ICAEW BL · Chapter 12
Employment law and data protection MCQs with Answers
12 multiple-choice questions on Employment law and data protection for ICAEW BL Business Law. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
Dev provides IT support services to Calloway Ltd. Which combination of facts most strongly suggests that Dev is an EMPLOYEE of Calloway Ltd rather than an independent contractor?
- A) He uses his own equipment, bears the cost if a job overruns, and works for several other clients
- B) He has an unrestricted right to send anyone of his choosing to do the work in his place
- C) He invoices Calloway Ltd per project, is registered for VAT and hires his own assistants
- D) He must do the work personally, Calloway Ltd sets his hours and methods, he is paid a monthly salary through its payroll and he is subject to its disciplinary procedures
Show answer & explanation
Answer: D) He must do the work personally, Calloway Ltd sets his hours and methods, he is paid a monthly salary through its payroll and he is subject to its disciplinary procedures
Under the multiple test in Ready Mixed Concrete v Minister of Pensions, a contract of employment requires personal service, a sufficient degree of control, and other terms consistent with employment. Option D shows all of these, together with integration into the organisation through payroll and disciplinary procedures. Using one's own equipment, bearing financial risk and working for many clients point to self-employment. An unfettered right of substitution is inconsistent with personal service (Express & Echo Publications v Tanton). Invoicing, VAT registration and hiring assistants also suggest an independent business.
Question 2
Which of the following is NOT generally an implied common-law duty of an employer towards its employees?
- A) To maintain mutual trust and confidence
- B) To take reasonable care for the employee's health and safety
- C) To provide a reference when the employee leaves
- D) To pay agreed wages
Show answer & explanation
Answer: C) To provide a reference when the employee leaves
At common law an employer must pay agreed remuneration, take reasonable care for employees' safety and not undermine mutual trust and confidence. There is no general duty to provide a reference. However, if an employer chooses to give one, it must take reasonable care that it is accurate and fair (Spring v Guardian Assurance).
Question 3
Marisol's contract entitles her to three months' notice. Her employer discovers that she has been secretly diverting its clients to her own side business, and dismisses her immediately without notice. Which statement about a claim by Marisol for wrongful dismissal is correct?
- A) It is unlikely to succeed, because her serious breach of contract (gross misconduct) entitled the employer to dismiss her without notice
- B) It will succeed and she will recover three months' pay, because contractual notice must always be given
- C) It will succeed if the employer failed to follow a fair disciplinary procedure, whatever she did
- D) She cannot bring it unless she first resigns and claims constructive dismissal
Show answer & explanation
Answer: A) It is unlikely to succeed, because her serious breach of contract (gross misconduct) entitled the employer to dismiss her without notice
Wrongful dismissal is a common-law claim for breach of contract, usually dismissal without the notice required by the contract. However, an employee who commits a repudiatory breach, such as gross misconduct involving dishonesty or breach of the duty of fidelity, may be dismissed summarily without notice (Boston Deep Sea Fishing v Ansell; Sinclair v Neighbour). Diverting the employer's clients is a serious breach of the implied duty of fidelity, so summary dismissal is justified. Procedural fairness is relevant to unfair dismissal, not to wrongful dismissal, and constructive dismissal requires the employee to resign.
Question 4
Without consultation or contractual authority, Lockhart Ltd cuts the salary of its office manager, Tess, by 20%. Tess grumbles to a colleague but continues to work and accept the reduced salary, without raising any objection with her employer, for nine months. She then resigns, citing the pay cut. Which statement best describes her position?
- A) She was constructively dismissed, because a unilateral pay cut is a repudiatory breach whenever the employee eventually resigns
- B) A constructive dismissal claim is likely to fail, because by continuing to work without objection for a long period she is likely to be treated as having affirmed the contract
- C) She can claim wrongful dismissal, because her employer reduced her pay
- D) She is entitled to a redundancy payment, because her pay was reduced
Show answer & explanation
Answer: B) A constructive dismissal claim is likely to fail, because by continuing to work without objection for a long period she is likely to be treated as having affirmed the contract
Constructive dismissal requires a repudiatory breach by the employer and a resignation in response to it before the employee affirms the contract (Western Excavating v Sharp). A unilateral pay cut is a fundamental breach, so had Tess resigned promptly she would have been constructively dismissed. But an employee who continues working on the new terms for a significant period without protest may be taken to have affirmed the contract (W E Cox Toner v Crook), losing the right to resign in response. Wrongful dismissal requires an actual dismissal in breach of contract, and a pay cut is not a redundancy situation.
Question 5
Pendle Ltd dismissed four employees in the same month. Which dismissal is automatically unfair, so that Pendle Ltd cannot rely on any of the potentially fair reasons in s98 Employment Rights Act 1996?
- A) A payroll clerk dismissed after repeated, documented errors despite further training and warnings
- B) A delivery driver dismissed after being banned from driving, where no other suitable job is available
- C) A warehouse operative dismissed for theft after a fair investigation and disciplinary hearing
- D) A sales assistant dismissed because she joined an independent trade union and began recruiting colleagues as members
Show answer & explanation
Answer: D) A sales assistant dismissed because she joined an independent trade union and began recruiting colleagues as members
The potentially fair reasons in s98 are capability or qualifications, conduct, redundancy, a statutory restriction (illegality), and some other substantial reason. The clerk's dismissal relates to capability, the driver's to a statutory restriction because he can no longer lawfully drive, and the operative's to conduct. Dismissal because of membership of, or taking part in the activities of, an independent trade union is automatically unfair (s152 Trade Union and Labour Relations (Consolidation) Act 1992). Even where there is a potentially fair reason, the tribunal must still decide whether dismissal was reasonable in all the circumstances.
Question 6
Fairhaven Accountants closes its Leeds office and moves all work to Manchester, 45 miles away. The Leeds employees' contracts have no mobility clause, and their jobs at Leeds come to an end. Is this a redundancy situation?
- A) No, because the employer's business is continuing elsewhere
- B) Yes, because the employer has ceased to carry on business in the place where the employees were employed
- C) No, because the employees could commute to Manchester
- D) Yes, but only if the firm is making a loss
Show answer & explanation
Answer: B) Yes, because the employer has ceased to carry on business in the place where the employees were employed
Under s139 Employment Rights Act 1996, redundancy includes the employer ceasing, or intending to cease, to carry on business in the place where the employee was employed. The business continuing elsewhere does not prevent a redundancy situation where the employees had no obligation to relocate. An offer of suitable alternative work in Manchester may affect entitlement to a redundancy payment, but the firm's profitability is irrelevant.
Question 7
A junior bookkeeper's contract says that for five years after leaving she must not work for any accountancy business anywhere in the UK. She leaves and joins a firm in a different city. Will the restriction be enforced?
- A) Yes, because she freely agreed to it when she signed the contract
- B) Yes, because all restrictive covenants in employment contracts are presumed valid
- C) Probably not, because it goes further than is reasonably necessary to protect any legitimate interest of the employer
- D) Yes, but only for the first year of the five-year period
Show answer & explanation
Answer: C) Probably not, because it goes further than is reasonably necessary to protect any legitimate interest of the employer
Restrictive covenants are void as restraints of trade unless they protect a legitimate interest, such as trade connections or confidential information, and are reasonable in duration, geographical area and scope. A UK-wide, five-year ban on a junior employee working for any accountancy business is likely to be unreasonable. Covenants are presumed void, not valid, and courts generally do not rewrite an unreasonable covenant to make it enforceable.
Question 8
An employment tribunal upholds Hamish's unfair dismissal claim and orders that he be treated in all respects as if he had never been dismissed, returning to his old job with arrears of pay. What is this remedy called?
- A) Reinstatement
- B) Re-engagement
- C) A basic award
- D) Specific performance
Show answer & explanation
Answer: A) Reinstatement
Reinstatement means the employer must treat the employee as if he had not been dismissed, returning him to the same job with arrears of pay and benefits. Re-engagement is employment in a comparable or other suitable job, possibly with an associated employer. A basic award is part of financial compensation. Specific performance is an equitable remedy in the civil courts and is not ordered by tribunals for employment.
Question 9
A recruitment firm's application form asks candidates for an accountancy role for their blood group, their parents' occupations and their favourite holiday destination. Which data protection principle is most clearly at risk?
- A) Accuracy: personal data must be kept up to date
- B) Storage limitation: personal data must not be kept longer than necessary
- C) Data minimisation: personal data must be adequate, relevant and limited to what is necessary for the purpose
- D) Accountability: the controller must be able to demonstrate compliance
Show answer & explanation
Answer: C) Data minimisation: personal data must be adequate, relevant and limited to what is necessary for the purpose
Under the data minimisation principle, personal data must be adequate, relevant and limited to what is necessary for the purposes of processing. Blood group, parents' occupations and holiday preferences are not relevant to assessing a candidate for an accountancy role. The other principles matter too, but collecting irrelevant data is most directly a data minimisation problem.
Question 10
Fernbrook Ltd uses an external payroll bureau to calculate and pay its employees' salaries. The bureau processes employees' personal data only on Fernbrook's documented instructions. Under the UK GDPR, how are the parties classified?
- A) The payroll bureau is the controller and Fernbrook Ltd is a processor
- B) Fernbrook Ltd is the controller and the payroll bureau is a processor
- C) Both are data subjects
- D) Neither is subject to the UK GDPR because payroll data is exempt
Show answer & explanation
Answer: B) Fernbrook Ltd is the controller and the payroll bureau is a processor
A controller decides the purposes and means of processing personal data. A processor processes personal data on behalf of the controller and on its instructions. Fernbrook decides why and how its employees' data is used, so it is the controller, and the bureau is its processor. The employees are the data subjects, and payroll data is not exempt.
Question 11
A firm keeps detailed files on clients who stopped using its services 20 years ago, although it has no legal or business reason to keep them. Which data protection principle is the firm most clearly breaching?
- A) Storage limitation
- B) Purpose limitation
- C) Lawfulness, fairness and transparency
- D) Integrity and confidentiality
Show answer & explanation
Answer: A) Storage limitation
Under the storage limitation principle, personal data must be kept in a form that identifies data subjects for no longer than is necessary for the purposes for which it is processed. Keeping old client files indefinitely with no legal or business reason breaches this principle. Purpose limitation is about using data only for specified, compatible purposes, and integrity and confidentiality is about security.
Question 12
Under the UK GDPR, which of the following is NOT a 'special category' of personal data requiring an additional condition for processing?
- A) Information about an individual's physical or mental health
- B) Information revealing an individual's trade union membership
- C) Biometric data processed to uniquely identify an individual
- D) An individual's home address and date of birth
Show answer & explanation
Answer: D) An individual's home address and date of birth
The special categories include data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, or trade union membership. They also include genetic data, biometric data used for identification, health data, and data about sex life or sexual orientation. Processing them needs both a lawful basis and an additional condition. A home address and date of birth are ordinary personal data. Criminal offence data is handled under a separate regime rather than as special category data.