LABOUR LAW: PROBLEM QUESTION High Flyer Ltd (HFL) employed Jenny Forbes (JF) in a senior sales executive role. She commenced in employment on 06 January 2003. JF has a written contract of employment and was given a letter of offer when she commenced. JF’s contractual notice period is 6 weeks and her age is 48. JF obtains regular pay increases against her basic salary, which for the financial year ending March 2013 was £36,100. However, a substantial part of her remuneration package is obtained through bonuses and allowances as follows: – A discretionary loyalty bonus of £6,000 per annum, which is always paid on on or after 15 December each year. In her letter of offer this is described as being “subject to the employee being in employment on the due date” (“the Loyalty Bonus”). – A discretionary sales bonus, which is calculated as a percentage of her monthly sales and paid quarterly in arrears “subject to the employee’s continued satisfactory performance in their assigned sales role” (“the Sales Bonus”). – A contractual monthly allowance of £1,500 per calendar month, which is paid monthly in advance and expressed to “cover expenses and inconvenience associated with the sales process” (“the Expenses Allowance”). – A contractual London area allowance to compensate for the additional cost of living in the capital of £200 per calendar month paid in advance (“the London Area Allowance”). The various bonuses mean that JF’s ‘on-target earnings’ for the financial year ending March 2013 amounted to £77,880. HFL’s policy on sick leave is that the company will pay 30 days per annum (pro-rata) at full salary and another 30 days per annum (pro-rata) at half salary. There are notification requirements, which include self-reporting for absences of less than a week and GP certification for absences longer than a working week. There is a ‘Flexible Working Clause’ in JF’s contract of employment in the following terms: “You may be required to work in any location which High Flyers Limited may in its discretion instruct you to work and it is a condition of your employment that you work flexibly in your job role to assist High Flyers Limited to achieve its stated goals including (but not limited to) customer satisfaction and high levels of product sales.” On 01 April 2013, HFL announce to sales staff (including JF) that due to the prevailing economic climate and after a careful costing exercise, HFL will be reducing the Expenses Allowance to £650 per calendar month, with immediate effect. There was an additional announcement that there would be no increase in base salary for any staff except the board level directors. In early May 2013, JF wrote to her line manager at HFL, Bill Smith (BS) in the following terms: “I am not happy about this proposal as I often spend large sums in obtaining my sales and feel the company should meet those costs.” HFL did not respond to JF but rather proceed to reduce the Expenses Allowance payment for May 2013. In late August 2013, BS called JF into a meeting room to discuss her performance. During the meeting BS concedes that JF is correct when she indicates that her sales performance is above average among her colleagues but BS contended that she has sold better in the past. BS also raised the issue of JF’s sickness absence to which JF responded that she had not breached HFL’s sickness absence policy either in terms of reporting her illness nor in terms of exhausting her contractual entitlement to sick leave. BS reminded JF that she had responsibility (on behalf of HFL) for a very lucrative and important sales area. Therefore, BS argued HFL expected higher than average sales within her area. JF stated that she has always done her level best to deliver sales for HFL and achieve higher payments for the Sales Bonus. BS did not ask and JF did not explain the reason for her absences. However, JF agreed that less sickness absence would see better sales figures and promised to improve her attendance in the future. The meeting concluded with BS stating that HFL is prepared to pay the discretionary Sales Bonus for the quarter ending July 2013 but that JF’s attendance would need to improve significantly. BS also reassures JF that no formal action would be taken or recorded by HFL. In late November 2013, HFL announced that the London Area Allowance would be halved to £100 per calendar month. Again JF wrote an email to BS to complain about this change to terms and conditions but received no reply. On 09 December 2013, BS called JF to another informal meeting where her sickness absence was again raised. After an initial improvement in JF’s attendance in September and October 2013, JF had called in sick 7 times in November and early December 2013 with the number of days totalling 11 days off. This time BS is concerned about a fall in JF’s sales figures that has taken JF below average for sales executives for the quarter ending November 2013. BS stated that he wanted to consult JF about her taking a different sales area for HFL, which on average produced 10 per cent less sales. JF protested vocally as she is very concerned that there may be a corresponding effect on her capacity to earn the Sales Bonus. JF contended that the economic climate is causing some of her drop in sales and in any event the October quarter is only 10 per cent down on the August quarter. JF asked to know what the sales figures are across the business but BS responded that he could not reveal this information due to the sensitivities of her colleagues. JF also reminded BS that she has complied fully with HFL sick leave policy and still had not exhausted her entitlement to full pay. BS did not deny these points. BS left the meeting on the basis that he will consider JF’s points and get back to her. BS emailed JF two days after the meeting on the morning of 11 December 2013, setting out a proposal that her sales area be swapped with that of her colleague John Newboys who recently joined HFL as a Sales Executive with effect from the beginning of 2014. JF wrote back the next day and resigned her employment citing the continual erosion of her financial package. JF consults HFL’s Human Resources Department about her final payment. HFL HR respond saying that salary will paid up and until her date of resignation but that neither the Sales Bonus for the November quarter nor the Loyalty Bonus for 2013 would be included in the final payment. Later that day, JF concerned about her continuing bouts of poor health consults her GP who informs her that she has been suffering morning sickness due to the fact that she is pregnant and her expected date of delivery is 21 July 2014. The following week JF telephoned HFL HR Department to complain about the non-payment of her allowance package and mentions her pregnancy. BS rang JF later in the same day to asked JF to re-consider her resignation and to state that she could have her old position back with HFL subject to satisfactory performance. JF refused the offer saying she could not work for HFL any more. JF consults you as to the claims that she may have against HFL and what sums may be recoverable from them. Also JF asks you to consider in your advice any arguments that HFL may have to defend JF’s potential claims. Please include references to relevant case law and statute (where appropriate).