of compensation based on failure by the respondents to follow the ACAS Code on Disciplinary and Grievance Procedures. The respondents argued that, when the written grievance was first raised, the claimant failed to raise it in circumstances that gave it the character of a protected disclosure, and only did so subsequently orally; therefore, for the grievance provisions of the Code to be engaged, it needed to be put in writing. The tribunal rejected the argument the procedure did not apply as the underlying matter remained the same.
The tribunal made an award of £1,626,452.07 against both respondents jointly and severally, in respect of detrimental treatment, and of £3,589.09 against the first respondent in respect of automatic unfair dismissal.
The respondents appealed; the EAT upheld the tribunal’s decision.
- Any attempt to limit liability to statutory employment claims in contractual documentation are ineffective – s203 Employment Rights Act 1996.
- For whistleblowing claims, there is no cap and compensation reflects loss; regardless of whether the contract was freely negotiated.
- A grievance needs to be in writing for ACAS Code to apply, however, even though the protected disclosure was not included in the written grievance itself and was made orally, it did not prevent application of the Code.
Where the employer dismisses, or takes other action against an employee because of what it regards as culpable conduct, the discipline provisions of the Code will apply.