Employment Law

In October 2012 the Government launched a consultation on its proposal for a new type of contract of employment of “employee-owner”, under which employees would be given shares in exchange for waiving certain employment rights.

Under these proposals a new tier of employment status would be created namely employee-owners who would receive shares of between £2,000 and £50,000 (exempt from Capital Gains Tax) in return for giving up specified employment rights (such as ordinary unfair dismissal). 

In December the Government published its response for the consultation, and despite mixed views from those taking part in the consultation, it wishes to proceed albeit with certain modifications.  For example the employee-owner contract will be renamed “employee-shareholder” contract and the upper limit of shares (£50,000) will be removed (but will remain for Capital Gains Tax exemption).  Amendments will be made to the Growth and Infrastructure Bill accordingly.  The Government is also set to issue guidance on these laws and the tax consequences of “employee-shareholder” contracts.  In particular the Government acknowledges that there is already uncertainty amongst employers as to the differences between the two existing types of employee status of workers and employees, and that adding a new status of employee-shareholder with different rights again could add further to the confusion. 

Daven Naghen, head of our Employment Team, commented as follows:-

“I don’t know yet whether the new scheme will be workable in practice, more information and detail is going to be required.  Watch this space!”

If you want to keep up to date with developments on employee-shareholder contracts then stay subscribed to our Employment Newsletter

Employment Contracts often contain what are known as restrictive covenants.  Businesses seek to impose such restrictive covenants in order to try and prevent or limit a departing employee from doing such things as setting up in competition, working for a competitor, enticing away staff and soliciting customers and suppliers.

The restrictive covenant must be reasonable, in that it can only go so far as reasonably protecting a legitimate interest of the business and should not be used to stop departing members of staff from working.  As a result it is always important to get legal advice on such clauses, to try and ensure that they are reasonable or otherwise if they are found to be unreasonable then they will be void and have no effect whatsoever. 

An interesting case on restrictive covenants from the end of last year (2012) was Pat Systems –v- Neilly, which was determined by the High Court. 

Mr Neilly joined Pat Systems in 2000 as a junior salesman.  His original contract included a restrictive covenant stating that for twelve months after leaving the company he could not join a competitor.  In 2005 Mr Neilly was promoted to director of global accounts, a senior position.  Upon promotion he signed a letter that increased his salary and notice period.  The letter also included an acknowledgement that all other terms and conditions in his contract would remain unaltered.

In 2012 Mr Neilly resigned giving three months’ notice, and informed Pat Systems that he intended joining a company that Pat Systems regarded as a competitor. 

In response Pat Systems dismissed him without notice for a serious anticipatory breach of contract. 

The High Court considered that at the time Mr Neilly entered the contract in 2000 that it was quite clearly the case that the clause was void as it was unreasonable to impose a 12 month restriction on a junior salesman. 

However Pat Systems argued that the contract had been entered into in 2005 when Mr Neilly got promoted, upon the basis of his acknowledgement that all other terms remained unchanged. 

The High Court ruled that an acknowledgement was insufficient, and that Mr Neilly either needed to sign a new contract (including the covenant) or he needed to sign a fresh indication of acceptance of the existing covenant.

Daven Naghen, head of our Employment Team commented as follows:-

“This highlights the need for businesses to ensure that employees sign a new contract every time there is a change in role or a promotion.  Had Pat Systems done so in 2005 when Mr Neilly was promoted, then this probably would have prevented Mr Neilly from joining a competitor for 12 months as a 12 month restriction would probably have been deemed reasonable for the position he had acquired in 2005.”

If you need advice on restrictive covenants or any issues in respect of drafting contracts then please contact Daven Naghen on 01775 722261 or email daven.naghen@maplessolicitors.com or write to Dav at 23 New Road, Spalding, Lincolnshire PE11 1DH.

The Government has confirmed that it will abolish the Default Retirement Age (DRA) from October 2011. The process will begin in April 2011. This has been welcomed by some who say this will protect against ageism. It also has the advantage of keeping experienced valuable workers in the workplace. They, in turn, can pass on their knowledge and experience to others. In 2009, it was estimated that 100,000 workers were forced to retire.

The law should evolve and change to reflect the social and economic changes in society. The Equality and Human Rights Commission already argue that a compulsory retirement age is discriminatory. The change in the law will hopefully lead to a change in people’s views about retirement and shift away from the current ‘countdown culture’.

Some people in the 60’s do not relish the prospect of retirement and enjoy the social and financial benefits of remaining in employment.

The current law is contained in the Employment Equality (Age) Regulations 2006. Under the provisions it allows employers to force employee’s retirement at the age of 65. This is arguably an arbitrary and unfair rule. The only statutory procedure in place is that notice must be given to the employee 6 months before reaching the age of 65 of a meeting with their employer. At the end of the meeting it is entirely at the discretion of the employer as to whether he will terminate the employment. Legally there is no redress for the employee.

The changes mean that people over 65 will have full employment law rights for the first time.  The regulations are expected to take effect from 6 April 2011. From the 6 April employers will no longer just be able to give notice of a meeting. Notice made prior to 6 April will be valid on the condition retirement must take place before the 1 October 2011.

For Employers the choices are that either they end the traditional retirement age, or keep it on the basis that they can objectively justify it. The statutory notice and consultation procedure will be abolished as well. ACAS has published guidance for employers on the changes titled: ‘Working without the Default Retirement Age’. Businesses have raised concerns about the effect this will have on them.

Another aspect of this of course is that it will help public finances, in the fact that employees will be paying tax and putting off claiming their state pension. Under such austere economic times, the ageing population places a strain on Government resources. An ageing, working population could potentially save the Government £3.5 billion a year.

For advice for your business on retiring a member of staff please contact Daven Naghen on daven.naghen@maplessolicitors.com or 01775 722261.

Recently an Employment Tribunal found in favour of Miriam O’Reilly’s claim against the BBC based upon the grounds of age and sex discrimination.  Miss O’Reilly (51 years of age) was a presenter on the BBC programme Countryfile, but she lost her job to a younger woman (Julia Bradbury aged 40).  The older male presented (John Craven aged 68) was retained.  The BBC had moved the show to a more “prime-time” slot and as part of a “make over” Miss O’Reilly lost her job.

The evidence presented on Miss O’Reilly’s behalf included reference by her colleagues to her wrinkles and her grey hair.

In its defence the BBC claimed it wanted to ensure that its presenters reflected the diversity of its audience.  The Tribunal however held that it had acted unlawfully in putting too much emphasis on youth.

Daven Naghen, head of our Employment Team commented as follows:-

“This case actually highlights the provisions in the new Equality Act 2010, which says that claims can be brought on a basis of combined characteristics.  These provisions are not yet in force, but will allow an employee to identify any two of the protected characteristics (e.g. sex, age, race, disability, gender reassignment, religion or belief, marriage/civil partnerships and pregnancy/maternity) in order to allege discrimination arises because of the particular combination and not because of one of the protected characteristics in isolation.

Hence when these new provisions come into force claims like Miss O’Reilly’s will be even stronger as they can be expressed as arising from the combination of two protected characteristics (e.g. as in this case age and sex) rather than from either of these alone.

If you need advice about the Equality Act 2010 and/or discrimination claims then please contact Daven Naghen on 01775 722261 or daven.naghen@maplessolicitors.com.

On 6^th April 2011 the right to request flexible working will be extended to parents of children under 18.

This right currently applies to employees who have had 26 weeks’ continuous employment before applying and have not made an application to work flexibly under the right during the past 12 months and:-

(i)              have or expect to have parental responsibility of a child aged under 17 or,

(ii)             have or expect to have parental responsibility of a disabled child under 18 who receives Disability Living Allowance or

(iii)            the parent/guardian/special guardian/foster parent/private foster carer or as the holder of a residence order or the spouse, partner or civil partner of one of these and are applying to care for the child or

(iv)           are a carer who cares, or expects to be caring, for an adult who is a spouse, partner, civil partner or relative; or who although not related to the applicant lives at the same address as the applicant.

This move to extend the right to parents of children under 18 is the first stage of changes to the law that will eventually extend the right to request flexible working to all employees.

Under the present law a business must seriously consider the application, and only reject it if there are good business reasons for doing so.  The employee only has the right to ask for flexible working, not the right to have it.

Good business grounds for refusing an application can include the burden of additional costs, the detrimental effect on the ability to meet customer demand, the inability to reorganise work amongst existing staff, the inability to recruit additional staff, the detrimental impact on quality, the detrimental impact on performance, the insufficiency of work during the periods the employee proposes to work and the planned structural changes.

Daven Naghen, head of our Employment Team, commented as follows:-

“Employers will need to take care to update flexible working policies and procedures to cover this slight change to the rules.  Currently the statutory right is just a right to request flexible working, and is not a right to have it.  Therefore employers can still reasonably decline applications if there is a legitimate business ground for doing so.

Those employees who do not have the statutory or legal right to request flexible working are still free to ask their employer if they can work flexibly.  It will be a matter for the business as to whether or not it is willing to consider such a request – it may be good employment practice to do so.”

If you require advice about dealing with an application by a member of staff for flexible working then please contact Daven Naghen on 01775 722261 or email daven.naghen@maplessolicitors.com