Organisations are regularly faced with grievances or allegations of wrongdoing that need prompt and thorough investigation. Getting it wrong can result in costly claims and damage to an organisation’s reputation. Here are our key points to consider for employers conducting investigations as part of a formal HR process:
Policy and procedure – identify (and be clear about) the HR policy and procedure you are following (especially if there are potential overlaps). For example, if an employee raises a grievance which deals with wider regulatory matters, will this be dealt with under your grievance and/or whistle-blowing procedure? Ensure that policies and procedures are applied fairly and consistently
Appoint an appropriate investigator – ensure independent investigators with sufficient expertise, training and experience are appointed. An investigator will typically be of certain seniority. Always consider whether an external investor (such as a law firm) might be more appropriate, especially where the subject matter is particularly sensitive and/or involves senior level employees
Scoping and framework – set out a clear scope and framework for the investigation. In particular give thought to the allegations/matters being investigated, what format the findings should take, and whether the investigator is to make any recommendations to the decision maker. Individuals involved in investigations should clearly understand their role and remit. However, remember things can change and the scope and framework might need to be updated
Confidentiality – ensure matters are dealt with as confidentially as possible. Only share matters to those who need to know and consider whether information can be shared in a more limited away (for example, just providing relevant extracts of documents rather than the whole thing)
General factors – for employers to remember and relay as applicable:
interrogate the evidence and always look for corroboration
understand the burden of proof to be applied (“case to answer” for investigations and “balance of probabilities” for hearings and decisions).
ensure decisions are made on facts and evidence and not speculation
keep careful paper trails and accurate notes
make sure everyone is aware that drafts of the investigation report could become disclosable in legal proceedings. The language and the tone of the report and any recommendations should also be appropriate
if an investigation touches upon criminal or regulatory matters, consider whether there is any need to make an external report.
Download our workplace investigations factsheet
Organisations are regularly faced with grievances or allegations of wrongdoing. Getting it wrong can damage an organisation’s reputation and result in costly claims.
Uncover the proposed amendments to the Employment Rights Bill
3 December 2024
News
After seven weeks of consultations and discussions, the Government has this week tabled a 53-page Amendment Paper to its landmark Employment Rights Bill (we have summarised the Bill here). The proposed amendments are wide ranging, with some significant reforms hidden amongst other more standard administrative changes. Whilst most of the proposals have been put forward by the Employment Rights Minister, Justin Madders, there are also contributions from several non-Labour MPs. It is unlikely that any of those opposition-led amendments will pass into law, but they certainly provide a useful indication of the perceived shortcomings of the Bill as it currently stands. By contrast, there is a strong likelihood that most, if not all, of Labour’s own proposals will pass into law.
Of those proposals, the headline amendment is the extension of the time limit for bringing claims in the Employment Tribunal. The limit has been stretched from 3 months to 6 months for all Tribunal Claims, giving employees much more time to enforce claims against their employers. Though significant, this amendment is not altogether surprising. It was included as one of several commitments in Labour’s Plan to Make Work Pay earlier this year, and it builds upon the general employee-friendly stance that Labour appears to have taken in recent months.
At this stage, it is not quite clear what impact the extended time limit will have. On the one hand, it could give prospective claimants more time to pursue a resolution with their employer outside of the Tribunal. On the other hand, it could open claims to a whole raft of employees who would have otherwise fallen foul of the relatively tight three-month deadline. If the latter does prove to be the case, then it will be interesting to see how the already-strained Tribunals deal with an even more demanding case load.
We have summarised some of the other significant proposals in the Amendment Paper below.
1. Initial period of employment
The Amendment Paper specifies that the ‘initial period of employment’ referred to in the Bill will be between three to nine months. The Government intends to pass secondary legislation in respect of this ‘probationary’ period, lessening the obligations on employers when making dismissals during that time. This amendment directly relates to the Bill’s proposal to give employees protection from unfair dismissal from day one of their employment.
2. Changes to guaranteed hours
There have been a number of minor changes to guaranteed hours contracts for workers, including rules on payments to workers when their shifts are moved, cancelled, or curtailed.
3. “Gender equality” definition
Under the Employment Rights Bill, the Government can produce secondary legislation requiring employers to create equality actions plans to promote gender equality. To that end, the Amendment Paper has extended the definition of “gender equality” to include menstrual problems and menstrual disorders.
4. Non-disclosure agreements
The Liberal Democrat MP Layla Moran has proposed a clause which will render as void any non-disclosure agreement that purports to prevent workers from disclosing any type of harassment, including sexual harassment.
5. Prohibition on ‘substitution clauses’
The Conservative MP Nick Timothy has proposed a clause which will prohibit the use of ‘substitution clauses’ in agreements between employers and employees, workers, or dependant contractors.
It now remains for the Public Bill Committee to debate the Bill, as amended, over the next two months. The Committee will hear evidence from a number of academics, industries, and trade unions during that time, with a view to reaching a conclusion on the Bill on 25 January 2025.
Employers are subject to a new duty to take reasonable steps to prevent sexual harassment at work with effect from 26 October. This is a steep change, as employers must now proactively make efforts to address such behaviour. If a claim of sexual harassment is established, a Tribunal will have to consider as a matter of course whether the employer took suitable steps and, if not, any compensation may be increased by up to 25%.
Between the introduction of this new duty, the publication of related guidance from the Equality and Human Rights Commission (or ‘EHRC’), and the approaching wave of work-related social events as the festive period draws nearer, there has never been a more opportune time for employers to act.
In this article we share five practical ways to embrace this important change to the law.
1. Introduce meaningful policy
Many employers will have longstanding policies to address harassment. All too often, however, we see ‘one-size-fits-all’ policies which are unlikely to be sufficient to meet the new and more demanding duty.
Your policy should take into account the specific risks and challenges posed by your workforce and working environment. For example, do you have risk factors such as lone or night workers, or colleagues in significant power imbalances? The EHRC guidance lists a host of potential matters to consider, much in the same way that a health and safety assessment might be undertaken. It may be beneficial to discuss matters with colleagues, to gain a better understanding of the interactions faced by workers and employees.
Implementing thorough and accurate policies is likely to be more than a simple box-ticking exercise and having these documents available is important in ensuring that all members of the workforce understand what is expected of them when it comes to preventing sexual harassment. A well thought out and articulated policy will serve as valuable evidence that you have seriously considered your duty and taken steps to comply with it.
Generally, a well-drafted policy should not stand isolated from your other policies, and this an opportune time to review things generally to ensure that compliance with this duty permeates your culture.
2. Implement consistent training
Having a policy in place is a crucial first step, but making sure that staff and management alike have received – and continue to receive – training on its content is essential to stand the strongest chance of making meaningful change and demonstrating compliance with the duty.
An effective training programme should cover: what constitutes sexual harassment; how to spot it; and how to appropriately respond to instances of sexual harassment, including escalating where appropriate. We are very familiar with providing external training and welcome any queries about either introducing or delivering a suitable programme.
It is worth bearing in mind that different roles are likely to require different training. For example, senior management may need a stronger awareness of how they will conduct investigations and risk assessments, whereas training for more junior colleagues may be best focussed upon reporting procedures. Truly embedding this new approach to sexual harassment will require education throughout the workforce.
3. Set a framework for investigations
An investigative framework is another essential mechanism to make sure that complaints of sexual harassment are handled in a manner which is effective, sensitive and compliant with the law.
In the unfortunate circumstances where you need to investigate allegations, a robust plan and an informed group of potential investigators will be vital to ensure that matters are progressed swiftly and without confusion. Key management figures should know what their role is vis-à-vis any investigation and how to support it effectively.
Under the spotlight of this new preventative duty, where an allegation of sexual harassment requires investigation, employers should conduct investigations through a lens of both fact finding and with a view to reflecting and learning, so that future occurrences of sexual harassment can be mitigated.
4. Actively manage internal processes
Strong policies, effective training and a clear investigative framework will do much to meet the challenge of the new preventative duty. However, the duty is an ongoing one and treating compliance as a one-time exercise is unlikely to suffice. Workplaces are ever-changing and active management will be necessary.
You might consider an annual review of internal processes, to reflect upon whether any changes to your workforce or workplace, or lessons learnt more generally, should change your approach. To make that meaningful, accurate records should be kept of incidents that have arisen and how they have been handled, as well the training that has been provided and to whom.
5. Read the guidance
Making these enduring changes is no small task. However, while we await case law, the EHRC published detailed and helpful guidance in September which is likely to hold considerable sway. The full guidance is available to read here.
The guidance helpfully provides case studies showing how the duty will apply in given scenarios. In addition, it explains legal terminology to help employers navigate the new requirements. Most notably, the guidance goes a significant way towards clarifying the ambiguity of what may be deemed to be ‘reasonable’ steps in a given workplace, although much will still depend on the context.
If you have any queries about how to implement the new duty to prevent sexual harassment, or would like assistance with policies, training or investigations, please do get in touch with our team.
Lifecycle of a Business – See you in court…? Employment claims against a company
10 September 2024
News
Setting up and running your own business is an amazing achievement. It requires vision, creativity, motivation and stamina. On occasion, it can even bring you fame, riches and fortune. But it can also result in reams of paperwork and cause sleepless nights. And as someone once said to me about children “It doesn’t get easier, it just changes”, so the same can be said for your business throughout its lifecycle. From setting up to exit, it will force you to consider issues that you might not previously have known anything about and it will need you to make many decisions, sometimes very quickly. What it certainly is not is mundane.
With this in mind, the corporate team at Forsters, together with some of our specialist colleagues, has written a series of articles about the various issues and some of the key points that it may help you to know about at each stage of a business’s life. Not all of these will be relevant to you or your business endeavours, but we hope that you will find at least some of these guides interesting and useful, whether you just have the glimmer of an idea, are a start-up, a well-established enterprise or are considering your exit options. Do feel free to drop us a line or pick up the phone if you would like to discuss any of the issues raised further.
We’ve already discussed various topics, including funding, employment and commercial contracts, but it’s now time to discuss when things go wrong…
See you in court…? Employment claims against a company
Companies will have disgruntled employees from time to time. Having well drafted contracts, effective policies and procedures and good HR management can often resolve or limit issues, but sometimes employment litigation is inevitable. This article provides a brief introduction to the employment litigation process, but we strongly recommend that you get in touch with your employment legal advisor if litigation is on the cards.
Most employment litigation takes place in the Employment Tribunal and often relates to:
Unfair dismissal – where an employee alleges that their dismissal was not for a “fair” reason (being conduct, capability, redundancy, legal reason, some other substantial reason) or that a fair procedure was not followed. In addition, an employee can bring a claim for automatic unfair dismissal where they have been dismissed for one of ten statutory reasons (such as asserting the right to be paid at least the national minimum wage).
Constructive dismissal – where an employee alleges that they have been treated so badly they have no option but to resign and treat themselves as having been dismissed.
Discrimination – where an employee alleges that they have suffered some form of adverse treatment due to a “protected characteristic” (such as age, sex or race). Discrimination can take several forms, including direct discrimination (such as not being promoted directly because of your protected characteristic), indirect discrimination (where the employer operates a policy or practice which adversely affects a particular group with the same protected characteristic) and harassment (where an employee is bullied or harassed by colleagues because of a protected characteristic).
Whistleblowing – where an employee alleges that they have suffered a form of detriment or been dismissed due to raising concerns about their employer’s practices.
Monies owed – where an employee alleges that they have not been paid what is due to them (such as salary, notice pay or in respect of annual leave).
Compensation for employment claims varies and often depends on the type of claim and the employee’s salary. Compensation for certain claims (such as unfair dismissal) is capped (at the lower of year’s salary and, currently, £115,115). Other claims, for example, whistleblowing and discrimination are uncapped and compensation awards tend to reflect any injury to feelings and, where the employee has been dismissed, the time it will take for them to find comparable income.
Please note that there are many other types of employment claims which can be brought in the Employment Tribunal. It is also possible for employees to bring certain claims in the county court or high court. These tend to be for breach of contract and can often be valuable – in particular claims in relation to unpaid bonuses.
Who can bring a claim?
Generally speaking, all employees can bring most types of employment claims, however some claims have service length requirements. For example, at the time of writing, only employees with at least two years’ service have the right to bring an unfair dismissal claim. However, the Labour government has committed to changing this and we are awaiting the detail.
Given the current service length requirement, it is a common litigation tactic for employees to allege some form of whistleblowing or discrimination in order get a claim off the ground.
The process
The time limits for bringing a claim in the Employment Tribunal are short and employees typically need to take action within three months of the issue (for example, the alleged poor treatment or dismissal) having occurred.
Before an employee can file a claim in the Employment Tribunal, they need to first follow the ACAS early conciliation process. This provides the parties with an opportunity to see if settlement can be achieved before any claim is filed. If settlement cannot be reached, ACAS will issue the employee with a certificate which allows them to then proceed to file a claim at the Employment Tribunal.
Once a claim is filed and accepted, the employer will be provided with a copy and is required to submit a response within 28 days. It is important that an employer spends time getting its response correct as this is the first opportunity it will have to set out its position. Once the response has been accepted, the Employment Tribunal will look to list a hearing and set out a timetable leading up to it. In essence, this will require the parties to disclose certain documents, agree a bundle of relevant documents to be referred to at the hearing and exchange witness evidence prior to the hearing.
The cost of defending employment litigation can be considerable and, unlike in a court, it is not normal for the losing party to pay the winning party’s costs (so it is unlikely that an employer will recover its legal costs even if it wins). Depending on the nature of the allegations, employers may also need to consider the reputational impact of fighting a claim and attending a hearing which will most likely be in the public domain. On the other hand, depending on the nature of the employer’s business and workforce, taking a stand and fighting against the employment claim could help to avoid setting a precedent that a company will always settle.
Where parties do agree a settlement prior to a hearing, this can be documented by way of an ACAS COT3 agreement or a settlement agreement, normally depending on whether the employee is legally represented or not.
Disclaimer
This note reflects the law as at 6 September 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.
Setting up and running your own business is an amazing achievement. It requires vision, creativity, motivation and stamina. On occasion, it can even bring you fame, riches and fortune. But it can also result in reams of paperwork and cause sleepless nights. And as someone once said to me about children “It doesn’t get easier, it just changes”, so the same can be said for your business throughout its lifecycle. From setting up to exit, it will force you to consider issues that you might not previously have known anything about and it will need you to make many decisions, sometimes very quickly. What it certainly is not is mundane.
With this in mind, the corporate team at Forsters, together with some of our specialist colleagues, has written a series of articles about the various issues and some of the key points that it may help you to know about at each stage of a business’s life. Not all of these will be relevant to you or your business endeavours, but we hope that you will find at least some of these guides interesting and useful, whether you just have the glimmer of an idea, are a start-up, a well-established enterprise or are considering your exit options. Do feel free to drop us a line or pick up the phone if you would like to discuss any of the issues raised further.
We’ve already discussed various topics, including funding, employment and commercial contracts, but it’s now time to discuss when things go wrong…
Employee Grievances
It is fair to say that not everything in business is smooth sailing, especially when it comes to staff. Dealing with staff grievances properly is important to help minimise workplace conflicts and improve employee relations.
Keep reading if you want to find out:
what could trigger a grievance
why having a grievance procedure is important
our top tips for getting the grievance procedure right.
What is a grievance?
An employee could have a grievance (i.e., a complaint) for many reasons. Common grievances that we come across include:
how an employee has been treated by another – this could be as a result of a series of events or an isolated incident
working conditions relating to hours and/or pay
how an employee has been managed by their line manager
the nature of an employee’s work – this could be because they are given work they were not hired to do, or they are being given too much or not enough.
By raising a grievance, an employee forces an employer to investigate the issue with a view to resolving the matter fairly and promptly.
Employees are generally expected to try and deal with concerns informally first of all, and many matters can often be ‘nipped in the bud’ by discussion with an employee’s line manager. Where concerns cannot be resolved informally, an employee has the right to submit a formal grievance in accordance with his or her employer’s grievance procedure.
The importance of a grievance procedure
Employers are required by law to have a written grievance procedure in place. Such a procedure will typically include the following stages:
submitting a grievance in writing
conducting a hearing (so that the employee can explain the detail of their complaint)
investigating the issue(s) at hand
delivering a written outcome and implementing any recommendations
Failure to follow a fair process can land an employer in hot water. Not dealing with a grievance properly could be a breach of the implied contractual duty of trust and fidelity and generally increase the chances of things ending up in the employment tribunal; in certain circumstances where the principles of the ACAS Code has not been applied, any compensatory award given to the employee could be subject to a 25% uplift.
Handling a grievance effectively
Below we set out our top tips to getting the grievance process right:
Consider the appropriate people to be involved and ensure decision makers are impartial. Sometimes engaging external support, such as external legal or HR advisors, will be appropriate.
Conduct a reasonable investigation to ensure that all the key facts are established.
Try to deal with issues promptly and have regard to any timescales set out in the grievance procedure.
Allow employees to be accompanied.
When making decisions, act consistently with previous decisions around similar grievances, as appropriate.
Keep the employee updated, especially if things are taking longer than planned and/or the employee is absent from work.
Take steps to keep matters confidential.
Take appeals seriously and consider them carefully.
Disclaimer
This note reflects the law as at 27 August 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.
Lifecycle of a Business – An Introduction to Incentive Arrangements and their Associated Tax Treatment
30 April 2024
News
Setting up and running your own business is an amazing achievement. It requires vision, creativity, motivation and stamina. On occasion, it can even bring you fame, riches and fortune. But it can also result in reams of paperwork and cause sleepless nights. And as someone once said to me about children “It doesn’t get easier, it just changes”, so the same can be said for your business throughout its lifecycle. From setting up to exit, it will force you to consider issues that you might not previously have known anything about and it will need you to make many decisions, sometimes very quickly. What it certainly is not is mundane.
With this in mind, the corporate team at Forsters, together with some of our specialist colleagues, has written a series of articles about the various issues and some of the key points that it may help you to know about at each stage of a business’s life. Not all of these will be relevant to you or your business endeavours, but we hope that you will find at least some of these guides interesting and useful, whether you just have the glimmer of an idea, are a start-up, a well-established enterprise or are considering your exit options. Do feel free to drop us a line or pick up the phone if you would like to discuss any of the issues raised further.
We’ve already discussed various topics, such as, set up, directors, funding and shareholder-related matters, but now let’s concentrate on “Employment: 9 to 5”.
An Introduction to Incentive Arrangements and their Associated Tax Treatment
In this article, we briefly outline some of the common types of share and cash incentives provided to directors/employees, and their associated tax treatment. Such incentives are a great way for businesses to attract and retain talent, ensuring that employees are rewarded in a way which aligns with the interests of a business more generally. In essence, they allow an employee to benefit from the growth in value of a business.
References to employees in this article include directors.
Issue of shares
Employees can be issued shares in a business. This gives an employee real ownership in a business straightaway (rather than an option to buy later), often with certain voting rights and the right to dividends. Such shares can be gifted or purchased by an employee.
Income tax will normally be due from the employee to the extent that the employee pays less than the market value of the shares that are issued to them. However, if the shares are subject to forfeiture provisions which last for no more than five years, a different tax treatment can apply.
A number of elections can also be made which will alter the tax treatment in some circumstances.
EMI schemes can be a very tax efficient way to incentivise staff, especially where a company has the potential for growth. Under the HMRC approved EMI share option scheme, employees can be granted options over shares (i.e. the right to acquire them at a certain price in the future) having a maximum value (at the date of grant) of £250,000. As with all option plans, the hope is that the value of the shares is worth more than the pre-agreed price at the time they are acquired.
EMI schemes can also include conditionality and time frames; companies can, for example, set performance or length of service milestones which need to be met before EMI options vest.
However, although EMI options benefit from favourable tax treatment, the company in question must be carrying on a “qualifying trade” and so it is not always possible to grant EMI options; for example, the business of owning and operating hotels is not a qualifying trade for EMI purposes.
CSOP share option scheme
Another form of HMRC approved share option scheme is the CSOP, under which an employee can be granted options over shares having a value (at the date of grant) of up to £60,000.
Unlike the EMI scheme, it is not necessary for the company to be carrying on a qualifying trade and, provided that the option is exercised, broadly, no earlier than three years from the time that the option is granted, the employee will not be subject to income tax on either the grant or exercise of the option. (Note that in some situations, it is possible for the option to be exercised earlier, for example, if the company is subject to a successful takeover.) Instead, the employee will be subject to capital gains tax (CGT) on the difference between the price paid on exercise and the market value of the shares when sold. At present CGT is payable at a much lower rate than income tax so this is a significant advantage of exercising a CSOP option.
Since CSOPs must comply with a number of HMRC conditions, it is necessary to ensure that these conditions are, and will continue to be, satisfied. In addition, given that the options have to be granted at a price equal to the current market value of the shares when the option is granted, a CSOP scheme will only act as a successful incentive if the share price increases after the date of grant.
Unapproved share option schemes
As the name suggests, unapproved share option schemes are not approved by HMRC and therefore the drafting of the scheme rules can be flexible. However, although income tax is not payable when the option is granted, on the exercise of the option the employee will be subject to income tax on the difference between the price paid on exercise and the value of the shares at that point.
If the shares are tradeable at the point of exercise (for example, because the exercise is triggered by an exit event such as a takeover) employer and employee national insurance contributions (NICs) will also be due.
Phantom share scheme
Under a phantom share scheme, the employee does not hold shares or a share option, but the economic effect is to track the performance of the shares as if the employee held shares or an option over shares.
Since the employee will only ever receive cash, the proceeds under a phantom share scheme are treated in the same way as other remuneration and so are subject to income tax and to employer’s and employee’s NICs.
Cash bonus scheme
A cash bonus scheme is treated in the same way as if the employee had received a salary and so the amount received under the scheme will be subject to income tax deducted under the PAYE scheme and also to employer’s and employee’s NICs.
What happens when an employee leaves?
With all incentive plans, companies should think about what happens to a participant’s interest once their employment comes to an end. It is important that this is made clear in any scheme documentation to avoid any later dispute. Typically, schemes will have a concept of “good” and “bad” leaver. “Good” leavers are normally those who leave due to no fault of their own (such as ill health or where they have been made redundant) and will often retain some of their interest (subject to any specific HMRC restrictions) – this could be all of it or only that which has vested before their employment ends. “Bad” leavers (such as those whose employment is terminated for cause) will often forfeit all of their entitlements.
If you would like to discuss any of the points raised in this article or incentive arrangements in any more detail, please get in touch with your usual Forsters’ contact or a member of the Forsters’ Corporate Tax team or Employment and Partnerships team.
Disclaimer
This note reflects the law as at 30 April 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice. In particular, incentive arrangements and their tax treatment are complex. This note provides a brief summary of the key points only.
Lifecycle of a Business – Getting the most out of recruitment and motivating and retaining valued staff
14 March 2024
News
Setting up and running your own business is an amazing achievement. It requires vision, creativity, motivation and stamina. On occasion, it can even bring you fame, riches and fortune. But it can also result in reams of paperwork and cause sleepless nights. And as someone once said to me about children “It doesn’t get easier, it just changes”, so the same can be said for your business throughout its lifecycle. From setting up to exit, it will force you to consider issues that you might not previously have known anything about and it will need you to make many decisions, sometimes very quickly. What it certainly is not is mundane.
With this in mind, the corporate team at Forsters, together with some of our specialist colleagues, has written a series of articles about the various issues and some of the key points that it may help you to know about at each stage of a business’s life. Not all of these will be relevant to you or your business endeavours, but we hope that you will find at least some of these guides interesting and useful, whether you just have the glimmer of an idea, are a start-up, a well-established enterprise or are considering your exit options. Do feel free to drop us a line or pick up the phone if you would like to discuss any of the issues raised further.
We’ve already discussed various topics, such as, set up, directors, funding and shareholder-related matters, but now let’s concentrate on “Employment: 9 to 5”.
Getting the most out of recruitment and motivating and retaining valued staff
Our recent article talked about the steps that a first-time employer needs to take before they actually employ any staff . We’re now going to think about the next stage.
A plethora of factors is causing employers to step back and evaluate their approach to staffing; factors which have been around for a while but which, cumulatively, are having a significant impact.
First, there was Brexit, which resulted in the net migration out of the UK of a notable portion of the workforce. This was followed by COVID-19, which triggered a seismic shift in working practices, including a move towards home and hybrid working. There has also been the introduction of Gen-Z into the workforce, who have brought with them a fresh mindset and different approach to established working norms. On top of these, economic factors, including higher interest rates and the “cost-of-living-crisis”, have resulted in job applicants requesting more from their remuneration packages. All of these factors have shifted the priorities of the workforce and have changed the demands being placed on employers.
So, how can an employer ensure that they appeal to the right recruits for their business? How can an employer motivate somebody to reach their potential in the business? And how might an employer look to retain valued individuals?
We’ll consider some potential responses to these questions below.
Recruiting for your business: not just a job role
The nature of recruitment has changed steadily over recent years, with the involvement of recruiters becoming increasingly prevalent, as opposed to individuals approaching potential employers directly.
With this “middle-man” approach seemingly becoming the norm, it is important that you (as an employer) know what you are looking for. Are you looking for an individual to fulfil a perfectly sculpted job description? Or, are you looking for an individual who can grow with the business as a long term prospect? The likelihood of finding the best talent will be increased by focusing on the latter.
A high-level job specification and having an awareness of the key competencies is very important, but actually contemplating how the successful recruit will integrate with your existing workforce is paramount. Recruiters not only have on-going relationships with employers, but with candidates as well, and will be very familiar with the candidate’s personality and their fit with your business. Therefore, being able to articulate the personal specifications that you envisage the successful candidate having has become just as important as knowing what their role will entail.
Motivation: getting the best from your workforce
With the labour market becoming fairly volatile, it is particularly important that employers know how to both motivate and retain their workforce to ensure that they stay incentivised to give their time and energy to your business.
When looking to motivate an individual, the key lies in effective two-way communication. Line managers should seek to understand what an individual is seeking to gain from their role: this could include taking on specific types of work or specialist projects, for example. There might be a long term goal that the individual wants to work towards (such as a promotion or qualification), and working towards this together is likely to incentivise the individual to equally invest their time in the company when they appreciate that the company is also investing in their development.
Financial motivation is also a reality. Following the introduction of gender pay reporting and ethnicity pay reporting, there is a growing conversation surrounding pay and remuneration transparency. Although reporting is not a requirement for all businesses, much of the workforce are beginning to look towards, and expect, transparent remuneration structures.
How to keep those motivated individuals working for YOU
Motivation and retention employ similar techniques, but whilst motivation is best seen through a professional lens and can be identified as having a cohesive workforce where everybody is positively achieving their individual professional goals and the goals of the company, retention tends to take a more personal perspective and results in individuals staying at a company long-term.
Retention can result from the “perks” of a job, including a competitive benefits and remuneration package, an inclusive culture and a sustainable work-life balance. Strong remuneration and a benefits package have long been the key ingredients for retention within the job market, but the cultural aspects of a workplace are becoming increasingly significant. For example, in determining what makes a “good employer”, employees now often cite the importance of an employer nurturing diversity and allowing individuals flexibility in their working day, including flexibility of working hours and location.
The younger generation of the workforce are increasingly looking for an environment that nurtures their authentic selves which means that, if an employer is looking to retain their workforce, they would do well to allow the differences amongst their workforce to thrive and be recognised.
Disclaimer
This note reflects the law as at 13 March 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.
Lifecycle of a Business – What to think about as a first-time employer
6 March 2024
News
Setting up and running your own business is an amazing achievement. It requires vision, creativity, motivation and stamina. On occasion, it can even bring you fame, riches and fortune. But it can also result in reams of paperwork and cause sleepless nights. And as someone once said to me about children “It doesn’t get easier, it just changes”, so the same can be said for your business throughout its lifecycle. From setting up to exit, it will force you to consider issues that you might not previously have known anything about and it will need you to make many decisions, sometimes very quickly. What it certainly is not is mundane.
With this in mind, the corporate team at Forsters, together with some of our specialist colleagues, has written a series of articles about the various issues and some of the key points that it may help you to know about at each stage of a business’s life. Not all of these will be relevant to you or your business endeavours, but we hope that you will find at least some of these guides interesting and useful, whether you just have the glimmer of an idea, are a start-up, a well-established enterprise or are considering your exit options. Do feel free to drop us a line or pick up the phone if you would like to discuss any of the issues raised further.
We’ve already discussed various topics, such as, set up, directors, funding and shareholder-related matters, but now let’s concentrate on “Employment: 9 to 5”.
What to think about as a first-time employer
A key part of any operating business is its workforce. To the untrained eye, becoming an employer appears to happen overnight; one minute there is just a company name, the next it has employees (…and much more!). But “appearances can be deceptive” and there are some non-negotiable foundations to be laid before the first employee walks through the door (or logs on remotely).
In no particular order, the housekeeping matters that you will need to have addressed as a first-time employer are: employer’s liability insurance, immigration considerations, relevant documentation and payroll and pension services.
Employer’s liability insurance
All employers have an obligation to ensure the health and safety of their employees. One way that the law ensures that this obligation is fulfilled is by requiring all employers to take out a valid employer’s liability insurance policy, covering disease and bodily injury of employees in the UK, with minimum cover of £5 million for each potential claim. Failure to have this in place on or before an employee’s first day is a criminal offence, carrying with it fines of up to £2,500 for every day that a valid policy is not in place.
Immigration
Unless an employee has the automatic right to work in the UK (i.e. they are a British or Irish national) or otherwise has a visa allowing them to work, the employee will need to be “sponsored” by their employer in order to have the right to work in the UK. Where this is the case, the employing entity will need a “sponsor licence”. To get this arranged, a comprehensive application needs to be submitted to the Home Office; this can take a few months to process, meaning that some pre-planning will be required in the event a future hire needs to be sponsored.
Documentation
There is a minimum suite of documentation that an employer must provide to new employees. This includes certain mandatory policies (such as disciplinary and grievance procedures), best practice policies (such as those relating to equal opportunities and whistle-blowing), the minimum particulars of employment and data privacy documentation.
The particulars of employment, which must be provided to an employee on or before their first day of employment, set out the bare bones of the employment arrangement, such as the names of the parties, rate of pay, commencement date, place of work, job title and so on. Typically, however, employers will provide more comprehensive contracts of employment which, if well drafted, will include bespoke clauses for the specific employment relationship, including in relation to confidentiality, intellectual property and post-employment restrictive covenants.
Employers process lots of employee and candidate data and they must provide privacy notices to the individuals whose data they will be processing, explaining how and why they will process their personal data.
Payroll and pensions
Last, but absolutely not least, employers must organise all applicable financial processes (and if necessary, appoint a payroll provider to manage the processes on their behalf). This will include setting up an auto-enrolment pension scheme for all eligible employees and making sure that all pay arrangements meet the National Minimum Wage requirements. Employers must also ensure that they are registered with HMRC (which they can do up to four weeks in advance) and that appropriate deductions for income tax and National Insurance contributions are made.
All of this might feel a little daunting, particularly alongside everything else which goes with establishing a business in the UK but, thankfully, the Forsters’ employment team are always at hand to assist and guide new businesses during these early stages…and beyond…
Disclaimer
This note reflects the law as at 6 March 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.
Employment Law: Looking Back on 2023 and the Forecast for 2024
5 January 2024
News
It can be tough being an employer: many are still grappling with the new employment landscape left after Covid (such as remote and hybrid working arrangements) and are still trying to understand the expectations of the new generation of worker, all whilst trying to keep up-to-date with a never-ending raft of legislative changes.
The beginning of a new year presents an opportunity to reflect on the year gone by and look forward to the year ahead. With 2024 underway, we reflect on the key employment law developments of 2023 and highlight some anticipated changes for you to look out for in 2024.
Employment Law Review – 2023
2023 was a significant year for employment law. The Retained EU Law (Revocation and Reform) Act 2023 created a suite of new legislation in relation to holiday, working time, TUPE and the Equality Act 2010. There were changes to flexible working and family-related rights that are due to come into effect later this year (2024). In case law, we had landmark judgments in respect of holiday pay and employment status, which offer some long-awaited clarity.
2023 – Important case law developments
Chief Constable of the Police Service of NI v Agnew – holiday pay
In the significant case of Agnew, the Supreme Court held that although an unlawful deductions claim must be brought within three months of the date the last payment was made (or where there is a series of deductions, the date of the last in the series), a gap of three months in deductions does not automatically break the “chain” and neither does a correct payment. A series is not necessarily determined by a period in time but a “common fault or unifying or central vice”. As such, a series of deductions may no longer be broken by a gap of more than three months, meaning an employee could, depending on the circumstances, make a claim in respect of underpayments which were made prior to any such gap.
This decision will have significant implications for employers across the UK. For one, it is likely to cost the Police Service of Northern Ireland £30-40 million in back pay for holiday pay claims. That being said, in Great Britain there is a two-year backstop on how far back holiday claims can go. Nonetheless, this case serves as a notable reminder of the importance of calculating holiday pay correctly.
Independent Workers Union of Great Britain v Central Arbitration Committee (Deliveroo) – employment status
In November 2023, the Supreme Court unanimously held that Deliveroo riders are not employees and therefore cannot be represented by trade unions for collective bargaining purposes. The key factor for determining self-employed status was that the riders have an unfettered right to appoint a substitute to perform their obligations under their contract and in practice.
Whilst the judgment provides clarification to employers (and a helpful reminder that a genuine right of substitution will nearly always mean that an individual is not an employee), it has received criticism regarding the potential risks it poses to vulnerable workers across the UK. The Labour Party has previously indicated a desire to reform the law on employment status and to strengthen the rights and protections for workers. With an election looming this year, this is definitely an area to watch.
Boydell v NZP Limited and other – the enforceability of non-competes
In Boydell v NZP Ltd the Court of Appeal upheld an injunction and the decision of the High Court that it was permissible to sever part of a 12-month non-compete clause. Boydell was employed as Head of Commercial – Speciality Products for NZP Limited (“NZP”). NZP’s business, the sale of bile acid derivatives, is a niche area of the pharmaceutical industry. When Boydell resigned to work as head of the bile acid division of one of their main competitors, NZP sought an injunction relying on the 12-month non-compete in Boydell’s employment contract. Boydell argued that the non-compete was too wide to be enforceable, principally in that it benefitted not only NZP but other companies it its group. The Court of Appeal found that the non-compete clause was clearly directed towards the specialist activities of NZP and therefore the clause was capable of severance. Severing part of the restriction, to remove the benefit to group companies, did not change the overall effect of the non-compete because it was primarily aimed at the specialist activities of NZP. Although this case demonstrates the courts’ flexibility in their approach to construction of covenants, it is a reminder that, to be enforceable, restrictions should be tailored to the specific needs of the business.
The impact of this case may be limited given the government’s proposal to reform the law on non-compete restrictions to a maximum duration of three months (see below).
Charalambous v National Bank of Greece – the disciplinary process
In the Charalambous case, the Employment Appeal Tribunal (the “EAT”) confirmed that it is possible for a dismissal to be fair in circumstances where the dismissing manager does not hold a disciplinary hearing with the employee. Although the dismissing manager was not present at the claimant’s disciplinary hearing, the EAT found that this was corrected at the appeal stage. In upholding the tribunal’s decision, the EAT noted, perhaps surprisingly, that although it is desirable for a meeting between the employee and decision-maker to take place, direct personal communication is not a requirement.
Lynskey v Direct Line Insurance Services Ltd – menopause and discrimination
The case of Lynskey v Direct Line provides a reminder for employers to be aware of the complex issues surrounding menopause and the way in which symptoms can impact performance. It has been established in a number of tribunal cases that menopause symptoms can amount to a disability under the Equality Act 2010. Ms Lynskey was successful in arguing that Direct Line had failed to make reasonable adjustments where the requirement to meet the performance standards of her role put her at a substantial disadvantage in comparison to employees who were not experiencing symptoms of menopause.
However, whilst this case demonstrates that the tribunal may take a more holistic approach to a disciplinary process, it should not be taken as an invitation to dispense with important aspects of procedure.
Higgs v Farmor’s School – belief discrimination
In Higgs v Farmor’s School the EAT found that the tribunal had erred in its finding that Farmor School had not dismissed Ms Higgs for reasons connected to her protected beliefs. Ms Higgs was dismissed following a number of Facebook posts which the school considered to be prejudicial to the LGBTQ+ community. The EAT found that Ms Higgs’s views were protected under the Equality Act 2010 and remitted the case to the tribunal for redetermination. The EAT gave helpful guidance on the legal framework around the right to protection in respect of one’s belief or religion and the factors that should be taken into consideration when determining whether manifestation of belief was so objectionable as to justify the actions taken by an employer.
Haycocks v ADP RPO – the redundancy process
The EAT’s decision in Haycocks v ADP RPO confirmed that a redundancy appeal cannot correct a lack of consultation. How reasonable a redundancy process is will depend on the employer and the circumstances giving rise to redundancy, however this case serves as a reminder to employers of the importance of consultation at a formative stage in the redundancy process.
2023 – Key legislation
Minimum service levels
Following a year (or two) consistently peppered with strikes in the rail, health, emergency services and teaching sectors, the government has now enacted its controversial Strike (Minimum Service Levels) Act 2023, which requires minimum service levels to be maintained, even during periods of strike.
Allocation of tips
We previously provided commentary back in October 2021 on the anticipated Employment (Allocation of Tips) Act 2023. This Act gained Royal Assent in 2023, with the measures coming into effect during 2024. The motivation behind the legislation is to provide workers with fair pay and to ensure that tips are allocated fairly amongst the workforce.
Workers (Predictable Terms and Conditions) Act 2023
Continuing the pursuit of instilling fairness amongst the workforce, this Act was granted Royal Assent in September 2023 and places obligations on employers to give a minimum period of notice of shift patterns or of ad hoc work to their workforce. Moreover, eligible employees will gain the right to request a “predictable work pattern”.
Worker Protection (Amendment of Equality Act 2010) Act 2023
This Act will require employers to take proactive steps to prevent their employees from being sexually harassed at work. The Equality and Human Rights Commission (the “EHRC”) will be publishing new guidance on what proactive steps employers are expected to take. Not only should employers carefully consider the EHRC guidance (when it is published) but they should also review and amend their existing policies to ensure compliance with the new requirements.
Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023
We commented in November 2023 on the changes to holiday pay, TUPE and working time reporting which came into effect on 1 January 2024. The government has now published guidance on calculating holiday pay in line with the changes.
The Employment Relations (Flexible Working) Act 2023
The Employment Relations (Flexible Working) Act gained Royal Assent in July 2023 and was partially enacted on 11 December via the Flexible Working (Amendment) Regulations 2023. With effect from 6 April 2024, all employees will have a right to submit a statutory flexible working request from day one of their employment. We discussed the impact of this legislation here, including the changes required in the way that employers are expected to respond to flexible working requests.
The Carer’s Leave Act 2023
The Carer’s Leave Act received Royal Assent in May 2023 and allows employees who have a dependant with a long-term care need to take leave to care for that dependent. One week of carer’s leave can be taken each year (regardless of the number of dependants an employee may have). Whilst there are notification requirements on the employee, an employer cannot require an employee to supply evidence in relation to a request before granting leave. An employer can postpone a request in limited circumstances.
Extension of the protections from redundancy – pregnancy and family leave
In December 2023, draft regulations were laid before Parliament to bring the Redundancy (Pregnancy and Family Leave) Act 2023 into operation. Under the new Act, from 6 April 2024, protection from redundancy afforded to employees on maternity, adoption or shared parental leave will be extended to employees who are pregnant and returning from such leave. More details on the impact of these protections can be found here.
What Can We Expect In 2024
The bills which gained Royal Assent in 2023 are very likely to be enacted in 2024. This will mean that employees and workers will benefit from the applicable enhanced rights and employers will need to ensure their compliance with any additional policies and procedures prescribed by the new legislation and be alive to the potential claims that an individual could bring.
In addition to legislative changes, there will also be the usual changes to national statutory rates, including those for minimum wage, statutory maternity pay and statutory sick pay, which are summarised below.
in May 2023, the government published its response to the consultation on the reform of non-compete clauses which proposed capping such clauses at three months. This may also be something to look out for in 2024; and
the government’s Statutory Code of Practice on âfire and rehireâ practices should be published in spring 2024.
Undoubtedly the speaking point of 2024 will be the next general election. If, as currently predicted by the polls, the Labour Party is successful, we are likely to see a number of employment law reforms designed to improve workers’ rights and protections.
April 2024 rate changes
National Minimum Wage
Category of worker
2023/2024
2024/2025
Aged 23+
£10.42
£11.44
Aged 21 – 22 inclusive
£10.18
£11.44
Aged 18 – 20 inclusive
£7.49
£8.60
Aged under 18
£5.28
£6.40
Apprentice rate
£5.28
£6.40
Statutory weekly cap
2023/2024
2024/2025
Statutory sick pay
£109.50
£184.03
Statutory maternity, paternity, adoption and shared parental pay together with maternity allowance
£172.48
£116.75
If you wish to discuss the above in any more detail or have any other employment or HR law related issues, please contact Joe Beeston, Partner, or Remy Ormesher, Associate, in our corporate group.
Disclaimer
This note reflects our opinion and views as of 5 January 2024 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.
The maze of UK law requirements for new employers (including those employing domestic staff such as housekeepers, nannies and gardeners) can feel daunting to navigate. However, it is important to consider the legal fundamentals as this will reduce the risk of any claim and help ensure that the new relationship works for both parties.
This overview will highlight the key concerns that a new domestic employer should be aware of and will give some pointers to help you start on the right footing.
Status
The first question to consider is how a staffing arrangement should be structured – should the individual be employed or engaged as a self-employed contractor?
‘Employees’ provide their services personally and are controlled by an employer in terms of working arrangements, hours, annual leave, etc. For example, a full-time housekeeper who is required to work Monday to Friday 9-5, would most likely be considered an employee. Employees (as opposed to ‘self-employed contractors’) receive the best employment protection and are entitled to paid annual leave, sick pay, national minimum wage and protections in relation to dismissal. Their salary should also be subject to deductions for tax and national insurance through a Pay As You Earn (PAYE) system.
‘Self-employed contractors’ have greater autonomy in their roles and their arrangements are normally more informal. For example, a gardener who provides services for five hours per week at times he/she chooses would most likely be considered a self-employed contractor. Self-employed contractors generally do not benefit from employment protections and are typically paid gross.
In our experience, an employment arrangement is the most common and the guidance below will assume an employer-employee arrangement.
Contracts
It is a legal requirement to deliver certain information to a new employee either on or before their first day of employment. Including details of their place of work, rate of pay and working hours, and is typically set out in a contract of employment. Well-drafted contracts go beyond this minimum level of information and contain bespoke clauses, for example, setting out the employer’s expectations of the employee in relation to confidentiality and restricting an employee’s ability to discuss matters relating to their employment on social media.
A comprehensive contract can also set out what happens at the end of the relationship, to ensure that all parties are fully informed and to help avoid an unfair dismissal claim.
Policies
There are certain policies that an employer must have in place, including a disciplinary and grievance policy and procedure. In addition, there are other policies which we always advise our clients to have in place, as they help both employers and employees to better understand what is expected of them, such as a sickness and absence policy and a discrimination and anti-harassment policy.
Getting the admin right: payroll, pension, insurances
We strongly advise our clients to seek the assistance of a payroll provider however big or small their workforce is. Payroll will help with ensuring that employees get paid the correct amount and in a timely manner. This is a task that can become more complex when instances of sick pay, family leave (for example, maternity or paternity leave) and overtime arise.
All employers must establish an autoenrollment pension scheme (which employees are entitled to opt-out of), which both employer and employee will pay contributions in to.
Employer’s liability insurance is also mandatory. This primarily provides insurance where an employee brings a personal injury claim against the employer in the course of their employment. Failure to have a valid policy in place can not only be costly but is also a criminal offence.
Right to work checks
It is important that clients check an employee’s right to work in the UK before their employment starts (for example, by checking that they have a UK passport or other visa/work permit). Failure to do so could result in fines of up to £60,000 per employee.
Accommodation
It is not uncommon for domestic employees to live at their place of work, whether in a separate dwelling or in a dedicated space within the same house as their employer. These arrangements need to be clearly documented, normally in a service occupancy agreement. It is important that such agreements make clear that an employee’s right to reside is linked to their employment and that, in the event their employment ends, their right to reside also ends.
For advice on employing domestic staff in the UK, please contact Joe Beeston.
Disclaimer
This note reflects the law as at November 2023. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.
Moving to the UK
Moving to the UK is an exciting life event whether it be a short-term move for work to explore business prospects or a more permanent relocation with the whole family; the UK offers an eclectic range of options to live, work and learn.
Restrictions preventing an employee from joining a competitor or setting up in competition for a period (typically between 6 – 12 months) after their employment has ended (a “non-compete”) is a common, albeit at times controversial, feature of UK employment contracts.
But changes appear to be afoot and it seems likely that non-competes as we know them may look a little different in the future.
Used appropriately – such as limiting their application only to senior employees or to those with access to highly confidential information and trade secrets, and then only for a reasonable period – a non-compete makes complete sense. It allows an employer to safeguard its position, preventing parts of its business from being diverted elsewhere, which other post-employment restrictions (such as confidentiality obligations and non-solicitation restrictions) cannot always fully protect.
Conversely, used inappropriately or abusively (as can often be the case), a non-compete arguably prevents free trade, restricts the labour market and innovation and, on a personal level, has a detrimental impact on an individual’s ability to earn a living. The ‘standard issued’ non-compete can, fairly regularly, result in hard working and innovative individuals taking time out to avoid any alleged breach and/or dispute with their former employer, despite the fact that such non-compete might actually be unenforceable. Perhaps the State of California, where non-competes have been banned for some time, is a good place to find evidence for these stifling of free trade and innovation arguments: Silicon Valley has, after all, essentially been built by employees leaving large tech firms and launching their own startups, as they are generally free to do albeit ostensibly in “competition” with their previous employer.
It is because of this tension that the UK government previously consulted on the use of non-competes and associated reforms. The consultation (called: “Measures to reform post-termination non-compete clauses in contracts of employment”) looked, in particular, at:
whether employers should be required to pay employees during a non-compete period (with such periods being limited in duration); and
the idea of banning them altogether.
Unfortunately, despite that consultation closing just over two years ago, we are still awaiting its outcome. That said, since the closing of the consultation, there have been some interesting developments in the non-compete area in other jurisdictions.
The most significant development has perhaps been in the US. Following an executive order to all agencies by Joe Biden to increase productivity, the US regulator, the Federal Trade Commission (“FTC”), has recently outlined plans to ban US employers from using non-competes or relying on existing non-compete provisions. The proposed new rule would categorise a non-compete as an “unfair method of competition’. However, the draft rule does provide for a carve-out in the context of a corporate transaction where a shareholder stays on with the business as an employee.
The fact that just weeks after the FTC outlined its plans, the UK Competition and Markets Authority reminded employers to avoid anti-competitive behaviour (such as wage fixing and agreements not to employ others’ employees) might suggest that we are keeping an eye on what is going on across the pond.
Anecdotally, some employment lawyers in the US believe that the proposed FTC rule is too vague, generating more questions than it answers. They anticipate that, following comment from various stakeholders, the rule (in the event it is passed) will be narrowed – for example, to create further exemptions for senior level executives (i.e. still permitting the use of non-competes in respect of their employment).
That said, other commentators believe a carve out for senior employees could be counter to the overriding executive order designed at increasing productivity, noting that such employees typically generate growth and innovation so restricting them would not achieve the order’s aims. There is also concern that having such a carve out would lead to ‘satellite’ litigation about an employee’s seniority and/or whether an associated non-compete is enforceable.
But perhaps recent developments north of the border, in Canada, will help reassure US lawyers. In 2021, the province of Ontario introduced a similar law (through the “Working for Workers Act”) banning the use of new non-competes (but not those already in existence), unless it is agreed in the context of a corporate transaction (similar to the FTC’s carve out) or for senior employees holding specific positions (for example, Chief Executive Officer, Chief Finance Officer or Chief Legal Officer).
Perhaps it is too early to tell whether the Ontario position strikes the right balance, but it does highlight that this topic seems to be firmly on the agenda in many countries and that changes here in the UK seem likely, especially given the current status in the US. It will certainly be interesting to see whether and how international developments such as those in the US and Canada inform or contribute to the debate here in the UK.
More generally, perhaps one could look closer to home to see how other European countries create a fairer non-compete environment. One of the points the UK government consulted on was the need to pay employees during any non-compete period and both France and Germany (for example) have adopted this model for some time. The financial consequences really focus an employer’s mind as to which employees they need to restrict, and this seems to strike a good balance between giving employers the ability to subject an employee to a non-compete (and pay them) where circumstances require whilst addressing the personal financial impact on the employee. Arguably, such model would be even fairer if the paid non-compete could only be used for senior employees, adopting the concept from Ontario.
So, is there a future for non-competes? I believe so, but perhaps in a different form to what we are familiar with in the UK. Such changes are still up for debate and might, in practice, be informed by any conclusions of the FTC. But in any event, any changes will likely result in a degree of uncertainty and further questions, keeping both employers and lawyers busy. For example:
how would garden leave provisions be considered in light of any ban or restriction on the use of non-competes: are they a non-compete through the backdoor or a standalone contractual provision?
will employers try to be more creative in their use of breach of non-solicitation and non-dealing covenants to try and reach the same outcome as a non-compete?
if non-competes are faded out or restricted in different jurisdictions, how will global companies who grant stock/equity under global plans that tend to be linked to non-competes work? For example, will we see a move away from global harmonised plans to a country specific approach?
As simple as E.S.G.? – pre-empt the challenges of implementing an Environmental, Social and Governance (“ESG”) agenda
16 February 2022
News
Having in place a genuine ESG agenda counts for a lot in today’s employment market. As well as appealing to prospective employees, it also attracts attention from peers who can view open reports.
As such there is growing support (and increased pressure) for employers to consider how they can operate their business in a manner which is as sympathetic as possible to ESG considerations. For example, businesses are responding to the challenge of climate change through finding innovative ways to reduce carbon emissions and increase sustainable practices, such as rethinking their use of disposable materials or increasing their use of green or public transport options. Doing so can however, create challenges from an employment law perspective.
So, to what extent can an employer require their workforce to comply with any ESG initiatives? A simple way to formalise a change to internal working practices is to introduce a new policy or to amend an existing one. This doesn’t require any explicit consent from your employees so is arguably the most straightforward way to set out your plans. The downside is that enforcing a policy can be difficult, so it might be preferable to instigate an update to contractual terms (this will be required in any event if the relevant policy is contractual in nature).
Updating contractual terms lawfully will involve a little more legwork than the policy option, including communicating the changes to your employees and getting their explicit consent. If they do not consent to the change, then their contractual terms will not technically have been updated because an employer cannot unilaterally enforce a change to contractual terms. Carrying out a short consultation process to engage employees with the proposed changes may increase the likelihood that you will get a high level of agreement to the updated terms.
More broadly, the increased focus on ESG agendas fuels the debate surrounding what is and is not a protected philosophical belief for the purposes of the Equality Act 2010 (the “Equality Act”). Where a belief is deemed protected under the Equality Act, individuals holding such a belief will be protected against discriminatory practices. For example, if an employee reasonably chooses not to comply with a policy because it would contravene their protected belief, an employer cannot compel that employee to comply without exposing themselves to the risk of a claim under the Equality Act being brought against them by the employee.
Where there could be some resistance to the implementation of policies, for example, if they arguably support some political agenda, the extent to which these policies risk straying into discrimination territory must be taken seriously. The Employment Tribunal has already considered the extent to which ethical veganism can be protected from discrimination in the case of Mr J Casamitjana Costa v The League Against Cruel Sports. In this case, ethical veganism was found, in a non-binding judgment, to be a protected philosophical belief. So, in a rather speculative way, it is possible that this shift in commercial focus could result in an increase in employment law developments.
An additional prediction, also related to ESG agendas, is the scope for protected disclosures (whistleblowing) to be made which expose employers’ “greenwashing”, i.e. insincere efforts to appear to be supporting a green agenda, or similar. It is clear that only realistic and genuine efforts, policies and contractual terms should be promoted, and equally, employers should be alive to the protections afforded to potential whistleblowers and to the correct way to respond when an employee comes to them with a potentially protected disclosure. Demonstrating ESG credibility through setting ambitious goals and having strong data-based credentials can help avoid charges like greenwashing – for example aligning your sustainability work with science-based targets, or another framework.
The current focus on ESG is leading many businesses into new territory in what is an exciting, yet challenging, time for employers. Developing ways in which your business and employees can do their bit to support sustainability and other ESG initiatives is an important role and one not to be shied away from. But, implementing these practices needs consideration and careful planning to reduce the potential risks.
If you wish to discuss the above in any more detail or have any other employment or HR law related issues, please contact Joe Beeston, Counsel, in our Corporate group.
Disclaimer
This note reflects our opinion and views as of 9 February 2022 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.
With 2022 well underway, you may want to keep an eye out for some of these anticipated employment law changes.
Firstly, there will be the annual rate changes in April. These will see a rise in the National Living Wage, the National Minimum Wage and National Insurance Contributions, as well as an increase to the statutory rates of pay such as maternity, paternity and sick pay. The rate changes always serve as a good prompt to make sure that all pay arrangements are up-to-date and in line with the statutory minimum requirements. The full list of revised rates is available on the gov.uk website and we have included a summary of the National Minimum Wage and statutory rate changes at the end of this article.
Later in the year, legislation which has faced pandemic-related delays will hopefully make its way through Parliament. Many of the expected changes will be captured in the Employment Bill, which, after being notably absent from the Queen’s Speech in 2021, will be considered “when parliamentary time allows”. The Employment Bill is due to include:
An attempt to encourage a greater work-life balance by introducing a day-one right to request flexible working. This is currently a right for employees with 26 weeks’ service only. The benefit of the right to make a flexible working request is that it must be considered by the employer following due process. A request can only be denied for one of eight reasons
Introduction of new statutory leave entitlements for carers as well as for parents with neonatal care obligations
Introduction of a new statutory right for those without a fixed working pattern to request a more stable or predictable contract, reasonable notice of expected working hours and compensation if work is cancelled on short notice
Extending existing redundancy protection measures that are available to employees on maternity leave from the point they notify their employer of their pregnancy until six months after their return to work. The proposed changes are now on their second reading in Parliament and will also apply to those taking adoption and shared parental leave
Establishing a single labour market enforcement body to bring together traditionally separate bodies with the focus on protecting workers’ rights, including holiday pay, sick pay and modern slavery.
Beyond these changes we also expect to see progression, if not confirmation, of the outcome of the consultations surrounding ethnicity pay reporting and disability workforce reporting. The consultation for disability reporting has gone live and the consultation period is open until 25 March 2022, welcoming comments from employers and employees on the possible benefits and problems which could arise from any reporting. The ethnicity pay reporting consultation period closed in January 2019, but the consultation paper is currently being considered. The outcomes of both consultations are likely to be published within the Employment Bill as well.
Similarly, the current gender pay gap reporting regulations are undergoing a government review, with particular regard being given to the effectiveness and necessity of the regulations. The review comes amongst critics’ opinions that the intended goals of the regulations may not have been achieved and on the other hand that the reporting could be enforcing an unnecessary burden on employers.
As well as bringing in the “new” it is forecast that some “old” will be revoked. Most notably we will start to see the lifting of temporary measures that were introduced to mitigate the problems posed by COVID-19. This will include lifting the short-form right to work checks and reinstating the need for employers to check original documentation or the prescribed online testing for those holding either a biometric residence permit, biometric residence card or frontier worker permit. In addition, employment tribunals are expected to move away from remote hearings and back towards traditional in-person hearings where possible.
Inevitably there will be developments throughout the year which we cannot yet anticipate, including any binding judgments given in the courts and tribunals. As always, we will keep abreast of any such developments and release updates on the most pertinent issues.
April 2022 rate changes
National Minimum Wage
Category of worker
2021/2022</span
2022/2023</span
Aged 23+
£8.91
£9.50
Aged 21 – 22 inclusive
£8.36
£9.18
Aged 18 – 20 inclusive
£6.56
£6.83
Aged under 18
£4.62
£4.81
Apprentice rate
£4.30
£4.81
Statutory rates
2021/2022</span
2022/2023</span
Statutory sick pay
£96.36
£99.35 per week
Statutory maternity, paternity, adoption and shared parental pay together with maternity allowance
£151.97
£156.66 per week
If you wish to discuss the above in any more detail or have any other employment or HR law related issues, please contact Joe Beeston, Counsel, in our Corporate group.
Disclaimer
This note reflects our opinion and views as of 14 January 2022 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.
Joe Beeston writes for CampdenFB on employment law for family businesses
9 November 2021
Views
Employment Counsel, Joe Beeston has authored an article for CampdenFB entitled ‘Get the basics right in family business employment law’.
“Family businesses often grow in an unstructured way, leading to a culture of informality. As a result, basic employment law documents can get overlooked and family members are not issued with employment contracts or subject to formal policies. This can leave the business exposed when issues arise as neither the business nor the family member have a ‘rule book’ to follow”.
In his article, Joe explains how to avoid clashing interests and deal with difficult situations, as well as highlighting best practice for future planning.
The full article can be read here. If you have any questions on topics raised in the article, or wish to seek further guidance, please do contact Joe.
Get your tips in order – new rules surrounding tips and gratuity payments for the hospitality sector
22 October 2021
News
In a world where cash payments are a growing rarity, practices around leaving a tip in recognition of good service in the hospitality sector are also changing. Customers are more frequently adding a gratuity at the point of payment when the card machine is presented to them. This is just one of the reasons why the UK government has deemed it necessary to review the way in which employers in the hospitality sector distribute tips, gratuity payments and service charges amongst their workers.
At the end of September 2021, the government confirmed its plans to introduce a package of measures to ensure that over two million workers in the hospitality sector are able to retain all of the tips, gratuity payments and service charges paid to them ; to enable these workers to receive “a fair day’s pay for a fair day’s work”.
The government has recently made several steps to protect and enhance workers’ rights and it seems that the onus for complying with this latest package lies predominantly with the employer. Employers will be required to:
have a policy in place stating how tips will be handled and distributed fairly, with no deductions (including deductions from card providers) other than tax and employee national insurance contributions; and
implement transparent and accurate record systems on how tips have historically been distributed to workers. These records must be provided to a worker within four weeks of their request to access them.
Failure to successfully adhere to the new statutory provisions will see aggrieved workers able to exercise their right to bring a claim in the Employment Tribunal for repayment of wrongfully deducted tips and gratuity payments. If a claim succeeds, the Employment Tribunal will also be able to issue a fine to the employer by way of penalty.
Commentary from business owners and employers in response to the announcement of the package is that, although willing to comply, challenges could arise when streamlining the handling of tips in a lawful way and is likely to require consultation with payroll providers and a revamp of commonplace practices of automated gratuity and service charges being applied at the point of card payment.
In the absence of a confirmed date for the measures to be implemented, now is the opportune time for employers in the hospitality industry to consider their current practices. This will reduce the risk of any costly penalties and avoid a last-minute scramble to become compliant when the statutory provisions come into force.
This note reflects our opinion and views as of 22 October 2021 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.
The Covid-19 pandemic created a perfect storm for the hotels sector and, despite ever improving signs of recovery, the resulting devastation will take time and innovation to repair. Unprecedented economic life-support provided by the UK government over the last two years has kept the gathering clouds at bay, but there could well be casualties in 2022 and beyond. This was the conclusion of a roundtable discussion hosted by Forsters on 10 November 2021.
In recognition of Disability Awareness Day on 12th September, we thought it a pertinent time to shine a spotlight on the current disability-related employment law hot topics.
Talking point – long COVID
One of the most prominent discussions at the moment is whether or not long COVID should be recognised as a disability within the meaning of the Equality Act 2010 (the “Equality Act“). The Trades Union Congress is, for example, of the view that is should be.
Recognition would enable those people who are suffering from the effects of long COVID to benefit from the protections afforded by the Equality Act, including the right not to be directly or indirectly discriminated against. Employers would also be obliged to make reasonable adjustments to enable an employee suffering with the condition to carry out their duties, such as amending their working hours and, perhaps, allowing them to continue working at home.
We are still understanding long COVID’s full effects and the question around whether the condition amounts to a “disability” has not yet been considered by the Employment Tribunal; consequently, the debate is currently centred on the interpretation of the statutory definition of a disability, which is: a physical or mental impairment which has a ‘substantial’ and ‘long-term’ adverse effect on the ability to carry out normal day-to-day activities. With the key symptoms of long COVID having been described as a cough, breathlessness, fever, palpitations, fatigue, cognitive impairment and joint pain, some have commented that these symptoms, particularly cognitive impairment, breathlessness and fatigue, could inhibit an individual’s ability to carry out day to day activities.
On this basis and until a definitive answer is given, employers should act cautiously if an employee is thought to be suffering from long COVID. As ACAS has suggested in its guidance: “it’s a good idea for the employer to focus on the reasonable adjustments they can make rather than trying to work out if an employee’s condition is a disability”.
Government strategy – National Disability Strategy
Indicative of a continued intention to protect those who are classed, or who should be classed, as disabled under the Equality Act, the government published its National Disability Strategy in July 2021. This includes, amongst other points:
The intention to introduce access to work passports which would document an individual’s specific needs within the workplace in relation to their disability.
An employer and employee support hub in conjunction with ACAS, which would clearly set out the rights and obligations afforded to both individuals and organisations.
The possibility of reporting obligations, akin to those of gender pay reporting, to document an employer’s actions as well as their shortcomings in relation to accommodating disability within their workforce.
Tribunal judgment – who should make the adjustments?
Finally, a recent interesting judgment given by the Employment Appeal Tribunal in the case of Mallon v AECOM Ltd (2021), has stated that employers cannot take for granted the fact that a third party should have, or is likely to have, made reasonable adjustments which would otherwise have been made by the employer under its duty to make reasonable adjustments.
Key facts in the case focused on the employer’s assumption that a job applicant’s family would support him when making a job application, so the employer did not need to adjust their application process to accommodate his disability (dyslexia). Whilst the judge did not say that employers can never rely on a third party making adjustments, the overall message is clear – an employer must consider all the circumstances giving rise to the need to make reasonable adjustments and should not step away from this duty lightly. This is a useful reminder to employers to always consider whether adjustments need to be made to their application processes.
For more information, please contact Joe Beeston (Counsel) in our Corporate team.
Disclaimer
This note reflects our opinion and views as of 9 September 2021 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.
HR Issues in the hotel sector – Joe Beeston writes for Boutique Hotel News
6 August 2021
Views
Joe Beeston, Counsel in Forsters’ Employment team, has written an article for Boutique Hotel News outlining some of the issues faced by hotel HR teams as the hotel sector cautiously begins a return to normality following a turbulent couple of years in the wake of the COVID-19 pandemic.
The coronavirus pandemic has, without a doubt, reshaped our personal and professional lives. All industries and sectors have been affected in one way or another and are responding in different ways. Some areas of the hotel industry have taken steps which no-one could have foreseen just a few months ago. So, how is the hotel industry responding to the crisis, what measures and arrangements are being put in place and what are the longer term considerations for it?
With corporate activity starting to increase, we thought it would be useful to consider some of the key employment aspects that can arise on a corporate transaction.
How do staff transfer to the buyer?
On a share sale, staff will generally be employed by a target company and the employment contracts will simply remain with the acquired target company following closing; in practice, nothing really changes from the staff’s point of view. It is important, therefore, that parties check that employees are properly employed by the target company (and not, as is sometimes the case, another non-target group company for legacy reasons).
Where a business is being acquired by way of an asset sale, employees will usually automatically transfer to a buyer entity under what’s commonly referred to as “TUPE”. In practice, employees ‘attach’ themselves to the business and automatically move with it on their same terms and conditions of employment and maintaining their continuous service. There are also restrictions on the buyer preventing it from trying to amend their terms and conditions of employment and terminating their employment.
Where TUPE applies, it is important that both the buyer and seller comply with their respective duties under the TUPE regulations, which, amongst other things, requires them to carry out an information and consultation process with affected staff. This can involve consulting with trade union representatives (if applicable) or electing a body of employee representatives and can take around one month.
Identifying key employees
Identifying the key employees will be vital.
The seller will want to ensure that it has identified a key team who can assist with the sale and stay with the business so as to be attractive to a buyer (given their knowledge and connections). The buyer will want to ensure that it acquires a key team who are engaged and ‘locked-in’.
It is common for the key team to have retention arrangements in place to incentivise them to stay with the business and work for a minimum transition period. The buyer might also want to further incentivise them by agreeing a management incentive plan, such as shares or options in the target company.
In addition, a buyer will want to know the terms on which the key employees are employed under. It is important, for example, that key employees are subject to:
Sufficient termination provisions and notice periods.
Robust confidentiality and intellectual property provisions.
Post-termination restrictions (e.g. Non-compete and non-poach provisions).
It is also important to understand what their commercial terms are (such as salary and agreed bonuses).
Where key employees do not have appropriate employment contracts in place, it is common for the parties to agree that new contracts are signed at closing.
Departing senior employees
It is often the case that senior employees and directors leave the business as part of a corporate transaction. In those circumstances, having them sign standard waiver and release agreements (under which they release any employment claims (such as for unfair dismissal)) is a good idea.
General employment issues
Through the due diligence process, it is important for the buyer to understand the general employment position to identify any claims and potential liability. This will include understanding:
The general terms on which employees and consultants are employed or engaged.
Any special arrangements, such as enhanced redundancy pay rights and contractual bonuses
Whether there are any recognised trade unions and, if so, what the relationship between the unions and the target business are like.
Whether there are live HR issues or live or threatened employment claims.
Whether the target company has utilised any government schemes during the COVID-19 pandemic (such as the furlough scheme) and, if so, the way it has used them.
It is important that these risks and liabilities are mitigated (to the extent commercially possible) through warranties and indemnities in the transaction documents.
Transition arrangements
It can often be the case, especially in the context of a “carve-out” deal, that the target business receives services from a central seller support function. This can typically include HR support, IT support and finance. The buyer will likely want the target business to continue to receive such support for a period after closing to allow it to make its own arrangements. Thought will need to be given as to how this support shall be staffed. It might be the case that support staff who are solely dedicated to the target business will transfer to the buyer at closing and such staff will therefore need to be seconded back to the seller to provide the transitional support.
Overseas employees
Where a business has employees based in other jurisdictions, it is important to take local advice. For example, in the US and in many Asian countries, there is no equivalent to the TUPE rules; therefore, if the transaction is structured as an asset sale, those employees will need to accept new employment contracts with the buyer and consideration will need to be given as to how any severance payments that are triggered as a result of the technical dismissal and rehiring are dealt with.
In addition, some countries (especially in Europe) have far stricter information and consultation requirements, including on share acquisitions. In France, for example, a business’ works council must be consulted about any proposed acquisition and given a one- to three- month period in which to pass its opinion: this often needs to happen before any transaction document is signed.
If you have any queries about this article or employment law in general please contact Joe Beeston, Senior Employment Associate, in our Employment team.
Disclaimer
This note reflects our opinion and views as of 9 November 2020 and is a general summary of the legal position in England and Wales. It does not constitute legal advice.
Many employers have sadly needed to make redundancies in recent months due to the pandemic and with the Coronavirus Job Retention Scheme coming to an end at the end of October 2020 and the new Job Support Scheme only filling part of the void, this trend will likely continue. This article provides a useful summary of the key considerations for employers who are contemplating a headcount reduction.
From growing a business to starting a family or handing over control of that business to the next generation, every individual has their own goals to aspire to. Our Private Wealth lawyers advise our clients throughout this family life cycle, providing the legal advice required for specific transactions such as purchasing a home or selling a business, whilst also advising on the long-term opportunities for succession and estate planning.
