Update on Recruitment Sector Issues April 2011

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1 Welcome to our legal update from the recruitment team at Osborne Clarke. Our update summarises some of the key legal developments impacting the recruitment sector. Topics: HMRC review of umbrella arrangements developing problem areas and new best practice Another umbrella development - Employment Benefit Trusts Review of IR35 and merger of Income Tax and NIC regimes Will AWR lead to a serious increase in MSC tax risk for staffing companies? False Self Employment VAT mitigation schemes for supplies to banks, insurers and health/care companies some pitfalls to avoid Bribery Act issues for staffing and umbrella companies referral fees etc. First prosecution under the Corporate Manslaughter Act - When Might Staffing Companies Be Prosecuted? Update on Germany Other News In Brief HMRC review of umbrella arrangements developing problem areas and new best practice HMRC seem to have started looking more closely at umbrella company arrangements. One area of focus is the "overarching nature" of contracts of employment issued by umbrella companies to workers. In at least one case now being handled by us, HMRC have raised a multi-million pound tax assessment against the umbrella employer on the basis that the umbrella had treated the cost of an umbrella worker's travel to a permanent workplace (which should be taxable) as the cost of travel to a temporary workplace (which can be paid tax free). This HMRC treatment stems from the fact that HMRC do not accept that some of the common types of alleged "overarching agreement" (which purportedly subsist from assignment to assignment, with each being at a temporary workplace) are really "overarching". HMRC seem to take the view that many of these contracts are really just one off employments lasting no longer than the duration of each assignment, with the place of that assignment therefore being a "permanent" workplace for tax purposes. HMRC do not now seem to accept that commonly used mechanisms like minimum hours guarantees are enough on their own to evidence a commitment to a long term "proper" employment relationship between the umbrella and the worker; Some umbrella arrangements have "pay when paid" clauses in them which do not seem consistent, in HMRC's view, with any normally recognised employer behaviour; and Other umbrella arrangements in practice see very few workers working via the umbrella for more than one assignment. This begs the question as to whether the worker and umbrella really ever expected the umbrella contract to be "likely" (which is a key word in the relevant tax provisions) to last beyond the first assignment (in which case HMRC would conclude that the first assignment site is the permanent place of work for that employment contract). In addition there is continuing evidence, in some subsectors, of umbrella companies which pay people gross or offshore, without applying the PAYE regime. These umbrella arrangements may also be attacked, not least because some may be tantamount to criminal tax evasion. In any event these arrangements raise the threat of substantial claims by HMRC against staffing companies or hirers under the Managed Service Company legislation (ss 61A-I of the Income Tax Earnings and Pensions Act 2003 ("ITEPA")) and/or ss 688 and 689 of ITEPA. See later in this briefing for the changes announced in the 2011 budget to the tax treatment of Employment Benefit Trusts and Disguised Remuneration Legislation which also impact many of these offshore umbrella arrangements. In keeping with HMRC's general commitment to targeting their enforcement activity on tax avoidance schemes the government released a 27 page dossier on Tax Avoidance alongside its 2011 budget on 23 March The dossier explains that 900M has been set aside to help HMRC crack down on what they perceive to be "tax avoidance". Whilst the document does not specify that umbrellas will be targeted, it implies that HMRC will use this budget to fund enforcement in areas already identified as posing a substantial risk. We imagine that offshore and/or gross payment arrangements will be looked at most closely. Some key issues for users of umbrella workers to note include the following: 1 of 8 Osborne Clarke

2 What should staffing companies do in response to this? Some staffing companies have received repeated requests from HMRC to disclose lists of umbrella companies which they use. If they are actively referring workers into unsafe or risky umbrellas they at best face the risk of the collapse of the umbrellas and out of pocket contractors looking to them or hirers for reimbursement. At worst they or hirers may be subject to direct claims by HMRC under the MSC legislation and/or s688/689 of ITEPA. The MSC legislation may even make individual directors etc. of a staffing company personally liable. Consequently staffing companies which tend to use or refer workers to the same "umbrella companies" should make sure that they carry out regular due diligence on these entities, looking at, in addition to all other due diligence points, whether: There is a "genuine" overarching contract in place (which umbrella models drafted by us have been held to be); The umbrella operates PAYE; and The umbrella or any of its related entities are situated "offshore". In the absence of regular and thorough due diligence we recommend that, while HMRC are focusing on umbrellas, staffing companies should certainly avoid taking referral fees and probably not appoint "preferred suppliers". Given the uncertainty facing independent umbrellas, and the possibility that almost any of them could be forced to cease trading on very short notice leaving workers unpaid, it is a very brave staffing company which engages a high proportion of umbrella workers from any one umbrella company without regular and thorough due diligence. And of course 1 October sees the introduction of the Agency Workers Regulations 2010 ("AWR") which could see many umbrella companies face substantial equal pay claims which could close them down as quickly as any tax assessment. Another umbrella development - Employment Benefit Trusts and Disguised Remuneration Legislation Rules restricting the use of employment benefit trusts are due to take effect from 6. Prior to December 2010 some employers, staffing companies and payroll intermediaries looked to reduce tax burdens by paying their employees using employment benefit trusts. But once the relevant section of the Finance Bill 2011 comes into force, the use of these schemes will be subject to an automatic tax charge unless that scheme falls within a narrow category of exemptions. chain of supply (e.g. many umbrellas) pays contractors or temps through an employment benefit trust arrangement. However in the case of intermediaries, it may not always be clear whether they are operating an employment benefit trust, particularly they are partly or wholly based off shore. Although liability will firstly sit with the entity operating the scheme, if that entity is an offshore provider then there are provisions in the intermediaries tax legislation which give HMRC the right to pursue any staffing company using the intermediary for any tax liability that intermediary owes instead. Even if a provider originally marketed itself as providing "a HMRC approved scheme" such as those offering 90% return and net income retention, then this HMRC stamp of approval may no longer be valid (to the extent it ever was many claims of this type are made with very little justification). In any event if you have concerns regarding your own payments or those administered by other providers you should speak to us immediately. Review of IR35 and merger of Income Tax and NIC regimes The 2011 budget confirmed that the government would continue to consider proposals to combine the UK income tax and National Insurance Contribution ("NIC") regimes. The separate charge for NICs has lead to a discrepancy between the amounts deducted from the self-the employed and the employed's pay. HMRC tried to address these discrepancies through IR35 and the OTS report suggested that if income tax and NIC were combined, the need for IR35 would disappear. However, the 2011 Budget confirmed that, although a consultation on the merger of the two tax regimes would go ahead, IR35 would in the meantime be retained to prevent revenue loss. It also stated that guidance would be published setting out the type of cases HMRC is likely to view as outside the scope of IR35 and would limit IR35 enforcement to "high risk" cases only. Plans to set up an IR35 forum and helpline to help with this new approach were also outlined in the 2011 Budget. Will AWR lead to a serious increase in MSC tax risk for staffing companies? The Chancellor s decision to retain IR35 for the time being, and only target contractors who are regarded as high risk, may increase the number of contractors choosing to work through personal service companies ("PSCs"). This will be of particular significance for staffing companies who pay, or know/suspect that an intermediary in their 2 of 8 Osborne Clarke

3 There is anecdotal evidence that many hirers and staffing companies are already being tempted to "persuade" contractors to switch from working as PAYE temps or through umbrella companies into becoming PSC contractors instead. A range of factors are causing this shift but a key one is that umbrella workers may well bring substantial equal pay claims under the Agency Workers Regulations from October 2011, whereas many believe PSC contractors are very unlikely (for fear of losing beneficial tax treatment outside IR35) to ever claim rights under the AWR. Staffing companies are now being approached right left and centre by accountancy services companies and umbrella providers seeking to persuade them that they have watertight AWR "solutions". One of the so-called solutions being suggested is the use of PSCs instead of umbrellas. This may be a valid supply model in the case of the sort of workers who, if properly advised by an expert in this field such as a chartered accountant, would conclude that PSC contracting is an appropriate business model for them (not least because they are genuinely outside IR35). However, a high proportion of ex PAYE temps and ex umbrella workers who may now be persuaded to operate as PSC contractors, and claim to be outside of IR35, may not actually fall outside IR35. The Chancellor's recent IR35 policy decision may now mean that, initially, they are not caught. This will lead to a lot of lost tax revenue. HMRC may then decide it needs to carry out more inspections to review whether these new PSC contractors are genuinely outside IR35. What might then happen is that contractors who fail to pass the "outside IR35" test may decide they may as well claim the upside i.e. claim AWR rights (including the same basic pay, disregarding expenses, as comparable perms). All this will mean that hirers and staffing companies will be back at square one on AWR! There is a much greater risk than AWR for all concerned: the MSC legislation of 2007 makes any hirer or staffing company which facilitates or encourages contractors to work through PSCs potentially liable for the tax that the PSC contractors would have paid if they were employees. Osborne Clarke are currently advising on a 10+M claim by HMRC under this legislation and it is obviously a very serious matter for the company concerned (and its directors who are potentially personally liable). The PSC models increasingly being promoted by accountancy service providers may in many cases expose hirers and staffing companies to these types of huge tax risks with potential personal liability. Staffing companies (and hirers) therefore need to be very careful about being seen to help PAYE temps and umbrella workers operate instead through PSCs. Even if HMRC do not get round to bringing a claim, this sort of contingent liability is likely to seriously reduce the value of any staffing company which actively "encourages" PSC contracting: the risk will be spotted by a buyer's or investor's advisers during the sale process. If the deal survives it will be at a far less attractive sale price. False Self Employment Meanwhile the debate on "false self employment", particularly in the construction sector, continues and on 4 March 2011 it was addressed by the government. Following on from the Daily Mirror's report into self employment in the construction sector, opposition politician Mr Chukka Umunna (Labour MP for Streatham where the construction union UCATT are headquartered) asked how the government planned to tackle the issues of false self employment. Mr Umunna went beyond the construction sector citing self employed pilots and courier drivers as examples of sectors where false self employment was rife. The government responded saying that awareness of advice countering self employment could be heightened, but confirmed that the question of whether someone is self employed or not is an issue for businesses to determine themselves. The government also confirmed that current enforcement mechanisms through HMRC were sufficient and re-emphasised that the Gangmasters Licensing Authority's ambit would not be extended to cover the construction industry. VAT mitigation schemes for supplies to banks, insurers and health/care companies some pitfalls to avoid The VAT staff hire concession was withdrawn in Since then suppliers of staff have had to charge VAT on the entire amount of their invoices except in special cases like the supply of nurses. The increase in VAT rate to 20% has led many hirers such as in the financial services sector (who usually cannot recover VAT) to look to reduce the amount of VAT they pay to staffing companies. This has led to new styles of VAT mitigation mechanism, for example the mechanisms suggested by us in our briefing of June of 8 Osborne Clarke

4 We have twice now reviewed VAT mitigation mechanisms suggested by major hirers to their staffing companies. We have found serious errors in them. They seem to have been set up by VAT specialists who do not take fully into account other legal, regulatory and tax issues and we urge all staffing companies to take care when they (or more likely their hirer clients) decide to implement VAT mitigation schemes set up by this sort of specialist. The key point with this is that resulting tax and regulatory liability may lie with the staffing company rather than the hirer. A particular problem which has now appeared with these mechanisms involves a directly engaged temp bank being set up by a hirer, with the staffing company acting as a payroll bureau in relation to these workers and the workers being treated in all other respects as "casual" PAYE temps paid under ss44-47 ITEPA. What has been overlooked is that these workers cannot be "casual" PAYE temps paid under ss ITEPA because those tax provisions only apply where the staffing company acts as contractual intermediary (i.e. the direct engagement prevents application of ss44-47 ITEPA). If ss ITEPA do not apply the staffing company has no right to deduct any tax. Instead workers are either employees of the hirer (in which case the hirer has to accept employment liabilities, and can and must deduct PAYE) or self-employed (in which case they should be paid gross, which HMRC would be bound to attack). It appears that these mechanisms have been recommended to hirers on the assumption that arranging payment via a staffing company might help the workers not be regarded as employees for employment law purposes. This is an incorrect assumption. There are ways of mitigating employment risk in the new VAT arrangements on which we are advising, but the mechanisms recommended by pure VAT specialists and/or major accountancy firms do not in our view properly address this legal issue. These arrangements are also likely to involve criminal breach of Regulation 8 of the Conduct of Employment Agencies and Employment Businesses Regulations This Regulation makes it an offence for a recruiter to introduce a worker to a hirer for direct engagement by the hirer, and then to help arrange for payment to the worker. There are ways of dealing with this but the proposed mechanisms we have recently seen do not appear to achieve this. Bribery Act issues for recruiters. New guidance issued 30 March government has decided to delay implementation until 1st July The Act repeals the existing law on bribery replacing it with a number of wider ranging offences. Bribery is defined widely under the Act. It covers offering or promising someone a "financial or other advantage" with the view to induce someone to "perform improperly a relevant function or activity" or to reward the person for their improper performance of such function or activity with the intention of obtaining or retaining business, or an advantage in the conduct of business. The Act contains a number of offences which already existed under law. Two of these are general offences, catching individuals who offer or accept a bribe with a third specific offence for bribing a foreign public official. Even if a staffing company (or any of its employees) does not commit any of these offences it will be guilty of bribery under the Act if a bribe is offered or accepted with the consent or connivance of a senior member of the staffing company. In this situation both the individual responsible and the staffing company will be guilty of the offence. A new offence will catch a staffing company if it fails to prevent bribery from being committed by persons performing services for it. However, if the staffing company can prove it had 'adequate procedures' in place to prevent such persons committing bribery it will have a defence to (only) this offence under the Act. This highlights the need for staffing companies to review their policies and procedures to make sure that they have adequate antibribery policies in place. If you are concerned about exposure under the Act then please contact us for further advice. The Act has very wide territorial scope and will potentially catch UK as well as international staffing companies with a UK base. The Act is not limited to events which occur in the UK, so if a London based staffing company or one of its employees accepted or made a bribe in Argentina then this may also be covered. Particular areas of Bribery Act concern for staffing and umbrella companies referral fees etc. Bribery clearly covers a wide range of activities. Two particular areas of concern are the giving/receipt of corporate hospitality and/or incentive or referral payments paid by umbrella companies etc.. The Bribery Act (the "Act") received Royal Assent on 8 April 2010 and was originally due to come into force in. The long awaited guidance notes to the Act were issued on 30 March 2011, and confirm that the 4 of 8 Osborne Clarke

5 The government has acknowledged that corporate hospitality is a key part of business and the Act is not looking to penalise reasonable and proportionate hospitality for "legitimate commercial purposes". However it draws the line against lavish corporate hospitality to the extent that it can "be used as a bribe to secure advantages". Until tested and unless covered in the guidance, it will be difficult to advise what constitutes 'reasonable and proportionate' corporate hospitality. In the meantime a common sense approach should be adopted when giving or receiving corporate hospitality, considering in each case whether the value of the event or gift is beyond standard practice. Shopping trips for customers or referrers to Milan would seem to us to fall within the ambit of the Act, whereas a nice "relationship-building" lunch would probably not. Incentive payments, including referral or marketing fees, will almost certainly fall within the Act's scope. However whether giving or receiving such a payment will be considered an illegal bribe will need to be considered on a case by case basis against the definition of a bribe under the Act. For example when a referral fee is paid it is clearly a financial award for the purpose of securing business. However this will only be considered a bribe if it is designed to improperly secure a reward of a contract in the staffing company's or umbrella company's favour. Whether a fee is designed to improperly secure a reward or not will be determined on a case by case basis. Until referral fees are challenged in court it will not be clear what a court will look at when determining whether the payment is in fact a bribe. However, anything that "hints" towards something being underhand such as a secret payment unknown to the ultimate hirer (including a payment made by way of "kickback" to increase a staffing company's margin where it is otherwise working to fixed margins) should be avoided at all costs (not least because there may be fraud involved as well). Where an umbrella company is asked to pay a staffing company a fee for "marketing" or "self-billing" services the umbrella (and staffing company) will have to be sure that such fee represents a proper charge for valuable services rendered rather than some sort of unlawful inducement/kickback. Whilst some staffing companies may choose to adopt a zero tolerance policy regarding these payments, other companies, depending on their exposure to a market where this is common practice may choose to take a different position. Either way, all types of staffing companies should ensure that the risk of liability is properly considered and all referral/marketing/self-billing fees charged by staffing companies to umbrellas should be as transparent and justifiable as possible. Staffing companies should review and update their practices and procedures before the Act comes into force including: Establishing clear policies relating to anti-bribery, corporate hospitality, gifts and facilitation payments in their contracts with intermediaries (including umbrellas and MSPs) if any; Establishing clear policies relating to anti-bribery, corporate hospitality, gifts and facilitation payments in their contracts with hirers if any; Establishing clear policies relating to anti-bribery, corporate hospitality, gifts and facilitation payments in their contracts with temps or contractors if any; Establishing clear policies relating to anti-bribery, corporate hospitality, gifts and facilitation payments in their contracts with their internal employees; Ensuring that staff are given training and made aware of all anti-corruption policies including giving them detailed guidance covering who they should contact if they have any related queries; Make screening for offences under Bribery Act part of your recruitment procedure; Carry out due diligence on third parties to check their anti-bribery record; Putting a whistle blowing system in place that enables the above to report any instances of bribery or corruption and updating your existing whistleblowing policies if necessary; and Appointing an 'anti-bribery officer' with a clear and defined role to look into and review policies as case law and best practice develops. The consequences of not tackling bribery are severe: individuals may face jail terms of up to ten years and companies can be charged with an unlimited fine. Of particular note to staffing companies with public sector clients is the potential to receive a ban from competing for public contracts. First prosecution under the Corporate Manslaughter Act - When Might Staffing Companies Be Prosecuted? The first prosecution under the Corporate Manslaughter and Corporate Homicide Act 2007 (the "Corporate Manslaughter Act") occurred on 18 February 2011 when Cotswold Geotechnical (Holdings) Limited ("CG") was fined 385,000 over the death of geologist Alexander Wright. 5 of 8 Osborne Clarke

6 Although the Corporate Manslaughter Act did not create new duties, this landmark case will be of significance for many staffing companies and umbrella companies supplying staff into sectors where there are inherent health and safety risks. In particular it re-opens the question of to what degree staffing companies supplying the services of non-employed individuals should be responsible for health and safety issues. Before the Corporate Manslaughter Act was implemented in April 2008, an organisation could only be liable for manslaughter under narrow rules on gross negligence developed by case law. Effectively, a "directing mind" of the company had to be identified and found guilty of manslaughter before the company could be held responsible. This was difficult to achieve and meant that few corporate manslaughter cases succeeded. Those that did were predominantly small companies where it is comparatively easier to identify one "directing mind" linked to the action which caused the victim's death. Following a spate of major disasters (without any substantial corporate manslaughter convictions), the government introduced the Corporate Manslaughter Act. The Corporate Manslaughter Act was designed to make it easier to prosecute large companies for corporate manslaughter, focusing on an organisation's collective management decisions rather than identifying an individual. A company can only be convicted of corporate manslaughter if the way in which its activities are run or managed by senior management (i) causes a person's death and (ii) amounts to a gross breach of a relevant duty of care owed to that person. Whether a gross breach of duty has occurred will be a question for the jury and will be decided by taking into account various factors including the following: whether the organisation failed to comply with any health and safety legislation; how serious that failure was; how much of a risk of death the failure posed; whether any evidence indicates that there were attitudes, policies, systems or accepted; practices within the organisation that encouraged/tolerated the failure; and any health and safety guidance that relates to the alleged breach. To limit exposure senior management should review their procedures to make sure that they are adequate in light of health and safety legislation as well as any associated guidance. They should also check that any health and safety procedures laid out are actually being met. Umbrella companies should approach this on the basis that they are the employer. Staffing companies should also follow this approach unless and until the extent to which they are responsible under the Corporate Manslaughter Act becomes clearer. The penalty for a company found guilty under the Corporate Manslaughter Act is a fine, the suggested minimum of which is 500,000. Individuals can not be found guilty under the Corporate Manslaughter Act. The CG case demonstrates that the CPS is willing to bring prosecutions under the Corporate Manslaughter Act. However this case can not be considered in isolation of the following which bare relevance on the ability of the CPS to bring a prosecution and also the amount of fine: CG is run by a sole director who was on-site immediately before the accident took place. This made the case relatively easy to prove and it is yet to be seen what will happen when a significantly larger company and/or one with a more complex management structure or complex supply to supervise is prosecuted; and The 385,000 fine imposed on CG was less than the minimum fine recommended under guidance issued by the Sentencing Council last year. However this is broadly in line with the Sentencing Council's suggested approach reflecting the fact that CG was a small company explaining the lesser fine of 385,000 and more lenient payment terms (CG were given 10 years to pay). Update on Germany German Temporary Workers National Minimum Wage The German government (coalition between the Conservatives and Free Democrats) have finally agreed with the Social Democrat opposition and passed legislation implementing a nationally binding minimum wage for temporary employees (the "Temp Minimum Wage"). The Temp Minimum Wage is due to come into effect on 1 May This is the same date that the German labour market opens up to staffing agencies from Eastern European member states of the European Union. 6 of 8 Osborne Clarke

7 This is significant because it goes above and beyond what is required under the Agency Workers Directive. It also highlights Germany's slightly aggressive tactic of using national legislation to protect the current staffing market from the threat of low paying competing agencies who may price existing agencies out of the market. On the other hand this measure could be seen as championing the rights of agency workers in Germany by ensuring that they receive sufficient remuneration. German Court Ruling Hits Temporary Work Agencies Under German law temporary workers generally have to receive 'equal pay for equal work'. This applies unless there is a specific collective bargaining agreement in place between the worker's staffing company and a correctly recognised union. Often such collective agreements mean that temporary workers will receive a reduced amount of pay compared to their permanent equivalents at a hirer. However on 28 February 2011 the highest German labour court ruled that all collective bargaining agreements negotiated by the CGZP (German Christian Unions) since 2005 are null and void. This is because the courts decided that CGZP was insufficiently representative to be regarded as a union and therefore no longer suitable for negotiating collective bargaining agreements. The decision was made even more significant due to its retroactivity effectively voiding all CGZP collective agreements negotiated from 2005 onwards. This means that c. 280,000 temporary workers may now bring equal pay claims. Such claims allow workers to demand that the difference between the wage negotiated by CGZP and the wage representing equal pay for equal work be paid to them by their staffing company. This figure is likely to run into billions of Euros. If the staffing agency can not afford to make this payment, e.g. if it goes out of business, the liability will be passed to the hirer. The same applies for social security and pensions contributions. Already, the German authorities have started to claim back the amount of social security and pension contributions which would have been paid at the higher 'equal pay for equal work' level from staffing companies. These contributions alone are predicted to cost staffing agencies 2.4 billion Euros. Although this court ruling does not affect English law, it demonstrates how damaging class actions leading to retrospective tax and social security claims can be So even though the German case is not directly relevant to the Agency Workers Regulations 2010 (the "AWR") it does resonate with some of the equal pay liability concerns many umbrella companies, staffing companies and enduser clients may face when the AWR comes into effect later this year. There are already concerns that unions will back equal pay class actions under the AWR particularly in relation to some of the more "aggressive" Swedish Derogation models that seem to be emerging and class actions under the AWR could lead to substantial rulings against umbrella companies and staffing companies. If this occurs and the relevant temporary work agency is unable to pay these sums, it will go out of business. Whilst the AWR does not address the question of liability transfer from an insolvent defendant directly, it is possible that a tribunal will regard other temporary worker agencies in the supply chain and even the end-user client as sharing responsibility and liability for the breach. As in the German case, this may include recovery from end-users particularly if they have played an active role in setting up arrangements to avoid equal pay obligations. It is likely that staffing companies will increasingly seek confirmation of an umbrella company's financial standing before relying on them to provide an AWR solution. Also in brief Employment tribunal reform Following a consultation by BIS (the government Department for Business, Innovation and Skills), proposals to reform the employment tribunal ("ET") system in England and Wales are being considered. Generally these proposals aim to reduce the cost burden currently faced by businesses defending labour claims bought by individuals. Staffing companies and employers will welcome the majority of these reforms which aim to discourage spurious claims and decrease the cost of defending claims for businesses. The proposals include, without being limited to, the following: that all claims are initially submitted to ACAS (envisaged reduction of 12,000 ET claims); give ET's greater power to tackle weak and vexatious claims: including increasing the power to strike out claims, increasing deposit order powers, increasing the maximum deposit a Claimant has to put down to bring a case and revising cost limits; formalising the settlement procedure so that rejected settlement offers can be reviewed by ET's to potentially reduce "additional costs" awarded against a party who has lost a claim but previously made a settlement order; revising formalities to shorten tribunal hearings ; and 7 of 8 Osborne Clarke

8 increasing the unfair dismissal qualification period to match the 2 years continuous service required for redundancy (significant for umbrella companies and those adopting "employed models" for example in response to the AWR). For further information on any of the issues raised, please get in touch with your usual Osborne Clarke contact or: Contact Repeal of the default retirement age On 17 February 2011 BIS published the draft Employment Equality (Repeal of Retirement Age) Regulations These regulations mean that businesses will not be able to rely on the default retirement age to justify dismissing an employee reaching a "default retirement age" on/after October this year. For employees/workers reaching 65 between and October 2011, default retirement will only be allowed where the employer has served the relevant individual with a notice before in accordance with the procedure set out in these regulations. Although it remains to be tested the narrow circumstances under which a "default retirement age" will be seen as justified, it is understood that this will only be permissible in very rare cases. These materials are written and provided for general information purposes only. They are not intended and should not be used as a substitute for taking legal advice. Specific legal advice should be taken before acting on any of the topics covered. Frances Lewis Consultant, Employment T +44 (0) M +44(0) frances.lewis@osborneclarke.com Contact Kevin Barrow Partner, Employment T +44 ( M +44 (0) kevin.barrow@osborneclarke.com 8 of 8 Osborne Clarke