Employment Law: The wrong way to rebrand a business

With food-led pubs weathering the economic storm better than most, it is no surprise that London's first gay pub has been turned into a gastropub after being rescued by a company which rebrands failing pubs in that way.

In 2008, what was then known as gay pub the Coleherne, was re-launched as the Pembroke Arms. The Pembroke's assistant manager was an openly gay man.

In an attempt to rebrand the previously gay pub, the employer went to great lengths to re-establish and reposition the pub in the eyes of its customers. The Coleherne had been notorious for attracting drug dealers and male prostitutes, but now, the Pembroke wanted to attract those who would enjoy the gastropub experience.

As part of this rebranding process, the employer suggested the assistant manager put a board outside the pub that read 'this is not a gay pub'. However, the assistant manager convinced the employer to settle for "under new management…friendly staff".

But it was said in emails by a director of the employer company that the pub was no longer "…an exclusively gay pub" and that "over-the-top old customers" would be barred.

Furthermore, the assistant manager was encouraged to seek customers who did not look gay to sit in prominent positions so that they could be seen by passers-by, in order to portray the new image of the pub.

Unable to work for the new employer

This became an issue of employment law when the assistant manager resigned, saying he felt unable to work for the kind of business that the employer was seeking to create.

The assistant manager, as claimant, then brought a claim against his employers for unlawful direct discrimination under the Employment Equality (Sexual Orientation) Regulations 2003.

The claimant also brought a claim for constructive unfair dismissal arguing that he resigned as a result of the employer's repudiatory breach of contract. The claimant's argument was two-fold: first, discriminatory comments were made to him directly, and secondly, he was put under pressure to work in and co-operate with a policy of purposely isolating gay customers from the pub.

This claim was heard by the Employment Tribunal, which awarded damages for injury to feelings caused to the claimant by exposing him to the discriminatory comments.

The tribunal held that the ways in which the employer chose to go about dispelling the image of the Pembroke being a "gay pub" were not discriminatory in themselves. These policies were described as "the manifestation of the legitimate policy of seeking to 'sell' the pub to a wider public".

Therefore, the claimant's claim that he had to work under a policy which actively discouraged gay customers failed. The Employment Tribunal held that the claimant had a 'mistaken perception' that his employer was a 'homophobic organisation'. The claimant appealed this decision.

On appeal, the Employment Appeal Tribunal held that the employer's policy discriminated against gay customers and staff on the grounds of their sexual orientation and was thus unlawful.

It held that gay customers were treated less favourably on the grounds of their sexual orientation and therefore the claimant's claim would succeed, in relation to the discriminatory effect of the employer's policy.

The tribunal also found that the implementation of the policy was a repudiatory breach of contract, entitling the employee to resign and claim constructive dismissal.

Discriminating behaviour

The difficulty with this judgment is that it read into the subtleties of the pub owner's behaviour to determine whether the behaviour was discriminatory.

Pub owners and landlords would expect to be able to choose the type of clientele they want to attract, yet when this is done at the expense of a protected section of society, it may be held to be discriminatory, as it was in this case.

When it comes to subtle displays of preference for certain type of customers, like seating the 'ideal' looking customer by the window for passers-by to see, this could be deemed to be discriminatory. So a balance needs to be struck between trying to attract a particular type of clientele through branding and the demands of today's discrimination law.

Needless to say, this is a somewhat unique scenario but provides a valuable lesson for employers and especially pub owners and landlords who are planning to make changes to their business. It is important that while putting such changes into practice, employees do not feel such practices are discriminatory.

If you are looking to rebrand your business in some way and want to change the image to attract a different clientele, that is a perfectly legitimate business decision. But to achieve this and avoid being accused of discriminatory behaviour, be careful not to exclude protected groups in society.

The mistake made by the Pembroke's new owner was while trying to dissuade prostitutes and drug users from the pub, they erroneously cast a net over the gay population as a whole so acted in a discriminatory manner. Therefore, think carefully about how you attract your clientele going forward.

Kimbells is well versed in the legal issues facing the drinks, hospitality and leisure industry, having specialised for many years in advising companies in this sector. Legal updates and commentary on topical industry issues can be found at​: www.kimbells.com​