Employment SolutionsCLB Solicitors

February 2009

This month, we are pleased to provide a good deal of information for all our newsletter subscribers. There are impending changes of vital importance to HR practitioners and managers (and that's not even including the dismissal and grievance procedure changes mentioned last month).

Of interest to many no doubt, the amount payable in respect of a redundancy payment for redundancy dismissals after the 1st February has increased. Whereas previously an employee was entitled to receive 330 for every week worked (calculated at a rate of 0.5 if aged less than 22 years and 1.5 for every year worked over the age of 42), the entitlement has now risen to 350 per week. This is very important information to bear in mind when calculating redundancy payments to individuals and also when calculating how much a redundancy exercise will cost the business. In line with this increase, the maximum award for unfair dismissal has also increased.

It seems only recently that holiday entitlement was extended from 20 days to 24 days per annum inclusive of bank holidays. Actually, it was only recently: October 2007 to be precise. 18 months on, the Government has increased annual leave entitlement from 24 days to 28 days including bank holidays. Please be aware of this change as those employers who provide 24 days' holiday including bank holidays will need to amend their employees' contracts of employment. All subscribers to Employment Solutions will be contacted in the next month and new clauses will be drafted on their behalf.

We are dealing with a multitude of TUPE cases at the moment as strong companies take over struggling ones. We have been advising our clients that, if they happen to be taking over a company in administration, the TUPE Regulations 2006 are relaxed so far as the 'alteration of contractual terms' and the 'automatically unfair dismissal' provisions go. When assisting in the purchase of a business in administration we always err on the side of caution and complete due diligence and consultation whenever possible, however, the case of Oakland v Wellswood Ltd gives transferees much more protection when purchasing businesses in administration; welcome news I am sure for those concerned with such acquisitions.

Finally, I would like to direct all Employment Solutions subscribers to our website as we have updated many of our documents and policies as well as adding many more template letters and forms. The extensive and interactive Employment Law Guide has proved to be a huge success and our website is now the best it has ever been. Our employment law team is going from strength to strength so if any newsletter subscribers want to speak with us about joining our growing client base, please do not hesitate to get in touch.

If you have enquiries about the items featured or require any further information then don't hesitate to contact us on 0151 239 1000, freephone 08000 320974 or by e-mail to enquiries@clbemployment.com.

Regards

Will Burrows


1. Increase in tribunal award limits

2. Holidays

3. Holiday entitlement and sickness absence

4. TUPE and post-transfer consultation

5. TUPE and insolvency

6. Working time 48-hour week opt-out

7. Employment tribunals - new procedural rules from 6th April 2009

8. Flexible working rights extended

9. And finally..."British jobs for British workers"!?


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1. Increase in tribunal award limits

On 1st February in each year, there is an inflation (or deflation) linked increase (or decrease) in the statutory maximum limits on many awards made by employment tribunals. The latest increases apply where the "appropriate date", generally the date of the event which triggers the claim (e.g. a dismissal), falls on or after 1st February 2009.

The changes are made by reference to the retail prices index for the year ending with the preceding September. The law provides that if in any year the RPI is higher or lower than the RPI for the previous September, an order must be made increasing or decreasing, as appropriate, the maximum amount of compensation which an employment tribunal can award in specified cases (see Employment Relations Act 1999 s.34). This includes most unfair dismissal cases.

The two main changes which have come into effect from 1st February 2009 are:

  • an increase from 330 to 350 in the limit on a week's pay which can be taken into account when calculating statutory redundancy pay or the "basic award" component of unfair dismissal compensation and which applies to government guarantee arrangements for employees where an employer becomes insolvent; and
  • an increase in the maximum "compensatory award" component of unfair dismissal compensation from 63,000 to 66,200.

The result is that the absolute maximum statutory redundancy payment increases from 9,900 to 10,500 and the absolute maximum unfair dismissal award in "ordinary" cases increases from 72,900 to 76,700.

In some unfair dismissal cases, generally those where dismissal is for a reason which makes it automatically unfair, there is no statutory limit on the amount an employment tribunal can award. This is also true of discrimination cases - again there is then no statutory limit on the amount an employment tribunal can award.

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2. Holidays

Since 1st October 2007 an increase in the minimum statutory holiday to which workers are entitled has been being phased in. The phasing in ends on 1st April 2009.

In general terms, a full time worker working 5 days a week was entitled to a minimum of 20 days' paid holiday before October 2007. Since 1st October 2007 he or she has been entitled to a minimum of 24 days and as from 1st April 2009 will be entitled to 28 days.

The precise position in any particular case is more complicated than the above simple outline suggests. For example, account has to be taken of when the individual's leave year starts and of any part time working or irregular hours worked. Technically the position is that the minimum statutory entitlement to paid holiday is 5.6 weeks from 1 April 2009 (which works out at 28 days for a full time employee).

Important detail points to note include that it is possible, if employer and worker agree, for any unused part of the new additional holiday to be carried forward. Carry-forward in respect of any untaken part of the basic 20 days' annual holiday is not permitted as that is a minimum health and safety requirement imposed by the EC Working Time Directive.

It is also important to note that the 28 days includes bank and public holidays. One result is that full time employees who previously, before the new rules came into operation, had the minimum 20 days' annual paid holiday plus 8 bank holidays as paid holiday may see no difference.

There is a useful Holiday Entitlement "calculator" available on the government's BusinessLink website.

Another point to bear in mind is that a worker must normally give his employer notice of intention to take holiday which must be at least twice as long as the amount of holiday to be taken. Similarly an employer can require a worker to take the holiday to which the worker is entitled, again by giving notice which must be at least twice as long as the amount of holiday to be taken. This can be especially relevant on dismissal - an employee who has not used his holiday entitlement when given notice of dismissal may prefer to work through his notice period and take cash in lieu of holiday when his job ends. This may not suit the employer who may prefer the worker to take his holiday rather than pay extra for it. In that situation the employer can require the employee to take his holiday, provided of course he gives him the appropriate notice.

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3. Holiday entitlement and sickness absence

For several years a big question mark has hung over the vexed issue of whether a person who is on long term sick leave but is technically still an employee is entitled to accrue holiday (and/or holiday pay) by virtue of the Working Time Regulations 1998 even though they are absent from work.

A subsidiary but also important issue has been whether the employee can claim that non-payment of holiday pay in those circumstances was an unlawful deduction from wages. Back claims for unlawful deductions from wages can be made without time limit if they are all part of a "series of deductions" but the 3 month time limit for bringing a claim under the Working Time Regulations 1998 does not include any such "series of deductions" provision.

The main question has now been answered by the European Court of Justice in a judgment combining a German and a UK case - in the UK case the employer was HMRC (Stringer, formerly Ainsworth, & ors v HMRC, ECJ case C-520/06 on 20th January 2009). In essence the answer is that holiday entitlement accrues even if an employee is absent on long term sick leave. On return to work the employee is entitled to take any paid holiday which has accrued but which he or she has not taken during their sickness absence. If he or she is dismissed or leaves the employment before taking this accrued holiday he or she will be entitled to pay in lieu.

The European judgment was concerned only with proper interpretation of the EC Working Time Directive. Therefore it will not apply to any holiday over and above the minimum required by the Directive, basically 20 days a year for a full time worker. The judgment will not prevent individuals (or individual EU member states) from setting out different arrangements in respect of holiday over and above the minimum required by the Directive, such as the increased minimum holiday entitlement provided for by the October 2007 changes in UK law referred to in the note above.

The subsidiary issue of whether the employee who has been on long term absence can claim that non-payment of holiday pay while absent counts as an unlawful deduction from wages is a domestic issue. It was not put to the European Court. However combining the part of the ECJ ruling which provides for pay in lieu if the employment ends and a decision by the British EAT in 2003 (in Canada Life Ltd v Gray and Farrar [2004] ICR 673), the answer would seem to be that if the claim is made after the employment has ended then the unpaid holiday pay can potentially be claimed as an unlawful deduction from wages back as far as 1998 (i.e. when the Working Time Regulations 1998 came into existence) . However if the claim is made while the employment is continuing this would not be possible.

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4. TUPE and post-transfer consultation

The TUPE regulations give various rights to employees in the event of change of ownership of the business or undertaking by which they are employed and related situations (Transfer of Undertakings (Protection of Employment) Regulations 2006, SI 2006/246).

One of these rights is the right to be informed and/or consulted. If an employer fails to inform or consult with employees when the regulations require him to do so an employment tribunal can order the employer to pay up to 13 weeks' pay to each affected employee.

There are (at least) two respects in which the relevant regulation (TUPE 2006 reg. 13) is unclear.

First, depending on the circumstances, the duty to inform and/or consult is sometimes imposed on the old (transferor) employer, sometimes on the new (transferee) employer and sometimes on both. Given the ambiguous wording used it has been uncertain whether the duty obliges a transferee employer to consult after the employees have been transferred to it (always assuming the transferee envisages "taking measures" connected with the transfer in relation to such employees - which it almost invarably will).

Second, there is uncertainty as to what constitutes "a week's pay" when calculating the maximum penalty for breach of the obligation. It seems that the government probably intended "a week's pay" to be subject to the same cap as applies when calculating unfair dismissal basic award and / or statutory redundancy pay (350 as from 1st February 2009). The regulation specifically states that Employment Rights Act 1996 s.227, which sets that cap, applies and the original DTI guidance on the 2006 TUPE regulations indicated that the cap does apply. However commentators have pointed out that the wording used has left another ambiguity. The official guidance has been changed and is now silent on the point. The better view, pending a ruling from the courts, is probably that there is no cap on "a week's pay" for this purpose.

Although that means there is no certain answer to the second issue, we do now have an answer to the first. The EAT has ruled in January 2009 that there is no obligation on a transferee employer to consult after the TUPE transfer has taken place as regards changes which it proposes in respect of employees who have transferred to it (UCATT v Amicus, Glasgow City Council & ors, EAT on 16th January 2009).

This will be welcome news for employers. However a word of caution - while it may well be that the result would have been the same anyway, the EAT's logic in coming to its decision may be open to question. This is because one of the reasons the EAT gave for its decision was that there would be no point in post-transfer consultation on the basis that the regulations make void most changes to employment terms and conditions connected with a TUPE transfer and there would be no point in consultation if changes made as a result would be void. This logic is open to criticism as it overlooks the Court of Appeal's decision a little over a year ago in a case called Regent Security Services v Power In that case the Court of Appeal ruled that the TUPE provision which makes void transfer-related changes in terms of employment applies only to changes which are to the detriment of employees.

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5. TUPE and insolvency

Another useful case for employers in troubled times!

Although, as noted above, the TUPE regulations give various rights to employees in the event of change of ownership of the business or undertaking by which they are employed and in related situations, it has long been recognised that the result can be counter-productive if the transferring business is in trouble. If no one is prepared to take over a struggling business because the rights of staff are carefully protected the likely result is that the staff will finish up with no jobs at all.

For this reason, both the EC Acquired Rights Directive and the British TUPE regulations made under it, provide for significant relaxations in "insolvent cases". In particular in "insolvent cases" there is a relaxation of the normal rules under which (i) the new owner takes on liability for employment related debts such as unpaid wages due to the staff and (ii) no adverse changes can be made to employment contracts of staff. Further, transfer-related dismissals will not be automatically unfair.

The wording of the British regulations (TUPE regulations 2006 reg. 8) ensures that this result follows if the "transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner".

There is an obvious problem when the transferor is in administration rather than liquidation. An administrator is generally appointed to carry on the business and hopefully to rescue it (or at least that is the theory!). The BERR official guidance is therefore that "Administration is not in the view of the Secretary of State analogous to bankruptcy proceedings". It follows that the official view is, or at any rate has been, that the TUPE rules apply in their full rigour if a transfer of a business is effected by an administrator.

That view has now been shown to be too simplistic. In a case in late 2008 involving what is sometimes referred to as a "pre-pack" administration, the judge was unimpressed by the BERR Guidance noted above. He said it did not provide any assistance. In the case the intention at all relevant times was for the administrator of a failing business to sell it on. The original employment tribunal had found as a matter of fact that the administration was "instituted with a view to the liquidation of the assets of the transferor". Further it was clearly "under the supervision of an insolvency practitioner". On that basis the EAT ruled that this was an "insolvent case" to which the relaxations from the rigour of the TUPE regulations applied.

The result was that an employee, Mr Oakland, was not able to claim the protection of the TUPE regulations and his unfair dismissal claim failed (Oakland v Wellswood (Yorkshire) Ltd, EAT on 5th November 2008).

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6. Working time 48 hour week opt-out

The EC Working Time Directive allows Member States to provide that, subject to conditions, the normal 48 hour average working week maximum which it imposes need not apply. The main condition is that each worker concerned must give voluntary agreement.

It is understood that in practice, the UK is the only country in the EU where employees and employers make extensive use of the opt-out facility. However illogical, it seems that other EU countries feel that allowing this opt out results in the UK having an unfair economic advantage and that opting out should be forbidden. Also some trade unions have argued for removal of the opt-out facility on the not unreasonable grounds (albeit grounds which beg a number of questions) that when rules are made for the protection of the health and safety of workers the law should only allow opting out of them in carefully defined special circumstances.

In May 2005 MEPs voted to scrap the opt out exemption but failed to get the Directive changed. After some horse-trading between Member States, a compromise agreement reached in summer 2008 looked likely to go ahead. Under this the UK would be allowed to keep the 48 hour working week opt-out, subject to an overall cap of 60 hours and to no opt-outs being permitted during the first four weeks of employment. However at a further debate in the European Parliament on 17th December 2008 MEP's voted again (by 421 to 273) in favour of abolishing the opt out exemption altogether by end of 2011.

The next stage is for the European Council of Ministers to consider the question. This is likely to take place by Spring 2009. The British government is on record as reconfirming as recently as 20th January 2009 that it still wishes to retain the opt-out right "and will be calling on the European Council to reject the damaging amendments on the Working Time Common Position adopted by the European Parliament" (Hansard HC col 1324W on 20th January 2009).

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7. Employment tribunals - new procedural rules from 6th April 2009

Quite significant changes to the rules which govern procedure in Employment Tribunals will come into effect on 6th April 2009. While generally technical, and clearly only of interest to people unfortunate enough to be embroiled in a dispute which is going to an employment tribunal, the changes are nonetheless important and their existence should not be overlooked.

In particular, the changes will simplify the compulsory application form required to start proceedings in an employment tribunal. This follows from the dropping, from 6th April 2009, of the ill fated compulsory dispute and grievance procedures which have been in place since October 2004 and which employers and employees had to go through as a preliminary before an employment tribunal would have jurisdiction to hear many types of case. However, this simplification does not mean a return to the days when an application to an employment tribunal could take almost any form so long as it was in writing. Even after 6th April 2009 a claim to an employment tribunal "must be presented on a claim form which has been prescribed by the Secretary of State".

Other changes of general interest include a new rule allowing any hearing "to be conducted (in whole or in part) by use of electronic communications provided that the Employment Judge or tribunal conducting the hearing considers it just and equitable to do so". Evidence may be given electronically although there is a safeguard ensuring that when oral evidence is given at a public hearing the public must be able to see and hear all parties to the communication - so a video link will be needed if oral evidence is to be admitted electronically.

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8. Flexible working rights extended

Subject to certain conditions, the right to request flexible working is at present available to employees who are parents of children under six (18 if disabled) and carers of adult (18+) dependants. Agency workers and members of the armed forces do not have the right. Failure by the employer to take such a request seriously can result in an employment tribunal ordering compensation of up to 2,800.

The main conditions are that the employee must have worked for the employer for at least 26 continuous weeks and must not have made a similar request within the previous year.

The government has confirmed in January, as originally announced last summer, that with effect from 6th April 2009 the right to request flexible working is to be extended to all those with parental responsibility for children aged 16 and under (Hansard HL on 23rd Jan 2009 col 1899).

It is worth noting that the government proposal leaves an odd potential gap. A carer of a dependant person aged 17 who is not disabled will have to wait until the 17 year old's next birthday before being legally entitled to the right. It is also worth noting, if only to avoid confusion, that there is a Private Member's Equal Pay and Flexible Working Bill currently before Parliament which seems to go a little further than the government - it proposes complete removal of age limits for the right to request flexible working, effectively leaving only the requirement that the person in respect of whom the right is exercised must be a child.

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9. And finally..."British jobs for British workers"!?

"You can go and work in Europe", Mandelson tells strikers. This was the headline of a recent article in the Independent on Sunday reporting a speech by Lord Mandelson at the World Economic Forum in Davos.

Given that the article followed hot on the heels of an illegal wildcat strike at an oil refinery in Lincolnshire in protest against proposals to bring in staff from Italy and Portugal, it may be more interesting as an example of provocative journalism than for any insight it offers into the serious matter of "free trade" versus "protectionism" which Peter Mandelson was addressing.

That subject, at a practical as well as at economic and philosophical levels, is likely to emerge as of increasing significance for all of us as the effects of recession are felt world wide. It seems likely that lawyers and others, especially in the USA and Europe, including the UK, should now be dusting down text books on the laws governing freedom of movement of workers and lawful industrial action.

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Will Burrows
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