Mind the gap

Schemes allowing employees extended time off work, such as career breaks, are all very well until the question of continuity arises. Sue Ashtiany reports

Continuity of employment is important. If you do not have a year's continuous service, you generally do not have protection from unfair dismissal. After two years of service, you start building up other rights, such as redundancy pay and increased rights to notice. Occupational pensions – those once generous provisions for making whoopee after a life of grind – also depend on a record of continuous service. The benefits of seniority are well known: you get paid more, you get first choice of holiday dates etc. So it is perhaps not surprising that the question of what counts towards 'continuity' is what keeps employment lawyers innocently occupied. There are permutations and nothing is simple.
One thing that counts is any part of a week during which the relations between the parties is governed by a contract of employment. That is relatively easy, although occasionally employers get caught out because they forget that the start of one week and the end of another makes two continuous weeks, even if there is a seven-day gap in between.
Another thing that counts – and is a little more difficult conceptually – is a period when the employee is not working because of a 'temporary cessation of work'. These temporary cessations can last weeks or even months. A number of educational establishments, which were in the habit of recruiting staff on discrete term-time contracts, were somewhat startled to discover that the whole period, breaks and all, counted towards continuity of service, when they thought they were carefully avoiding the whole problem.
Now we should spare a thought for the employer with a career break scheme. Career breaks are becoming quite popular. Many employers operate schemes in which staff can leave for periods of anything up to five years under arrangements whereby they can return to their employment in some form or other. Typically, under these schemes the contract of employment is terminated, the P45 is sent out and some system for keeping in touch is put in place for the period of the break. Often, the employer asks that the individual go back for a week or two each year to keep their hand in and to stay in touch with the organisation and developments in its business. Depending on the scheme, the employer either guarantees a job at the end of the break or at least commits to preferential re-employment for the person concerned as against other job applicants.
Until the recent decision in Curr v Marks & Spencer (M&S), most employers would have thought that the period of the career break did not count towards continuity; after all, the member of staff has resigned and the P45 has been delivered. The employer hopes to see them again in a few years with their bestsellers off their chests or their children at school, but in the meantime they are no longer on the staff. However, it now appears that, irrespective of whether or not the individual resigns, the career break may count as a period during which, 'by arrangement or custom', they are counted as 'continuing in the employment… for any purpose'. This is the third way in which continuity of employment builds up.
The M&S case ran thus. Back in 1990 the company decided to start up a career break scheme. Mrs Curr had worked for M&S for a number of years in a managerial position and had by this time started a period of maternity leave. The scheme that M&S was introducing was one that guaranteed re-employment to its managerial staff, although not necessarily at the same level or in the same function as their previous employment. The scheme was just being introduced while Curr was on maternity leave and she decided to apply for it. Although, admittedly, this was not made clear to her at the start of the discussions, by the time she went on leave the scheme was set up in such a way that staff were required to resign from their contracts of employment and the break caused the termination of all staff benefits.
There were continuing arrangements during the break, such as the fact that Curr was required to go back in for a couple of weeks a year, and efforts were made to keep in touch with her. But it was clear that the employer at least thought the employment had come to an end for a defined period. The advantage, from the employee's perspective, was that every effort would be made to give her a similar position, grade and salary if she wished to return to work. Curr duly took a four-year break and returned to work in 1994.
She continued with M&S for another five years, but in 1999 was made redundant. The company thought she was owed five years redundancy pay and paid her accordingly. She disagreed. She considered that all the years before, during and after the career break should count as continuous employment. She argued that the failure to make her a redundancy payment based on the whole period was an unlawful deduction from wages.
At first instance the tribunal disagreed with her. It considered that the clear arrangement under which she resigned precluded a finding that there was an arrangement in place whereby the parties regarded the employment as still in existence. And the minority member of the Employment Appeals Tribunal agreed. However, the majority accepted Curr's argument and allowed her appeal. As far as they were concerned, the arrangements for keeping in touch during the career break, what they described as the “continuing obligations and contacts”, meant that the relationship between the parties was a relationship of employment.
Up until this point, most people had thought the arrangements had to be such that both parties thought the employment was still on foot. The startling outcome in the M&S case is that the employer clearly did not think so, but was nevertheless found to have been in such a relationship. The case is going to appeal, but in the meantime prudent employers will have lost no time in reviewing the terms of their career break schemes. I would like to bet that most of them now end with the phrase: “Nothing in these arrangements should be seen as denoting any intention to continue the employment relationship during the break.”
Sue Ashtiany is a partner and head of the employment group in London at Nabarro Nathanson