Employment and pensions

Employment Law Coffee Break | Court of Appeal on protected disclosures, employment law in India and our HR pensions spotlight for May

Published on 26th May 2022

Welcome to our latest Coffee Break in which we look at the latest legal and practical developments impacting employers.

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Appeal on whether a dismissal was for a protected disclosure or the manner in which it was made

The Court of Appeal is today (26 May) hearing an appeal from the Employment Appeals Tribunal (EAT) which considered the application of the Supreme Court decision in Royal Mail Group v Jhuti (which qualifies the general rule that it is the reason of the decision-maker which is relevant in determining the reason for dismissal in particular circumstances where there is an "invented reason" for dismissal) and what in this case was the principal reason for dismissal – was it the protected disclosure or the conduct of the employee that accompanied it, or were the two inseparable?

Here the Head of Financial Audit at the respondent bank (Ms K) was dismissed after having raised protected disclosures with the Head of Legal regarding a legal agreement relating to one of the bank's new financial products. The Head of Legal had subsequently raised the matter with the senior management team, including her concerns that Ms K had questioned her professional integrity. Against the backdrop of previous concerns regarding the employee's style of interaction, the senior management team concluded that the continued employment of the employee was no longer tenable.    

The EAT agreed with the Employment Tribunal (ET) that the principal reason for the employee's dismissal was not the making of a protected disclosure but concerns regarding the manner in which Ms K raised her concerns and interacted with colleagues. There was not here the sort of exceptional manipulation or invention necessary for Jhuti to apply in looking behind the principal reason of the decision-makers in affecting the dismissal, reflecting remarks from the Supreme Court that the circumstances where Jhuti will be relevant "will not be common". The EAT also rejected the employee's argument that the making of the protected disclosure and her questioning of the Head of Legal's legal awareness and integrity were inseparable, noting that the ET was clear that on the evidence before it, what had motivated the senior management team to dismiss the employee was not the subject of the protected disclosure or the fact that she had raised her concerns but the way in which she had conveyed those concerns to the Head of Legal. The employee's unacceptable style of interaction had manifested itself in an incident which was serious in its impact on a senior colleague and there appeared to be no prospect that the employee would change her ways.  

Unfair dismissal claims relating to protected disclosures are an attractive proposition for employees; there is no minimum service threshold (unlike ordinary unfair dismissal claims where an employee must have two years' service) and there is no financial cap on compensation. The EAT decision provides some comfort to employers post-Jhuti that the general rule that an ET will scrutinise the reason of the decision-maker in making a termination stands firm, save in exceptional cases where there has been manipulation by senior management of which the decision-maker is unaware. We must now wait to see how the Court of Appeal approaches this issue and the extent to which a protected disclosure is separable from the manner in which it is made. Protect, the whistleblowing charity has been given permission to intervene in the appeal and has stated: "Our intervention seeks clarity on whether you can separate out the whistleblowing from the behaviour of the whistle-blower and the consequences… employers can succeed if they can successfully argue there was another main reason why they dismissed the whistle-blower. In this case, if there had been no whistleblowing, there would have been no breakdown of relationship".

The circumstances where an employee blows the whistle are often sensitive situations where emotions run high and relationships can be strained. It is therefore easy to see the way in which someone makes a protected disclosure could be viewed as a conduct issue. The Court of Appeal has a delicate line to walk between permitting employers to deal with misconduct and not wishing to deter employees from making protected disclosures for fear of facing potential disciplinary action in respect of the manner in which they make them.

Employment law considerations in India

As businesses increasingly look to expand overseas, in our latest Coffee Break podcast Julian Hemming, international employment partner at Osborne Clarke, talks to Arjun Paleri, partner at BTG Legal, about the key considerations for employers engaging a workforce in India, as well as the latest reforms to employment law in India. This is the first in a series of podcasts looking at employment law issues in India. Next time Arjun will be looking at diversity and inclusion issues and we hope that you will join us for this and others in our international series.

Listen to the podcast and subscribe

Pensions spotlight for May: who counts as a 'dependant' or a 'child' in my death-in-service scheme?

Many employers provide a lump sum death benefit when an employee dies in service. A common example is a lump sum of four times salary. This benefit is usually insured, for example through a group life or excepted life policy. The employer will pay the premium but, for tax reasons, the policy will be held on trust. Sometimes the policy is held by (and so the benefit is administered by) the trustee of an existing pension scheme. In other cases, the employer will offer a stand-alone death in service scheme and be the trustee.

When someone dies, the trustee has to decide who should receive the lump sum death benefit. The first thing they need to do is look at the scheme's lump sum death benefit rule.

This rule will say who the trustee can consider making a payment to.  For example, it might say that the trustee can pay all or part of the lump sum to or for the benefit of any spouse or civil partner, any child, any other relative, anyone nominated by the member in an expression of wishes form, or anyone who was a dependant of the member at the time of death. The wording will usually give the trustee absolute discretion as to which of these people, and in what proportion, to make a payment.

The trustee needs to make enquiries in order to find out who (and how many people) there are in each of the categories listed in the rule. Sometimes a person will fall into more than one category. For example, the deceased's spouse or civil partner might also fall into the categories of being nominated in the expression of wishes form and being a dependant at the time of death. Where there are numerous potential beneficiaries, the trustee will need to decide where to draw the line for these enquiries. There is no duty to identify every person in every category, for example where enquiries have already revealed a spouse and eligible children and the trustee has no evidence to suggest that further enquiry should be made.

When deciding the scope of enquiries to make, the trustee must check the meaning of words used in the rule. For example, are words like "child", "relative" or "dependant" defined and given a particular meaning?  If so, the trustee can only consider making a payment to, for example, a "dependant" who fits within that meaning.

Definitions of "dependant" need particular care. Does the definition say that someone will be a "dependant" of the deceased if they were financially dependent on them, or does it also include people who were financially interdependent with the deceased, or in a financial relationship of mutual dependence with them?  Do the rules say anything more about what these expressions mean in the context of your scheme?

The exact wording of the rules of your scheme will be important. Subject to this, some general principles are that:

  • You should seek evidence of financial dependence, even if you know the person who has died.
  • If someone provides evidence that they were living with the deceased and that bills/expenses were paid out of a joint account, this does not necessarily prove that they were financially dependent on (or financially interdependent with) them. The test is not whether someone was benefitting from the earnings of the deceased, but whether they were financially dependent on (or interdependent with) them.
  • For financial dependence, the rules might simply refer to being "dependent", or they might be more flexible, for example referring to being "wholly or in part dependent".
  • For financial interdependence (or a financial relationship of mutual dependence) you will usually need evidence of some financial dependency on both sides. That is, by the person who has died and the person you are considering. However (again subject to your scheme rules) there is no need for the person you are considering to have been more financially dependent on the deceased than the deceased was on them.
  • Case law suggests that, when you are considering whether some was financially dependent or interdependent on the person who has died, you might need to consider this in the context of the lifestyle they shared. This is particularly likely to be the case if the definition mirrors the one in the Finance Act 2004, or refers to being dependent at the date of death for the "necessaries of life" (as distinct from the "necessities of life"). (Punter Southall Governance Services Ltd v Benge, 2022.)

Definitions of (and so who can be considered for benefits as a) "child" can also vary. How is it defined for the purposes of the rule in your scheme? A recent decision suggests that, if "child" is not defined in the rules, it might be taken to include legitimate, illegitimate, legitimated and adopted children, but not step-children. (Goodrich v AB, 2022.) The Goodrich decision relates to an employee trust, but it also highlights some things to think about if the definition of "spouse" in your rules has not been updated to include a same sex spouse or civil partner, and includes a reminder of the general duty of trustees to "keep the affairs of their trust confidential".

Legal advice and/or training can help you to understand your lump sum death benefit rule. It can also help you to understand your duties if you are new to a death benefit decision-making role, or are faced with a particularly difficult case.

If you would like to discuss this issue further, please contact your usual Osborne Clarke contact or Claire Rankin

 

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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