Doyle Clayton – The Employment Solicitors...Doyle Clayton – The Employment Solicitors 4 February 2011 employee was seen kissing another employee and then going to a hotel room

Doyle Clayton – The Employment Solicitors

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February 2011 www.doyleclayton.co.uk

ANNUAL EMPLOYMENT LAW REVIEW

2010 to 2011

1. INTRODUCTION

1.1 2010 marked a change of Government. The most striking feature of this change has been the Coalition

Government’s commitment to adopting the majority of legislative initiatives on employment law

introduced by the previous Labour Government, and in some instances, going beyond this. Such

developments include the Government’s implementation of the Equality Act 2010 which included some

controversial provisions; abolishing the default retirement age when the previous Labour Government

had not made up its mind; implementing and improving upon certain maternity/paternity leave change

entitlements; extending rights on flexible working for working parents and going beyond this by

considering a general principle of flexible working for all; implementing the Agency Workers Regulations

2010 without making any changes as one might have expected; and implementing the Bribery Act 2010

(the Government in this regard has now promised a review and we are still awaiting guidance). The

Coalition Government appears to be about improving workers’ rights. The Government has launched

consultation exercises on extending flexible working rights, directors’ remuneration and on the vetting

and barring schemes.

1.2 But there is another side to this Government. This is reflected the imposition of limits on migration on

non-EU countries; expressions of concern over the inadequacies of the Employment Tribunal system;

and the likely increase in the one-year qualifying period of service for two years in respect of unfair

dismissal claims. The Government has just announced a consultation period on resolving workplace

disputes. The aim is to reduce the number of Tribunal claims or the number going to full hearings.

Besides Government initiatives, the FSA has introduced a revised Remuneration Code to apply from 1

January 2011 in respect of relevant Banks and others within the Financial Services sector. This is driven

by Government pressure and the EU Capital Requirements Directive. Slightly further away, the auto

enrolment scheme in relation to company pensions will commence in 2012.

1.3 At EU level, the 2010 Parental Leave Directive must be implemented by 2012. EU Parliament

amendments to the Pregnant Workers Directive are still being discussed by the Commission. In

December 2010 the EU launched a further consultation on revisions to the Working Time Directive

aimed largely at inactive periods of working time and opt-outs from various limits. In short,

employment law in 2010 and 2011 is proving as dynamic as ever. With the effects of the recession

continuing, and given the Coalition Government’s commitment on private sector growth, it is likely we

will see more initiatives during the course of 2011.


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2. KEY CASE DEVELOPMENTS IN 2010/2011

Redundancy: bumping

2.1 Employers should always assess whether bumping might be appropriate and consult with employees

over the selection pool. There should also be a discussion as to whether the employee would consider a

more junior role with lower pay. Fulcrum Pharma (Europe) v Bonassera, demonstrates that when

selecting whom to include in the pool of potentially redundant employees, it is wrong for an employer

to automatically decide that the pool should only contain the employee who holds the position it has

decided to remove. There are circumstances when it will be appropriate to include more junior

employees in the pool. However, the mere fact that the two employees had both carried out the other's

functions at certain times was not sufficient alone to require the pool to include both individuals. Other

factors should also be considered such as:

• the existence of other vacancies;

• how different the two jobs are;

• the difference in pay;

• the relative length of service of the two employees; and

• the qualifications of the employee at risk.

Employers should also ask the employee whether they would consider any junior roles which are vacant

or to which he could be bumped.

Redundancy: offering vacancies on maternity leave

2.2 Where the job of someone on maternity leave is made redundant, an employer must offer the

employee any suitable alternative vacancy for which the role, location and other terms are not

substantially less favourable. Merely inviting the employee to apply for such a role will render the

redundancy automatically unfair.

Where a vacancy would have involved a significant relocation and the employee had not indicated any

interest in relocating, there is no obligation to offer the role. The employer in Simpson v Endsleigh

Insurance Services was not obliged to offer an employee who had worked in London a vacancy in

Cheltenham. While the work was suitable and appropriate for her, the location was substantially less

favourable to her and it was not therefore a suitable alternative vacancy. Whether a vacancy is suitable

is an objective decision for the employer, although the employer must take into account what it knows

of the employee's personal circumstances.


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Redundancy scores: inflated scores on maternity leave

2.3 Employers in a redundancy situation should not always assume that favouring an employee on

maternity leave above other staff will be a risk-free option for them. In a redundancy scoring exercise,

an employer discriminated against a male lawyer on grounds of sex because it inflated the score of his

female colleague and automatically awarded her the maximum score to take account of the fact that

she was on maternity leave.

The law firm in De Belin v Eversheds Legal Services should have considered other ways of ensuring the

woman was not disadvantaged, such as using a different reference period. A male employee whose

actual rating was used, and who was selected for redundancy as a result of the female colleague being

awarded the maximum, had been unlawfully discriminated against.

Costs considerations may justify discrimination

2.4 In Woodcock v Cumbria Primary Care Trust it was not unlawful age discrimination for an employer to

dismiss an employee before it completed a full redundancy consultation with the intention of

preventing his accrual of an enhanced pension. The employee had known he was redundant for a whole

year and had no right to expect any further delay. The EAT decided that the aim of needing to dismiss a

redundant employee and denying him a windfall was more than merely a costs-based aim and was

justifiable. Previous cases suggested that the avoidance of cost cannot, on its own, be a legitimate aim

justifying discrimination, but can form part of the justification if combined with other factors.

The EAT suggested that cost set in its context (i.e. where the cost is disproportionate compared to the

discriminatory effect) might be capable of amounting to justification without needing to look for other

factors.

One area where this issue is likely to arise is in relation to employers choosing to limit the provision of

insurance benefits to older employees because of the increase in premiums above certain ages.

However, this decision should not be taken as giving employers the liberty to rush through the

dismissals of older workers in order to avoid incurring additional pension liabilities. The EAT recognised

that the employer had already been generous to the employee, that he had no legitimate expectation of

the enhanced pension and that it would have been an undeserved windfall.

Pregnancy Discrimination: office gossip

2.5 Christmas parties often give rise to problems for employers. In Nixon v Ross Coates Solicitors an HR

manager was told that a member of staff was pregnant and she promptly began speculating with other

employees about whom the child's father might be. The rumours and gossip which the pregnant

employee found distressing amounted to sexual harassment. The employer's failure to deal with the

rumours, refusal to relocate the employee to another office to avoid the gossip and the HR manager,

and refusal to pay her until she returned to work at her original office were all instances of unlawful

pregnancy-related discrimination. The gossip was triggered by events at a Christmas party, when the


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employee was seen kissing another employee and then going to a hotel room with him. The fact that the

gossip arose from the employee's own public conduct was irrelevant.

Disability: reinstating former employee who resigned while depressed

2.6 In certain circumstances, employers should consider allowing a former employee who is depressed and

who has resigned but subsequently regretted the decision, to be reinstated. The employee said that she

had made a hasty decision to resign in a distressed state of mind brought on by her depression. The EAT

in Hinsley v Chief Constable of West Mercia Constabulary ruled that reinstatement could be a

reasonable adjustment in some cases. The length of delay between the resignation and request to

return, and whether the employer has recruited a replacement, will be key factors in determining

whether reinstatement is a reasonable adjustment. It is not unheard of for employees suffering from

depression to resign and then to regret that decision subsequently and so these situations need to be

handled with care.

Age discrimination: justifying a retirement age

2.7 Employers seeking to justify the use of a retirement age may have more room for manoeuvre than

previously thought following Seldon v Clarkson, Wright & Jakes. Employers will not need to show a

public interest objective. However, they will still need to establish a legitimate business rationale for

using a retirement age and choosing a specific age. This case concerned a partnership with a retirement

age for partners of 65. Here, the tribunal identified three categories of legitimate aim:

• to ensure there were sufficient partnership prospects to recruit and retain associates;

• enabling workforce planning; and

• reducing potential departures of older partners through performance management and so

contributing to a more supportive workplace which allowed individuals to retire with dignity.

The Court of Appeal considered that the UK social policy justification for the age regulations were

consistent with the partnership's aims and therefore the firm’s chosen retirement age could be

justified if proportionate.

Employers seeking to justify retirement ages may draw some positives from this decision although the

abolition of the DRA from October 2011 will remove the rationale for choosing age 65.

Age discrimination and enhanced redundancy pay schemes: cap based on service to retirement age

was lawful

2.8 In Kraft Foods UK Ltd v Hastie a "cap" applied to payments under a contractual redundancy scheme

designed to prevent employees receiving more than they could have earned had they remained

employed until retirement age. This was a proportionate means of achieving a legitimate aim and


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therefore not discriminatory. The cap indirectly discriminated against older employees nearing

retirement age but was justified by the legitimate aim of preventing the employee receiving a windfall.

Although the amounts were calculated using length of service, the aim of the redundancy pay scheme

was still to compensate for the loss of the earnings which employees had a legitimate expectation of

receiving if they had remained in employment. This expectation ceased when the employee reached

normal retirement age, as he had no legal right to work beyond that age.

The removal of the statutory DRA will remove this justification as employees will have an expectation of

continuing in work past 65 unless the employer has a contractual retirement age of 65.

Flexible work: indirect sex discrimination

2.9 Is a woman who chooses to work part-time because she wishes to care for her children, but who is able

to make childcare arrangements to enable her to work full-time, able to bring an indirect sex

discrimination claim?

Claims of this type require the employee to show a disadvantage, namely something less than an

inability to comply with the obligation to work full time. Tribunals tend to take the view that a full-time

requirement places women at a disadvantage and then consider whether the full-time requirement can

be justified.

In Hacking & Paterson v Wilson, consideration was given to the make-up of the pool of comparators:

should the pool consist of all employees or just those who wanted the flexible working benefit? The EAT

could not say that if the pool was made up only of those employees who wanted the benefit that it

automatically followed that there was no indirect discrimination (since all requests would have been

declined).

The EAT doubted that an employee who chooses, but is not obliged, to work part-time could be

disadvantaged. Such indirect sex discrimination claims may now be more difficult.

Team moves: the perils of team poaching

2.10 A team move occurs when employees working for the same employer decide to leave and either set up

in competition on their own or to join a competitor. Usually these moves involve some degree of co-

ordination between the departing team and/or by their new employer. The high profile Tullett Prebon

plc and others v BGC Brokers highlights the risks involved in attempting to poach a large team,

particularly where managers in employment are instrumental in orchestrating the move.

BGC were found to have encouraged the brokers to walk out on Tullett, and to have been indifferent as

to whether the employees had genuine grounds for doing so. In the circumstances, BGC had induced the

brokers to breach their contracts and conspired to injure Tullett by unlawful means. It was enough that

BGC was indifferent to whether the employees breached their contracts, even if no breach was

intended.


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The court was prepared to enforce a combination of garden leave and non-compete covenants for up to

12 months, and also upheld a 12 month injunction against BGC poaching any Tullett employees

(including, unusually, the prohibition on lawful recruitment).

In a lengthy judgement, the following points of particular note were addressed:

a) a senior manager has a duty to inform his employer of a proposed poaching of his team by a

competitor and to follow his employer's instructions in response to the poaching;

b) contractual clauses requiring employees to report to their employer any approach by a

competitor are enforceable (although this may be specific to certain industries where

approaches are common and openly discussed between colleagues);

c) employees can rely on an employer's fundamental breach of contract to justify their leaving

employment, whether or not they resigned in response to that breach;

d) the court ordered the brokers to repay retention and loyalty bonuses they had received from

Tullett. The contractual clauses in contracts requiring them to repay were neither in restraint of

trade nor penalty clauses; and

e) it is a breach of duty for an employee to disclose information to a competitor to assist the

competitor to poach employees, even if that information revealed is not of itself confidential.

Team moves: duty to disclose one’s own or others’ misconduct

2.11 The implied duty of fidelity does not require an employee to disclose to their employer their own or

their fellow employee's misconduct, according to Lonmar Global Risks v West.

The High Court ruled that the obligation to disclose one’s own or a colleague's wrongdoing (such as an

intention to move to the competition in breach of contract) only applies to those who owe a fiduciary

duty as a result of their senior position or where there is an express duty to do so in the contract of

employment. Junior employees who, in contrast, owe a mere duty of fidelity may only be obliged not to

deliberately mislead an employer.

Dismissal: disciplinary hearing held before a related grievance appeal

2.12 An employer may be able fairly to hold a disciplinary hearing and dismiss an employee for refusing to

comply with a reasonable instruction without first hearing the employee's related grievance appeal

challenging the instruction. The employees in Samuel Smith Old Brewery v Marshall refused to comply

with an instruction for three months and had lodged a grievance. They refused to attend a disciplinary

hearing unless the grievance appeal was heard first. The employer proceeded with a disciplinary

hearing, which the employees refused to attend, and dismissed them in their absence.

The employer's policy did not provide for a suspension of the disciplinary process where grievances

were lodged and there is no requirement for a suspension in the Acas Code.


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The EAT ruled that dismissal was within the band of reasonable responses in these circumstances,

because the original grievance had been heard; if the employees had attended the disciplinary hearing,

they could have raised the points they intended to raise at any grievance appeal.

Dismissal: Employer’s reasonableness in treating reason as sufficient for dismissing the employee

2.13 In an unfair dismissal claim the Tribunal is required to consider whether the employer acted reasonably

or unreasonably in the circumstances in treating a potentially fair reason for dismissal as sufficient to

justify terminating the employment.

In London Borough of Brent v Fuller the Tribunal criticised the employer for having dismissed the

employee for misconduct. It felt that the employer had trumped up the alleged misconduct to justify the

dismissal. However, the Tribunal had failed to assess whether the employer had acted reasonably in the

circumstances with regard to the standards of a reasonable employer.

On appeal the EAT concluded that the Tribunal had not been entitled to substitute its own view of what

would have been appropriate for the employer to do without having taken into account the hypothetical

standards of a reasonable employer. Rather, the Tribunal was required to consider whether the

employer’s decision to dismiss was within the band of reasonable responses open to it in the

circumstances.

Disciplinary Hearings: Police Involvement

2.14 In Secretary of State for Justice v Mansfield, the EAT had to decide an unfair dismissal case concerning

an employee who was facing disciplinary proceedings at the same time as being investigated by the

Police. The question was whether the employer should postpone or continue the disciplinary

proceedings as a result of this. The EAT decided that an employer had a wide discretion to do either.

Mr Mansfield, a prison officer, became subject to a police investigation over allegations of planting

drugs on a prisoner. A disciplinary investigation, arising out of the same facts, was also underway. This

was postponed during the police investigation, meaning there was a lengthy delay in Mr Mansfield’s

dismissal. Mr Mansfield claimed that this was unfair.

The case illustrates the fact that it may be appropriate for disciplinary proceedings to be postponed

when there is an ongoing police investigation arising out of the same facts. Employers need to be

aware, however, that the ACAS Code states that “where the matter required prompt attention the

employer need not wait for the outcome of the prosecution before taking fair and reasonable action”.

Accordingly, what is reasonable will depend on the circumstances of the individual case.

Disciplinary hearings: right to legal representation

2.15 Employees are generally only entitled to be accompanied to internal disciplinary hearings by a work

colleague or suitably qualified Trade Union representative. However, in very limited circumstances


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certain employees may be entitled to external legal representation at an internal disciplinary hearing

where a potential outcome would be to prevent them from working in their profession in the future.

In Governors of X School v R a school employee was alleged to have had an inappropriate relationship

with a child. Disciplinary proceedings were commenced, and if upheld they would have had a significant

impact on whether the employee would be barred from working with children again. If so, the

employee would not have been able to practise his profession in the future.

As such serious professional consequences could result for the employee, the Court of Appeal held that

he was entitled to bring a legal representative into the disciplinary hearing (relying on the concept of the

right to a fair trial under Article 6 of the European Convention on Human Rights).

Summary dismissal: employers should communicate in person

2.16 Where an employee is summarily dismissed by letter, the effective date of termination (EDT) is the date

on which they actually read the letter or have a reasonable opportunity to discover its contents (Gisda

Cyf v Barratt). The reasonableness of the employee's behaviour is relevant to whether there was a

reasonable opportunity.

Consequently, an employer who summarily dismisses an employee by letter cannot now be certain of

the termination date when the letter is sent. The date will be outside of the employers control and will

depend on when the employee actually reads the letter or has had a reasonable opportunity to discover

its contents. This is important as the EDT may determine whether an employee has sufficient service to

claim unfair dismissal and any statutory claims.

Given the scope for uncertainty, employers should arrange to communicate their decision to dismiss in

person.

Constructive dismissal even if grievance upheld

2.17 An employer who has committed a fundamental breach of an employee's contract cannot stop the

employee claiming constructive dismissal by upholding the employee's grievance about that breach.

The employee may therefore choose to resign and claim constructive dismissal even if his complaint

about the breach has been upheld in an internal grievance investigation. The party which has committed

a repudiatory breach of contract cannot "cure" the breach before the other party has decided whether

to accept it (Buckland v Bournemouth).

When investigating grievances employers should be aware that if the complaint is upheld that will not

always prevent the employee from bringing a constructive dismissal claim.

Whistleblowing: causation test

2.18 In Fecitt & ors v NHS Manchester, the EAT has confirmed the causation test in whistleblowing cases.

The test makes it easier for Claimants to succeed in their claims.


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Ms Fecitt and her two colleagues made protected disclosures which led to a breakdown of relationships

with other colleagues. As a result of this, two of them were transferred out of the team by managers

and one had all working hours withdrawn (thus was effectively dismissed). The question was, was this

treatment because of the disclosure or because the working relationship had broken down? The EAT

had held that it was for the employer to show that the conduct was not because of the disclosure.

The judgment states that “...in cases where a Claimant was proved that he or she has made a protected

disclosure...and that he or she has subsequently suffered unwanted treatment amount to a detriment,

the Respondent...has the burden of proving on the balance of probabilities, that the relevant act or

deliberate failure was not done on the ground that the worker had made a protected disclosure. In

order to satisfy that burden the Respondent must prove that such act or deliberate failure was “in no

sense whatsoever” on the grounds that the Claimant had done the protected act; meaning that the

protected act played no more than a trivial part in the application of the detriment.”

This differs from previous whistleblowing case law which found that the protected disclosure must be

the core reason for the detriment for liability to arise. It is likely that employers will find it harder to

show the treatment in these circumstances were unconnected.

English employment claims brought by employees seconded here

2.19 An employee seconded to work in England can bring statutory claims here, even if the acts complained

of occur overseas and the employer has no place of business and does not carry on any transactions

here. The tribunal rule only permitting claims against a respondent who resides or carries on business in

England or Wales cannot be used to prevent an employee enforcing his statutory employment rights.

In Pervez v Macquarie Bank an employee was seconded by a foreign employer to work in London at the

employer's UK group company. Even though the relevant acts occurred in Hong Kong, he was eligible to

bring discrimination claims (as he satisfied the requirement to work at least partly in Great Britain) and

unfair dismissal (as at the time of dismissal he worked in Britain on a settled and indefinite basis and was

integrated into the British operation).

The requirement for the employer to carry on business in England should be construed as satisfied by an

employer seconding an employee to work here, even if the supply of workers to third parties was not

part of its ordinary business. To rule otherwise would deprive employees of the ability to enforce the

protections to which they were entitled under the primary legislation.

Bonuses: Pay in lieu did not include bonus

2.20 Where a payment in lieu clause was silent as to what it included, an employer operating the clause was

not obliged to pay a bonus which would have become due during the notice period. This was because

the bonus clause expressly stated that the employee must be employed to receive the bonus.


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Locke v Candy and Candy demonstrates the importance of a pay in lieu clause specifying what is due

under the clause and for this to be consistent with the bonus provision.

Bonuses: no implied term requiring employment on payment date

2.21 Many employers include express contractual provisions dealing with what happens to any bonus

entitlement when an employee leaves. Employers wishing to withhold a bonus from an employee who

has left or is under notice on the bonus payment date should expressly provide this in the scheme rules.

Rutherford v Seymour Pierce Ltd highlighted that it will be difficult to argue that such a term could be

implied in the absence of an express term.

Careful drafting is required; the Court expressed the view that a term which would enable an employer

to dismiss an employee on the day before the bonus payment date solely to avoid paying the bonus

would be unreasonable.

Bonus clauses: clear drafting needed

2.22 If an employer wants to reserve the right to exercise a complete discretion in awarding a bonus it must

use clear words. The wording of the contract in Khatri v Cooperatieve Centrale Raiffeisen-

Boerenleenbank BA set out what bonus the employee was entitled to for the year in question. It also

indicated that the employer could vary the bonus terms in subsequent years. The Court of Appeal ruled

that the wording only allowed the employer to use a different formula in future years, not to change the

formula set for the then current year.

The employer had also attempted to change the employee's terms and conditions, including removing

the bonus and had asked the employee to sign to indicate his acceptance of this. However, the change

had no immediate impact on the employee and the employee had not signed the letter to indicate his

acceptance (in spite of the employer's request to do so). There was nothing to suggest that his

continued work amounted to an acceptance. This illustrates the vital importance of employers following

up a response from an employee who has been asked to agree changes to a contract. If the employee

refuses to sign up to the change, the employer should promptly address the employee's reasons for

refusing. A potential consequence of not doing so, where the amendment does not have an immediate

practical effect on the employee, is that the employee may in the future argue that they did not accept

the change and that his continued working did not signify his acceptance.

Bonuses: Withholding payment

2.23 In Humphreys v Norilsk Nickel International (UK) Ltd, the High Court looked at the circumstances in

which an employer can withhold a discretionary performance-related bonus payment. It concluded that

the correct test was whether the employer’s decision not to pay was rational or not, rather than the

individual’s performance.

2.24 Dr Humphreys was employed as the chief economist for the company, but his forecasts were often 50%

out (which he blamed on the world economic crisis). His poor performance had contributed to the


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company sustaining significant losses and on this basis he was not awarded a bonus payment for 2008.

Dr Humphreys argued that he had performed relatively well that any poor performance could be

attributed to the economic climate. However, it was concluded that it was not for the Court to

determine whether or not this was the case and that the employer had acted rationally.

Unilateral changes to terms and conditions

2.25 Employers may be able to rely on a general clause allowing unilateral changes to terms and conditions

to alter key terms such as pay, provided they act reasonably in doing so.

In Bateman v Asda Stores the variation clause was in a staff handbook containing contractual terms as

well as non-contractual policies, and the employer reserved the right to amend the contents of the

handbook to reflect business needs. The EAT ruled that the right to vary without consent of the

employees applied to both contractual terms and non-contractual policies.

The implied duty of trust and confidence requires an employer using such a clause to act reasonably, to

consult and seek the employees' consent in advance, and to give reasonable notice of any change.

This decision appears useful for employers wishing to make changes to working practices to reflect the

changing needs of their business. However, the employees did not argue that the employer’s unilateral

variation of contract was a breach of the implied term of mutual trust and confidence at tribunal level

and so were unable to do so before the EAT. Had they done so, the outcome might have been different.

Holiday and sickness entitlement

2.26 The ECJ confirmed in the Stringer case that, under the Working Time Directive, workers on sick leave

must continue to accrue holiday rights but that is for the member states to decide whether workers can

actually take their statutory holiday during a period of sick leave. However, if workers are prevented

from taking their holiday because of sickness, they must be allowed to take it following their return to

work, even if this means carrying it over to the next leave year.

When the case returned to the House of Lords, the parties agreed that the WTR expressly prevent the

carry over of statutory holiday to the next leave year. Therefore, to give effect to the ECJ’s decision in

Stringer, the WTR must be interpreted as allowing workers on long-term sick leave to take, and be paid

in respect of, their statutory holiday entitlement.

On a separate point, the House of Lords held that workers can bring claims for unpaid statutory holiday

pay not only under regulation 30 of the WTR, but also under the deduction from wages provisions of

ERA 1996. This means that workers might be able to recover unpaid holiday pay going back several

years, which might not be possible under the WTR because of their stringent time limit rules.

In Pereda v Madrid Movilidad SA the ECJ held that where a worker’s prearranged statutory holiday

coincides with a period of sick leave, the Directive requires that the work has the option to designate an


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alternative period for the exercise of their holiday entitlement, even where the original holiday period

was scheduled to coincide with a factory shut down.

In Khan v Martin McColl a worker who had been on long-term sick leave submitted a claim for holiday

pay. The Tribunal rejected his claim on the basis that he had not requested holiday, and so had not

been “denied” it. Even though the Tribunal accepted that Mr Khan did not know he could request

holiday and probably would have requested holiday if he had known the Tribunal took the view that

there were many cases where employees did not make a claim because they did not know their rights

and as such the issue of knowledge was not a appropriate reason for Mr Khan’s claim to succeed.

The Tribunal also took the view that the employer’s payment on termination in lieu of holiday accrued

during the last year/current year holiday year of employment “broke” the series of deductions and so

rendered the claims for earlier accrued but unused holiday out of time. The Tribunal was of the view

that this must be right even though “a perfectly good claim can be defeated simply by the expedient of

paying the last amount of holiday pay.

In Walsh v Lancashire Care NHS Foundation Trust a Tribunal declined to order statutory holiday pay to

be paid in respect of untaken holiday. The employment judge stated that to be entitled to holiday pay

“a worker must serve the required notice” to take holiday under regulation 15 of the WTR. As Mr Walsh

did not comply with this “mandatory” requirement, he “lost or relinquished his entitlement to any

holiday pay in the relevant holiday years”.

But earlier cases seem to conflict. We need guidance from the EAT or Court of Appeal.

Holidays and PHI

2.27 In Souter v Royal College of Nursing Scotland, the ET found that Ms Souter, who had received an

income under a permanent health insurance (PHI) scheme for a number of years, was not entitled to 7

years’ payment in lieu of accrued but untaken statutory holiday when her employment came to an end

by reason of her retirement.

This was broadly for two reasons:-

• On termination, RCN made a payment in lieu of the statutory holiday she had accrued for the

current leave year. It followed that the last of any series of deductions in respect of statutory

holiday pay occurred at the end of the previous year and she had not brought her claim in time;

and

• She was found not to have experienced a loss of holiday pay during the period she was receiving

PHI. The ET found that when Ms Souter started receiving PHI benefits, her contract of

employment was effectively varied so that she would receive the lower PHI salary level.

Therefore, if she had taken any statutory holiday while in receipt of the PHI benefits, her holiday

pay would have been calculated with reference to the lower salary level, and as she had received

her PHI salary in full each year she had suffered no loss.


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The judgment is only a first instance judgement and could be appealed. However, once again we have

seen that employers may frustrate unlawful deduction of wages claims by making payment of the final

year’s entitlement to holiday at the termination of employment.

Trade Unions: Industrial Action

2.28 The Court of Appeal in Unite v British Airways Plc lifted a High Court injunction on a strike called by

Unite of BA Cabin Crew. The High Court had granted an Injunction on the basis the Union had not taken

reasonable steps to give its members the information required by Section 231 of Trade Union and

Labour Relations Consolidation Act 1992 regarding the result of a strike ballot. The Court of Appeal said

that the issue is not whether the Union could have done more to comply, but whether they had done

enough according to what a reasonable and prudent union would be required to do. By putting

information on its website and on workplace notice boards, and handing out flyers, Unite had shown a

good prospect of succeeding at Trial in showing that they had complied with Section 231. This case is a

warning for employers that where there are minor defects or potential minor defects in the Union

complying with the relevant procedures on calling for industrial action, the Court might well ignore this.

The usual approach of an employer is to examine in great detail any defects in the procedure adopted

by the Trade Union and to use this as a basis for seeking an Injunction. If a Union does not comply with

the relevant procedures, it also loses immunity in law from being sued by the employer or any third

party affected by the action taken.

Trade Unions and Collective Redundancy Consultation

2.29 In the highly significant case of United States of America v Nolan, the Court of Appeal has referred an

issue concerning collective redundancy obligations to the European Court of Justice. In essence, this

concerns whether any collective redundancy consultation over ways and means of avoiding

redundancies should include consultation about the very principle of whether the redundancy should be

made in the first place based on the business reasons for that decision. Thus, if an employer wishes to

shut down a site or base, should there be consultation about that very subject? This was the point

raised in the Nolan case which involved the United States Government closing down a military base in

Hampshire. There are conflicting authorities, but the usual position is that taken by the EAT in UK

Coalmining, where it was held that employers do have a duty to consult about the business reasons for

making the redundancies where the whole of a business or site is being closed, leading to mass

redundancies. This case may also have some bearing or impact upon redundancy exercises where no

collective consultation is involved.

TUPE and collective Agreements

2.30 In Parkwood Leisure Limited v Alemo-Herron, the Court of Appeal had to consider the impact of the

TUPE Regulations in relation to collective agreements. The Regulations provide that upon a TUPE

transfer, any collective agreement also transfers over as the transferee stepped into the shoes of the

transferor. It is normally open to a transferee to terminate the collective agreement at or shortly after

the transfer takes place. However, a line of cases stated that even where this took place, where the


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employment was governed by a collective agreement providing for nationally agreed pay, hours, and

other matters, any later settlement or agreement over such matters, would bind the transferee and

they would have no choice but to implement the nationally agreed terms. In this case, the nationally

agreed terms were relevant to the public sector, but the transferee was a private contractor. The Court

of Appeal held that where specific terms were incorporated into an employee’s contract as a result of a

collective agreement at or prior to the date of the transfer, those specific terms will continue to bind the

transferee after the transfer. But where there is a general provision referring to pay and other matters

being decided by a collective agreement from time to time, any new rates of pay or other matters

negotiated after the transfer, where the transferee is not a party to the negotiations, will not bind the

transferee.

TUPE: Administrative Changes amount to “Measures”

2.31 In Todd v Strain, the EAT has held that changes to pay arrangements following a TUPE transfer were

“measures” and therefore the employer should have informed and consulted with the employees about

the change before the transfer. Failure to do so was in breach of the Transfer of Undertakings

(Protection of Employment) Regulations 2006.

Mr Todd was the owner of a care home. In November 2007, Mr Todd announced the sale of the care

home to Care Concern. No detailed information was given at the meeting, which only about a third of

staff attended, and no information was given about the proposed change in the date of payment of

salaries. It was found that Mr Todd had not complied with the inform and consult obligations and he

had not elected employee representatives. The Tribunal awarded 13 weeks’ pay to each member of

staff affected, payable by Mr Todd only, as Care Concern was not found to be at fault for the failures.

The EAT considered that although the changes were administrative in nature, they were not inevitable

and therefore there is a requirement to inform and consult. Furthermore, TUPE did not prescribe that a

measure’s effect must be disadvantageous to employees in order to trigger the requirement to consult.

The duty to consult requirement is to enable such transitional arrangements to ne explained to

employees and to reassure them, if necessary, that they will not be prejudiced in any way. Mr Todd

should have therefore informed and consulted with staff.

In some instances, it will be hard to determine whether administrative changes are inevitable, as there is

a fine line between the two. Therefore, employers concerned about which side of the line they fall on

should err on the side of caution and consult.

TUPE: Change of Service Provider

2.32 In Ward Hadaway Solicitors v Capsticks, Ward Hadaway was a member of a panel who provided legal

services to the nursing and Midwifery Council. The Council decided to tender out its work to a single

provider, Capsticks. Ward Hadaway Solicitors continued to carry out the work already allocated to it and

the future work of a similar nature would be dealt with by Capsticks. The EAT concluded that only the


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work in progress was an “activity” for the purposes of the TUPE Regulations. However, as this did not

pass to a new service provider, TUPE did not apply.

Criticism of performance was not defamatory

2.33 In Daniels v British Broadcasting Corporation, the High Court struck out a libel action brought by Mr

Daniels against his former employer.

Mr Daniels complained that the employer’s comments during a capability procedure that the employee

made trivial errors, failed to follow instructions and failed to communicate adequately with colleagues,

were defamatory. The High Court disagreed, in the circumstances.

The Court explained that satisfying the legal requirements in such cases presents a high hurdle.

However, it is also noted that it is possible for a defamation action to be brought in such circumstances

and therefore care should be taken to ensure that any criticism is well founded, is not provided with

malice against the employee and confidentiality is maintained (i.e., that it is not imparted to others).

3. UK LEGISLATIVE CHANGES 2010/11 AND OTHER GOVERNMENT INITIATIVES

Abolition of default retirement age

3.1 The Default Retirement Age (DRA) is to be phased out this year. It means employers will no longer be

immune from age discrimination claims if employment is terminated at the age of 65. The change means

that from 6 April, bosses will not be able to issue any notifications for compulsory retirement using the

DRA procedure. Between 6 April and 1 October 2011, only those people who were told before 6 April

2011, and who are due to retire before 1 October 2011, can be compulsorily retired using DRA. Finally,

after 1 October 2011, employers will not be able to use DRA to force staff to retire.

Until it is phased out, the use of a retirement age may be lawful if it is a proportionate means of

achieving a legitimate aim (or the age set is at, or above, the current default retirement age of 65).

When the default retirement age is removed, employers will have to decide whether to have a

retirement age for its employees at all. Employers will also have to identify an appropriate age. If a

retirement age is not to be unlawful age discrimination, the age chosen will have to be a proportionate

means of achieving a legitimate aim.

3.2 The Government in January 2011 published its guidance on how employers should deal with the

abolition of the DRA. Every employer must now consider its approach to this subject.

The Equality Act 2010

3.3 On 1 October 2010 the Equality Act came into force consolidating and replacing previous discrimination

legislation and case law but in addition, making other changes. It concerns not just employment but

other areas such as the provision of goods and services. The idea behind the Act is to combine all the

various pieces of discrimination legislation into a single statute and to ensure that the approaches to the

varying strands of discrimination are consistent and cohesive.


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3.4 The following provisions came into force on 1 October 2010 (not just employment related):

• The basic framework of protection against direct and indirect discrimination, harassment and

victimisation in services and public functions; premises; work; education; associations, and

transport.

• Levelling up protection for people discriminated against because they are perceived to have, or

are associated with someone who has, a protected characteristic, so providing new protection for

people like carers.

• Clearer protection for breastfeeding mothers.

• Applying the EU definition of indirect discrimination to all protected characteristics.

• Extending protection from indirect discrimination to disability.

• Introducing a new concept of “discrimination arising from disability”, to replace protection under

previous legislation lost as a result of a legal judgment.

• Applying the detriment model to victimisation protection (aligning with the approach in

employment law).

• Harmonising the thresholds for the duty to make reasonable adjustments for disabled people and

imposing a duty on employers to consider whether auxiliary aids should be provided as a

reasonable adjustment.

• Extending protection from third party harassment to all protected characteristics.

• Making it more difficult for disabled people to be unfairly screened out when applying for jobs, by

restricting the circumstances in which employers can ask job applicants questions about disability

or health.

• Allowing hypothetical comparators for direct gender pay discrimination.

• Making pay secrecy clauses unenforceable (to a certain extent).

• Extending protection in private clubs to sex, religion or belief, pregnancy and maternity, and

gender reassignment.

• Introducing new powers for employment Tribunals to make recommendations which benefit the

wider workforce.

• Harmonising provisions allowing voluntary positive action.

It is important to recognise that this is a period of change and we will need to wait until case reports of

cases under the new law start to come through before we have clarity about how some of the issues will

be interpreted by Tribunals. Also it is important to remember that this is not retrospective. Cases which


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are ongoing or involve matters before 1 October 2010 will continue to be decided under the old

legislation.

3.5 Critics of the Act agree that there is little which is new and an opportunity has been missed to take

greater steps to protect employees. Some of the more controversial provisions of the Act, such as:

• combined discrimination;

• caste discrimination; and

• gender reporting requirements

have yet to be implemented. The Government will introduce voluntary positive action in recruiting and

promotion from April 2011. This will mean that employers will be allowed to take proportionate action

for groups which either share a protective characteristic (and suffer as a disadvantage as a result) or that

group’s participation in a particular activity by those who share a protective characteristic is

disproportionately low. This means that in effect, the employer can treat that person or group more

favourably but only in terms of recruitment and promotion, where the candidates are equally matched

and it is proportionate to do so.

The Government is also introducing the public sector equality duty from April 2011. This will require

public bodies and other organisations which exercise public functions to take equality into account both

in terms of acting as employers and when providing services. The duty will also impact upon policy and

strategic decisions made by those bodies. Private sector organisations that carry out work in the public

sector will also be covered in respect of that work including, for example, when they tender for that

work.

3.6 On Equal Pay and Gender Pay reporting, the Government wishes to work “towards a new social norm

where it is more acceptable to discuss pay and reveal what people can earn” as a means of tackling the

gender pay gap. Over the coming months, the Government will work with businesses and other

organisations in order to develop a voluntary scheme for gender pay reporting in the private and

voluntary sector. It is possible that the Government will choose to adopt Section 78 of the Equal Pay Act

2010, under which mandatory pay gap reporting is required. The Government will introduce new

specific duties for the public sector in which they will be required or strongly encouraged to provide

information about their gender pay gap. The paper sets out that the Government will be introducing

measures shortly in order to take “strong action where there is evidence of discrimination, for example,

against women on pay”. A consultation document will be provided in due course. The Government will

also work with businesses in order to encourage the promotion of women onto the Board of Listed

Companies. The Government claims that at least 50% of new appointments to public boards will be

women, by the end of the current Parliament.

Paternity and Maternity Rights

3.7 The previous Labour Government introduced a number of different sets of regulations (the most

significant of which are the Additional Paternity Leave Regulations 2010 and the Additional Statutory


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Paternity Pay (General) Regulations 2010) allowing fathers to share a portion of the Mother’s statutory

maternity leave and pay. These came into force on 6 April 2010. This legislation provides additional

benefits to the current allowance of 2 weeks’ Paternity Leave, and will apply to babies born on or after 3

April 2011.

3.8 Fathers currently enjoy up to 2 weeks’ Paternity Leave and Statutory Paternity Pay when their wife or

partner gives birth to or (in the case of wife, partner or same-sex civil partner) adopts a child, provided

that four criteria are satisfied.

The employee must:

• be the biological father or adopter of the child or be the mother’s husband or partner (or in the

case of an adopted child, be in a civil partnership with the adopter of the child) or have

responsibility for the child’s upbringing;

• have 26 weeks’ continuous employment by the end of the 15th week before the baby’s due date;

• have continued to work for that employer without a break up until the birth of the child;

• earn an average of the lower earnings limit per week (before tax).

If these four criteria are satisfied, then the father will be entitled to two consecutive weeks’ SPP at a

prescribed amount (currently £124.88 per week), or 90% of earnings (whichever is less).

3.9 Families will be able to choose whether the mother should forfeit up to six months’ maternity leave,

which can be taken by the father as additional paternity leave (APL). The minimum amount of paternity

leave will be 2 weeks, and the maximum will be 26 weeks. However, fathers are not permitted to take

APL until the baby is at least 20 weeks old. Like maternity leave, APL must be taken in a continuous

block.

3.10 In addition to APL, fathers will be entitled to Additional Statutory Paternity Pay (ASPP). The father will be

able to take over the mother’s right to maternity pay. For instance, the mother and father together will

be entitled to 39 weeks’ SMP or ASPP. If the mother takes 26 weeks’ Ordinary Maternity Leave and

forfeits her right to additional maternity leave, the father would receive ASPP for the first 13 weeks of

APL. The rate of pay will be the same as statutory paternity pay.

3.11 The contract of employment will remain intact during APL save for terms relating to remuneration. In

addition, the father will be entitled to return to the same job on the same terms at the end of APL.

The eligibility criteria will be:-

For APL:-

This is the same as for normal paternity leave. In addition to which:


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• The employee must have or expect to have the main responsibility (apart from any responsibility

of the mother) for the upbringing of the child;

• The mother must have returned to work and forfeited a portion of her maternity leave; and

• The baby must be at least 20 weeks old.

For ASPP:-

The same as for the requirements for APL plus:

• The employee intends to care for the child during APL;

• The employee’s normal weekly earnings are not less than the lower earnings limit;

• The mother is entitled to maternity allowance or pay;

• The mother has returned to work and has at least 2 weeks of her maternity allowance or

maternity pay period remaining.

3.12 Fathers will have to give at least 8 weeks’ notice of their intention to take APL. The notice must be in

writing. Along with the notice, fathers must provide a written employee declaration. A written

declaration made by the mother must be provided along with the notice and employee declaration.

3.13 The employer must provide written confirmation of the employee’s entitlement within 28 days of

receipt of the notice in respect to requests for both APL and ASPP, and must include the start and end

dates of the employee’s entitlement to APL and ASPP.

FSA Revised Code

3.15 In December 2010, the FSA published its final version of the amended Code on Remuneration which

came into force on 1 January 2011.

The existing Code had to be amended in order to ensure compliance with the Capital Requirements

Directive (“CRDIII”). CRDIII, amongst other matters, aims to align remuneration practices across the EU.

The FSA consulted over its proposed amendments to the Code, and that consultation period closed on 8

October 2010. The Committee of European Banking Supervisors (“CEBS”) published its Guidelines to

CRDIII on 10 December 2010 and the FSA has had regard to these in its drafting of the final amended

Code.

The scope of the amended Code is widened to over 2,500 firms in the UK, including CAD investment

firms, broker dealers, asset managers, hedge funds, venture capital firms and all banks and building

societies.

3.16 Many of the provisions outlined n the draft FSA Code, which was opened up to consultation, are

retained. The definition of “Code Staff”; the restrictions on how variable remuneration is paid (e.g.,

deferral of between 40% to 60% of bonuses over a minimum of three years; the requirement to pay a


20


proportion of bonus in shares or similar instructions; restrictions on guaranteed bonuses; malus and

clawback provisions; prohibiting reward for failure in severance payments and restrictions on

discretionary pension payments) remain in place. The de minimis exception also will still disapply

certain rules where individuals earn no more than £500,000 in one year and their variable remuneration

is no more than 33% of their total remuneration.

There are certain changes too, however. The main ones are that:

• the requirements to ensure that at least 50% of variable remuneration consists of shares or similar

instruments applies to both the deferred and immediately payable portions of any variable

remuneration award.

• variable remuneration paid in shares or other specified instructions should be subject to an

appropriate retention period; and

• the restrictions on paying guaranteed bonuses are to be applied on a firm wide basis, and not just

to Code Staff.

3.17 Compliance obligations can be neutralised provided this is proportional. The hope is that this would

incorporate greater flexibility for firms when applying the Code’s rules to themselves and to their Code

Staff.

A degree of flexibility has been incorporated into the amended Code through the creation of four

“proportionality tiers” of firms. There will be different expectations of the minimum levels of

compliance with certain parts of the Code for each tier.

• Tiers one and two: these two tiers contain credit institutions and broker dealers that engage in

significant proprietary trading/investment banking activities, and will include the 27 firms which

already are within the existing Code’s scope;

• Tier three – this consists primarily of small banks and building societies and firms that may

occasionally take overnight/short term risk with their balance sheets; and

• Tier Four – firms which generate income from agency business without putting their balance sheets

at risk.

Tier one firms will be subject to the highest level of expectation of compliance and most onerous

requirements, whilst Tiers two, three and four will be subject to a gradual relaxation of such

expectations and requirements.

3.18 Specifically, amongst other matters, Tier three and Tier four firms may be able to:

• disapply the requirements to defer payment of variable remuneration;

• pay 50% of the deferred variable remuneration in shares or similar instruments, subject to

retention requirements; and

• apply negative adjustments to any deferred portion in the event of poor performance by the

institution in question.


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This reflects the equivalent content of the CEBS guidelines.

The FSA has also said that the principle of proportionate application will apply across the range of firms

in each tier so as to try to avoid sharp differences between applying the Code to firms at the lower end

of the one tier and the higher end of the next.

3.19 Under the Financial Services and Market Act 2010, the FSA has the power to make rules under which

contractual provisions which do not comply with certain rules, including the restrictions on guaranteed

bonuses and deferral requirements, can be declared void and firms can be required to recover payments

made, or property transferred, in contravention of those rules.

The FSA has announced that it intends to limit the range of firms to which the voiding and recovery

provisions apply. In 2011, there will be a transitional provision which means that voiding under the new

Code will only apply to firms which currently are within the scope of the existing Code.

The FSA intends to bring forward a new limiting provision on voiding, so that such voiding will only apply

to firms broadly equivalent to Tier 1. This would provide some welcome flexibility and comfort to firms

that fall within Tiers 2 to 4 – but these firms should be prepared to fall within this provision on 1 January

2012 if, in fact, the limiting provision promised by the FSA is not brought into force.

3.20 The FSA has also published new rules implementing CRDII’s requirements on disclosure of

remuneration. Under these rules, firms will be required to disclose information on their remuneration

policies and pay-out. Firms will need to disclose details of their remuneration policies at least annually

and will need to make their first disclosure in respect of 2010 remuneration as soon as practicable, but

by no later than 31 December 2011.

The FSA will apply proportionality on the basis of the four tiers referred to above. Firms in Tier one will

be required to make full disclosure, whilst firms in Tiers two, three and four will be subject to less

onerous requirements.

Agency Workers Regulations 2010

3.21 At present, it is lawful to pay agency workers at a different rate to employees or workers of the client or

“hirer”, doing the same work, but that is about to change when the Agency Workers Regulations come

into force on 1 October 2011. Regulations must be introduced by December 2011 to give effect to the

EU Temporary Agency Workers Directive.

3.22 Agency workers unless already recognised as employees, will still not have any automatic right to other

rights that are currently only available to employees (such as unfair dismissal, redundancy payments,

family friendly rights), but the introduction of the Agency Workers Regulations will at least provide them

with some degree of protection. There are some limited protections against unfair dismissal or

detriment where the agency worker attempts to assert their rights under the Regulations. Agency

workers are, however, protected against discrimination by the hirer or agency under the Equality Act

2010.


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3.23 The key provisions are to ensure:

• Basic working and employment conditions that are no less favourable than if the agency worker

had been recruited directly by the hirer.

• Equal access for agency workers to facilities and permanent employment.

• Penalties for non-compliance by agencies and hirers.

3.24 Regulation 3 defines an agency worker as:

“an individual who is supplied by a temporary work agency to work temporarily for and under the

supervision an direction of a hirer; and has a contract with the temporary work agency which is a

contract of employment with the agency or any other contract to perform work and services personally

for the agency” (Reg 3(1))”. Those who are genuinely self-employed, working through their own limited

liability company or employed on a managed service contract will not be covered by the definition of

agency worker. However, being employed via an “umbrella company” or other intermediary will not

prevent the worker from gaining the advantages under the Agency Workers Regulations. Agency

workers will be entitled to the same basic working and employment conditions as they would have had

if they had been directly recruited by the hirer (Regulation 5). The agency will have to meet the extra

cost.

3.25 Basic working and employment conditions are:

(a) “where A would have been recruited as an employee, the relevant terms and conditions that are

ordinarily included in the contract of employment of the hirer; and

(b) where A would have been recruited as a worker, the relevant terms and conditions that are

ordinarily included in the contracts of workers of the hirer”.

Agency workers currently have the right to minimum wage, paid holiday, and the right not to work more

than an average of 48 hours a week. Soon they will have the right to the same pay, duration of working

time, night work, rest periods, breaks and annual leave as their directly employed comparators. Pay will

cover overtime pay, shift allowances, unsocial hours premiums and bonuses linked to performance. A

“comparable employee” is someone who is employed or engaged in the same or broadly similar work,

having regard, where relevant, to similar levels of qualifications and skills, and based in the same

establishment as the agency worker. Where there is no comparable employee in the same

establishment, a comparable employee based at a different establishment who satisfies the same

requirements will suffice.

3.26 Under Reg 12, agency workers will also have the right of access to collective facilities and amenities

provided by the hirer. For instance, this could include access to canteens and childcare facilities. It is

possible to objectively justify any less favourable treatment in relation to such facilities, so if there is a

waiting list for a particular benefit such as childcare facilities, it will be sufficient to place the agency

worker on the waiting list rather than be required to provide the benefit.


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Under Reg 13, agency workers will have the right to be informed of any permanent positions with the

hirer, and to be given the same opportunities as comparable worker to find permanent employment

with the hirer. No qualifying period applies to this right.

3.27 The right to equal treatment does not arise until the agency worker has completed the necessary

qualifying period. The worker must be able to show that he or she has worked in the same role with the

same hirer for 12 continuous calendar weeks. This could be doing one or more assignments. Continuity

is only broken where a new assignment is “substantively different” (Reg 7(3)) or where there is a break

of six calendar weeks during assignments in the same job (Reg 7(8)). If there is a break of under 6

weeks, then any time spent continuously working on the same role for the same hirer before the break

will be added to the time spent when the agency worker is rehired. If the agency tries to avoid its

obligations by moving the worker through different agencies or intermediaries, it could be liable for an

additional compensatory award of up to £5,000 under Reg 9 if it is found to have structured its

assignments so as to avoid its obligations to provide equal treatment under Reg 5.

The Bribery Act 2010

3.28 Current bribery and corruption law is found under both statutory enactments and common law but it is

archaic and littered with problems. Consequently, successful prosecutions are rare, particularly where

corporate entities are accused because it must be shown that the 'directing mind and will' of the entity

(eg. Directors/senior managers) is implicated - a difficult test to meet. The calls for clear and robust new

anti-bribery laws in the UK has culminated in the Bribery Act 2010. It was scheduled to come into force

in April 2011 but has been postponed until later this year for now.

3.29 The key provisions are:-

• Section 1: active bribery - prohibits giving, promising or offering a bribe. This offence will apply

whether the bribe is offered directly or through a third party;

• Section 2: passive bribery - prohibits requesting, agreeing to receive or accepting a bribe;

• Section 6: prohibits bribing a foreign official (again directly or through a third party). This also rules

out facilitation payments which might typically be paid to ensure that duties are performed. Local

'custom and practice' will not constitute a defence.

• Section 7: offence by commercial organisation where somebody acting on its behalf (eg. Agent or

employee) pays a bribe to obtain or retain a business advantage for the commercial organisation.

The only defence will be to show that "adequate procedures" were put in place by the commercial

organisation to prevent bribery.

3.30 A key feature of the Bribery Act is that an offence committed overseas may lead to prosecution in the

UK if: (a) the act would constitute an offence under the Bribery Act if committed in the UK; and (b) the


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offender has a close connection with the UK. This of course covers any UK Company or UK National. But

it also extends, for example, to a commercial organisation based predominantly overseas which

commits an act of bribery overseas (under the Bribery Act), and which has a subsidiary office in the UK,

as the offender would be deemed to have a 'close connection' with the UK through the subsidiary office.

3.31 The Section 7 Offence has caused the most controversy as it constitutes the most radical change to the

existing bribery laws and has many commercial organisations concerned about what 'adequate

procedures' need to be put in place. The government has delayed publishing the final guidance on

Section 7 but the draft guidance already published sets out six principles of bribery prevention as

follows:

• Risk assessment - be aware of bribery risks.

• Top level commitment - establish an anti-bribery culture.

• Due diligence - know who you transact with and put reciprocal anti-bribery arrangements in

place.

• Clear practical policies and procedures for all employees and business partners.

• Effective implementation of anti-bribery controls.

• Monitoring and review of anti-bribery controls.

Individuals prosecuted under the Act can be jailed for up to 10 years and unlimited fines can be imposed

on commercial organisations.

Workplace disputes consultation

3.32 On 27 January, 2011, the Government announced a new consultation on resolving workplace disputes.

The Consultation paper was published seeking views on various proposed reforms in this area, including

reforms to the Tribunal system. The proposals cover the following:-

• making greater use of Alternative Dispute Resolution tools such as Mediation;

• requiring all Tribunal claims to be submitted to ACAS in the first instance with ACAS having a

period of up to one month to offer pre-claim conciliation in all cases;

• giving greater powers to Tribunals to strike out weak or vexatious claims or to increase the limits

for deposit orders;

• seeking further information about the nature of the claim and that a statement of loss is

provided at the outset;

• developing a better process for allowing offers of settlement so that if the offer is not accepted,

there is a mechanism for recognising additional costs;


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• making various changes to the Tribunal procedure, such as witness statements being taken as

read;

• introducing fee charge mechanisms so that the Claimant for the first time would be required to

pay a fee upon lodging claims;

• increasing the unfair dismissal qualifying period from one year to two years;

• introducing financial penalties for employers found to have breached employees’ rights to

encourage compliance with their obligations;

• reviewing the formula for calculating Tribunal awards and statutory redundancy payment limits.

3.33 The headline grabbing news is of course the increase in the qualifying period from one year to two

years. Whether this will make any significant difference is another matter because anyone with less

than two years’ service will be more encouraged to look at using other causes of action such as

discrimination. Perhaps the most controversial change is that of fee charging so that any claimant

would have to pay a fee upon filing a claim. Up to now, the use of the Tribunal service has been cost

free for Claimants. Those who have weak or vexatious claims may think twice if they have to pay even

say £50 or £100 before filing a claim. It would appear that figures such as £500 per claim or a week’s

wages have been suggested as the relevant fee to be paid. It is likely the changes required will be

introduced within the next three to six months, following conclusion of the consultation period on 20

April 2011.

New tribunal award limits

3.34 The limit on the amount of the compensatory award for unfair dismissal increases from £65,300 to

£68,400 on 1 February 2011, meaning the maximum total award is £80,400.

Extension of the right to request flexible working

3.35 On 6 April 2011, the right to request flexible working will be extended to working parents of children

under 18. A consultation on extending the right to all employees, and the introduction of a flexible

parental leave system, will be published later this year.

Right to request time off for training

3.36 The right for employees to make a request in relation to study or training, which currently applies to

employees in organisations with 250 or more employees, is due to be extended to all employees from 6

April 2011. However on 11 August 2010, the government launched a 12-week consultation on the future

of the right to request time to train and was due to publish its response in December 2010. On 11

November 2010 the Business Minister, Mark Prisk, stated that the right to request would not apply to

employers with less than 50 employees. However, on 17 November he said that his earlier statement


26


was "premature" and that the policy was "still under active consideration until final decisions can be

made".

Maternity, paternity and adoption pay

3.37 The standard rates of statutory maternity, paternity and adoption pay will increase from £124.88 to

£128.73 per week from 3 April 2011. Statutory sick pay will also increase from £79.15 to £81.60 per

week from 6 April 2011.

National Minimum Wage may rise

3.38 The national minimum wage may rise on 1 October 2011, subject to the prevailing economic conditions

and the Low Pay Commission's recommendations to be delivered to the Government in February 2011.

4. IMMIGRATION

The Immigration ‘Cap’

4.1 The Coalition Government made a commitment to reduce net immigration into the UK “from the

hundreds of thousands to the tens of thousands”. One of the most debated ways of fulfilling this

commitment was the proposed introduction of an overall limit, or cap, on the number of (non-EU)

economic migrants entering the UK.

4.2 During last Autumn these proposals were put out to the public and key stakeholder groups to canvass

their views and the alternative methods of introducing the cap. The outcome of this consultation was

announced in November, with the Home Secretary Teresa May deciding to set the annual cap at 21,700

migrants, a number much below that predicted by commentators. However, she also announced a

concession to big business with the decision that intra company transfer – those staff moving to the UK

but within multinational companies – would not be included in the cap (but would be required to earn

at least £40,000 per year to be permitted to stay in the UK for over a year and would no longer be

allowed to obtain indefinite leave to remain). The various criteria under which a migrant must score

points would also change with migrants being required to fill posts at gradual level or above and earn

more than previously required: the system was being strengthened with a view to dramatically reducing

the numbers of successful applicants.

4.3 For the period between July 2010 and April 2011 a temporary cap was put in place by the Government

before the introduction of the permanent cap in April 2011. This temporary cap was recently held to be

unlawful in a legal challenge by the Joint Council for the Welfare of Immigrants. We await the

publication of how the permanent cap will work in practice as to date is far from clear how the small

number of available places will be allocated. It is sure to be a testing year for companies wishing to

bring in overseas talent to help their UK businesses.


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Closure of Tier 1 (General)

4.4 The closure of Tier 1 (General), announced in the late Autumn of 2010, was another significant

development concerning immigration law last year. This route allowed highly skilled workers from

overseas to enter the UK (without necessarily requiring a job offer) and work for a UK business. The

scheme closed for overseas applicants in December 2010.

4.5 The Home Office gave just 24 hours notice of this closure, an arguably unfair amount of time for UK

businesses and overseas applicants to take action. The route is still open for in-country applications

until April 2011, when it will close for good. We are informed that there will be a new Tier 1

(exceptional talent) route limited to 1,000 overseas nationals for “people of exceptional talent – the

scientists, academics and artists who have achieved international recognition, or are likely to do so”.

Exactly how that exceptional talent will be judged is yet to be decided and critics would say this route

may be a move back towards a subjective system and away from the objective and transparent

decisions promised when the Points Based System of immigration was launched. Immigration will

continue to be a hot political topic in 2011 and rapid legal change will continue to be the norm.

5. EU LAW

Parental Leave Directive

5.1 In March 2010, the EU adopted a directive extending the right to parental leave from three to four

months for each parents. It was provided that at least one of the four months cannot be transferred to

the other parent. All workers are covered including those on fixed terms, part-time and temporary

agency workers. At the moment, every parent has a personal entitlement of 13 weeks’ leave, but this

will have to be increased to at least 17 weeks, although 18 weeks is already provided where the child is

disabled.

Amendments to Pregnant Workers Directive

5.2 In 2008, the European Commission published a proposal to amend the Pregnant Workers Directive of

1992. The aim was to improve minimum maternity rights cross all member states. The proposals

included:-

• increasing the minimum period of maternity leave from 14 to 18 weeks;

• ensuring women receive full pay during maternity leave, although member states would be able

to specify a ceiling of not less than sick pay;

• extending compulsory maternity leave from two to six weeks;

• giving women the right to request written reasons for their dismissal if dismissed at any point

from pregnancy until six months after the end of maternity leave;


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• giving women the right to return from maternity leave to the same or equivalent post on no less

favourable terms;

• entitling women who are suspended from work on maternity grounds to receive full pay.

The UK already complies with a good number of the above proposals. The proposals were debated in

the European Parliament which voted to extend minimum maternity leave to 20 weeks at full pay. In

December 2010, EU Ministers expressed their concerns about this proposal and to introducing two

weeks fully paid paternity leave for fathers. The latest position appears to be that a new plan will be

drawn up outlining potential areas for compromise in bringing the revised Directive into force.

Self Employed Workers Directive 2010

5.3 This new Directive on self-employed workers and assisting spouses is intended to improve the rights of

millions of women in the labour market and will strengthen female entrepreneurship. All female self-

employed workers will be granted a maternity allowance and leave of at least 14 weeks, should they

choose to take it.

In Europe, around 16% of the active population is self-employed. Of these, around 11% rely on the help

of spouses and partners who work on a informal basis in small family businesses, such as farms or local

doctor’s practices. These are known as “assisting spouses”, and are traditionally completely dependent

on their self-employed partner. As such, they are at high risk of poverty in the event of divorce, or their

partner’s death or bankruptcy. Under the new Directive, such assisting spouses would have the right to

social security coverage (such as pensions) on an equal basis as formal self-employed workers, if the

Member State offers such protection to self-employed workers. In the UK, self employed workers

receive a basic state pension, and their payment of NICs contributes towards that entitlement.

5.4 Member States have 2 years within which to introduce the Directive into national law. The level of

benefits will be a matter for Member States to decide. It is likely that maternity allowance will be

calculated on the same basis as statutory maternity allowance for employees who do not have the

requisite earnings or length of service with their current employer.

6. CONCLUSION

There are big issues for employers to contend with in 2011 which include:-

• deciding company policy on whether to fix a retirement age.

• considering the impact of the Agency Worker Regulations.

• reviewing procedures for the transfer of maternity leave.

• reviewing policies, procedures, and training to prevent bribery.

• anticipating the impact of flexible working rights on the business.


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Besides this, we await the implementation of the Parental Leave Directive 2010 and any changes to

resolving workplace disputes. Once again, employment law is on a rollercoaster ride!

About Doyle Clayton

Doyle Clayton is the largest specialist provider of employment law advice to businesses and individuals

in the UK. Founded in 1997 our dedicated employment lawyers operate from offices in the City, Canary

Wharf and the Thames Valley providing advice and support to clients across the country.

We specialise exclusively in all aspects of employment law and work principally advising senior

executives and corporate clients on the full range of employment issues from non-contentious matters

to Tribunal and High Court disputes. Advice is also routinely given on ad hoc employment law questions

and business immigration matters, as well as providing corporate support in relation to more complex

employment law issues, such as TUPE.

London City

One Crown Court

Cheapside

London

EC2V 6LR

Canary Wharf

Level 33

25 Canada Square

London

E14 5LQ

Reading

Sovereign House

Vastern Road

Reading

RG1 1PW

T: 020 7329 9090 T: 020 7038 8051 T: 0118 959 6839

www.doyleclayton.co.uk

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Doyle Clayton – The Employment Solicitors...Doyle Clayton – The Employment Solicitors 4 February 2011 employee was seen kissing another employee and then going to a hotel room