What are the issues of redundancy after a period of absence

I read an article recently concerning the case of Charlesworth v Dransfields Engineering Service Limited (2017) UKEAT/0197/16/JOJ.

The case relates to a redundancy situation back in 2014 but the appeal was not heard by the Employment Appeal Tribunal (EAT) until January 2017. The situation is one that we have frequently given advice on; an employee was absent from work for some time, and this absence allowed the respondent to identify the possibility of restructuring the business in a way that deleted the absent employee’s post from the business and therefore saved costs (something like £40,000 in this case).

The employee (Charlesworth) who made the claim was employed by the respondent (Dransfields Engineering Service Limited) as a Branch Manager. Importantly the business was not achieving any level of profitability. The claimant developed renal cancer and was absent for two months due to having an operation. As you will be aware from previous Broadcasts the condition of cancer is automatically a protected characteristic in terms of disability.

After the period of illness the employee returned to work fit and was able to fulfil his role, however the employer, having undertaken a review, commenced consultation over the proposal for redundancy for the Branch Manager and unfortunately he was eventually dismissed on the ground of redundancy.

The case went to an Employment Tribunal (ET), at which the claimant argued that this was a sham redundancy in that there was no redundancy situation, and that the real reason for the dismissal was because of the disability. This claim was rejected by the ET. The ET found that the possibility of a restructuring that would enable cost savings to be made became apparent as a result of the claimant’s absence. However, the ET concluded that the claimant’s absence resulting from his disability was not an operative cause of his dismissal for redundancy.

The claimant appealed his case to the EAT on the basis that the original ET had failed to apply the correct causation test when dealing with Equality Act 2010 s.15. It was submitted that a cause or influence (however significant) is sufficient to constitute or to fulfil that requirement that it is “because of something arising in consequence of the disability“. It was argued that any cause, even if it does not operate on the mind of the putative discriminator and is therefore not an effective cause, is sufficient to satisfy section 15.

The EAT held that the causation requirement in Equality Act 2010 s.15 involved a two-stage approach.

  1. There must be something arising in consequence of the disability;
  2. The unfavourable treatment must be because of that something.

The question raised by the appeal was whether something less than an operative cause or influence is sufficient to satisfy the requirement that the unfavourable treatment is because of the relevant something. To the extent that it was being argued that a mere influence is sufficient, such an argument was not accepted by the EAT. The statute requires the unfavourable treatment to be because of something; nothing less will do. Provided the something is an effective cause (though it need not be the sole or the main cause of the unfavourable treatment), the causal test is established.

In this case, the ET had expressly accepted that in considering an Equality Act 2010 s.15 complaint it is not necessary for the claimant’s disability to be the cause of the respondent’s action, and that a cause need not be the only or main cause provided it is an effective cause. The EAT stated that there was no error of law in the ET’s approach.

The ET was entitled to ask whether the claimant’s absence, which it accepted arose in consequence of his disability, was an effective cause of the decision to dismiss him. To put that question another way, as the tribunal did, was the claimant’s sick leave one of the effective causes of his dismissal?

The ET accepted that there was a link between the claimant’s absence through illness and the fact that he was dismissed, the link being that his absence afforded the respondent an opportunity to observe that it could manage without anybody fulfilling the claimant’s role as Branch Manager. Nevertheless, the ET said that was not the same as saying that the claimant was dismissed because of his absence. This was a case where, on the facts found by this tribunal, it felt able to draw a distinction between the context within which the events occurred and those matters that were causative.

It is worth noting that the EAT commented that there will doubtless be many cases where an absence is the cause of a conclusion that the employer is able to manage without a particular employee and in those circumstances is likely to be an effective cause of a decision to dismiss even if not the main cause. This, however, does not detract from the possibility in a particular case or on particular facts, that absence is merely part of the context and not an effective cause.

If you have any employee concerns and would like to speak to me please contact the office on 01522 81 5100 and they will be able to direct you.


What will happen to Businesses in Lincoln after the 2017 General Election

how the general election 2017 will affect business in lincoln

If the opinion polls are to be believed, which might be a bit of a stretch given their recent way-off-the-mark predictions (Paddy Ashdown’s promise to eat his hat after the close of polling at the last General Election springs to mind), then the gap between the two main political parties is now very small. This leads us to think more deeply about what tax planning might be required given the colour of the party in charge on 9th June.

If the Tory blue flag flies above Downing Street, there could be increases in tax at some point, as their manifesto no longer includes a promise not to raise taxes. Theresa May, and more particularly Philip Hammond (has anyone seen him recently?), felt the previous non-hike promise was too much of a constraint on policy–makers. No further details have been given over where tax rises might hit.

If, on the other hand, the red flag is flying, then we know that there will be tax rises at both a personal level and on corporate profits, to pay for Labour’s spending commitments. Personal taxes will rise for those earning more than £80,000pa, and the recent increases in Inheritance Tax thresholds will be reversed. Companies will see an increase in the rate of Corporation Tax on their profits from the current rate of 19% to 26%.

There is also uncertainty over the HMRC flagship policy of Making Tax Digital (MTD). Many of the proposals for MTD were removed from the last Finance Act, which was truncated when the snap Election was called. The change to the amount of tax-free dividends from £5,000pa to £2,000pa were also a victim of this action. It remains to be seen if either of these will be re-introduced in what is sure to be a second Finance Bill/Act of 2017 following the General Election.

Whichever party takes the reins of power, it will be necessary for taxpayers to make sure they keep an eye on their own personal circumstances, and how any tax changes might impact on them. It will no doubt keep us on our toes, and lead to a lot more tax changes, regardless of which party is in charge.

how will the 2017 general election affect business in lincoln


Considering Business Acquisition for Business Growth

Want to grow your business fast? Considered a business acquisition?

Most business owners see the benefit in adopting a growth strategy. Sometimes though market forces make organic growth difficult and expensive. A much faster method of achieving growth targets is to bolt on other businesses through an acquisition.

You may choose a competitor whose sales you can absorb and strip out overheads. Your target might be complementary in that it offers something of use to your customers or vertically/ horizontally in your supply chain. Irrespective of the type for most a business acquisition offers the hope of growth. Many owner managers however, find the thought of an acquisition not appealing; too many problems, too much risk, too difficult to fund and too expensive.

At Nicholsons we partner with clients looking to acquire to help guide them through the purchase process every step of the way.

One piece of advice I often give is that deals don’t need to be Richard Gere in Pretty Woman style massive deals. I’ve recently worked on two acquisitions both with values of less than £25,000 but deals with values up to £100,000 can still generate good value.

Both of these recent deals offered integration benefits; sales and profit growth, customer cross selling opportunities, channel integration, economies of scale and a less than 3 year payback.

Smaller deals like this are often easier to complete. There are often smaller ego’s amongst the sellers (& their advisors) and whilst Due Diligence other pre purchase checks and legal documentation are still needed it can often be really focused on key areas which helps keep costs proportional to the deal size.

Sometimes buyer burnout in the deal process means that integration and day one planning is not effective. Smaller deals don’t drag on and there is plenty of energy left for integration planning. This is a real benefit of completing small deals because you can integrate them easily whilst keeping on top of the day job. Post purchase integration is where excellent business owners generate value and make acquisitions work so having more time on this area is a benefit.

So my advice would be. Don’t discount acquisitions as a means of achieving growth, but think smaller.