1 Industry Insight Chemicals and Manufacturing sector newsletter June 2015 In this issue: Noise induced hearing loss claims on the increase Page 1 Shared parental leave Page 3 Over time for a holiday? Page 5 Force majeure becomes a major farce Page 7 Manufacturing more powers for the Environment Agency? Page 9 Constructing additional duties for manufacturers Page 10 Noise induced hearing loss claims on the increase There has been a surge in noise induced hearing loss (industrial deafness) claims over the last months. These claims can relate to periods a very long time ago, and evidence to fight claims may be unavailable, but all is not lost. Many manufacturers will have noticed a significant upsurge in what used to be called industrial deafness claims (now described as noise induced hearing loss claims) over the last months. It is no coincidence that this has happened at the same time as the Government clamp down on motor accident claims. In a nutshell, those law firms chasing road traffic injury claims have had their fees drastically reduced. Some have moved into the market of actively marketing noise induced hearing loss claims nationwide. The result can produce some very old claims, often going back to the 70 s, 80 s and even in some cases the 60 s. This obviously means that claims are difficult if not impossible
2 Paul Hughes Legal Director Insurance T: +44 (0) E:paul.hughes to investigate. Evidence will have long since been destroyed. Witnesses will have disappeared or even died. Companies will have been bought or disposed of, quite possibly only in part. That could lead to major problems identifying who now carries the liability. It may even be that the insurer at the time cannot be identified, or has itself gone out of business. Does that mean that all is lost and nothing can be done to see off unmeritorious claims? Not necessarily. It may seem tempting to just pay these claims, as quite often the claims are not very large. However, recent court decisions show an increasing willingness by courts to strike out some of these claims on the basis that they are brought too late, under the Limitation Act. To make best use of this potential defence, it is necessary to carry out a thorough review of medical records in particular to see when the first mention of hearing problems was made to the GP or hospital, and what was said about any relationship with the patient s work. If these claims are a problem for your business, our insurance lawyers can advise you on whether they can be fought. 2
3 The new scheme gives parents significant flexibility: they can apply to take time off together or separately, in one continuous period, or discontinuously. Shared parental leave are you ready? The new regime entitling parents to share paid time off for child care came into effect recently. The regime applies to employees whose baby was due on or after 5 April 2015, or who adopted a child on or after that date. Leave can be taken in the first year after a child s birth or adoption. The manufacturing work force is usually maledominated, so this change to the employment law could have a big impact. Employees will have the same rights to maternity leave and two weeks paternity leave as before, but, mothers can convert up to 50 weeks of their maternity leave and 37 weeks of their statutory maternity pay into Shared Parental Leave (SPL) and Shared Parental Pay (ShPP), and share this with their partner. Additional paternity leave has been abolished. The new scheme gives parents significant flexibility: they can apply to take time off together or separately, in one continuous period, or discontinuously. Employers will be able to reject some but not all patterns of leave requested. It is important for employers to understand the eligibility requirements. In general terms, the mother or primary adopter must be entitled to some form of maternity or adoption 3
4 entitlement, have given notice to curtail it and must share the main responsibility for caring for the child with the named partner. The TUC estimates that around 40% of working parents will not be eligible because either the mother doesn t have a paid job, or the couple do not meet the requirement of being with the same employer for at least 26 weeks by the end of the 15th week before the due date or adoption match. The next hurdle is the different sets of notice that employees are expected to give curtailment of maternity or adoption leave, notification of eligibility (at least 8 weeks before taking leave) and intention of either parent to take up SPL. This process will be more straightforward if employers have a clearly drafted policy and template notification letters prepared in advance. Possibly the biggest issue facing employers is whether to offer enhanced ShPP and whether it is possible to offer only the statutory provision if they already provide enhanced maternity pay. First of all, the introduction of SPL does not affect existing maternity arrangements. The view of BIS (reflecting European Court of Justice decisions) is that the aims of maternity leave are to protect the mother s biological condition during pregnancy and birth and to protect the special relationship between a woman and her baby. SPL is something different focussed more on childcare. Government advice is that an employer can provide enhanced maternity pay but only statutory pay for SPL, provided that men and women on SPL are treated equally. However, some commentators are saying that there is still a risk of indirect discrimination claims, particularly where an employer has a very generous enhanced maternity pay policy. In those circumstances, it may be more difficult to justify a policy of providing only statutory pay for SPL. In the Tribunal case of Shuter v Ford Motor Company, Ford offered generous maternity leave provisions (up to 12 months full pay) but only statutory additional paternity leave provisions. The Tribunal held that Ford s enhanced maternity pay was justified, as it assisted in recruiting women into the workplace and also enabled them to progress into senior positions. Mr Shuter s indirect discrimination claim was not successful. Ford were able to provide detailed recruitment figures which was key to their ability to justify their policy. There could be further developments to follow but, for now, many employers are taking a wait and see approach and paying statutory pay only for SPL. As well as considering the legal risk of a claim, employers should also think about what they are trying to achieve from a workforce relations perspective. If an employer does not enhance SPL then they are only implementing a father s right to take time off work but not providing any real incentive to do so. Unless there is an incentive for fathers to take time off, take up is likely to be low. The employment team at Bond Dickinson has prepared a set of policy documents and template notification letters to help you implement the new SPL scheme. Please contact Lisa Robertson or Clare Sample if you would like to discuss this or other issues surrounding SPL. Clare Sample Associate Employment T: +44(0) E: clare.sample Claire-Jane Nicol Partner Employment T: +44 (0) E: claire-jane.nicol 4
5 The EAT concluded that employees have a right to receive their normal remuneration when using their statutory holiday entitlement (Over) Time for a holiday One of the current hot topics for employers relates to holiday pay. The general trend in recent case law has been to increase employees rights in relation to holiday pay and thereby increase costs for employers. In particular, a recent ruling by the Employment Appeal Tribunal (EAT) has potentially significant consequences for employers whose employees work overtime. It has long been the case that guaranteed overtime (which the employer is required to offer and the employee is required to work) must be taken into account when calculating holiday pay. The position in relation to non-guaranteed overtime, which the employee must work if requested to do so by their employer, was considered recently by the EAT in the recent case of Bear Scotland. The EAT concluded that employees have a right to receive their normal remuneration when using their statutory holiday entitlement; meaning the pay they would normally receive if they were working. In line with recent European case law, this had to include any payment that was linked intrinsically to the work the employee was required to do. The non-guaranteed overtime worked by the employees in the Bear Scotland case had been worked sufficiently 5
6 regularly so as to form part of their normal pay and, as the overtime work was required by the employer, the EAT was satisfied that there was an intrinsic link to the employees work. As a result, non-guaranteed overtime had to be taken into account when calculating holiday pay. The implications of the case for employers are significant, with the Director-General of the Institute of Directors warning of a holiday pay timebomb. It is estimated that in the region of 5 million UK employees work overtime and the decision also has wider implications, including in relation to shift allowances, standby and call-out payments, and potentially other payments. Another recent decision established the principle that holiday pay must also include an element to compensate employees in respect of commission they would have earned had they been at work, though the commission-related decision is currently being appealed. Case law in this area is still evolving, with some commentators suggesting that further challenges in relation to purely voluntary overtime may also be likely to succeed. As a result, the potential liabilities for employers in respect of underpaid holiday pay could be substantial. Employers should now take steps to establish whether their workforce performs overtime (or receives other payments) regularly or frequently and ensure that holiday pay includes appropriate elements to compensate employees for payments they would have received if they had been at work. Employers may be able to take steps now to limit their historic liabilities, as well as their liabilities going forward. Our employment team is offering a fixed-fee holiday pay audit to help clients determine whether they have any potential liabilities relating to underpaid holiday pay and to help develop a plan for dealing with holiday pay going forward. If you are interested in this fixed-fee service, contact Lisa Robertson or Natasha Robson for details. Lisa Robertson Managing Associate Employment T: +44 (0) E: lisa.robertson Natasha Robson Associate Employment T: +44 (0) E: natasha.robson 6
7 If a contract does not include a force majeure clause then you will be contractually liable for any failure or delay in performance caused by an event beyond your control. When a force majeure becomes a major farce For manufacturers, an interruption in production can quickly escalate into a major supply problem. Many are quick to declare force majeure, and expect that their customers will be patient until the problem is fixed. However, if you do not have adequate force majeure protection in your contracts then you have no legal right to use force majeure as a defence. Why do you need a force majeure clause? A force majeure clause which excuses performance of a contract following the occurrence of certain events (for example, storms, floods, or terrorist activities) is normally considered to be a boilerplate clause and not given very much attention. However, force majeure can be very important to a manufacturer when an unexpected 7 incident occurs which might give rise to an failure or delay in fulfilling contractual obligations. When such an incident arises, manufacturers face unique challenges around the point at which a glitch on the production line becomes a force majeure event and how to deal with customers when that happens.
8 If a contract does not include a force majeure clause then you will be contractually liable for any failure or delay in performance caused by an event beyond your control. The only legal protection will be if the contract is frustrated. However, the threshold to establish frustration is so high that it is not advisable to attempt to rely on frustration alone as a way of being discharged from liability for unexpected events. Instead, a suitably worded force majeure clause should always be inserted. When is an event beyond your reasonable control? Many force majeure clauses apply when an event beyond the affected parties reasonable contract occurs. This will always be a question of fact and will depend upon the specific circumstances of the incident. Where the delay or failure relates to issues in production or logistical issues such as extreme weather causing delays in delivery, you will need to consider whether you could have taken any reasonable steps to avoid the issue. For example, could you have stock piled product to cover any outages? Could you have put in place back up delivery plans or could you have undertaken more routine maintenance of your machinery? How do you deal with it? Presentation is everything. The issues around declaring force majeure can be serious; it could cause irreparable harm to your commercial relationships and reputation. If you seek to rely on a force majeure clause then you must generally use this as a last resort. Look at all of your contracts. Do they specify how and when notice is required, do they specify whether you should apportion remaining product fairly and equitably or are you required to prioritise certain customers? A well drafted force majeure can significantly reduce your contractual liability should an event beyond your control occur. Recommended steps: Check your standard contractual terms contain a force majeure clause. Check the list of examples and obligations included in the force majeure clause; ensure that they cover the issues which could actually affect your business. Tread with caution when issuing force majeure notices take legal advice early in the process to minimise claims for breach of contract. Peter Snaith Partner, Head of chemicals and manufacturing T: +44 (0) E: peter.snaith Sarah Daun Associate Commercial T: +44 (0) E: sarah.daun 8
9 Manufacturing more powers for the Environment Agency? Manufacturers should be aware that enhanced environmental enforcement powers may be on the way. The proposed changes may have slipped under the radar, as they are included in a consultation document, issued by the Department for Environment, Food & Rural Affairs (Defra), primarily focused on the waste industry. The main proposals which are relevant to manufacturers are the ability for the Environment Agency to: suspend an environmental permit where an operator has failed to meet the conditions of an enforcement notice; take steps to remove a risk of serious pollution, whether or not a facility is under a permit; and bring proceedings in the High Court to secure compliance with an enforcement notice without needing to first consider bringing criminal proceedings. The consultation also asked for views on whether proposals to toughen operator competence tests for regulated waste management facilities (including more stringent requirements for technical competence, financial provision and operator performance) should be extended to any other types of regulated activity. Of particular note is the proposal to extend the Agency s ability to suspend an environmental permit. At present, the Agency can only issue a 9 suspension notice where the continued operation of the regulated facility involves a risk of serious pollution. If the proposals go ahead, the Agency would be able to suspend a permit, and therefore the operation of a site, where the conditions in an enforcement notice have not been met. There are strict deadlines for appealing against an enforcement notice. If this goes ahead it will be more important than ever for manufacturers to give prompt consideration to whether the conditions in an enforcement notice are reasonable and feasible in order to decide whether an appeal is necessary. Defra is keen to stress that the proposals should come at no cost to legitimate operators. However, when set against the background of increasing fines for environmental offences (brought about in part by last year s new sentencing guidelines) and a recent increase in sentencing powers for the Magistrates Court, the proposals underline the increasing risks associated with getting things wrong. To minimise these risks, manufacturers should: review the conditions of any environmental permits which they hold to check for any compliance gaps; and take swift advice if the Agency takes any form of enforcement action to ensure all necessary steps are taken to minimise potential disruption to the business. Francesca Hodgson Solicitor Regulatory T: +44 (0) E: francesca.hodgson Stuart Wardlaw Partner Regulatory T: +44 (0) E: stuart.wardlaw
10 The new regulations mean that many more projects will be subject to additional duties. Constructing additional duties for manufacturers The Construction (Design and Management) Regulations (CDM) 2015 came into force on 6 April 2015, replacing the CDM Despite what the name might suggest, this change is relevant to any manufacturers involved in construction work. Construction work is defined widely by the CDM and includes projects involving renovation, redecoration or other maintenance, decommissioning and demolition. Transitional arrangements apply to ongoing projects which began before 6 April, but the key changes to be aware of are: 1. The role of CDM Co-ordinator has been abolished, with a new role of Principal Designer created. This new role should not be confused with the role of Principal Contractor. The Principal Designer must be appointed by the client in writing and is the designer with control over the pre-construction phase of the project. Their duties include ensuring that the design comes together in a way that delivers a project that can be built and used safely, ensuring parties cooperate and coordinating the handover of a safely designed project to the Principal Contractor. The Principal Designer should be appointed from the pre-existing project team rather than appointed as an additional consultant The notification threshold has changed. Going forward, HSE will need to be notified about projects exceeding 500 person days or longer than 30 working days with more than 20 workers working simultaneously. This should reduce the number of notifiable projects. 3. The trigger for additional duties has changed. Now, rather than the trigger being whether a project is notifiable, additional duties are triggered where it is reasonably foreseeable that more than one contractor (including subcontractor) will be working on a project at any time. This means, for example, that a Principal Contractor must be appointed where there is more than one contractor on a project as opposed to when the project is notifiable. 4. Removal of the Approved Code of Practice, which has been replaced by a new guidance document. The new regulations mean that many more projects will be subject to additional duties. Manufacturers should review any planned projects by reference to the wide ranging definition of construction work in regulation 2 of the CDM to ensure that, where required, projects are being planned and delivered in compliance with the new legislation. Francesca Hodgson Solicitor Regulatory T: +44 (0) E: francesca.hodgson Stuart Wardlaw Partner Regulatory T: +44 (0) E: stuart.wardlaw
11 This communication is produced for general information only and does not constitute legal or other professional advice. You should consult a suitably qualified lawyer on any specific legal problem or matter.