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March 2016 Review
the employment law briefing
Welcome to our monthly review of employment law news. Among this month's blog posts Susan Stafford reminds us that a "one size fits all" apprach to te application of restrictive covenants simply will not work. Covenants have to be relevant and necessary in the context of the work done by the individual concerned. Of course, the type of covenants and their scope are likely to change as an employee's career progresses. Susan has highlighted a recent decision in which it was held that covenants which were inappropriate when they were imposed will not be upheld, even if they become potentially relevant as the result of a promotion. If you have contracts including restrictive covenants now is a good time to dust them down and get them reviewed. Give Susan a call on 0151 239 1003 or send her an email to email@example.com.
Meanwhile, Katharine Kelly has no less than three blog posts featuring the very important introduction of the national living wage this month. As Katharine has pointed out some employers have courted controversy by seeking to offset the higher headline rate for over 25s by cutting benefits such as enhanced rates for Sunday working. As B&Q has found out, this can lead to a significant employee backlash and also raises the problematic area of unilateral variation of contracts and the corresponding risk of constructive unfair dismissal claims.
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This month's news:
This month's news round-up:
As you may or may not be aware, each year in April the Government introduces new legislation in respect of employment rights and responsibilities. Below is a summary of the key changes being implemented this month.
From 1st April 2016, workers aged 25 and over are entitled to the 'national living wage' rate of £7.20 per hour - this is essentially a new 'top rate' of the national minimum wage.
This has also taken effect from 1st April 2016 and the same enforcement provisions apply for failure to pay the national living wage. Further details can be found here: https://www.gov.uk/government/news/measures-to-ensure-people-receive-fair-pay-announced.
You may have noticed the Government's recent campaign to entice employers to provide more apprenticeships - in their latest drive they have decided to abolish National Insurance Contributions for apprentices aged under 25. These changes have been introduced with effect from 6th April 2016 and it is hoped they will incentivise employers to offer more apprenticeships going forwards.
Employers will be surprised to note that there will be no increase to statutory adoption, maternity, paternity or shared parental pay rates this year, and statutory sick pay is similarly unchanged. Details of the current applicable rates can be found here: https://www.gov.uk/government/collections/statutory-pay.
However new limits for statutory redundancy pay and employment tribunal awards have been introduced from 6th April 2016, and are as follows:
If you have had the opportunity to read my previous blog post 'Key Employment Law Changes', you will be aware that from 1st April 2016, all employers are under a duty to comply with new obligations under the 'National Living Wage' regulations.
It is important that small business owners in particular are aware of the implications of this, to ensure that they implement any necessary pay increases and are not subject to later claims for arrears of wages owed.
By way of background, the National Living Wage was originally calculated based on the amount that employees would have to earn in order to cover basic living costs - prior to this month however, this was used as a benchmark/guidance only, and the rates were not legally enforceable.
From 1 April 2016, the National Living Wage became law under the National Minimum Wage (Amendment) Regulations 2016 for workers aged 25 and over, increasing the minimum wage by £0.50 to £7.20 per hour - the effect is therefore essentially that the National Minimum Wage rate is increased.
Please note - the National Minimum Wage rates will continue to apply for workers aged under 25.
If you are a business owner, you should therefore make arrangements to assess who within your organisation will be entitled to this increase, notify them accordingly and advise your accounts/payroll team to implement the rise.
Further to my previous blog post about the introduction of the national living wage (NLW), I was interested to read that not all of us think the effective increase to the national minimum wage will have a positive impact on the UK or its employees.
You will by now probably be aware that larger businesses such as Kingfisher (owners of the likes of B&Q and Screwfix) immediately put provisions in place to ensure that the introduction of the NLW had a minimal impact on their finances. Kingfisher, for example, advised all employees that although they will increase the hourly rate of pay to £7.66 across the board (regardless of age), they will remove benefits such as time and a half/double time for working on Sundays/bank holidays and the increased pay previously received by staff working in London. In addition they have cut summer and winter bonuses and advised employees that should they not agree to these changes and sign a new contract of employment, "unfortunately this will result in your dismissal".
Workers have understandably reacted angrily to the changes and created a storm on social media by setting up a Facebook campaign and petition entitled "Don't use living wage as an excuse to cut pay and benefits". Rumour has it that the campaign was set up by a B&Q Manager under the pseudonym of Kevin Smith, who wrote:
Those who have worked within the business for over a decade and know our customers and our business the best are losing thousands of pounds a year. Big businesses like B&Q are using the national living wage as an excuse to cut overall pay and rewards for the people that need it the most.
Currently (as of 5th April 2016) the petition has 134,074 supporters.
Employers often choose to insert restrictive covenants into their employment contracts as a mechanism to protect their business interests when their employees leave. They are generally more appropriate for those more senior employees who have access to confidential information and/or have key relationships with clients, suppliers or other employees. However, it appears that more and more employers are including them as a standard feature in their employment contracts regardless of whether such clauses are relevant to the particular employee.
When drafting restrictive covenants it's important to ensure that the ambit is not too wide in terms of restricted business activity, geographical location and radius and the duration of the restrictions. If they are overly restrictive then the Court is likely to view them as an unlawful restraint of trade and thereby render them unenforceable. In making this determination the Courts look to strike a balance between the employer's interests, and allowing the employee the freedom to work where he chooses and to take advantage of his own professional skills and knowledge. Covenants included in a contract only to deter an employee from leaving are most unlikely to be enforceable.
This position was confirmed in the recent judgement of Bartholomew's Agri Food Limited v Michael Andrew Thornton. Whereupon Bartholomew's (the Applicant) made an application for an interim injunction against Mr Thornton (the Respondent) to enforce the terms of a restrictive covenant contained in the respondent's contract of employment. The Applicant argued that there were two aspects of protectable interest, namely customer connection and confidential information. However the Respondent argued that the relevant clauses relied upon by the Applicant were in restraint of trade, unreasonable and unenforceable.
In April 2015 the government implemented new legislation to make parental leave shareable with the objective of challenging the old fashioned assumption that women will always be the parent that stays at home. It was intended to give parents the choice and flexibility in caring for their children and to help mothers who wanted to return to work early share responsibility for the care of their child. It was anticipated that the introduction of SPL would be unlikely to impact significantly given the potential financial implications, lack of career progression and women's potential reluctance to share their leave. Given that we are now year into the changes it seems an appropriate time to reflect on the impact that SPL has actually had. It appears that fathers have been reluctant to take advantage of the SPL rules mainly on the basis of the financial limitations. Research among 200 employers conducted by My Family Care found that 80% of employees surveyed said that the decision whether they would elect for SPL would depend on whether their employers would pay more than they were obliged to. With statutory pay for parental leave currently set to a maximum of £139.58 per week it could be that many working fathers continue to believe that it's their duty to go out and earn the money. Another important consideration that may be affecting the implementation of SPL is women's reluctance to share their leave. Research suggests that 55% of women surveyed said that they would not want to. However, notwithstanding the potential limitations, the implementation of SPL can only serve to eradicate the inequalities that woman have long suffered in the workplace, by giving them the option to share their leave and combine work and family. It should enable women to carry on with their careers more easily whilst having a family.
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