Tag Archive: Changes

Employers need to review protection of confidential information as new European laws are approved to harmonise the protection of trade secrets

Employers need to be aware that the Trade Secrets Directive (TSD) was approved yesterday by the European Council, marking the end of its legislative journey in Europe. We can now expect to see its swift publication in the Official Journal, with entry into force 20 days later, with the impact that implementing legislation is likely to be introduced in each Member State by summer 2018. The aim of the TSD is to harmonise the protection of trade secrets across Europe and to make it easier for employers to adopt uniform business policies so that innovation and economic growth can be promoted. It will introduce a minimum level of protections, which can be supplemented by local laws.  Time will tell how each Member State will address this and employers should ensure they monitor progress to stay on top of the implications for their business.

The approval of the TSD comes at the same time as the US has brought into law the Defend Trade Secrets Act. This implements a federal basis for claims relating to misappropriation of trade secrets (for more on this, see our article, ‘Federal Trade Secret Bill signed into law‘). With the protection of trade secrets riding high in the international arena, directing attention onto this area, and gaining a full understanding of the implications of these new laws,  has never been more important for multi-national employers.

For employers in the UK (any Brexit aside) the imminent arrival of the TSD should serve as impetus to carry out a full review of how business assets, and confidential information in particular, are currently protected, with a particular focus on ensuring the requirements of the TSD are met. Whilst the TSD is potentially helpful in widening the scope of the commercial information which can be protected, failing to understand how to achieve this protection in practice, could instead lead to it being lost, with potentially devastating consequences for the business.

Here are the key issues for employers:

Meaning of trade secret

Under the TSD, a trade secret is information which is secret (in the sense that it is not readily known amongst the relevant circles); has commercial value; and, crucially, for which reasonable steps have been taken to keep it secret. The TSD’s specific focus on the reasonable steps which have been taken to protect the information is a change to the current UK regime, and should be a red flag to employers; unless employers can demonstrate those steps, protection of the trade secret may not be available.

Unlawful acquisition, use or disclosure of trade secrets

Trade secrets will be acquired unlawfully if obtained through unauthorised access to, or appropriation of, materials containing the trade secret, or through any conduct which is contrary to honest commercial practices. It seems likely that the meaning of ‘honest commercial practices’ will attract litigation. Use or disclosure of trade secrets will be unlawful if a person has acquired the trade secret unlawfully, or it is in breach of a confidentiality agreement, a contractual duty, or any other duty not to disclose the trade secret.

Whistleblowing

The TSD does not protect trade secrets where the disclosure of the information serves the public interest and reveals misconduct, wrongdoing or illegal activity. There are some differences to the current UK whistleblowing regime. Some potentially impact favourably on employers (eg it appears that actual misconduct etc has to be disclosed, rather than the worker simply having a reasonable belief that it exists); others less favourably (eg it appears there is no restriction with regards to whom the worker can disclose the information). However, the provisions lack clarity and it seems likely that they will be the source of litigation and references to the ECJ. This lack of clarity has also prompted the the Greens/EFA group in the European Parliament to launch a draft whistleblower protection directive, which has received cross-party support and is awaiting approval and proposal by the European Commission. As currently drafted, the draft whistleblower protection directive would set a minimum standard for whistleblower protection which affords more protection than many stand-alone whistleblower laws. However, this is only the beginning of a very long legislative process.

Sanctions

The UK will need to introduce provisions to provide remedies for unlawful acquisition, use or disclosure of trade secrets. The remedies must include interim injunctions, permanent injunctions and damages. It is also obliged to include sanctions, including the possibility of recurring penalties, for any person who fails to comply with an interim or permanent injunction.

In the lead up to the implementation of the TSD, employers should take the opportunity to carry out a thorough audit of the information which the business wishes to protect, and assess whether it meets, or could potentially meet, ‘trade secret’ status, in particular by reviewing the steps which are in place to protect it. Employers should carry out a review not only of existing contractual provisions and policy documents, but also the current tangible, physical protections of confidential information, and the training which staff have had in this regard.

Also, with the launch this week by the Government of its call for evidence into the impact of non-compete restrictions, protection of business assets looks set to be a key issue for employers throughout 2016 and beyond.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/employers-need-to-review-protection-of-confidential-information-as-new-european-laws-are-approved-to-harmonise-the-protection-of-trade-secrets/

Be Aware review of the year 2015

Adam Hartley, Partner and UK Employment Group Head, highlights the most important legislative and case law developments from 2015 and identifies the key developments to watch out for in 2016 in the annual Be Aware review of the year.

 

2015 LEGISLATION ROUND UP
Employment tribunals
5 April 2015 Cap on a week’s pay increased from £464 to £470.
5 April 2015 Unfair dismissal compensatory award increased from £76,574 to £78,335 (or 52 weeks’ pay whichever is the lower).
28 October 2015 HMCTS has developed a simpler and faster fee remission process in the employment tribunals. Under the new scheme, which is called “Help with Fees applicants self-assess their eligibility for fee remission and are no longer required to submit paperwork in support of their application. Instead, HMCTS check directly with the Department for Work and Pensions whether an applicant is eligible for fee remission. .
Family friendly
5 April 2015 Shared parental leave came into effect in respect of parents expecting a baby, or matched for adoption, on or after 5 April 2015. It allows employees to share up to 50 weeks of leave.
5 April 2015 Statutory maternity, adoption, paternity and shared parental pay increased from £138.18 per week to £139.58.
Increased rights for adopters: Removal of 26 service requirement for adoption leave, statutory adoption pay brought in line with statutory maternity pay. Adoption rights extended to adoptions from outside the UK.
5 April 2015 Age of child for the purposes of entitlement to unpaid parental leave increased from 5 to 18.
Modern slavery
29 October 2015 The government made two sets of regulations relating to the Modern Slavery Act 2015 (MSA). Their combined effect is to require commercial organisations to prepare an annual slavery and human trafficking statement for each financial year ending on or after 31 March 2016 in which their total turnover is above £36 million. The regulations are:The Modern Slavery Act 2015 (Transparency in Supply Chains) Regulations 2015: Section 54 of the MSA requires commercial organisations to prepare a slavery and human trafficking statement for each financial year in which their total turnover is above the prescribed amount. These Regulations set the amount of total turnover at £36 million. They also provide that total turnover will be determined by taking into account the global turnover of the organisation and its subsidiary undertakings (see section 1162 of the Companies Act 2006 for the meaning of “subsidiary undertaking”). The total turnover includes the amount derived from the provision of goods and services falling within the ordinary activities of that organisation and its subsidiary undertakings, after deducting trade discounts, value added tax and other taxes.The Modern Slavery Act 2015 (Commencement No. 3 and Transitional Provision) Regulations 2015: These bring section 54 into force on 29 October 2015. There is a transitional provision which provides that the requirement only applies in respect of financial years ending on or after 31 March 2016.The Home Office has also published guidance on the content of the slavery and human trafficking statement.For more information see our Be Aware alert.
National minimum wage
26 May 2015 Maximum penalty per worker for failure to pay the NMW increased to £20,000.
Zero hours contracts
26 May 2015 The Small Business , Enterprise and Employment Act 2015 brought into force a ban on exclusivity clauses in zero hours contracts. For more information see our Be Aware alert.

 

2015 CASE LAW ROUND UP
Agency workers
Coles v Ministry of Defence (EAT) The EAT upheld a tribunal’s decision that the scope of regulation 13, Agency Workers Regulations 2010 is limited to providing agency workers with a right to be informed of vacancies within the end user company. It rejected arguments that agency workers were entitled to be afforded equal status with comparable permanent employees in being considered for a vacancy. In dismissing the appeal, the EAT declined to make a reference to the European Court of Justice regarding the interpretation of the Temporary Workers Directive.
Annual leave
Lock v British Gas Trading (ET) The week’s pay provisions of the Employment Rights Act 1996 should be re-written for the purposes of the WTR and that commission and other similar payments are included in holiday pay.
Patterson v Castlereagh Borough Council (NICA) The Northern Ireland Court of Appeal held that there is no reason in principle why voluntary overtime should not be included in statutory holiday pay for the purposes of the Working Time Regulations (Northern Ireland) 1998 (which are substantively the same as the Working Time Regulations 1998). It will be a question of fact for each tribunal to determine whether or not overtime is “normally” carried out and whether overtime pay can properly be described as forming part of “normal remuneration” for these purposes. The court did not reach a decision on whether voluntary overtime should have been included in this particular case.
Plumb v Duncan Print Group Ltd   (EAT)  The Working Time Directive does not require workers on sick leave to demonstrate that they are physically unable to take annual leave in order to carry over accrued unused statutory holiday to a subsequent leave year. It is sufficient that they are absent on sick leave and do not choose to take annual leave during that period. However, the EAT also held that the right to carry over leave is not unlimited; the Directive only requires (at most) that workers on sick leave can take annual leave within a period of 18 months of the end of the leave year in which it accrues. The parties have been given leave to appeal to the Court of Appeal.
Data protection
Schrems v Data Protection Commissioner (ECJ) The ECJ gave its preliminary ruling to the Irish High Court that a decision adopted pursuant to Article 25(6) of the Data Protection Directive, like the Commission Decision on the EU-US Safe Harbor framework, does not prevent a national supervisory authority of a member state from examining the claim of a person concerning the protection of his rights and freedoms in regard to the processing of personal data relating to him, which has been transferred from a member state to a third country when that person contends that the law and practices in force in the third country do not ensure an adequate level of protection. The ECJ has also declared Safe Harbor invalid. For more information see our Be Aware alert.
Discrimination
Doran v Department for Work and Pensions (EAT) Employer’s duty to make reasonable adjustments not triggered where such employee had not given any sign she would be returning to work.
Land Registry v Houghton (EAT) An employer discriminated against disabled employees by operating a bonus scheme which did not pay out to employees who had received a warning for high levels of sickness absence, where the warning led to automatic disqualification.
Begum v Pedagogy Auras UK Ltd (EAT) The EAT upheld an employment tribunal’s judgment, that a nursery did not discriminate against a job applicant when it made clear at interview that its uniform policy meant that any garment worn should not present a tripping hazard. This was not a provision, criterion or practice which indirectly discriminated against Muslim women who wore jilbabs (a garment which covers the body from neck to ankle). The nursery allowed women to wear ankle-length jilbabs, so long as they did not present a tripping hazard.
Mbuyi v Newpark Childcare (Shepherds Bush) Ltd (ET) An employment tribunal held that a Christian nursery employee was directly and indirectly discriminated against by her employer on the grounds of her religion or belief when it dismissed her for expressing negative views about a colleague’s homosexuality. However, the employee’s claim of harassment was not upheld because the tribunal found no evidence that the conduct was unwanted by the employee, who welcomed the opportunity to discuss her religious beliefs.
Home Office (UK Border Agency) v Essop and others (CA) The Court of Appeal gave guidance on how a tribunal should approach the requirement in indirect discrimination claims for claimants to show not only group disadvantage caused by application of a provision, criterion or practice (PCP), but also that this caused their personal disadvantage. In doing so, the court disagreed with the EAT’s decision that claimants do not have to prove the reason why they have suffered disadvantage from a PCP.
Metroline Travel Ltd v Stoute UK (EAT) The EAT allowed an appeal against a finding that an employee with Type 2 diabetes was disabled for the purposes of the Equality Act 2010. The employee followed a diabetic diet designed to avoid sugary foods such as fizzy drinks. The tribunal held that this was equivalent of a medical treatment, and that without the treatment, the employee’s condition would meet the definition of a disability. The EAT disagreed, finding that mere abstention from sugary drinks could not be regarded as a “diet” and therefore could not constitute “treatment”. As such, Type 2 diabetes, in itself, does not amount to a disability under the Equality Act 2010.
CHEZ Razpredelenie Bulgaria (ECJ) A person may claim indirect discrimination under the Race Directive even though they do not possess the protected characteristic which has given rise to the discriminatory practice in question. An individual may suffer disadvantage alongside a disadvantaged group without sharing the characteristic of the group. This is contrary to the UK position.   Although the decision relates to the supply of goods and services, it has far-reaching implications for discrimination in an employment context. The concept of “associative discrimination” established after Coleman can no longer be regarded as confined to direct discrimination law. For more information see our Be Aware alert.
Thompson v London Central Bus Company Ltd (EAT) The EAT considered a claim of victimisation based on protected acts performed by a third party. It held that the tribunal had erred in conducting an assessment of the degree of connection or association between the individual and the third party. The appropriate test was whether the employer subjected the claimant to a detriment by reason of the protected acts of others. For more information see our Be Aware alert.
FOA, acting on behalf of Karsten Kaltoft v Billund Kommune (ECJ) The ECJ held that there is no general principle prohibiting discrimination on the grounds of obesity but obesity may fall within the definition of disability if it entails a limitation resulting from long-term physical, mental or psychological impairments which, in interaction with various barriers, hinder a worker’s full and effective participation in their professional life. For more information see our Be Aware alert.
Employment Status
Stack v Ajar-Tec Ltd (CA) A shareholder and director who provided work to a company informally and received no remuneration was an employee.
Employment tribunals
(R (Unison) v Lord Chancellor (CA) The Court of Appeal dismissed the challenge brought by Unison against the introduction of fees in the employment tribunals and the EAT. For more information see our Be Aware alert. Unison has sought permission to appeal to the Supreme Court. In the meantime, a formal review on the impact of tribunal fees by the Ministry of Justice is underway with completion of the review expected later in the year.
Redundancies
USDAW and Wilson (the ‘Woolworths’ case) (ECJ)Lyttle and others v Bluebird UK Bidco 2 Ltd/Cañas v Nexea Gestión Documental SA (ECJ) The ECJ held that “establishment” means the local unit or entity to which the redundant workers are assigned to carry out their duties.
University College Union v University of Stirling (SC) The dismissal of fixed-term employees on expiry of their contracts falls within the definition of redundancy for collective redundancy consultation purposes. While dismissals related to the individual concerned fall outside the ambit of the obligations in TULRCA, these dismissals did not relate to the individual so were within scope. This judgment overturns the Court of Session’s decision, which agreed with the EAT that the dismissals were not for redundancy. As a result of the EAT’s decision, the law in Great Britain (but not Northern Ireland) was amended to expressly exclude employees on fixed-term contracts from collective consultation obligations so the decision is mostly of academic relevance.
United States of America v Nolan (CA) The Supreme Court upheld the decisions of the EAT and Court of Appeal finding that section 188 of TULRCA applied to redundancies at a US military base in the UK. The Court of Appeal had previously ordered a further hearing to determine the key point which arose in the case: whether the obligation to consult collectively arises when an employer is proposing to make a strategic business or operational decision that will foreseeably lead to collective redundancies, or whether that obligation only arises once the employer has made that strategic decision and is proposing consequential redundancies. That issue has now been remitted back to the Court of Appeal.
Territorial scope
Lodge v Dignity & Choice of Dying (EAT) An American citizen employed by a British company who worked remotely in Australia for family reasons was entitled to pursue unfair dismissal and whistleblowing claims in an English employment tribunal.
TUPE
E Ivor Hughes Educational Foundation v Morris and others (EAT) The EAT upheld a tribunal’s decision to make a 90 day protective award in circumstances where no consultation was undertaken because the employer was unaware of its legal obligation to consult. The EAT agreed with the tribunal that there were no special circumstances rendering it not reasonably practicable to comply with consultation requirements. It held that circumstances which may hypothetically have existed, but which were not in fact taken into account by an employer when considering the duty to collectively consult, were not capable of constituting “special circumstances”.
BT Managed Services Ltd v Edwards and another (EAT) An employee who had been off work for six years and had no prospect of returning to work was not “assigned” to an organised grouping for TUPE purposes. The employee’s only connection with the grouping was administrative: he remained “on the books” so that he could continue to receive permanent health insurance.
Unfair dismissal
Ramphal v Department for Transport (EAT) The EAT allowed an appeal against the decision of an employment judge that an employee had been fairly dismissed in circumstances where the investigating officer’s recommendations had been heavily influenced by input from HR. The investigating officer’s report originally recommended a finding of misconduct and a sanction of a written warning, but after numerous comments and amendments by HR, the final report found the employee to have committed gross misconduct, and recommended immediate dismissal. HR’s advice should be limited essentially to matters of law and procedure, as opposed to questions of culpability, which are reserved for the investigating officer.
Whistleblowing
Underwood v Wincanton plc (EAT)       A dispute between an employer and a group of four employees relating to their terms and conditions of employment was capable of being a protected disclosure, entitling them to seek protection against unfair dismissal under whistleblowing legislation. The employees had raised a collective complaint regarding the allocation of overtime. The EAT overturned a tribunal’s decision to strike out the claim and held that a dispute between employer and employee as to terms of employment is a matter capable of being in the public interest. For more information see our Be Aware alert
Working time
Federacion de Servicios Privados del sindicato Comisiones Obreras v Tyco Integrated Security SL (ECJ) The ECJ followed the Advocate General’s opinion by finding that the time spent by workers, who do not have a fixed or habitual place of work, on travelling each day between their homes and the premises of the first and last customers designated by their employer is “working time” for the purposes of the Working Time Directive. For more information see our Be Aware alert.

 

 

2016 LEGISLATION ON THE HORIZON
Apprenticeships
The Enterprise Bill will regulate use of the word “apprenticeship” to cover only government-accredited schemes and increase the number of public sector apprenticeships offered.An apprenticeship levy of 0.5% of payroll will be imposed on employers with an annual pay bill of more than £3 million but not until April 2017.
Equal pay
Mandatory gender pay gap reporting to be introduced. The Equality Act 2010 contains a power for the Government to introduce regulations which require employers of 250 or more employees to publish information showing whether there are differences in the pay of their male and female employees. In July 2015, the Government consulted on its proposals to introduce these regulations. The consultation closed in September 2015, and a response is expected imminently.The Government sought views on how the gender pay gap should be reported. It suggested, by way of example:

  • One overall gender pay gap figure that captures the difference between the average earnings of men and women as a percentage of men’s earnings;
  • Calculating separate gender pay gap figures for full-time and part-time employees;
  • Showing the difference in average earnings of men and women by grade or job type.

The Government also sought views on the frequency of reporting (which will be no more than annual) and on where the information should be published.

Rates and limits
National minimum wage

As part of the July 2015 Budget, the government announced that it would introduce a premium, over and above the NMW, for workers aged 25 and over. This is known as the National Living Wage. The government will set the first premium in April 2016 at 50p which will effectively result in a higher NMW of £7.20 for older workers.

SMP and other statutory payments

The Department for Work and Pensions has published proposed benefit and pension rates for the tax year beginning on 6 April 2016, including figures for Statutory Maternity, Paternity, Adoption and Shared Parental Pay, Maternity Allowance, and Statutory Sick Pay. Because of a 0.1% fall in CPI in the year to September 2015, there will be no increase to those payments (or the qualifying earnings thresholds) for 2016-17 and so the figures will remain the same as the current tax year.

Scottish devolution
The Scotland Bill 2015-16 will amend the Scotland Act 1998 and devolve various powers to the Scottish Parliament, including in relation to the administration and management of employment tribunals. The devolved powers will be limited to ensure that consistency in the practice and procedure between the Scottish tribunals and the tribunals in England and Wales is maintained, but it will potentially give the Scottish Parliament power to change tribunal funding or abolish tribunal fees altogether.
Termination payments
The Government is proposing substantial changes to the tax treatment of payments made on termination of employment. The key parts are:

  • Removal of the distinction between contractual and non-contractual payments – all payments will be taxable, subject to specific exemptions;
  • Alignment of the tax and NIC treatment; and
  • Getting rid of the £30,000 tax free allowance.
The Enterprise Bill will also impose a £95,000 cap on exit payments made to public sector workers.
Trade unions
The Trade Union Bill aims to reform various aspects of the law on industrial action and trade union obligations and activities. The proposed reforms include increasing ballot thresholds, extending the notice of industrial action required to be given to employers, introducing time limits on ballots and changes to facility time. The Bill would also introduce more stringent requirements for unions to supervise picketing. The Government is also proposing to remove Regulation 7 from the Conduct of Employment Agencies and Employment Businesses Regulations 2003, which prevents employers hiring agency staff during industrial action. The Bill is currently before the House of Lords.
Zero hours contracts
The draft Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015 were laid before Parliament in October 2015. The Regulations will give employees the right not to be unfairly dismissed or subjected to a detriment because they have breached a provision or purported provision of the zero hours contract to which section 27A(3)(1) of the Employment Rights Act 1996 applies – ie a provision which prohibits the worker from doing  work or performing services under another contract or arrangement.  Zero hours contracts are defined under the ERA as a contract of employment or other worker’s contract under which (a) the undertaking to do or perform work or services is an undertaking to do so conditionally on the employer making work or services available to the worker and (b) there is no certainty that any such work or services will be made available to the worker. There will be no qualifying period for the unfair dismissal claim. The Regulations will come into force 28 days after they are made – so the commencement date is not yet known.
Human Rights Act
On 17 October 2015, the Independent newspaper reported that the government intends to proceed with its introduction of a British Bill of Rights to replace the Human Rights Act 1998. A 12-week consultation is expected to start in December 2015 with a view to the new law receiving Royal Assent by the summer of 2016.

 

 

2016 CASES ON THE HORIZON
Annual leave
Lock v British Gas Trading Ltd (EAT) The EAT will hear the appeal on 8 and 9 December on whether the WTR can be read to provide that the calculation of statutory holiday pay includes commission where that forms part of a worker’s remuneration. Judgment is expected in early 2016.
Atypical workers
Moran and others v Ideal Cleaning Services Ltd and another (CA)  Whether the Agency Workers Regulations 2010 apply to a group of agency workers who were assigned to one hirer for periods ranging between six and 25 years.To float on 2 or 3 March 2016
Collective employee relations
British Airline Pilots’ Association v Jet2.com Ltd (CA) Whether an airline, on which the specified method of collective bargaining had been imposed by the CAC, was not required to negotiate with a recognised trade union over pilots’ rostering arrangements. To float on 9 or 10 November 2016.
R (Boots Management Services Ltd) v Central Arbitration Committee and others (CA) Whether the statutory union recognition scheme in Schedule A1 to the Trade Union and Labour Relations (Consolidation) Act 1992 is incompatible with the Human Rights Act 1998. To float on 22 or 23 November 2016.
Discrimination
Hainsworth v Ministry of Defence (Supreme Court) Can a reasonable adjustments claim be advanced by an employee who is not herself disabled, but is associated with someone who is disabled, in circumstances where the adjustment sought would enable the associated person with disabilities to undergo training/education?
Griffiths v Secretary of State for Work and Pensions (CA)  Whether the reasonable adjustments duty arises where a sickness absence procedure contained discretionary provisions which were more favourable to disabled employees. Judgment reserved on 22 September 2015
Whistleblowing
Chesterton Global Ltd (t/a Chestertons) v Nurmohamed (CA)  Appeal from the EAT which held that it is not necessary to show that a disclosure was of interest to the public as a whole, as only a section of the public will be directly affected by any given disclosure and that a small group may be sufficient. To float on 11 or 12 October 2016.

 

 

Permanent link to this article: http://www.dlapiperbeaware.co.uk/be-aware-review-of-the-year-2015/

Government launches consultation on changes to taxation of termination payments

The Government has launched a consultation process on proposed reforms to the way in which termination payments are taxed.  The proposals would significantly change the tax treatment of any payments made to employees on termination of their employment.

The current position

The current position is that, in general, any elements of a termination package that arise from the contract of employment (eg a contractual payment in lieu of notice) are subject to income tax and National Insurance Contributions (NICs). In contrast, any payments which do not arise from the employment (eg damages) are only liable to income tax on any amounts over £30,000.  Further, employer and employee NICs are not payable on these payments.  There are also various exemptions applying to termination payments which apply, even on elements over £30,000. These include payments made because of the death, disability or injury of an employee, payment under a tax exempt or registered pensions scheme, HM Forces payments and payments in respect of certain legal costs.

The purpose of the reforms

A termination package is typically made up of several different types of payment (eg damages, statutory redundancy payment, payment in lieu of notice). The Office of Tax Simplification has concluded that the tax system applying to these payments is “fraught with confusion and  uncertainty”,  and that it is unfair as it benefits those who are better paid and better advised.  As a result it has recommended that reform is necessary.  The Government agrees and is therefore proposing to create a regime which is intended to be easier for employers to administer and for employees to understand.

The proposals

The Government’s proposals include:

  • A new exemption for individuals who have lost their job through redundancy. An employee would need 2 years’ service to qualify for the exemption but the exemption would then increase proportionately with the number of years’ service an employee has completed, up to a prescribed maximum. The Government is seeking views on whether an individual’s redundancy would need to meet the definition in the Employment Rights Act 1996:
    • the employer ceasing, or intending to cease, to carry on the business for the purposes of which the employee was employed;
    • the employer ceasing or intending to cease to carry on that business in the place the employee was employed;
    • the requirement for the employee to carry out work of a particular kind of work has ceased or diminished or is expected to cease or diminish; or
    • the requirement to carry out work of that particular kind in the place where that employee was employed has ceased or diminished or is expected to cease or diminish.

It proposes, however, that voluntary redundancies would be included.

  • Removing the distinction between contractual and non-contractual termination payments. This would mean that all payments made in connection with termination of employment would be treated as earnings and therefore subject to income tax and employer/employee NICs.
  • No exemption would be available to employees who choose to resign and receive a payment from their employer for doing so. Further, the Government suggests that the exemption would not be available to employees receiving a termination payment at the end of a fixed-term contract, or where the custom/agreements is that the employment will end after a fixed period of time.
  • Any tax-free payment made would become taxable and liable to NICs if the employee is re-engaged to do a similar job for the same company or associated company within a 12 month period.
  • A new exemption for payments paid in connection with compensation for unfair or wrongful dismissal, or payments connected with discrimination awarded by a tribunal
  • The current exemption for payments in respect of injury or disability would be retained, as would HM Forces payments. The Government is seeking views on retention of any of the other existing exemptions.

The Government’s proposals mark a significant shift away from the current regime and potentially reduce the situations in which tax-free payments can be made to an employee on termination of their employment. In circumstances where tax-free payments may still be available eg in redundancy situations, the Government has not yet indicated what new tax-free threshold will apply but it seems likely that this will be much less than the existing £30,000. The fact that employees will need 2 years’ service to even qualify, and that the tax-free threshold will increase depending on years’ service, means that any future tax-free sums are likely to be significantly lower than an employee may currently expect. For employers, this may mean that it becomes more difficult to negotiate attractive termination packages with its employees, resulting  in protracted terminations and increased expense.

The consultation closes on 16 October and the progress of the Government’s proposals will be reported in future alerts.

 

Permanent link to this article: http://www.dlapiperbeaware.co.uk/government-launches-consultation-on-changes-to-taxation-of-termination-payments/

Government releases details of Trade Union Bill

With the disruption caused by last week’s tube strikes still fresh in people’s minds, the Government has today published a press release providing further details on its proposals for strike reform.

The proposals are in response to a number of strikes in recent years which have arguably caused significant disruption to business and consumers, despite, on the figures, not being supported by a majority of the particular workforce.  This situation has arisen because a lawful strike needs only the support of a majority of the workers voting, meaning that very low turnouts of voting workers can still result in legitimate industrial action.

The Government has now confirmed that it will introduce a Trade Union Bill which will implement:

  • A 50% threshold for ballot turn-outs;
  • An additional threshold of 40% of support to take industrial action in key public services such as education and transport;
  • A 4 month time limit for industrial action from the date of the ballot;
  • Changes to the ballot paper to give a clear description of the trade dispute and the planned industrial action;
  • A requirement for members to make an active choice of opting-in to contributions to political funds; and
  • Safeguards to ensure non-striking members of a workforce are able to continue work without intimidation.
  • The Government will consult on a number of its proposed measures including:
  • The proposed introduction of the 40% threshold for strikes in essential public services;
  • Reforming and modernising the rules and codes of practice on picketing and protests linked to industrial disputes; and
  • The repeal of a ban on the use of agency workers.

The consultation will open today and run until September 2015.

Trade unions are, unsurprisingly, highly opposed to the proposed reforms, stating that the proposals will make legal strikes “close to impossible”. UNITE has gone further and indicated this week that it has passed a motion to remove from its rule book the words caveating strike action, “so far as may be lawful”.

The real impact remains to be seen, however.  There is no doubt that the reforms will have a significant impact on sectors which have traditionally seen low levels of turnout, for example in essential public and civil services – where not only a 50% turnout but also a 40% threshold of support will apply.  However, whether this will lead to a reduction in strikes remains to be seen; given the potential sanctions for trade unions in relation to illegal strike activity, unlawful action seems unlikely, despite UNITE’s  amendment to its rules. Employers should, however, remain vigilant to potentially unlawful activity.  Where legal picketing is curbed, employers may see more ancillary protests where employers need to look more broadly at the laws of nuisance and other non-industrial torts, and become more creative about how they deal with concerted action by trade unions. Unions may also adopt a more militant approach in an attempt to galvanise the workforce into turning out and voting.  However, a number of sectors, such as transport, have historically had high levels of turnout in support of industrial action and would already meet the new thresholds. In the rail industry, RMT recently obtained a 60% turnout with an 80% vote in favour of strike action.  In practice, therefore, the impact of the new reforms may be limited in some sectors.

Where lawful strike action does take place, being able to use agency workers to cover striking workers may also not be the ideal solution it seems; this is potentially a piecemeal approach which does not adequately meet the needs of employers or their customers.  The outcome of the consultation on this will therefore be awaited with interest.

We will report on the progress of the Bill in future alerts.

 

Permanent link to this article: http://www.dlapiperbeaware.co.uk/government-releases-details-of-trade-union-bill/

Transparency in supply chains: The Modern Slavery Act 2015

Jonathan Exten-Wright, a Partner in our London office, comments: Worker welfare in global supply chains is back on the agenda.

While historically there were voluntary initiatives in “soft law” terms such as the UN Guiding Principles, which required multinationals to give this their attention, now there is a momentum towards compulsory reporting in non-financial narratives by major corporations. This will move forward in the EU with the coming into force by December 2016 of a Directive requiring some 6,500 companies to report on their human rights position, including labour matters.

In the UK, the landmark Modern Slavery Act 2015, which requires transparency, reporting and the taking of preventative steps in supply chains relating to forced labour and human trafficking, received Royal Assent at the end of March. This gives urgent legal force to addressing these issues.

From “soft law…”

Since the ground-breaking “Protect, Respect, and Remedy” Framework was adopted by the UN in 2011, companies are expected to respect human rights throughout their business operations.  The UN Guiding Principles (UNGP) detail how companies can know and show that they respect human rights in practice.

Companies are expected not only to avoid causing or contributing to adverse human rights impacts, but to address “human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts”.  Thus businesses have a responsibility to address adverse human rights impacts through their own activities and across the entirety of their value chain.

Suppliers represent a particular challenge for companies: adverse human rights impacts can occur at any level of a supply chain – from the bottom tier of direct or strategic suppliers, all the way through via multiple layers of sub-suppliers and sub-contractors, to those at the end of the supply chain that provide raw material inputs.

…to “hard law”

Under the Modern Slavery Act 2015, larger businesses with a certain level of turnover derived from their UK operations will be required to publish an annual slavery and human trafficking statement.  This will mean that any relevant commercial organisation in scope by virtue of the turnover definition – to be announced by the UK Government shortly -which supplies goods and services in the UK will need to report on what actions they have taken to ensure their supply chain is “slavery free”.  Businesses will need to describe the steps they have taken to ensure that slavery and human trafficking is not taking place in their supply chains or any part of their own business.  The statement will require director sign-off.

Because of the larger number of companies likely to be affected, this potentially has a much wider application than the strategic reporting requirements for quoted companies alluded to above.  The UK Home Office consultation into what size of company this new reporting requirement will affect closed in May 2015.  The outcome of that consultation will be published in advance of the commencement of the relevant sections of the Modern Slavery Act  which are expected to come into force in October 2015 (although this is yet to be confirmed by the Home Office). At that point we will know the full scale of the impact on businesses operating in the UK, with Government Guidance to follow.

The Modern Slavery Act also criminalises arranging or facilitating human trafficking or being an accessory to such offences.

For commercial organisations operating in the UK, these provisions have extraterritorial application.

Key points to note

So, what are the five key issues to know about the Act?

1.   Action will be expected

Businesses operating in the UK need to ensure their end-to-end supply chains are free from slavery. Taking its cue from Californian legislation, the Act will require businesses to provide a statement on the steps they are taking to prevent slavery and human trafficking in their supply chains and their own business.

2.  Ensuring transparency

The statement must be signed off by a director or equivalent and published on the company website to ensure senior management engagement and transparency.

3.   Embedded in law

The UK Government’s consultation as to which businesses will be in scope, using the measure of turnover, concluded on 7 May. The future Guidance is expected to cover the information to be included in such statements – including policies that are to be adopted, due diligence processes that could be used, how risk in a supply chain can be assessed and managed, training to staff, and monitoring. No longer about corporate social responsibility or brand protection, such transparency will be a legal requirement.

4.   Measuring effectiveness

Businesses should be looking at how they show they respect human rights and prevent human trafficking and modern slavery in their supply chains, the use of appropriate mechanisms to ensure adherence to human rights standards, and how they measure the effectiveness of the steps they are taking and report this back. Moreover, there is even the theoretical risk of being an accessory to criminal offences committed in the UK or overseas: this cannot be taken lightly.

5.   Integrating the law

Integrating human rights and labour issues into existing risk management processes, identifying material and salient risks, and revisiting sourcing strategy and supply chain management will be necessary. Businesses should be considering now how they plan to comply, prevent abuses, and report on their actions.

How we can help?

With so much at stake, companies and their directors need specialist advisors to help them navigate this new terrain. With leading labour law, human rights and regulatory and government advisory expertise, DLA Piper is well-placed to be your human rights trusted advisor. We have global reach and local knowledge of the salient risks which are pertinent to each jurisdiction, making us ideally placed to support companies during the complete life-cycle of human rights issues almost any business can face.

 

Permanent link to this article: http://www.dlapiperbeaware.co.uk/transparency-in-supply-chains-the-modern-slavery-act-2015/

New employment legislation on the horizon

Clare Gregory, a Partner in our Sheffield office, comments: On 27 May 2015 the Queen unveiled the Government’s legislative programme for the new Parliament, the first exclusively Conservative programme for nearly 20 years. This included a number of employment-law reforms, particularly in the fields of industrial action and immigration, none of which come as a surprise having been heavily trailed before and since the election.

The Trade Unions Bill will create more barriers for trade unions wishing to call a strike. First, more than 50% of a union’s eligible members must vote in order for the ballot to be valid. Second, if the strike affects “essential public services” at least 40% of those entitled to vote must be in favour of the strike. The Bill will also lift the ban on the use of agency staff to provide cover when strike action takes place. There is to be a new time limit on the ballot for industrial action and a promise to tackle intimidation of non-striking workers, although it is unclear how this would be done. The Government said the point of the bill was to “ensure that disruption to essential public services has a democratic mandate”. The Bill would also force trade union members to opt in if they want to pay a political levy.

An attempt to fulfil a Conservative manifesto promise to reduce regulation on small businesses, the Enterprise Bill would cap redundancy pay to public sector workers. The new Business Secretary Sajid Javid has said that the Bill also intends to “cut red tape for business by at least £10 billion over the next five years.” It is not clear precisely what red tape will be targeted, but the CBI is calling for further deregulation in the field of employment. Savid Javid has said, however, that he will not be going back to the controversial Beecroft proposals for no fault dismissals.

The Immigration Bill will create a new enforcement agency to tackle the worst cases of exploitation as well as creating an offence of illegal working and enabling wages to be seized as the proceeds of crime. Ministers promise to consult on the introduction of a new visa levy on businesses that recruit overseas labour to fund extra apprenticeships for British and EU workers.

More profound changes may ultimately result from the EU Referendum Bill which will set in law an in-out vote as to whether the UK should remain in the EU before the end of 2017. David Cameron has indicated that he is not necessarily looking for a EU exit, but continued EU membership is dependent on the UK negotiating more acceptable terms including reforms to support business growth and job creation and restrict EU migrants claiming benefits in the UK. An EU exit would provide the Government with more flexibility to make changes to employment laws such as TUPE and the Agency Worker Regulations.

Notably, the Queen’s Speech stopped short of a legislative plan to scrap the Human Rights Act, but it did confirm government plans to present proposals for reform. Human rights as set out in the European Convention have impacted the employment relationship; particularly the right to a private and family life; to freedom of thought, conscience and religion; to freedom of expression; to freedom of assembly and association; and the right not to be discriminated against. At this stage it is unclear how repeal of the Human Rights Act might impact on employment rights.

The day before the Queen’s speech, other employment law changes came into effect with little fanfare: Exclusivity clauses in zero hours contracts became unlawful as from 26 May.  This change, which was a key feature of the employment law reforms contained in the Small Business, Enterprise and Employment Act 2015, came into force 2 months after the Act was passed.

Under the new law, any clause in a zero hours contract which prohibits a worker from “doing work or performing services” under another contract, or prohibits him or her from doing so “without the employer’s consent”, will now be unenforceable by the employer. The new law has, however, been described as toothless by some commentators as a worker cannot currently claim detriment as a result of an employer trying to enforce such a clause. However, there is further scope under the Act for the Government to add this protection for zero hours workers.  Draft rules, which were attached to the coalition government’s response to its public consultation on the exclusivity ban earlier this year, have not yet been brought into force. These included a new right not to suffer any detriment should the workers take a job under other contracts and an extension of the scope of the exclusivity ban to workers on very low weekly pay/working hours. Until these anti-avoidance measures are in place, the ban will not create any meaningful protection for zero hours workers. However, it is likely to be only be a matter of time before this protection is introduced. Employers who operate zero hours contracts may wish to remove any offending clauses from their contracts in anticipation of this.

The government, in its response to the consultation on the new law, pledged to review and improve existing guidance available to employers and workers regarding zero hours contracts. Such guidance would help to correct the confusion which often surrounds the rights of zero hours workers, particularly in relation to working time and holiday pay.

The following employment-related provisions also came into force on 26 May:

  • Increase in the penalty which can be imposed on an employer who pays less than the National Minimum Wage; the maximum penalty is now £20,000 per worker, rather per employer; and
  • Provision giving power for the Secretary of State to make regulations to prevent discrimination by NHS employers against job applicants on the grounds that they appear to be NHS whistleblowers.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/new-employment-legislation-on-the-horizon/

Final employment law changes for this Parliament

Vinita Arora, a Partner in our London office, comments: On Monday 30 March 2015, Parliament dissolved and the period of pre-election purdah began, meaning that the government will be unable to make decisions or announce policies if they are likely to have significant effects or be politically contentious in the run-up to the election on 7 May. However, there is still time for one more round of employment law changes to take effect in April 2015:

Shared parental leave

The new system of shared parental leave will be available to parents of children due to be born or placed for adoption with them on or after 5 April 2015.

Adoption leave

With effect from 5 April, the requirement for 26 weeks’ service before employees become entitled to adoption leave is removed, and a new right is introduced for both single and joint adopters to attend adoption appointments together with protection against suffering a detriment or being dismissed in relation to exercising that right. Adoption leave rights are also extended to employees fostering a child under the “Fostering for Adoption” scheme.

Unpaid parental leave

Also with effect from 5 April, the current system of unpaid parental leave is extended to parents of children up to age 18 (currently only parents of children up to the age of five can take the leave).

Tribunal recommendations

On 6 April, employment tribunal powers to make wider recommendations in discrimination cases are removed.

National minimum wage consolidation

On 6 April, Regulations come into effect which consolidate the national minimum wage legislation.

These measures will bring to an end a five year period of significant change in employment law. What happens next depends on the outcome of the election but judging by the announcements already made by some of the main political parties, we can expect to see legislative proposals in relation to zero hours contracts, apprenticeships, equal pay and the national minimum wage. We will report on any developments as they happen on our On the horizon legislation tracker (pdf) which provides up-to-date information on key employment law changes and instant access to relevant legislation, including draft Bills.

 

Permanent link to this article: http://www.dlapiperbeaware.co.uk/final-employment-law-changes-for-this-parliament-2/

Milestone date for the UK’s working parents – 1 December 2014

In a significant move away from the tradition of birth-related leave being the preserve of a woman, from 1 December 2014, the UK’s new shared parental leave regime will, for the first time, allow parents to share up to 50 weeks’ leave. The new regulations apply to parents expecting a baby on or after 5 April 2015 as well as to adoptions and to employees who become parents through a surrogacy arrangement.

Sandra Wallace, the UK Employment Group Head, comments, “Today marks an exciting milestone in the development of family friendly employment rights in the UK. That excitement is, however, slightly tainted by the fact that the legislation enacting the new regime is extremely complex;   at the most recent count there were 22 sets of implementing regulations. The regime places onerous notification and other burdens on both employers and employees so, at first blush, the task of understanding and implementing shared parental leave may not seem straight forward. That said, if employers put  time into addressing the new requirements now and take some sensible preparatory steps, the new scheme is likely to run smoothly within their organisation. No-one is expecting an immediate rush of requests and it is anticipated that employee use of the new rights will gradually increase over the coming years. Our recommendation is that, as a starting point,  UK businesses should prepare by putting relevant policies in place (for example, a revised maternity policy and a shared parental leave and pay policy); by producing notification forms for their employees to use; and by producing guidance for managers on handling requests for shared parental leave. For further details see our previous post –  One month countdown to shared parental leave and our handy infographic.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/milestone-date-for-the-uks-working-parents-1-december-2014/

One month countdown to shared parental leave

Clare Gregory, a Partner in our Sheffield office comments: There has been increasing publicity recently about the new shared parental leave regime which will, from 1 December 2014,  for the first time, allow parents to share up to 50 weeks’ leave. This is one of the most radical of the Government’s recent employment law reforms and will undoubtedly have a significant impact on both employers and employees. It completely overhauls the existing system of maternity and paternity leave for those parents who wish to share leave with their partners.   Features of the new regime of particular note are that couples can take leave together or separately;   leave can be taken in a continuous block or in discontinuous blocks of one week at a time; and an employee can vary the leave dates they have requested up to a maximum of three times.

Most employers are already broadly aware that family-friendly rights are facing the biggest changes ever seen, however, many have yet to realise how soon they might feel the impact of the implementation of shared parental leave (SPL).  The majority of the new regulations will come into force on 1 December 2014 and will apply to parents expecting a baby on or after 5 April 2015.  This means that any eligible employees who have become pregnant since July 2014 or who become pregnant from now will fall under the new regime and be entitled to share up to 50 weeks’ leave.  There is therefore only a matter of weeks left to get systems in place. 

Employers should be taking steps to put in place appropriate policies and procedures so that they are able to inform employees about their rights and obligations. It will also be essential to train staff and managers on the new regime.  The legislation which has been published to date is complex and places onerous burdens on both employers and employees which means that understanding and implementing the new regime is not going to be straight forward. 

The top three areas we anticipate are likely to cause headaches for employers are:-

Enhanced pay

The new rights raise questions about how employers should deal with pay during shared parental leave, particularly where they offer a scheme of enhanced pay during maternity leave.  Addressing this appropriately will be key to maintaining good employee relations and ensuring that there is no discrimination.  However, the legal issues in this area are not straight forward and employers should therefore tread carefully in making any decisions.

There is the potential for direct discrimination in relation to pay if an employer offers an enhanced maternity pay scheme but does not mirror those provisions in a shared parental pay scheme.  Potentially a man on shared parental leave could seek to compare himself to a woman on maternity leave and argue that he is being treated less favourably because he is not entitled to enhanced pay.  This is a particular risk in light of the removal of the exclusivity of maternity leave for women – leave is now interchangeable after just 2 weeks which gives rise to the argument that a man taking SPL at any time after 2 weeks should be entitled to the same pay which a woman would receive if she was on maternity leave at the corresponding point in time.  There are also potential claims for indirect discrimination, for example if the shared parental pay policy disadvantages more men than women – which it may because women will have the choice as to whether to continue on an enhanced maternity scheme whereas men will not.

Discontinuous periods of leave

Under the new regime, employees will be permitted to request either a continuous period of leave or discontinuous periods of leave in blocks of a week at a time.  Where a request is made for a discontinuous block of leave,  the employer can either consent to the leave dates,  suggest alternative dates or refuse the request.   Employers should put in place rigorous systems for dealing with discontinuous leave requests as they are only given two weeks in which to consider/discuss the request with the employee.   Given this very short time period,  policies should specify exactly who such leave requests should be directed to in order to avoid the risk of a request languishing in a manager’s in-box and not reaching HR until the two week window has passed.  Further, any refusal of a request for discontinuous leave will have to be handled very carefully to avoid constructive dismissal claim and/or claims of discrimination where, for example, mens’ and womens’ requests are treated differently.

Communications between employers

There will there be no central co-ordination of how the 50 weeks’ leave is being shared between parents which has caused some employers to express concern that there is a risk of both parents taking time that amounts to over 50 weeks in total.

The Regulations which have been published do not provide for any communication between employers.  Instead, the provisions require each employee to comply with detailed notice and evidential obligations, in which they must provide information about, and include signed declarations from, the other employee. Each employee must also give the name and address of the other employee’s employer.  However, beyond this there are no provisions to facilitate communication between employers.    The notices to be given by each employee require them to tell their employer how much SPL is available and how much each parent intends to take.  As such, the system could be open to fraud but the Government considers that the system of notices and evidence proposed is sufficient to prevent/deter this.   

A suggested approach for employers is, as part of their implementation plan, to produce detailed notification forms for use by their employees which assist them to provide as much of the required information as possible.   Forms and policies should also make clear that the employer will rely on the provided  information;  that if any information is found to be untrue there is the risk of disciplinary action;  and also that the employer will share information with other employers if asked to do so.

 

Permanent link to this article: http://www.dlapiperbeaware.co.uk/one-month-countdown-to-shared-parental-leave/

What next for employment law post-referendum? And post-election?

Kate Hodgkiss a Partner in our Edinburgh office, comments: The people of Scotland have spoken, and the answer is No. No, at least, to independence; however, the three main Westminster political parties were forced to make substantial concessions regarding further devolution of powers to the Scottish Parliament in order to secure the No vote which raises questions over the potential implications of so-called ‘Devo Max’ in the field of employment.

Employment, benefits, social security and immigration are all matters currently reserved to the UK Parliament but whether this will remain the case when further powers are devolved is up for grabs. Gordon Brown’s speech for the Better Together campaign the week before the referendum, in which he pledged a 12 point plan for devolution,  included employment rights amongst those further powers that he believes should be devolved to Scotland.

A House of Commons debate on the 12-point plan is expected in mid-October and a draft bill will follow in early 2015. However, it is unlikely that amending legislation will be passed until after the General Election in May 2015.

Assuming employment rights does form part of the parcel of powers to be transferred north of the border, the main areas in which the SNP would look to make legislative changes are outlined in a White Paper published in November 2013. These include:

  • Worker representation on company boards;
  • Targets for greater representation of women on company boards;
  • Making the living wage and minimum wage central to their employment policies;
  • Guaranteed work, apprenticeship or training for young people under 24;
  • Restoring 90 days’ consultation in collective redundancy situations affecting 100+ staff; and
  • Abolishing the shares for rights scheme.

What if the SNP do not hold a majority in Scotland? If Scottish Labour were to be returned to power in the next Scottish Parliamentary elections, the leader of the Scottish Labour party has committed that the administration would abolish tribunal fees. This is further than the Labour party have been prepared to go south of the border; in a speech to Labour party conference the Shadow Business Secretary Chuka Umunna pledged to “reform the tribunal system so affordability is not a barrier to justice” which is vague but suggests rather less than complete abolition of fees. Labour have also pledged to abolish “exploitative” zero hours contracts and increase the national minimum wage to £8 by 2020. Also speaking at Labour party conference, Shadow Chancellor Ed Balls also pledged to scrap the ‘shares for rights’ employee-shareholder regime. The Labour party have not made any firm commitment in respect of the other policy areas on the SNP’s list. 

It remains to be seen whether it will be possible to deliver ‘Devo Max’ and what the constitutional landscape will look like once the dust settles. However, if employment law is devolved, depending on the outcome of the 2015 General Election, the result could be very different regimes for Scotland and England in some respects. This could lead to problems for employers operating in both England and Scotland. In particular, if Devo Max results in a situation where tribunal fees are payable in respect of a claim brought in England, but not in Scotland, this would likely lead to employees forum shopping.

Employment rights are unlikely to form the most significant battleground in the bunfight over increased devolution, but there will be implications for UK employers which will need to be closely monitored.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/16746/

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