New Compensation limits

avatar Posted on February 18th, 2015 by Margaret Davis

Readers may recollect a few years ago the government announcing that any changes to employment legislation would take effect in April and October of each year. The objective was to allow some certainty in terms of planning. Well, for the second year running, increases in the compensation limits and minimum awards that apply to a range of employment claims will take effect in April.

While April may seem a long way off, knowing now what those changes are may be relevant to decisions that need to be made over the next couple of months in respect of redundancies and other dismissals.

The increases are in line with the RPI measure of inflation as at September 2014. This means that the maximum amount of a week’s pay for calculating a redundancy payment and various other awards, including the basic award for unfair dismissal, will increase from £464 to £475. Therefore, if an employee aged between 61 and 64 with 20 or more years of continuous employment earning at least £475 per week has their employment terminated by reason of redundancy on or after 6 April 2015, they will be entitled to a statutory redundancy payment of £14,250.

In the case of unfair dismissal, the maximum award for compensation will increase from £76,574 to £78,335. This increase will only apply to dismissals where the termination date is on or after 6 April 2015. By way of reminder, if an employee’s annual gross salary is less than £78,335, then their compensation will be capped at their annual salary.

Finally, the minimum basic award increases from £5,676 to £5,807 in cases where the principal reason for dismissal was due to the employee refusing to comply with a requirement that would be a contravention of the Working Time Regulations 1998, or because they refused to forgo a right under those Regulations. This minimum basic award extends to dismissals that relate to representative functions under those Regulations, as well as to cases where the principal reason for dismissal is due to the employee being a trade union representatives or trustee under an occupational pension scheme as defined in the Pension Schemes Act 1993.

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“You fat b@57@rd” – disability harassment claim upheld

avatar Posted on February 16th, 2015 by Neil Johnston

Following on from the much publicised decision of the European Court of Justice finding in Kaltoft v Municipality of Billund, just before Christmas, that obesity could be a disability where it represents a limitation that hinders a person’s full and effective participation in professional life, a Northern Irish Industrial Tribunal in Bickerstaff v Butcher has upheld a claim of disability harassment where the disability alleged is obesity.

Mr Bickerstaff worked for Randox Laboratories. Mr Bickerstaff is morbidly obese with a BMI of 48.5. One employee in particular, Gerard Butcher, on an almost daily basis verbally abused Mr Bickerstaff calling him various offensive names prefixed by “fat”. Mr Bickerstaff raised a grievance and went off sick with stress, Mr Butcher admitted his actions but alleged it was just “banter”. Randox dismissed Mr Butcher for gross misconduct and settled a claim brought by Mr Bickerstaff. However, Mr Bickerstaff continued to bring a claim against Mr Butcher alleging harassment relating to disability.

Relying on medical evidence the Tribunal found that Mr Bickerstaff’s mobility is “substantially affected by his morbid obesity” and found that he is a disabled person within the meaning set out in the Equality Act. It also went on to uphold Mr Bickerstaff’s claim against Mr Butcher.

This is the first case in the UK relating to obesity as a disability following the ECJ decision in Kaltoft. It is a reminder that the victims of harassment can pursue and obtain compensation from those who perpetrate the harassment. It is also a good reminder that the Equality Act has a wide reach and that when giving equal opportunities and dignity at work training respect for others should not just be limited to a narrow interpretation of the protected characteristics under the Equality Act. If you would like to discuss this case, training or any particular issues relating to obesity or the Equality Act please do not hesitate to contact me or one of the team.

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Employee on sick leave affirmed her contract by delaying resignation

avatar Posted on February 9th, 2015 by Joanne White

The Employment Appeal Tribunal (EAT) has handed down its judgement in the case of Mari v Reuters in which it upheld the Employment Tribunal’s (ET) decision to reject the Claimant’s argument that she was too ill to resign while on long-term sick. The EAT held that she had in fact affirmed her contract by both her delay in resigning and her conduct.

This is a useful case to re-cap on the issue of affirmation, particularly in respect of employees who are on long-term sick who may be threatening legal proceedings to avoid a capability dismissal.

Ms Mari began working for Reuters in 2004. She went off sick with numerous symptoms including stress and depression throughout her employment and she eventually resigned in 2012. Following her resignation, Ms Mari issued a claim for, amongst other things, constructive dismissal. In order to issue such a claim, Ms Mari had to establish that her employer had fundamentally breached her contract of employment and she argued that they had done this by continuously giving her work that was below her level of expertise (i.e. she had effectively been demoted).

In the ET, Ms Mari argued that despite the fundamental breach by her employer, she was in such a bad way when she was off sick, that she was simply too ill to resign. The ET rejected this argument on the basis that during her time off sick, she was still able to engage in coherent email correspondence with her employer regarding other aspects of her contract.

The ET therefore naturally concluded that had she wanted to, she was well enough to resign, despite being off sick. Consequently, in failing to do so, she had effectively affirmed the alleged breaches of her employer.

The ET also rejected Ms Mari’s alternative argument that apart from the delay in resigning, she had done nothing to affirm her contract. The ET held that although the delay in itself did not affirm the contract, affirmation was implied by her conduct. It held that she had affirmed her contract by:

  • repeatedly requesting access to and using work email while she was off sick
  • accepting 39 weeks’ sick pay
  • requesting to be considered for permanent health insurance
  • discussing her continued employment at disciplinary and welfare meetings

In short, the ET found no evidence that Ms Mari genuinely believed that she had rejected her contract of employment due to the alleged breach by her employer. The EAT agreed.

The EAT held that the material question was whether Ms Mari resigned in response to her employer’s alleged breach of contract and given the delay, as well as her conduct, it decided that she had not.

Ms Mari argued that accepting sick pay was a “neutral factor” with regard to affirming her contract. In respect of receipt of sick pay, each case will turn on its own facts and so the significance of an employee accepting sick pay is one that needs to be treated with caution. On one hand, an employee may be so seriously ill that it would be unjust to suggest that it constituted affirmation of a contract. However, as in the case of Ms Mari, when the receipt of sick pay is coupled with taking positive steps to exercise other contractual rights, it is likely that this will be considered to amount to affirmation.

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Advocate General backs UK Government in Woolies case

avatar Posted on February 5th, 2015 by Nicholas Thorpe

Advocate General Wahl has today delivered his opinion in the Woolies case on the meaning of “establishment”. If you are an avid follower of our blog, you will know that the Woolies case had been referred by the Court of Appeal to the European Court of Justice (ECJ) after the Employment Appeal Tribunal (EAT) removed the requirement under section 188 of the Trade Union & Labour Relations (Consolidation) Act 1992 for the proposed collective redundancies to be “at one establishment”.

The result of the EAT’s decision meant that multi-site employers, potentially, had to take into account redundancies across all of their sites, rather than at each site, when determining whether or not their collective obligations to inform and consult in a redundancy situation had been triggered because of plans to make 20 or more staff redundant.

In contrast to the EAT’s decision, the Advocate General’s opinion supports the UK Government’s position that the meaning of “establishment” under the relevant European Directive should be the same whichever limb of the Directive a Member State has sought to implement under national law, and that an establishment is the “local employment unit”. The issue of what is a “local employment unit” is a question of fact which would need to be determined by the national courts on a case-by-case basis (which was the position prior to the EAT’s decision in Woolies).

If the ECJ follows the Advocate General’s opinion, this will see a welcome return to the previous position adopted by multi-site employers and the UK courts to the question of establishment – and will remove some of the uncertainty employers have faced over recent months. However, we will need to wait a few months before judgment is given by the ECJ.

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Right to be accompanied – new ACAS guidance

avatar Posted on February 5th, 2015 by James Warren

ACAS has belatedly released its response to a consultation run at the start of 2014 – concerning proposed changes to the ACAS Code of Practice on Disciplinary and Grievance Procedures. The need for changes to the statutory code was recognised as a result of the Employment Appeal Tribunal case of Toal and Anor v GB Oils. This decision held that employees could choose whoever they wished as their companion for a disciplinary or grievance meeting, so long as they fell within one of the statutory categories – a fellow worker or a qualified trade union official. The case ran counter to the terms of the original code, which suggested it would not normally be reasonable for employees to choose (and employers might reject) people who have to travel from a distant location, or whose attendance might prejudice the conduct of the meeting.

There are many examples of why limits on the choice of companions are needed to avoid unfairness or, indeed, simply unworkable disciplinary processes. But as the Toal decision held, the current legislation underpinning the right to be accompanied does not allow scope for such restrictions.

The consultation proposed draft new guidance, on which there were a number of comments submitted, mainly all aimed at seeking to ensure that the law in this area is now explained as clearly as possible. These have largely been accepted by ACAS, although it has confirmed that it still wishes to provide practical guidance that goes beyond a simple statement of the legal requirement.

The updated language which will be included in the Code when formally approved by Parliament is shown below:

13.    Workers have a statutory right to be accompanied by a companion where the disciplinary meeting could result in:

         – a formal warning being issued; or

         – the taking of some other disciplinary action; or

         – the confirmation of a warning or some other disciplinary action (appeal hearings).

14.    The statutory right is to be accompanied by a fellow worker, a trade union representative, or an official employed by a trade union. A trade union representative who is not an employed official must have been certified by their union as being competent to accompany a worker. Employers must agree to a worker’s request to be accompanied by any companion from one of these categories. Workers may also alter their choice of companion if they wish. As a matter of good practice, in making their choice workers should bear in mind the practicalities of the arrangements. For instance, a worker may choose to be accompanied by a companion who is suitable, willing and available on site rather than someone from a geographically remote location.

15.    To exercise the statutory right to be accompanied workers must make a reasonable request. What is reasonable will depend on the circumstances of each individual case. A request to be accompanied does not have to be in writing or within a certain time frame. However, a worker should provide enough time for the employer to deal with the companion’s attendance at the meeting. Workers should also consider how they make their request so that it is clearly understood, for instance by letting the employer know in advance the name of the companion where possible and whether they are a fellow worker or trade union official or representative.

16.    If a worker’s chosen companion will not be available at the time proposed for the hearing by the employer, the employer must postpone the hearing to a time proposed by the worker provided that the alternative time is both reasonable and not more than five working days after the date originally proposed.

17.    The companion should be allowed to address the hearing to put and sum up the worker’s case, respond on behalf of the worker to any views expressed at the meeting and confer with the worker during the hearing. The companion does not, however, have the right to answer questions on the worker’s behalf, address the hearing if the worker does not wish it or prevent the employer from explaining their case.

Vince Cable has indicated that the ACAS Code of Practice on Disciplinary and Grievance Procedures may be reviewed as a whole, given the time which has passed since it was first drafted. However, it seems that the separate strong argument for a review of the underlying legislation on which the Toal decision is based will need to await consideration by a new government.

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Annual HR Planner 2015 – Thursday, 5 February 2015

avatar Posted on January 21st, 2015 by Richard Kenyon

Our Annual HR Planner is the perfect opportunity for HR professionals, senior managers and in-house lawyers to review the main developments from 2014 and plan effectively for the changes coming in 2015.

This seminar will take place in our London offices on Thursday 5 February 2015 from 10.00am until 1.00pm including lunch and will cover the following topics:

A recap of developments in 2014

  • The problems with holiday and holiday pay
  • Employment Tribunal and ACAS conciliation developments
  • Major cases and practical implications
  • The rising risks of social media

What’s coming up in 2015

  • Shared parental leave
  • Pensions in the news
  • HR issues in the General Election mix
  • Cases to watch out for in 2015

It can be difficult to keep up with the fast pace of change and always remain one step ahead, particularly when juggling all your demands at a senior level.  We will be looking at some of the issues that senior HR professionals and in-house Counsel have had to face over the last 12 months.  We will share with you our insights, having helped many clients find appropriate solutions for their businesses, and will flag future changes, so that you can plan ahead.

We look forward to you joining us.

If you would like to register for our Annual HR Planner, please click here.

 

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Two year limit on back dating of holiday pay claims

avatar Posted on December 18th, 2014 by Nicholas Thorpe

So, the rumours were right. Following the recent holiday pay ruling in the Employment Appeal Tribunal (EAT) that holiday should reflect non-guaranteed overtime, the Government has announced today that it will impose a two year cap on the back dating of holiday pay claims.

Changes will be made to the Employment Rights Act 1996 which will prevent claims for holiday pay stretching back further than 2 years. While the EAT’s ruling gave employers some arguments to limit the back dating of holiday pay claims, these changes will give employers much needed certainty in relation to their potential financial exposure and should help to reduce the potential costs to employers.

However, employers are not out of the woods yet. These changes will not be introduced until 1 July 2015. Therefore, workers could still make claims under the existing arrangements over the next 6 months, which will act as a transition period before the new rules come into force, for holiday pay stretching back beyond 2 years. We are therefore likely to see increased activity from unions and employee representative bodies in the New Year seeking pay settlements before the new 2 year cap comes into force.

So, enjoy your holidays; as next year looks like it is going to be another interesting year for us all!

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What to expect in 2015

avatar Posted on December 16th, 2014 by Margaret Davis

Despite the stated aim of the Government to cut red tape for business, one cannot help but look back over 2014 and wonder whether this was no more than aspirational given some of the changes introduced this year.

In 2014, we saw the introduction of new rules in the Employment Tribunals that Claimants have to comply with before their claim may proceed, complex Shared Parental Leave Regulations that came into force on 1 December, and the power for Employment Tribunals to order equal pay audits (see More changes – new law).

Even the courts have not been quiet. The recent judgments on the calculation of holiday pay have created considerable uncertainty as to what should be included in the calculation of holiday and the period over which holiday pay should be calculated.

Some may ask whether 2015 will be any different. The short answer is no. New legislation will start to bed in and we can also expect to see rulings in Europe on the long running collective redundancy consultation cases, as well as decisions on the new fees regime in the Employment Tribunals and the unfair dismissal compensation cap. And, of course, we have the General Election in May 2015!

So, as you head off for the festivities and eating fest that Christmas means for many of us, you might want to use up a few calories thinking about what some of these significant employment law changes may mean to your business in 2015 and where to place them on your New Year’s Resolution list.

Bonus caps and claw backs for financial institutions

Following the publication of the Advocate General’s opinion that the UK’s challenge to the bonus cap provisions of the Capital Requirements Directive should be rejected, the Government has announced that it is dropping its challenge. The first bonuses to be affected by the new regime will be those paid on or after 1 January 2015 in respect of performance in the 2014 calendar year.

If employers have not already planned for this, they could well be up against time in ensuring that they comply with the revised rules set out in Chapter 19A of the Senior Management Arrangements Systems and Controls sourcebook (SYSC).

Revised rules on clawback will also apply to awards made from 1 January 2015, and further changes are proposed in relation to malus provisions, buy-outs and the deferral and vesting periods for variable pay.

Collective redundancy consultation

USDAW has also announced that the Advocate General will publish an opinion on 5 February 2014 in the case of USDAW v Ethel Austin Ltd (in administration) and another – more commonly known as the Woolworths case.

Readers of this blog will recollect that the Employment Appeal Tribunal (EAT) ruled that the words “at one establishment” in the statute governing collective redundancies are to be disregarded (see Retail administrations, collective redundancies and protective awards).  The effect of this was that employees working in Woolworths stores where fewer than 20 employees were employed had the right to be collectively consulted when the decision was made by the administrators to close stores and make employees redundant.

A Northern Ireland case and a Spanish case on the same issue were also referred to the ECJ which will be looking at the construction of the EU Collective Redundancies Directive, including the meaning of “establishment” and whether the Directive has direct effect.

While opinions of the Advocate General (AG) are not binding on the ECJ, rarely has the court ignored the opinion of the AG.  It will take many months for the ECJ’s judgment to come through but the opinion will give a flavour of what employers should expect.

Family friendly legislation

The new Shared Parental Leave regulations came into force on 1 December 2014. If you have not already introduced a shared parental leave policy then this should be number 1 on your New Year Resolution list.

It may not be obvious to many employers that they already have parents who qualify for the new rights (such as fathers, same sex partners or adoptive parents) who may not yet have disclosed their intentions.

Holiday pay

Unite has now stated that it will not be appealing the judgment of the EAT in the co-joined appeals in Bear Scotland.  That means that the determination of the EAT on the question of limiting the period over which claims may be backdated where there has been a 3 month gap in under-payments will, for the time being, be the clearest statement of the law.

There is, however, still litigation pending, and there are other cases concerning holiday pay, which may eventually provide further guidance and clarity on some of the other issues, such as the reference period for calculating holiday pay, and whether or not payments other than overtime or commission should be payable during holidays.

We will keep readers updated on any developments in this area, but employers should make sure that they understand the potential liability they have for arrears and put in place changes that will reduce the risk of any future claims for arrears of pay (see Overtime to be included in holiday pay calculations).

National Minimum Wage (NMW)

As part of the ‘Red Tape Challenge’ Vince Cable in November 2011 announced that the NMW regulations should be simplified by “merging the current body of 17 different regulations into a single consolidated set, and complementing the work the Low Pay Commission is already doing to streamline the regime”. In July 2014 a draft set of Regulations were published and went out to consultation and this closed on 15 September 2014. The new Regulations also contain an increased maximum financial penalty from £5,000 to £20,000 for employers who fail to pay the NMW.

The regulations are dependent upon the Small Business Enterprise and Employment Bill 2014-15 being enacted. The second reading of this bill took place on 2 December 2014 and the committee stages of the Bill will take place in February 2014. It is not expected that the new Regulations will be in force before the General Election in May. The anticipated commencement date is October 2015.

Zero hours contracts

While zero hours contracts continue to attract media attention, and there was much talk of comprehensive reform, the only change that is proposed for such contracts is that in 2015 there will be a ban on exclusivity in zero hours contracts. This is again something that is dependent on the Small Business, Enterprise and Employment Bill 2014-2015 being enacted.

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George Osborne doffs his cap to the Advocate General

avatar Posted on November 21st, 2014 by James Warren

In an unexpected move this morning, it emerged that the UK government is dropping its legal challenge to the EU rules limiting bankers’ bonuses.

The EU directive (CRD IV) applying a “cap” came into force in July 2013 and limits the level of any bonuses awarded to bankers to the value of their normal ‘fixed salary’ remuneration or, with special shareholder approval, to a maximum of twice their salaries. The directive’s ostensible purpose is to avoid bankers being incentivised to attain inappropriate short-term goals which expose banks, their shareholders and the wider economy to excessive financial risk. However, the UK Government has argued that the measure may have an overall negative impact, suggesting that the cap could lead to key talent leaving Europe and/or simply drive up basic pay, meaning banks are stuck with high fixed costs even in difficult years.

The UK applied to the European Court of Justice to overturn the key provisions of CRD IV, raising six legal grounds for their annulment. Yesterday the court’s legal adviser, Advocate General Jääskinen, released his opinion on those arguments, concluding that none of them had any legal merit. The ECJ does not always follow its Advocate General’s advice, but it does in around three quarters of cases, and in this particular case the government’s submissions were largely given short shrift.

One argument which the Advocate General recognised as having potential value suggested that regulating bankers’ pay represented interference in social policy issues, and in particular, the right of national governments to set domestic rules on pay levels. The Advocate General’s analysis on this issue focused on the fact that the rules only fix the ratio of variable to fixed pay, and therefore do not in fact limit or regulate the actual level of pay. In abandoning the legal challenge today, this point has in turn been seized upon, somewhat ironically, by George Osborne. He uses it to highlight his continuing dissatisfaction with the EU rules, because they do not in fact impose any such limit. He stated:

I’m not going to spend taxpayers’ money on a legal challenge now unlikely to succeed. The fact remains these are badly designed rules that are pushing up bankers’ pay, not reducing it. These rules may be legal but they are entirely self-defeating, so we need to find another way to end rewards for failure in our banks.

Mr Osborne is now apparently focused on seeking agreement on some form of global standard, to support bankers’ remuneration being structured in a way which encourages appropriate risk taking. This may include measures such as those floated by senior bankers to put more of the nominally “fixed” component of their pay at risk if decisions are taken which have bad consequences in the long term. Any such approach is likely to continue to be at odds with the present EU rules if it effectively increases the variable pay component. And, in the meantime, the current use by banks of “allowances” to supplement pay is much more likely to be tackled as a breach of those rules.

The government’s emphasis on the need for a single worldwide set of standards is nonetheless telling, and explains its real motive for challenging CRD IV. The underlying concern is that one set of rules for London and another more “liberal” set for New York or other financial centres will simply lead to business moving to the more favourable location. As the Advocate General’s opinion indirectly highlights, there is no barrier to the UK Government imposing whatever appropriate further limits or controls on bankers’ pay it considers appropriate. However, despite the rhetoric about bankers’ pay, it will not contemplate any such measures if they might lead international banks and other financial institutions to set up shop elsewhere than London.

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Overtime to be included in holiday pay calculations

avatar Posted on November 4th, 2014 by Nicholas Thorpe

This week has seen significant media coverage of an Employment Appeal Tribunal case concerning the inclusion of overtime in holiday pay calculations, with reports that businesses could face a potential bill running to billions of pounds. The case follows earlier decisions concerning the inclusion of other elements of pay in the calculation of holiday pay, such as shift premia and sales commission.

So, is your business at risk of a significant holiday pay bill? And if so, what can you do to mitigate that risk?

What is the issue?

In a nutshell, the cases concern the elements of pay that should be included in an employee’s holiday pay calculation. In the past, many employers have taken into account base salary only when calculating holiday pay. However, the recent cases require a significant change in the way that employers calculate future holiday pay.

Employees may also seek to recover past underpayments by way of a series of unlawful deductions of wages, potentially going back as far as 1998, when the holiday pay legislation was first introduced in the UK. The costs could therefore be significant.

What types of pay should be factored into holiday pay?

Overtime and holiday pay

Today’s decision provides some answers. The Employment Appeal Tribunal (EAT) has confirmed that ‘non-guaranteed’ overtime should be included in the calculation of holiday pay in so far as it relates to the 4 week entitlement provided under EU legislation (‘non-guaranteed’ overtime being overtime which an employee is required to perform if requested). However, it does not have to be included in the additional 1.6 weeks’ leave provided under UK legislation.

The question of whether or not ‘voluntary’ overtime should be included in an employee’s holiday pay calculation was not directly addressed by the EAT. The EAT also gave employers some hope in relation to the potential back pay liability, with claims for arrears of pay being out of time if there has been a break of more than three months between successive underpayments. However, permission has been given to appeal this point to the Court of Appeal.

Other payments

Today’s decision follows earlier decisions which confirmed that shift premia and sales commission should also be included in the calculation of holiday pay. The current trend of cases also calls into question other elements of pay, including bonus payments.

What should employers do?

Many employers have been adopting a “wait and see” approach to this issue, but in light of today’s decision and the publicity it is likely to attract, that approach is looking increasingly unsustainable and it is only a matter of time before employees start to challenge their holiday pay calculations, particularly with reports of some Claimant based firms running PPI-type compensation campaigns asking employees whether their holiday has been underpaid.

While the risk of significant ‘back pay’ claims may have been reduced by today’s decision, employers should take steps to understand how these cases affect them. Employers need to identify whether they are at risk, review their pay structures and payroll operations and understand what options might be available to them to mitigate the potential costs.

How we can help?

We can help you to assess the impact of the recent cases on your business through our comprehensive holiday pay audit, calculate the costs and suggest appropriate risk mitigation strategies. This is an issue that cannot be ignored. It is not going away.

For more information on how we might support your business address these issues, please contact Nicholas Thorpe, or any of the other partners in the Employment and Pensions Group.

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