Supreme Court Ruling Limits Recovery of Breach of Contract Damages
By Hazel Oliver
The UK's Supreme Court has handed down a major judgment (PDF) on damages for breach of an employment contract in the joined cases of Edwards v Chesterfield Royal Hospitals NHS Trust and Botham v Ministry of Defence. Both cases concerned whether a dismissed employee can claim damages arising from breach of a contractual disciplinary procedure.
Background
In the case of Johnson v Unisys Ltd [2001] IRLR 279, the House of Lords (predecessor of the Supreme Court) had ruled that an employee cannot recover compensation for the "manner of dismissal" by means of a breach of contract claim, but must instead bring an unfair dismissal claim in the Employment Tribunal where the statutory limit on compensation would apply. (This is the so-called "Johnson exclusion".) Subsequently, in Eastwood v Magnox Electric plc [2004] IRLR 733, the House of Lords clarified that a claim for an employer's breach of the implied duty of trust and confidence during a disciplinary process could be made where this breach was both prior to and independent of any later dismissal.
Continue Reading...Fixed-Term Contract Under "Anti-Crisis" Law
According to Article 13 of the so-called "anti-crisis law" Act of 1 July 2009, employment on the basis of a fixed-term contract may not exceed 24 months. The act came into force on 22 August 2009, so employment on the basis of contracts concluded on or before that day exceeded the 24 months' limit on 22 August 2011. The act itself does not determine legal consequences of such excess. It is argued that on this date those contracts converted into agreements for indefinite period of time.
Important Supreme Court Ruling on Employment Status
The UK's Supreme Court has held that for a contract to be deemed a 'sham', it is not necessary to show that the parties intended to deceive. It is enough that the reality of the situation is very different from the written terms and conditions.
The case, Autoclenz Ltd v Belcher and others [2011] UKSC 41 (PDF), concerned 20 car valeters. They claimed that they were 'workers' within the meaning of the National Minimum Wage Regulations 1999 and the Working Time Regulations 1998 and so entitled to the minimum wage and statutory paid annual leave.
The valeters had each signed a written contract describing them as "a self-employed independent contractor" with an express acknowledgement that they were not an employee. They paid their own tax (and indemnified Autoclenz for any liability to tax and/or national insurance) and were required to purchase their own overalls from Autoclenz.
Continue Reading...Koelzsch Judgment: European Court of Justice Clarifies Applicable Employment Law for Employment in More than One Country
On 15 March 2011, the European Court of Justice (ECJ) delivered a judgment on the question how to determine which legislation applies to an employment contract in case of employment in more than one country. The case at hand concerned a truck driver involved in international transport who was domiciled in Germany and who had a Luxemburg employer.
According to the Rome Convention, the parties are free to determine the applicable law when concluding an employment agreement. However, this choice of law may not have as a consequence that the employee would lose the protection of the mandatory rules that would apply in the absence of such choice of law. In such case, the law of the country in which the employee habitually works applies. In the event the employee does not habitually work in any one country, the law of the country where the place of business that hired the employee is situated applies.
Continue Reading...Interprofessional Agreement 2011-2012: A Decisive Step Towards Harmonizing the Status of Blue- and White-Collar Employees
On 18 January 2011, the social partners agreed a draft Interprofessional Agreement ("I.P.A.") for the years 2011-2012. This draft still needs to be submitted to several institutions of the group of social partners, after which the government will take the necessary legal action in order to put the measures in place.
Besides the usual subjects (linking social payments to welfare, salary norms, extending the measures relating to early retirement, etc.), the draft I.P.A. contains an important chapter relating to harmonizing the status of blue- and white-collar employees.
As of 2012, the notice period for white-collar employees whose annual gross salary exceeds 30,535 EUR (amount for 2011), would be one month per year of commenced seniority, with a minimum of three months (the trial period is not taken into consideration). This rule would thus replace the Claeys formula as a reference for these employees. Clauses providing for a different notice period could still be agreed on, at the earliest upon entry into service, for those white-collar employees earning more than 61,071 EUR gross per year (amount for 2011). Note, however, that this new regime would in any case only apply for new employment contracts, which means that for all existing employment contracts, the current principle on the basis of which the notice period is determined, would continue to apply. The Claeys formula will thus remain relevant for the years to come.
Continue Reading...10 Tips for Employers with Operations in China
The continuing growth of the Chinese economy means that even more foreign companies are looking to the People's Republic of China (or the PRC) to expand their operations. However, while many new operators in China are focused on lower labor costs or the vast potential market, these foreign businesses often neglect to fully educate themselves about Chinese employment laws and rules critical to their operations' success.
Indeed, the rapid evolution of the Chinese labor environment in the face of ongoing social changes presents many challenges for both foreign and domestic companies. Below, we summarize 10 key considerations for global businesses with employees in China and highlight some common mistakes.
Continue Reading...Law Applicable to an Employment Contract
The Rome Convention (80/934/EEC) on the law applicable to contractual obligations applies to contractual obligations in situations involving a choice of law. The signatories to a contract may as a rule choose the law applicable to all or a part of the contract.
However, in an employment contract, a choice of law made by the parties cannot have the result of depriving the employee of the protection afforded to him by the mandatory rules of the law which would be applicable in the absence of choice, i.e., (1) by the law of the country in which the employee habitually carries out his work in performance of the contract, even if he is temporarily employed in another country; (2) or, if the employee does not habitually carry out his work in any one country, by the law of the country in which the place of business through which he was engaged is situated; (3) unless it appears from the circumstances as a whole that the contract is more closely connected with another country, in which case the contract must be governed by the law of that country.
Continue Reading...The System of "Replacing Entrepreneurs"
With the Act of 28 April 2010 on diverse provisions, a so-called "system of replacing entrepreneurs" was elaborated, which entered into force on 1 July 2010. Self-employed persons (i.e., individuals or directors of a legal entity) who temporarily cannot exercise their professional activity, can look for candidates who have declared themselves "replacing entrepreneur" via an online-register. In order to be included in such register, the entrepreneurs must present themselves at an office for enterprises ("ondernemingsloket"/"guichet d'entreprises") which is only possible if a company number can be presented.
Continue Reading...Implied Amendment of Terms and Conditions of Employment
An amendment to an employment agreement may be implied from the mutual actions of the employee and the employer (judgment of the Supreme Court of 14 January 2010; I PK 155/09). When the employer delegates the employee to another job, which is allowed for up to 3 months in a calendar year (art. 42 §3 of the Labour Code) and upon the employee's consent the delegation exceeds the statutory period, it is possible that the parties have concluded an implied permanent amendment to the employment agreement. In such a case, the employee can refuse to go back to the original position. To reinstate the employee in the original position, the employer must ask him to conclude another amendment which will revert the employment agreement to its original shape or serve the so-called "notice of alteration of terms and conditions of employment". Nonetheless, the intentions of both parties must be examined in each case.
Conversion of Contract for Probation Period into Contract for Indefinite Period of Time
According to one of the recent judgments of the Supreme Court, it is possible to include a clause in a contract for probation period which states that when the probation period expires, the contract converts into an agreement for indefinite period (judgment of 4 November 2009; I PK 159/09). This solution is, however, not advisable. It may cause practical problems. For instance, if the outcome of the probation period is not satisfactory and the said provision is included in the contract, in order to terminate it after the probation period has expired it would be necessary to follow the procedure applicable to the termination of an agreement for indefinite period, including stating a justified reason for termination. It would not be possible to benefit from the "advantage" of the contract for probation period, that is, its automatic termination upon the lapse of the probation period. The said judgment does not address these problems sufficiently.