2009 EMPLOYMENT ARTICLES
 
 

 

Collective Redundancy Consultation – A Reminder (Jan09)

Employers are reminded of the potentially serious financial consequences of failing to consult when making collective redundancies.

If an employer is proposing to make redundant 20 or more employees at one establishment within a period of 90 days or less, the collective consultation provisions of Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 come into play. Where the employer is proposing to dismiss 100 or more employees, the consultation period must be at least 90 days; otherwise it must be at least 30 days. Failure to consult with the appropriate representatives of affected employees can lead to a protective award requiring the employer to pay each affected employee 90 days’ pay. Even if the obligation to consult is for a minimum 30 day period, a serious breach of the requirement can result in employees being granted a 90 day protective award.

Genuine efforts to consult must be made – merely keeping employees informed does not fulfil this duty. Consultation of the required duration must take place before any employees are given redundancy notices. Consultation must be meaningful, with a view to reaching an agreement. If the decision to dismiss employees has already been taken, it effectively compromises the consultation process.

In addition, in a collective redundancy situation, the employer has a statutory duty to notify the projected redundancies to the Secretary of State for the Department for Business, Enterprise and Regulatory Reform before giving notice to terminate an employee’s contract. If an employer fails to give the required notification to the Department, the Secretary of State may institute legal proceedings that could lead, on summary conviction, to a fine of up to £5,000.

The obligation to consult over avoiding proposed redundancies extends to consultations over the reasons for the closure of a business. Where it is recognised that dismissals will inevitably, or almost inevitably, result from closure, dismissals are proposed at the point when the closure of the business is proposed. Where closure and dismissals are inextricably linked, the duty to consult over the reasons for the closure arises.

Collective consultation does not replace the need to consult with individuals who may be made redundant in order for any subsequent dismissal to be fair.

It is important that employers are aware of this requirement to consult at an early stage in the decision-making process. Making employees redundant always requires care and advice should be sought as soon as redundancies are contemplated. Restructuring a business, even where staff may not actually leave your employment, also carries with it potential risks. Care must always be taken where fundamental changes are made to employees’ jobs. We can help ensure that a proposed redundancy programme or the restructuring of your business is carried out with the minimum risk of unanticipated financial consequences.

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Annual Increase in Tribunal Awards (Jan09)

The Employment Rights (Increase of Limits) Order 2008, which details the annual inflation-linked increase in limits on the amounts which can be awarded by employment tribunals, was made on 24 November 2008 and applies where the appropriate date falls on or after 1 February 2009.

The main increases in compensation limits are:

  • the maximum compensatory award for unfair dismissal has increased from £63,000 to £66,200;
  • the maximum amount for a week’s pay (for calculating various tribunal awards including the basic award or redundancy payment) has increased from £330 to £350; and
  • the limit on the amount of guarantee payment payable to an employee in respect of any day has increased from £20.40 to £21.50.

There is no statutory cap on the amount a tribunal can award in discrimination cases.

The full list of the increases can be found in the Schedule to the Order here.

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Age Discrimination and Selection for Redundancy (Feb09)

In Rolls Royce plc v Unite the Union, Rolls Royce contended that the length of service criterion in collective agreements relating to redundancy, entered into with the trade union, amounted to unlawful indirect age discrimination against younger employees under the Employment Equality (Age) Regulations 2006. The outcome of this case will be important for all employers considering making redundancies.

There were no issues of fact to be determined and the case was heard in the High Court at the request of both parties. It concerned two collective agreements, regarding redeployment and redundancy, which provided for an ‘assessment matrix’ for use when selecting employees for redundancy. This was designed to enable the company and its employees to be able to restructure ‘flexibly and peaceably’. There were five measured criteria for which points were awarded, one of which was length of continuous service. Those with the fewest points would be selected for redundancy.

The High Court ruled that the length of service criterion adopted did discriminate against younger employees but it could be objectively justified as a proportionate means of achieving a legitimate business aim – i.e. that if a redundancy exercise were necessary, it would be carried out ‘peaceably’ and in a way that was perceived as fair. The scheme was therefore covered by Regulation 3(1) of the Employment Equality (Age) Regulations. The Court was of the view that ‘the criterion of length of service respects the loyalty and experience of the older workforce and protects the older employees from being put onto the labour market at a time when they are particularly likely to find alternative employment hard to find’.

In addition, the Court ruled that giving points for long service as one part of a redundancy selection matrix conferred a benefit on the employee concerned as it might lead to the retention of employment which would otherwise be lost. As such, it was probable that this would be regarded as reasonably fulfilling a business need within Regulation 32(2), which simply requires the employer to justify the impact of an age related award made only to employees whose length of service exceeds five years.

This decision clarifies the position regarding the use of length of service when selecting employees for redundancy. Adopting a scheme where length of service is just one of a number of criteria used to arrive at a fair selection process is likely to enable the employer to defend an age discrimination claim. However, a scheme based solely on ‘last in, first out’ is unlikely to be justifiable.

However, the judge gave Rolls-Royce permission to appeal his ruling on the ground that it was ‘clearly an important point for both parties’.

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EMPLOYMENT LAW CHANGES FOR APRIL 2009 (Mar09)

Changes to employment law and practice led by the Department of Business, Enterprise and Regulatory Reform and changes in occupational health and safety law and practice led by the Health and Safety Executive are normally implemented on one of two dates a year. The reason for this is to make life easier for employers, who must ensure that their policies and procedures comply by the implementation dates – or risk significant penalties.

The two commencement dates are 6 April, the start of the tax year, and 1 October, the date on which the National Minimum Wage (NMW) is revised each year.

The main changes due to be introduced in April 2009 are:

  • Repeal of the Dispute Resolution Procedures – 6 April 2009

The Employment Act 2008 repeals the statutory dispute resolution procedures and related provisions dealing with procedural unfairness in dismissal cases. In their place will be a revised voluntary Advisory Conciliation and Arbitration Service (ACAS) Code of Practice supported by non-statutory guidance aimed at encouraging employers and employees to resolve issues both earlier and informally. Changes are also made to the law relating to conciliation by officers of ACAS, with the removal of fixed periods for conciliation. The Employment Tribunal (ET) will have the discretion to increase or reduce an award by up to 25 per cent where either side unreasonably fails to comply with the new Code of Practice. The draft Code of Practice can be found here.

This is a significant change but employers are reminded that until 6 April they must follow the existing statutory dispute resolution procedures when disciplining or dismissing staff and handling grievances. Contact James Bell for assistance in putting in place suitable policies and procedures that are in line with the new Code.

The Employment Tribunals (Constitution and Rules of Procedure) Amendment Regulations 2008 make consequential procedural changes, resulting from the Employment Act 2008, to ET practice and also make changes with regard to default judgments, electronic communications, the withdrawal and dismissal of proceedings and Stage 1 hearings in equal value claims.

  • The Right to Request Flexible Working – 6 April 2009

The Government has confirmed its intention to extend the right to request flexible working arrangements to those with parental responsibility for children aged 16 and under. For further information, see here.

  • Enforcement of the National Minimum Wage – 6 April 2009

The Employment Act 2008 makes changes to the way in which payment of the NMW is enforced. HM Revenue and Customs (HMRC) officers are given wider powers of investigation and restrictions are removed on the exchange of information between HMRC and the Employment Standards Inspectorate. There will be a new penalty for employers who underpay their workers and a new method of calculating arrears that takes into account the length of time they have been outstanding.

For further information, see here.

  • Changes to Trade Union Membership Law – 6 April 2009

The Employment Act 2008 includes changes that will bring trade union rules in line with European legislation and grant unions the right to expel or exclude members who are also members of political parties such as the British National Party.

  • Increase in Holiday Entitlement – 1 April 2009

In October 2007, the minimum statutory paid holiday entitlement was increased from 20 days a year to 24 days for those working a 5 day week (pro-rata for part-time workers). From 1 April, the minimum statutory annual leave entitlement will be increased to 28 days a year. Paid time off does not have to be given for bank and public holidays but, if it is, employers can include this in the holiday entitlement. For further information, see here.

  • Statutory Maternity Pay – 5 April 2009

The standard weekly rate of Statutory Maternity Pay, Statutory Paternity Pay and Statutory Adoption Pay will increase from £117.18 to £123.06 for payment weeks starting on or after Sunday 5 April 2009.

  • Statutory Sick Pay – 6 April 2009

The weekly rate for days of sick absence commencing on or after 6 April 2009 will increase from £75.40 to £79.15.

  • The Points-Based Immigration System: Tier 4 – 1 April 2009

At the end of March 2009, the existing student route for migrants from outside the European Economic Area and Switzerland wishing to study in the UK will close and be replaced by Tier 4 of the points-based system of immigration. For further information, see here.

  • Increased Penalties for Breaches of Health and Safety Law – In Force Now

Employers are reminded that the Health and Safety (Offences) Act 2008, which alters the penalty framework set out in Section 33 of the Health and Safety at Work etc. Act 1974, came into force on 16 January 2009. The Act introduced harsher penalties for businesses that commit certain health and safety offences.

The maximum penalty that can be imposed in the lower courts for breaching health and safety regulations has been increased from £5,000 to £20,000 and the range of offences for which an individual can be imprisoned has also been broadened.

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A Guide to Dealing with Requests for Flexible Working Arrangements (Apr09)

From 6 April 2009, the statutory right to request flexible working arrangements is extended to parents of children aged 16 and under. Employees with caring responsibilities for children aged up to 6 (18 and under where the child is disabled) and carers of adults already have this right.

An employee must have completed 26 weeks' continuous employment with their employer in order to qualify for the right and can only make one request in any 12-month period.

There is a statutory procedure which must be followed when a request for flexible working arrangements is made.

The employee's request must give details of the revised working pattern they wish to adopt. After acknowledging receipt of the request, the employer has a duty to consider it seriously to decide whether the business can accommodate the requested working pattern.

If the employer is able to agree to the request without further discussion, the employee must be notified of this in writing. If the employer wishes to discuss the application, a meeting must be arranged for discussions to take place with the employee within 28 days of receiving a valid request. If this is not possible, the deadline can be extended with the written agreement of the employee.

The employee has the right to be accompanied at the meeting by a work colleague or a trade union representative. That person may address the meeting and confer with the employee but may not answer questions on the employee's behalf.

The employer must notify the employee of their decision within 14 days of the meeting. Further time to consider a request requires the employee's written consent. If the employer and/or the employee are uncertain whether the new arrangements will work in practice, it is possible to undergo a trial period, which could take place during an agreed extension to the time allowed before the employer makes their final decision.

If the employer accepts a flexible working request, they must write to the employee giving details of their new working pattern, the date on which it will start and stating that the arrangement means a permanent change to the employee's terms and conditions of employment (unless agreed otherwise). The notification must be dated.

If you decide that you cannot accommodate any kind of flexible working for an employee, you must write to them stating which of the listed business grounds for refusing a request apply and explain why these apply in the circumstances. The notification must be dated and set out the procedure to follow should the employee wish to appeal against the decision.
You can reject a flexible working request on only a limited number of set grounds. These are:

  • planned structural changes;
  • the burden of additional costs;
  • a detrimental impact on quality;
  • the inability to recruit additional staff;
  • a detrimental impact on performance;
  • the inability to reorganise work among existing staff;
  • a detrimental effect on ability to meet customer demand; or
  • lack of work during the periods the employee proposes to work.

Should the employee wish to appeal against the decision, they must do so in writing within 14 days of the date of receiving the written notice of refusal. The employer must arrange an appeal meeting within 14 days of receipt of the employee's appeal notice. Where possible, the appeal should be heard by a different manager. The employer must inform the employee of the outcome of the appeal in writing within 14 days of the date of the appeal meeting.

The sanction against an employer who fails to grant a request where clear business reasons do not apply is that an employment tribunal can order that the application be reconsidered and can award a maximum level of compensation of eight times a week's pay, subject to a statutory cap.

Where the employer agrees to change the employee's terms of employment, there is no provision in the legislation for the employee's contract to revert back to what it was should their circumstances change. It may, therefore, be sensible to discuss with the employee whether they wish the change to be for a specified period only.

Employees have protection against detrimental treatment for seeking to exercise their rights under this law and any dismissal for having done so will be automatically unfair.

The Department for Business, Enterprise and Regulatory Reform has made available forms for employees and employers to use at each possible stage of the process when a request for flexible working is made. It is not mandatory to use them, but employers will find them useful to make sure that all the statutory requirements are met. The forms can be found at http://www.berr.gov.uk/whatwedo/employment/workandfamilies/flexible-working/flexforms/index.html.

If you receive a request for flexible working arrangements and would like individual advice, please contact JAMES BELL.

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UK's Opt-Out from the 48-Hour Weekly Working Limit Under Threat (Apr09)

The EU Working Time Directive requires member states to ensure that national rules make it unlawful for an employer to require workers to work more than an average of 48 hours a week. The Working Time Regulations 1998 implement the Directive in the UK. However, the UK Government negotiated an opt-out from the 48-hour weekly working limit where an individual employee gives his or her prior agreement to waive this right.

In December last year, the European Parliament voted in favour of scrapping the UK's opt-out. A revised Working Time Directive will impose a 48-hour maximum working week, calculated over a reference period of 12 months. If the Directive is adopted, the Government will have three years to implement it. In addition, the Parliament approved a proposal for all hours when an employee is 'on-call' to count as working time, in a majority of cases.

This decision was condemned by UK business leaders. The Deputy Director General of the Confederation of British Industry, John Cridland, called the vote "misguided. Trying to ban people from choosing to work more that 48 hours a week is a mistake, and would replace opportunity with obstruction." However, Brendan Barber, General Secretary of the Trades Union Congress (TUC), welcomed the vote. In his view, "members of the European Parliament have courageously defied the abusers and the slave-drivers over the loss of the 'right' to work people till they drop."

There is still a way to go, however, before the revised Directive is adopted. Member states have until May to agree a deal with the European Parliament through the Council of EU Ministers. If no agreement is reached, the opt-out will remain in place.

The TUC has estimated that in 2008, 5.24 million people worked overtime without any extra pay. Whilst critical of the UK's long-hours culture, the TUC recognises that the recession is making people frightened of losing their jobs and it is inevitable that many of them will be putting in extra hours if they believe it will help protect them from being made redundant or keep their employer in business.

The laws on working time across the European Union are intended to guarantee better protection of the health and safety of workers. The issues of competitiveness and cost must therefore be weighed against achieving a sensible work-life balance so that employers and employees can have the flexibility over working hours that they seek. Employers are advised to consider the likely health and safety implications for their employees of continually working long hours. Not only are tired employees more vulnerable to accidents but also an employer who fails to take remedial action when an employee has made them aware that he or she is suffering from stress as a result of overwork can be found liable for a breach of the duty of care owed to the employee.

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'Heat of the Moment' Resignations - When Do They Count? (May09)

The Employment Appeal Tribunal (EAT) has clarified that there are only limited circumstances in which an employee's unambiguous words of resignation should not be relied upon because they can be regarded as being given in the heat of the moment (Ali v Birmingham City Council).

Mr Mohammed Ali worked for Birmingham City Council as a data entry clerk. On 25 April 2007, Mr Ali handed in his resignation to his manager. He claimed that at the time he was very stressed for personal reasons and was not 'thinking straight'.

On being given Mr Ali's resignation letter, his manager sought the advice of the Council's Human Resources (HR) department and, as a consequence, offered him a cooling-off period to reconsider his decision. When she returned 20 minutes later, Mr Ali appeared to be getting upset so she gave him more time. After a further 10 minutes, Mr Ali asked his manager to return to the room and confirmed that he did wish to tender his resignation. This was accepted.

On 27 April, Mr Ali rang the HR department asking about his 'rights' and was told that as he had effectively resigned, he did not have an automatic right to return. He said he needed more time to think about it.

On 30 April, Mr Ali's manager received an email from him saying that he had resigned whilst he was extremely stressed and now realised that this had been a mistake. He was informed that a decision had been made not to reinstate his contract of employment.

Mr Ali claimed that he had been unfairly dismissed but the Employment Tribunal (ET) found that he had resigned and could not therefore bring a claim. Mr Ali appealed against this decision on the grounds that special circumstances existed in his case which justified making an exception. He had resigned in the heat of the moment, so there was no real resignation and he also contended that he had not been given a reasonable amount of time to reflect on his decision.

The EAT dismissed the appeal. There are very limited circumstances in which the unambiguous words of a resignation should not be relied upon, one of which is if it is given in the heat of the moment. The ET had given careful consideration to the circumstances in this case and found that there was no evidence that Mr Ali acted in the heat of the moment when he resigned. He had persisted in his desire to do so after he had been given a number of opportunities to reflect on the matter. Furthermore, where such circumstances do exist, case law states that the appropriate period allowed to an employee to change their mind is 'likely to be a day or two' (Kwik-Fit GB Limited v Lineham). Mr Ali did not ask for his resignation to be rescinded until more than four days after he had tendered it.

"In this case, the EAT found that the period of reflection allowed to Mr Ali on the day he resigned was sufficient to show that his decision could not be regarded as having been taken in the heat of the moment. However, even had it found otherwise, the time it took him to change his mind was outside the time frame allowed in such circumstances."

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Increased Penalties for Breaches of Health and Safety Law (May09)

Employers are reminded that the Health and Safety (Offences) Act 2008, which made changes to the penalty framework set out in Section 33 of the Health and Safety at Work etc. Act 1974, came into force on 16 January 2009. The Act introduced harsher penalties for businesses that commit certain health and safety offences.

The maximum penalty that can be imposed in the lower courts for breaching health and safety regulations has been increased from £5,000 to £20,000 and the range of offences for which an individual can be imprisoned has also been broadened.

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Employment Status - Independent Contractors or Employees? (Jun09)

Whether or not a worker is an employee (working under a contract of service) or is self-employed (working under a contract for services) is an important distinction for tax as well as employment law purposes and HM Revenue and Customs (HMRC) will challenge the employment status of workers if they consider that the arrangements in place do not reflect the reality of the working relationship.

Whilst all aspects of the nature of the employment relationship should be taken into account, for a contract of service to exist, the following must be present:

" an obligation to provide the work personally;
" mutuality of obligation between the employer and the employee; and
" an element of control exercised by the person who is regarded as the employer or 'master'.

In Littlewood (t/a J L Window & Door Services) and anor v HMRC Special Commissioner, Mr and Mrs Littlewood traded in partnership as J L Windows and Doors. HMRC reviewed the partnership's operation of the Construction Industry Scheme and the status of its workers and determined that several individuals were employees rather than independent contractors and that PAYE and NICs were payable on that basis. J L Windows appealed against the decision.

The Special Commissioner supported HMRC's argument that there was mutuality of obligations within each job. However, this finding was not enough to determine the nature of the contract.

As to whether each worker was obliged to carry out the work in person, workers occasionally used their own helpers to assist with a job but the Special Commissioner did not see this as a significant factor.

With regard to control, the workers operated in teams consisting of between two and five people, with an experienced worker appointed by Mr Littlewood as the 'charge hand'. The charge hand acted as spokesperson for the workers in their team and calculated the amount of work required to complete a given contract. They then gave Mr Littlewood a total price for the contract, having agreed prices with the other workers in their team. How the money for a job was divided amongst the team members was up to the charge hand, although the individual payments were made by J L Windows.

Mr Littlewood argued that he had not retained control over the workers. He was not on site overseeing how the work was done and had no control over the hours worked. HMRC argued that the degree of control necessary for there to be a contract of service need only be slight. It was the right to exert to control that was significant. In their view, the charge hand represented Mr Littlewood and acted on his behalf in giving instructions to the other workers.

The Special Commissioner concluded that the workers acted independently of Mr Littlewood and agreed matters within their teams, membership of which was chosen by the charge hands, not Mr Littlewood. Team members had to act on the instructions of the person running the site. Mr Littlewood's site visits were to check on the progress of the job and to see if any changes to the original pricing were necessary to allow for extra work not taken into account when determining the price quoted to the customer.

In the view of the Special Commissioner, therefore, J L Windows did not exercise sufficient control over the workers to make itself master. In the absence of the element of control, the contracts could not be seen as contracts of service and so any other tests became irrelevant.

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Partners and Compulsory Retirement Age (Jun09)

The Employment Equality (Age) Regulations 2006 introduced a new, default retirement age of 65 and allow that provided certain procedures are followed, compulsory retirement at that age will not be discriminatory. However, the default retirement age exemption does not apply to partners in a partnership. In order to justify the inclusion of a mandatory retirement age in its partnership agreement, a firm must be able to demonstrate that this is a proportionate means of achieving a legitimate aim if it is to defeat a claim of age discrimination.

In Seldon v Clarkson, Wright & Jakes, the former senior partner of a firm of solicitors claimed that the provision in the partnership agreement that required all partners to resign at age 65 (although they could be kept on by agreement) was discriminatory.

The Employment Tribunal (ET) found that although the provision constituted direct age discrimination, it was justified. Of the six reasons put forward by the firm for having a mandatory retirement age, the ET considered the following to be legitimate objectives:

" To ensure that associates are given the opportunity of partnership after a reasonable period, thereby ensuring they do not leave the firm;
" To facilitate the planning of the partnership and workforce across individual departments by having a realistic long-term expectation as to when vacancies will arise; and
" To limit the need to expel partners by way of performance management, thereby contributing to the congenial and supportive culture in the firm.

In the ET's view, the mandatory retirement clause was a necessary and proportionate means of achieving these objectives. The evidence supported the fact that it played a significant part in the retention of associates as it ensured there were clear opportunities for advancement. Furthermore, a principle whereby partners could be expelled for poor performance would not be consistent with the culture of congeniality. The mandatory retirement age ensured that underperforming partners close to retirement age were spared this indignity. As to why the compulsory retirement age was fixed at 65, the ET considered it not unreasonable to assume that on reaching this age some partners would not be able to make as great a contribution to the partnership as they had in the past.

Mr Seldon appealed on various grounds. In addition, the Equality and Human Rights Commission was permitted to make representations as it challenged what it held to be the discriminatory assumption relied on by the ET that once a person reaches age 65, there is a significantly greater risk that they will underperform.

The Employment Appeal Tribunal held that the ET was entitled to find that the principle of compulsory retirement was justified and achieved certain legitimate objectives. However, whilst the partnership could therefore adopt a ruling requiring all partners to retire at a particular age, they had not established any justification for fixing the mandatory retirement age at 65 because performance would most likely begin to deteriorate at around that age. There was no evidential basis for that assumption before the ET. As such, the particular objective of congeniality did not justify the rule. Whilst the default retirement age is 65 under the domestic law, that provision was adopted for labour market considerations, rather than because it is accepted that performance diminishes at that age.

The case was therefore remitted to the ET to consider the question afresh.

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New Minimum Wage Rates Announced (Jul09)

The Government has announced new National Minimum Wage (NMW) rates that will apply from 1 October 2009.

For workers aged 22 and over, the rate will increase from £5.73 to £5.80 an hour. The rate for 18- to 21-year-olds will rise from £4.77 to £4.83 and for 16- and 17-year-olds the rate will increase from £3.53 an hour to £3.57.

The accommodation offset will rise from £4.46 per day to £4.51 from 1 October 2009.

In addition to the rate changes, the Government has accepted the recommendation of the Low Pay Commission (LPC) that the adult rate of the NMW should be extended to 21-year-olds. This will be implemented from October 2010.

The LPC has also recommended that information on employers who have shown a wilful disregard for NMW legislation should be publicly available. The Government has committed itself to developing proposals to achieve this, taking into account the practical issues involved.

The Government will also consider the LPC's proposal that a minimum wage be introduced for apprentices and will respond in full to this when it sets the LPC's remit for 2010.

The former Department for Business, Enterprise and Regulatory Reform (now the Department for Business, Innovation and Skills) has already announced that the NMW Regulations are to be changed so that tips and service charges can no longer be used to make up staff salaries to the minimum legal level. This change will take effect in October 2009.

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Enforcement of the National Minimum Wage - The New Regime (Jul09)

From 6 April 2009, changes have been made to the way the National Minimum Wage (NMW) is enforced. In addition, where HM Revenue and Customs (HMRC) discover that a worker has been paid less than the NMW, he or she is entitled to have arrears of wages repaid at current rates. These changes were brought in by the Employment Act 2008. The Act also gives HMRC compliance officers new inspection powers and strengthens the criminal regime for NMW offences.

If HMRC find that there has been an underpayment of the NMW, they may issue a notice of underpayment requiring the employer to repay the arrears and to pay a financial penalty to the Secretary of State. Employers can appeal to the Employment Tribunal against the notice of underpayment.

A penalty set at 50 per cent of the total underpayment will be charged in respect of underpayments of the NMW occurring in pay reference periods starting on or after 6 April 2009. However, there is a minimum penalty of £100 and a maximum penalty of £5,000. Employers who comply fully with the notice of underpayment within 14 days of service will receive a discount of 50 per cent on the penalty.

Where workers are owed arrears, the repayment must take account of the length of time that has elapsed since the underpayment. Where the rate of the NMW at the time the arrears are calculated is higher than the NMW in force at the time the underpayment occurred, the arrears will be calculated by reference to the current rate.

Compliance officers have the power to remove NMW records from an employer's premises for photocopying. The compliance officer will be entitled to remove complete records but must return them within a reasonable period.

The Employment Act 2008 also gives HMRC the power to use the search and seize powers in the Police and Criminal Evidence Act 1984 when investigating criminal offences under the National Minimum Wage Act 1998 and makes changes to the way that criminal offences are investigated and enforced. With effect from 6 April 2009, the most serious cases can be brought to trial in the Crown Court. This means that employers who deliberately fail to pay the NMW may face harsher penalties.

The Government has published a document setting out its policy on HMRC enforcement and prosecutions, which can be found here.

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Redundancy Pay (Aug09)

In his April Budget, the Chancellor of the Exchequer announced that the Government intended to increase from £350 to £380 the maximum amount of a week's pay used when calculating statutory redundancy pay. The change will take place from 1 October 2009.

The one-off increase will apply to a week's pay for calculating various tribunal awards.

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No Immediate Review of the Default Retirement Age (Aug09)

Opponents of the mandatory retirement age of 65, contained in the Employment Equality (Age) Regulations 2006, are disappointed that the new Equality Bill does not contain measures to abolish it. However, the Government has confirmed that it will undertake an evidence based review of the default retirement age in 2011. This will allow time to see how the Regulations are working and help businesses plan in the knowledge that there will not be an imminent change. If the review concludes that a retirement age is no longer necessary, the Government will take action to remove it.

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Redundancy Dismissal and Age Discrimination (Aug09)

A recent case (Killa v Electronic Motions Systems Ltd.) illustrates the danger when making redundancy dismissals of failing to use objective criteria or a proper selection process to determine which employees are to go, and of not offering employees suitable alternative work where this is available.

59-year-old Mr Killa was employed by Electronic Motions Systems Ltd. as an electronic engineer. He was selected for redundancy without a proper selection process based on objective criteria being applied. At the end of the first redundancy consultation meeting, he was dismissed with immediate effect and asked to leave the company's premises. He was not allowed to return to work. Although suitable alternative work was available, this was not offered to Mr Killa.

Mr Killa brought a claim of unfair dismissal and age discrimination. The Employment Tribunal (ET) found that his dismissal was unfair, both procedurally and substantively, and, as his employer could not explain the reasons for its actions, his selection for redundancy dismissal amounted to age discrimination.

The ET found that Mr Killa had done all he could to mitigate his loss by trying to find a new job, including training as an electrician to make it easier to find work.

The ET observed that 'it is not, unfortunately, the case that someone aged 59, 60 or over competes on a level playing field with younger people. The reality is that age discrimination exists and is likely to be highly influential in limiting his opportunities'. Mr Killa was awarded compensation of £90,361, including loss of earnings, loss of benefits and damages for injury to feelings on account of the manner in which he was dismissed.

When selecting workers for redundancy, objective criteria must be used and it is advisable to agree the basis for selection with employee representatives. Written records of the process should be kept. Selecting older workers in the absence of any objective justification for so doing is a risky strategy.

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Controlling Shareholder Can Be an Employee (Sept09)

In Secretary of State for Business, Enterprise and Regulatory Reform (BERR) v 1. Richard Neufeld and 2. Keith Howe, the Court of Appeal has confirmed that a shareholder and director of a company can also be an employee under a contract of employment with the company, even where that person has a controlling interest in, or even total control of, the company.

The two cases arose because of the insolvency of companies and hinged on whether or not each claimant had been an employee of the failed company. If so, he was entitled to the protection afforded by Section 182 of the Employment Rights Act 1996 (ERA) to those who are employees at the date when the employer company has become insolvent.

The facts of Mr Neufeld’s case were as follows. He was managing director of A & N Communications in Print Ltd. (A&N) and held 90 per cent of the shares. The company went into insolvent liquidation. He first began working for Neufeld Press Ltd. in 1982 as a member of its sales team. In 1988 he became a shareholder and one of the company’s three directors. In 2001, this undertaking was transferred to A&N. Mr Neufeld continued to work as part of the sales team, managed by the sales director, and worked a 60-hour week carrying out sales as well as management duties. He had loaned money to A&N as well as providing personal guarantees on the company’s behalf. None of the three directors had a written contract of employment.

The Secretary of State had refused to meet Mr Neufeld’s claim for redundancy money, notice money and holiday pay owing at the date of insolvency to be paid from the National Insurance Fund (NIF). His claim amounted to approximately £10,000.

Mr Neufeld brought a claim under Section 188 of the ERA and the Employment Tribunal (ET) dismissed his claim. It held that the fact that he had given personal guarantees on A&N’s behalf, had lent money to the company and had control over it showed that in reality he was not an employee of the company when it became insolvent. In the ET’s view, he was running his own business as a manager and major shareholder.

The Employment Appeal Tribunal (EAT) disagreed. In its view, the correct approach was to focus on the conduct of the parties in carrying out the ‘purported’ contract of employment. Other factors were only relevant in so far as they reflected upon that conduct. The EAT held that the ET judge had erred in law in taking into account irrelevant matters.

The Secretary of State appealed to the Court of Appeal. The appeal was heard at the same time as another case because a salient factor in each was that the claimant was a controlling shareholder and a director of the company. The Secretary of State asked the Court of Appeal to clarify the approach to be adopted by the ET in these circumstances.

The Court of Appeal dismissed both appeals. In giving its judgment, Rimer LJ analysed the previous case law and authorities governing this question. In the Court’s view, the correct approach is to first determine whether the putative contract is genuine or a ‘sham’. If it is genuine, is it a contract of employment rather than, for example, a contract for services? As the critical question in such cases is whether or not the putative employee was an employee at the time of the company’s insolvency, it may be necessary to examine what has been done under the claimed contract, particularly where this is not in writing. The fact of a person’s control over the company will form a ‘backdrop’ against which the assessment of the conduct under the contract will be made, but will not ordinarily be of any special relevance in deciding whether or not that person has a valid contract of employment; nor will the fact that they have share capital invested in the company or have made loans to it or given personal guarantees on its behalf. Such considerations will ordinarily be irrelevant in determining whether or not a valid contract has been created. They show an owner acting as an owner. They do not show that the owner cannot also be an employee.

This is an important case as there were 12,000 claims on the NIF by directors in 2008 and, given the current economic situation, the number in 2009 is expected to far exceed this total. Contact us if you would like advice on any of the issues raised.

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The Importance of Safety Standards (Sept09)

A recent case highlights the importance for those working in the building industry of ensuring that they carry out work in accordance with the applicable health and safety requirements.

In May last year, qualified scaffolders working for Sky Scaffolding (Midlands) Ltd. were erecting scaffolding on the pavement in Coventry city centre. The scaffolders began work early in an attempt to avoid working when the streets would be busy, but they were still working at 9.20am, a very busy period. A steel pole fell from a height of five metres onto a member of the public, gashing her leg. The woman was immobilised for several weeks and still suffers from anxiety attacks as a result of the accident.

At the time of the accident, the scaffolders were securing the site on account of the streets being busy but, according to the Health and Safety Executive (HSE) press release, they had ‘failed to take more-robust [sic] steps to ensure that the system of work was effective to protect the public from simple human error such as dropped materials or tools during scaffolding erection’.

Use of the pavement had not been restricted, nor was it closed to pedestrians although, to prevent such accidents occurring, a workman had been given the task of asking pedestrians to wait when he was passing materials and poles up to his colleagues or while materials were being handled overhead. However, this job was too great a task for one individual as pedestrians were coming along the pavement in both directions. The workman failed to see the woman approaching and so did not ask her to wait.

The company was charged with not taking sufficient and suitable steps to prevent injury to passers by and with not conducting a sufficient and suitable risk assessment. It pleaded guilty in the Magistrates’ Court to breaching Regulation 3[1](b) of the Management of Health and Safety at Work Regulations 1999 and Regulation 10(2) of the Work at Height Regulations 2005 and was ordered to pay a fine of £4,000 and costs of £1,761. As of 16 January 2009, the maximum penalty the Magistrates’ Court can award for a single breach of either regulation is a fine of up to £20,000 or up to a year’s imprisonment.

The HSE has stressed the importance of scaffolders segregating themselves from the public whilst conducting dangerous overhead activities.

Information on construction safety and working at height can be found on the HSE website.

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Swine Flu – Guidance for Employers (Oct09)

On 18 September, the NHS announced that new cases of swine flu (influenza A H1N1) in England had risen by a third, suggesting that the surge in infections anticipated with the approach of winter may have already begun.

The swine flu virus is an unusual strain, not only because it has proven to be highly infectious in the summer months but also because it seems to affect young people more severely than it does the middle-aged. Thus far, more than 70 people have died in the UK after contracting the virus. Pregnant women and those with underlying health problems are considered to be particularly at risk.

Swine flu has several potential legal implications for firms, for example:

Liability for failing to take steps to prevent the spread of the infection, particularly to those known to be in a high-risk group, and to maintain a safe working environment. Have you carried out a risk assessment yet? Don’t forget that there is a specific statutory duty on employers to carry out a risk assessment in respect of pregnant women and new mothers;
The impact on staff who remain at work, if they work longer hours than usual in order to cover for staff who have contracted the virus;
Problems which may arise if an outbreak results in you failing to deliver to one of your customers or you have a supplier or contractor who lets you down as a result of swine flu (which may be considered to be ‘force majure’). Consider your potential liabilities should either event occur and check your insurance position carefully.

It will be a fortunate business that is left completely unscathed by the virus but there are steps that you can take to protect your staff and keep them informed so as to improve the chances of keeping your business up and running. Be prepared to be flexible. Could staff work from home? Are there alternative ways of doing business other than by direct contact, for example teleconferencing instead of face to face meetings?

Given that employees may be able to self-certify themselves as unfit for work for up to a fortnight, employers must be prepared to deal with the disruption the pandemic may cause. If you have not already done so, put in place contingency measures for dealing with mass absenteeism. Also, consider what steps you can take to prevent staff returning to work too soon.

Examine all your staff policies and procedures to make sure they are compatible with any situations that may arise. For example, does your sickness policy cover the position of a member of staff who is healthy but who has to take time off work because they have caring responsibilities for someone else who is infected with the virus?

Make sure you have up-to-date contact details for all your staff and know who to contact in an emergency.

As always, when considering measures you can take to protect employees, it is important to take care not to overstep the line between protecting them and violating their human rights.

You can keep up-to-date on the latest Government guidance at
http://www.direct.gov.uk/en/groups/dg_digitalassets/@dg/@en/documents/digitalasset/dg_178842.htm and at
http://www.direct.gov.uk/en/Swineflu/DG_177831

If you are concerned about the effects of swine flu, we can help you to formulate a management strategy to deal with it.

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Get Ready for Compulsory Pensions (Oct09)

The Pensions Act 2008 contains provisions which will make it compulsory (from 2012) for an employer to enrol qualifying workers aged between 22 and the state pension age who earn more than a de minimus amount (currently set at £5,035 per annum) into a pension scheme and to make contributions to the scheme.

The employer will be required to contribute a minimum of 3 per cent of salary and the employee will be required to contribute a minimum of 4 per cent of salary, up to a maximum of (currently) £3,600 per annum.

There will be substantial fines for failure to comply with the new regulations. Clearly, there are likely to be many changes to the provisions between now and the planned implementation date of 2012, but this is a good time to start thinking through the potential impact of the new regime on your business.

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TUPE and the Duty to Disclose ‘Employee Liability Information’ (Nov09)

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) protect the employment rights of employees when their employer changes as a result of the relevant transfer of a business or a part of one or when there is a service provision change – for example when a contract is assigned to a new contractor following re-tendering.

The TUPE Regulations introduced a new duty on the transferor to supply specific information about the transferring employees to the new employer by providing what is termed ‘employee liability information’. This must be given at least two weeks before the completion of the transfer unless this is not reasonably practicable. The information that must be provided is:

the identity of the employees who will transfer;
the age of those employees;
information contained in the statements of employment particulars for those employees;
information relating to any collective agreements which apply to those employees;
instances of any disciplinary action within the preceding two years taken by the transferor in respect of those employees in circumstances where the statutory dispute resolution procedures applied or, from 6 April 2009, where the ACAS Code of Practice on disciplinary and grievance procedures applied;
instances of any grievances raised by those employees within the preceding two years in circumstances where the statutory dispute resolution procedures applied or, from 6 April 2009, where the ACAS Code of Practice on disciplinary and grievance procedures applied; and
instances of any legal action taken by the transferring employees against the transferor in the last two years and details of any potential legal actions which may be brought by those employees where the transferor has reasonable grounds for believing that such action might occur.

The information must be provided in writing or in a form which is accessible to the new employer. It is advisable for the transferor to consult with the transferee to discuss the method to be used.

If the transferor does not comply with this duty, the transferee can make a complaint to the Employment Tribunal (ET). If the ET finds in favour of the new employer, it has the power to award compensation for any loss incurred because the information was not provided. The level of compensation will normally be no less than £500 for each employee for whom information was not provided or for whom the information given was defective, unless the ET rules that it would be unjust or inequitable to award this default amount.

Failure to comply with the TUPE provisions can be very expensive for businesses and it is important to take advice at the earliest possible stage of the transfer process.

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Government Plans National Minimum Wage for Apprentices (Nov09)

The Government has announced that it has asked the Low Pay Commission to set a National Minimum Wage (NMW) for apprentices.

Currently, apprentices under age 19 do not qualify for the NMW. Neither do those over age 19 who are in the first 12 months of their apprenticeship.

There is a guaranteed rate of pay for Learning and Skills Council apprenticeships and this was increased from £80 to £95 per week from 1 August 2009.

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Default Retirement Age – Review Brought Forward (Nov09)

The Department for Work and Pensions has announced that the Government now plans to undertake an evidence based review of the default retirement age, currently age 65, in 2010, not 2011 as originally planned. The U-turn is attributed to acceptance that an earlier review is appropriate given the ageing population. Many people wish to work beyond the age of 65 and, with longer life expectancy, a culture of early retirement is becoming increasingly unaffordable.

Duty of Care to Employees – Obvious Risks (Dec09)

Every employer owes a duty of care to its employees, but deciding who is responsible for an accident can be very difficult when the issue is whether warnings against risks should have been given or, if given, were adequate.

Employers often argue that employees are responsible for their own actions, but employers have a duty to warn employees of potential risks in the workplace, even if these are obvious. A recent case has confirmed that some risks are so obvious that warnings need not be given, for example where to argue a lack of awareness of the risk would be absurd. However, it is hard to distinguish between what would be deemed to be that obvious and what would not.

In the case in point, an employee turned a box upside down in order to reach material on a top shelf. The box slipped from underneath him, causing him to fall and sustain injury. The employee’s case failed both in the lower court and on appeal because the employer had specifically warned all employees that the use of boxes for this purpose was unsafe and had provided a safe alternative for reaching high items.

The Court of Appeal said that an employer is responsible for devising safe working methods and practices and, where they have issued a warning against a specific risk, they should not be held liable for an injury to an employee who ignored the warning. The judge commented that ‘some dangers are so obvious that no instruction is required’ but this would not have been the case in this instance. Had the employer not warned of the potential risks attached to using the box for this task, the argument that the employee was capable of appreciating the risk for himself would have been rejected.

What constitutes a sufficient warning is a grey area and is an issue of fact, not law, so previous case rulings provide little assistance as each case is judged on its own facts. In an unreported case, an employer was held to be liable for an injury sustained by an employee who had mopped a floor and then slipped on the wet surface she created. The employer argued that it was obvious that the floor would be wet immediately after mopping and that it needed to be dry mopped to be safe. This argument was rejected by the court, however.

It has been suggested that an employer is only under an obligation to warn employees of risks that fit within the broad remit of the employee’s job description. For example, if an employee were to put his fingers into an electrical socket, the employer would not be liable for the resulting injury as this was not a part of their ‘system of work’. In contrast, an employee who has been asked to rectify a paper jam in a photocopier should be warned of the risks. In some circumstances, an employer may decide to let experienced employees devise their own safe working practices in relation to certain tasks but, ultimately, it is the employer’s responsibility to assess and warn against workplace risks.

The best way to safeguard against potential claims is to warn against all potential risks, however obvious. Ensuring a full risk assessment of tasks is carried out and that all staff are trained properly is paramount.

The Gender Pay Gap – Be Prepared (Dec09)

The gender pay gap is the term used to describe the difference between the hourly earnings of men and women. It is determined by calculating the overall pay of women as a percentage of that of men. The pay gap is the difference between this and 100 per cent. So, for example, if women’s pay is 80 per cent of men’s, the pay gap is 20 per cent.

There are different ways of calculating the gender pay gap. If calculated using the mean (average) hourly pay, women’s pay (excluding overtime) was 17.1 per cent less than men’s pay in 2008, showing an increase on the comparable figure of 17.0 per cent for 2007.

At present, private sector employers are only under an obligation to disclose gender pay information if requested to do so as part of a questionnaire under the Equal Pay Act 1970 or during Employment Tribunal proceedings. However, the Equality Bill contains a power to require employers with more than a specified number of employees to report on the gender pay gap. The original provision was for those with more than 250 employees to provide this information but a reduction in the number to 100 has been mooted.

Initially, organisations with more than the specified number of employees will be ‘encouraged’ to volunteer information on the average hourly pay of male and female workers. To this end, the Equality and Human Rights Commission will carry out a consultation in order to develop a system of pay reporting for the private sector. If by 2013 it is clear that a voluntary reporting system has been ineffective in narrowing the gender pay gap, legislation will be brought forward to force disclosure. The Equality Bill also bans secrecy clauses which prevent staff from disclosing their salaries to colleagues.

A recent survey of senior Human Resources professionals revealed that only 29 per cent of organisations had conducted gender pay audits and only five per cent had actually reported their findings. Employers would therefore be well advised to carry out an audit sooner rather than later and to ensure that any discrepancies are remedied so as to reduce the risk of equal pay claims in the future.

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Information on this website does not consitute legal advice.  Reading this material is not a substitute for taking advice from a solicitor.
BELL PARK KERRIDGE IS A TRADING NAME OF BELL PARK KERRIDGE LIMITED INCORPORATED IN ENGLAND AND WALES
Registered Office: Clifford Court | Cooper Way | Parkhouse | Carlisle | Cumbria | CA3 0JG
Directors: James Bell, LLB and Duncan Carter, LLB
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