What's new in the Autumn?

The following changes in legislation relevant to employers will come into force in October and November 2008.

New National Minimum Wage rates

From 1 October, the new national minimum wage hourly rates will be:

· Workers aged 22 and over: £5.73
· Workers aged 18 to 21: £4.77
· Workers aged 16 and 17: £3.53

Conflicts of interest

The provisions of the Companies Act 2006 dealing with directors' conflicts of interest come into force on 1 October. For more information see our e-bulletins of 3 September and 30 September.

Changes to maternity and adoption rights

For employees whose babies are due on or after 5 October changes to the Sex Discrimination act mean that there will no longer be any distinction between Ordinary Maternity Leave (OML) and Additional Maternity Leave (AML) in relation to pregnancy or maternity discrimination.

Employees who are due to give birth or adopt on or after 5 October will also, by virtue of the Maternity and Parental Leave Etc and the Paternity and Adoption Leave (Amendment) Regulations 2008, have the right to enjoy the same terms and conditions during AML and additional adoption leave (AAL) as during ordinary maternity and adoption leave. This means that the right to receive non-pay benefits such as company car and accrual of contractual holiday pay and to accrue seniority and length of service will now continue during AML and AAL. For more information on the changes see our recent employment bulletin. There is an exception for pension and some other employment-related benefit schemes which will continue during AML only for so long as employees receive statutory or contractual maternity pay. For more details see our recent pensions bulletin.

Statutory sick pay for agency workers

The Fixed Term Workers Regulations will be amended from 27 October so that agency workers on contracts of three months or less will be entitled to receive statutory sick pay.

Immigration

Tiers 2 and 5 of the new points based migration scheme will come into force on 18 November. Tier 2 applies to skilled workers filling a gap in the UK market. Employers wishing to employ a Tier 2 worker will need to apply for a sponsor license. The Borders and Immigration Agency has produced Codes of Practice to assist employers sponsoring Tier 2 workers and revised guidance on sponsor applications. Tier 5 applies to individuals travelling temporarily, primarily for non-economic reasons.

03 October 2008

Compulsory retirement capable of being justified

The Advocate General, in his opinion on the age discrimination case between Heyday and the Secretary of State for Business Enterprises and Regulatory Reform, has paved the way for retaining the UK default retirement age of 65.

Heyday (part of Age Concern) has brought a case challenging the legitimacy of certain aspects of the Age Discrimination Regulations 2008, alleging that the UK government has failed to properly implement the Equal Treatment Directive.

The Advocate General has now issued his opinion, in which he states that it is not unlawful to include a rule in national legislation permitting employers to dismiss an employee at 65 or over, provided it can be objectively and reasonably justified by reference to legitimate aims. In coming to his opinion, the Advocate General followed the ECJ decision in the recent Palacios case and so this aspect of his decision is not surprising. He also dismissed the second part of Heyday's challenge by confirming Equal Treatment Directive permits justification of both direct and indirect discrimination on grounds of age.

Impact on employers

The Advocate General's opinion is not binding upon the ECJ, but provides assistance to it in reaching its decision, which should be issued in a few months' time. If the ECJ follows the Advocate General's opinion, the case will then return to the High Court for determination. Whilst the decision is being seen as a victory for the UK government, it will still have to show in the High Court proceedings that the compulsory retirement provisions of the Age Discrimination Regulations can be objectively justified by reference to legitimate aims relating to employment policy and the labour market.

In the meantime the 260 or so claims for age discrimination relating to compulsory retirement currently pending before UK employment tribunals will continue to be put on hold.

Regardless of the outcome of these proceedings, the government has committed to reviewing the default retirement age before March 2011, when it is possible that it could be abolished altogether.

03 October 2008

Equal pay update

Employment tribunal statistics show that in 2007/2008 the Employment Tribunal Service received more claims for equal pay than for any other type of employment claim. While most of the claims lodged have been against public sector employers, the private sector may well start to experience similar claims. There have recently been a number of important developments relating to equal pay, in relation to collective agreements, pay protection and TUPE.

Collective agreement cannot justify discriminatory practice

In British Airways v Grundy, the Court of Appeal has held that discrepancies in pay between a claimant and her male comparators could not be justified simply by demonstrating that they had arisen as part of a collective bargaining agreement.

Impact on employers

In its judgment, the Court of Appeal made it clear that negotiators must be alive to the possibility that differentials arising from collective bargaining may be detrimental to employees of one gender. If they overlook this possibility and it results in an equal pay, they cannot then seek to justify the pay differentials and defend equal pay claims by reference to the collective agreement.

Pay protection schemes unlawful

The Court of Appeal has held that pay protection arrangements put in place by local authorities discriminated against women and could not be justified (Bainbridge v Redcar & Cleveland Borough Council and Surtees v Middlesbrough Borough Council).
The local authority defendants in these cases had carried out job evaluation studies and, through negotiation with trade unions, had graded staff onto a single pay structure. The purpose behind these agreements was to eradicate historical pay inequalities between men and women.

Inevitably, under the new structure, there were employees who received pay rises (mostly women) and others who were subject to pay cuts (mostly men). Pay protection arrangements had been put in place to cushion the impact on those receiving cuts by retaining their existing levels of pay for a year and then reducing their pay to the lower rates in stages over a further two to three years. It was mainly male staff who benefited from the pay protection arrangements as, historically, the female dominated posts had been paid less than their comparators.

The female claimants argued that the pay protection arrangements were unlawful as they unfairly protected the male dominated posts' pay and continued the pay discrimination against them.

The Court of Appeal accepted that discriminatory pay protection arrangements could be justified, but in these circumstances they were not. The employer's knowledge of the discrimination, their motive and intention were not relevant in deciding whether the arrangements were discriminatory, but were factors that could be taken into account in deciding whether the arrangements were justified.

Impact on employers

Not all pay protection schemes will be discriminatory but, where they are, employers will need to be able to justify them. The justification threshold is a high one and the employer needs to be able to show that the pay protection scheme corresponds to a real need and is an appropriate way of achieving their objectives and necessary to do so. An employer is more likely to be able to justify a pay protection arrangement where it has considered all the options and formed a business case, having calculated the costs of increasing female pay as opposed to simply "red-circling" male pay.

Transferee's liabilities for equal pay

The Employment Appeal Tribunal, in Sodexo Limited v Gutridge & North Tees & Hartlepool NHS Foundation Trust has held that, following a TUPE transfer, a transferee can be liable for the transferor's equal pay breaches.

This case involves employees who had been transferred from their NHS Trust employer to Sodexo. Some five years after the transfer they raised equal pay claims against Sodexo in relation to pre-transfer equal pay liabilities. Their comparators were male maintenance assistants who also worked at the hospital, but who had not transferred to Sodexo.

The EAT held that equal pay claims relating to the period prior to the transfer do transfer under TUPE to the transferee employer. However, the time limit for bringing such a claim is six months from the date of the transfer and in this case the employee's claims were out of time. They could therefore not recover back pay relating to the period prior to the transfer on this occasion.

However, the EAT went on to say that the equality clause implied into every contract of employment by the Equal Pay Act "bites" as soon as there is a case of an equal pay - there is no need for a legal ruling. As a result, at the time of the TUPE transfer the claimants had a contractual right to be paid at the same rate as their male comparators. This contractual right transfers under TUPE, putting the transferee under a continuing obligation to honour its terms. The claimants could therefore enforce the right to higher pay against Sodexo. The time limit for claims of this nature is six months from the end of the employee's employment with the transferee.

Impact upon employers

This may seem a harsh result for new employers who will face liability for historical equal pay claims even though they do not arise for years after a transfer.

Even where a transferee is able to obtain details of the pay structure as part of a due diligence exercise, it is unlikely to have sufficient detail to enable it to identify equal pay breaches that could potentially give rise to a claim. Where possible, transferees should seek warranties dealing with equal pay compliance and indemnities against such claims, particularly where equal pay is a live issue in the sector of industry in which they are operating.

New ACAS guide to job evaluation

In light of the increasing number of equal pay claims, employers may be interested in ACAS' new guide to job evaluation. ACAS considers that employers will be less vulnerable to equal pay claims if they implement job evaluation schemes. The guide considers the benefits and risks of undertaking job evaluation and explains how a job evaluation risk analysis should be established and implemented so that the employer can decide whether they should undertake a job evaluation scheme in their particular business.

03 October 2008

No right to legal representation at disciplinary hearings

The High Court has upheld an employer's express term preventing legal representation at an internal disciplinary hearing. The implied term of trust and confidence cannot be used to overrule such an express term in the circumstances and refusal to allow legal representation does not amount to a breach of the employee's human rights.

In the case of Kulkarni v Milton Keynes Hospital NHS Trust, following allegations by a patient that Mr Kulkarni had examined her inappropriately, the Trust suspended Mr Kulkarni and commenced disciplinary proceedings.

The Trust's disciplinary policy expressly excluded anyone acting in a legal capacity from accompanying an employee to a disciplinary hearing. Mr Kulkarni demanded the right to be accompanied by a legal representative during his disciplinary proceedings, as his entire professional career potentially rested on the outcome. The Trust declined to allow legal representation and the High Court has upheld the Trust's express term. The express term did not breach the rules of natural justice and allowed no scope to imply a term that the employee could be allowed legal representation. The Court also considered that Article 6 of the European Convention on Human Rights (the right to a fair trial) did not require employees to be allowed legal representation at internal disciplinary hearings.

Impact upon employers

This case endorses the approach of employers who do not wish to allow legal representation at internal hearings. Employers should consider amending their disciplinary policies to make it an express term that legal representation will not be allowed, if their policies do not already say so. Employers should however remain alive to the need to take into account individual circumstances when applying their disciplinary policies, in particular when dealing with employees who may be disabled for the purposes of the Disability Discrimination Act and for whom it may be necessary to make reasonable adjustments.

03 October 2008

Springboard injunction granted following mass staff defection

In the case of UBS Wealth Management (UK) Limited v Vestra Wealth LLP, the High Court has granted a springboard injunction against the newly formed Vestra Wealth LLP which had poached a large number of UBS staff. The terms of the injunction prevent Vestra from poaching clients of UBS or any more of its employees until a full trial of the issues.

Mr Scott, a former senior employee of UBS, left the company to found a new company, Vestra. He persuaded a large number of employees to join him in his new company, with 52 staff resigning on the same date in May and further 23 leaving to join his company in the new few weeks. UBS investigated the circumstances and came to the conclusion that Mr Scott and four other senior employees has acted together and in secret persuade staff to leave and that the four senior employees had co-ordinated defections while still employed by UBS. UBS therefore asked the Court for a springboard injunction to prevent Vestra from benefiting unfairly from the breaches of contract and conspiracy that it believed had occurred.

The four senior managers and Vestra sought to defend the injunction on the basis that it was Mr Scott, who was free of restrictive covenants at the time, who had masterminded the whole thing. However, the Court found that it was "inherently unlikely" that this was this case and that this was strengthened by evidence of transcripts of telephone conversations showing that Mr Scott had not acted alone. The staff had not left individually, but en masse after secret planning. This was an obvious breach of the employees' duties of loyalty and fidelity. The Court therefore came to the conclusion that UBS was extremely likely to be able to prove at trial that the poaching had constituted a breach of fidelity and lawful conspiracy and therefore the balance of convenience test led them to grant the springboard injunction.

Impact upon employers

This decision shows that it is possible to obtain springboard relief in relation to any breaches of contract by departing employees and not just misuse of confidential information. A springboard injunction can be sought if an employee's earlier breach of contract has given him a head start in competition with his former employer. This was a rather extreme case, and distinguished in part by the unusual amount of evidence available to UBS. It does, however, illustrate the trend that courts are becoming more willing to grant injunctions to protect employers' legitimate business interests. It also demonstrates the legal pitfalls involved in trying to organise team moves.

03 October 2008

Consultations

The government is currently consulting on the following:

Extension of the right to request flexible working

Following the Walsh Review, the government announced that it intends to extend the right to request flexible working hours to parents of children aged 16 and under. The consultation paper was published in August and also considers the best way to simplify and reduce the administrative burden on businesses. The government estimates that the new measures will benefit around 4.5 million employees and will translate into 300,000 additional requests to work flexibly each year. Any business wishing to respond to the consultation should do so by 18 November.

Consultation on proposals to amend the European Works Council Directive

The government is consulting upon proposed amendments to European Works Council Directive. The amendments seek to increase the number of European Works Councils and to improve the setting up and operation of European Works Councils. The consultation runs for 4 weeks and closes on 6 October.

Request for time off for training

The UK government intends to introduce the right to request time off to train for employees in England in 2010. Its consultation on this right closed in September. The Scottish government has now issued a consultation paper seeking views on extending this right to Scotland. The consultation closes on 31 October.

03 October 2008