Riam wins

14 08 2009

I was pleased to learn that Riam Dean, the law student who sued Abercrombie & Fitch for wrongful dismissal and unlawful harassment (because of her disability) won her case at the London Central Employment Tribunal.  According to The Independent today, she was awarded £7,800 compensation for injury to feelings, £1,077.37 for loss of earnings and £136.75 damages for being wrongfully dismissed.  It is reported that she did not succeed with her claim for “direct” disability discrimination which the ET thought was “not well founded”.   I would be interested to read the law report on this case, if it ever gets published, for the reasoning behind the decision. I’ve posted before on the case (click here).

It’s always good to see the style police take a battering.

Bonus Rage and Clawbacks

5 08 2009

Unusually for an August the topic of bonuses is back in the news pages.  This isn’t surprising given that the recession has been firmly blamed on reckless bankers supposedly taking unnecessary risks to generate huge returns that almost led the banking system to collapse last autumn.  Both Barclays and HSBC have announced huge profits for the last six months.  In Barclays case it was £3bn up 8% on the equivalent period last year, and the comparable figure for HSBC was £2.8bn.  Both banks also revealed that they were making massive provision for bad debts.  Bob Diamond, the head of Barclays Capital (BarCap) was on the front page of The Independent on Tuesday, where it was reported that he had received a remuneration package in excess of $50mn at the height of the boom.  The Independent also reported that the “average net income generated per member of staff” at BarCap had increased from £134,000 to £193,000 per member of staff in the last six months.   The FT also reports today that a US hedge fund group called Och-Ziff, based in the US made a loss of $88.3mn because of a 74% increase in bonuses paid to its top traders.  At the Dale Langley & Co website we recently posted on the steps the FSA are taking to try and restrict remuneration packages – click here to visit.  The government, the FSA and the public are all determined to stick the boot in.

Much of the anger generated over this issue has been stoked by the fact that the taxpayer bailed out the banking system to prevent its collapse. In the case of Barclays and HSBC, of course, they did not directly receive state funds but are judged to have been indirect beneficiaries of the taxpayers’ largesse.  If this wasn’t August we would, presumably be seeing the usual collection of hippies, anarchists and eco-warriors calling for bankers to be strung up from the nearest lamp-post (where are they – visiting their holiday squats in Tuscany?)  The central issue is how do you balance the need for restraint with incentivising employees to produce the goods?   Some much needed perspective on the whole issue was provided by Sean O’Grady writing in today’s Independent (click here).   He calls for “sensible, intelligent rules” to govern remuneration packages and deplores the hypocrisy that sees people calling for bankers to hand back their bonuses:  “if you or I were offered a £25mn bonus, we wouldn’t hand it back.  Nor would we say no to the taxpayer paying for a second home, as our MPs did”.  Good performance should be rewarded appropriately.

This of course is the nub of the matter as far as employees (and employment lawyers) are concerned.  Over the years I have seen many people who are unhappy with the annual bonus they have been awarded and I’ve written before on the difficult legal issues that arise when it comes to challenging a bonus (click here).  In recent months with all the redundancies occurring, perhaps not surprisingly, it has become less and less common for employers to make any sort of payment in respect of bonus. When negotiating a contract of employment it is always worth trying to include provision for payment, or pro-rata payment, of the bonus that would have been received had the employee remained in employment at the payment date.

Repayment and clawback provisions in new contracts of employment are also becoming increasingly common, especially amongst those banks that have received state funds.  They will usually require that if performance (whether individual or corporate) does not match up to expectations then bonuses paid (including guaranteed bonuses) can be clawed back.  The period of time covered by the clawback can be quite lengthy, perhaps two – three years, meaning that the recipient employee can be left in some uncertainty about how secure the guarantee is. This is an issue that needs to be dealt with at the stage of negotiating the terms of the contract upon joining the business: it can sometimes be renegotiated to the benefit of the employee.   Just recently I have been instructed on a number of contract negotiations by employees who have secured offers of employment – evidence of “green shoots” perhaps?   – and some of the sting of the clawback was removed.

Further advice on swine flu

28 07 2009

Personnel Today, a very useful website for HR and employment law matters has published  an article on what steps employers can take – click here to visit it.

There are also RSS feeds so you should have no reaosn not to be fully up-to-date!

More on Swine Flu

28 07 2009

Well, since I jumped on the Swine Flu bandwagon with my post last week, I thought I better stay there for a bit longer. 

In that post I wondered just what precautions an employer could be expected to take to avoid the risk of being found liable to an employee for contracting swine flu at work (always assuming that it could be proven that the infection was picked up in the workplace).  My view then (and now) is not much, beyond promoting good hygiene and not insisting on ill employees coming into the office to spread their germs.   Business Link, the organisation for employers, has provided guidance on their website – click here to go to the site.

It’s all good stuff and makes a lot of sense from the real threat to employers – business continuity.  How do you run your business if half your staff are off ill?  That is the real concern; not the prospect of increased lawsuits.

Swine Flu – should employers worry about being sued?

23 07 2009

Thanks to Annabel Kaye of Irenicon (@AnnabelKaye) for bringing the article in MailOnline to my attention, via Twitter.  The full article can be found at http://www.dailymail.co.uk/news/articles-1201371/Bosses-risk-lawsuits-staff-swine-flu  .  Apparently, according to the Mail, employers need to be getting worried about the risk of being sued by employees who catch swine flu from doing their jobs .  The article quotes  lawyers and other commentators who  point out the risk of increased litigation.

Whilst some employees may try it on and threaten their employers with claims in most cases they won’t get off the ground and, like Annabel, I don’t buy the need to panic. In her tweet she made the very cogent point that the employee would have difficulty in proving where they contracted swine flu.  For an employer to be at risk of being successfully sued for personal injury arising out of contracting swine flu at work, the employee will have to jump through the following hoops;

  1.  The employer was in breach of their duty of care to the employee in  not taking reasonable steps to reduce the risk of contracting the virus
  2. The employer’s breach of duty caused the employee to have swine flu
  3. As a result the employee suffered personal injury


Whilst there are undoubtedly steps that can be taken to minimise the risks of it spreading (like good hygiene practices) etc   the main reason why employers won’t be taken to the cleaners on this one is because of (2) above – causation.  How is an employee to prove that they contracted the virus at work as opposed to on the train/tube/bus or the gym or from the kids (or the kids’ friends) or the other parents waiting at the school gates, shopping mall etc?  The list of potential sources is endless.  Just because a customer/colleague might sneeze in your general direction (try saying with a French accent for the full Monty Python effect) will not be enough to persuade a wizened County Court District Judge to enter judgment.   

I am also sceptical about what steps an employer can take to reduce the risk – providing soap/antibacterial gel in offices and cleaning phones and keyboards are about the only steps I think an employer can reasonably be expected to take.  Getting staff to work from home might not be possible – for how long?  I’m all for flexible working practices where reasonably required but how long do you send staff home for – months?  Separating desks – so what?  (why do I keep thinking of the Titanic’s deck chairs?) ; switch off the air-con? Now you’re talking, let’s hope we don’t have a heat wave.  A court asked to consider the issue of breach of duty (1) above will want to consider what steps an employer could reasonably have taken to reduce the risk. That won’t include taking steps that will shut the employer’s business down.

 Finally, even if an employee could overcome the first two hurdles, the amount of compensation they would receive for an unpleasant illness that lasted a week/ten days would not be great, probably not more than £1000, which is the minimum limit for Claimants recovering their legal costs plus compensation in the County Court, below that the cases aren’t financially viable for lawyers to get involved. If someone developed secondary problems consequent upon the swine flu then the level of compensation might be higher, but it is all very tenuous.  For this reason the no win no fee merchants won’t get involved.   If a privately paying client came to me and said they wanted to sue their employer because they got swine flu I would tell them to think again, and carefully.

I don’t want to seem flippant about swine flu, or underplay the risk it poses.  It is clearly, for some people, a very nasty, indeed fatal, illness.  But, as Corporal Jones used to say “Don’t panic” and articles such as this one in MailOnline only serve to whip up anxiety, but that’s what the Daily Mail is for, isn’t it?

BA is in the news again …

24 06 2009

BA has been in the news … again and, as usual, for all the wrong reasons. The company formerly claiming to be the world’s favourite airline has now asked 40,000 of its staff to not just take a pay cut but to work for nothing for a month to ensure the company’s survival.  Now there’s an enticing offer … not.

The offer to staff involves them either working without pay for up to one month, or taking unpaid leave for that time.  The deduction would then be taken out of their salary over a period of three to six months.  Willie Walsh, BA’s Chief Executive, has agreed to take zero pay for July but as his monthly salary is reportedly £61,000  he will have enough saved up not to need to worry about how to pay the milkman. I did hear on the radio (although I haven’t found it again in print anywhere) that some of the affected pilots were being offered equity in the company to make up for the shortfall, which could be a good bet, but why isn’t it being offered to all staff? 

Enough of this: what should an employee do when faced with this dilemma? Very few employees love their jobs enough to want to work for nothing.  On the other hand if accepting a temporary moratorium on pay would prevent redundancy then the issue gets more complicated. Even if true, will the salary sacrifice make much difference? Many of those affected will already be hard pressed paying their mortgages and credit card bills. Will building societies and credit card companies also agree to a reduction in payments to them? My guess is no. If I were an employee of BA my first thought would be to assess whether I believed Willie Walsh when he said that the company’s future was at stake.  On balance, BA should probably be applauded for trying to find a solution other than just slashing headcount.

The legal issue is really the same as I discussed in my earlier posts on pay cuts vs. redundancy.  An employer faces some tricky legal issues when proposing a pay reduction or, as here a complete pay cut. An employee, if not persuaded by management’s declarations of poverty, could claim constructive dismissal if the pay cut is implemented without their agreement.  Under contract law, any unilateral variation of the terms of a contract is a breach of contract.  When, as here, the term in question is fundamental to the very essence of the contract, a breach can be said to be “repudiatory”, meaning the employee can treat him/herself as being released from all obligations under the contract if he/she chooses to do so.   

An employer would be well advised to consult with employees if it wants to impose a pay cut or pay moratorium.  If more than 20 employees are involved then at least one month should be allowed for the consultation process, or three months if more than 90.  The reason for this is that if any employees don’t want to accept the proposed reduction, they could claim not only constructive unfair dismissal but also a “Protective Award” of one or three month’s pay depending on the number of employees involved. It follows from this that there is little or no difference, from an employer’s point of view, in conducting a redundancy consultation process or a pay cut consultation process. An employer that consults over a proposed pay cut will probably be able to demonstrate (to an Employment Tribunal) that it has tried to take all steps to avoid redundancies if that later becomes necessary.

The employer needs to move cautiously and carefully if it is to avoid claims by disaffected employees.  If any “sweeteners” can be given to staff (such as equity, or additional holiday) that is more likely to succeed.  If an employee refuses the pay cut/moratorium the employer could potentially dismiss that employee and state the reason for the dismissal as being “some other substantial reason”, which is one of the potentially fair reasons for terminating an employee’s employment under the Employment Rights Act, but a claim for unfair dismissal will probably follow if that employee has more than 12 months continuous employment experience.

Advice to both employers and employees: take legal advice before going down this route.  If anyone out there reading this works for BA please do get in touch and let me know your views and decision.

Monday musings

11 05 2009

Apologies for the recent silence.  Last week I took Mrs J. and the Junior Jobsworths to Southwold, Suffolk, for a brief holiday.  I had every good intention of posting whilst away but couldn’t get WiFi access.  I have to admit that I didn’t try that hard either. 

Without internet access I was a bit short on employment issues to write about, apart from the one emerging political story on MPs expenses as published by the Daily Telegraph. I have been particularly struck (like with a  cricket bat) by Hazel Blear’s defence of her own failure to pay Capital Gains Tax on a residence she sold on which she was claiming expenses.  She said (as all MPs seem to be doing) that she hadn’t broken any rules but the “system was wrong”.  No one seems to have asked her at what point she realised the system was wrong; perhaps it was when she was found out? Did it not occur to her at the point she elected to choose the London flat as her main residence for CGT but not for parliamentary purposes?  She must think the electorate is stupid.

Why I am posting on this?  Simply because in an employment context any employee doing the same would probably face disciplinary proceedings and a real risk of dismissal. If you want to get rid of an employee, take a look at their expense claims is what I was once told.  What has been happening in Parliament just demonstrates how out of touch they are there. 

Rant over.