The claimant, the managing director of the respondent’s United Kingdom company, entered into an employee shareholder agreement in accordance with section 205A of the Employment Rights Act 1996. Under section 205A(2) of the Act, he was excluded from the statutory right to claim unfair dismissal and redundancy payment but a separate deed drawn up by the parties at the same time gave him the contractual right to be paid the equivalent of an unfair dismissal and redundancy award, provided that within three months of the termination of his employment he requested the appointment of an independent expert to determine his entitlement to the payments. Over a year later a new service agreement between the parties was said to supersede all previous agreements except for the contractual reinstatement of his rights provided for in the deed. The claimant was dismissed and at a preliminary hearing his complaint of unfair dismissal was struck out by an employment judge as having no reasonable prospect of success. The judge decided that the new service agreement did not refer to the employee shareholder status or to the subject matter of the section 205A agreement and was not inconsistent with it. He rejected the claimant’s submission that it should be a condition for continuing shareholder status that both parties should agree that it continued when termination of employment occurred. He considered that the claimant ought to have been aware that the respondent’s intention to reinstate his employment rights in the deed meant that he would have only the contractual right of referral to an expert and not the statutory right to go to a tribunal and concluded that at the time of dismissal the claimant was an employee shareholder and could not claim that his dismissal was unfair.
On an appeal by the claimant contending, inter alia, that a purposive construction of section 205A required the protection of his right to claim unfair dismissal—
Held, appeal dismissed. The general right for employees not to be unfairly dismissed under section 94 of the Employment Rights Act 1996 was subject to exclusions, one of which was an agreement to become an employee shareholder under section 205A of the Act. Safeguards for the protection of employee shareholders under section 205A(1) included a written statement designed to ensure that the employee was able to reach a fully informed decision as to whether to accept shareholder status, with additional procedural safeguards including the need to receive independent advice set out in section 205A(5) and (6). While the exclusion from statutory protection ought to be read narrowly and conditions required for shareholder status strictly applied in accordance with the approach to construing a legislative exception from a protective statutory right, a section 205A agreement was a separate provision with distinct requirements and was different from an agreement restricting the contracting out of provisions of the Act under section 203. Further, while section 205A did not specifically address the approach to the termination of employee shareholder status and the reinstatement of statutory employment rights, there was no justification from the language of the section to require parties to confirm positively each of the pre-conditions for shareholder status at the time the termination of the contract occurred. However, a possible way to terminate a shareholder agreement was to enter into a subsequent inconsistent agreement, which would depend on the factual matrix, and since the new service agreement reinstated the contractual rights to complain of unfair dismissal and redundancy, which was consistent with the exclusion of the claimant’s rights under the 1996 Act, the employment judge’s decision would be upheld (paras 33, 38, 40, 42).
Christopher Milsom (instructed by Curzon Green Solicitors) for the claimant.
Spencer Keen (instructed by New Look Retailers Ltd, Legal Department) for the respondent.