Articles | Employment bulletin September 2013 

Sign up for our October briefing; catch up with the new employee shareholder status and NMW increases; let us know if you agree with a disability decision and the altered TUPE reforms.

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Ian Machray

Ian Machray

Breakfast briefing

Jacqueline McDermott will guide you through the minefield of seeking to prevent your employees from sabotaging your business.

Venue:  At the offices of Field Seymour Parkes, 1 London Street, Reading RG1 4PN
Date:  Tuesday 8th October 2013
Time:  8am for 8.30am - 09.30am.
Reply:  If you would like to attend please send an email to Sarah Walker.

Employee shareholders

As trailed in our December 2012 bulletin, a new form of employee status is now available. Since 1 September, employers have had the option of offering employee shareholder status to new joiners and current employees.  As a reminder the basic tenant of the arrangement is that the employer gives the person fully paid up shares in the company (or its parent company) worth at least £2,000 in exchange for the individual giving up some employment rights (ordinary unfair dismissal rights, entitlement to a statutory redundancy payment and some family friendly rights).  The idea is that the person, as someone with a stake in the business, will be more motivated and productive.  However, according to an article in the Daily Telegraph on Saturday, neither the British Chamber of Commerce nor the Department for Business have received enquiries or companies expressing an interest in the concept.

If any employers are considering offering this status to their candidates/employees, they should be aware that there are several conditions which have to be satisfied including

  • a different style written statement of particulars which sets out the employment rights which the individual will not have and details about the shares offered (such as class,  whether they have voting rights or attract dividends payments, whether pre-emption rights and drag & tag along rights apply);
  • independent legal advice at the employer’s cost; and
  • a waiting period of 7 days after the legal advice has been received.

Such details about the shares will be unfamiliar territory for most employees and it seems likely that this option will only be relevant for a very small number of companies and individuals.

HMRC has updated its Share and Asset Valuation Manual in the light of employee shareholder status.  This confirms that employers will be able to apply to HMRC for a share valuation before the shares are given to the employee shareholder.  The first £50,000 worth of the share value will be exempt from capital gains tax.

The employee shareholder will be allowed to sell their shares while still employed but that will not change their status.  They will only be able to become “true” employees if their employer agrees.  This may give rise to employers seeking to “persuade” the employee shareholder to give their shares without receiving the benefit of the forfeited employment rights.

If the employee shareholder keeps the shares during their relationship with the employer, it will be the employer’s decision as to whether they have to sell them when their employment ends.

National minimum wage

The national minimum wage increases announced in April will come into effect on 1 October. As a reminder:

  • 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.

Restrictions on naming employers who don’t pay NMW will be removed next month in the hope that the adverse publicity from being named and shamed will encourage employers to comply with the law.

Gross misconduct = dismissal, doesn’t it?

It is well known that for a dismissal to be fair it has to be within the band of reasonable responses.  Many employers will assume that a finding of gross misconduct will automatically mean that dismissal will fall within that band.  However, a recent case reminds us that this approach contains a potentially fatal short cut.  The case concerned a consultant who saw private patients while signed off sick and on full sick pay from the NHS despite two previous instructions not to do so.  The Employment Appeal Tribunal (EAT) found that the tribunal had not considered the fairness of her dismissal correctly because it had not taken into account any mitigating factors.

Cases of gross misconduct are often emotive for employers and there can be a desire to exit the employee as quickly as possible.  This case shows the ease of falling at the final hurdle.  An employer needs to make sure that once they have reached a finding of gross misconduct they pause to consider whether there are any mitigating factors whether or not they have been raised by the employee. The most common examples will be length of service, previously unblemished record and the effect of dismissal on the employee’s future career. Employers should make it clear in the dismissal letter that they have considered such issues before deciding to dismiss the employee.

Disability-related absences

Many employers have policies in place to manage short term sickness absences which trigger investigation and disciplinary sanctions (up to and including dismissal) after a certain amount of sickness absence.  Clearly adjustments have to be made when applying such policies to disabled employees.  Discounting disability-related absences sounds a simple solution but applying that principle in practice can be difficult, particularly where the disability interacts with other illnesses, as another recent case showed. 

The employee was asthmatic and had three upper respiratory tract infections resulting in 14 days’ absence.  The employer’s policy provided for disciplinary action to be taken after 10 days’ absence.  The employer, without the benefit of medical evidence, made an allowance for what it considered related to her disability. That reduced the relevant number of days to 12 but as that was still higher than the 10 permitted by the policy, the employer proceeded to issue a warning.  The employee claimed a failure to make reasonable adjustments.

The EAT provided guidance on how to make adjustments for absences caused by a disability which interacts with other ordinary illnesses.  The EAT said that are at least 2 possible approaches:

  • Consider in detail and if necessary with medical evidence each period of absence and seek to analyse precisely whether or not the absence was attributable to the disability; and
  • Establish “with proper information” (presumably this means medical evidence) what sort of periods of absence would someone suffering from the particular disability reasonably be expected to have over the course of an average year due to the disability.

The second option is surprising as the courts are usually very focused on the particular employee and their disability. We would caution against relying on a doctor’s report about the periods of absence an average person with a particular disability is likely to have.  We would recommend the first option as much safer.  In either case, professional medical input is usually key.

TUPE reforms watered down

The proposed reforms to TUPE (outlined in our February bulletin) were due to come into force next month.

However, the Government has just published its response to the consultation. The Government has been persuaded to drop two of the most significant original proposals:

  • the service provision change provisions will not be repealed; and
  • the obligation to provide employee liability information will remain (although the time limit will be extended to 28 days).

However, the Government does propose to:

  • allow the buyer/new contractor to consult about potential redundancies before the transfer date provided the seller/old contractor agrees and the consultation can be meaningful;
  • allow micro businesses to inform and consult directly with their employees rather than through employee representatives;
  • expand the “ETO” definition (which buyers/new contractors can use to justify dismissals connected with the TUPE transfer) to include changes to locations so redundancies which arise out of a change of the workplace will not be automatically unfair.

We understand that BIS has informally said that the changes will probably come into force in January 2014.