Employment law

TUPE

Rossiter v Pendragon plc; Air Foyle Ltd v Crosby-Clarke (2002) IRLR 483

These joined appeals saw the Court of Appeal overrule the Employment Appeals Tribunal (EAT) decision in the Rossiter case (2001) IRLR 256.

Regulation 5(5) of the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) was not intended to create a new right to claim constructive dismissal.

The EAT went too far in deciding that it could read section 95(1)(c) of the Employment Rights Act 1996 in a 'purposive' way to comply with the Acquired Rights Directive.

The traditional test for establishing a constructive dismissal, laid down in Western Excavating (ECC) Ltd v Sharp (1978) IRLR 27, applies to a case involving a transfer of an undertaking, as any other.

Here, the EAT had been wrong to hold that in TUPE cases an employee can establish a constructive dismissal by reason of a substantial change in his working conditions to his detriment, even if the employer's actions do not constitute a repudiatory breach of the contract.

Share options

Mallone v BPB Industries plc (2002) IRLR 452

Lord Justice Rix recognised that share option schemes 'can lead to controversy'.

He said High Court Judge Christopher Symons QC had erred in holding that the rule in the scheme in question, allowing options to be cancelled at the director's discretion, dealt only with options which had not yet matured.

The structure of the rule made it clear that it was dealing with options of any kind.

However, crucially the judge had been entitled to find that the directors' committee acted irrationally in cancelling Mr Mallone's mature share options when he left the job.

Thus the cancellation was not lawful and effective under the terms of the scheme.

An award of compensation to Mr Mallone in excess of 100,000 was upheld.

Lord Justice Rix went on: 'A poorly performing executive may be represented as leaving in failure but with valuable options.

Alternatively, the options may not be worth anything or very much at the time of departure, but may subsequently become valuable because an improvement in performance of his company after his leaving, or because of the re-rating of the market.

Thus the scheme can operate in a way which might seem arbitrary.

But such possibilities are always present.

An executive might be able to exercise his options before his departure, perhaps in anticipation of his employer's displeasure.

'Considerations such as these...

are not...

a valid reason for treating the whole scheme as a sort of mirage, whereby the executive is welcomed as a participant, encouraged to perform well in return for reward, granted options in recognition of his good performance, led on to further acts of good performance and loyalty, only to learn at the end of his possibly many years of employment, when perhaps the tide has turned and his powers are waning, that his options, matured and vested as they may have become, are removed from him without explanation.'

By Martin Edwards, Mace & Jones, Liverpool