Unfair dismissal qualifying period: increase to affect new joiners only

The Department for Business, Innovation and Skills (BIS) has informally stated that the planned increase in the qualifying period for unfair dismissal from one to two years will only apply to those starting employment on or after 6 April 2012, according to Practical Law Company. 

If confirmed, this would mean that there is no advantage to be had by employers postponing any pending dismissals of employees who currently have 12-22 months' service until after 5 April, but some may wish to consider delaying recruitment plans until after this date. 

Parental leave: changes delayed to March 2013

Under EU law, unpaid parental leave (available to parents of children under 5) must be increased from the current 13 weeks to 18 weeks by 8 March 2012, or one year later if this is necessary "to take account of particular difficulties" in implementation.  According to Acas and other sources, BIS has confirmed that it will use the additional year's grace in order to accommodate ongoing work to address flexible working policies and parental leave provision as part of the Modern Workplaces initiative, so the extension will now come into force in the UK in March 2013. 

Collective redundancy threshold: possible challenge to meaning of establishment

A recent tribunal decision could form the basis of an appeal challenging the concept of "establishment" for the purposes of the collective redundancy threshold.  A successful appeal could mean that the duty to inform and consult applies to more multi-site employer redundancies.

The obligation to inform and consult on collective redundancies only applies if an employer proposes to dismiss at least 20 employees at one establishment within a 90 day period. Previous EAT case law has established that this is incompatible with the EU Collective Redundancy Directive, which applies the threshold to dismissals at different establishments, but that the incompatibility cannot be cured with a purposive interpretation. 

ECJ caselaw has interpreted "establishment" to cover small business units, even if they are not geographically separate, do not have legal, economic, financial, administrative or technological autonomy, or do not have their own management capable of independently making redundancies.  The rationale is the ECJ's desire to maximise the number of situations covered by the Directive, as the cases have come from Member States which have chosen to use the alternative threshold in the Directive based on the percentage of employees in an establishment - the smaller the establishment, the more likely the percentage threshold is met.  However, this interpretation of "establishment" has the opposite effect in the UK, as illustrated by the recent tribunal decision that Woolworths stores were separate establishments, thereby taking a number of them out of scope of the duty to consult.

Employers should keep a close eye on any appeal in this case.  The EAT authority on interpretation made it pointless for the tribunal to refer the incompatibility issue to the ECJ, and the tribunal also felt bound by the ECJ case law on the meaning of establishment (albeit in a different context).  If appealed, the EAT may be able and willing to take a different approach.  (USDAW v WW Realisation 1, ET)

The case is timely, given that the Government is currently seeking evidence on whether a statutory definition of "establishment" would be helpful.

Statutory holiday: public sector workers can rely directly on EU directive 

The ECJ has ruled that Article 7(1) of the Working Time Directive providing a right to 4 weeks' leave has direct effect.  This means that public sector workers should be able to enforce their EU-derived holiday rights directly, regardless of how the UK regulations are interpreted. 

This is significant given the uncertainty over whether UK law can be construed in accordance with the EU position on carry-over of holiday by sick employees.

The ECJ ruling also lends support to the view that the EU caselaw on carryover need only apply to the minimum 4 weeks' leave, and not to the additional 1.6 weeks provided by UK law.  This is the position seemingly taken by the government in its current proposals to amend UK working time law, but contrasts with the approach taken by a recent tribunal in Adams v Harwich International Port, which held that sick workers can carry over all 5.6 weeks' statutory holiday to the next leave year.  (Dominguez v Centre informatique du Centre Ouest Atlantique, ECJ)  

Repeated renewals of fixed term contract: justified if for recurring temporary cover

EU law requires the repeated use of fixed term contracts to be objectively justified.  In Great Britain employees who have been continuously employed for four years or more on a series of fixed-term contracts are automatically deemed to be permanent unless the employer can justify the continuing use of fixed-term contracts on objective grounds.

The ECJ has ruled that it may be justified to continue to use a fixed term contract for employees providing temporary cover for others on leave, even where (due to its size) the employer might need to employ temporary replacements on a recurring basis such that the replacements could have been given contracts of indefinite duration.  In contrast, the renewal of a fixed-term contract to cover permanent rather than temporary needs cannot be justified. The number of fixed-term contracts that the employee has worked under for the same employer and those contracts' cumulative duration will be a relevant factor in deciding the issue of justification. (Kücük v Land Nordrhein-Westfalen, ECJ) 

48 hour working week: employers can rely on reasonable policy to refuse overtime to non-opted out employees

It is lawful for employers to adopt a reasonable policy of refusing overtime to employees who have not opted out of the 48 hour maximum working week.  This is not unlawful detriment on the ground of refusing to sign an opt out, according to a recent EAT decision. 

The reason for refusing the overtime was to enforce a reasonable policy aimed at complying with working time law, and not because of the claimant's refusal to sign the opt out. 

The EAT was bound by the tribunal's finding that the employer's policy was reasonable.  It is perhaps this element of the decision which might not be followed in future cases, given that in practice the claimant's hours were nowhere near the working time limit.  The assumed reasonableness of the policy was a critical part of the EAT's reasoning. (Arriva London South v Nicolaou, EAT) 

Disability: employers may need to make reasonable adjustments to a practice even if it does not apply directly to disabled employees

The EAT has confirmed that employers should consider reasonable adjustments to policies or practices which do not apply directly to disabled employees but which have an indirect effect on them. In this case the practice of other employees hot-desking affected the claimant because it meant that the desk dedicated for his use was not always free at the start of his shift. (Roberts v North West Ambulance, EAT) 

TUPE: payments for loss of pension rights should be separated out from payments to continue in employment

The Court of Appeal has confirmed that payments to employees on a TUPE transfer made partly to compensate for the loss of pension rights and partly as an incentive for the employees to work willingly and without industrial action were fully taxable as employment income.

If a payment has arisen at least in part from the employment, then it is taxable as employment income even if there was another reason such as to compensate lost pension rights (which, if it were theonly reason, would mean a different tax treatment). Employers should therefore expressly split any such payment between the various grounds so that each part can be taxed appropriately. (Kuehne + Nagel Drinks Logistics Ltd, Stott and Joyce v HMRC, CA) 

Compromise agreement: scope of legal fees indemnity

Where a compromise agreement includes an indemnity for legal fees incurred in "any administrative, regulatory, judicial or quasi-judicial proceedings" as a result of holding the job, this does not cover fees incurred in criminal proceedings relating to the ex-employee's personal wrongdoing. While this is a helpful decision for employers, it remains prudent to draft such indemnities tightly to ensure they accurately reflect the parties' intentions. (Coulson v Newsgroup Newspapers, HC). 

Employment status: university sponsorship contract not employment

A contract under which a company sponsored a student's university course and provided paid 'industrial training' during holidays did not amount to an employment contract because the primary purpose of the arrangement was training and not employment.  (GE Caledonian Ltd v McCandliss, EAT) 

Discrimination: voluntary commitment to anonymous CVs

The use of anonymous CVs was mooted by the Liberal Democrats in their election manifesto and proposed as an (ultimately unsuccessful) amendment to the Equalities Bill.  This month saw over 100 of Britain's leading companies backing a new deal designed by Nick Clegg to increase social mobility by making the process of getting a job fairer, including the use of CVs or application forms that are name-free and do not include details of the applicant's educational establishments.  Best practice employers may wish to consider adopting a similar practice.

Executive remuneration: Government outlines proposals

The Government has given its outline response to its consultation on executive remuneration published in September last year (see our Herbert Smith corporate e-bulletin 2011/266 for more details).

The response was set out in a speech given by the Secretary of State, Dr Vince Cable, on 24 January (having been confirmed in a similar ministerial statement made in Parliament on 23 January). The Government has also published a summary of the responses received to the September 2011 discussion paper.

There is as yet no detail beyond these statements, and the proposals are still subject to detailed consultation before regulations can be put forward. Dr Cable stated that BIS will be consulting "in coming weeks" to take these proposals forward. It is not currently clear when any of the proposals would be brought into force.

The Government's proposals to tackle the issues they have identified in relation to executive remuneration fall into four areas:

Greater transparency - The Government is proposing that remuneration reports should be split into two sections. The first section of the report will set out the company's proposed future pay policy and should explain why specific benchmarks were used, how employee earnings and employees' views were taken into account when structuring the policy, how performance will be assessed and the performance criteria for bonuses. Any exit payment arrangements will also need to be disclosed. The second section of the report will detail how the pay policy was implemented over the last year and should include details on how pay awards relate to the company's performance and outline how executive pay compares with other distributions made by the company (for example dividends, taxation and its general wage bill).

Increased shareholder power - The route favoured by the Government is to give shareholders a binding vote on the company's future pay policy and making any directors' notice period longer than one year and any exit payments of more than one year's basic salary subject to shareholder approval. The Government wants to consult on whether the requisite shareholder approval level for the binding vote on future pay should be 50% or 75%. Shareholders would also vote on the implementation of the pay policy over the last year, as they currently do through their advisory vote on the remuneration report. The Government accepts that there would be problems if this latter vote was made a binding vote but wants to explore what sanctions could be applied if the resolution receives a significant number of votes against. The Government also wants the Financial Reporting Council to consult on amending the Governance Code to require all large public companies to adopt clawback mechanisms so that pay can be clawed back in the event that performance "has not lived up to expectations".

Reform of remuneration committees - The Government is proposing that executive directors should be prevented from being members of remuneration committees of other large companies. It wants to see more diverse boards and, for example, mentions that more needs to be done in the drive to increase the number of women on boards. The Government also wants companies to be more transparent about their arrangements with remuneration consultants.

Developing best practice - The final proposal is for a High Pay Centre to be established, to be headed by the chair of the High Pay Commission, which will work to monitor board pay.

New resources

  • Acas has published new guidance for employers on dealing with issues arising from the 2012 Olympics.