The EAT has held in SPI Spirits (UK) Ltd and Shefler v Zabelin that a clause in Mr Zabelin’s contract restricting the amount to be paid on termination was void because it was contrary to his statutory employment rights. In addition, parliament had legislated that there should be no cap on compensation for whistleblowing cases.
Basic facts
Mr Zabelin, the company’s Group Chief Investment Officer, was paid an annual salary of £180,000 plus a discretionary bonus. Because of the impact of the pandemic on the business, he agreed to a 30 per cent pay cut for the period from April to June 2020. When the group HR director announced on 3 June that the cut would be extended until at least the beginning of September, he asked in an email on 4 June for more information before agreeing to “any further hardships”.
At a video meeting on 5 June with the HR Director, he pointed out that imposing a unilateral pay cut would constitute a breach of contract. He also said that the previous pay cut had created a toxic environment among employees which could impact on their mental health and expressed concern that the group was using the pandemic as an excuse to cut pay.
On 8 June he was contacted by the company’s major shareholder, Mr Shefler, who mentioned that the company was thinking of changing the bonus scheme so that it was only given to staff who had gone beyond their usual “scope of work”. When Mr Zabelin pointed out that this was not what his contract said, Mr Shefler fired him. He brought a claim of unfair dismissal.
Tribunal decision
The tribunal found that Mr Zabelin had been automatically unfairly dismissed for making protected disclosures (blowing the whistle) about his pay; his 2020 bonus; general staff welfare; and using Covid as a cover for cutting pay.
When it came to deciding on a remedy, the tribunal dismissed the company’s submission that Mr Zabelin’s compensation should be capped at £270,000 because of certain provisions in his contract about the maximum he could be paid on termination. Instead it held that the clause was void under section 203 of the Employment Rights Act 1996 (ERA) as its purpose was to “exclude or limit the operation” of the legislation.
The tribunal also ignored the company’s argument that it should not uplift his award by 20 per cent because of a failure to follow the ACAS Code on Disciplinary and Grievance Procedures. In total, it awarded Mr Zabelin just over £1.6 million.
The company appealed, arguing (among other things) that it was not “just and equitable” to give Mr Zabelin more than £270,000 on termination given that he had freely agreed to this amount as part of negotiations between parties of equal bargaining power. It also argued that the tribunal should not have awarded an uplift under the ACAS code as he had not lodged a written grievance.
EAT decision
Dismissing the appeal, the EAT held that it was irrelevant that Mr Zabelin had agreed to the cap as it was unenforceable under section 203 ERA. Nor could it be “just and equitable” to produce an outcome which would have the same effect as disapplying or limiting a statutory provision. In any event, parliament had legislated that there should be no cap on compensation for whistleblowing cases.
With regard to the uplift, the EAT agreed with the company that, for the ACAS code to apply, any grievance has to be in writing. However, the tribunal was right to conclude that Mr Zabelin’s email of 4 June 2020 was “sufficient” to trigger an obligation on the part of the company to follow the grievance provisions of the code. As such the uplift was appropriate.