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A B C D E F G H I J K L M N O P R S T V W Y

Employment Bulletin

A regular bulletin that provides updates affecting employment issues and the related legislation and best practice.

Latest Issue

In the latest issue of our employment bulletin we look at the issues of taking a 'break' as it is one of the most common questions asked by workers during a shift. But is an employer in breach of the Working Time Regulations 1998 if a worker doesn't take a break, even when they haven't asked for one? This was the interesting point raised in the recent case of Grange v Abellio London Limited.

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"Can I take my break now, please?"

Thursday 8th December 2016

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Employment Bulletin - Issue 312

We would assume that this is one of the most common questions asked by workers during a shift! But is an employer in breach of the Working Time Regulations 1998 (the “WTR”) if a worker doesn’t take a break, even when they haven’t asked for one? This was the interesting point raised in the recent case of Grange v Abellio London Limited. 
 
To briefly recap the law in this area, broadly speaking, workers are entitled to a rest break of 20 minutes, if their daily working time is more than 6 hours. If an employer refuses this right, the worker can bring an employment tribunal claim. 
 
Mr Grange was initially allocated an eight hour shift, with a half hour break. Due to the demands of the job, he often found it difficult to take a break and he frequently worked an entire shift without rest. In July 2012, Mr Grange’s employer changed his shift to eight hours and Mr Grange was told that he was no longer entitled to a break, but was permitted to finish 30 minutes earlier instead. Mr Grange raised a grievance to complain about the fact that he wasn’t able to take a rest break, and hadn’t been able to even prior to the July 2012 shift change. He argued that this constituted a “refusal” to exercise his rights under the WTR.  
 
When this case was first heard in the Employment Tribunal it was found that as Mr Grange hadn’t actively asked for a break during each shift, there could not have been a refusal on the part of the employer. Prior to July 2012, working practices had allowed for a rest break, regardless of whether not one was actually taken. Whilst post July 2012, the employer had instructed or set an expectation that no breaks be taken, Mr Grange had nevertheless not challenged this and had not requested to take his 20 minutes, until the grievance was submitted.  
 
The Employment Appeal Tribunal, however, disagreed. In the Appeal Tribunal’s view the purpose of the legislation is clear; rest breaks are needed to protect workers’ welfare. If an employer adopts working practices that don’t allow workers to take breaks, then this will constitute a “refusal”. Whilst the Appeals Tribunal didn’t ultimately rule on whether or not the particular facts of this case amounted to a refusal, the principle to come out of the judgment is clear - an express request is not a prerequisite. 
 
Although the position remains that workers can’t be forced to take rest breaks, the “if you don’t ask, you don’t get” attitude, will no longer get employers very far. Employers would, therefore, be well advised to proactively encourage the taking of rest breaks and to ensure that working practices do allow/make provision for breaks. Employers who, in reality, allow breaks to go by the wayside will find themselves in considerable difficulty if they face a claim.  
 
For the full judgment, please click here.
 
If you would like to discuss any matters around rest breaks please do not hesitate to contact:
 

Amy Anderson

Solicitor
Tel: 0161 836 8952

Autumn Statement 2016: A look at the key points for employment law, pensions and the recruitment sector

Thursday 24th November 2016

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Employment Bulletin - Issue 311

Chancellor of the Exchequer Philip Hammond delivered his first (and last) Autumn Statement since taking over from George Osborne following June’s Brexit referendum. From next year, the Autumn Statement will become the main Budget, announcing tax changes well in advance of the start of the tax year. From 2018 onwards, the Spring Statement will respond to the forecast from the Office for Budget Responsibility (OBR).

The Chancellor confirmed earlier government announcements, that George Osborne’s pledge to eliminate the budget deficit by 2019/20 would be abandoned. Borrowing is back. The dominating feature in this year’s Autumn Statement focused on raising productivity and setting out the support needed to grow the economy, as Britain prepares to leave the European Union.

Key announcements for employment law include:

  • The unemployment rate was 4.8% in the three months to September 2016 – an 11 year low. The OBR forecasts that the number of people in employment will continue to increase, reaching 32.3 million in 2021.
  • Following the recommendations of the independent Low Pay Commission, the government will increase the National Living Wage (NLW) by 4.3% from £7.20 per hour to £7.50 per hour in April 2017.
  • From April 2017 employee and employer NI thresholds to be equalised at £157 per week.
  • From April 2017 the tax and employer NI advantages of salary sacrifice schemes will be removed. Following consultation, arrangements relating to pension savings, childcare, the cycle to work scheme, and ultra-low emission cars, will be excluded from this change.
  • At the Budget, the government committed to removing the tax benefits of disguised earnings for employees. The government will now extend the scope of the changes to employers and the self-employed.

Key announcements for pension law include:

  • The Money Purchase Annual Allowance will be reduced to £4,000 from April 2017, to prevent inappropriate double tax relief.
  • A new market leading savings bond to be launched with an interest rate of 2.2% gross and a term of three years.
  • The ‘triple lock’ on the state pension will remain until the next Parliament, but will be reviewed to tackle the challenges of rising longevity and fiscal sustainability. 

If you would like to discuss any issues on these announcements or to discuss any employment and pensions law matter please contact:

Elspeth Beatty
Associate, Employment & Pensions
Tel: 0151 600 3114 or email: elspeth.beatty@brabners.com

 

Recruitment sector update:

The government re-affirmed that it will be tackling the use of disguised remuneration schemes by employees and employers and removing tax benefits related to disguised earnings.  This is consistent with previous Budget communications, but the government has gone on to confirm that it will:

1.      “strengthen sanctions and deterrents and take further action on disguised remuneration tax avoidance schemes”;

2.      “…reform the off-payroll working rules in the public sector from April 2017 by moving responsibility for operating them and paying the correct tax to the body paying the worker’s company.  The government believes public sector bodies have a duty to ensure that those who work for them pay the right amount of tax…”;

3.     ”in response to feedback during consultation, the 5% tax free allowance will be removed for those working in the public sector, reflecting the fact that workers no longer bear the administrative burden of deciding whether the rules apply”; and  

4.     “The government is investing further in HMRC to increase its activity on countering avoidance and taking cases forward for litigation...”

These points are confirmed in the Treasury’s Blue Book (published to accompany the Autumn Statement yesterday). 

What does this mean for those running businesses in the recruitment sector or for persons working in the sector?

Firstly, the proposed IR35 tax legislation changes are going ahead.  This means that businesses that pay personal service companies (e.g employment businesses) and operate in the public sector will need to scrutinise the supply chain and check compliance arrangements, given the tax responsibilities that will be imposed on them.

Secondly, the 5% tax-free allowance that personal service companies currently benefit from will be removed for contractors working in the public sector when the new rules are introduced.   

Thirdly, it appears that HMRC will receive more funding to help them counter tax avoidance and this is likely to result in additional scrutiny being applied to recruitment businesses and contractors working in this sector.

Please also check out our Employment section update (above), which also comments on the confirmed increase to the National Living Wage from April 2017 and changes to salary sacrifice arrangements.  

If any assistance is needed in considering these recruitment sector matters or re-visiting contractual arrangements in light of the announcements, then please do not hesitate to contact Emma Clarke or Paul Chamberlain:

Paul Chamberlain
Head of Employment & Pensions - Manchester
Tel: 0161 836 8864 or email: paul.chamberlain@brabners.com

Emma Clarke
Associate, Employment & Pensions 
Tel: 0161 836 8951 or email: emma.clarke@brabners.com


The latest on holiday pay – clarity on what amounts to a 'week’s pay'

Wednesday 9th November 2016

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Employment Bulletin - Issue 310

Two recent cases have both clarified and expanded upon what amounts to a ‘week’s pay’ for the purposes of calculating statutory holiday pay.

Susan McKenzie looks at the decisions with some useful points to note for employers.

The case of British Gas Trading Ltd v Lock looked at whether results-based commission payments should be included when calculating statutory holiday pay and the decision in Brettle v Dudley Metropolitan Borough Council considered the same for voluntary overtime.

British Gas Trading Ltd v Lock

The Court of Appeal has upheld the Employment Tribunal and EAT’s decisions that there is no obstacle to interpreting the Working Time Regulations (“WTR”) so as to include results-based commission payments in the calculation of holiday pay, thus giving effect to the decision of the Court of Justice of the European Union that contractual commission payments must be taken into account when calculating holiday pay.   

The Court of Appeal considered the ‘underlying thrust’ of the WTR, namely that the WTR were enacted solely and deliberately to implement the Working Time Directive (“the Directive”). The Court decided that it must therefore be presumed that the UK government intended to fulfil all of its obligations arising under the Directive. This could be achieved by reading a new subsection into the WTR.

Far from bringing total clarity to the calculation of holiday pay in cases involving commission and/ or bonuses the Court of Appeal made it clear that its judgment was only focussed on the specific case of Mr Lock. The Court declined to provide answers as to whether commission and/ or bonuses should be included in holiday pay in all cases and what should be the appropriate reference period for calculating the commission/ bonus aspect of holiday pay.

Points to Note

  • Employers are advised to keep a watching brief on developments in this area. The Court of Appeal decided that the wording the Employment Tribunal had suggested should be read into the WTR was too wide. In addition, we understand that British Gas will seek leave to appeal the decision to the Supreme Court.
     
  • As well as further clarifying what should be included in the calculation of “holiday pay” this case also shows that although the UK has voted for Brexit until we actually leave the EU the Courts are required to apply the European interpretation.

Brettle v Dudley Metropolitan Borough Council

Five lead claimants brought a case in the Employment Tribunal for unlawful deductions from wages in respect of 56 employees employed by a directorate which carried out housing repairs.

The five employees worked different shift patterns, with different degrees of regularity to the overtime worked. They argued that their holiday pay should have included an amount in respect of voluntary overtime, voluntary standby allowances and voluntary call-out payments.

Decision

The Employment Tribunal considered the existing case law in relation to holiday pay and working time, in particular Williams, Lock and Bear. Particular regard was given to the fact that an employee should not be deterred from taking annual leave, and that which is normally received constitutes ‘normal pay’. The Tribunal decided that the payments received were intrinsically linked to the work required to be done under the contract by the worker. Notwithstanding the fact that the additional overtime was voluntary, where overtime was regularly worked, this was to be included in normal pay and should therefore form part of the employee’s holiday pay.

Points to Note

  • As a non-binding tribunal decision the Brettle case is of limited value; however it does give a further indication as to the direction in which holiday pay cases are going.
     
  • Provided the voluntary overtime is worked with ‘sufficient regularity’ an employee’s holiday pay ought to reflect that the additional work has become part of their normal work. It will be for employers to decide whether to include those payments in their calculations going forward, or wait for the issue to be decided at the EAT.
     
  • This only applies to the first four weeks of annual leave (which are derived from the Directive), not in respect of the additional 1.6 weeks provided for under the WTR.  

Need advice or wish to talk to us?

If you need advice on holiday pay calculations please do not hesitate to contact us.

Working Time seminar - 23 November
The impact of these cases, and the issue of working time more generally, will be discussed in depth in our Working Time Seminar held in Brabners’ Liverpool office on 23 November 2016. For more information on the seminar and to book your place please click here

Solicitor, Employment & Pensions team
Tel: 0151 600 3157

Settlement agreement unenforceable due to lack of mental capacity

Wednesday 9th November 2016

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Employment Bulletin - Issue 310

In the case of Glasgow City Council v Dahhan, the Employment Appeal Tribunal (EAT) held that an employment tribunal had jurisdiction to decide whether a settlement agreement which satisfied the requirements of section 203(3) of the Employment Rights Act 1996 was nevertheless unenforceable because the Claimant lacked the mental capacity to enter into it.

This decision follows from the case of Industrious Ltd v Horizon Recruitment Ltd (in liquidation) and Vincent which held that an employment tribunal had jurisdiction to determine whether a compromise agreement was unenforceable because of misrepresentation.

Facts of the case

Mr Dahhan was employed as a teacher by Glasgow City Council (“the Council”) and brought tribunal claims for direct discrimination, harassment and victimisation on the grounds of race.

The parties entered into a settlement agreement under which Mr Dahhan gave up all claims arising from his employment at the Council. The tribunal was subsequently advised by Mr Dahhan to withdraw his claims.

Mr Dahhan later wrote to the tribunal requesting reconsideration of the withdrawal of his claims arguing that he had lacked capacity to instruct a solicitor and to make decisions at the time the settlement agreement was entered into.

An employment judge held that the tribunal had jurisdiction to set aside the settlement agreement on the grounds that it was invalid because Mr Dahhan lacked the capacity to contract at the time he entered into it. The matter then went to the Employment Appeal Tribunal where the Council’s appeal was dismissed.

Section 203 Employment Rights Act 1996 (ERA 1996)

Section 203(1) of ERA 1996 provides that any provision in an agreement is void in so far as it purports to preclude a person from bringing any proceedings under the ERA 1996 before an employment tribunal.

Section 203(2) of ERA 1996 provides that subsection (1) does not apply to certain types of claim if the conditions set out in subsection (3) are satisfied in relation to the agreement. Section 203(3) provides for the following conditions:

  • The agreement must be in writing
  • The agreement relates to particular proceedings
  • The employee has received advice from a relevant independent advisor
  • The agreement must state that the conditions regarding compromise agreements are satisfied.

Comment

This case underlines the difficulties which can arise in trying to ensure a binding agreement in circumstances where there are question marks over the capacity of one of the parties to fully understand the Agreement he / she is entering into and its implications. 

Unless there is a qualifying settlement agreement which is valid in both substance and form, a tribunal cannot dismiss a claim on the basis that it has been settled. Dahann shows that if there is sufficient evidence to establish a lack of capacity then a tribunal will not find the agreement to be enforceable, notwithstanding the fact that the settlement agreement in question may be compliant with section 203 of ERA 1996.

Where a contract is found to be a nullity, its component parts stand or fall together, meaning that the tribunal’s decision that the settlement agreement was not valid might extend beyond the specific issues being litigated before the tribunal. The EAT took the view that any attempts by the parties to bring other claims would have to be considered in light of ‘res judicata’, the doctrine preventing a party from re-litigating any claim or defence already litigated.

Points to Note

  • Where a party has a doubt as to the capacity of an individual entering into a settlement agreement, or even conducting proceedings more generally, the possibility of that person seeking medical assistance should be explored, as should the possibility of an employment judge exercising their case management powers in order to assist matters.
     
  • Parties to a settlement agreement should always do so with the benefit of separate independent legal advice in order to ensure that the settlement agreement is valid in both substance and form.

If you would like more information or to discuss the potential impact of this case, please contact:

Partner, Employment & Pensions team
Tel: 0151 600 3162

Uber: Does the latest decision give any more clarity on employment status?

Tuesday 1st November 2016

Employment Bulletin - Issue 309

Laura Pointon looks at the key points from the Uber Employment Tribunal including the meaning of 'mutuality of obligation' which the case centred on. Follow this link to read Laura Pointon's blog.
 
 
 
 

EAT ruling: Permanent pay protection can be a reasonable adjustment for a disabled employee

Tuesday 18th October 2016

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Employment Bulletin - Issue 308

In the case of G4S Cash Solutions (UK) Ltd v Powell, the Employment Appeal Tribunal (EAT) held that an employer was required, as a reasonable adjustment, to continue employing a disabled employee in a more junior role involving a less physical activity, preserving his existing rate of pay on an indefinite basis.

Brief facts of the case

Mr Powell worked as an engineer maintaining G4S ATM machines until he was no longer able to carry out his duties due to a severe back problem. Mr Powell was, in light of his disability, given the new role of ‘key runner’ which consisted of delivering parts to the other G4S engineers. Mr Powell was able to do this job despite his disability and believed that he would remain on his engineer’s salary indefinitely.

A year later, G4S informed Mr Powell that they were considering dispensing with the position of key runner for organisational reasons and offered a number of alternative vacancies to him. It was made clear to Mr Powell that if none of the offers were considered suitable he would be able to remain in his role as key runner but take a 10% reduction in salary or face being dismissed on medical grounds.

None of the alternative vacancies were considered suitable and Mr Powell refused to have his salary reduced. G4S dismissed Mr Powell and the matter went to the Employment Tribunal where Mr Powell’s complaints of disability discrimination and unfair dismissal were upheld. The matter then went to the EAT where the original decision was confirmed and it was decided that, in the circumstances of this case, G4S had failed to make a reasonable adjustment by failing to allow Mr Powell to continue in his role as key runner at his existing rate of pay.

What does the Equality Act 2010 say?

Where an employer knows or ought to have reasonably known that an individual is disabled and is likely to be placed at a substantial disadvantage because of their disability, an employer is under a duty to make reasonable adjustments in the workplace to ensure that a disabled person is not put at a substantial disadvantage when compared with those who are not disabled.

What constitutes reasonable adjustments?

What exactly constitutes a ‘reasonable adjustment’ will need to be considered in light of the facts of each case; however the EHRC Employment Statutory Code of Practice contains a non-exhaustive list of potential adjustments that employers might be required to make. Examples include:

  • Making adjustments to premises
  • Providing information in accessible formats
  • Allocating some of a disabled person's duties to another person
  • Transferring a disabled person to fill an existing vacancy
  • Altering a disabled person's hours of working or training
  • Acquiring or modifying equipment
  • Modifying disciplinary or grievance procedures
  • Adjusting redundancy selection criteria

Points to note:

  • Whilst the decision in Powell does appear to further expand on what would be considered a ‘reasonable adjustment’ it will certainly not be an “everyday event” that an employer is required to protect an employee’s salary as part of that adjustment.
     
  • One of the objectives of the EqA 2010 is to keep employees in work and in some circumstances there may be an additional cost to an employer in achieving that objective. The Powell case further stresses that the reasonableness of potential adjustments must be assessed on a case-by-case basis although employers will always be expected to give considerable thought to the financial resources of the company in making their decision.
     
  •  An adjustment which also amounts to a contractual change (as in this case) will not be effective without securing the employee’s consent.
     
  • Careful and thorough consideration should be given of all aspects of the adjustments proposed.
     
  •  Ensure offers of adjustments are clearly and precisely documented and communicated.

Need advice or wish to talk to us?

To further discuss the potential impact of this case, or any other employment law issue, please contact:


Chris Pavlou

Senior Associate, Employment & Pensions team
Tel: 0151 600 3152
Email: chris.pavlou@brabners.com  


Asda Face Equal Pay Battle

Friday 14th October 2016

Employment Bulletin - Stop Press - Issue 307

An Employment Tribunal held today that staff bringing equal pay claims against Asda are able to compare their jobs in Asda retail stores with the jobs of their colleagues who work in distribution centres. Asda had sought to argue that the jobs could not be compared for the purposes of equal pay because the shops and distribution centres were in different locations, with different pay arrangements.

The decision means that the Asda staff class action can proceed and leaves Asda facing the prospect of a large liability if found to have failed to ensure equal pay. This serves as a reminder of the importance of employer’s addressing any gender pay gap and avoiding potentially large back pay claims down the line.

The decision is particularly pertinent as with effect from April 2017 employers with more than 250 employees will need to calculate their gender pay gap by looking at mean and median figures for pay among men and women and publish their first gender pay gap information by the end of April 2018.

If you have any queries regarding equal pay or gender pay gap reporting please do not hesitate to contact Brendan McAleese or a member of our employment team.


Brendan McAleese

Solicitor, Employment & Pensions
Tel: 0151 600 3067
Email: brendan.mcaleese@brabners.com


Watching brief: Brexit and Employment Law

Tuesday 4th October 2016

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Employment Bulletin -  Issue 306

At the Tory Party Conference Theresa May said the UK will begin the formal Brexit negotiation process by the end of March 2017. The timing on triggering Article 50 of the Lisbon Treaty means the UK looks set to leave the EU by summer 2019. But, in the 13 weeks that have passed since the Brexit vote are we any more enlightened as to the potential impact of Brexit from an employment law perspective? And what are employers saying about the practical implications of Brexit in the workplace?

Steady As She Goes?

The status quo is broadly expected to continue during the negotiation period with the next 12-24 months appearing to be relatively quiet in terms of planned employment legislation. We are unlikely to see Brexit having an early impact on employment law.

  • Both the Leave and Remain campaigns focused heavily on workers’ rights. It is highly unlikely that the government will target workers’ rights whilst negotiations are ongoing, as any such attempts could potentially jeopardise those negotiations. The UK will be expected to demonstrate that it has minimum employment protections in place to remain a viable trading partner for the EU.
     
  • Perhaps with that in mind, Theresa May has made a point in saying that existing workers’ legal rights will continue to be guaranteed in law. 
     
  • Most employers have maintained a message as steady as she goes. Confidence has returned after the immediate post leave shock. There is yet to be a Brexit effect on the jobs market with the latest figures showing a slight fall in unemployment levels.
     
  • That said, Immigration rules will be different and the government will have to directly address a number of questions around the immigration status of EU nationals currently working in the UK and the requirements which will be placed on those who enter the UK to work in the future. Theresa May has promised some control over the number of people coming to the UK. The basis of that control has yet to be determined. Campaigners to leave championed a points based system but indications are that the government will look at other options; theoretically a work permit or visa system, restrictions on entry to those with job offers, a quota system or emergency brake.  

Challenges Faced by Employers Post Vote

  • Challenges faced by employers have tended to be specific to businesses who place a particular reliance on recruiting from the EU. Businesses are reporting concerns from potential EU national recruits who are unwilling to commit to roles in the UK given the uncertainty as to their status and ability to remain long term.
     
  • Also, we have received reports of employee unrest from businesses who rely heavily on EU colleagues, particular unskilled workers, arising from misinformation relating to their current immigration status. Employers faced with this would be advised to issue its own information on immigration status and put measures in place to support EU colleagues who, based on an informed decision, want to proceed with a citizenship application rather than leave this to be dealt with by an outside agency.
     
  • Reported cases of post Brexit discrimination taking place within the workplace have been rare though some employers have faced the fall out arising from employees facing abuse outside of work or (in some cases) travelling to and from work.
     
  • Some businesses have been affected by projects being put on hold (for example in the commercial property market) whilst the impact of Brexit is assessed meaning that short term steps are being taken to keep control of costs (a moratorium on pay rises for example).
Need advice or wish to talk to us?
 
If you would like to discuss any issues you may have about employment law and Brexit please do not hesitate to contact:
 
Partner, Employment & Pensions team
Tel: 0151 600 3162
 

 


Is your business protected? Top tips for employers regarding the use of restrictive covenants and gardening leave.

Friday 10th June 2016

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Employment Bulletin - Issue 305

The Business Secretary, Sajid Javid, recently announced a ‘call for evidence’ requesting opinions on non-compete clauses. His aim is to investigate whether these clauses prohibit entrepreneurship and innovation. The Business Secretary appears to be seizing upon unenforceable clauses which seek to deter employees from working for a competitor or setting up on their own.

Non-compete clauses are one of a number of ways employers can seek to restrict the activities of their employees post-employment. These are collectively known as restrictive covenants and are commonly found in contracts of employment, particularly for senior employees.

When drafted correctly, restrictive covenants and garden leave clauses are a powerful source of protection for employers against the potential damage to the business that could be caused by an employee leaving to work for a competitor or setting up on their own and trying to poach your key staff, customers and clients.

The legal position

Restrictive covenants in employment contracts are subject to stringent scrutiny by the courts given the inequality of bargaining position between the employer and the employee.

In deciding whether restrictive covenants are enforceable the court will evaluate whether the restriction goes any further than is reasonably required to protect the legitimate interests of the employer. This will be assessed at the time the employment contract is entered into and does not take into account promotions or new positions generally.

The court will also consider the nature of the business when the clause was entered into. Therefore, in a business which has evolved to carry out different work the restrictive covenants may no longer be relevant and therefore are more likely to be unenforceable.

Another common pitfall is that employers have a ‘one size fits all’ approach where the restrictive covenants in use are the same for all roles across the business. The courts do not favour this approach as it fails to take into account an employee’s changing roles and responsibilities as they progress and are promoted within the business.

A significant legal question mark has always existed in respect of broadly drafted non- compete clauses. Mr Javid’s investigations will further call into question whether a blanket ban on competing can realistically be said to serve legitimate business interests.

How can garden leave help?

Placing an employee on garden leave is a valuable tactic to employ when an employee tells you they are leaving. 

A well drafted clause would allow you to remove the employee from the workplace immediately and compel them to see out their notice period at home without contact with any of your clients or suppliers.

Putting an employee on garden leave comes at a cost. The employee would be entitled to their usual remuneration and benefits for the duration of their notice period but you may decide that commercially this is a cost worth bearing to protect your business.

The duration of a garden leave clause is often off- set against the period for which an employee would be restricted under restrictive covenants. Without such off- set a court may find both clauses to be unenforceable if the court believes the combined duration of employee restriction is too penal. 

Practical tips

Business protection is very much a case of prevention being cheaper than cure- you need to make sure that your restrictive covenants are enforceable.

We recommend that you should:

  • Review employment contracts of key employees annually, particularly restrictive covenants.
    We suggest that this could form part of a salary review process.
  • Avoid a ‘one size fits all approach’ to restrictive covenants. 
  • Issue new contracts with relevant restrictive covenants with promotions or role changes. 
  • Review your use of garden leave- make sure your contracts include this right.

Need advice or wish to talk to us?

If you would like to discuss any issues regarding restrictive covenants and gardening leave, or for any other employment law matter please contact either:


Stephen Brodie

Partner, Employment & Pensions team
Tel: 0151 600 3150
Email: stephen.brodie@brabners.com


 
Trainee Solicitor, Employment & Pensions team 
Tel: 0151 600 3114
 

Financial penalties for unpaid tribunal awards and settlements

Friday 29th April 2016

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Employment Bulletin - Issue 304

A new financial penalty scheme came into force on 6 April 2016, the aim of which is to deter non-payment of tribunal awards and Acas conciliated settlements, and to penalise employers who fail to pay awards and settlements. 
 
The scheme is in addition to the tribunal’s existing power to order an employer to pay a financial penalty to the Secretary of State where the employer is found to have breached a worker’s rights, and that breach has ‘one or more aggravating features’. The tribunal has the power to make such an order, even where an award is not made. 
 
On 13 April 2016 the Department for Business Innovation & Skills published a new employment tribunal penalty enforcement form to accompany the new scheme. 
 
Key points of the process are:
 
  • Regarding tribunal awards, a complaint cannot be made until 42 days after the judgment was made. For Acas conciliated settlements, a complaint can be submitted if payment has not been received by the date agreed as part of the settlement;
     
  • The employer will first be contacted regarding the outstanding payment, and then issued with a warning notice by an enforcement officer, stating that a financial penalty will be imposed unless the ‘relevant sum’ is paid by no less than 28 days from the date of the notice. The warning notice will explain that the employer has a right to make representations about the unpaid relevant sum or its ability to pay, by the specified date;
     
  • If the enforcement officer is satisfied that the employer has failed to pay the unpaid relevant sum in full before the date specified in the warning notice, he may issue a penalty notice requiring the employer to pay a financial penalty to the Secretary of State;
     
  • The penalty will be 50% of the unpaid relevant sum, subject to a minimum of £100 and a maximum of £5,000. If the employer pays both the unpaid relevant sum owed to the claimant and the penalty, the amount of the penalty will be reduced by 50%. Interest continues to accrue on a financial penalty which is not paid within the specified period;
     
  • There are limited grounds on which an employer can appeal again the imposition of the penalty notice or the amount of penalty, and will have 28 days from the date of the penalty notice to appeal.
A 2013 study conducted by BIS before the changes to the employment tribunal process in July 2013, identified that over a third of awards went unpaid. The study identified that financial difficulties were the main reason for late payment, with 25 per cent of awards remaining unpaid because of insolvency. Over half of claimants surveyed believed that the insolvent company was trading again. In its study, BIS suggests that the phenomenon of so called ‘phoenix companies’ has the potential to damage the reputation of the Employment Tribunals in the eyes of claimants or prospective claimants. 
 
The new financial penalty scheme is an additional method of enforcement against a company that is available to claimants, however it is unlikely to provide a complete remedy for non-payment, particularly in respect of unpaid awards by insolvent companies. 
 
If you are interested in finding out more about the approach to take on enforcing an employment tribunal award or conciliated settlement, please do not hesitate to contact us. 
 
Solicitor, Employment & Pensions team 
Tel: 0151 600 3114

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