Employment Law Update

1. Tribunal Chairmen to be abolished

As from 1 December Chairmen of Employment Tribunals are to be given the new title of Employment Judge. This will apply to both part-time and salaried Chairmen. 

2. Age Discrimination

The President of the Employment Tribunals has handed down a practice direction staying all current (and future) tribunal claims which involve an allegation that Regulation 30 of the Age Regulations (providing for lawful retirement at or beyond 65) is unlawful. The cases will be stayed until the European Court of Justice has dealt with the Heyday case. 

3. Cross-Border Mergers

On 15 December 2007, the Companies (Cross-Border Merger) Regulations 2007 will come into effect. They establish a new legal framework within which cross-border mergers between UK and the other EEA companies should operate. Amongst other things the Regulations impose obligations in relation to:

• The information that must be supplied to employees prior to the merger occurring; and
• The creation of employee participation rights in the merged company. 

Until the employee participation rights are finalised the High Court will be unable to make an order approving the completion of the cross-border merger. 

These Regulations may lead to UK employees being represented at board level for the first time in some cases.

4. Immigration

The first part of the Government’s new points based immigration system will be launched by 14 March 2008. The Government has now published a statement of intent setting out how the points system will work for highly-skilled migrants. The new highly-skilled tier will replace the current 8 immigration routes.  Plans to include unskilled workers in the points based system has been shelved for the foreseeable future.

With effect from 29 February 2008 the maximum penalty which can be imposed by the Secretary of State under the Immigration Asylum and Nationality Act 2006 Section 15(2) on an employer who acts contrary to that section in the employment of an adult subject to immigration control will be £10,000. Employers may avoid fines for employing illegal immigrants by checking, copying and retaining documents specified in the Regulations. 

5. ABI Remuneration Guidelines

The Association of British Insurers has updated its remuneration Guidelines. Complimentary copies of the Guidelines are available on request. 

6. Employment Bill

This was introduced into the House of Lords at the beginning of December. Key provisions are:

• The abolition of the Statutory Dismissal and Grievance Procedures
• Tribunals to have a discretion to increase awards by up to 25% if an employer unreasonably fails to comply with a Code of Practice
• Extending ACAS’ powers of conciliation and removing the fixed conciliation periods
• The commencement date is likely to be Spring 2009.

7. Strike

Cooper & Others v The Isle of Wight College 2007 EWHC 2831 (QB)

The High Court held in this case that when an employer made a deduction from wages in respect of time spent by employees on a one-day strike it could only deduct the sum equivalent to one day’s pay. If the employer was not entitled to deduct an additional sum in respect of the holiday pay that the employees would have earned entitlement to by working on the day in question.

8. TUPE: Private Equity

The Private Equity (Transfer of Undertakings and Protection of Employment) Bill 2007-08 was read for the first time on 5 December 2007.  If passed it would apply the Transfer of Undertakings (Protection of Employment) Regulations 2006 to the acquisition disposal of substantial shareholdings by private equity companies. The bill is a private members bill presented by John Hepple MP and will be read for a second time on 7 March 2008. 

TUPE: Objecting to Transfer

New ISG Limited v Vernon 2007 EWHC 2665 (CH)

This is an interesting decision from the Chancery Division. Five employees objected to a TUPE transfer two days after it had taken place once they discovered the previously withheld identity of the new employer and realised they did not want to work for it. The new employer sought interim to enforce restrictive covenants in their contracts arguing that the right to object must be exercised before the transfer and since it was not, the benefit of the restrictive covenants had transferred over to it. 

The Court disagreed, holding that a valid objection can take place after the date of transfer where the employee does not initially know the identity of the transferee and objects promptly as soon as he or she finds out. The objection then has a retrospective effect and prevents the operation of TUPE. 

Accordingly the benefit of the restrictive covenants had not transferred to the new employer and the application for injunctive relief was refused. 

9. Statutory dismissal procedures

Venniri v Autodex UKEAT/0436/07/ZT

In this case the EAT held that Tribunals are obliged to consider whether a dismissal is automatically unfair under the statutory dismissal procedures.  It is not necessary for an employee to raise compliance as an issue. Respondents therefore will be asked on or before the Directions are ordered whether it is admitted that the statutory procedures were not completed.

10. Temps and Agency Workers

The Temporary and Agency Workers (Equal Treatment) Bill 2007-08 has been laid before Parliament. If passed it would require the principle of equal treatment to be applied to temporary and agency workers and make provisions about the enforcement of their rights. The bill will be read for a second time on 22 February 2008. 

In the interim, His Honour Judge Meeran, the President of the Employment Tribunals has issued a Practice Direction staying cases on the employment status of agency workers pending the Court of Appeal judgment in James v London Borough of Greenwich (2006).

11. Redundancy

Court v Dennis Publishing Limited 2200327/2007

A publishing company was held to have directly discriminated against a 55 year old senior employee on the ground of his age, when selecting him for redundancy. A number of factors led the Tribunal to draw an inference of discrimination including a general culture within the company that younger, cheaper employees were preferable to older, more expensive staff and failing to consider for redundancy any other employees who all happened to be at least 20 years younger than the Claimant. His claims for unfair dismissal and breach of contract also succeeded.

In this case the employer was unable to offer any explanation for the discriminatory treatment of Mr Court. However, employers can still avail themselves of the justification defence by showing that the less favourable treatment meted out to the employee on the grounds of his or her age was a proportionate means of achieving a legitimate aim. 

Home Office v Evans & Others 2007 EWCA Civ 1089

The Court of Appeal held that an employer could invoke against its employees the mobility clause in their contracts rather than following a redundancy procedure. As the immigration control at Waterloo was to close, the Home Office sought to enforce the Claimants’ mobility obligations and they were notified they would be transferred to Heathrow. They resigned and unsuccessfully claimed constructive dismissal. 

Where there is a contractual mobility clause an employer can exercise it even in a redundancy situation provided it makes clear that this it what it is doing and acts consistently with that and does not simply seek to use the clause as a defence to a redundancy claim after the fact. 

12. Executive Bonus Terms

Kahn v Dunlop Hayward (DHL Limited) 2007 EWHC 2659 

The High Court considered in this case a dispute over special terms agreed for one executive under a cash bonus scheme. The special terms had been fully documented and the Judge preferred the executive’s view of what had been agreed.  The employer had effectively agreed to terms without appreciating how generously they would reward him. The total claimed by Mr Kahn for three years bonus under the special terms amounted to just under £500,000.  DHL claimed that the special terms as Mr Kahn represented them could not have been agreed since they would not make commercial sense and would leave to Mr Kahn’s bonus entitlement exceeding DHL’s profits. 

Notwithstanding this the Court found in favour of Mr Khan relying on a contemporaneous email sent to Mr Kahn which summarised the conclusive meeting concerning the special bonus terms as best evidence of what those terms were. The commercial sense/economic consequences argument advanced by DHL did not have any impact on the strict contractual analysis undertaken by the Court  and consequential liability.

13. Payments for Restrictive Covenants

Kent Foods Limited v Revenue & Customs [2007] SPC 00643

In this case the Special Commissioner concluded that a payment made under a non-compete agreement executed in connection with the disposal of the entire share capital of a company was taxable as employment income rather than as a capital receipt. The case illustrates the difficulty of arguing that payments for restrictive covenants (even when they are given in connection with the disposal of shares) are not earnings, particularly where the covenants are set out in a document separate from the main share purchase agreement. 

Kent Foods Limited was owned in equal shares by Mr and Mrs Dalglish until it was acquired in December 1999 by Ellis and Everard. Mr Dalglish was to remain employed by Kent but would be paid a further £500,000 in two instalments under a non-compete agreement. This non-compete agreement was not linked to his employment but was between Mr Dalglish and Ellis and Everard. It was held that the payment “in connection with” employment in the case was not de minimis. The payment was made in connection with the giving of a restrictive covenant which fell to be taxed as employment income and as such was subject to NIC. 

If capital treatment is sought the restrictive covenants should be set out in the share purchase agreement there must be no link to employment and if the payment is consideration for the acquisition of shares there should be no reference to “loyalty bonuses” in any documentation or correspondence. 

and finally…

14. Top Tips for a Successful Staff Christmas Party

• Attendance should not be compulsory
• Clear written guidance should be given to all employees about the standards of behaviour expected at the party
• If it is an evening event arrangements should be made for employees to get home safely afterwards
• There should be someone responsible for supervising the event and dealing with difficult employees or their partners
• Everyone should be reminded they are expected back at work the next day unless the party falls at a weekend. 
• If it does fall on a Friday consider the convenience for those with childcare commitments or of certain faiths and whether they can attend
• Provide plenty of soft drinks
• Be sympathetic to those with a hangover the next day – at least they made it in!

Very warm compliments of the Season to everyone from the Employment Group and best wishes to all for a successful 2008.