A reminder that contractual agreements can’t be used to subvert statutory employment rights
A recent Employment Appeal Tribunal decision reminds employers that contractual terms cannot be used if their effect is to subvert or limit statutory employment rights. Disputes which have their root in statutory employment rights (such as unfair dismissal and discrimination) can only generally be settled through ACAS (using a COT3 agreement), or by signature of a settlement agreement which complies with the requirements set out in section 203 Employment Rights Act 1996 (including a requirement that legal advice is taken by the employee).
In the case of SPI Spirits (UK) Limited v Zabelin, the Employment tribunal found that the Claimant had been subjected to detriment and automatically unfairly dismissed on grounds of whistleblowing.
The respondent argued that it would be ‘just and equitable’ for the Claimant’s remedy to be capped at £270,000, as this was the maximum liability on termination included in the contract of employment. The Respondent argued that the Claimant was legally trained and had taken advice on the contract such that the cap should be applied. They further argued that the award should not be uplifted for failure to follow the ACAS Code of Practice as the Claimant’s written grievance did not contain any protected disclosures. These were made later – verbally. The tribunal disagreed, applied a 20% uplift to compensation and awarded the Claimant over £1 million.
The respondent appealed. The EAT agreed with the tribunal:
- Any attempt to limit liability for employment claims in contractual documentation will be ineffective – an unenforceable contractual cap on the tribunal’s awards (s203 Employment Rights Act 1996).
- The fact that the contractual clause was ‘freely negotiated’ did not mean that it would be ‘just and equitable’ to apply the cap. For whistleblowing cases, there is no cap and compensation should reflect the loss caused. The tribunal should not be fettered in its ability to reach an appropriate compensation figure.
- Although a grievance needs to be in writing in order for the ACAS Code apply, the fact that no protected disclosure was included in the written document itself did not mean that the ACAS Code on grievances did not apply.
- Regardless, the relevant sections of the ACAS Code in this case were those that relate to disciplinary proceedings. Where the employer dismisses or takes other action against an employee because, in substance, of what it regards as culpable conduct, the discipline provisions of the ACAS Code will apply.