Bonus Hysteria vs Expenses Sleaze

31 03 2009

The recent indignity suffered by Home Secretary Jacqui Smith over her husband’s viewing of two “adult” films, which she then submitted as part of her parliamentary expenses claim got me thinking again about the slightly older furore over Sir Fred Goodwin and his humungus pension, and the ongoing hysteria over bankers’ bonuses.  I posted a couple of weeks ago on why I thought it unlikely that Harriet Harman’s threat to take government action to recover Sir Fred’s pension would be successful.  In the meantime Congress in the USA has got itself worked up into  a  lather over bankers’ bonuses and is considering a 90% rate of tax on all executives (from those institutions receiving state bail outs, particularly AIG) receiving compensation packages in excess of $250,000. 

When I posted on the subject originally, I said I thought that the politicians were merely trying to deflect attention from their own  inability to actually take meaningful action to mitigate the effects of the recession.  Nothing that has happened since dissuades me from that view.  Indeed reports in the newpapers suggest that President Obama has been coming under some pressure to do something and there are signs that his honeymoon period may be drawing to an end.  A report in the Financial Times on the 27th last was headline “America’s liberal lay into Obama” and he was accused “of taking dictation from the same financiers who have brought the economy to the brink of depression”.  Some of the (American) people I follow on Twitter are also incensed by his actions (ok, that’s not representative I know but the mood of optimism that greeted his inauguration seems to have withered).  America’s liberals! Heaven help the man!

Politics is never an easy world and politicians will always be criticised whatever they do.  What irks me in with these two particular issues though is how politicians were calling, effectively, for the rule of law to be pushed aside so that valid contractual relationships between employer and employee could be set aside to satisfy the public call for bankers’ blood (and make the politicians look like they were doing something) when at the same time politicians dissatisfied with their incomes are loading their expense claims up onto the taxpayer  bcause they feel their salaries don’t compensate the sufficiently.  Jacqui Smith gets a salary of £141,000.  Her husband, who acts as her parliamentary aide, gets a salary of £40,000 (if the newspapers are to be believed).  She lives in her sister’s house during the week (and that has been the subject of criticism already)  and claims an allowance for that.  I have no issue with what her husband chooses to watch on TV (although I do wonder how stupid he must have been to submit the cost as an expense).  Jacqui Smith is not alone in having her expenses questioned – and no doubt we will be hearing a lot more similar stories in future  –  but I do have an issue with the hypocrisy of politicians (as a class) who criticise bankers for greed when their own actions don’t pass scrutiny. 

I’m not surprised; it was ever thus but let’s just bear it in mind next time Harriet Harman, Gordon Brown, Alistair Darling et al start singling out sections of the working population for special treatment.


Solicitors get it wrong too

27 03 2009

Of course they do I hear you shout.  In a recent case before the Liverpool Employment Tribunal a firm in Southport got themselves into a serious mess with the TUPE (Transfer of Undertaking (Protection of Employment) Regulations 2006.  TUPE, for those who haven’t had the misfortune to be acquainted with it, are the Regulations that protect employees when a business (“an undertaking” in the Regs) gets transferred from one business to another.  The Regs are very complicated and most employment lawyers, if being honest, would admit to loathing them.  If an employee is dismissed because of a reason connected with a transfer of an undertaking, TUPE provides that the dismissal is automatically unfair. 

What in fact occurred in this instance was that Barnetts won a contract to supply conveyancing services to the Britannia Building Society, in place of the firm then doing the work.  When the TUPE regulations were updated in 2006 one of the alterations was to allow “service provision changes” to be covered by the Regs.  This meant that if, for instance a local authority decided to outsource its school dinner function to a private company, the dinner ladies would TUPE across, thus preserving their employment rights.  It also applies to solicitors  and I am only surprised that more firms haven’t been caught by it before now.

In this case some of the employees who were transferring did not want to do so (because it meant moving to offices further away) and thus they claimed that the effect of the transfer was to repudiate their contracts of employment.  They brought claims for unfair dismissal against Barnetts, the new company and of the six employees that brought claims, two succeeded.  The two that succeeded were able to show that they were “assigned” to the Britannia work; their fellow claimants couldn’t. Both Barnetts and their predecessor firm agreed that TUPE didn’t apply; bad decision. 

This must have been something of a blow for Barnetts after the inevitable pleasure that would have ensued in winning the work in the first place.  The Tribunal hasn’t awarded compensation yet to the successful claimants but it will, no doubt, be fairly large and, on top of the amount of management time expended in defending the claims, will take the gloss off winning the Britannia work in  the first place.

The above article will appear in the “Docklands” and “Peninsula” newspapers week commencing 30th March.

Climate change – the new religion?

20 03 2009





Ark of the covenant


If there was any doubt that it was then it has been dispelled by a London Employment Tribunal recently.  The facts are interesting enough, but the point of law raised is potentially massive and may cause to happen what Judges fear more than anything else: the floodgates opening! Cue Biblical style disaster, get building the ark now! (Judges and lawyers always worry about “the floodgates” opening when there is a new development in law – it might mean a deluge of cases swamping the courts).

In this particular case, according to The Independent, one Tim Nicholson was employed by a company called Grainger plc, a property investment company, as their Head of Sustainability.  His job seems to have been to develop the company’s green policies and reduce its carbon footprint.  Grainger apparently had strong policies on corporate responsibility and the environment, albeit Mr Nicholson thought they were just for decorative effect.  When he tried to do his job and implement green iniatives he was met with resistance and obstruction. 

He was made redundant and claimed unfair dismissal.  Importantly, he also claiemd that he had been discriminated against because of his “philosophical” belief in climate change. He had made far reaching “green” adaptations to his lifestyle and practised what he preached.  He brought the claim under the Employment Equality (Religion and Belief) Regulations, which provide that a person shall not be subject to less favourable treatment on the basis of their religious or philosophical belief.  What is important in this instance is that a belief in climate change has not hitherto been afforded, officially anyway, the status of a philosophical or religious belief, although you might be forgiven for thinking that it had given the huge amount of publicity given to it.        The Regulations themselves do not provide a definition of what constitutes a religion or a philosophical belief. At a preliminary hearing the Employment Judge decided that Mr Nicholson’s green beliefs did come within the protection provided by the Regulations.

The important issue from the employment law perspective is the impact this could have upon claims.  We are not told for how long Mr Nicholson was employed by Grainger prior to his redundancy, but if he had less than 12 months continuous employment he would not be eligible to bring a claim for unfair dismissal.  However, there is no 12 month qualification period where the dismissal is alleged to have been on discriminatory grounds.  Secondly, claims for discrimination are not limited by the statutory cap on compensation (currently £66,200) that applies to unfair dismissal claims. 

This wasn’t the final hearing and no judgment has been given on whether Mr Nicholson was dismissed unfairly or discriminatorily.  There will probably be an appeal and I would be very surprised if this decision is not overturned at some stage.  Keep those floodgates closed!

Will SRP be increased?

18 03 2009

I ask this because a Private Members’ Bill, sponsored by Lindsay Hoyle MP, is currently making its way through Parliament.  Its aim is to increase the level of statutory redundancy pay given to employees with more than two years’ service from the current cap of £350 per week per complete year of service (or £525 per week for workers over 41) in to line with average earnings, as opposed to RPI with which it is currently linked. This would mean an increase in the cap  from £350 to £500/750. The award is made up to a maximum of 20 years’ service. Over the years it has fallen behind inflation and means that the maximum an employee made redundant at the moment  can receive (in the absence of a claim for unfair dismissal or an enhanced redundancy package offered by the employer) is a maximum sum of  £7,000 (for those under 41 at dismissal) or £10,500 for those over 41 (and thus would have to be 61 at dismissal with 20 years service to receive it).  In addition employees are entitled to be given their contractual, or statutory notice, and can be asked to work the notice, be put on garden leave for the duration or be paid in lieu. If an employee has less than two years service with an employer he/she is not entitled to any statutory redundancy payment, only to notice.

The Bill passed through its Second Reading last Friday but stands little chance of becoming law.  The Government and the Tories are against it because of the additional burden it would place on hard-pressed employers. The issue is causing dissension in the Labour ranks with allegations of dirty tricks being made against government whips (see the BBC’s report of the 13th March)  and angry denials from the government. 

Business groups have said that the Bill threatens firms that are already struggling and may put them out of business.  The effect of the increase would be to make the new maximum for workers under 41 from £10,000 to £15,000 for those with 20 years service over 41.  They are significant increases but unlikely, in my view, to topple otherwise surviving businesses over the edge into insolvency.  If it would then it seems probable that the business would be going under sooner or later anyway.  It should be remembered as well that those are the maximum figures and comparatively few people will qualify for the maximums.  

In reality, it means a bigger burden on the tax-payer because if the employer does become insolvent the employee will have to apply to the Redundancy Payments Office (aka the National Insurance Fund) for the payments.

Just to recap on that, the RPO pays out the following sums to employees left high and dry by their employer going bust;

1.  Up to eight weeks wages – unpaid wages, contractual benefits like commission and bonus & overtime

2. Up to six weeks accrued holiday pay for the 12 months prior to insolvency

3. Notice monies – for statutory minimum not contractual notice periods

4. A basic award for unfair dismissal (calculated in the same way as for SRP)

In each case a week’s pay is capped at the statutory maximum – i.e the £350/525 discussed above that may (but probably won’t) be increased by Mr Hoyle’s Statutory Redundancy Payment (Amendment) Bill.

It’s a very difficult issue at a time when everyone is struggling.  In the City most businesses pay out enhanced packages, perhaps based on one month’s salary per year, or maybe two weeks’ per year and if the Bill becomes law it will be academic for them, but certainly not for the many smaller businesses being crunched at the moment.

More on Sir Fred Goodwin

14 03 2009
Private Eye 14th March 2009

Private Eye 14th March 2009


I couldn’t resist putting this up. The debate about Sir Fred’s pension position rolls on and there’s plenty of material on other blogs about it as well as in the newspapers.  I had hoped someone somewhere would have picked up on my suggestion that he should hand his knighthood back (if not his pension for reasons i set out in my last post on the topic but I haven’t come across any comments so far.

A rant about Data Protection

13 03 2009

The recent uproar over the revelation that a company called The Consulting Association (TCA) maintained a blacklist of “problem” employees which it then passed on to construction companies, reminded me of the National Staff Dismissal Register set up in the retail industry last year and which I wrote about in these pages last October.  In that case Action Against Business Crime (AABC), a consortium formed between the Home Office (!!!)  and the British Retail Consortium, set up a scheme to share information between potential employers of details of employees dismissed for offences of dishonesty, but not convicted in the criminal courts of wrongdoing.  In other words if an employer dismissed an employee for theft or fraud they would then place that person’s details on the NSDR and thus make it much harder for them to get alternative work, at least within the retail sector.  At the time it was claimed that this didn’t breach the Data Protection Act (DPA), which claim I still find rather surprising.

What is so very different about TCA’s activities?   The Information Commissioner says that they have committed a serious breach of the DPA and could be prosecuted for failing to register itself as a data holder under the DPA.  The BBC reports that information passed on by TCA to its subscribers was highly prejudicial and personal, such as “Irish ex-Army, bad egg” and “ex-shop-steward, definite problems” and included people who had raised health and safety issues on construction sites and union membership.  These are all issues which are covered by legislation designed to protect workers.  For instance, if a worker is dismissed for belonging to a Union it will be an automatically unfair dismissal, as it will if someone is dismissed for raising health and safety issues.  Anti-discrimination laws prevent a person being discriminated against on grounds of nationality – and that covers recruitment of staff as well as not subjecting them to detriment when actually in employment.  What the TCA is alleged to have done is more extreme than the NSDR scheme, but the principal is the same – personal information is being disseminated about workers who have no knowledge of the disclosure or right of redress and without any safeguards in place on the accuracy of the information. These types of scheme need to be banned: they are a far more insidious threat to our personal liberty than the ubiquitous CCTV cameras that watch our movements wherever we go. 

“Usefully Employed” also posted an interesting piece on this very issue earlier this week – see the link to his blog on my blogroll.

This article will appear in the “Docklands” and “Peninsula” newspapers week commencing 16th March. 

The National Staff Dismissal Register

13 03 2009

A rather alarming new initiative was reported last week: the creation of the National Staff Dismissal Register, by an organisation called Action Against Business Crime (AABC), a consortium formed between the Home office and the British Retail Consortium.  It is a database for employers to share details on those staff dismissed (but not necessarily convicted in the criminal courts) for offences of dishonesty; e.g. theft, forgery, damage to company property and so on. According to the AABC’s own press release the register seeks to create a central register to cover those employees not convicted or cautioned for criminal offences. It appears that it is aimed at the retail industry at the moment, although it will almost certainly spread if successful.  It will go live this month.  Apparently it is not in contravention of the Data Protection Act.


This strikes me as being a very dangerous development.  What safeguards are there for employees placed upon it?    It means that unscrupulous employers, or those with a grudge against a former employee could put an employee’s name on the register and effectively stop them getting work in the future.  What about the old adage of being innocent until proved guilty?  This scheme is aimed at those people who haven’t been cautioned or prosecuted and thus haven’t had the opportunity to defend themselves.  It must also raise issues under the Human Rights Act.  I don’t condone workplace crime by any means, but this intrusive scheme can’t be the right way to address the issue.


This post first appeared in the “Docklands” and “Peninsula” newspapers last October.