July Legal Alert

legal alert

This month: 



Case law: Employers welcome clarification of power to restrict religious symbols at work

Employers planning to restrict wearing of religious symbols at work should ensure the restrictions do not put those with religious beliefs at a substantial disadvantage compared to others or, if they do, that they can be justified, following a recent legal ruling.

An employer added a provision to its employee code of conduct on 13 June 2006 that 'employees are prohibited, in the workplace, from wearing any visible signs of their political, philosophical or religious beliefs and/or from giving expression to any ritual arising from them'.  This prohibition formalised an unwritten company rule that had applied previously.

On 12 June 2006, a female Muslim employee was dismissed because of her intention to wear an Islamic headscarf to work. She had worked as a receptionist for her employer for around three years without wearing a headscarf and had only recently insisted that she wanted to wear one to work. She claimed wrongful dismissal on the basis that dismissal was direct discrimination on grounds of her religion.

It is direct discrimination if an employer treats an employee with a protected characteristic - such as a particular religious belief - less favourably because of something arising in consequence of the employee's belief, and the employer cannot show that the treatment is a proportionate means of achieving a legitimate aim.

The Employment Tribunal dismissed her claim. She appealed but her appeal was put on hold while the Tribunal asked the European Court of Justice (ECJ) whether the relevant EU Directive on equal treatment in employment 'should … be interpreted as meaning that the prohibition on wearing … a headscarf at the workplace does not constitute direct discrimination where the employer's rule prohibits all employees from wearing outward signs of political, philosophical and religious beliefs at the workplace'.

The ECJ ruled that stopping a female Islamic employee from wearing an Islamic headscarf at work was not direct religious discrimination provided the ban was because of a general company rule prohibiting visible political, philosophical and religious symbols in the workplace, not because of stereotypes or prejudice against one or more particular religions or against religious beliefs in general.

However, it said such a ban might constitute indirect religious discrimination. Indirect discrimination takes place if an employer operates a provision, criterion or practice ('PCP') which puts people with a protected characteristic such as their religious belief (including the employee who is complaining about it) at a substantial disadvantage compared with people who do not share that belief.

However, a PCP will not be unlawful if it is a proportionate means of achieving a legitimate aim. The ECJ said a PCP might satisfy this test if it was to implement a policy of religious and ideological neutrality, and was proportionate. Proportionality would depend on matters such as:

  • how large and conspicuous the religious symbol was (eg a headscarf would be more conspicuous than an earring)
  • the nature of the employee's job (eg are they in a prominent role or a position of authority)
  • the context in which it is carried out (eg whether they are customer-facing), and
  • the 'national identity' of the relevant EU member state

Operative date

  • Now


  • Employers planning to restrict wearing of religious symbols at work should ensure the restrictions do not put those with religious beliefs at a substantial disadvantage compared to others or, if they do, that they can be justified

Case ref: Samira Achbita & Anor v G4S Secure Solutions NV [2016] EUECJ C-157/15


New law: Annual return for limited companies abolished from 30 June 2016

Limited companies must now file a new 'confirmation statement' at Companies House at least once every 12 months, instead of the previous annual return.

The new rules require the company to check and confirm that the information held about it by Companies House is up-to-date and, if required, to file the necessary information to update the Companies House record.

A confirmation statement must be made within 12 months of the last confirmation statement, and filed within 14 days after that (which is less than the 28 days allowed for filing an annual return under the old rules).  However, a company can file as many confirmation statements as it wishes in each 12-month period. Companies House will send out filing reminders in the same way as before.

Note that companies must now file information at Companies House about 'persons with significant control' in their confirmation statement. Companies are required to maintain a PSC register since 6 April 2016.

Notification of some changes to the information held by Companies House can be made in the confirmation statement itself, such as changes to the company's shareholder information, its SIC code (which defines the company's business activities) or its share capital. Other changes, such as to the company's registered office, must be filed separately.

If a confirmation statement is filed in paper format (on form CS01), the Companies House fee is £40. If it is filed electronically using the Companies House WebFiling service the fee is £13. The fee will only have to be paid once in each 12-month period, no matter how many confirmation statements a company files in that period.

There are similar rules for Limited Liability Partnerships. Companies House has issued a detailed guidance on the new rules on its website.

Operative date

  • Now


  • Companies should:
    • Diarise when they need to file their first and subsequent confirmation statements
    • Ensure their records means they can easily check and confirm the information held about them at Companies House, and provide any additional information such as details of persons with significant control
    • Download the new guidance


Case law: Employer can search for and destroy confidential information on ex-employee's electronic devices and computer

An employer taking legal action against an ex-employee and/or its new employer for wrongful use of its confidential information can apply for a court order authorising a search of electronic devices and computers, and destruction of such information found, following a recent ruling.

An employee left his employment and joined a competitor, taking confidential information about his former employer's clients with him. When the competitor used the information to approach around 300 of the former employer's clients, and to guide its pricing policies, the former employer claimed wrongful use of its confidential information.  It also asked the court for an interim order that the ex-employee's and the competitor's electronic devices and computers should be searched and any confidential information found on them destroyed.

Although there was no precedent for such an order, the court granted it, subject to conditions. It ruled that the employee and his new employer had admitted taking and knowingly misusing the former employer's confidential information and had apparently used a 'high degree of subterfuge' when doing so, so there was evidence they could not be trusted to search for and destroy that information themselves.

The conditions imposed included:

  • An independent expert, appointed by the ex-employee, was to carry out the search
  • The terms of the search were to be agreed between the parties
  • The information discovered would be kept until after the main trial in case it had been wrongfully removed

Operative date

  • Now


  • An employer taking legal action against an ex-employee and/or his new employer for wrongful use of its confidential information should consider applying for a court order allowing it to search for and destroy such information held on their electronic devices and computers

Case ref: Arthur J. Gallagher Services (UK) Ltd v Skriptchencko [2016] EWHC 603


Case law: Ruling makes it easier for employers to agree changes to post-termination restrictions with employees

Employers proposing to ask existing employees to agree new post-termination restrictions could argue that simply keeping them on as employees is sufficient benefit to make the restrictions enforceable, following a recent ruling.

Two trainee scientists were asked to sign fresh contracts of employment. The new contracts contained restrictions stopping them from soliciting or dealing with their employer's clients for six months if they ceased to be employed. 

Both later resigned and went to work for a competitor, and asked the court to declare that the restrictions were invalid.

According to previous court rulings, changes to restrictions of this type were only enforceable against an existing employee if the employer had given the employee a tangible benefit, such as a pay rise, bonus or promotion, in return. Their argument was that no such benefit had been given in this case, so the restrictions were unenforceable.

The court refused to make the declaration, ruling that the employer had given the employees a benefit in return for imposing the new restrictions. The benefit was continued employment and, therefore, access to its clients and confidential information so they could progress their careers. It also found that their employment might have been terminated had they refused to sign. The restrictions were therefore enforceable.

Operative date

  • Now


  • Employers proposing to ask existing employees to agree new post-termination restrictions should consider whether simply keeping them on as employees may be sufficient benefit to ensure that the restrictions are enforceable

Case ref: Pickwell & Nicholls v Pro Cam CP Ltd [2016] EWHC 1304


Case law: Contractors couldn't bring discrimination claim because there was no 'mutuality' between assignments

Employers should consider carefully whether their relationship with people working for them on an assignment basis creates 'mutuality of obligation' between them, in between assignments.  If it does, there is a risk that those workers are employees and can therefore bring discrimination claims.

Two translators worked for HM Courts and Tribunals Service ('HMCTS') on an assignment by assignment basis. HMCTS was not required to offer them assignments and, if it did, they were not required to accept them, ie there was no 'mutuality of obligation'. If the translators did accept work, they were paid for it but they were not entitled to holiday pay, sick pay or pension. They were considered (and considered themselves) self-employed for tax purposes.

However, when they found that other translators were being paid on a different basis they argued they were employees, and therefore entitled to bring a race discrimination claim.  They argued that they were employees because their contracts required them to do the necessary work personally – they could not substitute anyone else to do that work for them.  In addition, during assignments they worked under the direction of HMCTS rather than on their own initiative.

The Court of Appeal said the main issue was what the relationship between the two parties was during each assignment. However, it said that what happened between assignments was also a relevant factor which could shed light on the relationship between the parties. In this case, each assignment stood alone – there was no 'umbrella' contract which provided for mutuality of obligation between assignments.

The Court found that working on an assignment by assignment basis is more likely to imply that a person has a degree of independence in their work, which is not compatible with being an employee.  The translators were not therefore employees, and could not bring a race discrimination claim.

Operative date

  • Now


  • Employers should consider carefully whether their relationship with people working for them on an assignment basis creates mutuality of obligation between them between assignments because, if it does, they risk those workers being able to bring discrimination claims

Case ref: Secretary of State for Justice v Windle and Arada [2016] EWCA Civ 459


Case law: Mere expectation that a disabled employee will work late can lead to disability discrimination claim

Employers should clarify to disabled employees who are expected to work late whether  they are legally required to do so, because such an expectation could justify the employee bringing an indirect discrimination claim.

An employee had a high-powered analyst job in financial services and regularly worked late. Unfortunately, he was involved in an accident outside work which left him with dizziness, tiredness, inability to concentrate and headaches.  His symptoms meant he was disabled for employment law purposes. To his employer's knowledge, it was particularly hard for him to work in the evenings.

On his return to work he initially worked an 8-hour day but over time his hours gradually crept up. Sometimes he worked extra hours because his employer asked him to, and sometimes he chose to. Because he was regularly working extra hours without objecting to them, his employer assumed over time that he would work one or two late nights every week and began asking him which nights he would be working late.

Eventually he formally complained about 'having' to work late. His manager shouted at him in front of other employees, saying that he should leave if he did not like working late. He resigned that day and claimed indirect disability discrimination, on grounds his employer had failed to make reasonable adjustments for his disability.

It is indirect discrimination if an employer operates a provision, criterion or practice (PCP) which puts people with a disability (including the employee who is complaining about it) at a substantial disadvantage compared with people who do not have that disability. If there is such a PCP the employer must make 'reasonable adjustments' for disabled employees to remove the substantial disadvantage. Whether an adjustment is 'reasonable' depends on the circumstances.

However, a PCP will not be unlawful if it is a proportionate means of achieving a legitimate aim – for example, there are health and safety reasons for it.

The employee argued that the PCP was the requirement to work extra hours in the evening. He said he was required to work those hours because he was afraid that failing to do so could lead to a loss of his bonus (previously around £100,000 per year) or even redundancy. The employer argued that he was not required to work late – he had voluntarily chosen to do so, therefore there was no PCP.

The Employment Tribunal ruled that while the employee may have decided it was in his interests to work late, and even though an assumption had developed that he would do so, none of this amounted to his employer 'requiring' him to work late. On the occasions he had specifically been asked to work late he could always have said 'no'.

However, on appeal, the Employment Appeal Tribunal disagreed. It ruled that an assumption or other expectation that an employee would work late could amount to 'requiring' them to do so, even though there was no apparent compulsion by the employer. There was therefore a PCP that employees would work late, and there was an issue to be decided over what reasonable adjustments should have been made.

Operative date

  • Now


  • Employers should ensure they make clear to a disabled employee, who is expected to work in certain ways or at certain times, that they are not required to do so otherwise they risk an indirect discrimination claim on grounds they failed to make reasonable adjustments for the employee

Case ref: Carreras v United First Partners Research UKEAT/0266/15/RN


Case law: Tribunal may order reinstatement of an unfairly dismissed employee on restricted terms, even if it's not what the employee wants

Employers unfairly dismissing an employee should be aware that an Employment Tribunal may order that the employee be reinstated on certain terms, even if reinstatement on those terms is not what the employee wants.

An employee working for the police had been accused of perjury in very public circumstances following her involvement in a high profile murder case, but was acquitted. She resumed her duties but was not allowed to sign off reports or give evidence in court.

She was later unfairly dismissed, and the Employment Tribunal ordered her reinstatement but with the inference that her new role would continue to be restricted, so that she could still not give evidence in court.

Her employer appealed against the reinstatement order arguing that such a restriction was not acceptable to her as she wanted to resume full duties.

The Supreme Court found that the law merely required that she be reinstated in her previous employment. That could be achieved even if, on reinstatement, she was still barred from giving evidence in court because she had already been working under that restriction for several years without this amounting to a breach of her contract of employment. An Employment Tribunal did not have to be satisfied that a reinstatement order would be acceptable to both employer and employee before ordering reinstatement.

Operative date

  • Now


  • Employers unfairly dismissing an employee should be aware that an Employment Tribunal may order that the employee be reinstated on certain terms, even if such a reinstatement is not what the employee wants

Case ref: McBride v Scottish Police Authority [2016] UKSC 27


Case law: Signage can stop third parties acquiring rights of way over land, Court of Appeal confirms

Landowners can stop third parties claiming rights to use their land by using visible, clearly worded signs prohibiting such use, even if those signs are ignored, the Court of Appeal has confirmed.

In this case, the buyers bought a car park from the local Conservative Club. Customers of a neighbouring fish and chip shop had frequently parked in the car park to buy fish and chips, and the shop's suppliers had parked vans and lorries there while making deliveries, for more than 20 years.

The Conservative Club had put a sign in the car park saying 'Private car park. For the use of club patrons only. By order of the committee'. This was clearly visible and the shop owners were aware of it. There was also a sign in the window of the Club. Both signs had been ignored by the shop's customers and suppliers.

The shop owners claimed their customers and suppliers had a legal right to park there, and a pedestrian right of way over the car park.  Such rights are known in law as 'easements'. One of the circumstances when the law will recognise an easement is if:

  • an owner of property (the 'dominant' land) uses another landowner's land (the 'servient' land) for the benefit of his property;
  • for a continuous period of 20 years or more; and
  • the use is 'as of right', which means it is:
    • not secret;
    • not the result of the other landowner giving permission; and
    • exercised without using force.

When calculating the 20-year period, the owner of the dominant land can also count use of the servient land by any of the previous owners of the dominant land, provided the use has been continuous.

In this case, the use of the car park had been open (not secret), and was not subject to a specific permission. The issue was therefore whether it had been exercised using force.

The new owner of the car park argued that the sign in the car park made it clear to everyone, including customers and suppliers, that the Club objected to use of the car park by anyone other than club patrons. It argued that this meant the use of the car park by anyone else was use by force.

The Court of Appeal agreed, and ruled that the word 'force' was not limited to violence. It was sufficient if customers and suppliers ignored clearly visible signs which made it clear that the owner objected to use of the car park by third parties, and that such use was 'contentious'.

It also ruled that it was not necessary for the owner of the car park to put up physical barriers to entry to the car park, or go to court to enforce its rights.

The Court said 'most people do not have the means to bring legal proceedings. There is a social cost to confrontation and, unless absolutely necessary, the law of property should not require confrontation in order for people to retain and defend what is theirs'.

Operative date

  • Now


  • Landowners concerned to stop third parties claiming rights to use their land should ensure they put up clearly worded signs, which prohibit such use
  • Landowners should also monitor the use of their land in a way that could result in an easement over it being recognised, and take steps to stop such use before it develops into a use 'as of right'

Case ref: Winterburn and another v Bennett and another [2016] EWCA Civ 482


New consultation: Public sector workers using personal service companies face changes to IR35 rules

Individuals working for public sector organisations through personal service companies are affected by proposals in a new consultation on changes to the IR35 regime. Those affected include employment agencies and others providing those organisations with workers.

The 'IR35' rules are aimed at ensuring individuals working for employers through their own personal service companies (rather than directly) pay broadly similar amounts of income tax and National Insurance as direct employees.  However, the Government claims there is evidence of widespread non-compliance with these rules.

HM Revenue and Customs is therefore consulting on proposals that where such individuals work for public sector organisations, the organisation (or a third party where the worker has been engaged through that third party, such as an employment agency, outsourcing company or consultancy firm which supplies workers) will operate the IR35 regime and pay the necessary tax - and not the individual or their personal service company.

The consultation, Off-payroll working in the public sector: reform of the intermediaries legislation, proposes that the new regime should be introduced from April 2017.

IR35 in the private sector will be unaffected.

The closing date for comments is 18 August 2016.

Operative date

  • Now


  • Individuals working for public sector organisations through personal service companies (and the employment agencies and others providing those organisations with workers) should consider downloading and responding to the consultation on the HMRC website


New scheme: Eligible companies reconsider Patent Box tax regime following changes to benefits under it

Companies eligible for the Patent Box scheme, a preferential tax regime for income arising from certain patents, should consider whether new rules mean it is still worth trying to benefit from it. The changes will apply from 1 July 2016.

The Government has introduced changes to the Patent Box scheme which allows companies with income attributable to certain patents they either own, or have an exclusive licence to commercialise, to pay only ten per cent corporation tax on that income, rather than the much higher standard rates.

The most important change is that from 1 July, the amount of profit attributable to the patent depends on the percentage of the expenditure incurred by the company in developing it. This will mean the benefits for some companies will be reduced.

Transitional provisions mean those already in the scheme at 30 June 2016 continue to enjoy its previous benefits until 2021.

Operative date

  • Now


  • Eligible companies should consider whether they wish to join the revised scheme, given the changes made to it


Case law: Supplier who restricted prices chargeable by online retailers must pay significant fine for breach of competition law

Suppliers and their retail customers should ensure they are aware of, and take steps to ensure compliance with, competition law if their acts or practices (such as restricting online sale prices of their products) might restrict or distort competition, a recent case makes clear.

A supplier manufactured and sold bathroom fittings which were sold both online and offline by retailer customers. The supplier introduced online trading guidelines following complaints from offline retailers about their growing online sales.

There was a 'recommendation' in the guidelines that online prices for two lines of products should not drop lower than 25 per cent below the recommended prices for those lines when sold by an offline retailer. The guidelines specifically said that recommendations were not legally binding.

The Competition and Markets Authority found that the main objective of the guidelines was to put a ceiling on the amount of discount online retailers could offer, and this was a breach of competition law. They found that there was a degree of coercion by the supplier to force retailers to accept the guidelines: its copyright licensing procedures required retailers to comply with the guidelines before using the supplier's imagery (which, of course, they needed to do to sell the supplier's products effectively).

The supplier monitored retailers' pricing, recorded those in breach of the pricing 'recommendation' and took action against them in several cases.  This included threatening to charge them higher prices, and stop them using its imagery, and to stop supplying them.

The CMA therefore found that the 'recommendation' was not a recommendation at all but set a minimum price that online retailers could charge - in breach of competition law.

It also found that internal communications showed the supplier's management were aware they may have been breaching competition law.

The supplier argued that the guidelines and licensing procedures were to protect its brand as some online retailers had provided poor service; and others had tried to pass off other goods as being the supplier's goods - exposing the supplier to the risk of counterfeiting charges.

However, the CMA ruled that while these may have been genuine reasons for the guidelines and procedures, they were 'at most, subsidiary to the objective of protecting resellers' margins by reducing price competition from resellers making sales online' and were not a legitimate justification for restricting competition in any event.

The supplier admitted the breach, agreed the fine and agreed to provide tailored training for all employees and introduce a procedure for identifying and dealing with potential competition law risks. It agreed to review its activities every year and submit an annual report to the CMA for the next three years.

These measures reduced its fine by 25 per cent, to £786,668.

The CMA indicated it could also have fined the retailers in this case for taking part in 'resale price maintenance', which is also a breach of competition law.  However, it chose not to.

Operative date

  • Now


  • Suppliers and their retail customers should ensure they are aware of, and take steps to ensure compliance with, competition law where any proposed act or practice might conceivably restrict or distort competition, or risk significant fines

Case ref: CMA Case CE/9857-14


Case law: Retention of title clause can mean loss of protections under sale of goods law

Parties to a contract containing a 'retention of title' clause saying goods remain the property of the supplier until paid for, may find they can't rely on the implied terms and other protections given by sale of goods laws, as there has been no sale, a court has ruled.

A simple retention of title clause in a contract will say that goods delivered by a supplier remain the property of the supplier until they have been paid for. If the buyer doesn't pay for them the supplier can go onto the buyer's premises and take its goods back.

Other retention of title clauses can be more sophisticated, for example, saying that the supplier can recover goods if the buyer owes it any money, whether for those goods or for some other reason. This is known as an 'all monies' retention of title clause.

In a recent case, a supplier supplied 'bunkers' (fuel) to a buyer under a chain of contracts. Each contained a standard retention of title clause intended to protect the supplier against non-payment. However, the parties all understood that there was nothing to stop the buyer using the fuel before payment became due. The buyer became insolvent and the supplier claimed the price for the fuel.

The Supreme Court ruled that the contracts were not 'contracts of sale' under the Sale of Goods Act 1979 because there is only a contract of sale if title to (ownership of) goods has passed from a supplier to a buyer. The effect of the retention of title clauses in the contracts - given that the fuel might not exist by the time payment was due - meant that title could not pass under those contracts. This meant that the buyer was not protected by the implied terms under the Act, and the supplier could not rely on the Act to recover the price of the fuel.

The Supreme Court also decided that even if the contracts had been contracts of sale under the Sale of Goods Act, payment may still have been required. This implies that a failure to pass title in goods is no longer a defence for a buyer trying to avoid paying the purchase price.

Operative date

  • Now


  • Businesses should ensure they consider the potential consequences of including retention of title clauses in their terms of business and other contracts, including the possibility that sale of goods law does not apply and they cannot recover payment for their goods

Case law: PST Energy 7 Shipping LLC v O W Bunker Malta Limited [2016] UKSC 23


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