Employment Law Update - September 2007

In this issue…

October legislative changes

• Holidays
• New discrimination commission
• NMW
• Flexible working
• Directors' duties
• Racial & religious hatred
• Data protection

Data protection

• New guidance on meaning of "personal data"

Unfair dismissal

• Dismissal at request of third party
• Employer responsible for employee's incapacity may still dismiss fairly

Collective redundancy

• 17 compulsory + 3 voluntary redundancies = 20 = collective consultation provisions triggered

ICE

• First penalty notice for failure to inform and consult

Sick pay

• Meaning of "pay" for employer's sick pay scheme

October legislative changes

The following legislative changes effecting employers come into force in October:

Statutory holiday entitlement - 1 October

The amount of holiday to which workers are entitled under the Working Time Regulations 1998 is due to increase from four weeks to 4.8 weeks from 1 October 2007. This will mean 24 days for a five day a week worker. A further total increase to 5.6 weeks will come into force on 1 April 2009. For workers whose holiday year does not start on 1 October, their holiday entitlement will increase by a proportion of the total increase.

The provisions relating to the first four weeks' paid holiday will remain largely unchanged. With regard to the additional 0.8 rising to 1.6 weeks, some additional flexibility is provided. The new extra days may, by agreement, be carried forward into a subsequent holiday year. Also during the transitional period up to 1 April 2009 only, the employer can buy out the additional days.

To assist employers with calculating the new statutory holiday entitlement which for most employers will come into effect part way through a holiday year, the DBERR have published a holiday entitlement ready reckoner and also a frequently asked questions guide.

New discrimination commission - 1 October

The single equality body, the Commission for Equality and Human Rights (CEHR) is established on 1 October. The CEHR will subsume the work of the Commission for Racial Equality (CRE), the Disability Rights Commission (DRC) and the Equal Opportunities Commission (EOC), and will also have responsibility for the 'new' equality areas of age, religion or belief and sexual orientation.

National minimum wage (NMW) - 1 October

The NMW hourly rates from 1 October will be:

• Standard adult rate, for workers aged 22 or over: £5.52 (currently £5.35).
• Development rate, for workers aged between 18 and 21: £4.60 (currently £4.45).
• Young workers rate, for workers aged under 18 but above the compulsory school age that are not apprentices: £3.40 (currently £3.30).

The accommodation allowance under regulation 36 of the NMW Regulations will also rise from £4.15 a day to £4.30 a day. This is the sum that will count towards the NMW if accommodation is provided as a benefit in kind. If accommodation is provided but the employer charges for it, any excess above this figure must be deducted from the worker's gross pay when calculating whether the worker has received the NMW.

Flexible working - 1 October

On 1 October, the definition of 'adopter' is extended to those who are adopting a child, where the child has not been placed with those adopters by a UK adoption agency.

Directors duties - 1 October

The majority of the provisions of the Companies Act 2006 relating to the codification of director's duties come into effect on 1 October including:

• Duty to act within powers
• Duty to promote the success of the company
• Duty to exercise independent judgment
• Duty to exercise reasonable care skill and diligence

In fulfilling the duty to promote the success of the company the director must, amongst other things, have regard to the interests of the employees.

Racial and religious hatred - 1 October

On 1 October a new criminal offence of stirring up hatred against a person on the grounds of their religion is introduced, which is punishable by a fine or a prison sentence of up to seven years. The offence applies to the use of words or behavior which are threatening and intended to stir up religious hatred, that is hatred against a group of people defined by reference to their religious belief or lack of belief.

While the act is not limited to the field of employment and creates a criminal rather than civil offence, an act of religious discrimination in the workplace could also amount to an offence under the act. Where a body corporate is guilty of the offence and "it is shown that the offence was committed with the consent or connivance of a director, manager, secretary or other similar officer" then both that individual and the body corporate are guilty of the offence.

Data protection - 24 October

The last remaining provisions of the Data Protection Act 1998 come into force. Manual filing systems in existence before 24 October 1998 are now required to comply with the Data Protection Directive.

Data protection

ICO publishes new guidance on personal data

The Information Commissioner's office (ICO) has issued a new 21-page technical guidance note, "Determining what is personal data". This explains and illustrates the Information Commissioner's view of what is "personal data" for the purposes of the Data Protection Act 1998. Note while the guidance is persuasive, it does not carry force of law before the courts.

The guidance is available at http://www.ico.gov.uk/ and provides many examples to illustrate circumstances when data relates to an identifiable, living individual, particularly in circumstances where it is not obvious whether data falls within the definition. It does not cover the meaning of "relevant filing systems", on which the ICO intends to issue further guidance in the near future.

Unfair dismissal

Dismissal at request of third party

In Greenwood v Whiteghyll Plastics Limited, the Employment Appeals Tribunal (EAT) reminds employers that, while pressure from a third party is capable of justifying an employee's dismissal as amounting to "some other substantial reason", an employer must consider whether and to what extent there would be any injustice to the employee, as a result of being dismissed, and any steps that could be taken to alleviate that injustice. When assessing whether an injustice will result from a dismissal in such circumstances, an employer should consider factors such as:

• How long it had employed the employee.
• Whether or not the employee's work was in fact unsatisfactory.
• The difficulties the employee may face in obtaining new employment.

When considering steps it can take (given its size and administrative resources) to alleviate that injustice, employers should:

• Investigate the situation with the third party to see if it can be resolved without the need to remove the employee.
• Look for an alternative role for the employee that does not involve contact with that third party, or provide training to relocate them within the employer's business.

While an employer faced with a client refusing to allow an individual to work on their account is placed in a difficult position, they still need to properly investigate the matter and consider alternatives short of dismissal. And, as ever, ensure the dismissal is procedurally fair, including compliance with the statutory dismissal procedures.

Employer responsible for employee's incapacity may still dismiss fairly

The Court of Appeal in McAdie v Royal Bank of Scotland, has endorsed the EAT's approach in finding that an employer could fairly dismiss an employee for ill-health capability, despite the fact that the employee's stress-related illness was attributed to the conduct of the employer. The case concerned the fairness of a dismissal where the employee had been on long-term stress-related sickness absence for some 15 months, caused by bullying and mismanagement at work, and there was no prospect that she would be able to return to work.

In particular the Court of Appeal held:

• the fact that the employer has caused the incapacity in question, however culpably, does not preclude it from fairly dismissing the employee
• the real question is whether the employer acted reasonably "in all the circumstances" - and the circumstances include the fact that the employer was responsible for the original absence
• where the employer is responsible for an employee's incapacity, it should normally be expected to "go the extra mile in finding alternative employment for such an employee, or to put up with a longer period of sickness absence than would otherwise be reasonable".

On the facts of this case, the tribunal had found that there was nothing more the bank could have done to try to save Mrs McAdie's employment leaving no alternative to dismissal. So, on one hand, a tribunal will not ignore the fact that an employer caused the ill-health, on the other, the fact that an employer has caused the incapacity, however culpably, cannot prevent it from ever effecting a fair dismissal. In such cases, an employer will need to ensure that it has considered whether it has "gone the extra mile" before proceeding with a dismissal.

Note - this case concerned unfair dismissal. An employee who has been injured as a result of as breach of duty may (depending on the circumstances) have other claims such as breach of contract (implied term of trust and confidence); under the tort of negligence for breach of the employer's duty of care resulting in personal injury; or for breach of a statutory duty placed on an employer. The EAT had pointed out that tribunals should not let sympathy for the employee lead to the granting of compensation for unfair dismissal, for what is in fact compensation for injury.

Collective redundancies

17 compulsory + 3 voluntary redundancies = 20 = collective consultation provisions triggered

An employer proposing to make collective redundancies is required to consult in advance with representatives of the affected employees. A collective redundancy situation arises where twenty or more employees are to be made redundant at one establishment within a period of ninety days or less.

The EAT in Optare Group v TGWU is a useful reminder to employers that voluntary redundancy will count as a "dismissal" where it occurs in response to a proposal by the employer to effect redundancies.

In this case, the employer originally intended to make 19 redundancies. The employer called for volunteers and also carried out redundancy selection process. The employer accepted three volunteers for redundancy and crucially, made 17 persons assessed as a result of selection exercise compulsorily redundant. The employer tried to argue that they did not need to count the three voluntary redundancies and therefore avoid triggering the collective consultation requirements. Nice try, but the tribunal and EAT both confirmed that where an employer in an existing redundancy situation has issued an invitation to employees to volunteer for redundancy, those who do so must be counted in the total number of proposed redundancies.

Remember voluntary redundancies fall within the count for triggering the collective consultation requirements.

ICE

First penalty notice for failure to inform and consult

The EAT in Amicus v Macmillan Publishers Limited has awarded the first penalty for a breach of the Information and Consultation of Employees Regulations 2004 (ICE Regulations). The penalty was awarded following the Central Arbitration Committee (CAC) declaration that Macmillan were in breach of the regulations in failing to hold a ballot to elect employee information and consultation representatives.

In fixing the penalty, the EAT set a sum which would "deter others from adopting what can only be described as the wholly cavalier attitude to their obligations that has been demonstrated by [Macmillan]". The EAT considered that, although Macmillan's was not "the most serious breach of these obligations which might be envisaged", it was "nonetheless a very grave breach affecting many employees" and awarded a penalty of £55,000 out of a maximum of £75,000.

Macmillan did not completely ignore the employee request it received, but thought that it could rely on its existing arrangements for employee consultation and continue to implement local agreements on a site-by-site basis. MacMillan's approach to implement local agreements on a site by site basis is acceptable and once all sites are covered such agreements may count as pre-existing agreements under Regulation 8(1). However, this case highlights that if a formal employee request is submitted before "pre-existing agreements" have been concluded at every site, the whole negotiating exercise must effectively be started again from scratch, following the procedures and timescales laid down for negotiated agreements in the regulations.

Note from 6 April 2008 the ICE regulations will be extended to employers with 50 or more employees.

Sick pay

Meaning of "pay" for employer's sick pay scheme

Contractual sick pay schemes are commonly provided by employers offering a contractual right to enhanced sick pay which generally makes up the difference between the statutory sick pay figure and normal pay for a fixed period of time in any given year.

But what is meant by "pay" in the context of an employer's sick pay policy? The answer is straight forward for an employee who works regular set hours. But what about employees whose hours regularly vary above a stated minimum guarantee? This is the questioned recently answered by the EAT in Beattie v Age Concern.

In this case, Mrs Beattie had a guaranteed minimum of 15 hours per week. But, for over ten years and from the outset of her employment Mrs Beattie worked over thirty hours each week. Under the company sick pay scheme, she was entitled to six months full pay followed by six months half pay. When she was off work due to a long-term illness, a dispute arose as to whether her sick pay should be based on 15 hours per week, being the guaranteed contractual hours or her normal weekly hours which, although variable, regularly exceed just over 30 hours a week.

In this case, the EAT held that the tribunal had been wrong to find that "pay" meant the 15 guaranteed hours, instead the tribunal should have looked at what had actually been Mrs Beattie's weekly hours as agreed with her line manager. Accordingly, the sick pay should be based on a weekly average of 30 hours. The EAT found that the parties would not have contemplated "pay" relating to the minimum guarantee, rather than to the hours actually worked. This was particularly relevant in relation to the operation of a sick pay scheme which was designed to support an employee, by the "continuation of the money upon the basis of his liabilities have been contracted and upon which his economic life depends".

This whole dispute could have been avoided had Age Concern more carefully drafted their sick pay policy. Employers are under no obligation to offer enhanced sick pay in the first place as there is no automatic presumption that employees are entitled to their normal rate of pay when off sick. Age Concern could have specified in their scheme that for the purposes of the sick pay policy "pay" would be based on the employee's minimum guaranteed hours. It is always important for an employer to ensure that the terms of any sick pay policy are clear and that, where appropriate, a method for calculating any payments to be made to employees under the policy are clearly specified. This is particularly important where an employee works variable hours. The lesson for employers is that when drafting contractual terms - always take care!

Checklist:

A contractual sick pay scheme should be set out in the employee's contract of employment or a separate sickness policy (Section 1 Particulars of Employment requirement) and clearly state:

1. If the policy is discretionary;
2. Any qualifying period of service and how that is to be calculated;
3. The period for payment;
4. How "pay" is calculated for the purposes of contractual sick pay, particularly where employees work under flexible arrangements;
5. Any requirements for medical evidence;
6. Any excluded conditions;
7. That any SSP received will be deducted from their contractual pay entitlement;
8. Any provision for recouping contractual sick pay where the employee's absence is due to third party negligence and the employee successfully recovers damages from the third party.