Canter Levin & Berg Employment Solutions

employment law support provided exclusively by specialist employment lawyers

July 2015

the employment law briefing

Welcome to our July newsletter. This month we have passed another milestone with over 2000 Twitter followers. Thank you all and in recognition of your support we're providing a very special summer offer. If you follow us on Twitter and you have not yet subscribed to our service we will arrange for a no obligation visit from one of our specialist employment lawyers to discuss any employment law issues that you have, a free audit of your employment law requirements and a 10 per cent discount for the first year's subscription. Free specialist legal advice for SMEs! We're breaking the mould by by allowing you to judge for yourselves before any commitment and by showing that our service is of the highest standard. Remember that it's all inclusive with no hidden charges. Our subscription rates are unparallelled for the quality of service that we provide. Our online service with hundreds of template documents and guidance notes is just £49 per month and our full service with direct support from a designated and specialist employment solicitor starts from just £99 per month.

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This offer is available until 30 September and if you want to arrange a visit please call me on direct dial 0151 239 1003 or email me at martinmalone@canter-law.co.uk. Visits will be arranged to take place until 31 October. If you need urgent assistance we can arrange visits at short notice, subject to a minimum subscription for 12 months.

This month's news:

  1. Carrying over holiday pay when off sick
  2. Ordinary parental leave - an update
  3. Team poaching and springboard injunctions
  4. Government launches consultation on simplification of tax treatment of termination payments
  5. What do you need to know about the national living wage?

Kind regards

Martin Malone

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This month's news round-up:

1. Carrying over holiday pay when off sick

Duncan-print-group

Extended absence from work on sick leave can create odd situations, such as the accumulation of holiday entitlement. Most employers know that employees on maternity leave continue to accrue holiday entitlement and this is often added at the end of the maternity leave period.

In this month's Employment Appeal Tribunal decision in the case of Plumb v Duncan Print Group the question was whether Mr Plumb, who had been off work for nearly four years, could claim all his accumulated holiday entitlement.

Mr Plumb was employed as a printer. He had an accident on 26 April 2010. He remained on sick leave until his employment was terminated on 10 February 2014. According to the terms of his employment his leave years ran from 1 February to 31 January. He was refused a request for sick leave from 5 August 2013. When his employment was terminated he claimed holiday pay for 2010, 2011 and 2012. His request was refused in the basis that he could not demonstrate that he was unable, by reason of his medical condition, to take annual leave within the leave years.

Regular readers are aware that European law has dictated that holiday pay can accrue during sickness absence but there should be a cut off point. I wrote about this in the blog in 2011.

The employment tribunal took the view that Mr Plumb could not demonstrate that he was unable, by reason of his medical condition, to take annual leave while he was on sick leave and therefore dismissed his claim. That was not the basis on which the European decisions had excluded claims because they were based on the need for a cut off point.

The tribunal's approach was wrong:

click to read more...

2. Ordinary parental leave - an update

paternity-leave-2

I was recently updating the subscription zone for our subscribers to Canter Levin & Berg Employment Solutions when I was reminded that, in addition to taking into account the new arrangements for shared parental leave there are knock on effects for what was previously referred to as parental leave.

Most of us who deal with maternity absences are familiar with the general provisions applicable to maternity leave and they are set out in detail in our subscription zone so subscribers know exactly what to do in that regard.

However, what was previously parental leave is now known as as ordinary parental leave. The main reason is to avoid confusion with shared parental leave.

From April 2015 the entitlement applies in respect of any children before their 18th birthday and the specific provisions relating to disabled and adopted children no longer apply.

The main point about ordinary parental leave is that, although the entitlement is for up to 18 weeks per child, it is unpaid. Accordingly, it is unlikely to be at the forefront of the minds of those considering their parental leave arrangements. However it should not be disregarded, particularly in terms of planning for staffing requirements.

There is still a requirement for employees to have been employed for at least one year before having the entitlement. It is also important to remember that the entitlement to shared parental leave is not contingent on ordinary parental leave - both are free standing rights. Bearing in mind that the entitlement can span a period of 18 years there will be many cases in which employers can do little more than trust that the information provided to them by their employees (particularly in respect of former employment) is correct.

click to read more...

3. Team poaching and springboard injunctions

willis

Springboard injunctions are often granted in circumstances in which senior or key sales employees leave to work for a competitor. The name derives from the case of Bullivant v Ellis†(1987) in which Mr Justice Falconer stated that the purpose of the injunction was "to prevent the defendants from taking unfair advantage of the springboard which...they must have built up by their misuse of the information in the card index".

Most such injunctions are sought with a view to preventing misuse of confidential information (such as customer connections and contacts), serious breaches of contract or other unlawful conduct. Unsurprisingly, in the vast majority of cases the application for an injunction will be based on alleged breaches of post-termination covenants, such as those which are stipulated by non-compete and similar clauses.

However, there are limited instances in which an injunction may be obtained, even in the event that there are no such contractual provisions. In Willis v Jardine Lloyd Thompson. In a refreshingly brief judgment the Court of Appeal disagreed with the decision of His Honour Judge Seymour to refuse to grant an interim injunction. He took the view that there was no point in granting an injunction because, in effect, the horse had bolted with the defection of a large number of employees to a competitor.

Willis is a major international insurance broker. It has a highly respected Fine Art, Jewellery and Specie Gifts Division and is the world leader in this sector with sales amounting to tens of millions of dollars each year.In a witness statement made by Willis' CEO of Market Services, David Thomas, on 13 April 2015 he stated that some 30 employees from the department had left in the last 10 days. 22 left on Maundy Thursday, four left on 9 April, three on 10 April and two on the 13th. those leaving included almost all the senior management team and key sales staff. Some 30 more junior staff were left. It turned out that they had all left to join a direct competitor, Jardine Lloyd Thompson (JLT). Mr Thomas thought that there would be a second wave of resignations and that this was as part of a coordinated attack. It was suspected that the underlying strategy was to weaken the department by the mass defections, thereby enabling JLT to acquire the whole department at a discounted price.

click to read more...

4. Government launches consultation on simplification of tax treatment of termination payments

HMRC

One of the most contentious areas in the field of employment law concerns the tax treatment of settlement payments on the termination of employment. In the 20 years plus that I have been dealing with employment law matters the law in this area has never been entirely settled and there has been a long series of often contradictory decisions, such that it is possible to find a decision to match almost any chosen stance. As recently as two months ago I was writing about a decision of the First Tier Tax Tribunal which appeared to suggest that many such payments are not taxable.

Against this background, on 24 July the Government published a consultation document on "Simplification of the Tax and National Insurance Treatment of Termination Payments". The consultation is open until 16 October and seeks views on:

  • removing the distinction between contractual (currently taxable) and non-contractual (currently generally non-taxable) termination payments and whether this will make the process easier to understand for employers and employees;
  • whether the in come tax and National Insurance treatment of termination payments should be aligned;
  • which of the existing tax exemptions should be retained; and
  • whether new tax exemptions should be introduced.

Research by the Government suggests that there is a widespread but mistaken belief that the first £30,000 of any pay-off is tax free. Many employers do not understand how the current provisions should operate in practice. It is also difficult and time-consuming for employers to work out which parts of a settlement payment are tax free and which are subject to tax.

The research also suggested that the current £30,000 was probably unaffordable if it applies to both contractual and non-contractual payments.

One potential approach referred to in the consultation is to create a new exemption which increases proportionately with the number of years worked. the minimum service requirement (to qualify for the exemption would be two years. Qualifying service would have to be with the existing employer or continuing service including a former employer if the employee was TUPE transferred. Such exemptions might only apply in the event of redundancy, compulsory or voluntary. An example provided is that of an employee receiving a termination payment after 10 years' service of £13.750 comprising statutory redundancy (£4750), pay in lieu of notice (£3000), an ex gratia payment of £5000 and £1000 holiday pay. If the exemption was set at £6000 after two years and then an extra £1000 for each additional year the exemption would be £14,000 and the entire payment would therefore be tax free. In contrast, if someone's employment is terminated because of poor performance and that triggers a severance payment of £100,000, the full amount would be taxable.

click to read more...

5. What do you need to know about the national living wage?

George_Osborne

Mimicking the late Steve Jobs' "...and there's one last thing" announcements at Apple Worldwide Developers' Conferences, Chancellor George Osborne delayed the announcement the implementation of a compulsory national living wage (NLW) until near the end of his Summer Budget speech.

Perhaps the easiest way of understanding the new arrangements is that, in effect, they boil down to a hike in the national minimum wage rates for workers aged over 25 but little else.

The NMW is due to rise from the current £6.50 per hour to £6.70 per hour in October. This increase broadly reflects those applied in recent years (£2010 £5.93; 2011 £6.08; 2012 £6.19; 2013 £6.31). The new rate of £7.20 per hour will therefore represent an increase of 50p per hour when implemented. Of course the Government's strategy is to seek to transfer the pay burden for low paid employees from the Government to employers, as demonstrated by the corresponding reductions in benefits and, in particular, tax credits.

It is intended that the living wage †will increase to £9.00 per hour in 2020. In fact, this is not too far out of line with what had been forecast had the NMW been retained and increased in accordance with recommendations (as now) from the Low Pay Commission. The Office for Budget Responsibility has suggested that the increase is likely to result in the direct loss of about 60,000 jobs. However, Mr Osborne pointed out that the cost of the increase equates to approximately 1% of corporate profits and he is cutting corporation tax from the current 20% to 19% in 2017 and 18% in 2020. It should also be noted that the OBR's estimates rely on growth in productivity in low pay sectors which has, in fact, fallen below expectations in recent years.

It is important to distinguish the new NLW from the existing living wage set by the Living Wage Foundation which is already £9.15 in London and £7.80 elsewhere.

click to read more...

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