October 2013 - Partners Employment Law Seminar

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Partners Employment Lawyers

Employment Law Update

7th October 2013

Changing Contract

Terms

Presenter: Hina Belitz

7th October 2013

Identifying the problem

Numerous issues

can arise through

terms and

conditions changes

Variation Clauses

Unilateral changes by the

employer

For Example

“We may make changes to these terms and conditions of employment on giving you 14 days’ written notice.”

or

“Our policies are discretionary and can be changed by us at any time.”

Theory vs. Practice at the Tribunal

Theory : in the contract - a

binding clause

Practice : two devices used to show employer in breach

The Tribunal will favour the argument 1. that the variation clause, if construed properly, does not cover the situation in question; or,

2 by relying on an implied term fettering the right of the employer to vary the contract, namely that the employer will not do so arbitrarily or unreasonably.

Ambiguity

• Ambiguous clauses

favour the employee - the contra proferentum rule is often applied

• Make your variation clause clear and

simple

Implied trust and confidence

•Courts will imply a term that the employer will not exercise a variation clause capriciously or unreasonably. This is essentially a different way of stating the well established implied term of trust and confidence.

• This is most commonly seen in city banker bonus cases, where banks are not allowed to use their discretion when setting discretionary bonuses in a way that is capricious or unfair. However, it has wider application.

•Can apply to other clauses such as relocation clauses

Agreement to the changes – the ideal way

Changes in writing for

clarity,

but not technically required

The Two issues

1) making sure the employees actually agree to the change

2) making sure the agreement is binding

1) Making sure the employees actually agree to the change

Union agreement

only binding on

employee if

Authorised to vary contracts on their

behalfA Clause can be

included in the

individuals’ contracts

to allow for this

Silence doesn’t mean consent

Working under

protest is not

binding

If an employee carries on working, but under protest, then he is not taken to have agreed to the variation and it will not, therefore, bind him. The protest need not be immediate, but must be within a reasonable period (typically weeks rather than months).

If the employer nevertheless insists on the change, the employee can do one of four things:-

1) resign, and claim constructive dismissal

2) accept the new terms under continuing protest and at the same time claim constructive unfair dismissal on the basis he was dismissed under one contract and is now working under a new one on the varied terms

3) seek a declaration from the employment tribunal as to the terms and conditions under which he is employed;

4) work under protest, content in the knowledge that the changes are not binding and – if ever sued for refusal to comply with the changes (eg a new restrictive covenant) – a court will not enforce them. If the employer decides to dismiss him, he will have a claim for unfair dismissal (subject to the employer’s defence that it had a sound business reason for the variation).

(2) Making sure the agreement is binding

Consideration from the

employer

• pay raise, more holiday,

etc

Dismissing and re-hiring

Advantages

The advantage of dismissal and re-engagement is that it is certain to achieve the aim of varying terms and conditions of employment (at least, for those who accept the offer of re-engagement).

It prevents the employees from later bringing claims for wrongful dismissal (assuming the dismissal was on notice, which it should be), unlawful deductions from wages, or breach of contract generally.

Disadvantages

The disadvantages of dismissal and re-engagement are (a) it is incredibly damaging to workplace morale; (b) it usually involves extensive collective consultation; and (c) there is a risk of unfair dismissal claims.

Business protection

a key fairness

justification

Examples of cases where dismissals in these circumstances have been held to be fair.

• employee dismissed for refusing to work extra hours even though union accepted extra hours would be needed to keep the business alive — Ellis v Brighton Co-op Society Ltd [1976] IRLR 419.

• supervisor dismissed for refusing to supervise extra staff — Bowater Containers Ltd v McCormack [1980] IRLR 50.

• employees dismissed for refusing to accept adverse changes to employment contracts pursuant to important business reorganisations — Chubb Fire Security Ltd v Harper [1983] IRLR 311 and Catamaran Cruisers Ltd v Williams & Another [1994] IRLR 386

• employees dismissed for refusing to accept a ‘buy-out’ payment in lieu of the employer ending an annual bonus – Slade v TNT (UK) (EAT/0113/11)

Dismissal for refusal

Generally deemed

fair if no negative

financial impact on

employees

Employee dismissed for refusing to sign a restrictive covenant preventing ex-employees from soliciting clients for 12 months, in circumstances where the company was facing problems from staff who had left and set up in competition — RS Components Ltd v Irwin [1974] 1 All ER 41.

• employee dismissed for refusing to move within reasonable travelling distance of head office, when head office relocated — Farr v Hoveringham Gravels Ltd [1972] IRLR 104, IT.

• woman dismissed for refusing to work during school holidays, even though she had been given 12 months’ notice to make suitable childcare arrangements — Moreton v Selby Protective Clothing Co Ltd [1974] IRLR 269, IT.

Tribunal Considerations

Extent of impact is a key

factor

•The factors a tribunal will take into account, when deciding whether the dismissal is fair or unfair, include:

• the extent of the detrimental impact on the employees if the variation occurs.

• the extent of the detrimental impact on the employer if the variation does not occur. If the employer can demonstrate the business is facing insolvency (so the employees will lose their jobs without variation) this will be a very compelling factor. However, it is not necessary for the employer to establish this — Catamaran Cruisers v Williams (supra.).

• whether the trade union (if recognised) accepts the changes are reasonable — Hollister v NFU (supra).

• the number of employees who have consented. The greater the number who consent, the more willing a tribunal will be to hold that the variations are reasonable.

PRESENTER: WILLIAM BAYS

7TH OCTOBER 2013

18Employment Law Update

Employment

Law Reforms

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Early Conciliation


Probably coming into force 6 April 2014

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• Acas current involvement in cases – rarely conciliates in pre-issue claims because of lack of funding.

• Steps for Early Conciliation

1. Before issuing a claim, the Claimant must send details of their claim to Acas2. They will then be offered the option to engage in early conciliation to try to resolve the claim3. If conciliation is refused by any party to the claim then the individual can bring a claim in the

tribunal4. If the parties do want to conciliate, the period of conciliation will last one month (and can be

extended by a further two weeks)5. At the point that the conciliation fails or at the expiry of one month (whichever happens first)

the individual can bring a claim in the employment tribunal6. When a claimant submits details of their claim to ACAS, this will ‘stop the clock’ in terms of

time limits. They will then have either one month from the end of the conciliation (or, if longer, their original time limit) to present their a claim.

This is expected to begin in April 2014.

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Applies to everything except

1. Certain exempt jurisdiction

2. EC already completed (e.g. because requested by

employer)

3. Multiple claims

4. Claim Form includes jurisdictions not subject to EC

5. Claims against MI5, MI6 and GCHQ

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The Early Conciliation form

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Two Stage Process

First Stage: Early Conciliation Support Officer

• Contact Claimant and take basic details

• Give general information

• Check whether employer still trading

• Enquire whether Claimant represented

• Get contact details for person at Respondent

This call is envisaged to take place by close of business

on the day following receipt of the EC Form

If the prospective Claimant does not want ACAS to

contact the Respondent, the conciliation fails and a

Certificate will be issued…

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Two Stage Process

Second Stage: Conciliation Officer

• Conciliation Officer endeavours to promote a

settlement

• Lasts for up to one calendar month

• Extendable by further two weeks if reasonable

chance of achieving a settlement

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The Early Conciliation

Certificate:• Name and address of the prospective Claimant

• Date of receipt by ACAS of EC Form

• ACAS’s Unique Reference Number

• Date of issue of the EC Certificate, and a

statement indicating the method by which it is

sent

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Changes to limitation periods

• Day A – when EC Form provided to ACAS

• Day B – when EC Certificate is deemed

received

• Limitation clock stops day after day ‘A’

and resumes day after day ‘B’.

• BUT if time limit would otherwise have

expired less than a month after day ‘B’, it is

extended to a month after day ‘B’.

This is complicated, but the key thing to

remember is – no matter, what the

claimant will always get a month

after day B.

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Problem Areas


• What if the wrong Respondent

is named on the form?

• What if another claim comes

up?



Tribunal Fees

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1) From the 29th July 2013, all Claimants were expected to pay

a court fee when submitting their claim to the Tribunal

2) There is an additional charge just before the hearing.

Tribunal Fees

The two stage approach was intended to give the parties two extra

nudges towards the negotiation table, each time a new fee is due.

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Tribunal Fees

The amount of the fees depends on the type of claim which were

divided into two levels

1. For Type A claims, the issue fee is to be £160 and the hearing

fee is to be £230.

2. For Type B claims, the issue fee is to be £250 and the hearing

fee is to be £950.

N.B. Judicial Mediation is paid for by the Respondent at £600

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Common Type A claims include those for:

•Statutory redundancy payments.

•Equal pay (whether for breach of the sex equality clause or the maternity equality clause).

•Unlawful deductions from wages.

•Breach of contract.

•Determination of what should be included in a section 1 statement (for more information on

section 1 statements, seeChanging terms of employment: a quick guide: Section 1 statement of

terms).

•Failure to inform and consult as required by TUPE.

•Refusal to allow annual leave, compensation, payment or compensatory rest under the Working

Time Regulations 1998 (SI 1998/1833).

•Refusal to allow time off for dependants.

•Refusal to permit, or pay for, time off for antenatal care.

•Failure to permit time off for trade union duties or public duties.

•Failure to permit, or pay for, time off for trade union activities or time off for employee

representatives

•Failure to permit, or pay for, time off to look for work or arrange training.

Tribunal Fees

http://uk.practicallaw.com/5-381-4413#a127252

http://uk.practicallaw.com/8-107-7424

http://uk.practicallaw.com/4-506-3858?pit=

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Common type B claims therefore include:

•Unfair dismissal (ordinary and automatic)

•Discrimination.

•Whistleblowing.

Tribunal Fees

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Issue fees and hearing fees: fee groups

The starting point to determine the issue fee payable by a fee group bringing a type A claim is:

•Where there are between 2 and 10 claimants: £320.


•Where there are over 200 claimants: £960.

The starting point to determine the issue fee payable by a fee group bringing a type B claim is:


•Where there are between 11 and 200 claimants: £1,000.

•Where there are over 200 claimants: £1,500.

The starting point to determine the hearing fee payable by a fee group bringing a type A claim is:




The starting point to determine the hearing fee payable by a fee group bringing a type B claim is:




Tribunal Fees

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Tribunal Fees

Gross Monthly Income is below:

Single In a couple

With no children £1,085 £1,245

1 Child £1,330 £1,490

2 Children £1,575 £1,735

For those who cannot afford the fees there is a two stage test for

qualifying for remission

1) “Disposable Capital” of applicant and/or their partner

1) E.g. Investments, Redundancy Payments and Savings

2) Gross Monthly Income

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Changes to

Whistleblowing


Edward Snowden

Chelsea (Bradley) Manning

Julian Assange

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Whistleblowing is when a worker reports suspected wrongdoing at work.

Officially this is called ‘making a disclosure in the public interest’.

A worker can report things that aren’t right, are illegal or if anyone at work is

neglecting their duties, including:

•someone’s health and safety is in danger

•damage to the environment

•a criminal offence

•the company isn’t obeying the law (like not having the right insurance)

•covering up wrongdoing

Whistleblowing

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Protection from detriment after damage is done

Dismissal – Easy to prove

Detriment – discrimination bully/ harassment

Whistleblowing

Disclosure - Reasonable belief of the “worker”

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As of 25th June 2013, a change in the law on whistle blowing came into force aspart of the changes to Enterprise and Regulatory Reform Act 2013

The most important changes fall into four categories.

Protected Disclosures must be in the Public Interest No Requirement for Good Faith Personal Actions Against Fellow Employees Vicarious Liability

Changes to Whistleblowing

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1. Protected Disclosures must be in the Public Interest

• The old legislation was intended to protect employees disclosing illegal or dangerous practicesE.g. hospitals, breaches of health and safety which endangered the public, environment etc.

• This principle was extended through case law to include a disclosures relating to the employees’ own contract.

• The advantage to the employee was no limit on the compensation for dismissal following a protected disclosure


The New Law

• Simply to try to close that “loophole.”

• Any disclosures must be in the public interest in order to qualify as protected

• How will the Tribunal interpret that…… who knows? – we’ll have to wait and see

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2. Good Faith

Under the previous law there was a requirement for protected disclosures tobe made in good faith, for example, not vindictively against the company.


The new law has removed this requirement and the claimant’s motivation formaking the disclosure is no longer relevant.

The New Law

Use as a shield not a sword? – statutory cap

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3. Personal Actions Against Fellow Employees

The new legislation allows employees to bring civil actions againstfellow employees who treat them less favourably.


E.g. Mid Staffordshire Hospital – Nurses falsifying records

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4. Vicarious Liability

Companies can now be held vicariously liable for the detriment suffered by anemployee for bringing a protected disclosure.

This would be in the case that an individual was treated less favourably by afellow employee much in the same was as with discrimination.


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2008 – 2012 – 75% of whistleblowing cases settled – buying silence?

Missed opportunity?

Protection from “discrimination as a whistle-blower” for future job application

Reward system in USA? – a cut of the fineE.g. Bradly Berkensfield – a year and a half in prison and $105m waiting when he gets out


Employers should be grateful?

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Employee Shareholders

What’s the Plan?

Simply an exchange

An employee gives up their statutory rights in

exchange for shares in a business.

A new class of employee is created

Partners Employment Lawyer 02073746546

www.partnerslaw.co.uk

Who is an Employee

Shareholder?

Clause 23 to add a new section 205A to the Employment Rights Act 1996

“(1) An individual who is or becomes an employee of a company is an “employee owner” if—

(a) the company and the individual agree that the individual is to be an employee owner, and

(b) in consideration of that agreement, the company issues or allots to the individual shares in the company which have a value, on the day of issue or allotment, of no less than £2,000 and no more than £50,000. Partners Employment Lawyer 02073746546


What Rights are Given Up?

Clause 23 to add a new section 205A to the Employment Rights Act 1996

(2) An employee who is an employee owner does not have— (a) the right to make an application under section

63D (request to undertake study or training

(b) the right to make an application under section 80F (request for flexible working),

(c) the right under section 94 not to be unfairly dismissed, or

(d) the right under section 135 to a redundancy payment.



Why do they want to do this?

October 2011 – Beecroft Report – Adrian Beecroft

Small businesses are over burdened with complicated employment law

This led to the plan for No Fault Dismissals

Dropped due to lack of support. – No evidence to support the proposed benefit.

Companies did not want this change

George Osbourne: -“particularly suitable to new businesses starting up and small and medium sized firms.”

No-fault dismissal would give businesses confidence to hire more staff and so help create job Partners Employment Lawyer 02073746546


How will it affect Employees?

• No Unfair Dismissal

No procedure need be followed

No consulting with employees

No following the ACAS Code of Practice etc.

• No right to request training.

Therefore;

Employees may fall behind technological developments

Employees may not network, build relationships



How will it affect Employees?

• No redundancy payment.

No meetings – at risk of redundancy

No search for suitable alternative employment

No large scale consultations

• No right to request flexible working

Mothers and Carers?

Job Sharing

Working from Home

FlexitimePartners Employment Lawyer 02073746546


IN EXCHANGE FOR RIGHTS

Shares with a value between £2,000 and £50,000

Not Capital Gains Tax on payments

Benefit from dividend

New and expanding companies could make the

dividend/sale price more substantial than a redundancy

payment




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Settlement Agreement ACAS Code of Conduct

Code designed to help employers through S111A of the ERA 1996

In particular relating to how to approach employees and the

new rules on Without Prejudice Conversations

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For an Agreement to be valid it must satisfy the following conditions:

(a) The agreement must be in writing;

(b) The agreement must relate to a particular complaint or proceedings

(c) The employee must have received advice from a relevant independent adviser on the terms and effect of the proposed agreement and its effect on the employee’s ability to pursue that complaint or proceedings before an employment tribunal.

To be legally binding for these purposes, a settlement agreement has to specifically state the claims that it is intended to cover.

(d) The independent adviser must have a current contract of insurance or professional indemnity insurance covering the risk of a claim by the employee in respect of loss arising from that advice;

(e) The agreement must identify the adviser;

(f) The agreement must state that the applicable statutory conditions regulating the settlement agreement have been satisfied.


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Section 111A of the ERA 1996 provides that offers under a settlement agreement can be made on a confidential basis and cannot be used as evidence in an unfair dismissal claim to an employment tribunal.

Pre-termination negotiations can be treated as confidential even where there is no current employment dispute or where one or more of the parties is unaware that there is an employment problem.

Section 111A of the ERA 1996

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An automatically unfair reason for dismissal such as whistleblowing, union membership or asserting a statutory right are not covered by the confidentiality provisions.

Exceptions

Claims other than unfair dismissal, such as discrimination, harassment, victimisation or other behaviour prohibited by the Equality Act 2010, or claims relating to breach of contract or wrongful dismissal.

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Improper Behaviour

Where there has been some improper behaviour it will not mean that an employer will necessarily lose any subsequent unfair dismissal claim that is brought to an employment tribunal.

If a settlement agreement is being discussed as a means of settling an existing employment dispute, the negotiations between the parties can be carried out on a ‘without prejudice’ basis

Exactly what the Tribunal will decide constitutes improper behaviour is unclear.

The phrase “unambiguous impropriety” has been taken from the Without Prejudice Principlee.g. undue pressure to accept terms

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There is no legal requirement for an employee to be allowed to be accompanied to a Without Prejudice discussion.

However, It is considered good practice by ACAS

Could be a fellow employee or trade union representative


Right to be accompanied

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Employees should be given reasonable time to review the changes

Employee time to review terms

ACAS guidance says that this means 10 days to consider and take advice

Parties can agree otherwise

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ACAS Guidance

ACAS have produced a non-statutory guide to help employers

Of particular use for employers are:

- Procedural checklists

- Template letters for employers to use

- Hypothetical scenarios to guide employers through the process

- http://www.acas.org.uk

http://www.acas.org.uk/

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Summary of changes

• Early Conciliation

• Tribunal Fees

• Whistleblowing

• Employee Shareholders

• ACAS Code of Conduct for Settlement Agreement

From 1st October

• Third Party Harassment

• Minimum wage increase

Discrimination

Awareness

Remziye Ozcan

7th October 2013

Discrimination Awareness

• Statistics

Average compensation in discrimination claims

from April to June 2013:

£9K for race discrimination

£17K for disability discrimination

£11K for sex discrimination

Maximum award for race discrimination was

£65K…. But in 2011/12 the maximum was

£4.4million!

• Unlimited compensation

•Equality Act 2010 – applies to all employers

What is a protected characteristic?•Unlawful to discriminate against individuals in respect of specific characteristics known as protected characteristics which are:

• Age (reference to an age or an age range e.g. 20 year olds or the “over fifties”)• Disability (look at later)• Race (colour, nationality, ethnic or national origin e.g. Scottish )• Sex (being a man or a woman)• Sexual orientation (homosexual, heterosexual, bisexual)• Religion or belief (including lack of religion)• Pregnancy/maternity• Gender reassignment

• Legislation protects:• employees which, for the purposes of the EA, includes workers, contract workers and those who personally perform services –

references in seminar to employees includes all these categories;• job applicants;• former employees;• no service requirement

Who is protected

Types of discrimination

• Direct

• Indirect

• Harassment

• Victimisation

• Discrimination arising from disability

• Failure to make reasonable adjustments -

disability

Recruitment – Avoiding Discrimination

• What does the job really

entail?Employers must not discriminate:

• In any arrangement made to fill a vacancy• In the terms offered• In the decision to refuse someone a job

• To avoid discrimination, prior to recruiting into the role consider•What does the job really entail –skills/qualities/experience•Job descriptions/person specifications should accurately reflect the real requirements of the job•Avoid making assumptions/stereotypes

Recruitment - Direct Discrimination

Less favourable treatment because of protected

characteristic•Explanation of direct discrimination:

• employer treats another person less favourably

• than they treat or would treat others

• because of a protected characteristic

• Example: Employer recruiting to a role decides not to interview

women, whether or not they are suitable. Women treated less

favourably than men because of their sex

• The fact that the employer and the employee share the same

characteristic is not a defence to discrimination

•Lack of intention to discriminate is not relevant, if that was the effect of

the treatment

Recruitment - Indirect Discrimination

• Provision, Criterion or Practice

• Applies to all

• Disadvantages group with protected

characteristic• Disadvantages individual with protected

characteristic

• Objective justification

Application and Selection

• Objective

• Standardised

• Non-discriminatory•The process of considering application should be objective,

standardised and non discriminatory. Aim to get the best

candidate for the job:

• Individuals shortlisting should not see

candidates personal details

• Fair and objective criteria

• Conduct interview on the basis of the

•application form, job description,

•any agreed weighting and results of

any selection test (disability-reasonable

adjustments)

• If possible more than one person involved in assessment

• Keep documents for at least 4 months – 3 months to

bring a claim

Recruitment - Pregnancy

• Disclosure obligations

• Refusal to recruit

Recruitment - Disability & Health

• Avoiding disability

discrimination

• Pre-employment enquiries

DURING EMPLOYMENT

• Less favourable treatment?

• Why/discriminatory reason?

Association & Perception

It’s who you know, as well as what

you are!

•Discrimination if an employer

treats an employee less

favourably because of their

association with another person

who has a protected

characteristic.

• Discrimination if an employer

treats an employee less

favourably because they

perceive them to have a

protected characteristic. Even if

they are mistaken.

Disability Discrimination I

Disabled if:

• physical/mental impairment

• long term

• substantial & adverse effect on ability to

do day to day activities

Disability Discrimination II

Discrimination

arising from disabilityIndividual treated unfavourably (not

less favourably) because of

something arising in consequence of

their disability there will be

discrimination unless:

1. The employer can show that it was

a proportionate means of

achieving a legitimate aim –

objective justification – (looked at

above in relation to indirect

discrimination); or

2. Employer did not know or could not

reasonably be expected to know of

disability

Disability Discrimination III

Duty to make reasonable

adjustments

Reasonable Adjustments

• If applicant/employee is disabled = duty to make reasonable adjustments in 3 scenarios

• to avoid physical feature or pcp (e.g. working practices) putting them at a substantial disadvantage.

• Provide auxiliary aids (e.g. computer adapted equipment) to avoid substantial disadvantage

• Where duty arises failure to comply=discrimination. No defence of justification.

• Examples of adjustments:

• Making adjustments to premises (e.g. wheelchair access);

• Acquiring or modifying equipment (e.g. suitable computer packages);

• Providing information in an accessible format;

• Allocating some of the disabled person’s duties to another worker;

• Transferring the disabled worker to fill an existing vacancy (e.g. if no reasonable adjustments can be made to their current role);

• Altering the disabled worker’s hours of work (e.g. later starts);

• Assigning the disabled worker to a different place of work;

• Allowing the disabled worker to be absent during working or training hours for rehabilitation, assessment or treatment;

Disability IV

What is

reasonable?

Obligation is to make adjustments

that are reasonable – consider:

• whether taking any particular steps would be effective in preventing the

substantial disadvantage (if the adjustment would not work it will not be

reasonable);

• the practicability of the step;

• the financial and other costs of making the adjustment and the extent of any

disruption caused

• is it cost effective overall e.g. cost of adjustment compared to

recruiting/training new member of staff;

• can’t pass cost onto employee

• the extent of the employer’s financial or other resources;

• the availability of financial or other assistance to help make an adjustment

(e.g. Access to Work);

• the type and size of the employer.

• Vary from case to case

•

Dealing with Absence I

• Follow own procedure/ACAS code

• Investigations

• Factors to consider

• Reasonable adjustments

Dealing with absence II

Do I have to:

• Disregard disability

related absence?

• Extend contractual sick pay?

Dealing with Absence IV

Annual leave

Employers need to think about whether

their annual leave policy and its

application may be discriminatory

Harassment

• Unwanted conduct – related to

protected characteristic

• Purpose of effect

• Violating Dignity

• Hostile/degrading/humiliating or

offensive environment

Victimisation

Victimisation – protected acts – detriment

Don’t Panic

•ECHR statutory code of practice

•ECHR non statutory guidance

• ACAS

Hiring and Firing: Protecting the Business

Hina Belitz

7th October 2013

Hiring new employees

Overview

I wish our contracts had said…

You really should settle this

one…

What do you mean: there’s

nothing to stop him poaching

our key customers

Keep your contracts up to date

•The single most important measure you can take to protect the business is to regularly review the contracts of employment of key employees (and the company procedures they operate under) to make sure they are up-to-date.

• And make sure changes are recorded – you need to show a paper trail of agreed variations.

• One major costs in a termination situation establishing what the parties rights are because the employment documentation has not kept pace with the variations that have been agreed over the years.

• Some don’t matter – they can be evidenced in other ways, like pay awards.

• But some matter a great deal, like the terms of bonus arrangements, pension terms, and post-termination restrictive covenants

Update key terms

• pay: bonus, deferred compensation, share options, pension

• notice

• business protection on termination

• rules of conduct during employment

Rules of conduct

•Markets, financial and consumer are increasingly sensitive to breaches and it is vital that companies articulate very clearly to employees, including senior staff, what is and is not acceptable behaviour.

•Are there particular rules of conduct, breach of which might cause the company harm, either financially or to its reputation?

•Are the company’s standard disciplinary rules comprehensive enough?

• Check which rules are contractual – and identify which are within your entire discretion to change.

• Best practice is to consult before implementing changes even where you have managerial prerogative.

Firing employees

Notice

What period

of notice

should you offer?

•So this brings us on to the question of how much notice should your contracts set out? The length of notice should be determined by business need not seniority

• Need to undertake an assessment, a cost benefit exercise: required length of notice to:

• protect the business operations• find and induct a replacement• cost of buying out notice if the employer does not want the employee to work it

•keeping an employee who has resigned out of the market may be more important than the short term cash flow implications of a notice period.

• In many situations the length of the notice period is an important factor in being able to respond tactically to the departure of a key employee with influence over key suppliers/customers.

If the length of notice is not

defined, the court implies a

‘reasonable’ period of notice

Protecting the business

• Protect Confidential

Information

• Prevent Unfair Competition

• Protect Customers and Suppliers

• Retain Remaining Workforce

Garden leave

•One of the best ways of protecting these interests is to impose a period of garden leave You can do this:

• partially, by transferring the employee to ‘non-core’ activities, so that you are still getting value from the wages you are paying, or

• completely - by putting the individual on garden leave. This type of leave is a period of paid suspension, when the contract of employment is continuing.

Transferring the employee to special duties

• You can only change employee’s contractual duties with their consent.

• So to avoid any doubt it would be wise to include a clause in your contract allowing transfer within reason to alternative duties during the notice period.

• Do not impose a change – you may be acting in breach of contract.

• This is what the employee may be waiting for - you giving them ammunition to allege you have constructively dismissed them (by acting in breach of contract).

Confidentiality

The law already implies

some basic protection

Better to be safe than sorry

– spell out confidentiality

obligations

Restrictive covenants - why wait till the horse has bolted?

Restrictions can be agreed:

• on recruitment

• during employment

• on termination, or

• later, to settle a termination

dispute

Does the company have a free hand in drawing up restrictive covenants?

• Restrictions are void unless they are ‘reasonable’

• Careful, role and sector-focussed, drafting is required

• Keep them up-to-date with job changes

They must be:

• necessary to protect an

identifiable legitimate

business interest, and

• reasonable in their scope

Tax and termination payments

• Protect the £30,000 tax

relief

• Attach some money to the covenants

or risk the whole termination payment

being taxable

Dismissing employees – avoiding the pitfalls• wrongful dismissal

• unfair dismissal

• discrimination

• tax

• integrity of post-

termination restrictions

• damage to reputation

What is the difference: wrongful dismissal/unfair dismissal?

1) Dismissal in breach of contract

= wrongful dismissal

2) Dismissal in breach of contract

and/or

No fair reason for dismissal/Failed to

follow a fair procedure

= unfair dismissal

PILONs and tax

•There is a downside of a PILON

clause … the £30,000 tax relief is

not available

Also:

• It may not be available if you

customarily make pay in lieu of

notice payments without an

express clause

• Which is most important to you –

the tax relief or the covenants?

PILON

Non-Poachi

ng

Non-

Dealing

No-Compe

te

•This approach means you avoid one of the consequences of a wrongful dismissal – that the employee is discharged from their obligations under the contract (restrictive covenants).

• This failsafe mechanism only works though if you have a PILON clause hardcoded in the employment contract.

• Usually the employer simply pays the wages and a capital sum reflecting the value to the employee of the contractual benefits (such as pension contributions, healthcare costs, etc.) the employee has lost by not having been given due notice.

Compensation in a wrongful dismissal claim

What’s this about

‘mitigating my

losses’…?

•The dismissed employee can bring the claim in either the ordinary civil courts (generally speaking in the County Court, in high value cases in the High Court) or the employment tribunal.

•The employment tribunal is restricted to making an award of no more than £25,000 in damages for breach of contract claims.

• Employees are often advised, because of this financial cap, to claim what loss they can under a different type of employment tribunal claim.

• When calculating how much to award an employee who has been dismissed in breach of contract the court or tribunal is obliged to put the employee in the financial position they would have been in had the employer complied with the terms of the contract.

• Employees have a duty to mitigate the amount they have lost by trying to get another job.

Settlements

Which is best in a particular case?

• ‘Full and final settlement’

• Settlement agreement

• COT3 (Acas)

Thank You!

For more information please contact Hina Belitz

0207 374 6546

[email protected]


@hinalegal

www.facebook.com/EmploymentLawyersLondon

mailto:[email protected]