Articles | Employment bulletin May 2013

Every month the employment team considers the latest employment issues affecting  both employers and employees.  Here is our offering for May 2013.

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Ian Machray

Ian Machray

Breakfast briefing and mock employment tribunal

You are invited to our next breakfast briefing “Staff behaving badly” on 18 June.  Read more.

Have you seen an Employment Tribunal in action?  If not and you would prefer a more friendly setting, join us on 2 July 2013 when FSP will be staging a mock tribunal in conjunction with Hays.  We will be drawing on our experience from real cases.

The mock tribunal is designed to provide an insight into how tribunals approach claims before them but there will of course be healthy doses of comic relief provided throughout the afternoon.  High attendance is expected at this event so please reserve your place as soon as possible.  Read more.

Latest position on some of this year’s changes

As we have mentioned in recent bulletins, we are due to see a number of changes to employment law and practice this year.  The position on some of these changes is becoming clearer.

Employee/shareholder status

We have reported that the government intends to create a new hybrid form of employment status - the employee/shareholder.  The essence of this proposal is that the employee is given shares in exchange for giving up certain key employment rights.  After a game of legislative ‘ping pong’ between the House of Commons and the House of Lords, the latter has overcome its objection to the proposals having secured some concessions from the Government.

Any employer who offers the new status to individuals will have to give them a letter setting out which employment rights the individuals would be giving up and any conditions attached to the shares.  The employer will also have to pay the reasonable costs of the individuals taking legal advice about the offer whether or not the individuals take up the offer. (What’s ‘reasonable’ in this context is a matter of speculation at this stage.  A standard figure may evolve in a similar way to employers’ contributions to employees’ legal costs on compromise agreements which tend to be within a fairly standard range). 

The Government had already conceded that job seekers will not lose their benefits if they refuse a job only offered on an employee/shareholder status and that existing employees will be protected if they refuse to change status.  However, employers will retain the right to offer jobs only on this basis.

The new status is due come into force on 1 September 2013.

Fees in Employment Tribunals

The government has confirmed that it will be introducing fees for using Employment Tribunals this summer (although the exact date has not yet been published).  Many fear that this will limit access to justice by ex-employees while others hope that it will see a reduction in tactical or vexatious claims.

To start a claim an ex-employee will need to pay a fee - £250 for most types of claims (eg unfair dismissal, discrimination and whistle-blowing) and £160 for simpler claims (such as unlawful deductions from wages and redundancy payments).   A second fee will be payable before the hearing (£950 for most claims or £230 for the simpler claims).  The higher fee at this stage is clearly designed to encourage settlement and avoid taking up the tribunal’s time with a hearing.  At the moment we know that a claim will not be allowed to continue if the relevant fees are not paid, although it’s not clear if that means the case will be struck out or merely “stayed” (ie put on hold) until the fee is paid.

Changes to national minimum wage

Despite the sluggish economic climate the Government has announced increases to the national minimum wage with effect from 1 October 2013.
•    The adult rate will increase by 12p to £6.31 an hour.
•    The rate for 18-20 year olds will increase by 5p to £5.03 an hour.
•    The rate for 16-17 year olds will increase by 4p to £3.72 an hour.
•    The apprentice rate will increase by 3p to £2.68 an hour.
•    The accommodation offset will increase by 9p to £4.91 an hour.

Discrimination: who speaks on behalf of your company?

Discrimination by a prospective employer against a candidate in a recruitment process on the basis of sexuality is, of course, against the law across the EU.   But whose actions count as being the employer’s in this context?

The European Court of Justice recently considered a case involving a Romanian football club and its “patron” and shareholder, Mr. Becali who, though not responsible for recruitment, nevertheless played an important role in the management of the club at the relevant time.  He said publicly that he would rather close the club than employ a footballer who was rumoured to be gay.  The court said that, even though Mr. Becali did not have the legal authority to bind the club, his comments could still lead to the presumption that the club’s recruitment policy was discriminatory.   It did however also say that if an employer clearly distanced itself from such remarks this would be taken into account and might lead a court to overturn its presumption of discrimination.

So might this be the time to review who you invite to your equality training?  Don’t be tempted to limit the guest list to directors and managers particularly if others have a public profile associated with your business.

TUPE: A welcome case for employers

Under TUPE, the seller of a business has to consult its employees about any changes connected with the proposed sale which will affect them.   Nothing new there, but how do you apply that principle to a situation where a business has been split into two parts, one of which will be sold and the other closed down as a result?  The tribunal decided that, although the sale of part of the business meant that the remainder was not viable and therefore had to be closed down, the employees in the part that was closed were not entitled to be consulted about the sale.

While this case is welcome news for employers, it obviously should only be followed in situations which exactly mirror its facts.  A very different result would be likely if, for example, there was cross-over between the parts of the business.

Promises, promises

The Court of Appeal has upheld the right of bankers to their bonuses in a recent decision which will doubtless be the subject of much public criticism on political grounds but which legally speaking is entirely understandable.  The facts of the case are specific to the events leading up to the financial crisis in 2008 but nonetheless the principles have far wider application. 

In August 2008, in the face of great uncertainty in the financial markets and facing a  likely mass exodus of staff, Dresdner Kleinwort Investment Bank told its staff at a “town hall” meeting that it had set aside 400 million euros as a guaranteed bonus pool from which discretionary bonuses would be allocated based on individual performance.  Critically, staff were told that the pool would be distributed “no matter what” ie without reference to the bank’s performance.  The staff were reassured by further messages referring to the bonus pool.  Despite the economic climate, nothing changed until December 2008 when the staff received their individual letters notifying them of the amount of their bonuses.  Those letters said for the first time that the bonuses could be reduced if the bank’s actual earnings were materially different to the projected earnings.  In February 2009, the staff’s bonuses were reduced by 90%.

The staff claimed that the bank had breached their contracts by failing to pay the full bonuses. The court did not accept the bank’s many arguments in their defence.  Most importantly, the court found that the announcement at the “town hall” meeting was a legally binding promise which the bank had to honour.  The court also held that the terms of the December letters breached the implied duty of trust and confidence and therefore could not be relied upon.

The moral of the case is that employers should only make promises that they intend to keep and once made they should appreciate that there are very few circumstances in which promises to existing staff will not be considered legally binding.  For that reason, employers should ensure that all conditions are included in the original promise and should not expect to be able to rewrite the promise at a later date.

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