JULY 2012 // FOCUS ON: contemplating change and social media
AZETTE the quarterly newsletter of Floyd Graham & Co.
Lawyers for today’s employers
IN THIS ISSUE // CHANGING TERMS & CONDITIONS WHAT STEPS CAN YOUR BUSINESS TAKE TO AVOID LITIGATION?
THE FUTURE OF TUPE WE TAKE A LOOK AT HOW CHANGES TO TERMS & CONDITIONS CAN BE MADE AND THE FUTURE OF TUPE
UNDERSTANDING SOCIAL MEDIA
THERE’S NO ESCAPING IT, SO WHERE DOES YOUR COMPANY DRAW THE LINE?
Floyd Graham & Co Solicitors Lawyers for today's employers
2 Deanery Court Grange Farm Preston Deanery Northants NN7 2DT Email: firstname.lastname@example.org Tel: +44 (0)1604 871143 www.floydgraham.co.uk
CHAIRMAN'S VIEW Welcome to our summer edition of the FGazette! We say “summer” with a pinch of salt after the weather we have seen over the past few weeks and with hope that we will see some sun at some point again this season! The last 3 months have been extremely busy in employment law. We have seen two decisions made by the Supreme Court in relation to age discrimination. Of particular interest is the much publicised case of Seldon in relation to forced retirement. In this case, it was held that “inter-generational fairness” and “dignity” are legitimate reasons for forcing a partner in a law firm to retire. Employers and partnerships have welcomed this decision because it appears that in principle, employers can justify a compulsory retirement age in certain circumstances. The Supreme Court did not however assist with how an employee then goes on to justify a particular retirement age in their business; how this is done is still unclear. What is clear is employers will have to decide this on their own particular facts. No doubt, advisers and employers will learn more on the issue of whether particular retirement ages can be justified from future employment tribunal decisions. We will keep you updated on this particular issue. Aside from the Jubilee celebrations, the Queen also delivered her speech on 9 May 2012 at the State Opening of Parliament. Her speech confirmed amongst other things the Government’s commitment to reform employment law, overhaul the employment tribunal system and encourage earlier resolution of employment claims. Since this speech, the Government has published the Report on Employment Law by venture capitalist Adrian Beecroft. The Report makes for controversial reading with proposals for compensated no-fault dismissals, allowing
micro-businesses to “opt-out” of a selection of different employment laws, reducing collective redundancy consultation from 90 to 30 days and capping compensation for loss of earnings in discrimination cases. All of Mr Beecroft’s proposals are meant to address Britain’s “deficit crisis” and remove employment laws that “simply exacerbate the national problem of high unemployment.” Unsurprisingly, one of the main criticisms of the Report is its focus on employment law as the cause for the economic crisis when most employers are more concerned about access to finance or weak demand. Quite separate from the Report, the Enterprise and Regulatory Reform Bill has also been laid before Parliament. Amongst the initiatives to improve the efficiency of the employment tribunal system and encourage early resolution of the disputes, the whistleblowing legislation has also come under scrutiny. The government wants to ensure that any disclosure can only qualify for whistleblowing protection if it is made in the public interest. This would prevent workers relying on the legislation to ‘blow the whistle’ about a breach of their own employment contract. This has to be a welcome move as this loophole has been a ripe area for litigation over the last few years. Within this edition of the FGazette we discuss three topics which we find of particular interest: changing terms and conditions generally and also in the context of a transfer of a business or change in service provider as well as current legal decisions in relation to social media. As always, we would appreciate your feedback on the content and presentation of the newsletter. We also hope to see you at one or all of our forthcoming seminars.
IN THIS ISSUE // page 3 // fgC news page 4 // WHERE ARE WE @ WITH SOCIAL MEDIA? page 6 // CHANGING TERMS AND CONDITIONS page 8 // TUPE - TIME FOR A CHANGE? page 11 // brainteasers
MOCK EMPLOYMENT TRIBUNAL - AN OUTSTANDING SUCCESS The team at Floyd Graham & Co Solicitors are overjoyed at the success of the Mock Employment Tribunal which took place on 24 May 2012 at the Hilton Hotel. We would like to say a big thank you to all sixty companies that attended our Mock Employment Tribunal, especially given the glorious sunshine. We would also like to thank all of the attendees for their fantastic feedback that we received following the event, a sample of which
of detailed documents required before considering an “Realisation Employment Tribunal ” good value, our clients would like to see more of these “Excellent, ” Les Stringer, The White Company Limited
Hellie Baxter, ACS Recruitment
interesting, eye opening, thoroughly enjoyable “Very ” Hayley Swann, Opus Energy Ltd
FGC NEWs ranged from…
Finally, our thanks go to the Barristers from Ely Place Chambers including Michael Salter, Cath Urquhart and Aidan Briggs for their fantastic performances together with Clive Hodgkinson, Managing Director of C Butt Ltd and Gillian Rutherford, HR Consultant who posed as the Lay Members.
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THURS 05 JULY 2012 MANAGING REDUNDANCIES EFFECTIVELY FGC OFFICE 8AM - 10AM In today’s economic climate redundancy is likely to be an unavoidable consideration for employers. Planning and executing a successful redundancy exercise is essential if claims of unfair dismissal and discrimination are to be avoided. Our practical seminar will consider: • What is redundancy • Alternatives to redundancy • Creating an effective framework for managing redundancies • Consultation obligations – collective and individual • Selection of individuals • Payments outside the statutory requirements • Common mistakes • Dismissing with minimal risk and avoiding claims
To reserve your place at our ‘Managing Redundancies Effectively’ seminar e-mail firstname.lastname@example.org or call us on 01604 871143.
FUTURE SEMINAR dates for your diary 20 september 2012 06 december 2012
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WHERE ARE WE @ WITH SOCIAL MEDIA? like it or loathe it, social media is here to stay and there is no escaping it. On average in one year, we will share 415 pieces of content on Facebook, spend an average of about 23 minutes a day on Twitter, tweet a total of around 15,795 tweets*, not to mention all of the unmeasureable time spent emailing and surfing the internet. Social media is also used more and more for business purposes â€“ 2 out of 3 social media users believe that Twitter influences purchases, 50% of people follow brands in social media and 41% of the class of 2011 used social media in their job search*. The statistics are alarming and the use of social media for business purposes has also brought about its own challenges insofar as confidential information, business reputation and staff relations are concerned as can be seen from the cases discussed opposite: *Statistics have been obtained from the social SKINNY - thesocialskinny.com
It is clear that as well as being an effective communication tool, social media can also cause problems especially for employers where the line between personal lives and professional/work lives is not drawn. In the US, we have seen drastic action being taken by employers asking for candidatesâ€™ facebook passwords at interview. UK employers have already been warned against taking such action by the Information Commissionerâ€™s Office. There will no doubt be numerous cases on the issue of social media going forward. In the interim, employers should ensure that they confront social media issues head on as its use at home and work becomes ever more popular.
CHANGING TERMS & COND WHAT IF EMPLOYEES In this challenging economic climate, it is critical for businesses to be competitive and one way to achieve this is through cost reductions. Employees’ salaries and benefits constitute a major cost for most businesses. For example, increasingly commercial client contracts may only be attained at unprecedented low prices and, when this occurs, businesses can no longer justify the previous benefits and salaries agreed with employees. They therefore seek, or are forced, to change employees’ terms and conditions. But faced with the threat of employment tribunal litigation, what can employers do and how real is this threat?
The safest and most effective way of changing terms and conditions is usually to obtain employees’ consent to changes. However, this is not always possible, particularly if employees feel the change is so significant that it will cause them financial hardship. As a last resort, employers may decide to dismiss employees and offer to re-engage them on the new terms of employment. This is known as a unilateral variation of contract and carries the risk that employees bring unfair dismissal and/or wrongful dismissal claims. However, it is possible for employers to dismiss employees fairly in these circumstances and this was
re-iterated by the Employment Appeal Tribunal (“EAT”) in the recent case of Slade and ors v TNT (UK) Ltd (“the TNT case”). In this case an employer dismissed and offered to reengage employees on the same terms as previously, but without the bonus they had previously received. Even though the employer did not offer the “buyout” payment on re-engagement (which had been offered to reach voluntary agreement to the change), on the facts of this case, the EAT held that the employees were fairly dismissed for a “substantial reason”. Some of the main principles from this case are considered opposite.
DITIONS. DON’T CONSENT?
The fairness of any dismissal depends on the specific circumstances of the case and the EAT in the TNT case referred to the fact that there is no “one size fits all formulation”. Applying the principles below will assist an employer immeasurably, but we would strongly recommend seeking legal advice as to how these apply to the circumstances of a particular business.
What steps can employers take to avoid tribunal claims when unilaterally varying contracts of employment? Ensure there is a sound business reason for making the changes. For example, in the TNT case, reasons given for discontinuing the bonus scheme included that the employer believed it would reduce costs, only some of the employees were receiving it, and that the employer believed that the effect of the bonus was that certain workers were receiving 26% above market rate for comparable work. The employer also had proof that its operating profit had substantially fallen over a two year period and discontinuing the bonus scheme was an addition to other cost cutting measures.
Consult with employees. In particular, if 20 or more employees will be affected, the employer has an obligation to consult with unions and/or employee representatives under its collective consultation obligations if dismissal is a potential outcome. In the TNT case, the employer undertook extensive consultation with employees and unions over a number of months to attempt to reach agreement. During this consultation, the employer offered employees the opportunity to take a onetime lump sum in effect to “buy-out” the bonus. The employees eventually rejected this option and the employer then terminated their contracts of employment by issuing them with their contractual notice and an offer of re-engagement without the bonus and any “buy-out”. Employees argued that this was unfair and disputed the removal of the “buy-out” payment, but the EAT found that in the circumstances of this case, they were fairly dismissed.
If the business is seeking to impose pay cuts to save costs, a Tribunal may take into consideration whether the pay cut applies to all employees including management.
Serve employees with the correct notice. The notice period is usually contained in the contract of employment and varies according to the length of service and position of employees. If there is no notice provision in the contract of employment, and as a minimum in any event, employees should receive 1 week’s notice for each complete year of service, up to a maximum of 12 weeks. If incorrect notice is given, this could result in a wrongful dismissal and unlawful deduction from wages claims.
TIME FOR A CHANGE?
As we have seen in the previous article, employers may in certain circumstances be able to unilaterally change terms and conditions of employment with minimal risk of challenge in the employment tribunal if they act reasonably. The same cannot be said if an employer wishes to vary terms and conditions following a business transfer or transfer of services (out sourcing or in housing) in circumstances where the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) apply.
TUPE provides a layer of protection for employees, which in turn creates additional practical and legal difficulties for employers.
TUPE provides a layer of protection for employees, which in turn creates additional practical and legal difficulties for employers. The starting point is that all contractual variations are void if the reason for the change is due to either: (1) the transfer of a business or the transfer of services; or (2) a reason connected to such a transfer.
There is however scope for change in certain cases; contractual variations are permissible where the sole or principal reason for the change is either for:
• A reason unconnected with the transfer It is however often difficult to disconnect the proposed changes from the transfer.
• A reason connected with the transfer, which is an economic, technical or organisational reason entailing changes in the workforce (more commonly known as the ETO reason) An ETO reason is not defined under TUPE. Whilst an employer may be able to easily identify a relevant ETO reason it may not be able to satisfy the second part of the statutory requirement as there is no change to the workforce. Employers need to be able to show that the reason made it necessary to change the numbers of the workforce or there had been a significant change in job function or job description of those who have transferred.
The change is not connected with the transfer and can therefore be introduced unilaterally... Despite the reality being that there is limited opportunity to rely upon the exceptions, a number of myths have arisen around changing terms and conditions in the context of TUPE:
The business can impose contractual changes after two years...
This is a misconception. There is no set time limit following the transfer after which a change can be enforced without challenge. The passage of time between a transfer and the change may be indicative that there is no connection between the two but it is not the determining factor. There have been cases where a change has been found to be transfer related even after two years.
An harmonisation exercise is an ETO reason...
TUPE does not allow harmonisation of terms and conditions following a transfer. In addition, harmonisation will only be an ETO reason if there is also to be a change in the workforce either in size or function. On balance, relatively few contractual changes would involve such a change.
The change may be permitted under TUPE. This does not however mean that the change is lawful. An employer is still expected to follow a reasonable and fair procedure when making any changes. This may involve as a minimum individual as well as collective consultation with trade union representatives or employee representatives, potentially under both the TUPE and collective redundancy consultation regimes, with a view to reaching agreement.
The future for TUPE
What is clear is that the employment tribunal will closely scrutinise any contractual changes where there has been a transfer of business or service provision change. Employers will need to ensure that they maintain a clear audit trail to explain the reasons behind any changes. Otherwise, they are unlikely to be able to resist any challenge to the changes. Undeniably, TUPE is complex and employers find that the lack of scope to implement contractual change can severely hinder their need to maximise efficiency and profitability particularly in the current economic climate. All this may however be set to change.
The highly publicised and controversial Beecroft Report on Employment Law was published by the government in May. Its main call to action is for employment law to be simplified. TUPE did not avoid Beecroft’s scrutiny and various recommendations have been made: •
employers should be able to enforce harmonised terms and conditions on the workforce one year after the transfer; and
• there should be greater clarity over the ETO reason. Whilst the Beecroft Report is controversial and many doubt that a simplification of employment law will open up the labour market and contribute to economic growth to the level the government believes, a review of the TUPE legislation is not a bad thing. If the legislation is changed then ultimately employers may have greater flexibility and confidence about their obligations and employees’ rights when acquiring businesses or contracting to provide services. The government is already ahead of the game as consultation on its Call for Evidence about the effectiveness of TUPE closed on 31 January 2012. The responses are currently under consideration. Public consultation will follow if a need for change is identified. We will let you know of any further developments in future briefings.
legislation timetable Enterprise and Regulatory Reform Bill 2012-2013 Proposals for: • A duty on the parties and ACAS to attempt pre-claim conciliation • Introduction of “legal officers” to determine certain proceedings with all parties’ consent by way of a so-called “rapid resolution” scheme
THE COMMITEE STAGE COMMENCED ON 19 June, 2012 AND IS EXPECTED TO REPORT BACK BY 17, JULY 2012
• Additional powers for the Secretary of State • The imposition of financial penalties to be paid by losing employers into a Consolidation Fund • Changes to the definition of “protected disclosures” so that in relation to whistleblowing, there would be a requirement that the qualifying disclosure is made in the public interest
200 days to go – ACAS helps employers prepare for the Olympics 2012
Guidance for employers on their legal obligations to employees who wish to fulfil volunteering commitments at the 2012 Olympics
Sunday Trading Legislation Allows for Sunday Trading during the Olympics and reduces the notice workers need to give if they wish to opt out of Sunday working during this period
Pensions Act 2008: auto-enrolment For employers with 250 or more employees on the PAYE scheme on 1 April 2012, employers will be required to automatically enrol workers who meet specific criteria into workplace pension arrangements under the auto-enrolment regime. These pension arrangements will need to meet minimum standards and employers will be required to make contributions in respect of eligible workers
01 october, 2012 to 01 february, 2018
EMPLOYMENT LAW QUIZ
Check your level of employment law knowledge with our quick quiz on some areas we have touched on in this edition of the FGazette: 1. When considering redundancies, in which one of the following circumstances must an employer consult with employee representatives and notify BIS? a) When an employer proposes to make redundancies of 10 or more employees within a period of 30 days or less. b) When an employer proposes to make redundancies of 20 or more employees within a period of at least 100 days. c) When an employer proposes to make redundancies of 20 or more employees within a period of 90 days or less. d) When an employer proposes to make redundancies of 10 or more employees within a period of 90 days or less.
2. Which one of the following is a correct statement of an employee’s minimum statutory notice period? a) An employee with 10 years’ service is entitled to 3 months’ notice. b) An employee who has passed their probationary period is entitled to 4 weeks’ notice. c) A senior executive is entitled to 6 months’ notice. d) An employee with 5 years’ service is entitled to 5 weeks’ notice.
3. What is the maximum total compensation (basic award and compensatory award) an employee with 20 years’ service can be awarded if they bring a successful unfair dismissal claim (and no other claims) in the Employment Tribunal? a) £85,200 b) £72,300 c) £68,400 d) £80,400
4. Which one of the following is not a potentially fair reason to dismiss an employee: a) The employee is a driver and has lost their driving licence. b) The employee’s job no longer exists because it is no longer economically viable for the company to continue carrying out the work of the particular kind that the employee undertakes. c) The employee has reached the age of 65 and so has been retired. The employer does not have a particular reason for retiring the employee at the age of 65, but it is in the employee’s contract that this is normal retirement age. d) The employee took money from the till to keep them going until pay day. They intended to put it back.
HAVE YOU GOT THEM RIGHT? answers below Answers: 1c, 2d, 3a, 4c. Congratulations if you answered 3 or 4 questions correctly! You appear to have a good understanding of employment law. If you answered less than 3 correctly, please do give us a call to discuss any areas of uncertainty.
SPOTLIGHT ON OUR SERVICES As a dedicated employment law and HR practice, Floyd Graham & Co Ltd provides the whole spectrum of HR and employment law services. The Spotlight feature gives us the opportunity to give you an insight into a particular service in each publication. In this edition of the FGazette, we would like to introduce you to Sentinel.
More and more of our clients are enjoying the benefits of Sentinel as it provides the complete HR and Employment Law compliance package for employers. We would be delighted to give you a live demonstration of this package. Connect with Floyd Graham & Co Solicitors To arrange a visit or for more information, please contact us on email@example.com OR 01604 871148 VISIT US ONLINE: www.floydgraham.co.uk
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