Gannons Solicitors 020 7438 1060
London solicitors specialising in the law relating to employment, partnerships/LLPs and company commercial
Snapshot
This articles covers the three main stages of employment:
There are three general types: employees, workers and the self employed.
• Employees – an individual who has entered into or who works under a contract of employment
• Workers – an employee or a person who works under a contract and offers his personal services in return for pay to someone who is not his customer or client e.g. labour-only subcontractors
• Self employed – provide services to customers/clients. They are in business for themselves.
• There cannot be an employment relationship without mutual obligations. For example, the employer pays the employee and the employee does the work his employer gives him.
Recently, courts have been prepared, in cases where they have felt the individual deserved protection, to imply mutuality, e.g. where a company was obliged to provide a specific amount of work each year, but the individual was not obliged to accept it, the court found that the individual, by implication, had to accept or reject offers in good faith, and hence there were mutual obligations.
• The employer must have the right to exercise sufficient control over his employees e.g. what to do, when to do it and how. Highly-skilled employees often have little day-to-day control exercised over them. Here the courts will look for a sufficient framework of control.
• An employee must perform his job personally, e.g. if a person can choose to send somebody else to work in his place, he will generally not be an employee. Some limited right of substitution is not fatal to an employment relationship.
• Other factors include: intention, what the contract says, integration, receipt of benefits and annual leave, subject to discipline, who provides the equipment, degree of financial risk and ability to benefit from improved efficiency.
• The courts’ approach is to gather the facts, step back from them and look at the whole picture.
• Tax: responsibility for deductions for income tax and national insurance contributions lies with the employer.
• Employee rights: written statement of main terms, discrimination, equal pay, unlawful deductions from wages, itemised pay statements, guarantee payments, sick pay, maternity, adoption and paternity rights, parental rights, safe place of work, minimum notice, written reasons for dismissal, TUPE rights, redundancy rights, unfair dismissal, pay during medical suspension, equality for fixed term workers, requests for flexible working, statutory dispute resolution.
• Worker rights: breaks and rest periods, paid annual leave, equality for part time workers, discrimination protection, national minimum wage, trade union activities, whistle blowing rights, accompaniment to discipline and grievance hearings, health and safety rights.
• Self-employed individuals providing personal services: In discrimination claims, an employee includes those who contract personally to provide any work or services. This includes many people who are nominally “self-employed” but who have agreed to carry out work personally. Certain non-workers are therefore protected under discrimination legislation.
It is crucial that equal opportunities are borne in mind during the recruitment and selection process.
It is unlawful to discriminate against prospective employees on the following grounds:
• Race
• Sex
• Religion or belief
• Sexual orientation
• Age
• Disability
The principles to be applied in respect of the first four of the above grounds are broadly similar, but there are particular rules in relation to disability and age discrimination – these are looked at below.
It is unlawful for an employer to discriminate against an employee or applicant for employment on any of the above grounds in the following ways:
• by refusing or deliberately omitting to offer employment;
• by offering inferior terms of employment;
• in the manner of selection or the procedure adopted (for example, the use and wording of advertisements, the sources of recruitment and the way in which interviewing and selection is conducted).
Direct - that is, where an employer acts in a certain way solely due to a particular characteristic, such as the person’s sex or religion; or
Indirect - that is where selection criteria, policies, benefits, employment rules or any other practices, although they are applied to all employees, have the effect of disadvantaging people of a particular age unless the practice can be justified.
• Draw up a job specification outlining essential and desirable qualifications, skills and experience of the ideal candidate.
• Draw up a person specification outlining essential and desirable qualifications, skills and experience of the ideal candidate.
• Ensure that all requirements are legal and justifiable.
• Think carefully about where advertisements are placed and their wording.
• Ensure application forms avoid requests for details which may be viewed as discriminatory. This includes information such as dates of birth, dates of qualifications, questions about marital status/children etc. Avoid asking for photos which may be seen as an attempt at race discrimination.
• Ensure that interviewers are aware of discrimination issues.
• Ensure interviews are structured and fair.
• Implement an equal opportunities monitoring policy – monitor its operation.
• Keep notes and ensure a consistent approach is taken to note-taking.
It can be lawful to discriminate in certain circumstances, in relation to a job for which a particular characteristic is a genuine occupational qualification or requirement.
It can also be lawful to adopt measures to encourage applications from certain under-represented groups.
The Data Protection Act 1998 regulates the use of and access to an employee’s (or candidate’s) private and personal information. The Act is monitored and enforced by the Information Commissioner to whom complaints should be made in the event of a breach, although in certain circumstances, an employee can bring a claim in the civil courts. In the field of recruitment, the following points provide guidance:
• Train those involved in recruitment and selection, making serious data protection breaches a disciplinary offence;
• Only request data about the applicant which is relevant to and necessary for the recruitment process; adverts and application forms must make clear to whom the applicant’s information will be provided and how it will be used.
• Information requested should be relevant to the recruitment decision to be made and proportionate to the position in question. If other information will be required, this should be made clear, together with from whom this information will be sought. Applications should also make clear what checks will be made on any information given. Applications should be kept secure at all times.
• Interview notes should be relevant and necessary to the recruitment process, should be securely stored, and destroyed after a reasonable time (bearing in mind the need to guard against discrimination claims). Interviewers should have Data Protection training.
• Information must be securely stored or destroyed after a reasonable period. Destruction will normally take place after the end of the statutory period for bringing a claim in relation to the recruitment process, unless there is a clear business case for keeping the information for longer, in which case consideration should be given to anonymous the information.
Every employee will have a contract with his or her employer. The contract need not be in writing, as terms can be orally agreed or even implied. To avoid confusion as to the terms of the contract, it is better ensure that written contracts are produced and signed by the parties.
Some terms are implied into all employment contracts. Key implied terms include an employee’s duty to work and to exercise reasonable care and skill and an employer’s duty to pay agreed wages. The implied term with the broadest scope is the duty of mutual trust and confidence. The essence of this duty is that the employee must act faithfully in the employer’s interests, and the employer must treat the employee with respect and not act arbitrarily towards him or her.
Other contractual terms can be imposed, varied or otherwise regulated by statute. Most significant is the statutory minimum period of notice, national minimum wage and an equality clause (regarding equal pay).
All employees within two months of starting employment, must be given written confirmation of certain key employment terms. These terms are:
(1) name of employer and employee,
(2) when employment began,
(3) when continuous employment began,
(4) scale or rate of remuneration or the method of calculating it,
(5) intervals at which remuneration is paid,
(6) terms and conditions relating to hours of work,
(7) terms relating to holidays,
(8) terms relating to incapacity for due to sickness or injury,
(9) terms relating to pensions and pension schemes,
(10) length of notice,
(11) job title or brief job description,
(12) if employment is not intended to be permanent its length,
(13) place of work, or if several the employer’s address,
(14) applicable collective agreements,
(15) certain terms relating to work outside of the UK where employee required to work outside UK for more than a month, and
(16) disciplinary and grievance procedures.
The statement is not a contract or conclusive proof of contract terms.
The statement will inevitably be insufficient in itself to cover all of the terms an employer may wish to apply. Careful consideration should be given to additional terms and policies, e.g. restraint clauses, confidentiality, monitoring, health and safety to name but a few.
As referred to above, employers owe a duty both to employees and other workers not to discriminate unlawfully on the grounds of:
• Sex (including gender reassignment) or marital status (including civil partnership status)
• Race, colour, nationality, ethnic or national origins
• Sexual orientation
• Religion or belief
• Disability
• Age
• Fixed term and Part time status
Common features of UK discrimination law include the following:
• Qualifying service: unlike most unfair dismissal claims, there is no qualifying period of employment necessary in discrimination cases – so a claim can be brought from the first day of employment;
• Compensation: in discrimination cases, this is not subject to a financial cap, and given the complexity of the law, defending cases can be expensive and involve significant amounts of management time.
• Vicarious liability: employers may be held liable for the discriminatory acts of others, particularly where the act in question has been committed by one of its employees in the course of his or her employment. An employer will only have a defence to a claim where it has taken reasonably practicable steps to prevent the discriminatory act taking place.
Direct discrimination occurs where an employer carries out a particular act on the grounds that an employee possesses a certain characteristic. A typical example would be refusing to employ a woman in a job involving heavy lifting because it is “men’s work”; or promoting someone of one racial group rather than someone equally or more qualified from another racial group simply because they belong to that racial group or because they would “fit in” better.
Direct discrimination may be permitted in a limited number of cases where the characteristic is a genuine occupational requirement of the job, for example, working as an attendant in a sports centre changing room, or an Italian waiter working in an Italian restaurant (for reasons of authenticity only).
Indirect discrimination occurs where a policy, provision, practice or criterion is applied, which although on the face of it is neutral, inadvertently puts a specific group at a disadvantage when compared with others. It is sometimes possible to defend a claim of indirect discrimination if the practice etc can be justified. The disadvantage will have to be proportionately balanced against the needs of the employer in running a successful business.
For example, since the majority of those who work part-time are women, a practice of not employing part-timers will be indirectly discriminatory against women, unless the practice can be justified – this would probably only be achieved by demonstrating that the job genuinely cannot be done on a part-time or job-share basis.
Victimisation occurs where an employee has been treated less favourably as a result of alleging in good faith that he or she has been discriminated against for because he/she has taken certain steps such as bringing proceedings under the discrimination legislation.
For example, if a gay employee alleges that his employer has discriminated against him and is subsequently dismissed, he may claim that he has been victimised.
Harassment is subjecting a person to unwanted conduct on the grounds of their gender, race, disability, sexual orientation, or religion or belief, where this has the purpose or effect of violating that person’s dignity or creates an intimidating, hostile, degrading or offensive environment. The use of inappropriate language, ostracising an employee or excluding him or her from communal activities, or physically or emotionally tormenting him/her because of a particular characteristic, are all examples of harassment. In some circumstances, harassment is a criminal offence.
The Equal Pay Act 1970 implies an equality clause into every employment contract so if any term in a woman’s or man’s contract is or becomes less favourable than a similar term in a respective man’s or woman’s contract, the less favourable term will be made as favourable as the other term.
Also, where the woman/man’s contract does not include a beneficial term that is included in the man/woman’s contract, the woman/man’s contract will be amended to include such a beneficial term.
This applies where the woman and the man are undertaking like work (work is of the same or a broadly similar nature and any differences are not of practical importance in relation to the performance of the employment contract), work rated as equivalent (in terms of demands made on the worker in relation to various headings – e.g. effort, skill, decision making, responsibility) or work of equal/greater value (in terms of demands the job carries, e.g. effort, skill and decision).
It is possible to defend equal pay claims. A claim in respect of work of equal value will fail if a job-evaluation assessment has concluded that the work is not of equal value. Like work and equivalent work claims can be defended if the difference in pay or benefits is genuinely due to a material factor other than gender.
There must be an actual comparator to bring an Equal Pay claim, so a particular individual must be identified. Hypothetical comparators are not permitted.
Disability discrimination is different to the other categories of discrimination.
“Disability” is defined as a physical or mental impairment which has a substantial and long-term effect on the employee’s ability to carry out day-to-day activities. Certain conditions like cancer, multiple sclerosis and HIV automatically qualify as a “disability”.
Unlike other categories of discrimination, determining who falls within the definition of “disabled” is not straightforward.
Disability discrimination falls into the following categories: direct discrimination (discriminating against someone on the grounds of their disability), disability-related discrimination (discriminating against someone for a reason related to their disability), harassment and victimisation.
An employer also has a duty to make reasonable adjustments to its premises, the employee’s job or terms of employment, or any other “arrangements” concerning the employment relationship where the disabled employee would otherwise be at a substantial disadvantage when compared to a non-disabled employee. If an employer fails to make a reasonable adjustment, it may be discriminating against the disabled employee.
The Employment Equality (Age) Regulations 2006 introduced on 1st October 2006 represent one of the biggest changes in UK employment law for decades.
Their scope is massive because it potentially affects everybody and unlike other forms of discrimination, not just people possessing a particular characteristic. It protects young and old workers alike.
To summarise the key characteristics:
• Upper age limits on unfair dismissal and redundancy have been removed.
• There will be a national default retirement age of 65, making compulsory retirement below 65 unlawful unless objectively justified.
• Employees will have the right to request to work beyond 65 or any other retirement age set by the company. The employer has a duty to consider such requests.
• There are limited circumstances when discrimination may be lawful:
- Unlike other forms of discrimination, both indirect and direct age discrimination can be justified, although in practice, it will be difficult to justify direct age discrimination.
- The genuine occupational requirements exception will be available as will positive action
- Enhanced redundancy payments (based on age)
- National minimum wage (see below)
- Retirement.
A fixed-term employee has an employment contract that is due to end when: (1) a specific date is reached; (2) a specified event does or does not happen; or (3) a specified task has been completed.
Fixed-term employees have the right not to be treated less favourably than comparable permanent employees, and to become a permanent employee if they have served under successive fixed-term contracts.
A comparable permanent employee is employed by the same employer to do the same or broadly similar work and who works or is based at the same establishment as the fixed-term employee in question.
If a fixed-term employee believes that he is the subject of unequal treatment, he can request the employer to give reasons for the alleged less favourable treatment. The employer should reply in writing within 21 days. Adverse inferences can be drawn from a failure to reply without a reasonable excuse, and from evasive or equivocal answers.
Unequal terms can be justified by an employer if the unequal treatment is a necessary and appropriate means of achieving a legitimate business objective.
If a fixed-term employee’s contract is renewed or re-engaged after at least 4 years of continuous employment, it will take effect as if the contract was a permanent one, unless the employer can justify the fixed-term status on objective grounds.
Remember: the ending of a fixed term contract is a dismissal and procedures will need to be followed (for more on dismissals, see below).
Part-time workers have the right not to be treated less favourably than comparable full-time staff. The comparator must be employed under the same type of contract as the part-time worker, carrying out the same or broadly similar work and work or be based at the same establishment as the part-time worker.
In determining whether a worker has been treated less favourably than a full-time comparator, the pro rata principle must be applied unless it is inappropriate. This principle means that, where a comparable full-time worker receives or is entitled to receive pay or any other benefit, a part-time worker is to receive not less than the proportion of that pay or other benefit that the number of his weekly hours bears to the number of weekly hours of the full-time comparator.
Part-time workers should therefore be given pro rata entitlement to benefits such as pay, annual leave, maternity leave and parental leave. For example, where full-time employees working a five-day week are contractually entitled to 25 days' paid holiday a year, an employee who works three days a week will be entitled to 15 days' paid annual leave.
Sometimes the part-time worker can claim equality with terms he used to enjoy if either he has transferred to part-time work or is returning to part-time work after absence.
As most part-time workers are women, employers should also be aware of rules prohibiting indirect discrimination (see above).
Unequal contract terms for part-timers can be justified by an employer on objective grounds.
Part-time workers also have the right not to be subject to a detriment due to their part-time status.
If a part-time worker believes that he is the subject of unequal treatment, he can request the employer to give reasons for the alleged less favourable treatment. The employer should reply in writing within 21 days. Adverse inferences can be drawn from a failure to reply without a reasonable excuse, and from evasive or equivocal answers.
The law protects employees from having unauthorised deductions made from their wages. An employer may be able to lawfully deduct from an employee’s wages if the employment contract expressly allows the deduction, prior written consent to the deduction is given, statute or court order requires the deduction, or the employee has refused to perform all of their duties.
Wages is defined as wider than just salary, and includes bonuses, holiday pay, and luncheon vouchers. It does not include (amongst others) expenses or pension payments.
It will not be an illegal deduction from wages for an employer to recover an overpayment of salary. The employer is therefore not prevented from deducting the overpayment from future wages or salary provided that this is done reasonably over a period of time and not done in such a way as to amount to a breach of trust and confidence in the employment relationship.
In practice, the employer will recover the overpayment, and the employee will then have to make a legal claim to attempt to claim the money back, showing 3 things:
1. it must be shown that the overpayment is the fault of the company and not the employee;
2. it must have been reasonable for the employee not to know that they were being overpaid; and
3. the employee must have irrevocably acted to their disadvantage on the assumption that the payment of salary was correct (for example, by spending the money).
Pregnant employees are entitled not to be subjected to any detriment nor to be dismissed because they propose to exercise or have exercised any rights provided under family-friendly legislation. Any such dismissal will be automatically unfair and could also amount to sex discrimination.
Pregnant employees are entitled to take up to 26 weeks’ leave (Ordinary Maternity Leave – “OML”), starting at the earliest in the 11th week before the expected week of birth, and the latest on the day after birth. Employers must not allow employees to work in the 2 weeks after the date of birth, if they are entitled to OML.
In order to exercise the right to take maternity leave, a woman must notify her employer by no later than the end of the 15th week before the expected week of childbirth (the “EWC”) of:
• the fact she is pregnant
• the EWC
• the date on which she intends to start maternity leave.
Within 28 days of receiving notification, the employer must write to the employee notifying her of the end date of her leave. The notified date of commencement can be changed by the employee giving 28 days’ notice. OML will commence automatically if the baby is born early or the employee has sickness absence due to pregnancy during the last four weeks before the EWC.
Additional Maternity Leave (“AML”), which is unpaid, is available to an employee who qualifies for OML. This is an additional 26 weeks after OML. Employees who intend to return before the end of AML must give 8 weeks’ notice.
Employers are allowed to make “reasonable contact” with an employee on (or adoption) leave.
Pregnant employees also have the right to time off for antenatal care classes. This is subject to certain conditions, e.g. the classes must be made by appointment on a GP/midwife/health visitor’s advice. An employer can refuse a request for time off, if it is reasonable to do so.
Adoptive parents’ right to leave are similar, but not identical, to the maternity leave provisions and the employee must have been employed for 26 weeks when notified of the adoption in order to qualify for Ordinary Adoption Leave. Paid adoption leave (which is the same level as statutory maternity leave) can be taken by either “adopter” but not both, although the adopter’s partner may be entitled to take “paternity leave” (regardless of gender).
An eligible employee whose wife or partner gives birth is entitled to take one or two weeks’ paternity leave after the child’s birth provided it is completed within the first 8 weeks after the date of the child’s birth. To be eligible, the employee must have completed 26 weeks’ service at the end of the 15th week before the EWC.
There will in future (not before April 2008) be an additional paternity leave of up to 26 weeks.
During OML and paternity leave, all terms except pay continue. Subject to complying with the notification requirements, a woman who has been continuously employed for at least 26 weeks by the end of the 15th week before the EWC (and who earns above the lower earnings limit for National Insurance purposes) will be entitled to receive statutory maternity pay (“SMP”) during OML. All or most of SMP, depending on the amount of the employer’s total National Insurance Contributions, can be recouped from the Government.
SMP is paid for 39 weeks and starts on the same day as OML. SMP amounts to 90% of the woman’s salary for the first 6 weeks and currently a flat rate of £123.06 per week for the next 20 weeks. Adoption pay works in the same way. During AML (and Additional Adoption Leave), the contract continues, but most terms are suspended.
An employee on maternity or adoption leave is also entitled to work up to 10 Keeping In Touch days during the leave without losing SMP.
Paternity pay is also paid at a flat rate of £123.06 per week.
Employees who have been employed by their employer for at least a year have the right to take unpaid parental leave to care for a child for whom they are or expect to be responsible for. The right lasts until the child’s 5th birthday (or 18th birthday if the child is disabled), or for 5 years from placement if the child is adopted. Being “responsible” means mothers, a father married to the mother at the time of birth or adoption, those who have responsibility through a formal agreement or a court order, and a father registered on the birth certificate.
Caring for a child probably includes spending more time with young children, accompanying a child during a hospital stay, and checking out new schools. The duration of parental leave is limited to a total of 13 weeks for each child, or 18 weeks for disabled children, e.g. if an employee takes 3 weeks’ leave and then changes employer, he will be entitled to a further 10 weeks' parental leave in relation to the child, not 13 weeks. The Regulations state that leave can only be taken in one-week blocks, unless a Workforce Agreement provides otherwise.
If an employer has not agreed the procedure to apply to Parental Leave requests, statute provides a fallback procedure to deal with matters such as evidence of entitlement, notice and periods of leave, and the employer’s ability to postpone leave in certain circumstances.
Certain contractual provisions continue during parental leave (similar to the rights of a woman on AML), and an employee who takes parental leave for 4 weeks or less is entitled to return to the job in which they were previously employed. If leave of more than 4 weeks is taken, the same applies unless it is not reasonably practicable for the employer to permit this, where the employee is entitled to return to a job which is suitable and appropriate.
Employees have the right in certain circumstances to take time off unpaid to deal with unforeseen events concerning dependants. The right is to a reasonable amount of time off to take whatever actions are necessary to deal with the unforeseen event. This is to provide assistance where a dependant falls ill, gives birth or is injured or assaulted; to make arrangements for a dependant who is ill or injured; time off when a dependant dies; time off when there are unexpected disruptions to or the ending of care arrangements for a dependant; or to deal with an incident concerning the employee’s child that occurs unexpectedly at school.
Dependants are classified as spouses, civil partners, children, parents and people living in the employee’s household (but not employees or tenants).
The employee must inform the employer of the reason for absence as soon as reasonably practicable. Unless this cannot be complied with until the employee returns to work, the employee must also tell the employer how long they expect to be absent. If the employee does not properly notify the employer, the right to take time off is lost.
Employees with children aged up to an including 16, or under 18 if disabled, have a right to request of their employer in certain circumstances, flexible working. To be eligible, the employee must have worked continuously for the employer for 26 weeks and have responsibility for a child under the age of 6 or a disabled child under the age of 18. Only one application can be made every 12 months. The request can only be for changes in working hours, working times and/or working from home and any change is a permanent one, with no right to revert back to the old working pattern.
The employer must give the request proper consideration, and can only reject a request on specific grounds. These include: burden of additional costs, detrimental effect on ability to meet customer demands, inability to re-organise work among existing staff.
There is a set procedure for the employee to make and for the employer to deal with the request.
If an employer fails to comply with the specified procedure, or refuses the request for a reason other than one of the specified reasons, or bases a decision to reject the application on incorrect facts, an employee can present a claim to an Employment Tribunal. A tribunal can make an order requiring the employer to reconsider the matter and/or make an award of compensation of up to 8 weeks’ pay. A refusal to permit flexible working may also amount to indirect sex discrimination.
There are limits on average weekly working time and night work, and rules requiring daily and weekly rest periods and annual holidays.
Rules relating to working time may not apply to workers or may only partially apply to workers if they (1) have unmeasured or partially measured working time, (2) work shifts or (3) work in certain industries, e.g. air, road, rail and sea. Further rules can be partially exempted if it is required for flexibility, continuity or other special reasons, or where there are group agreements.
Further specific provisions apply to night workers where at least 3 hours of the worker’s normal working day are carried out between 11.00pm and 6.00am.
Unless he/she opts out in writing (opt outs can be rescinded by the worker on a maximum of 3 months’ notice), a worker’s weekly working hours, including overtime, must not exceed an average of 48 hours each week. Unless agreed otherwise, the average is normally calculated over any 17 week period, although it is possible for a group agreement to extend this period to up to 52 weeks.
Workers are entitled to weekly, daily and in-work rest breaks. Daily rest comprises 11 consecutive hours in a 24 hour period, weekly rest comprises 24 hours in a 7 day period, and in-work rest comprises 20 minutes where daily working is more than 6 hours.
An employee’s right to annual leave is usually regulated by his or her contract of employment. However, the Working Time Regulations 1998 set out minimum requirements under which every “worker” has the right to take a minimum of 28 days’ paid leave in each leave year, which can include public and bank holidays. This right applies to temporary workers, home workers and many contractors, particularly in the construction and hospital industries, who are not genuinely self-employed.
Under the Regulations:
• Holiday accrues during the first year of employment at the rate of one-twelfth of the annual entitlement on the first day of each month.
• Leave may not be carried forward
• Except in the year of termination, an employer cannot pay in lieu of untaken leave. Leave taken in excess of a pro rata entitlement cannot be reclaimed by an employer without a specific contractual right to do so.
• There are rules as to how a worker may give notice of intention to take leave and how an employer may refuse a leave request.
Workers must not be paid less than the appropriate national minimum wage (NMW). Workers include agency and home workers.
Current rates are:
• £3.53 for 16-17 year olds (not apprentices),
• £4.77 for 18-21 year olds, and
• £5.73 for those aged 22 and above (the “adult minimum wage”).
Included in the calculation is pay (including overtime), bonuses, commissions, tips and gratuities paid through payroll and amounts in relation to accommodation. Not included, are salary advances or loans or benefits in kind other than an allowance for accommodation. Neither list is exhaustive.
Although the age brackets are, on the face of it, age discrimination, the Government has created an exemption to the Age Regulations such that employers can pay employees in the adult minimum wage group more than those in the 18-21 group doing the same job as long as the 18-21 group is paid less than the adult minimum wage. Employers will also be able to pay the 18-21 group more than those under 18 as long as the under-18s are paid less than the adult minimum wage.
Special rules exist to calculate the rate paid to salaried and time workers, output workers and unmeasured time workers.
Employees employed for at least a year have the statutory right not to be unfairly dismissed.
There are also several other categories of unfair dismissal for which there is no minimum period of employment and for which dismissal is automatically unfair, including:
• Pregnancy, maternity, paternity or parental leave
• Health and safety reasons
• Asserting or trying to enforce a statutory right
• Whistleblowing
• Shop and betting workers who refuse to work on Sundays.
Compensation for unfair dismissal consists of 2 elements:
• Basic award: equivalent to a statutory redundancy payment and based on the employee’s salary, age and length of service (maximum £10,500 from 1 February 2009);
• Compensatory award: compensating the employee for his or her actual losses, principally his or her loss of earnings (maximum £66,200 from 1 February 2009). Note: there is no cap for certain kinds of unfair dismissal such as dismissals related to whistleblowing)
If an employer wants to fairly dismiss an employee:
(1) the reason for the dismissal must be one of the five reasons the law recognises as fair (capability / conduct / redundancy / continued employment would contravene statute (“illegality”) / some other substantial reason);
(2) a fair process must be followed and it must have acted reasonably in dismissing the employee for the selected reason. Employment tribunals will consider whether, in the circumstances (including the employer’s size and administrative resources), it acted reasonably in treating the reason as a sufficient ground for dismissing the employee.
If an employee succeeds in showing that the reason for dismissal is an automatically unfair reason, the employer does no even get the chance to show it acted reasonably.
Prior to the introduction of the ACAS Code on 6 April 2009, almost any type of dismissal was potentially covered by the statutory dismissal and disciplinary procedures (SDDPs), but there were complex regulations governing which procedure applied and when they might be excluded. The new regime only applies to disciplinary matters (including misconduct and poor performance).
The consequences of failing to follow the correct procedure are different under the new regime. The key differences include the following:
There are numerous examples of misconduct during employment. For example, disobeying a lawful and reasonable instruction, dishonesty, fighting, sexual harassment, absence without permission, poor timekeeping or any other breach of contract or work rules.
Some acts of misconduct may justify immediate (or “summary” dismissal) without notice where they amount to fundamental breaches of contract, such as theft, violence or refusal to carry out reasonable instructions. Less serious acts may not justify immediate dismissal and the employer may well be acting unfairly if clear warnings are not given – particularly where the rule alleged to have been breached was not clear.
In either case, an employer must follow a fair procedure. If the dismissal is not immediate, this will involve investigating the allegations and holding a disciplinary hearing at which the employee should have the opportunity to state his or her case and put forward any arguments in mitigation to reduce the penalty. Any warning should give the employee a clear indication of what standards are expected and what the consequence of a further breach of discipline will be. If the dismissal is immediate the procedure is modified but even a day’s delay is likely to be too much in order to dismiss immediately.
Dismissals for reasons of capability usually fall into two categories:
(1) poor performance or incompetence – either where the employee has not met the requirements of the job or where he or she fails to develop the new skills required to do a job;
(2) inability to do the job due to ill health.
In the case of poor performance, other than in cases of gross incompetence, an employee will need to be told where their performance is falling short and what improvements are expected. Training should be considered if appropriate and a reasonable time frame should be set for review to allow the employee a reasonable opportunity to improve. An employee should be warned that if he does not improve, dismissal could follow.
In the case of ill health, an employer should consider the following:
• Medical investigation: where there is a long period of absence, or there has been an injury that could prevent the employee from carrying out his or her job, the employer will need to gain an understanding of the employee’s medical condition. It may be necessary to approach the employee’s GP or specialist to obtain a report – for which there is a prescribed statutory procedure.
If an employer is faced with short-term intermittent absence, it will not likely be worth carrying out an investigation, and it may be necessary to treat the matter as one of misconduct. Beware however of stated symptoms which could indicate a condition or disability recognised by the Disability Discrimination Act 1995 (“DDA”).
• Alternative employment and reasonable adjustments: where the employee is unable to return to his or her old job, the employer will need to think about whether any alternative employment is available or whether a reasonable adjustment can be made to the existing job which would enable the employee to return to or continue in work. Any failure to do so is likely to be found to be unreasonable, making the dismissal unfair.
If the employee has a long-term disability that affects his or her ability to carry out normal day-to-day activities (or suffers with a “deemed” disability such as cancer or ME), dismissing him or her for a reason connected to his or her disability, or failing to consider reasonable steps to prevent him or her from being at a substantial disadvantage will amount to disability discrimination.
“Reasonable steps” can include: transferring some duties to another employee, acquiring or modifying equipment or allowing the employee to be absent for treatment during working hours or altering work routines to provide adequate breaks.
• Consultation: While considering reasonable adjustments and alternative employment, an employer will need to consult with the employee to determine whether there are reasonable prospects of a return to work. Such discussions can reveal new facts and circumstances of which the employer was unaware. If no suitable work is available and there is no reasonable adjustment that can be made to ease the employee’s return to work, the employer may dismiss on notice.
The employer must also consider whether the employee should be allowed an ill-health retirement as an alternative.
This situation exists where an employer’s requirements for employees to do work of a particular kind has ceased or diminished, or is likely to cease or diminish in the immediate future. This could cover shut down of one of several locations of the employer, or the introduction of new equipment meaning fewer employees are required to do the same amount of work.
Even where a redundancy situation clearly exists, an employee dismissed for redundancy will still have a valid claim (but generally only if employed for at least 1 year) if a fair procedure is not followed. Depending on the number of employees dismissed for redundancy and the timing of those dismissals, a collective process will have to be followed, and notice will have to be given to BERR.
An employee who is dismissed for redundancy, and who has been employed at least for 2 years, will be entitled to receive a statutory redundancy payment, calculated with reference to the employee’s age, length of service and weekly wage. The maximum amount payable is capped (currently £10,500 from 1st February 2009).
Before dismissing an employee for reasons of redundancy, an employer should consider the following:
• Selection: where redundancies are made from a pool of employees doing the same or similar jobs, an employer must act fairly in choosing who is to be made redundant. Objective criteria must be used, and this is often done by using a matrix in which points are awarded to employees for a range or criteria, selection based on the number of points scored. Such criteria may include absence records, disciplinary records, performance and skills. The often-cited concept of “last-in first-out” is better avoided since the introduction of age legislation as it can be seen to be indirectly discriminatory against younger people.
• Individual consultation: this is critical in all cases before the final decision to dismiss is taken, even if the decision seems inevitable. Employees should be warned that their selection is “provisional” subject to hearing any comments they may have. The employee should be furnished with information on why the redundancy is taking place, why they have been selected, what the redundancy package would be and that they have a right to appeal against the decision.
• Alternative employment: Always during the consultation process, an employer should be considering whether there are any suitable alternative roles which a potentially redundant employee could take. If alternative employment is available, it does not have to be on the same terms and conditions.
Again, it is imperative that procedures are followed, and given the sensitive nature of a redundancy, it is often wise to hand the letter provsionally selecting the employee to a potentially redundant employee at an initial consultation meeting.
It is also justifiable to dismiss an employee because to continue to employ him or her would breach another law. Each case must be looked at on its own facts however, and the circumstances will be reviewed to judge whether dismissal was a fair step to take.
A final fair reason is that of SOSR. This encompasses reasons not neatly falling into other categories, and covers instances of business reorganisation where for example, the duties of employees are reallocated without a reduction in the number of employees (such that it is not a redundancy) but may still amount to a dismissal for SOSR. Again, the employer must still show that it acted reasonably in treating that reason as a sufficient reason for dismissal.
Unless guilty of gross misconduct, each employee is entitled to receive a minimum period of notice. This starts at one week for employees employed for at least a month, and then rises to 2 weeks’ notice when 2 years’ employment has been reached, followed by a further week for each further year’s service up to a maximum of 12 weeks. If the employment contract gives less notice, the statutory minimum will apply, but if the contract provides for more notice, the greater contractual period will apply.
A right to receive written reasons for dismissal within 14 days of a request for such exists for all employees who, with a few exceptions, have been employed for at least a year, if the employee has been dismissed (with or without notice) or where a fixed term contract has come to an end without being renewed under the same contract.
Following the termination of employment, most obligations and liabilities associated with the employment relationship cease, but certain obligations are capable of continuing to bind either or both parties to the employment relationship. For example, all current and former employees are subject to an implied contractual term not to use or disclose information if it amounts to a trade secret. This term survives termination of the contract of employment and, in principle, the obligation is of unlimited duration (unless the information loses its confidential character). Information that does not amount to a trade secret however should be protected by the employer imposing an express contractual term on employees requiring them to maintain confidentiality both during and after employment.
Employers are able to protect their business by imposing restrictions on an employee’s activities after termination of employment. The following contractual clauses are typical of those imposed by employers and are specifically designed to outlive the termination of the employment contract:
• Non-compete
• Non-poaching (of former fellow employees)
• Non-solicitation (of former clients)
• Non-dealing (with former clients)
The courts however, will not uphold a covenant that is considered to be an unreasonable restraint of trade. The burden of proof is on the employer to demonstrate that any covenants that it seeks to enforce are reasonable and necessary in order to protect a legitimate interest of the business. In particular, a covenant must be no greater than is necessary in terms of its:
• Scope: it should only relate to matters with which both the employer and employee are or were directly concerned during the course of employment;
• Duration: it must not last too long;
• Geographical area: it must not apply to a wider area than is reasonable.
Covenants such as these must be drafted carefully to ensure that they do not go further than is necessary and subsequently be found by a court to be unreasonable and unenforceable. As a general rule, the more extensive a covenant is, the less likely a court is to allow an employer to enforce it.
It must also be noted that a person who is in breach of contract cannot rely on other terms of the contract. An employer who for example breaches the implied duty of trust and confidence or who fails to give an employee sufficient notice of termination will not then be able to rely on the post-termination restraint of trade clauses.
In conclusion, there are a wealth of employment law matters to consider when recruiting employees and drafting employment contracts. In addition, there are ongoing issues such as discrimination, maternity and paternity leave and flexible working to consider during employment. At the point of termination, there is a need to carry out a fair dismissal procedure and review of any restrictive covenants.
Based in Holborn we serve clients in the West End, City, Covent Garden as well as other areas of London, the UK and internationally.
This paper is designed to provide a summary of the issues addressed. Therefore, it is not intended as a detailed commentary on the relevant law and any comments made should not be acted upon without first taking specific legal advice.
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