Changes & Developments: UK Employment Law 2012
By Ilana Swimer
Posted: 5th November 2012 09:02
Employment law is constantly evolving. As an employer you need to ensure that you are up to speed with developments and the consequences for your business. Ilana Swimer, employment solicitor at Halebury, discusses key employment law developments from 2012, what’s in the pipeline for 2013 and the commercial impact of these changes.
Key Legislative Changes From 2012
1. Unfair dismissal: employees employed on or after 6 April 2012, now require two years of continuous service before being eligible to issue an unfair dismissal claim. Employers have more time to consider whether an employee is meeting the expectations of the company and to deal with issues that arise.
Some employees may try to circumvent this change, bringing claims where no qualifying period of service is required, so it is essential that employers still follow the correct procedures when dismissing.
2. Pensions: Auto Enrolment
From 1 October 2012, large employers in Great Britain (120,000 plus employees in their PAYE system) are obliged to enrol eligible employees into a workplace pension scheme and make minimum employer contributions. This obligation on all employers will be phased in over the next five years, the timing depending on the employer’s size.
Ten Employment Law Cases From 2012
1. Accruing paid holiday during sickness absence
Employees who do not have the opportunity to take their annual holiday entitlement because they are on long-term sick leave are entitled to carry their unused holiday forward into the following holiday year and receive payment in lieu of untaken holiday when their employment terminates. (NHS Leeds v Larner)
There are practical steps that an employer can take to manage the impact of this decision, including ensuring that employment contracts and staff handbooks are as robust as possible to limit potentially large claims by sick employees for accrued but untaken holiday.
2. Post Termination Restrictions and Promotions
Employers who have recently promoted an employee (or are about to do so) should review any restrictive covenants contained in their contract of employment if they want them to be enforceable. Employers should consider whether the restrictions are reasonable and expressly restate and amend them as necessary to ensure they are appropriate for the employee’s new role. It is not enough simply to state that an employee’s terms remain unchanged. (Patsystems Holdings Ltd v Neilly)
3. Age discrimination and compulsory retirement age
The default retirement age of 65 has been abolished. Some employers are seeking to retain a compulsory retirement age, although to do so, the aim must be in the public interest, consistent with social policy aims of the State, appropriate and reasonably necessary. This is a tall order. (Seldon v Clarkson Wright)
4. Remunerationduring a phased return for disabled employees
Disabled employees only need to be paid for the hours that they work during a phased return provided that other part-timers are treated in the same way. There is no need to continue to pay the employee as though they are working full-time. (Newcastle upon Tyne Hospitals NHS Foundation Trust v Bagley)
5. TUPE – where a service provision change does not apply
Employees in strategic roles may not transfer under TUPE, as they may not be assigned to the service transferring. (Edinburgh Home-Link Partnership v The City of Edinburgh Council)
Also, TUPE may not apply where there has been a change in identity of the client and the service provider, for example, where a commercial property is sold. (Taurus Group Ltd v Crofts)
6. Harmonising terms and conditions of employment following a TUPE transfer
This is a tricky area. Following a TUPE transfer, even where other employees are being made redundant at the same time, and even if the proposals to harmonise terms and conditions are borne out of a necessity to save costs, dismissing employees for refusing to accept a pay cut and rehiring them on new terms will amount to an automatic unfair dismissal. Incongruously, this can mean that it is less risky for an employer to make employees redundant following a TUPE transfer than it is to try to preserve their employment, albeit on less favourable terms. (The Manchester College v Hazel)
For those employers considering redundancies/reorganisations, it is worth remembering that a requirement to reduce hours but not headcount can amount to redundancy. (Packman v Fauchon)
8. Social media
Employers are facing more cases of employees posting inappropriate comments on social media sites. Employers should have a clear policy on social media use (outside or during working hours) and be clear on potential consequences if it is breached.
9. Age discrimination – justifying a discriminatory act
Employers can use cost savings to justify a discriminatory act, provided that it is not the only reason and proportionate. The impact of this decision remains to be seen. (Woodcock v Cumbria PCT)
10. Hot off the press – equal pay claims
Equal pay claims can now be brought in the High Court for up to 6 years after the termination of employment, rather than six months (for Tribunal claims), which could mean a rise in the number of such claims in the coming months.
What’s In the Pipeline for 2013?
From March 2013, parental leave will increase from 13 to 18 weeks.
The Coalition Government is currently consulting on a number of initiatives relating to “Ending the employment relationship” (closing on 23 November 2012), including:
- ‘protected conversations’ - employers and employees can discuss terminating employment by agreement, without the risk of either side disclosing such discussions in tribunal proceedings. In practice, as the proposal does not apply to claims for automatic unfair dismissal or discrimination, or to any conversation the tribunal believes is “improper” (not yet defined), the significance is diluted.
- standard “settlement agreements” (currently compromise agreements) including a ‘guideline tariff’ on settlement payments. There is no proposal to change the requirement that the employee must obtain independent legal advice to validate the Agreement.
- reducing the cap on unfair dismissal compensation. Employers will welcome this change as it is widely acknowledged that the current cap of £72,300 leads to unrealistic settlement expectations, even though the current average award for unfair dismissal is only £9,133.
The government is also consulting about changes to TUPE and about changes to the tribunal rules, including the introduction of fees and filtering out unmeritorious or vexatious claims.
Reforms to executive pay aim to create stronger links between director’s remuneration and company performance by increasing shareholder voting rights and transparency in relation to director’s remuneration. The proposals are contained in the Enterprise Bill, due to come into force on 1 October 2013, although companies entering into or varying director contracts now should consider the proposals.
Redressing the gender imbalance on corporate boards is high on the agenda, with the European Commission considering possible legislative action. The Davies report recommends that FTSE 100 boards should aim for a minimum of 25% female representation by 2015.
And finally, George Osborne recently announced a controversial proposal for a new type of employment relationship: “employee owner”. Only brief details are available, but in exchange for relinquishing unfair dismissal, redundancy and other rights, employees would be given shares in their employer’s company that would be exempt from capital gains tax. The proposal is aimed at fast growing and medium sized companies. It is fraught with difficulties but watch this space.
Ilana Swimer is an employment lawyer at Halebury, an alternative legal practice. She has extensive experience advising a wide range of companies on all aspects of employment law including contentious, non-contentious and transactional matters, as well as providing day-to-day advice on best practice.
Halebury specialises in employment, commercial and corporate law within the technology, media, telecoms and sports sectors. Its team are experienced lawyers trained in leading City practices with a wealth of industry in-house experience.
Ilana can be contacted on +44 (0) 207 127 2500 and +44 (0) 7717 171658 or by email at firstname.lastname@example.org.