Things employers shouldn’t ask …

2 09 2009

Most people know that employers these days shouldn’t in job interviews ask women of child-bearing age when they intend to start a family.  Nor should they now ask potential employees how old they are.  The reason in both cases is that (a) it is usually going to be none of the employer’s business but, also, (b) it runs the risk of the applicant/employee later stating that the failure to appoint them was on discriminatory grounds. A report on the Personnel Today website from a few days ago questioned the wisdom of Cherwell District Council in asking employees to state whether they intended to retire in the next two or three years.  The Council is currently asking staff to work fewer hours or to work without pay to avoid the need for redundancies.  However, its request to staff to detail their plans and aspirations over the next two to three years could lead to them facing an age discrimination claim, suggests the article, if an employee could show that they were selected for redundancy because of their stated plan to seek retirement.  The same risk would apply if a woman stated she intended to start a family and was subsequently place “at risk”. 

The central difficulty in any such case is proving that the employer selected the employee for redundancy on discriminatory grounds.  I recently advised a client who was made redundant having advised his employer some months earlier that he intended to emigrate in a few years’ time.  He suspected that the employer therefore saw him as someone who wouldn’t be with the business long term and was this less likely to be as upset about having his employment terminated compared with someone who was, apparently, fully committed.  The employer, of course, denied that factor had played any part in their decision and the matter settled without Employment Tribunal proceedings.

Employers may see asking employees about their future plans as being a much easier way to select candidates for redundancy, but it is fraught with danger and may well embroil the employer in unwanted litigation if it took any action of any sort against the employee. Discrimination claims are not subject to the maximum cap on compensation that applies in unfair dismissal claims (and currently stands at £66,200). An employee who considers that their selection for redundancy was unfair can bring a claim for unfair dismissal (provided they have at least 12 months continuous employment experience of course) but that claim will be limited by the cap: not so with a claim based on discrimination as the reason for selection. Note to employers: just don’t do it.





Rolls Royce v Unite: an update

8 06 2009

On the 28th November last year I posted on the above case, which was heard in the High Court, on the redundancy criteria used by Rolls Royce when selecting candidates for redundancy.  Please see that post for more details of the criteria used.  The interesting point about this particular case is that it looked at the interplay between redundancy selection criteria and the Age Discrimination legislation.  Rolls Royce were seeking a declaration from the Court that their redundancy criteria, which added one point per year of service to individual employees’ scores (in addition to the scores they received for various other criteria) WAS in breach of the Age Discrimination regulations.  This is because employees with longer service would get more points and was thus indirectly discriminatory towards younger employees. 

The case then went to the Court of Appeal, which upheld the High Court’s decision.  The result of this case is that it is not a breach of the age discrimination to award employees points for length of service.    Those regulations do provide that an employer may justify a policy that is, on the face of it, age discriminatory, provided they can justify the reason for the policy.  The High Court viewed rewarding loyalty to longer serving staff and recognising that older employees would probably struggle more to get new employment than younger people as sufficient justification.

The rather unusual factor here was that it was Rolls Royce seeking to overturn its agreed redundancy policy and wanted the court to find that its policy was in breach of the age discrimination regulations.  The company clearly wanted more flexibility in being able to select candidates than its policy allowed and it was the Union that was defending the existing policy, which it had negotiated on behalf of its members in less difficult times. 

Ultimately this decision is probably going to be of limited value apart from in large companies that have collective agreements with their (unionised) workforces that have been in place for some time and pre-date the introduction of the Age Discrimination regulations in 2006.   In those situations it will be of help to the older worker.   Elsewhere the situation is likely to remain the same.  What this decision doesn’t allow is for older employees to claim positive discrimination in their favour.  The redundancy selection criteria used by employers is open to challenge in all cases, if an employee thinks they have been discriminated against on grounds of age (or other discriminatory factor) but this result is likely to be of academic interest only.    

 

It would, perhaps, have carried more weight if it had been the decision from the Court of Appeal following a case that had been heard before an Employment Tribunal and then the Employment Appeal Tribunal, rather than a rather “academic” analysis of the law by the High Court but, nonetheless, it is a useful addition to the employee’s (and Claimant’s solicitor’s armoury





Race Discrimination and Redundancy

5 06 2009

Two recent cases before the Suffolk ET highlighted the risks that employer face when making redundancies.  In this particular matter, Obikwu v British Refugee Council and Ukwaja v British Refugee Council (BRC), two (black) immigration workers were selected for redundancy by their employer, the BRC.  The ET found in favour of both workers in April 2008, but it was only in the last few days that Mr Obikwu’s remedies hearing took place which settled the level of compensation to be paid to him. Ms Ukwaja’s case was determined last January.

They both worked at the Oakington immigration centre in Cambridge.  Plans were announced to close it in May 2006 but were subsequently suspended.  However five months after the decision to close it was put on hold both of the claimants were made redundant.  Their departure removed the only two non-white employees from the staff at the building.  Not surprisingly, both brought claims for unfair dismissal and race discrimination. 

How did this situation arise?  The ET held that the manager in charge of selecting candidates for redundancy, one Anne-Marie Leech, had “subconsciously” favoured colleagues with whom she was friendly.  The Claimants alleged that she was “consciously biased” against them (although the ET rejected that allegation), which was probably not surprising because Ms Leech hosted a party at her house (to which the two Claimants were not invited) and none of those people who did attend were selected for redundancy. It’s not clear from the newpaper reports whether Mr Obikwu and Ms Ukwaja were the only employees made redundant, or just the only two ethnic minority employees amongst a wider cohort.  The ET Chairman noted that white workers with less experience were selected to remain in employment over the two Claimants.  In the circumstances it is not surprising that they both won.

There are two legal issues raised in this case.  One concerns the need for employers to have fair and reasonable (and objective) selection criteria when choosing which employees to select for redundancy.  If an employer fails to make an objective choice then the affected employee may have a claim for unfair dismissal (if they have more than 12 months continuous employment experience at the date of termination).  The maximum compensation that an ET can award for unfair dismissal is capped at £66,200 plus a basic award of £350 per year of service. However, and this is the second legal issue raised in this particular case, if the employer selects an employee for redundancy on grounds of their race, colour, nationality or ethnic or national origin that will amount to an automatically unfair dismissal.  An employee who believes they have been discriminated against on grounds of their race will probably be advised to bring a claim under the Race Relations Act 1976 for compensation because, unlike the compensatory award for unfair dismissal under the Employment Rights Act (ERA), that award is not capped.  That can lead to a very substantial award being made, because the ET can also award compensation for injury to feelings, as well as loss of earnings and other financial losses.  There is also no 12 month qualifying period required under RRA claims.  The employee cannot claim compensation under the RRA and a compensatory award under the ERA.

Mr Obikwu was awarded £65,475 for unfair dismissal, racial discrimination, psychiatric injury and loss of earnings.  I haven’t seen how the award was broken down so it is hard to say what value the ET put on each head of claim.  However, in the case of Ms. Ukwaja, she was apparently awarded £30,000, which comprised £15,000 for injury to feelings due to racial discrimination, £8,349 for unfair dismissal, £5,000 for discrimination and £2,643 for interest on lost earnings.       

From a legal point of view there was nothing particularly noteworthy about these cases.  What caught the eye of the media though was the fact of a charity involved with refugees unfairly dismissing and racially discriminating against two ethnic minority staff: the BRC deserved to be censured for that. However, not everyone might agree with that:  I found one report of the cases on The Independent’s website and read some of the comments that followed the report.  Sadly, some of the respondents saw this story as an example of “another utterly baseless thought crime!  Another opportunity to redistribute monies to chosen victim groups, taken with relish” and “It’s a bit naughty taking a charity to court, surely the funds raised by the Refugee Council would be better spent on helping everyone in [the] developing world move to Europe than on handouts to disgruntled employees”.  No, actually.  The anti-discrimination laws exist for a reason; no employer is exempt.  The whole episode leaves a nasty taste in the mouth.





Statutory Redundancy Pay to increase

23 04 2009

British Parliament

 

As you will probably have heard by now, the Chancellor announced an increase to Statutory Redundancy Payment in the Budget yesterday, from the current figure of £350 to £380 per week. He hasn’t said from when the new increase will take effect and the lower figure itself was only introduced in February this year.  The government is also considering further legislation on SRP rates in the next Parliament.

So, what does the increase mean?  SRP is only payable (by the employer) to employees with two years’ continuous employment experience and that figure is paid to employees between the ages of 22 and 41.  For qualifying employees over 41 they will receive 1.5 times £380 = £570.  For those under 22 the applicable figure becomes £190 per week.

SRP is, in reality, a cap.  If the employee earns less than £380 per week, assuming they qualify for SRP when made redundant, they will be paid their weekly salary multiplied by the number of complete years they have served with that employer.     The minimum annual gross salary needed in order to reach the cap is £19,760.  Many employers pay enhanced payments on redundancy, but these are usually discretionary and difficult to enforce legally unless there is a contractual entitlement. 

The Budget Report states (at para 5.27 p.96) that the increase is intended “to help provide adequate support for individuals who have been made redundant”.  For people receiving enhanced redundancy packages today’s announcement will seem academic. But for those smaller employers that can only afford to pay the “official” SRP this increase will be an added burden on them.  It is also hard to see how the increase will materially improve the financial position of employees suddenly finding themselves out of a job.

The TUC was campaigning recently for SRP to be increased to £500. The Chancellor clearly didn’t take their arguments on board and neither was he swayed to increase the maximum amount of tax relief from its current ceiling of £30,000 to £50,000. The HMRC currently allows a concession, pursuant to the Income Tax (Earnings & Pensions) Act 2003, whereby the first £30,000 of a compensation payment for loss of employment, can be paid free of income tax and national insurance deductions.  The limit has been set at £30,000 for many years now and an increase is long overdue.  Presumably the government thought that increasing that limit would be seen as benefiting the better off and thus politically unpalatable at the moment.   They probably also didn’t want to reduce the tax take at a time when redundancies are increasing massively and there is more pressure on the public purse.  However, increasing the tax free limit would do much more to help more people made redundant and reduce the burden on employers.





More on Redundancy v Pay Cuts

17 04 2009

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I posted on this subject a while ago and it has received such a lot of visits I thought I better give my public more of what they want. It also gives me an opportunity to provide an update on the poll I set up below on this issue. At the moment 57% of respondents would elect a pay cut and 31% would take redundancy.  The remaining 11% didn’t know.   Whether those results will change after this post wil be interesting to see.

In my previous post on the 27th February I wrote that the risk to an employer in reducing or attempting to reduce salary was that it might constitute a breach of contract and could lead to litigation if the employee didn’t agree  to the cut.  A claim for breach of contract and/or unlawful deduction from wages  and/or constructive unfair dismissal could be the result.  Only employees with more than one year’s service can claim unfair dismissal, but any employee can claim for breach of contract or for unlawful deduction of wages, which is what an unagreed reduction in pay would be.  The crucial issue, therefore,  is to get the agreement of the employees concerned and, if this is obtained, many of the problems fall away. How does an employer go about this?

By consultation is the answer. An employer needs to approach the matter with sensitivity and it needs to set out to the employees concerned the reason for the proposal and to show that it has considered other options to a pay cut.  Employees need to be given time to consider the proposals  (within a defined timetable) and to put forward any suggestions they have, which should then be given due consideration. In all probability, other options to a  pay cut will include redundancy and the employer will need to set out the business and financial reasons for suggesting the pay cut.  Other options though might include laying off employees, reducing hours and reducing benefits.  A pay cut is likely to be more palatable for employees if it is stated to be a temporary reduction, e.g.  for six months pending further review by employer and employee.

In all these circumstances the employer will be aided hugely if the employment contracts it provides to its staff contain a clause that allows the employer to make amendments to the terms of the contract (most don’t it has to be said).  In the absence of such  a clause an employee who is not minded to accept the reduction in pay, or alteration to their hours, will be strengthened in any claim for breach of contract.  That risk does not disappear even if there is such a clause because the employer must act reasonably when seeking to amend the contract, but it does give the employer scope for manoeuvre.  In other words, if the employer consults properly and frankly with affected employees  and can demonstrate the necessity for making  pay cuts, it should reduce the risk of being successfully sued for breach of contract by a disgruntled employee.  

An employer may be required to consult collectively with any recognised unions at the workplace or to get employees to elect representatives to consult on their behalf.   I covered this point in my previous post.

Assuming that agreement is reached with employees, the employer should then  get the affected employees to sign a letter confirming their agreement to the reduction in pay.  The letter should set out the company’s reasons for imposing the pay cut (ie to avoid redundancy), refer to the meeting(s) with the employee during the consultation process and ask them to sign and return a copy to signify their acceptance.   This isn’t guaranteed to prevent claims against the employer but it should help to minimise the risk of successful claims being made.  In the current economic climate, the majority of employees will probably accept a pay cut rather than take the risk of being out of work altogether.  

By the way, I mentioned “lay-offs”  above.  If an employer wants to “lay off” staff it should proceed with care  and take legal advice before doing anything; there are many pitfalls and can lead to claims for breach of contract and constructive dismissal. A lay off is where an employee is, effectively, suspended from work without pay. I will write about lay-offs in a future post.





TUPE

7 04 2009

Apart from the post below I haven’t touched upon these regulations, mainly because they are not the most interesting regulations in the world to read.  However, I have been spurred on by posting on the case of Royden & others v Barnetts  (see below) and TUPE comes up quite a few times on the search engines as a keyword.  In future posts I will look at the TUPE issues on the insolvency of the employer as well as the consultation obligations imposed upon employers by TUPE.

So, what do the Transfer of Undertakings (Protection of employment) Regulations 2006 (TUPE) actually do?

It protects those employees where the employing business changes hands, by;

 (1) protecting them from dismissal because of the transfer,

(2) by requiring the employer to inform and consult those employees affected, and

(3) transferring all rights  liabilities and obligations from the transferor company (“oldco”) to the transferee (“newco”).  

 

 

There must be more than a transfer of shares.  All employees employed by oldco at the point of transfer automatically move across to newco with the same terms and conditions of employment.  This means that if newco tries to provide amended terms and conditions to transferred staff they will be in breach of contract and may end up facing claims for constructive dismissal.

Furthermore, if newco dismisses transferring staff for a reason connected with the transfer that will be an automatically unfair dismissal , although if newco can argue that there were “economic, technical or organisational” reasons entailing changes in the workforce of either the Transferor or Transferee”  for the dismissal, it won’t be automatically unfair.  It might still be an unfair dismissal if the reason for the dismissal (not being the transfer) was also unfair. 

An ET would look at all the circumstances of the dismissal before making its finding.  In particular the ET will consider whether the employee was likely to have been dismissed even if the transfer had not occurred.  If yes then the dismissal will probably not have been for reason of the transfer, but it might still be unfair (i.e perhaps unfair selection for redundancy, or maybe discriminatory reasons were involved; the list is long).   One of the potentially fair reasons for a dismissal under the Employment Rights Act 1996 is “some other substantial reason” (SOSR).  For an employer to escape liability altogether for the dismissal it will have to show that the reason for dismissal comes within SOSR and that it was reasonable for them to rely upon that as the reason for dismissal. 

If an employee is found to have been unfairly dismissed (whether automatically or not) the maximum amount they can recover from an ET (up to February 2010 anyway) is £66,200 plus a basic award of £350 (or £525 depending on age) per week per year of service.  The employee needs 12 months continuous employment experience with oldco to be able to claim unfair dismissal.

Claims involving TUPE can be complex and if you are concerned about your position or think you might need legal advice do call me on 0207 464 8433 or email me on michaelscutt@dalelangley.co.uk





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.