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June 2008
Two Important Cases
Employer's appeal against stay in retirement case dismissed
in Johns v Solent SD the Court of Appeal has dismissed
the appeal by Solent SD. Mrs Johns brought claims of unfair
dismissal and age discrimination following her retirement
under the statutory retirement procedure >>more>>
TUPE 2006 - Service provision changes
In Kimberley Group Housing Ltd v Hambley and ors; Angel
Services (UK) Ltd v Hambley and ors the EAT overturned the
tribunal's decision which apportioned liability on a percentage
basis between two companies who had taken over a service provision
contract which was previously performed by one company >>more>>
February 2008
Case update: Court of Appeal decision on agency workers
The Court of Appeal has today handed down judgement in the
much anticipated case of James v London Borough of Greenwich.
The case concerns the highly vexed issue of agency workers
being, or becoming, employees of the end-user business.
Ms James worked for the Council for 5 years via an agency.
Following a period of sickness she was released by the Council
who had been supplied with a replacement agency worker in
her absence. Ms James claimed she was an employee of the Council
and that she had been unfairly dismissed. The EAT, however,
found that she was not an employee.
The James case followed on from other recent high profile
Court of Appeal cases on this issue such as Dacas v Brook
Street Bureau (UK) Ltd [2004] ICR 143 and Cable & Wireless
plc v Muscat [2006] IRLR 354. These cases were viewed as part
of a disturbing trend towards making it easier for agency
workers to claim to be employees and created significant uncertainty
and risk for agencies and their clients. However, James in
the lower courts seemed to be turning back the tide –
and was warmly welcomed by the temporary worker industry and
businesses.
The Court of Appeal today dismissed Ms James’ appeal,
finding that she was not an employee of the Council. They
emphasised that the correct approach to these cases is a factual
analysis by the Tribunals and, crucially, the issue is whether
it is necessary to imply a contract of employment. It emphasised
that this was more than a contract of employment being desirable
or more consistent with the arrangements; it has to be necessary
given the reality of the situation.
The Court of Appeal also reiterated that it was for Government
to deal with any perceived injustice on the part of agency
workers, rather than the Courts. In the meantime, businesses
were fully entitled to choose to use agency workers and they
were not normally to be regarded as employees in disguise.
As a result it will only be in exceptional circumstances
that agency workers can expect to have the rights of employees
and it should create some much needed stability on this issue.
As the Court of Appeal emphasised, businesses are entitled
to choose to use agency workers over employees and it is appropriate
they can do so with confidence.
Whilst this decision is good news for employment agencies
and their clients, it does not mean that there are no risks.
There are a range of steps that those involved can and need
to take to materially reduce the risks of this type of claim
arising, inlcuding ensuring that the arrangements are properly
documented. For more details pleace contact Michael
Bradshaw on 020 7203 5329 or email michael.bradshaw@charlesrussell.co.uk.
June 2007
Increase In Annual Leave - The Latest Proposals
Following the consultation process earlier this year,
the government has today (12 June) issued an update in relation
to increasing minimum statutory holiday entitlement from 20
to 28 days. The latest proposals are:
- To increase the statutory holiday entitlement initially
from 20 to 24 days on 1 October 2007.
- To delay the introduction of the second increase to 28 days
until 1 April 2009 (the previous proposal had been that this
happen in October 2008, but the Government recognised the
cost pressures of this).
- Under the current regime, none of the statutory holiday
entitlement can either be carried over to a new holiday year
or paid in lieu (except on termination). In order to help
employers with transitional arrangements however, the DTI
are proposing that payment in lieu can be made in relation
to the additional 4 days to be introduced in October this
year, until 1 April 2009.
It is estimated that approximately 80% of employers effectively
already give their staff 28 days leave (or 4 weeks in addition
to paid Bank Holidays, which will also satisfy the new entitlement),
and the impact of these proposals on those businesses will
be minimal. For the remaining 20 % however, the estimated
cost will be between £3.3 and £4.4 billion, with
the DTI recognising that the hospitality and retail sectors
will be most affected.
February 2007
Restrictions - How Far Can You Go?
Post termination restrictions are a balancing act for employers.
What is a reasonable period of time? How wide a geographical
area is allowable? Earlier this week, the Court of Appeal
reached a decision upholding the enforceability of restrictive
covenants lasting 12 months, which included a non-compete
clause.
Mr Thomas was a Managing Director of insurance brokers, Farr.
Farr specialises in providing services for providers of social
housing, in particular, housing associations.
Mr Thomas had various restrictions including non-solicitation
and non-disclosure of confidential information. Additionally,
there was a non-competition covenant seeking to prevent him
from competing with Farr’s business in “any geographic
area in which any Company in the Group conducts the Business
or part thereof and for which the Executive was responsible
or to which he rendered services in the 12 months preceding
the Termination Date”. He resigned in April 2006, claiming
constructive dismissal, and was offered a position with a
competitor. His claim against Farr included seeking a declaration
that the non-compete clause was an unreasonable restraint
of trade and unenforceable.
However, both the High Court and the Court of Appeal upheld
the covenants. Mr Thomas had argued that the non-solicitation
and confidentiality clauses should be sufficient to protect
Farr’s business interests and that the non-compete clause
was both too wide in its geographical area and unreasonably
long. It was submitted to the Court of Appeal on behalf of
Mr Thomas that the clause would, for example, prevent him
from competing with Farr for business not only from its existing
clients but also from those who used another broker or no
broker at all.
The Court of Appeal found that this would be a fair argument
if the confidential information which Mr Thomas would acquire
during the course of his employment was relevant only to existing
clients. That was not so in this case. Additionally, the clause
would not prevent Mr Thomas from acting as an insurance broker
in sectors other than social housing, nor would it prevent
him from acting for insurers in that sector as long as he
did not do so in a way which was in competition with Farr.
In terms of the length of the covenant, the Court found that
12 months was a conservative estimate of the time for which
its confidential information would retain its currency and
therefore was not an unreasonable period.
Mr Thomas was clearly a key employee for Farr’s business
and had confidential financial information which would seriously
impact on the way Farr continued to do business. Whilst the
Courts have historically been reluctant to enforce such a
wide and long lasting competition covenant, in this case their
view was that they were not preventing Mr Thomas from earning
a living. In one of his own witness statements, Mr Thomas
had stated that “in whatever sector one works, the same
skills are required in order to be a good insurance broker”.
The wording of the restrictions did not prevent Mr Farr from
working as an insurance broker at all, merely from working
in competition with Farr. What was key for the courts here
was Mr Thomas knowledge of the financial and business development
strategies of Farr.
Farr had about 25% of the insurance market in social housing,
which is a small and specialist market. The nature of the
market assisted Farr in enforcing the non-compete clause.
However, the decision is a reminder that employers can enforce
contractual restrictions through the courts if there is a
legitimate business interest to protect and the restrictions
are properly drafted to be reasonable in scope and duration.
It is also a reminder to senior employees that they cannot
assume that lengthy post-termination restrictions will always
be struck down by the courts.
October 2006 ECJ provides support for pay based on length
of service
The much anticipated European Court of Justice decision on
pay disparities resulting from length of service has now been
given. In Cadman v HSE, the ECJ has found that the HSE can,
in principle, use length of service as a reason for pay differences
even if the men and women are doing work of equal value -
this is because they accept that it achieves the legitimate
objective of rewarding experience. However, if the employee
can provide evidence raising serious doubts that the length
of service criteria is appropriate in achieving that aim,
then the employer will need to justify its' use.
How does this fit with the new Age Regulations? Whilst Mrs
Cadman brought her claim under the equal pay regime, since
1 October such a claim could now be brought under the Age
Regulations. Under the new Regulations, using a length of
service criterion in a pay scale may be indirectly discriminatory.
The Regulations themselves provide an exemption for use of
length of service up to five years, but beyond that it must
be justified. In order to justify such a provision, employers
will need to demonstrate that using service encourages loyalty
and motivation, or rewards experience. This case may make
that task easier.
To Roll Up Or Not to Roll Up? The Holiday Pay Dilema
The much anticipated European Court of Justice decision in
Robinson - Steele v Clarke has now been handed
down. In keeping with recent tradition, the ECJ has not followed
the Advocate General's opinion!
The issue that the ECJ had to grapple with was whether "rolled
up" holiday is permissible under the Working Time Directive.
Where an employer has a number of casual workers, adding a
percentage to their hourly rate has proved the most practical
way of dealing with holiday pay arrangements. This type of
arrangement however may lead to workers not taking their holiday,
as they would receive no actual payment during the time they
are off which arguably goes against the health and safety
principles underpinning the Directive. The ECJ has now ruled
that rolled up holiday pay is not permissible
under the Directive. Interestingly, they did also find that
where there have been transparent rolled up holiday arrangements,
then any sums paid under this arrangement could be set off
against holiday pay due during the holiday period.
What does this mean for employers?
The commercial decision for companies is whether to continue
rolling up holiday pay and rely on the fact that if a worker
brings a claim any sums paid towards holiday pay as part of
a rolled up holiday pay arrangement can be set off against
sums due to the worker for holiday taken. Best practice however
would dictate that employers no longer apply any rolled up
holiday pay provisions and instead ensure that workers are
paid as and when they take leave. On a practical level, this
would be extremely difficulty to administer for casual workers
who have an unpredictable pattern of work. It is likely that
the UK Government will need to amend the Working Time Regulations
to reflect the ECJ decision which may finally bring some certainty
for those dealing with this issue on a daily basis.
Is it becoming increasingly difficult to be a "worker"?
In the recent case A D Bly Construction Ltd v Cochrane,
the EAT upheld a tribunal's decision that a labourer who worked
continuously and solely for one company for a long period
of time was not a "worker" as they found there was
no mutuality of obligation between the parties. Mr Cochrane
worked under a contract which specifically stated that there
was no mutuality of obligation between himself and Bly. However,
he never refused work and worked exclusively for Bly. The
EAT held that in order to be a "worker" it is not
enough to show personal service, there must be an obligation
on the employer to offer work and on the individual to accept
the work.
This decision is potentially good news for employers who
employ casual workers if the contract with the casual worker
makes clear there is no obligation to provide work and there
is no obligation for the casual worker to do the work offered.
The most obvious benefit is the worker may not be entitled
to holiday pay.
However, a note of caution - this decision has appealed to
the Court of Appeal - so watch this space for further developments!
Good news at last for employers on holiday pay
In recent years there have been a number of controversial
decisions concerning the issue of holiday pay which have not
been in the employer’s favour. However, the Court of
Appeal has now limited an employer’s potential liability
in two respects in its decision in Commissioners of Inland
Revenue v Ainsworth & ors where it held:-
- Workers on unpaid long-term sick leave are not entitled
to be paid holiday pay while they are absent from work.
This overturns the EAT ruling in Kigass Aero Components
Ltd v Brown.
- A claim for non-payment of holiday pay may only be brought
under the Working Time Regulations ("WTR") and
not as a claim for unlawful deduction from wages. The significance
of this is that the time limit for a claim under the WTR
is within 3 months of the initial breach whereas the time
limit for a claim for unlawful deduction from wages is within
3 months of the last of a series of non-payments which meant
liability could potentially be backdated to the introduction
of the WTR in 1998. The decisions in List Design v Douglas
and Canada Life v Gray were overruled.
This year we are also waiting for the ECJ’s decision
on whether it is lawful to roll-up holiday pay. Watch this
space!
Statutory Dismissal, Disciplinary and Grievance Procedures
Regulations have now been laid before Parliament with a view
to implementation in October 2004. For more details of the
proposals, visit the DTI website at www.dti.gov.uk/er/resolvingdisputes.htm
Age Discrimination
The Government has to implement legislation outlining age
discrimination by 2006. The DTI have now issued a consultation
document which can be viewed on the DTI website at www.dti.gov.uk/er/equality/age.htm
Information and Consultation
The Government has published proposals on how to implement
the Implementation and Consultation Directive. This will affect
employers from 2005 and gives employees greater access to
information. For more details visit the DTI website at www.dti.gov.uk/er/consultation/proposal.htm
Please click
here for further information on the forthcoming legislation.
Experts encourage sports professionals to have their say
on pensions threat
Leading law firm Charles Russell is consulting on the
views of major football, rugby, cricket and other sports clubs,
organisations, players and their representatives as it alerts
them to proposed changes in pensions law which threaten sports
professionals.
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