Terms implied into contracts of employment by statute

The right to equal pay.

The right to equal pay in the Equal Pay Act 1970 came into force at the same time as the Sex Discrimination Act 1975 to avoid any negative effects on women's job prospects.

The Equal Pay Act was drafted to apply to all terms of the contract of employment and not just pay, but excluded death or retirement benefits. The ECJ extended the equality protection through its interpretation of the word 'pay' as including 'all aspects and conditions of remuneration'. This has enabled it to be extended to travel concessions for retired employees; access to occupational pension schemes; age of retirement; pension age, pension benefits and statutory or contractual severance payments. The latter has led to equal rights for men and women, with both now required to carry on until 65.

The Equal Pay Act (EPA) allows men and women to claim equal terms with an employee of the opposite sex employed by the same or an associated employer in respect of (i) like work; (ii) work rated as equivalent and (iii) work of equal value.

'Like work'. A woman is doing like work if it is 'of the same or a broadly similar nature' to that of a man. In Copper Pass v. Lawton [1977], a woman cook in the directors' dining room preparing lunches for 10-20 people per day successfully claimed the same rate of pay as two male chefs working in the staff canteen preparing 350 meals a day in six sittings.

'Equivalent work'. This enables comparisons between totally different jobs to overcome the problem that certain jobs will always be predominantly 'male' or 'female'. Thus if the jobs of the man and the woman have been rated as of equivalent value under a job evaluation study, then the woman is entitled to equal pay with the man. This requires an analytical job evaluation study.

‘Work of equal value'. A claim in respect of work of equal value involves the appointment by the industrial tribunal of an independent expert to investigate the claim. The woman can choose whoever she wishes as comparator and may even choose several.

Defences. The employer has a defence where he can show that the difference is due to a material factor other than sex, including length of service, merit, qualifications and so on.

Maternity rights. Women have (i) a right not to be dismissed on the grounds of pregnancy; (ii) a right to time off for ante-natal care; (iii) a right to maternity leave and maternity pay. The dismissal of an employee is automatically unfair 'if the reason or principal reason for her dismissal is that she is pregnant or any other reason connected with her pregnancy': EPCA.

The right to time off for ante-natal care was inserted into the EPCA 1978, by the Employment Act 1980. There is no qualifying period, the right is to paid time off and relates to ante-natal appointments which the woman is advised to attend by a medical adviser.

Under the Pregnant Workers Directive all workers are entitled to maternity leave irrespective of their length of service. There is a basic right to 14 weeks' maternity leave which can begin up to 11 weeks before the expected date of childbirth. During this time, all the normal benefits of employment must be continued including pension scheme membership, use of a company car and the accrual of holiday entitlement. The employer is not, however, required to pay remuneration. Instead, for so long as the woman has been in employment for 26 weeks, she receives statutory maternity pay (SMP) at the rate of 90 per cent other normal earnings for six weeks and then maternity allowance, the equivalent of statutory sick pay for the remaining period. Employees whose service is too short to qualify for SMP receive a maternity allowance for the whole period.

Women with more than two years' service qualify for up to 40 weeks maternity leave, EPCA; however, most of this extra period is unpaid – unless the employer enhances the statutory rights. The woman receives basic SMP which is the equivalent of statutory sick pay.

Right to time off. These rights relate to (i) time off for ante-natal care (see above); (ii) time off for trade union duties and activities; (iii) time off for public duties; (iv) time off for a redundant worker to seek new employment, and (v) time off for safety representatives.

An employee is entitled to time off to carry out duties as a magistrate, a member of local authority, health authority of hospital trust, a governor of a school, college or university, a member statutory of a tribunal or the National Rivers Authority.

Discrimination on the grounds of race and sex. It is unlawful to discriminate directly or indirectly on the grounds of sex or race. The Sex Discrimination Act also covers discrimination against married people on the grounds of their married status, whilst the Race Relations Act (RRA) prohibits discrimination on the grounds of 'colour, race, nationality and ethnic or national origin’.

Remedies. If discrimination is proved the tribunal has power (a) to make an order declaring the rights of the parties; (b) to require the employer to pay compensation, and (c) to recommend the employer to take action within a specified period to obviate or reduce the adverse effect of the discrimination.

Unfair dismissal

The employer has the burden of proving that the dismissal was fair. The fair reasons are (i) reasons relating to capability or qualifications; (ii) reasons relating to conduct; (iii) redundancy; (iv) that continued employment would be a breach of statute; and (v) some other substantial reason of a kind to justify dismissal.

The Act also specifies grounds for dismissal which are automatically unfair: (i) that the employee was, or proposed to become a member of an independent trade union; (ii) that the employee had taken part in the activities of an independent trade union; (iii) pregnancy or any reason connected with pregnancy; (iv) failure to offer alternative employment to an employee returning from maternity leave whose original job no longer exists; (v) refusal to join a union where there is a union membership agreement and the employee has objected on religious grounds; and (vi) sexual or racial discrimination.

Dismissal is defined in the EPCA 1978 and includes (i) termination of a contract of employment by the employer whether summarily or by notice; (ii)refusal to renew a fixed-term contract which has expired; and (iii) 'constructive dismissal' where the employee terminates but this is justified by the conduct of the employer.

Termination with or without notice There are cases where there is ambiguity as to whether an employee has been dismissed and the essential test seems to be what the employer intended by the words used and what a reasonable employee would have understood.

Contracts can be terminated by frustration which is not dismissal. Incapacity through illness is the main source of claims. The criteria for determining when the incapacity frustrates a contract were laid down in Egg Stores (Stamford Hill) v. Leibovici [1977] and include (i) the length of the employment; (ii) the expected duration of the employment; (iii) the nature of the job.

Where an employer dies, goes into voluntary or compulsory liquidation or, in the case of a partnership is dissolved, the employee is treated as having been dismissed and is entitled to redundancy payments if the business is not continued under a new owner or his contract is not continued.

Refusal to renew a fixed term contract. A fixed term contract must have a defined beginning and end with the date known at the outset. Where no termination date is specified, it may be a contract for a particular purpose and not protected. A fixed term contract may include a term providing for termination by either party giving notice.

Constructive dismissal. Claims often arise from the employer exercising a power to vary the contract. In White v. Reflecting Roadstuds Ltd (1991), White's contract provided that 'the company reserves the rights ... to transfer employees to alternative work, and it is a condition of the contract that they are willing to do so when requested'. White's attendance suffered since he found his current employment too physically demanding and, after a warning, he was transferred and claimed this was constructive dismissal. The EAT found the transfer was in accordance with the flexibility clause which permitted transfer to work at lower rates of pay. The use of the clause did not have to be reasonable but could only be used on grounds of operational efficiency.

The EAT had taken into consideration the implied term of mutual trust and confidence. In Greenaway Harrison Ltd v. Wiles (1994), the employer wished to change the hours of telephonists, and women with children, who claimed that they would find the new shifts difficult, were told that they would be dismissed if they failed to agree to the new terms. The court held that, in the absence of real consultation, although the employer had a legal right to terminate the contract without notice, the threat amounted to constructive dismissal and was unfair.

Remedies for unfair dismissal

If an employee has been found to have been unfairly dismissed, the tribunal has a first duty to explain the remedies of reinstatement and re-engagement and see whether the employee wants to be re-employed. The essential difference between the two is that under reinstatement employees return to the employer in their old job as if they had never been removed. Re-engagement means that they will be taken back by the employer in a new job or in the old job but at a different location, or even by a different company within the group. Employees should enjoy the same advantages as if there had been no interruption in service. Employers can be ordered to take back an employee, but in practice this remedy is only awarded in about 1 per cent of all cases.

The alternative and more usual remedy is compensation. The compensation will be made up of a basic award which is calculated following an arithmetic formula in much the same way as redundancy payment, according to the number of years' service. In addition there will be an additional compensatory award which is subject to a maximum limit.

Although there is a potential of high awards for unfair dismissal, most awards made are low, which causes dissatisfaction with the remedy.

Statutory claim. Employees must establish that they have been continuously employed for a period of two years and an action must be brought to the tribunal within three months of the effective date of the termination. The legislation, however, excludes claims in respect of (i) employees past normal retiring age, (ii) persons on strike and (iii) spouses of the owner of the business.

Common law action for wrongful dismissal Employees can always bring an action for wrongful dismissal at common law and claim damages. The problem here is that, since contracts of employment – apart from fixed term contracts – always allow the employer to terminate the employment by giving the employee adequate notice, the courts have limited damages to the net wages during the notice period. Jurisdiction for breach of employment contracts has now been granted to industrial tribunals under the Industrial Tribunals Extension of Jurisdiction (England and Wales) Regulations 1994.

The limit for damages is the same as for the lower court and fixed at £25000. There is no qualification period in relation to claims, nor any minimum hours of service, and claims can be brought by any ex-employee.

It would be possible for employees with two years' continuity of employment to bring statutory and common claims which, adding both claims together, will enable a maximum compensation of £36000.

Damages for breach of a contract of employment Contract damages are intended to put the person in the position they would have been in had the contract been properly performed and employees will be entitled to the loss that they have suffered through the contract being wrongly terminated, usually the value of their remuneration package for the time it would have taken to terminate the contract properly.

Compensation is limited to contractual entitlement. In Powell v. Braun [1954], Powell was given an increased annual bonus instead of a wage increase. The court held that, although previously discretionary, by being given in place of a wage increase it had become contractual.

Apart from wages, damages are likely to include profit share, lost commission, pension, cars, medical and other insurance, any cheap loan or mortgage subsidy or educational benefit taken up by the employee, and free or reduced cost goods and services and expenses which do not have to be accounted for and so need not be incurred. Payments by third parties are also included, such as tips to a waiter. The courts refuse to award damages for injured feelings or the fact that the dismissal is likely to make finding new employment more difficult. It was thought that the decision in Cox v. Philips Industries Ltd [1976], where damages were awarded for the plaintiff’s emotional distress when he was demoted, would lead to a change in the law but in Bliss v. South East Thames Regional Health Authority [1987] the court followed the earlier case in rejecting a claim in respect of illness said to have been the result of the dismissal.

Redundancy.

An employer is liable to make a redundancy payment to an employee who has been continuously employed for at least two years and who is (a) dismissed, or (b) laid off or kept on short time for four or more consecutive weeks or for a series of six weeks or more within 13 weeks.

The payments must be of at least the statutory minimum. These are: (i) for each year of employment at age 41 or over but under 65, one-and-a-half weeks' pay; (ii) for every year of employment at age 22 or over but under 41, one week's pay; (iii) for each year of employment at age 18 or over but under 22, half a week's pay.

There is a maximum sum per week which changes regularly and a maximum number of years of service which counts, currently 20 years.