Plexus Law - Employment Writes - April 2013

Employment Writes April Edition

Employment Law Change So, we are still talking about employment law change. The changes that did happen; new statutory rates and the new collective consultation rules. The changes that we were expecting, but didn’t happen (not yet at least); the new employment tribunal (ET) rules of procedure, employee shareholders, the removal of the third party harassment provisions and discrimination questionnaires, and the revised guidance on ‘fit notes’.

In this edition we

consider further the new ‘employee shareholder’ concept, which has finally received approval in the House of Lords, subject to a number of concessions.

We also look at some recent case law generated by the Employment Appeal Tribunal (EAT) and Court of Appeal, and the topic of women in the boardroom.

But first, the changes that did happen…

The 90-day collective consultation period is now redundant Although (at the time of writing) the

“...procedures will need to be amended to reflect the new consultation periods.”

final statutory instrument has still not

code of practice, which aims to

been published, we understand from

improve the quality of consultation

the draft provisions that the following

and provide guidance on

changes have been made to the

difficult issues, is also due to be

redundancy collective consultation

published.

rules, with effect from 6 April 2013:

Be

• The minimum consultation period

statutory rules have changed, many

before the first redundancy can

organisations will have procedures

take effect has been reduced from

in

90 to 45 days, where 100 or more

policies which refer to the old 90-

employees are affected.

day consultation period. To benefit

that

handbooks

although

or

the

redundancy

from the statutory change, these

award however remains at 90

procedures will need to be amended

days’ pay. The logic being that

to

this will discourage employers

periods. Company procedures may

from not consulting and simply

or may not have contractual effect,

bearing the cost of a full

so you need to take advice on how to

protective award.

affect a contractual change in order

has reduced from 90 to 45 days.

• The 30-day minimum consultation period where 20-100 employees are affected remains unchanged.

• Employees on fixed-term contracts are excluded from collective redundancy consultation obligations.

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aware

• The upper limit for the protective

• The period for lodging a form HR1

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• A new ACAS non-statutory

reflect

the

new

consultation

to benefit from these new rules.

New statutory rates – at a glance

• Statutory sick pay has increased from £85.85 to £86.70, with the weekly earnings threshold also rising from £107 to £109 (effective from 6 April 2013).

• The prescribed rates for statutory maternity pay, paternity pay and adoption pay have increased from £135.45 to £136.78. The weekly earnings threshold for these payments has risen from £107 to £109 (effective from 7 April 2013).

• Maternity allowance has increased from £135.45 to £136.78, with the earnings threshold remaining at £30 (effective from 8 April 2013).

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Employee shareholder status – selling employee rights is just not right, says the Lords.

“In the old days the price of slavery was 20 or 30 pieces of silver – is it now £2,000?”

“In the old days the price of slavery was 20 or 30 pieces of silver – is it now £2,000?” So said Lord O’Donnell during the House of Lords’ debate in March, which resulted in a huge defeat of 232 peers voting against and 178 in favour of the new “employee shareholder” status.

With the implementation date now delayed until Autumn 2013, the Bill has been back and forth between the Commons and the Lords over the last few weeks. It has finally received the consent of the House of Lords, but subject to the introduction of a number of concessions.

So what is this all about? Well, in exchange for being given a number of fully paid-up shares (between £2,000 and £50,000), an individual agrees to waive certain employment rights. The first £2,000 of share value received by the individual will be free from income tax. Any capital gains made on the first £50,000 profit from the shares will also be tax free. The

rights the employee shareholder is obliged to sacrifice include their unfair dismissal rights, right to a redundancy payment, the right to request flexible working, and time-off for training. It will also be more difficult for them to return from maternity leave or additional paternity leave, as sixteen weeks’ notice is needed, instead of the usual eight. Claims for unfair dismissal are still possible though, if the case falls into one of the “automatically unfair” categories as well as claims for discrimination.

An existing employee cannot be subjected to a detriment for not agreeing to become an employee shareholder, although no such protection exits for new starters. The main objection to the introduction of this new status stems from the low likely take up. The prime target audience, small businesses and start-ups, may be put off by the practical difficulties in valuing the shares and the red tape attached

to complex tax and company law requirements. In fact, the people who are likely to benefit the most from this arrangement are high earners in listed companies.

The new status will cause considerable confusion for employers at the outset and also on the termination of an employee shareholder contract, and significant litigation is likely to ensue. Little thought has been given, for example, to the consequences of a TUPE transfer or the potential for abuse. The decision to restrict an employee shareholder’s access to maternity rights and flexible working also flies in the face of the Government’s stated commitment to enhance family-friendly policies.

cooling off period with then apply, during which any agreement to the job offer will not be binding.

Although these concessions are welcome, the practical effect of this new status still needs more thought.

We concur with Lord Forsyth who described the proposal as having “all the trappings of something that was thought up by someone in the bath”.

“all the trappings of something that was thought up by someone in the bath”.

Following the recent debate, a jobseeker will now not be penalised for refusing to take an ‘employee shareholder’ role. Further concessions include the requirement for an employee shareholder to take “independent legal advice”, paid for by their employer, in order for the agreement to be valid. They will need to be given a written statement setting out the rights they are giving up as well as details of the rights attached to the shares offered. A seven day

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Are Women Getting On Board?

Quiz question. What do Burberry, Diageo, Capita, GlaxoSmithKline and Standard Life all have in common?

“...it would take 70 years before we would see equality in the boardroom.”

They each have more than 33.3% female representation on their board of directors. They are also named by the Female FTSE Board Report 2013, produced by Cranfield University (the Cranfield Report), as being the topranked FTSE 100 companies for female board representation.

The Cranfield Report, issued this month, shows that in the first six months since the last report (March 2012), the pace of change was extremely encouraging with 44% of new FTSE 100 board appointments going to women and 36% of FTSE 250 companies. However, those high levels have not been sustained and over the past six months they have dropped to 26% and 29% respectively.

Lord Davies in his 2011 report “Women on Boards” (the Davies Report) recommended that FTSE 350 firms should set themselves targets for female board

representation and FTSE 100 firms should aim for a minimum of 25% female representation by 2015. In the absence of any intervention he predicted it would take 70 years before we would see equality in the boardroom. According to Lord Davies, the business benefits of having a diverse boardroom are: • Improved corporate performance as a result of diverse backgrounds, lifestyles, experiences and skills makes for more rounded decisions and less ‘group think’.

• Better corporate governance.

• Accessing the wider talent pool.

• Improved market responsiveness, as companies find it easier to tap into the psyche of their customer base if they are more representative of their consumers and workforce.

The main contributing factor to the problem is the lack of female talent in the pipeline due to high female attrition rates at middle to senior management level. This loss of talent

is the result of a lack of flexible working opportunities, difficulties in achieving work-life balance, increasing child care costs and the struggle against the glass ceiling.

Women also miss out on promotion opportunities due to the influence of informal networks, the differences in the way that men and women are mentored and sponsored, as well as gender traits, such as a tendency for women to undervalue their skills.

Executive search companies also have a role to play and must improve the methods used to seek out talent.

The European Commission (EC) has proposed legislation in order to reach the objective of a minimum 40% female boardroom representation by 2020. The proposed directive includes a measure for positive action whereby a female candidate should be given preference over an equally qualified male candidate, but does not yet go so far as the imposition of mandatory quotas. The UK voted for a self-regulating system, following the recommendations of Lord Davies.

enough. For example only 5.8% of executive directorships in the FTSE 100 are female (up from 5.5% in 2010). The reality is that until we have a workable system for shared parenting responsibilities, this is unlikely to change significantly.

The UK Government is intending to implement further measures to improve flexibility in the workforce (extending the right to request flexible working and the new concept of flexible parental leave due to be implemented in 2015). There are also improved tax breaks for child care to help retain ‘pipeline talent’. Time will tell if the progress of UK boards towards gender balance continues.

It is clear however that if sufficient progress isn’t made towards the 40% target then the implementation of mandatory quotas could be a real possibility.

“Women also miss out on promotion opportunities...”

The progress made since 2011 by UK boards is certainly encouraging, despite the very recent dip in improvement, but it’s still not

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Oops!

Post-employment victimisation is not unlawful says the EAT In Rowstock Ltd & another v Jessemey UKEAT/0112/12/DM, the EAT decided that post-employment victimisation is not unlawful under the Equality Act 2010 (the Act), despite the fact that its omission from the Act appears to be an error.

Mr Jessemey, 65, was dismissed by his employer, Rowstock Ltd, because of his age. No procedure was followed.

He brought claims of age discrimination and unfair dismissal. Following this, Mr Jessemey became aware that Rowstock had given an unfavourable reference about him to an employment agency. As a result, Mr Jessemey brought a victimisation claim as well.

At the ET, it was accepted that the reason why Rowstock provided the unfavourable reference was because Mr Jessemey had brought discrimination proceedings against them. Therefore, this was an act of victimisation as defined in the Act.

However, the tribunal decided that the claim for victimisation had to fail.

Section 108 of the Act does not refer to post-employment victimisation being unlawful. In fact section 108(7) states the exact opposite, that it is lawful. Section 108 does however outlaw post-employment discrimination and harassment.

Mr Jessemey appealed, supported by the Equality and Human Rights Commission (EHRC). Mr Jessemey argued that Parliament must have intended to include post-employment victimisation claims when it was drafting section 108(7), as this was the pre-2010 position. He further argued that in any event, the Act should be interpreted as providing protection against victimisation on account of the EU laws.

The EAT was sympathetic to the arguments put forward by Mr Jessemey and the EHRC and said that it was “highly unlikely” that Parliament intended for section 108 to

prevent a claim of post-employment victimisation. Although the EAT was tempted to interpret the legislation to include post-employment victimisation, they decided that they couldn’t interpret wording in the Act which would be the exact reverse of what it actually says. The EAT has given permission for this ruling to be appealed at the Court of Appeal.

This ruling highlights what appears to be an error in section 108 of the Act. If the EAT is right and post-termination victimisation is not protected, then UK law is not compliant with EU law and an amendment to the Act is required. Until that amendment is made, potential victims of postemployment victimisation may choose to bring a claim against the Government for damages for failing to implement EU law properly. This is a complex argument to raise as well as being costly, so all parties will benefit from a speedy amendment by the Government.

Assessment centre competency tests make redundancy process unfair In Mental Health Care (UK) Ltd v Biluan and another UKEAT/0248/12, the EAT found that an employer acted unreasonably when it used a series of competency tests with no input from managers or reference to past performance history, in order to select staff for redundancy. The EAT upheld the dismissals as unfair and found that the employer’s “blind faith in process” had resulted in it losing touch with common sense and fairness.

The claimants worked as a nurse and a support worker at a residential hospital for patients with mental health and learning difficulties. In 2010 the hospital identified the need to close one of the wards, resulting in 19 redundancies. The selection pool comprised all 58 of the nursing and support staff at the hospital.

The selection process involved a competency assessment, as well as reference to disciplinary and sickness absence records. The process was

heavily weighted in favour of the competency assessment, which involved a written test, an individual interview and a group exercise, and was normally used for hospital recruitment. The assessment was carried out by a team of HR staff, without any input from managers or reference to performance records or appraisals. This was because the hospital believed that they had insufficient performance information on which to base a sound selection process.

The claimants brought successful unfair dismissal claims in the ET and the EAT against the hospital arising out of their selection for redundancy.

The EAT criticised the use of competency assessments, without any reference to past appraisals or the views of managers. This was confirmed by the fact that the redundancy process had resulted in some “surprising outcomes”, as admitted by the hospital. There was also criticism about the way in which

the assessment was conducted.

The scoring process was not clear (some were using a 0-5 scale, others a 1-5 scale) and the assessors had collaborated with their scoring.

The EAT stated that this was not a case where the ET had incorrectly substituted its own view with that of the employer.

Although competency assessments in a redundancy scenario have their place, for example, when matching vacant posts to potentially redundant employees as part of a reorganisation process, in these circumstances the lack of manager input and reference to any past performance or appraisal information was fatal.

This demonstrates the importance of implementing a performance appraisal process, as the resulting data can prove useful in a number of scenarios. It also highlights the dangers of proceeding blindly with a process at the cost of common sense.

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Can an employer discipline an employee twice, resulting in dismissal, for the same offence?

Yes, says the Court of Appeal, in the Baby P case of Christou and another v London Borough of Haringey [2013] EWCA Civ 178.

Following Baby P’s death, Haringey LBC disciplined the team manager and social worker responsible for his care. Haringey had two disciplinary procedures. The simplified version was used for more minor offences with lesser sanctions and had no right of appeal. The full version was used for more serious cases and included the sanction of summary dismissal for matters of gross misconduct. Mrs Christou and Ms Ward were both given written warnings which would remain on their files for 12 months, following the use of the simplified disciplinary procedure. The decision to pursue this course of action was made following the case review of Haringey’s Local Safeguarding Children Board.

“...serious inadequacies with the safeguarding services...”

Following the criminal trial in November 2008, the Secretary of State for Children, Schools and Families announced an investigation into child protection and welfare services at Haringey. The resulting report identified serious inadequacies with the safeguarding services and required a reinvestigation of Baby P’s case and the employees involved, using a new management team.

Haringey decided to discipline Ms Christou and Ms Ward again using the full disciplinary procedure. They were subsequently summarily dismissed for gross misconduct in April 2009.

The employees brought unsuccessful claims for unfair dismissal. The ET was satisfied that the reason for the dismissals was the employees’ conduct and not any external factors such as media or political pressure.

The employees argued that they had already been disciplined, so it was unfair that they had been through a second disciplinary process and subsequently dismissed. The tribunal took account of this fact when determining whether or not Haringey acted reasonably.

However, they concluded that in some circumstances, where new information came to light, or where there was evidence of fraud or corruption, that a second disciplinary process would be fair.

The employees unsuccessfully appealed to the EAT and issued a further appeal to the Court of Appeal arguing cause of action estoppel or res judicata (i.e. that you cannot be tried twice for the same offence) and abuse of process.

The Court of Appeal agreed with the EAT that cause of action estoppel did not arise, as an internal disciplinary process was not an adjudication of a dispute. They determined also that there was no abuse of process, and that the court’s determination as to whether Haringey had acted reasonably and fairly in reopening the second disciplinary proceedings was essentially a consideration of the same question. The court was satisfied that there were good reasons for reopening the second set of disciplinary procedures, namely the gravity of the allegations and the fact that the new management took a more serious view of the incident.

The instances when it will be fair to discipline an employee twice for the same offence, particularly where no new evidence is being relied upon, will be rare and this case should be treated with caution. However, it is encouraging that the courts support this action from employers where the matters in question are very serious or involve tragic circumstances and where clearly the first disciplinary process was inadequate.

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Contact Us For more information please contact: Charlotte Cooper Head of Employment Plexus Law T: 01386 769179 E: charlotte.cooper@plexus-law.co.uk

T: 0844 245 4000

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