Employment law banner

Employment Law Newsletter - January 2013


Holding off on auto-enrolment?

Recently, several clients have raised with us the same uncertainty about an aspect of pensions auto-enrolment. The common feature of these businesses is that they all use casual workers. They are unsure how the annual earnings 'trigger', which defines those who must be auto-enrolled, applies to a casual worker whose earnings in a given year cannot be guaranteed at the outset to match the amount of the trigger. Does the employer wait until the end of the year and enrol retroactively if earnings hit the trigger? Or, at least, enrol only once the earnings during the year match the trigger?

The answer to both questions is no. If such uncertainty about ultimate annual earnings were a general brake on auto-enrolment, virtually nobody would be subject to the new rules from the outset - even a 'regular' employee might leave employment before their earnings hit the trigger. But that is not how the system works. Such 'regular' employees are eligible if their contractually stated earnings match or exceed the trigger. And, in any event, total reliance on annual earnings is unnecessary. The annual earnings trigger has monthly and weekly (pay reference period) equivalents that are just as valid and, for a casual worker, more relevant. So, unless a right of postponement for up to three months has been properly exercised, auto-enrolment should occur as soon as a casual worker's earnings hit the monthly or weekly equivalent.

Of course, it is highly likely that an auto-enrolled casual's earnings will fluctuate, even to the point that, in a subsequent week or month, they drop below the trigger amount and maybe no contributions are made. But that is a different point from the one about meeting the employer's duty on auto-enrolment when it first arises.


Mind the gap

In Welton v Deluxe Retail, the EAT has undermined a tactic commonly used by employers to defeat the accrual of continuous service.

It held that, despite a gap of more than a week between an employee's dismissal (on Tuesday 23rd February 2010) and his starting work under a new contract with the same employer (on Monday 8th March 2010), service under the two contracts was continuous. This was because the second contract was formed when the employee initially accepted fresh employment (in the week beginning Sunday 28th February 2010) rather than when he actually started working again - 'factual employment' is not necessary to create an employment contract. So, there was no week 'during the whole of which' there was no contract of employment between the parties. Therefore, the three separate weeks concerned all counted under the wording of the statutory rules and the employee had sufficient service to claim unfair dismissal when he was again dismissed later in 2010.

The only obvious way around this is to avoid or conceal any agreement between the parties in the 'middle week'. However, even then, it is likely that the gap could be caught and counted by the additional rules on an absence caused by 'a temporary cessation of work'. So, by all means continue to use the 'one week+ gap' tactic - it might persuade the 'unadvised' that there is no continuity - but do recognise its risks and limitations.


Don't ask for too much

The detail behind the High Court's recent ruling in CEF Holdings v Mundey & others on the application and validity of post-termination restraints is outwardly complex. But two messages will suffice.

The first is relatively straightforward and familiar - don't overdo the restrictions, tailor them to the individual's position and then review and update them if and when relevant circumstances change. In Mundey, a total bar on ex-employees' competing with CEF in certain types of activity was unenforceable because a separate restriction on soliciting customers adequately protected CEF's legitimate interests (which, in any event, were no longer the same as the activities covered by the 'non-compete' restraint). And a rule against inciting any employee to leave CEF could not reasonably be applied against former branch or store managers (many of the defendants), who had only ever come into contact with a small proportion of the company's 3,000 employees.

The second, although more specific, is as important, particularly with the dispersed nature of many modern businesses and their workforces. If an ex-employee is domiciled in Scotland or Northern Ireland (which, of course, have separate courts), his former employer cannot automatically bring proceedings in the English/Welsh courts to enforce contractual restraints. So, to allow any proceedings to be brought in these jurisdictions, such provisions should not be made subject to the exclusive jurisdiction of the English/Welsh courts.


Up and away

It happens before our next issue (in mid-February), so we'd better mention it here - the statutory compensation limits experience their customary uplift on 1st February. The cap on a 'week's pay' (for statutory redundancy payments and the basic award in unfair dismissal) rises from £430 to £450 - so the maximum possible statutory entitlement will be £13,500. The limit on the compensatory award for unfair dismissal increases by £1,900 to £74,200. And the maximum 'day's pay' for a guarantee payment becomes £24.20.

If you would like to discuss this or any other issue facing your organisation please speak to your usual contact at Collinson Grant or Richard Hendry on 0161 703 5600

Although care has been taken in the preparation of this Newsletter, Collinson Grant cannot accept responsibility for errors, omissions or advice given. Readers should note that only Acts of Parliament and Statutory Instruments have the force of law and only the courts can authoritatively interpret the law.