Age discrimination

A year after the Employment Equality (Age Discrimination) Regulations 2006 (“Age Regulations”) came into force, there have been over a 1000 claims and a lot of speculation over their effect. Although there has not been any comprehensive guidance from case law yet, two high profile decisions came out in October 2007.

In Bloxham v Freshfields Bruckhaus Deringer, the Employment Tribunal ruled that law firm Freshfields’ changes to its pension provisions were indeed discriminatory on the grounds of age, but that they were objectively justifiable and therefore not in breach of the Age Regulations. Freshfields only had a finite pot to divide between partners and retired partners and made the changes to the otherwise unsustainable scheme after extensive consultation. This will be of some comfort to employers faced with unworkable pension schemes.

The charity Heyday has challenged the retirement age of 65 in the Age Regulations, claiming it is contrary to the European directive on age discrimination. However, the European Court of Justice’s ruling in the separate case of Palacios de la Villa v Cortefiel Servicios may have pre-empted the outcome of Heyday’s challenge. In Palacios, a Spanish law allowing compulsory retirement ages was justified under the directive because it had a legitimate aim of expanding employment opportunities. This suggests that the Age Regulations’ retirement age will be justifiable.

Annual leave

From 1 October 2007, statutory holiday entitlements increased from 4 to 4.8 weeks per year. Most full-time workers will therefore be entitled to a minimum of 24 days. The increase will be phased in gradually for holiday years starting at various times during the calendar year, and employers can check their employees’ entitlements using the calculator at www.businesslink.gov.uk. From 1 April 2009, the entitlement will increase again to 5.6 weeks, equal to 28 days for most full-time workers. Employers can still agree additional holidays in their employee contracts.

Directors’ service contracts and duties

Employers, especially public companies, should ensure they have a system in place for complying with the new provisions relating to directors’ service contracts and duties introduced by the new provisions of the Companies Act 2006. These came into force on 1 October 2007.

The definition of a director’s service contract has been widened and includes contracts of services (employment contracts), contracts for services (such as consultancy contracts) and letters of appointment, and applies to shadow directors. All such contracts must be available for inspection by shareholders at the registered office during their term and for 12 months afterwards. Shareholders must approve service contracts of over two years (formerly five years). The prohibitions on paying directors’ remuneration free of income tax or agreeing to make adjustments for changes to income tax were repealed earlier this year, on 1 April 2007.

As regards the new statutory directors’ duties, companies should particularly have regard to the duty to promote the success of the company, including considering the impact of the company on the community and environment. The company should ensure there are procedures in place for documenting consideration of and compliance with these duties. References to the duties could be incorporated into directors’ service contracts.

Data protection

The Information Commissioner’s Office issued guidance in September 2007 to assist small and medium sized organisations in ensuring compliance with the Data Protection Act 1998 (“DPA”) (available at www.ico.gov.uk). The Code focuses on avoiding accidental breaches by staff. However, it is also a helpful reminder to the employer to ensure it has a co-ordinated policy for compliance in place, bearing in mind that it will be responsible for holding and processing personal information subject to the DPA when recruiting, during employment and afterwards. Employers should consider setting up a system for monitoring compliance with their policy, giving responsibility for the DPA to a senior human resources manager and training their staff.