Online Update. Essential Information for Employers

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1 Online Update Essential Information for Employers In the News Shared parental leave: for men with "cojones"? Men who believe in equality and look after their children have the "most cojones", according to Nick Clegg's wife. The comment came as the Deputy PM spoke at the launch of Cityfathers, a support group for working fathers, whose research found that one in three fathers in the City takes no paternity leave (or less than the full entitlement) and one in five would like to work more flexibly but is too afraid to ask. A new system of 'shared parental leave' is being introduced in 2015, with the aim of encouraging more fathers to be involved with early childcare. But how will the system work and what can employers do now to prepare? Under the new system: there would be a compulsory maternity leave period of two weeks for mothers but there would then be 50 weeks of 'shared parental leave' which could be shared between the parents as they see fit shared parental leave could be taken simultaneously, in single consecutive blocks or the parents could alternate in small blocks of at least a week each the leave pattern would have to be agreed with the employer, failing which the leave would have to be taken in a single block by either or both parents the first 39 weeks of shared parental leave would be paid at the statutory rate currently payable for maternity leave and the remainder would be unpaid shared parental leave would only be available to parents who have at least 26 weeks' service and adoptive parents, as well as those in a prospective surrogacy arrangement, would be eligible for shared parental leave and pay if they meet the relevant criteria. Maternity and adoption leave will remain available to mothers/adopters who do not wish to take advantage of shared parental leave, and fathers will retain the current right to two weeks' ordinary paternity leave in addition to any shared parental leave taken. The changes will apply to parents with babies due on or after 5 April Employers may wish to start updating their policies now to prepare for the changes and queries from staff. Consideration should also be given to some of the tricky practical issues, such as how requests for flexible leave patterns will be dealt with and whether any enhanced maternity pay will be extended to those taking shared parental leave. Case Watch Restrictive covenants: to honour and obey The employer, a computer service company, lost a customer contract to a competitor. Three employees also resigned and moved to the competitor, to continue working on the contract. However, their old employment contracts contained a 'non-dealing' clause which prevented them from working for any of their former employer's customers for six months after leaving. After they left, the former employer asked them to give an undertaking that they would comply with the non-dealing clause. They initially gave the undertaking to avoid being sued for breach of the non-dealing clause but later withdrew May 2014 shared parental leave could be taken simultaneously, in single consecutive blocks or the parents could alternate in small blocks of at least a week each 1

2 it when their new employer offered to cover the costs of any claim. The former employer then sought a court order to enforce the non-dealing clause and the undertaking given. In response, the employees argued that the non-dealing clause was too wide to be enforceable and they should, therefore, not be required to comply with it or the undertaking. The court refused to enforce the undertaking or the non-dealing clause. The customer contract had already been lost and there was no chance of it being recovered, even if the employees complied with the non-dealing clause. There was therefore no real or useful purpose in an order requiring compliance. However, the court did say that, once someone gives an undertaking, the starting point is that it should be enforced unless that person can show a good reason for the court not to do so. It is relatively common for an employer to ask for an undertaking where there is evidence an ex-employee is using confidential information or breaching a restrictive covenant. The undertaking is a promise to comply with the relevant restrictions in the employment contract in return for the employer agreeing not to sue the ex-employee for breach of contract. As this case highlights, undertakings can give the employer a tactical advantage, as the starting point is that they should be enforced and an employee will have to establish a good reason to get out of them. The same principles would apply where the employee's restrictive covenants and duties regarding confidential information are repeated in a settlement agreement. Another advantage in repeating covenants in an undertaking or settlement agreement is that the employer could revise the covenant to make it more enforceable, eg by slightly reducing the length of the covenant. However, the case also shows that employers must act quickly in these cases a court will not grant an order which has no practical effect, eg where there is very little time left to run on the restrictive covenants. Capgemini India Private Ltd and another v Krishnan and others undertakings can give the employer a tactical advantage TUPE and share sale: buyers beware The shares in a repair and maintenance company were sold when it fell into financial difficulties. After the sale, employees were told that they would move to the buyer's parent and that there would be a programme of integration. An integration team was appointed and the integration process began immediately. The buyer's parent set about imposing major changes to work methods and took over day to day control of the business. The company's original board members resigned and were replaced by nominees of the buyer's parent. A number of employees brought a claim arguing that this was a TUPE transfer and there had been a failure to inform and consult employees or their representatives about the transfer. The Employment Tribunal ruled that there had been a TUPE transfer. Although the sale of the company's shares did not trigger TUPE, day to day control of the company had, in fact, transferred to the buyer's parent. As a matter of fact, there had been a transfer of the business to the buyer's parent at the same time as the sale of the shares. On appeal, the Employment Appeal Tribunal agreed. Normally TUPE does not apply where the shares in a company are bought and the identity of the employer does not change. However, this case shows that in exceptional cases, where the purchaser of the shares also takes over day to day control of the business, there can be a transfer of the business to the purchaser which triggers TUPE. There does not necessarily need to be any formal transfer of assets or employees but a TUPE transfer might happen if, as a matter of fact, the buyer (or a related entity) assumes the day to day running of the business purchased. If such an arrangement is envisaged, there will be a duty to inform and consult employee representatives about the transfer before it takes place. Jackson Lloyd Ltd and Mears Group plc v Smith and others a TUPE transfer might happen if, as a matter of fact, the buyer assumes the day to day running of the business purchased. 2

3 Can employees record disciplinary hearings? The employee, who had worked for a bank, brought claims of sexual harassment, sex discrimination and constructive unfair dismissal following her resignation. Prior to resigning, she had secretly recorded a grievance hearing and a disciplinary hearing which she attended. The recording covered the hearings as well as the private conversations of the panel members. The employee wanted to introduce the recordings as evidence in her Employment Tribunal claims. She claimed that, during a break in the grievance hearing, a manager had said he was deliberately skipping the key issues and, during a break in the disciplinary hearing, another manager had made inappropriate comments of a sexual nature. The Employment Tribunal and Employment Appeal Tribunal ruled that the recordings could be used in evidence. The EAT confirmed that an employee can rely on a recording of a hearing even if it is obtained covertly, without permission. In contrast, a secret recording of the panel's private deliberations would usually not be admitted on public policy grounds. In this case, the comments made during the breaks did not relate to the panel's consideration of the issues and so could be relied on by the employee in the Employment Tribunal. The case is a reminder that employers cannot always stop employees recording disciplinary and grievance hearings or relying on a secret recording in an Employment Tribunal claim. Some employers expressly prohibit employees from recording hearings in their disciplinary and grievance policies. Whilst this may act as a deterrent, it is difficult to police. It is much safer for employers to ensure that any private deliberations are held in a separate room, to avoid being caught on a mobile phone or other recording device secretly left in the hearing room. Punjab National Bank (International) Ltd and others v Gosain Dismissing troublemakers The employee was a pharmacist whose employment lasted just over two weeks before her dismissal. The employee brought an Employment Tribunal claim arguing she had been dismissed for blowing the whistle. She pointed to a number of s where she had raised health and safety concerns and the fact that the pharmacy failed to comply with statutory requirements two of these were sent to all staff and one was copied to a professional standards inspector. A separate dispute arose around the pharmacy's refusal of her request for time off in lieu and her unwillingness to change her working hours. She sent an to the pharmacist manager, copied to all staff, accusing the HR manager of discrimination and bullying. The employer considered her to be irrational and extremely aggressive and dismissed her on the basis of "mutual unsuitability" and breakdown in trust and confidence. The Employment Tribunal ruled that the employee's dismissal was unfair, as she had been dismissed for blowing the whistle. It decided that the employer had resented the fact that she had raised the health and safety issues and compliance with statutory standards. The employer appealed, arguing that it was not the fact she had raised concerns but the manner in which they were raised which led to dismissal. The Employment Appeal Tribunal had considerable sympathy for the employer and said it seemed inherently unlikely the employer would dismiss her for seeking to ensure compliance with statutory requirements and good practice, which was part of her role. However, the EAT felt that the Employment Tribunal was better placed to decide the reason for dismissal and allowed the unfair dismissal ruling to stand. This case is unhelpful as it shows that it can be difficult to dismiss an employee who has blown the whistle, even if there are genuinely independent reasons for the dismissal. Despite the ruling, the comments of the EAT are encouraging as they show that, even where an employee has blown the whistle, an employer might be justified in dismissing if there has been some other misconduct or irrational or aggressive behaviour. Employers in these circumstances should tread carefully, being clear about the reasons for dismissal and taking extra care to ensure that appropriate procedures are followed. The employer will also be in a stronger position if it has a clear whistleblowing policy that encourages employees to raise concerns and ensures that, in practice, concerns are escalated and fully investigated. Blackbay Ventures Ltd t/a Chemistree v Gahir...employers cannot always stop employees recording disciplinary and grievance hearings Employers in these circumstances should tread carefully, being clear about the reasons for dismissal and taking extra care to ensure that appropriate procedures are followed. 3

4 New Law Employment Tribunal early conciliation On 6 May 2014, Acas early conciliation was introduced on a mandatory basis. It has been available voluntarily since 6 April 2014 but anyone wanting to make an Employment Tribunal claim from 6 May 2014 must now notify Acas before issuing the Tribunal claim. Acas will then offer early conciliation to the parties for a period of one month (although this can be extended by up to 14 days by agreement). While contacting Acas is compulsory, participating in conciliation is not either party can decline to participate without any adverse consequences. If either party does refuse conciliation, or conciliation fails to reach a settlement, the claimant will be able to issue the claim in the Employment Tribunal. The time limit for bringing the claim will be put on hold while early conciliation is attempted. Employment Tribunal ET1 Claim Forms and Employment Tribunal ET3 Response Forms have been revised to reflect the new Acas early conciliation process and must be used from 6 May TUPE On 1 May 2014, the time period for a transferor to provide employee liability information to a transferee on a TUPE transfer increased from 14 days to 28 days before the transfer. This applies to TUPE transfers that take place on or after 1 May Immigration: right to work In May 2014, the maximum penalty for inadvertently employing an illegal worker will increase from 10,000 to 20,000. Employers can avoid such penalties if they have carried out prescribed checks on the individual's right to work, by viewing and copying specified original documents before the individual starts work, and at least annually for anyone with a visa. Immigration: sponsorship A change in the immigration rules now means that where the ownership of an employer which is a licensed immigration sponsor changes, the sponsor licence will be revoked. The new owner will have to apply for a fresh sponsorship licence to continue employing sponsored migrants. This means that on a share sale, where the shares of an employer are sold and ownership changes hands, the new owner will have to apply for a fresh sponsorship licence or it will be unable to keep employing any sponsored migrant workers. Previously the employer could continue with the same licence if its shares were sold and the identity of the employer did not change. Now, a fresh sponsor licence application must be made within 28 days of the share sale and the Home Office must be notified of the change in ownership. On 6 April 2014, a number of other changes were made to the immigration rules which affect licenced sponsors. The key changes are: it is now possible to obtain a Tier 2 sponsored visa for an employee which lasts up to five years straightaway. Previously employees could only apply for an initial visa for three years, which then had to be extended to get to five years the minimum salary required to obtain a Tier 2 sponsored visa for an employee has increased from 20,300 to 20,500. The minimum salary required for a Tier 2 Intra Company Transfer visa for longer than 12 months has increased from 40,600 to 41,000 the 'high earner' threshold under Tier 2 has increased from 152,100 to 153,500. For employees earning at least this amount, the employer does not need to conduct a resident labour market test or be satisfied that there are no suitably qualified settled workers before issuing a sponsorship certificate under Tier 2 General and the personal savings thresholds required for workers and their dependants applying for visas will increase. As the required savings must be held for three months before the date of the visa application, the new thresholds will take effect from 1 July anyone wanting to make an Employment Tribunal claim from 6 May 2014 must now notify Acas before issuing the Tribunal claim. 4

5 National minimum wage On 1 October 2014, the national minimum wage will increase as follows: the adult rate (for workers aged 21 and over) will increase from 6.31 to 6.50 per hour the rate for year-olds will increase from 5.03 to 5.13 per hour the rate for year-olds will increase from 3.72 to 3.79 per hour and the rate for apprentices aged under 19 or in the first year of their apprenticeship will increase from 2.68 to 2.73 per hour. Flexible working On 30 June 2014, the right to request flexible working will be extended to all employees with at least 26 weeks' continuous employment. Currently the right only applies to employees who care for a child under the age of 17 (18 if disabled) or a dependant adult. The change may have little impact on employers who already consider all flexible working requests regardless of the reasons. However, some employers may see an increase in requests and have to decide how to best prioritise them. On 30 June 2014, the current statutory process that must be followed to consider a request will also be abolished and replaced with a new general duty to consider requests 'reasonably', in line with a new Acas Code of Practice. Watch This Space Time running out for zero-hours contracts? Zero-hours contracts have been in the press again with Labour leader Ed Miliband proposing restrictions that his party would introduce if it won the next general election. The Government's own consultation on zero-hours contracts concluded on 14 March 2014 and the Government is expected to announce its proposals in the next few months. Amongst the ideas being considered by the Government are: banning exclusivity clauses that prevent workers from working for another employer where there is no guarantee of work improving information and guidance available to individuals about zero-hours contracts and producing a code of practice on the fair use of zero-hours contracts and exclusivity clauses, possibly with model clauses. While there have been calls for much tighter restrictions on the use of zero-hours contracts, the Government has so far recognised a need to balance the rights of workers against the benefits these contracts offer businesses. Calculating holiday pay An important case on whether overtime should be included in holiday pay is due to be heard in the Employment Appeal Tribunal at the end of July As reported in the November 2013 edition of Online Update an Employment Tribunal ruled in Neal v Freightliner Ltd that overtime should have been included in the holiday pay calculation for an employee who regularly worked overtime. Previously, the UK rules on holiday pay have said that voluntary overtime does not need to be taken into account for workers with set working hours. If the Tribunal decision is upheld, the ruling could lead to claims for back-pay for workers whose holiday pay in previous years has not included an element for overtime. Online Update will report developments....some employers may see an increase in requests and have to decide how to best prioritise them....the Government has so far recognised a need to balance the rights of workers against the benefits these contracts offer businesses. 5

6 Our Work Since the last edition of Online Update our work has included: advising a client on its TUPE information and consultation process as the seller of a business in an asset transfer advising a client on structuring an engagement in the best way to argue "selfemployment" status rather than "employment" advising a client around closing two business locations and consolidation into a new site, including collective consultation issues and the impact of the Woolworths case advising a client around its obligations under a Data Protection subject access request advising a client on the UK aspects of a pan-european collective redundancy consultation reviewing a public sector consultancy agreement for IR35 compliance and issues under the Agency Workers Regulations assisting a client to obtain an immigration sponsorship licence and advising on the advertising requirements for a Tier 2 General sponsored visa 6

7 If you have any queries on this edition of Online Update, please contact any member of the Employment Department Partners: Andrew Lilley, Siân Keall, Tim Gilbert, Ed Mills Anna West, Adam Rice, Oliver Jones, Glendon Salter, Ailie Murray, Alice Heatley, Adam Wyman, Christopher Thomas, Charmaine Pollock, Alex Fisher, Jenny Clayton, Xabier Reynoso, James Champness, Will Dixon, David Harford If you have a colleague, or a contact in another organisation, who would like to receive Online Update, please send contact details to employment@traverssmith.com Travers Smith LLP 10 Snow Hill London EC1A 2AL T: +44 (0) F: +44 (0) Travers Smith LLP is a limited liability partnership registered in England and Wales under number OC and is regulated by the Solicitors Regulation Authority. The word "partner" is used to refer to a member of Travers Smith LLP. A list of the members of Travers Smith LLP is open to inspection at our registered office and principal place of business: 10 Snow Hill, London, EC1A 2AL. We are not authorised under the Financial Services and Markets Act 2000 but we are able, in certain circumstances, to offer a limited range of investment services because we are members of the Law Society of England and Wales and regulated by the Solicitors Regulation Authority. We can provide these investment services if they are an incidental part of the professional services we have been engaged to provide. The information in this document is intended to be of a general nature and is not a substitute for detailed legal advice.