Employment Update, UK - February 2007

By Elizabeth Lang, David Samuels


New legislation

Increasing annual leave under WTR: further consultation

The Government has announced proposals to increase workers' holiday entitlement from 20 days per year to 28 for full-time workers, so that workers will also be paid for leave on the eight bank holidays per year. Under the proposals statutory annual leave entitlement would be increased in two stages, rising to 4.8 weeks (24 days) on 1 October 2007, and 5.6 weeks (28 days) on 1 October 2008.

Flexible Working (Eligibility, Complaints and Remedies) (Amendment) Regulations 2006

The Work and Families Act 2006 will give those who care for adults the right to request flexible working. The Flexible Working (Eligibility, Complaints and Remedies) (Amendment) Regulations 2006 have now been published, and will come into force in April 2007. They will amend the Flexible Working (Eligibility, Complaints and Remedies) Regulations 2002 to widen the existing statutory right to request flexible working to cover those who care for certain adults. The definition will be extended to include employees who care for their spouse, their partner, a near relative or someone who lives at their address. As a result of the width of this definition the Department of Trade and Industry (DTI) anticipates that 1.4 million carers will be eligible to request flexible working from April.

Rates of statutory payments and Tribunal Limits for 2007-08

HM Revenue & Customs has announced Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Statutory Adoption Pay (SAP) rates for 2007-2008:

  • The flat rates of SMP, SPP and SAP will increase to £112.75 per week from 1 April 2007;

  • The flat rate of SSP will increase to £72.55 per week from 6 April 2007;

  • The Unfair Dismissal basic award has been raised to a maximum of £9,300 (the weekly rate being £310);

  • The Unfair Dismissal compensatory award has been raised to a maximum of £60,600.

National minimum wage enforcement policy published

In his Pre-Budget Report, the Chancellor announced that the Government will increase the resources devoted to national minimum wage enforcement. Employers who refuse to pay the minimum wage could now face a fine of at least £224.70 for defaulting on an enforcement notice which names one worker. The Government hopes that its policy will deter employers from failing to pay national minimum wage in the future, encourage employers to comply with an enforcement notice, and in doing so, persuade employers to pay arrears to workers.

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Case law

Exercise of discretion

McCarthy v McCarthy & Stone plc, heard in August 2006, confirmed that a company's discretion under an employee share scheme could only be exercised in accordance with the strict terms set out in the scheme rules governing exercise of that discretion, and the company was therefore not permitted to take into account the alleged misconduct of the optionholder.

A more employer-friendly decision followed in Commerzbank AG v Keen in October. The Court of Appeal emphasised the high hurdle that an employee will have to overcome to demonstrate that a discretion has been exercised irrationally or perversely. The fact that an employee has not been told the reasons for the exercise of a discretion or who has exercised it will be relevant but not determinative to the question of irrationality or perversity. The Court also found that section 3 of the Unfair Contract Terms Act 1977 does not apply to employment contracts. Although this is therefore an encouraging decision for employers, Takacs v Barclays Services Jersey Limited warns that employers are still at risk from claims that they have terminated employment to avoid their bonus obligations.

Agency workers: employment status

In James v Greenwich Council the EAT held that a tribunal was entitled to find that an agency worker supplied to the Council for some five years who had been treated in all other respects as a permanent employee was not employed by the Council. The EAT rejected the suggestion that the passage of time could lead to the inference of a contract of employment between an agency worker and an end user.

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Treatment must actually occur for the purposes of the SDA; claimants do not have to show intention to breach trust and confidence

In Baldwin v Brighton and Hove City Council the EAT considered the meaning of "treats" for the purposes of treating a person less favourably than a comparator under the Sex Discrimination Act 1975. It held that it is not sufficient to show that a respondent "would have" treated the claimant in a less favourable way, the treatment in question must actually take place. It also held that the authorities on the implied term of mutual trust and confidence established that it was enough for an employer's conduct to be likely to destroy trust and confidence; the employee did not have to show that the employer intended it to do so.

Court of Appeal confirms ambit of compensatory award

The Court of Appeal in Langley and Carter v Burlo upheld the view when assessing the amount of a compensatory award for unfair dismissal following summary dismissal tribunals should not reduce the amount of the award to take account of any earnings that the employee received from another employer during the notice period. However the Court of Appeal held that this could not be extended to create a wider principle that employees should receive full pay during the notice period when they would not have done so had they not been dismissed.

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Protective award should not be reduced by earnings during the protected period

Under the Trade Unions and Labour Relations (Consolidation) Act 1992 (“TULRCA”) employees are entitled to a protective award where their employer fails to comply with the obligations to consult on collective redundancies. The protective award is intended to be punitive. In Cranswick County Foods PLC v Beall the EAT considered employees' rights to a protective award where they remain in employment throughout the protected period. It held that TULRCA did not mean that the amount of the protective award should be reduced to take account of the remuneration that they received during that period. Therefore there will be some level of "double recovery" for those employees who remain employed through some or all of the period (but are subsequently made redundant).

Preparing to compete did not breach salesman's contractual or fiduciary duties

In Helmet Integrated Systems Ltd v Tunnard the Court of Appeal held that a salesman did not breach his contract nor any fiduciary duties, when he failed to inform his employer that he was taking preparatory steps to develop a product which he intended, following his resignation, to market in competition with the employer. The steps taken included obtaining funding from the DTI to develop the product, commissioning concept drawings and sending those drawings to his employer's rival (who later invested in the project). Although the employee was obliged under his contract to report any competitor activity to his employers, the Court of Appeal held that in the circumstances there was no contractual or fiduciary duty to report his own activities. The employers were therefore not entitled to an account of profits.

Reference to ECJ on "associative" disability discrimination will go ahead

In Attridge Law & another v Coleman the EAT is to ask the ECJ whether the Equal Treatment Framework Directive's provisions on disability cover "associative discrimination" (that is, discrimination against a non-disabled person on grounds of their association with a disabled person). It held that the Disability Discrimination Act 1995 would be capable of this and that the reference to the ECJ should therefore go ahead. The outcome of the case could have major implications for the scope of disability discrimination law in the UK.