It's a trap!

Employment Law Newsletter - September 2013


In this issue ...

  Much ado about nothing much - with the emperor's new clothes   Waiving the rules?  
  'No, it wasn't like that at all!...'   Not always everything that it seems  
  At long last   Player or assassin?  
  Paying for your holidays   Grey matters  
  Linking back to LinkedIn      

Much ado about nothing much - with the emperor's new clothes

The value of a new regime is often inversely proportionate to the size or complexity of the apparatus that surrounds and feeds it. And that, we suspect, is gradually being illustrated by the new 'employee shareholder' laws. We take the view that they are largely a gimmick with which the majority of established employees at least will have little truck - many will find it impossible to equate the benefits of, say, £5,000 worth of shares with accrued entitlements to redundancy pay and protection from unfair dismissal.

Even if we were wrong about that comparison or if we were to switch the focus to new recruits, would employers move in great numbers to embrace the scheme? They already have two years to assess, manage and, if necessary, remove employees before the principal statutory protections 'bite'. And, in any event, whatever qualms they might have about giving part-ownership of the business to the staff are unlikely to be reduced by the process laid down (by the Growth and Infrastructure Act, would you believe?) for making offers, providing information about the particular shares, and ensuring that an employee has taken legal advice. The brew, already containing guidance from the Department for Business, Innovation and Skills, is further thickened with HMRC's update to its Share Valuation Manual (SVM). Quite predictable of course, because the issue of shares to an employee shareholder is exempt from income tax up to a value of £2,000 (on a restricted/actual value basis, says the SVM) and the disposal of the shares is exempt from Capital Gains Tax up to £50,000 (here, the valuation is on an unrestricted basis). But, amidst all the process and paperwork (and the scheme is undoubtedly targeted at SMEs, remember), someone might realise that there's a business to run!

Clearly, the SVM already existed before this 'update', in part because there has been ownership of shares by employees - 'employee ownership' - for several decades. And, although the recent legislation is a case of preaching to the converted for those existing practitioners of employee ownership, perhaps its most worthwhile and enduring benefit will be to draw more employers towards having 'employees who are shareholders' rather than 'employee shareholders'.


'No, it wasn't like that at all!...'

If an 'agreed' termination of employment occurs under a properly-drafted settlement agreement, then, almost by definition, you don't need to worry much about what has happened beforehand or how the termination is described in the agreement itself. But, in other circumstances, the terminology can be vital. In Francis v Pertemps, the employer contrived to snatch defeat from the jaws of victory by issuing a letter, intended to confirm a pretty solid consensual termination, with references to 'notice of redundancy' and 'appeal against the termination of your employment'. As these expressions are redolent of a forced or unilateral termination (dismissal), the EAT found that the ex-employee could present a claim of unfair dismissal.

So, be careful. For example, in a letter confirming a mutually agreed termination or, for that matter, a resignation, it would rarely make sense or be necessary to refer to pay in lieu of notice (in either) or notice at all (in the former).


At long last

The Government has finally published its response to consultation on changes to TUPE, laying out those subjects on which it will now legislate. Against the odds, the 'service provision change' limb of the definition of a transfer will remain, although it will stipulate that the activities before and after the switch must be 'fundamentally or essentially the same'. The requirement to provide 'employee liability information' stays and it will have to be given to the transferee 28 days before the transfer rather than 14.

Other leading runners in the gallop for enactment in January 2014 are:

The scope for consultation pre-transfer to count for the purpose of complying with the separate rules about collective consultation on post-transfer redundancies. A precondition will be the agreement of the transferor. Why? Because it will be the transferee, subject to the collective redundancy obligation, who wants this facility and who needs to engage directly with representatives of people still employed by the transferor
On legacy issues:
express provision for the 'static' approach to terms derived from the transferor's collective bargaining (see the July Employment Law Newsflash about the ECJ's ruling in Parkwood Leisure v Alemo-Herron); and
the ability for transferees to renegotiate contractual terms derived from collective agreements once one year has elapsed since the transfer, provided that the change is 'overall' no less favourable to the employee
Making a post-transfer change of workplace location an 'economic, technical or organisational reason entailing changes in the workforce', so preventing dismissals on this basis from being automatically unfair.

New, expanded guidance will be published as well.

So, plenty of topics of conversation for those Christmas and New Year's Eve parties.....


Paying for your holidays

Here are a couple of notable decisions on the rules around leave under the Working Time Regulations (WTR).

In Sood Enterprises v Healy, the EAT has considered an aspect of the obligation to allow 'carry over' to another holiday year of accrued holidays that could not be taken because of sickness (see, most recently, our August 2012 and June 2012 editions). It has concluded that carry over does not apply to the 'extra' 1.6 weeks (or eight days) minimum leave under the WTR that are not required by the EU's Working Time Directive.

In Neal v Freightliner, an employment tribunal, focusing on the words 'normal remuneration' in the Directive, has ruled that holiday pay under the WTR must take into account pay for overtime (averaged over the preceding 12 weeks), even if the extra hours were neither obligatory nor consistent. The claim here was only concerned with the basic four weeks' entitlement under the WTR. Even if the Neal point itself survives any appeal or reconsideration by the EAT, it seems that the general influence of Sood above would rule out the need to include overtime earnings in pay for the extra 1.6 weeks. But, of course, that leaves unanswered the question of whether the cost of including overtime in the 'additional' holiday pay for any particular workplace is sufficiently prohibitive to merit the time and effort of calculating when the cut-off occurs for individual employees.


Linking back to LinkedIn

In our June edition we confronted some of the difficulties in the law about the control of social media accounts run by employees in their names. Now, in Whitmar Publications v Gamage, the High Court has ordered a former employee, who had responsibility for maintaining LinkedIn accounts on the employer's system and for promoting its business, to give the employer exclusive access, management and control of the contact groups and to avoid doing anything that impeded that access.

Although the ruling was only in interlocutory proceedings (about the former employee's misuse of this supposedly confidential material) where the arguments were not aired in great detail, it is nevertheless a notable attack on the supposedly exclusive, contractual relationship between LinkedIn and the individual account holder. However, to enhance the prospects of this outcome, clear contractual obligations on the employee to promote the employer's business on social media are important. And provisions about facilitating the employer's post-termination access do no harm either.


Waiving the rules?

Just how far does the duty to make reasonable adjustments for a disabled employee go? That was the question for the EAT in Wade v Sheffield Hallam University, where the context was the approach to selecting for appointment to an internal vacancy. Ms Wade argued that she should not have been subjected to the competitive interview process that the university had in place and which had been material in her failure to be appointed.

The EAT disagreed. There was nothing to suggest that the rejection of her application was perverse and it was reasonable for the university to ensure that the essential requirements of the job would be met. There was no sensible way of removing the competitive interview for her alone. Indeed, the logical, but quite unreasonable, effect of waiving it would have been her automatic appointment over better candidates (probably to avoid a discrimination claim!).


Not always everything that it seems

In Brito-Babapulle v Ealing NHS Trust, the EAT has re-emphasised a point that is quite obvious but frequently disregarded - it will not always be reasonable and fair to dismiss for an offence that is, even undeniably, gross misconduct. Although such a serious transgression of standards will create a presumption that dismissal is appropriate, that completes only 'Part 1' of the employer's deliberations - the context and surrounding circumstances must be considered before a final decision on sanction is taken.


Player or assassin?

Here's an interesting approach to turning around the culture of an organisation. Every year, TGI Friday's, the restaurant chain, assesses all of its employees and puts them in one of four categories: players; wannabe players (willing but in need of training); potential players (trained but not necessarily willing); and assassins. The last group, deemed likely to sabotage efforts to improve the business, are removed. The process was initiated by Karen Forrester, the UK Managing Director. In the first round four years ago, 12% of the employees left. Last year only 2% had to be weeded out. Defying the double-dip recession, the UK business has reported 14 consecutive quarters of growth.
(Source: HR magazine)


Grey matters

We're not convinced that many employers have woken up to the implications of an ageing workforce, despite the growing body of literature on the subject. According to the Office for National Statistics, the proportion of employees aged over 50 increased from 21% in 1992 to 29% in 2013, while the proportion of those aged between 16 and 24 fell from 18% to 12%.

According to the Chartered Institute of Personnel and Development, these data imply that:

the flow of young people into the labour market may be insufficient to satisfy the demand for higher skills
there needs to be a greater focus on retaining skilled workers and retraining existing ones
there will be more employment opportunities for older workers and those caring for the elderly.

The abolition of the default retirement age and better general health have made working beyond the age of 65 virtually 'normal' these days, says the Equality and Human Rights Commission, whose research found that 62% of women and 59% of men want to work beyond the state pension age. Many people have no occupational pension and need the money, but for others the attraction is social or personal fulfilment.

We think the consequences of these changes in the workforce will have a significant effect on the way organisations manage, or ought to manage, their people. A few predictions:

an increase in the prevalence, and range, of flexible benefits
a more 'sympathetic' view of requests for flexible working hours and phased retirement
a change in approaches to occupational healthcare
new learning and development initiatives
greater emphasis on knowledge management
a shift in the emphasis of talent management and retention
changes to practices for reward, career paths and job design.

The danger is that, as the gradual greying of the workforce is not sufficiently obvious to many employers, they will fail to develop the initiatives or responses necessary to sustain business or organisational health and dynamism.


If you would like to discuss this or any other issue facing your organisation please speak to your usual contact at Collinson Grant or Jo Hale 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.