Articles | Employment bulletin September 2016

This month we look at unscrupulous claims, changes to the taxation of termination payments, pay protection for disabled employees and the role of HR in a disciplinary process.

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David Clay

David Clay

Employment Seminar – 12 October 2016

Gender pay gap reporting – be prepared for the new regime

Employment Seminar

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From April 2017 employers with 250 or more employees shall be legally required to publish annual gender pay gap reports. The mandatory reports are the latest government initiative aimed at tackling the gender pay gap.

 

At our next Breakfast Briefing on 12 October, Ian Machray, head of our employment team, will highlight the key issues to be aware of and give practical guidance on the regulations.

 

Breakfast is provided and there will be opportunities for group discussion, sharing of experience and asking questions of the team.

 

If you would like to attend this free seminar, or receive details of future events, please contact Sarah Walker at function@fsp-law.com.

Planning to fail

Can an applicant bring a tribunal claim for failing to get a job they don’t want?

Planning to fail

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The law regarding serial claimants and those who bring spurious claims has come a long way over the years through lots of interesting case law. In 2014, for example, we saw an individual banned from bringing any further employment claims after he brought 30 unsuccessful cases over four years.

 

The European Court of Justice (ECJ) has now stated that the EU Directives prohibiting discrimination cannot be relied upon by claimants who apply for roles, not with a view to gaining the position itself, but to obtain compensation.

 

Mr Kratzer applied for a graduate trainee role at a company in Germany. When his application was rejected, he claimed that this was due to his age and sex and demanded €17,500 compensation. The company informed Mr Kratzer that the rejection was an automatically generated error and asked him to interview. Mr Kratzer refused to attend an interview until he received the compensation demanded. He then issued claims for age and sex discrimination.

 

The court was concerned that Mr Kratzer had applied for the role, not for the purposes of gaining the post, but to allow a discrimination claim to be brought. They referred the matter to the ECJ, which confirmed that a person acting in such a manner did not qualify for EU protection against discrimination. The purpose of the law was to provide protection to those who are genuinely seeking employment, and not for those with ulterior motives.

 

Employers can take some comfort from this example of the law protecting them from unscrupulous claims. However, it can be difficult to establish that an application is not genuine and, whilst this case was dismissed, the employer was no doubt put to considerable inconvenience and cost. Employers should accordingly ensure that their recruitment processes are fair and non-discriminatory in practice and appearance.

 

We would be happy to review your recruitment processes to ensure they help you find the best staff and avoid any legal pitfalls.

Taxation of termination payments

Important changes from April 2018

Taxation of termination payments

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Although HMRC claims ‘tax doesn’t have to be taxing’, that probably doesn’t chime with the experience of many businesses. The taxation of payments made to an employee on the termination of their employment can be a particularly murky area, with numerous pitfalls for employers. Deducting the wrong amount of income tax or national insurance contributions (NICs) may result in interest and penalty charges and administrative headaches, so it’s important to get it right first time.

 

The government for its part has recognised that the system can be improved, and has recently published draft legislation designed to simplify tax and NIC charges on termination payments. The new legislation will take effect from April 2018. Here are the main changes to be aware of:

 

  • At present, a payment in lieu of notice (PILON) will be taxable where it is authorised by a clause in an employee’s contract, but if the contract is silent then the tax position can be unclear. From April 2018, the distinction between contractual and non-contractual PILONs will be removed and all PILONs will be subject to deductions for tax and NICs.

 

  • The first £30,000 of a termination payment is currently exempt from tax and NICs, with tax (but not NICs) payable on sums above this amount. From April 2018, employer NICs will also be chargeable on payments over £30,000. Payments relating solely to the termination of employment will continue to be exempt from employee NICs.

 

  • The tax exemption for injury payments remains, but the government will clarify that this exemption does not apply to payments for injury to feelings, except where the injury to feelings amounts to a psychiatric injury which is a recognised medical condition.

 

Some other ideas which were previously floated, such as a variable tax free threshold for termination payments based on length of service, and the removal of the exemption for legal costs, have not been taken forward. Although employers will not welcome the new employer NIC charge on termination payments over £30,000, the overall result is a move towards a simpler system. Employers should ensure key staff are aware of the changes well before the new rules kick in.

Reasonable or unreasonable?

Disabled employee demands same pay for easier job

Reasonable or unreasonable?

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In broad terms, the Equality Act 2010 requires employers to make reasonable adjustments where working arrangements put a disabled person at a substantial disadvantage compared to others. What is reasonable will always depend on the particular facts. The Employment Appeal Tribunal (EAT) has recently considered whether maintaining the pay of a disabled employee after his transfer to a less demanding role could amount to a reasonable adjustment.

 

The case concerned Mr Powell, an engineer for G4S Cash Solutions. Over the course of his employment Mr Powell developed back pain and became unfit to carry out his role. After a period of sickness absence Mr Powell returned to work in a ‘key runner’ role, which was a less skilled position involving the delivery of parts to engineers. G4S initially maintained Mr Powell’s salary, but later proposed a 10% cut to reflect the reduced skills required. Mr Powell refused the lower pay and was dismissed. He subsequently brought claims including a reasonable adjustments claim.

 

The EAT found G4S should have maintained Mr Powell’s salary at the original higher rate, despite the fact he was now performing a less skilled role. It focused on the fact that G4S had maintained Mr Powell’s salary for around a year before proposing any reduction and that the cost to G4S of making the adjustment was nominal taking into account its resources. While pay protection clearly involved a cost to the employer, the EAT felt this was no different to other forms of costs incurred by employers in making reasonable adjustments, such as the purchase of special equipment or provision of training or support.

 

The EAT recognised that long-term pay protection will not be an “everyday event”, but its decision shows that employers should not discount it as a potentially reasonable adjustment. Although paying a disabled employee at a higher rate than a non-disabled employee could cause resentment, the duty to make reasonable adjustments may require an employer to treat an employee more favourably than others in order to meet that duty.

When it comes to disciplinary matters…

Your HR team must tread carefully

When it comes to disciplinary matters…

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Human Resources and in-house legal professionals provide employers with valuable guidance and support. However, when it comes to disciplinary matters HR teams should proceed with caution. In October 2015 we reported on the ‘Ramphal’ case, where a HR team overplayed its role and risked undermining the validity of a disciplinary sanction (read more). A recent Employment Appeal Tribunal (EAT) case has again highlighted the difficulties caused by HR teams going too far.

 

The case concerned Dr Dronsfield of the University of Reading. Dr Dronsfield was bound by the university’s polices and procedures but breached a policy when failing to disclose a personal relationship with a student. Following a disciplinary process run by Professor Green, Dr Dronsfield was summarily dismissed by the university. He brought a claim for unfair dismissal.

 

The EAT found that an investigatory report prepared jointly by Prof Green and HR had been heavily amended to Dr Dronsfield’s detriment following discussions between Prof Green, HR and the university’s in-house lawyer. The final report left out key conclusions favourable to Dr Dronsfield that had been included in an earlier draft. The EAT felt that the Tribunal had failed to consider whether Dr Dronsfield’s dismissal was reasonable in the context of the omissions from the final report and concluded that the case should be considered afresh by a new Tribunal.

 

The case is a reminder that it is for an investigating or disciplinary officer to prepare appropriate reports that reflect his or her own judgement. If amendments are made to draft reports following discussions with HR, the relevant officer must be able to explain and justify those changes. HR’s role should be limited to matters of law and procedure, and employers must make sure that both HR and managers are well trained on their respective responsibilities.

 

Employers should note that all draft documents and internal written communications could be disclosable in tribunal proceedings and subjected to scrutiny. Communications with solicitors (including in-house solicitors) benefit from legal privilege and are not disclosable, so it is best practice to discuss any matters that might lead to litigation with a solicitor at an early stage.