Employment SolutionsCLB Solicitors

November 2008

We have news from a huge variety of sectors this month; much of which will be of relevance to all our subscribers.

The changes in maternity leave have now been implemented and, surprise surprise, there are now more around the corner. The government is proposing, at policy level, to protect a pregnant employee's job for anything up to 12 months. I don't need to tell any of our subscribers what that would entail in the current economic climate, especially with restructuring and redundancy being the current big topics at the office.

Every employer who has been to a Tribunal will know that there are many unmeritorious claims floating around the Employment Tribunal system. It is of little comfort that the claimant is beaten resoundingly when you have dedicated substantial time and resources to defending the claim. The Sunday Telegraph (9th November 2008) has revealed that there was 32 million awarded to claimants last year. However, when you consider the amount of settlements that there have been and the costs to business in defending poor claims to protect the company reputation, the total cost will be many times more. It is no surprise then that whistle-blowing legislation is being used by unscrupulous individuals to get a claim into the Tribunal where the claimant has less than one year's service or to bolster a weak case. Speaking as someone who has defended many whistle-blowing cases, all of which thus far have been judged to be ill-founded, I can confidently state that proving them is incredibly difficult and genuine whistle-blowing cases are rare and usually highly publicised.

You may think I am bored with telling my clients and subscribers about the importance of restrictive covenants in the modern contract of employment; you would be wrong. At present, companies are shedding employees at a very high rate, however, when the employer hands them a compromise agreement are the terms properly constructed so that they protect the business interests of the employer? Or, will the ex-employee simply worsen the employer's situation by setting up a rival company or working for a competitor? I can tell you that applying for injunctions and then suing for breach of contract is a lengthy and expensive business, especially if you lose. Restrictive covenants in compromise agreements, service agreements and contracts of employment need to be carefully drafted and to be bespoke to the relationship. It is no good simply googling the clause and cutting and pasting; the chances are any judge will hold it to be void as it will not address the situation at hand and the employer will be exposed to the situation it had sought to avoid. Please take advice before issuing high level contracts and compromise agreements. That is my final word on the matter for the moment barring a huge case in November that is worthy of appearing in next month's newsletter.

It is worth noting that, in my own personal view, the burden on small businesses in complying with the increasing amount of new legislation and changes to old laws seems to be reaching a level not seen since the birth of modern employment law in the 1970s. Workplace management now enshrines employment law, aspects of corporate and commercial law, health and safety law, immigration law, tax law, criminal law (money laundering, enhanced CRB checks, corporate homicide and manslaughter), environmental law and, increasingly, other areas as well. The problem facing many companies is that they do not know their obligations under the modern law, however, when something does go wrong the penalties are increasingly severe as can be seen from the huge awards of compensation in the Employment Tribunal and the possibility of life destroying criminal penalties from anything as diverse as employing illegal immigrants to causing the death of an employee through an unsafe working practice. Ensuring that your workplace law needs are met is the only way to avoid potential problems at a later date although this does, in my opinion, put an unreasonable demand on small and medium businesses.

Finally, we are at the Merseyside Business Fair on the 11th November so please pop in and see us if you are attending. We are running Redundancy and Restructuring consultations for employers both at the event and throughout the rest of the year. If you wish to book a free one hour Redundancy or Restructure consultation please email me at williamburrows@canter-law.co.uk.

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. Maternity Rights

2. Employing immigrant workers

3. Agency and temporary staff

4. Incapacity Benefit phase out

5. Restrictive covenants, garden leave etc.

6. Health and Safety (Offences) Act 2008

7. Whistleblowing abuse

8. Flexible working

9. Welsh race discrimination

10. and finally...big money!


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1. Maternity Rights

There are two new items of interest.

First, with effect from 5th October 2008 (following introduction of two sets of new regulations - the Sex Discrimination Act 1975 (Amendment) Regulations 2008 and the Maternity and Parental Leave etc. and the Paternity and Adoption Leave (Amendment) Regulations 2008) almost all differences between ordinary maternity leave (the first 26 weeks of leave) and additional maternity leave (the next 26 weeks) have been removed.

The only difference of general practical significance now left is that the right to return after ordinary maternity leave is a right for a mother to return "to the job in which she was employed before her absence" whereas after additional maternity leave it is still a right to return either to that job "or, if it is not reasonably practicable for the employer to permit her to return to that job, to another job which is both suitable for her and appropriate for her to do in the circumstances". Abolition of even this difference is under consideration - it was on the agenda at the Labour Party National Policy Forum in July 2008.

Second, an EC announcement. Mostly this is irrelevant in the UK as women here already have the right to return to the same job or an equivalent one after maternity leave and already have the right to request a flexible work pattern on return to work. However one proposal does have an effect in the UK. The EC proposes that compulsory maternity leave should be increased to 18 weeks, six of which will have to be after the birth (at present in the UK this is just two weeks). The other 12 weeks will be available either before or after the birth.

There is further information about the proposals in an EC memo issued on 3rd October. The memo includes a table headed "What are the existing periods and conditions of maternity leave in EU countries?". Interestingly this shows, in a column headed "duration", that UK law provides for longer maternity leave than the law of any other Member State, generally by a substantial amount.

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2. Employing immigrant workers

From 27th November 2008 employers wishing to bring non-European Economic Area skilled and / or temporary workers to the United Kingdom will need to have what is called a sponsor's license. Licensed sponsors will be able to issue "certificates of sponsorship" to intending migrants. The migrant concerned can then use the certificate to apply for entry clearance.

This is all part of implementation of the new points based system for assessing the eligibility of non-EEA migrants to work in the UK. The general rule under the system is that non-EEA migrants require a sponsor unless they are applying under the highly skilled tier known as "tier 1". Skilled workers generally come under what is known as "tier 2" and temporary workers come under "tier 5".

Migrants from the EEA are, of course, not affected. They have had freedom of movement within the EEA since 1st January 1994.

In general the conditions for obtaining a sponsorship licence are that:

  • the applicant must be a "legitimate organisation" working within the law in the United Kingdom;
  • there are no reasons to believe that the applicant is a threat to immigration control; and
  • the applicant will meet its continuing "sponsorship duties".

The details and the process of applying for and retaining a licence, including inspections and checks by the Home Office, are complicated - much more so than under the previous "work permit" system. It should be noted that applicants have to pay a fee (between 300 and 1,000) to the government.

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3. Agency and temporary staff

Two recent developments are of importance for those who use or supply (or who are) temporary workers.

First and most importantly, on 22nd October 2008 after years of negotiation, muddied in particular by the UK using the "working time 48 hour week opt-out" as a bargaining counter, the European Parliament approved the 2002 draft directive on Temporary Agency Work (technically the EU Directive on "Working conditions for temporary workers", COM/2002/0701 final, November 2002). The 2008 version is understood to be much the same as the 2002 draft although a change is that Member States have three (rather than two) years to incorporate its provisions into national law. The precise wording is expected to be published in the EC Official Journal towards the end of 2008 or in early 2009.

As agreed between the British government, the TUC and the CBI, the result will be that after 12 weeks' employment temporary workers will have the same pay and holiday rights as the employer's permanent staff. The obligation on employers to provide equal treatment for temps will not extend to providing benefits from occupational social security schemes (e.g. pension and sickness benefit schemes) available for permanent staff. The Recruitment & Employment Confederation is calling "for the implementation of these regulations to be pushed back to avoid putting more jobs at risk".

Second, and quite separately, new rules came into effect in the UK on 27th October 2008 to ensure that agency workers are treated in the same way as other staff with regard to entitlement to Statutory Sick Pay. This is a technical correction of an oversight - in 2002 a rule was abolished under which a fixed-term employee was not eligible for SSP if the fixed term was for less than three months but the Courts later held that the wording did not achieve this result if the individual was an agency worker. The position has now been corrected.

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4. Incapacity Benefit phase out

Incapacity Benefit and Income Support paid on incapacity grounds are being phased out. From 27th October 2008, any new claimant gets instead a benefit called "Employment and Support Allowance". Those already receiving Incapacity Benefit or Income Support (government figures show that there are some 2.6 million) are continuing to receive those benefits for the time being provided they satisfy the entitlement conditions.

The fundamental difference between the old and new systems is the new focus on what work the claimant can do rather than on what he or she can't do.

All applicants, except those severely ill or disabled, will be required to take part in a 13-week assessment. During that 13 week period they will have a "work capability assessment" carried out at a Medical Examination Centre by a doctor or nurse approved by the Secretary of State (not their own GP).

During this assessment period they will receive a basic rate payment (up to 60.50 a week for a single person aged 25+ or 47.95 a week for a single person under 25). After the assessment period, those who qualify will enter either a "Support Group" or a "Work-Related Activity Group". They will then be entitled to Employment and Support Allowance proper.

The Support Group is for those with an illness or disability which makes it impractical for them to work. They will generally receive up to 89.50 a week.

The Work-Related Activity Group is for others. They will be expected to prepare for a return to work as a condition of receiving Employment and Support Allowance. They will generally be required to attend a "work focused interview" every month until they get back into work and will generally receive a weekly payment of 84.50 a week (it can be more - the precise amount is subject to a means test and will also depend on how many National Insurance Contributions the claimant has paid).

The system is "stick and carrot". The stick part means that after the 13 week assessment period, a claimant who fails to attend a "work focused interview" without good reason will forfeit a substantial part of the weekly benefit. The amount forfeited increases if they persist in non-attendance. There is a 14 page "sanctions guide" on the DWP website for those wanting more information on this important but inevitably complicated aspect.

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5. Restrictive covenants, garden leave etc.

Given the current economic downturn, we looked at various aspects of redundancy law in our September and October newsletters. The often difficult question of enforceability of restrictive covenants after employment ends is equally relevant.

Post-termination restrictive covenants limit the freedom of individuals to do the work they want in the way they want. Unsurprisingly therefore the starting point from which a court will begin if asked to enforce such a covenant is to refuse to do so. On the other hand a court will not take kindly to an individual breaking an agreement freely entered into. The result, in practice, is generally a balancing act - the court will generally agree to enforce a post-termination restrictive covenant if in all the circumstances it would be reasonable for it to do so but not otherwise.

There are generally four different types of restrictive covenant, forbidding respectively:

  • solicitation of the employer's customers / clients;
  • dealing with the employer's customers / clients;
  • solicitation of the employer's continuing employees; and
  • competition.

In considering whether such covenants are reasonable and enforceable the courts take into account matters such as duration; whether the restriction covers only persons with whom the employee had direct contact; geographical area; whether only specified activities are covered; whether the covenants are individual covenants which can be separated from each other or whether they stand or fall as a whole; and current business practice generally. The more limited the restriction the more likely it is to be enforceable.

As one would expect, there is much relevant case law and much scope for argument by skilful advocates. In a recent high profile case (see August 2008 newsletter) the UBS finance house won a temporary injunction to prevent former employees from poaching its clients and staff. They were setting up a "wealth management" company called Vestra in competition with UBS's wealth management division. The judge took a dim view of what was going on saying "It is in my judgment an unlawful conspiracy dressed up as lawful competition" and granted a temporary injunction in favour of UBS.

This was a good example of what is sometimes called a "springboard" or "head start" injunction - these being catchy names given to injunctions which an employer can sometimes obtain to prevent an employee or former employee using confidential information belonging to the employer as a springboard to launch a new business.

Garden (or gardening) leave is relevant here. An employee who continues to receive normal salary but is told not to report for duty is said to be on "garden leave". Typically this happens if the employer needs to protect himself against competition or poaching of customers / clients / staff by a senior employee who has given notice or is to be dismissed. Restrictive covenants can be unreliable and difficult to enforce against ex-employees so it may be attractive for the employer to send the employee home on "garden leave".

However there are risks for the employer. Even if the employee's contract specifically provides for "garden leave" the employee may, depending on the circumstances, be able to argue that an attempt to keep him at home without work amounts to constructive dismissal. He could then argue that his employment contract had been wrongfully terminated by the employer and therefore that he was immediately released from all obligations under the contract. The employer might thus have scored an unpleasant own goal by sending the employee home on garden leave - the employee, no longer bound by the contract, could be automatically released from any post-termination restrictive covenants it might contain.

It should go without saying that if issues arise which might involve restrictive covenants and / or garden leave it is vital to obtain legal advice from the outset. Subscribers should always contact us for advice included within the subscription and we will be pleased to outline our charges for non-subscribers.

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6. Health and Safety (Offences) Act 2008

As flagged up in our August newsletter the Health and Safety (Offences) Act 2008 (as it is now known) increases the maximum penalties for certain health and safety offences. In particular it increases the maximum fines which a Magistrates Court can impose (generally from 5,000 to 20,000) and gives Magistrates Courts power to impose prison sentences in serious cases.

The Act received Royal Assent on 16th October 2008. It follows a series of Private Members' Bills over the last few years attempting unsuccessfully to get similar legislation enacted. The Act works by altering the penalties set out in the Health and Safety at Work etc. Act 1974 s.33.

The Health and Safety (Offences) Act 2008 comes into force on 16th January 2009. It does not apply to offences committed before then even if prosecuted afterwards. It extends to England and Wales, Scotland and Northern Ireland.

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7. Whistleblowing abuse

Whistleblowing is defined in Chambers dictionary as "Giving information (usually to the authorities) about illegal and underhand practices". The law has given protection to employees who "blow the whistle" since 1998 when appropriate changes were made to the Employment Rights Act in response to scandals such as Matrix Churchill, Maxwell, Clapham Rail and the Zeebrugge Ferry disaster. After each of these incidents official enquiries had established that workers who were aware of dangers had been too scared to sound the alarm.

Predictably, it seems some individuals deliberately concoct whistleblowing claims if they have a grudge against their employer, or more usually their ex-employer. As with discrimination claims, there is no statutory limit on the compensation if they win and there is no requirement to complete any particular period of employment as a precondition of bringing a claim. Both those considerations restrict the value and availability of an unfair dismissal claim but neither applies to a whistleblowing claim. Further, as a cynic might point out, a white Anglo Saxon male will generally find it difficult to bring a discrimination claim and if dismissed may be tempted to look around to see whether any other claim with uncapped compensation might be available. An argument that the real reason for his dismissal was that he had "blown the whistle" on some unacceptable practice by his employer is an obvious candidate.

One such case came to light last year after the Nomura banking firm dismissed a Mr Hussey. He had been their head of German sales and co-head of structured solutions and was dismissed for performance related reasons. However Mr Hussey claimed he had been fired for being a whistle blower and looked for very substantial compensation. He failed to satisfy the employment tribunal that he had had anything to blow the whistle about and so failed in that claim - although Nomura did not follow the correct procedures and so was not blame free.

The possible problem is one of which employment tribunals are aware. The law is that an employer can defeat a whistleblowing claim if the employee bringing it was not acting in good faith or did not reasonably believe in the truth of information disclosed. Employment tribunals will do their best to prevent improper claims (another recent example is Muchesa v Central & Cecil Housing Care Support, EAT on 22nd August 2008) but nevertheless the moral is that employers should be on their guard and ready to contest claims which are falsely made.

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8. Flexible working

Flexible working was identified in a recent survey as the "perk" which many employees would rather have than any other (Accor Services free whitepaper, October 2008).

Both the Labour government and the Conservative opposition are on record as favouring extension of the legally enforceable right of parents, and some others, who are responsible for looking after children aged under 6 (or under 18 if the child is disabled) to ensure that requests they make for flexible working arrangements are taken seriously by their employers.

This right was enacted in April 2003 and in April 2007 was extended to cover carers of adults. In May 2008 the government indicated that with effect from April 2009 the right was to be further extended to be available to all parents with children under the age of 16. The proposal followed a failed 2007 private member's Bill which would have extended the right to request flexible working to all parents with children under the age of 18.

However, given the economic downturn and in face of pressure from business, the government has recently signalled that it is reconsidering the currently proposed extension, at any rate in relation to its introduction as soon as April 2009. The TUC general secretary Brendan Barber has been quoted as saying this would be "an astonishingly irrelevant response" to the problems facing the economy (see The Guardian, 20th October 2008). As at 10th November no decision has been announced.

For completeness, it is worth noting a further proposed change to the current "flexible work" rules. The law currently provides that an employer must give written notice to an employee of either agreement or disagreement to a request for flexible working. Few employers are aware that they have a legal obligation to give written notice of agreement and the current proposals will remove that obligation. The requirement to give written notice of a refusal will, of course, remain.

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9. Welsh language race discrimination

In a timely reminder for businesses in the North West and Wales a Caernarfon woman has recently won her claim for unfair dismissal and race discrimination. Lawyers practising in this (geographical) area - the writer included! - have often found to their cost and inconvenience that native Welsh speakers have the right to require that court proceedings are conducted in Welsh. Gwyneth Green worked for Siemens Healthcare Limited in Llanberis. She claims that she was not allowed to speak in Welsh at a disciplinary hearing. Siemens maintained that as a multi-national business the "business language" of the entire corporation was English but they had a "very open approach" on the Welsh language. Ms Green declined reinstatement and was awarded "substantial" compensation at tribunal.

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10. and finally...big money!

Until quite recently the maximum compensation which an employment tribunal had power to award was very low. It is still restricted in unfair dismissal cases (currently to 63,000). In breach of contract cases the limit is 25,000 and the absolute maximum statutory redundancy payment is currently 9,900. However in discrimination and, as noted above, whistleblowing cases the sky is the limit - there is no statutory maximum on the amount an employment tribunal can award.

Here are three recent examples:

  • 600,000 was recently awarded to a Muslim lawyer employed by the Crown Prosecution Service. In September 2001, shortly after the 9/11 attacks on the World Trade Centre in New York, she was at Bradford Magistrates' Court. A security guard joked that she was a risk to security and she joked back that she was a friend of Osama Bin Laden and went on, more seriously, to describe her disgust at the 9/11 attacks and to criticise the USA. Her remarks were overheard by some Asians and by some white men who were in court for public order offences. Apparently this incited them to create some form of disturbance. News of this got back to the CPS which clearly overreacted. They suspended her, started disciplinary proceedings and moved her to another office although the "evidence" on which they acted was no more than a hearsay and unparticularised account by unnamed complainants. Although clearly in the wrong, the CPS refused to apologise. If they had done so, the lady concerned says she would have dropped the matter. In the event she took them to an employment tribunal where she won her claim of unlawful racial discrimination. That decision was upheld by the Court of Appeal which sent the case back to a tribunal to assess compensation. The lady concerned has now been awarded 600,000 (Aziz v. Crown Prosecution Service [2007] ICR 153).
  • 4.3m claimed and 2.7m awarded. A chartered accountant of Indian origin joined Abbey National in 2001 as a risk analyst. He was dismissed by reason of redundancy in 2006. He took Abbey National to an employment tribunal and won claims of race discrimination, unfair dismissal and breach of contract (the last being in relation to non-payment of a bonus). At the subsequent remedies hearing he asked for compensation of no less than 4.3m, largely on the basis that he would never get such a well paid job again and would suffer 75% loss of earnings until he reached age 65 in 20 or so years time. The tribunal cut that claim down - to 2.8m. Not surprisingly Abbey appealed. It lost on the issue of liability but has won on the issue of remedy. The EAT ruled that the original tribunal had applied the wrong principles in assessing compensation and has remitted assessment of compensation back for reconsideration in the light of its guidance (Chagger v Abbey National PLC & Hopkins EAT, October 2008).
  • Multi-million-pound compensation claimed. Two French Muslim sisters, twins in their early thirties, are reported to have made more than 200 separate allegations of discrimination against their ex-employer, the French broker Tradition Securities and Futures. The ladies, Samira and Hanan Fariad, had worked for two years in the firm's City of London office but resigned at the end of 2006 in protest after, they allege, Jewish clients were transferred from them to non-Muslim colleagues. The case opened at Central London Employment Tribunal at the end of October and is scheduled to go on for 55 days. A restricted reporting order, which is being contested by the Press, means that at present only few details are available.
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advice service

Call free on 08000 320974, e-mail enquiries@clbemployment.com or contact one of our employment lawyers:

Will Burrows
Direct dial: 0151 239 1010
e-mail: williamburrows@canter-law.co.uk

John Booth
Direct dial: 0151 239 1124
e-mail:johnbooth@canter-law.co.uk

Misbah Sadiq (currently on maternity leave)
Direct dial: 0151 239 1138
e-mail: misbahsadiq@canter-law.co.uk

Rupert Budgen
Direct dial: 0151 239 1059
e-mail: rupertbudgen@canter-law.co.uk

Kath Kelly
Direct dial: 0151 239 1079
e-mail: katharinekelly@canter-law.co.uk

Sean Carty
Direct dial: 0151 239 1138
e-mail: seancarty@canter-law.co.uk

Martin Malone
Direct dial: 0151 239 1003
e-mail: martinmalone@canter-law.co.uk

For sales and client services enquiries please contact:

Jameel Abbas
Direct dial: 0151 239 1017
e-mail: jameelabbas@canter-law.co.uk

use our extensive resources on the CLB Employment Solutions website.

service enquiries

If you have any enquiries about using the service or if you are interested in subscribing, please contact Will Burrows on 0151 239 1010 or e-mail willburrows@canter-law.co.uk.

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