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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.

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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

Employment Agency Amendment Regulations published

Friday 22nd April 2016

Employment Bulletin - Stop Press - Issue 303

The Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2016 (SI 2016/510) have been published. The regulations, which were published on 20 April 2016, are due to come into effect on 7 May 2016. They amend the Conduct of Employment Agencies and Employment Business Regulations 2003 (SI 2003/3319) (the “Conduct Regulations”). 
 
The amendments come as a result of a Government consultation on proposed changes to the regulation of the private recruitment industry. The consultation closed on 23 November 2015.
 
One of the main changes is the removal of the requirement for employment businesses to enter into written terms and conditions with hirers, before supplying any services. 
 
In addition, there is now a ban on agencies or employment businesses from publishing a "relevant recruitment advertisement" in an EEA state other than the UK, unless the advertisement is published in English in Great Britain first, or at the same time.
 
It is now no longer necessary for an employment business or agency to ascertain that any other employment agency or business that they enter into a contract with is suitable to act in that capacity; nor is it any longer necessary for the parties to agree in what capacity each of them will act. 
 
It is also no longer prohibited for recruitment agencies to enter into a contract on behalf of a client. 
 
The Secretary of State is required to review the Conduct Regulations every five years.
 
Need advice or wish to talk to us?
 
If you would like to discuss any matters about these changes or for any other recruitment related issues please contact:
 
Head of Employment & Pensions - Manchester
Tel: 0161 836 8864 

NMW, LW, NLW… WTH does that all mean?

Friday 1st April 2016

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Employment Bulletin - Issue 302 

The National Minimum Wage Regulations come into force today, bringing in the National Living Wage - which is not to be confused with the Living Wage.

In this article we attempt to clarify the natural acronym confusion, and set out all the main issues you need to know.

What is it and who will be entitled to the National Living Wage?

The National Minimum Wage (Amendment) Regulations 2016 (SI 2016/68) comes into force today (1 April 2016). The new National Living Wage (NLW) will be set at a rate of £7.20 an hour, and will apply to workers who are 25 years old and over, including:

  • Employees
  • Most workers and agency workers
  • Casual labourers
  • Agricultural workers
  • Apprentices who are aged 25 and over

Is this different to the National Minimum Wage (NMW) and Living Wage (LW)?

The NLW should not be confused with the LW set by the Living Wage Foundation, a campaigning organisation that promotes a voluntary minimum hourly rate paid calculated according to the basic cost of living.

The NMW will remain in place, and a compulsory living wage will be a top up for workers aged 25 and over.

How is the new NLW set?

The NLW will form part of the remit of the independent Low Paid Commission which will make annual rate recommendations, in the same way that it makes recommendations for changes to the NMW.

Under the new rules, workers aged over 25 and above are guaranteed to receive at least £7.20 per hour, rising each year to a target of 60% of median earnings by 2020, when the minimum wage is expected to be above £9 per hour.

What are the penalties for failure to comply?

The penalty for non-payment would be 200% of the amount owed, unless the arrears are paid within 14 days.

The maximum fine for non-payment will be £20,000 per worker. Employers who fail to pay could be banned from being a company director for up to 15 years.

A new enforcement team has been set up by HMRC to pursue criminal prosecutions.

What are the implications for your business and how are others reacting?

  • The rules do not apply to younger workers and, it is suggested that companies will mitigate some of the effects by reducing out of hours premium pay rates and other perks.
     
  • It may make it artificially more attractive for firms to engage contractors rather than employees and ignore a large section of low paid workers.
     
  • A report from the British Retail Consortium says the NLW will add £3bn to annual wage bills.
     
  • Sir Charlie Mayfield, the Head of the Consortium and the Chairman of the John Lewis Partnership said it would add downward pressure on workforce numbers and cause more jobs to be lost than expected, especially in “economically fragile” areas such as Wales and the North of England.
     
  • To fund the changes, one large retailer is cutting the rate of pay on Sundays and Bank Holidays from double time to time-and-a-half, while night shift supplements will apply after midnight instead of the current 10pm.
     
  • 20% of employers who have participated in a CIPD survey said that they would absorb the extra costs but 16% said that they would reduce overtime and bonuses in response.
  • In light of these higher rates of pay, pension contributions and national insurance contributions will also be likely to rise. Entitlements proportionate to salary such as maternity and paternity pay are likely to be affected.
  • It may make hiring of staff under the age of 25 much more attractive as they will only need to be paid at the lower national minimum wage level. Employers will therefore need to be careful that they are not guilty of age discrimination when making staffing and recruiting decisions in the future.

If you would like more information or to discuss any issues you may have please contact:  


Chris Pavlou

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


Hughes v Royal London: High Court Ruling closes loophole for trustees to refuse transfers in potential pension scams

Friday 11th March 2016

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Pensions law update

Since the new era of pension freedom began, in which pension scheme members aged 55 or over were given access to significantly more flexibility if their rules allowed it, there has been an increase in the number of attempts to scam members. Generally known as ‘pension liberation’, members are often offered favourable terms to transfer their money to schemes offering exotic and unusual investments, often with proposed returns far higher than conventional pension arrangements. 
 
Trustees and managers of pension schemes have been keen to find legitimate reasons to refuse transfer requests where there are concerns as to the status of the new pension scheme.  Generally a member has a right to a transfer of his or her pot to a new scheme in many cases, but a Pensions Ombudsman ruling gave trustees another string to their bow to refuse transfers. The High Court has overturned the Ombudsman’s findings.
 
Hughes is a case where pension liberation was suspected. Ms Hughes sought to transfer the cash equivalent of her Royal London personal pension scheme, in order to invest in an occupational pension scheme (ie one with a sponsoring employer and a trust deed). She had become a member of that new scheme. The technical term for the transfer amount is ‘transfer credits’.
 
Under Section 181(1) of the Pension Schemes Act 1993, “transfer credits” are rights allowed to an earner under the rules of an occupational pension scheme by reference to a transfer to that scheme of his accrued rights from another scheme. 
 
Ms Hughes’s earnings were not related to the scheme employer of the new scheme, Royal London argued that Ms Hughes was not “an earner”, within the definition of transfer credits.   They therefore did not have to make the transfer. The Pensions Ombudsman agreed with Royal London’s interpretation of “earner”. He concluded that Royal London did not have to transfer Ms Hughes’ benefits to the new scheme. 
 
On appeal, the High Court concluded that the Pensions Ombudsman had read words into the definition of “earner” in the 1993 Act. A person could be an earner even if their earnings came from a source other than the new scheme’s employer.  There was no need for the earnings to be connected to that employer and scheme. As such, Royal London was ordered to transfer Ms Hughes’s accrued rights, so that she would be awarded transfer credits under the new scheme.
 
While members have always been entitled in most cases to a transfer, the High Court’s ruling does mean that, where trustees have suspicions that the proposed receiving scheme is not necessarily all it claims to be, but its paperwork is in order, they cannot use the fact that the member will not be paid by that scheme’s employer as a reason to refuse the transfer.  The only crumb of comfort for trustees is that, even if they have suspicions, if they have discharged their obligations towards the member at the point of transfer, it is the member’s responsibility if things go wrong.  No doubt members will try to claim that the trustees should have prevented them from making the transfer, but if the trustees have done all that they should then they should be able to defend any claim.
 
If you would like to discuss any issues regarding these developments for for any other pension scheme matters please contact: 
 
 
Trainee Solicitor, Employment & Pensions team
Tel: 0151 600 3146
 

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