Changes in Legislation

There are always employment law changes taking effect in April.  This year those changes include:

  • The introduction of the National Living Wage.  In reality, this is no more than an increase in the National Minimum Wage for those aged 25 and above.  The rate is now £7.20 an hour, with rather less for those under the age of 25 and apprentices.
  • An employer who fails to pay a Tribunal award or a settlement sum under an ACAS-brokered COT3 Agreement can now be subject to a Penalty Notice of 50% of the amount outstanding, subject to a minimum of £100 and a maximum of £5,000.  A little disappointingly, the money is paid to the Secretary of State and not to the successful claimant.
  • Tribunal limits have risen again.  The maximum compensatory award for unfair dismissal is going up to £78,962 (although, if lower, the maximum amount is 12 months’ gross pay).  The maximum figure for a week’s pay for the calculation of a redundancy payment or basic award for unfair dismissal increases from £475 to £479.

Tax

A couple of points of interest here:

  • An employee receiving a compensation payment (as distinct from a contractual payment) on leaving employment can take up to £30,000 tax-free.  The balance is currently subject to tax alone, but not National Insurance.  From 2018 the employer will have to pay National Insurance Contributions on the amount by which the payment exceeds £30,000.  There are also likely to be further changes reducing the scope to make tax-free payments.
     
  • In the tax case of Moorthy -v- HMRC the Upper Tribunal confirmed that no tax arose on compensation that the taxpayer received for discrimination that occurred before termination of his employment.  The tax-free limitation referred to above related only to compensation payable in respect of discrimination that arose from the termination itself.

Gross Misconduct

Two slightly contrasting cases:

  • In Stimpson -v- CitiBank (a case connected with the LIBOR scandal) the Employment Appeal Tribunal (“EAT”) found against the Bank, which had dismissed a trader for disclosure of confidential client information to traders from different banks, even though the Bank’s Policies and Codes of Practice prohibited such conduct.

    The EAT found that, applying normal unfair dismissal principles, the Bank should have carried out a reasonable investigation which would have revealed that there was, in fact, a culture of information-sharing between foreign exchange traders at different banks.
     
  • In the case of Metroline West -v- Ajaj, a bus driver claimed to be unfit for work although surveillance evidence proved that he was exaggerating.  Although the Employment Tribunal determined his unfair dismissal claim on the basis of his capability to return to work, the EAT took a different view.

    In a pleasing Judgment, the EAT held that an employee who “pulls a sickie” is dishonest, in fundamental breach of contract and commits gross misconduct.  As such, he was liable to be dismissed fairly without notice.

Restrictive Covenants

It is somewhat frustrating being unable to advise clients with any great degree of certainty as to whether the restrictive covenants to be included in their Contracts of Employment would, ultimately, be upheld by a Court.  The basic rule is that a clause in a Contract which seeks to inhibit an employee’s ability to follow his chosen trade, calling or profession would be void as a restraint of trade unless it went no further than was reasonably necessary to protect the legitimate interests of the employer.

In Bartholomews Agri Food -v- Thornton, the High Court found that a restrictive covenant was unreasonable and thus unenforceable.

One of the main arguments here was that at the beginning of the employment when the condition was first imposed, it was patently unreasonable.  At that point, Mr Thornton was a Trainee Agronomist with neither experience nor a customer base and the barring-out clause imposed on him at that point was manifestly inappropriate.

The Court went on to find that in any event the clause operated unreasonably but it is clear that the employer’s case was doomed from the moment the Contract was entered into.

The moral of the story must be to review restrictive covenants regularly and to ensure that they are appropriate for the particular circumstances of each and every employee they are intended to affect.

“Landmark Ruling on Holiday Pay”

In the January 2015 Newsletter I dealt with the EAT’s Decision in the case of Bear Scotland Limited -v- Faulton and, more particularly, the media reporting of it.  That case you will remember confirmed that holiday pay in respect of statutory leave had to take into account certain overtime payments and any directly linked allowances.

In British Gas Trading Limited -v- Locke, the EAT has applied that reasoning and determined that holiday pay in respect of statutory leave should also include results-based commission.

I have already had one client ask me about the application of this Judgment to his holiday pay arrangements and a close analysis of the contractual terms for the payment of commission indicated that he had no obligation to pay any more.  Based on this, it might be inappropriate to jump to any conclusions as to the effect of the recent case law on your holiday pay arrangements.

Office Move

We have been in our current Banstead offices for over 20 years.  However, on the weekend around 20th May 2016 we are moving to new premises at the other end of the High Street (above Pizza Express).  Those premises are more conveniently set out and obviously much more convenient for pizza deliveries.  Clients will receive a formal notification of the move nearer the time.

The new address will be Curzon House, 24 High Street, Banstead, Surrey, SM7 2LJ.  Telephone numbers will remain the same.  The next Newsletter will be sent from our new offices!

As always, these newsletters are only a guide to some changes in Employment Law.  They are by no means exhaustive nor an alternative to getting proper advice about your particular problem.  Please call me for more help on any employment matter.

With best wishes.

Yours sincerely


MALCOLM LAWRENCE

e-mail : mjl@copleyclark.co.uk