UK Employment Law Coffee Break: Grievance process and constructive dismissal, green bonuses, and our HR Pensions spotlight for November

Engaging in a grievance procedure did not affirm the employer's breach of contract

An employee is constructively dismissed if "the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer's conduct". This includes a repudiatory breach by the employer of an express or implied term of the contract, where the employee resigns (with or without notice) in response to that breach, and does not unreasonably delay before resigning.

What amounts to an unreasonable delay is the subject of much case law, but a recent Employment Appeal Tribunal judgment underlines that following an internal appeal or grievance process will not generally mean that the employee loses their right to claim constructive dismissal.

Here, the employee submitted a grievance in April 2020 alleging discrimination and breach of the implied term of mutual trust and confidence. During email discussions about documentation, she wrote "I reserve all of my rights". In June 2020 the employee resigned by email with immediate effect asserting a breach of trust and confidence. Her grievance was dismissed in August 2020.

The Employment Tribunal found that the employer had breached the implied term of trust and confidence, but dismissed the employee's constructive dismissal claim as, in its view, the employee had affirmed her contract before she resigned. The employee had continued to accept payment for three months without resigning as a result of the employer's breach. The employee had raised a grievance about the breach, which was not completed at the time she resigned, and had expressly reserved her rights.

The Employment Appeal Tribunal (EAT) found that "the Employment Tribunal focussed entirely on receipt of payment during a period of delay between the breach and resignation …We consider that the key point in the appeal is that the Employment Tribunal did not take into account the fact that the claimant had raised a grievance that had not been completed at the date of her resignation. We consider that it was vital that the Employment Tribunal take this matter into account when considering affirmation."

The exercise of a contractual grievance or appeal procedure in an attempt to give an employer an opportunity to resolve the issues that give rise to the breach of contract "is not likely to be treated as an unequivocal affirmation of the contract". Use of a contractual grievance procedure will generally be no more than “continuing to work and draw pay for a limited period of time" so generally will not amount to affirmation. The Employment Tribunal had failed to take the employee's continuing grievance and reservation of her rights into account and the EAT therefore remitted the case to the same tribunal to consider this issue.

It is perhaps not surprising that the tribunal system supports employees in following internal grievance procedures before resorting to a tribunal claim. Were it the case that the employee would lose their right to claim constructive dismissal for following an internal procedure this would likely see an increase in tribunal claims and reduce the scope for an employee to reach an internal conclusion. Employers should consider grievances and appeals with an open mind as they can in some circumstances address earlier mistakes in process and can, where trust and confidence remains, address and repair issues in the employment relationship.

Green HR: the sustainability bonus in employment contracts in Europe

Sustainability is a growing priority for many companies. On the European level, there are a range of regulatory requirements with which companies need to comply (such as the Corporate Sustainability Reporting Directive or the European Sustainability Reporting Standards) as well as those on a national level. 

Our latest international Insight looks at how some employers are going further and introducing innovative bonus schemes – for example, one German professional soccer club has recently included an ecological "common good" clause in its employment contracts – and, in so doing, has implemented a "sustainability bonus system".

Read more >

HR pensions spotlight for November: Autumn Statement 2023

Last week's update looked at the main announcements for employers in this year's Autumn Statement. It also flagged the government's pension "pot for life" proposal. We have now published an Insight on how the Autumn Statement 2023 affects UK pensions.

The key takeaways for employers are as follows:

What do the lifetime allowance changes mean for your employees? 

The government has confirmed that it will legislate to remove the Lifetime Allowance with effect from 6 April 2024 and HMRC has published a policy paper summarising the final intended changes.

Employers now have a very short time frame in which to consider the impact of the removal of the Lifetime Allowance on arrangements for higher earners and to work with pension providers and trustees on communications to members. 

Restrictions will remain for lump sum payments, including those payable on death, under registered pension schemes and registered death in service schemes.

The pressure to consolidate trust-based defined contribution (DC) schemes will continue 

There was confirmation that the government intends to introduce legislation, "when parliamentary time allows", to place duties on the trustees of occupational DC schemes to offer a "suite of decumulation products and services, which are suitable for their members and consistent with pension freedoms."  

There was also an emphasis on unlocking pension scheme investment into the UK economy, on the consolidation or scaling up of pension schemes in order to make it easier for them to allocate part of their investment portfolio to these types of asset and announcements relating to the new value for money (VFM) framework for personal and occupational DC pensions. 

For employers that operate trust-based DC schemes, these announcements confirm the message to consider consolidation into a larger scheme which can provide value (for example a good DC Master Trust) if this would be in the best interests of members.  

New guidance for employers on choosing their workplace pension scheme 

The government would like employers to focus on best value and long-term outcomes for savers, rather than on costs and charges. New guidance from the Pensions Regulator is expected to expand on this. 

New options for surplus assets in DB schemes 

Employers with defined benefit schemes should note that the government is going to consult, this winter, on a new consolidator option and on possible "changes to rules around when surpluses can be repaid, including new mechanisms to protect members", where a surplus is to be paid out at a point before wind-up.

The chancellor also shared plans to reduce the authorised surplus repayment charge – that is, the tax charge on repayment of surplus to an employer – from 35% to 25% from 6 April 2024. We are waiting for the details of this, but it could be relevant to project timings for any employer planning to wind-up a DB scheme.

More staff eligible for automatic enrolment? 

Depending on circumstances, the increase in the statutory minimum wage rates could increase the number of employees who are eligible for automatic enrolment.

NI reduction could be an opportunity to boost pension saving 

The increase in take home pay resulting from the reduction of the main rate of Class 1 employee national insurance contributions from 12% to 10% with effect from 6 January 2024 might give employers, or their pension providers, an opportunity to remind employees of the need to keep their pension saving under review.

Employees who have either reduced their pension contributions or opted out of the scheme, and any others who wish to boost their pension, might wish to consider paying the NI saving into their pension.

If you have any questions please do contact your usual Osborne Clarke contact or pensions partner, Claire Rankin.