UK Employment Law Coffee Break: Sexual harassment, fire and re-hire and employment status for tax purposes

Sexual harassment: Our webinar on the new preventative duty

We are hosting a webinar looking specifically at the new legal duty to take reasonable steps to prevent sexual harassment on Thursday 26 September; we hope you will join us by signing up.

You can read more about the new duty in last week's Coffee Break. We also run tailored training for clients and their HR teams and line managers on addressing harassment and sexual harassment in the workplace. Please get in touch with your usual Osborne Clarke contact if you would like to discuss how we can support your organisation in preparing for this new duty.

Supreme Court restores injunction preventing use of fire and rehire

The High Court previously granted an injunction preventing a supermarket from using "fire and rehire" to withdraw a particular collectively agreed contractual benefit. "Fire and rehire" is a term used to describe the process of dismissal and re-engagement, sometimes used to make changes to terms and conditions of employment where agreement has not been possible and where employees are dismissed on their existing terms and offered re-employment on the new terms.

The Court of Appeal subsequently overturned the High Court decision. The Supreme Court has now restored the original injunction.

Withdrawal of benefit 'guaranteed for life'

Here, the benefit which the employer was seeking to withdraw had been described in communications as "guaranteed for life", remaining for "as long as" each employee was employed in their current role or agreed to any changes by mutual consent, and which could not be "negotiated away" by the employer or union. In the relevant collective agreement it was described as a "permanent feature".

In these circumstances the High Court had determined that a term should be implied into each relevant employment contract to the effect that the employer's "right to terminate [the] contract on notice cannot be exercised for the purpose of removing or diminishing the right of that employee to Retained Pay" and that it was appropriate to grant an injunction preventing the employer from proceeding to terminate the affected contracts for this reason.

This implied term did not, however, impact on the employer's right to terminate an affected employee's contract for "good cause", such as where an employee "is genuinely redundant or has committed an act of gross misconduct".  This decision was appealed to the Court of Appeal which overturned the High Court decision.

Supreme Court restores injunction

The Supreme Court has now restored the High Court decision holding that it was necessary to imply a term precluding the employer's exercise of its otherwise unqualified termination rights to dismiss the affected employees to deny them the Retained Pay.

Implying such a term was essential to the proper functioning of the contractual promise which had been made; it was inconceivable that both parties intended that the employer retain a unilateral right immediately to dismiss the employees so that it could remove the right to Retained Pay.

However, the Supreme Court agreed with the High Court that the employer's right to dismiss for a reason unconnected with the right to Retained Pay was unaffected by this implied term. Damages would not be an adequate remedy in this case, given any assessment would involve significant speculation and uncertainty; an injunction was appropriate, therefore, to restrain the employer from acting in breach of the implied term by dismissing the employees.

What does this mean for employers?

The Supreme Court's decision to restore the injunction in this case sends a clear message about the care needed when drafting contractual terms, including to build in appropriate caveats to address possible future changes in circumstances.

Here, the employer stated that the "Retained Pay arrangements achieved what they were designed to achieve, but we feel it is now the right time to phase those arrangements out". In the earlier High Court decision it was noted that "it would have been open for [the employer] to seek to set a longstop date… and/or make clear that it subsisted only for as long as the particular contract endured" which it had not done.

Implying a term preventing termination in respect of a specific benefit will not be appropriate in all cases where termination and re-engagement is proposed; the High Court had noted here that "the difficulty in this case lies not in the intention to offer re-engagement but in the intention to terminate the original contract for the purpose of extinguishing or diminishing the right to Retained Pay" against the particular factual background.

Where fire and rehire is being considered, legal advice should be taken to minimise the risk of legal claims and potential damage to employee relations – with consideration given to whether any form of sweetener, such as a lump sum payment in returning for giving up future rights, is appropriate.

Where the contract terms do permit termination in these circumstances, care must be taken to ensure that any dismissals do not fall foul of unfair dismissal rules and employers must remain alert to the risk of discrimination claims.

Employers must factor into their process the new Code of Practice on dismissal and re-engagement, which came into force on 18 July 2024 and which clarifies the steps employers should take when seeking to change contractual terms and conditions of employment where there is a prospect of dismissal and re-engagement. There is no direct claim for breach of the code but tribunals must take it into account where relevant: compensation for certain tribunal claims can be adjusted by up to 25% where there has been a failure to follow the code, including unfair dismissal awards.  

Employers should also be prepared for further developments in this regard. The new government has committed to further reform the law to provide "effective remedies against abuse" on fire and rehire, replacing the "inadequate statutory code of practice with a strengthened one". More details may be set out in the Employment Rights Bill which it is anticipated will be published shortly.  

Supreme Court says gig-working football refs likely to be employees for PAYE and NICs purposes

The Supreme Court has dismissed Professional Game Match Officials Limited's (PGMOL) appeal against HMRC relating to whether part-time football referees were its employees for tax purposes. The judgment given on 16 September will have widescale implications for the classification of tax status of any self-employed worker in the UK who has been treated as self-employed when providing their personal service, including many contractors, freelancers, and gig workers.

The decision underlines the fact that sufficient mutuality of obligation and control can be present even where a contract or gig is for a short period or specific purpose or both, without the hirer actively supervising or intervening while the work is done.  

Please read more in our Insight.