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Oliver McCannn   


Employers Update - February 2011

Welcome to the February edition of Employ!

In this month’s Employ! we take a look at the latest developments in the abolishment of retirement dismissals, as well as the increase in Employment Tribunal limits, proposed reforms to the Employment Tribunal system and the Royal Wedding “Bank Holiday” in addition to important case law developments. We also answer your questions so please keep submitting questions for future editions of Employ!

If you have any queries or wish to have a chat about Taylors Employment Services please contact Oliver McCann on 0844 8000 263 or oliver.mccann@taylors.co.uk.

Oliver McCann - Partner and Head of Employment
James Bellamy - Employment Solicitor

Tel: 0844 8000 263
Email: oliver.mccann@taylors.co.uk


In This Edition:

» Retirement Update
» Compensation Limits Increase and Tribunal Reform!
» It’s a Right Royal Mess!
» Redundancy and Restructuring
» Lewd Comment by Nurse did not Justify Dismissal!
» IR35 – Employee or Not?
» Bribery Act Update
» Your Questions

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Retirement Update

Employ! has previously reported on the abolishment of the retirement age in the October 2010, December 2010 and January 2011 editions. The regulations to abolish the retirement age have now been laid before Parliament and published. Whilst most of the regulations are as expected, there appears to be a serious mistake!

What do I need to know?

As currently drafted, you will only be allowed to rely on the transitional provisions (as communicated in October’s Employ!) if the employee “attains 65” between 6th April and 30th September. Arguably, the wording is such that any employee who is already 65 and is to retire between 6th April and 30th September will fall outside the transitional arrangements and, as such, if they are dismissed on grounds of retirement, they will be able to claim age discrimination and unfair dismissal, even if the full retirement process has been followed.

This is a technical issue, but unless it is amended, it may well succeed! Watch this space and for those currently trying to retire those individuals who have already turned 65, it would be wise to pause for thought and take legal advice.

Note also that the regulations provide that it is not an age contravention to provide insurance benefits to the under 65s but not to the over 65s. Taylors will report more fully on this in due course once the dust has settled!

Compensation Limits Increase and Tribunal Reform!

Earlier this month the maximum compensation amounts which can be awarded by Employment Tribunals increased and the government announced its proposals for future Employment Tribunal system reforms which if implemented would be welcome relief for many employers.

What do I need to know?

Key compensation limit increases are:

  • the maximum compensatory award for unfair dismissal increased from £65,300 to £68,400;
  • the limit on the amount of a guarantee payment payable to an employee in respect of any day increased from £21.20 to £22.20;
  • the minimum amount of compensation where an individual is found to have been unlawfully excluded or expelled from a trade union increased from £7,200 to £7,600; and
  • the maximum amount of a week’s pay for the purpose of calculating a redundancy payment or for various awards including the basic or additional award of compensation for unfair dismissal increased from £380 to £400.

A full list of the changes can be found in The Employment Rights (Increase of Limits) Order 2010.

Note there are certain claims for unfair dismissal where the statutory limit does not apply, ie. whistle-blowing dismissals and health and safety dismissals. Discrimination claims also have no limit on the size of the compensatory award.

Remember - Taylors offers a variety of employer protection packages which not only ensure you have access to employment law advice from qualified lawyers but also insure you against compensation awards and the legal costs of defending Employment Tribunal claims. More information can be found at http://www.taylors.co.uk/employer-protection-scheme.htm

The Government has also commenced consultation on reforms to the current Employment Tribunal system including:

  • increasing the qualifying period for employees to be eligible to bring a claim for unfair dismissal from one to two years – a huge benefit to employers with up to 4500 fewer unfair dismissal claims anticipated from this change alone!
  • introducing fees to bring claims, similar to the civil courts, which may reduce the number of vexatious or weak claims;
  • requiring all claims to be lodged with ACAS in the first instance for up to a month in order to allow pre-claim conciliation to be offered;
  • extending the jurisdictions where an Employment Judge can sit alone to include unfair dismissal claims, introducing the use of legal officers to deal with certain case management functions and taking witness statements as read, rather than having them read out by the witnesses themselves; and
  • tackling weak and vexatious claims by providing Employment Tribunals with a range of more flexible and robust case management powers, so that weaker cases can be dealt with in a way that does not mean disproportionate costs for employers.

The consultation also includes a proposal to introduce financial penalties for those employers found to have breached an individual’s rights. This could be up to half the amount of the total award made to the Claimant and would be payable to the Exchequer – a revenue generating proposal!

It’s a Right Royal Mess!

Prince William and Kate Middleton marry on 29th April 2011 with the government declaring the day a “Bank Holiday”, much to the delight of millions of employees across the country!

Reports suggest that the cost to the UK economy and business will exceed £5 billion pounds by creating consecutive 4 day weekends with Good Friday (22nd), Easter Monday (25th), the new Bank Holiday (29th) and May Day (2nd May). It seems there has been little regard for the costly impact this decision will have on businesses.

What do I need to know?

Whether an employer must recognise the extra Bank Holiday depends on the contractual position with your employees. Those employers who allocate a set number of days for annual leave, regardless of Bank Holidays, or those employers who specifically set out in the employment contract which Bank Holidays they will recognise, will be unaffected – they can insist that the employee works on that day if the business is open or that the employee uses a day from his or her usual annual leave entitlement where the business closes or the employee wishes to observe it (subject to the employer’s holiday policy and booking requirements!).

Matters are more complex, however, for those employers with employment contracts which state “20 days plus Bank Holidays”. Clearly, when the contracts were issued and agreed, the employer intended this clause to cover the “normal” 8 Bank Holidays in the year and employers will seek to argue this as the correct interpretation.

Employees, however, will rely on an old Latin rule of contractual interpretation (“contra preferentum”) which states that any ambiguous term will be construed against the party which imposed its inclusion into the contract, ie. the employer. If the employee is successful but has been denied the right to take the day off as paid, then claims for unlawful deduction of wages and breach of contract may follow.

Employees will argue that there are existing laws which allow for Bank Holidays to be changed or moved or other days to be declared, and that this should have been expressly excluded for by the employer. For example, 2012 will see the Queen’s Jubilee celebrated by moving the late May Bank Holiday to Monday 4th June and also by declaring a further Bank Holiday on Tuesday 5th June – yet more bad news for employers!

With the above in mind, all employers need to carefully consider their approach to the Royal Wedding Bank Holiday. A balance needs to be struck between compliance with the terms of your employment contracts, the importance of staff morale and the need to operate your business on that day.

Redundancy and Restructuring – Getting it Right!

As there continues to be uncertainty surrounding the economy, businesses continue to seek advice on restructuring their operations to improve efficiency and effectiveness.

Often employers create an entirely new role which replaces one or two existing roles. The employer will argue that the new role is entirely different and requires different skills, capabilities and experience (and sometimes qualifications) and, as such, there is a redundancy situation as there is a reduction in the number of employees required to carry out “work of a particular kind”.

So what do you do if you create one different role to replace two existing roles? Are you obliged to follow the usual redundancy selection criteria, or can you adopt an interview process?

What do I need to know?

A recent case, Morgan v The Welsh Rugby Union 2011, confirms the usual redundancy guidance set out in the case of Williams v Compare Maxam does not apply to cases where the redundant employees are applying for “a new and different” role. Engagement to this new role has to be one based on the needs of the business looking forward, in particular focusing on the individual’s ability to perform the new role. As such, it is perfectly legitimate to abandon the standard redundancy selection process and adopt an interview process.

The only requirement is that the interview process be fair and objective (ie. be based on the individual’s ability to meet the key skills and deliverables of the new role). The case confirmed that as long as an interview is fair and objective, it matters not that an interview panel does not adhere strictly to the job description/requirements and that the format of the interview differs substantially between two candidates. The emphasis must be on appointing the candidate who the interview panel feel best able to fulfil the role.

Note that this case involved two internal candidates. The case of Harris v Ralph Martindale suggests that the interview process for a new role should in the first instance be limited to those at risk of redundancy and only after a conclusion is reached that the “at risk internal candidates” are not suitable for the new role, should the interview process open up to other internal and external applicants. However, this case does not create any rule and indeed is arguably contrary to the Morgan case - if the decision to appoint to the new role must be forward-thinking and the key is appointing the best candidate to perform that role (particularly at senior level), then to restrict the interview process to “at risk employees” would be contrary to that need by depriving the employer of a proper selection for the new role!

Lewd Comment by Nurse did not Justify Dismissal!

A recent Court of Appeal decision confirmed that a nurse had been unfairly dismissed by the London Hospitals NHS Trust after she was reported by a fellow nurse as saying “It’s been a long time since I’ve had a man underneath me like this” whilst straddling a half naked man who need urgently to be sedated.

The Trust felt the comments were unforgivably rude and worthy of dismissal.

What do I need to know?

As with any dismissal, to avoid it being unfair, all the facts need to taken into consideration!

In this case, the nurse had an unblemished work record, intervened (despite being off duty) to assist colleagues struggling to handle a fitting patient in urgent need of medical care, the patient was unaware of the comment and, through her actions, she helped to save the patient. For her efforts, she was kicked by the patient during the process as well. The nurse explained that she made her comment in the heat of the moment, embarrassed at her position.

The Employment Tribunal felt that the comment was at best lewd, and commented that a large proportion of the population would have found the comment humorous. The Court of Appeal agreed that considering what the population at large would think was relevant to the issue of reasonableness when there was disagreement as to the seriousness of the offence.

IR35 – Employee or Not?

IR35 rules provide that where an individual provides personal services to an end user through an intermediary (usually a personal service company) in circumstances where (but for the existence of the intermediary) there would be an employment relationship, then an employment relationship will be implied and the intermediary will be liable for tax and employer NI as if it was the employer for income received from the end user.

A recent case, MDB Design Services v HMRC, has reiterated that the guidelines for determining employment status in these circumstances involve consideration of the combined effect of a contract and it being complied with in practice as well as mutuality, control, business risk and integration.

What do I need to know?

In this case, it was held that a sole director of a service company contracted to Airbus over several contracts was not an employee of Airbus. The Tribunal held that the relationship was typical of a contract for services. Where aspects point towards an employment relationship such as hourly payments, work approval, on site working, time recording and intellectual property vesting in the end user, they would have less weight if they arose from the special needs of the end user and were therefore still consistent with self employed status.

Note that on the issue of integration, a recent agency worker case held that integration into the end user’s business was not fatal to the existence of an agency worker relationship (Tilson v Alstom Transport 2011).

Bribery Act Update

In the last edition of Employ! we reported on the introduction of the Bribery Act in April 2011. The government has confirmed that this will be delayed until guidance on the Act is finalised and published and, at that point, three months notice given before it becomes law.

Your Questions Answered

1. We have an employee who is a senior salesman and who has recently handed in his notice. We would like to place him on garden leave, given his access to confidential information and customer contact, which he could unlawfully take advantage of. We have noticed that we do not have an express “garden leave” provision in his contract of employment. If we proceed to place him on garden leave do so does this constitute a breach of contract?

No. Although express clauses would always be recommended, in this case you could get away with it. Recent case law has established that even without an express garden leave provision, you are entitled to place an employee on garden leave provided that he would not lose valuable skills relevant to his profession whilst not able to work and it would not prevent him from earning a living (ie. commission only contracts). In your present circumstances, it would seem unlikely to fall within that category.

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