LEVY & McRAE announces the opening of its Corporate Department as of 1st December 2008. The department is being led by Andrew Sleigh who has a long established reputation in the corporate law marketplace in Scotland and joins the firm from Burness LLP.

Gary Booth joins the team as an associate from Allen & Overy in Dubai having trained at Dundas & Wilson in Glasgow. The Corporate Department will focus on the SME, private limited company and professional partnership sectors and will complement Levy & McRae’s existing significant activities in these areas.

When employee share options feature in TUPE transfers, major complications can arise.

Where Transfer of Undertakings (Protection of Employment) (TUPE) applies, the rights and liabilities of transferring staff automatically switch to the new employer on the same terms and conditions as applied under the original employment contract. Any attempt to change the terms and conditions is, broadly speaking, unlawful.

Most companies recognise and deal with these obligations on receipt of the standard employee liability information. What happens, however, when the transferring employee’s rights include staff incentives?

Where transferring staff have express or implied contractual rights to share incentives, they should be entitled to participate in ‘a scheme of substantial equivalence’ that does not contain features the transferee can’t provide.

If the transferee does not provide said scheme, they could face claims for damages for breach of contract for the losses arising from an inability to participate in a share plan or constructive dismissal. Transferors might also face claims in anticipation of the transfer. However, replicating a transferor’s share incentive plans may be prohibitively expensive or simply not part of the ethos of the transferee.

Transferees must identify the risks before they can manage them, and this may involve wider enquiries than the standard employee liability information provides, such as access to incentive scheme rules. Transferees can then: request an indemnity from the transferor in respect of potential claims brought by staff or request a price adjustment to take account of the risks or implement post-transfer share incentive arrangements or extend existing arrangements to the transferred staff. The first two options could be the easiest, but their viability depends on bargaining power.

Clearly, any risk of claims can be minimised where the new incentive arrangements broadly replicate existing ones. The risk is greatest if the transferee provides no replacement incentive arrangements. However, as the tribunals have not set guidelines as to what might be ‘substantial equivalence’, the middle ground is unclear.

Until guidelines are set, this will have to be judged on a case-by-case basis. However, transferees could take the approach that a basic replacement plan is sufficient and rely on the uncertainty of the substantial equivalence test to deter staff from bringing claims.

www.personneltoday.com, 17 October, 2008

We bring you the Employment Appeal Tribunal’s decision against a Tribunal’s refusal to allow a claimant an oral hearing prior to striking out his claim.

In Zeynalov v BP Exploration (Caspian Sea) Limited and others the Employment Appeal Tribunal (EAT) found that a tribunal that refused to allow a Claimant an oral hearing prior to striking out his claim was not acting in accordance with the overriding objective of dealing with cases justly.

Mr Zeynalov bought a claim against his employers, claiming that he had been unfairly dismissed and that he had been subjected to a detriment for making a protected disclosure(s). His claim was for £5 million. His claim was struck out by the tribunal on the grounds that his claim was misconceived and because Mr Zeynalov had acted unreasonably during the course of the hearing (8 & 9 October) to decide whether the claim should be struck out.

A week before that hearing on 8 & 9 October, Mr Zeynalov submitted another claim form. His intention, when putting forward this new claim form, was to amend the original claim form. In fact, what Mr Zeynalov had done was issue new claims which had to be accepted by the tribunal.

At the conclusion of the hearing, the Employment Judge stated that as the new claims raised complaints which appeared in and had been or were about to be the subject of decision in the first claim, she was considering striking out the new claims. A letter was then sent to Mr Zeynalov informing him that consideration was to be given to striking out all of the new claims.

The grounds of the strike out were based upon the possibility that the claims were vexatious and/or had no reasonable prospect of success. Mr Zeynalov and his employer’s representatives were invited to put forward any arguments/comments about the potential strike out in writing. They were then further permitted to put in written submissions in answer to the other’s arguments/comments. Mr Zeynalov put forward both his arguments/comments and written submissions. He then requested the opportunity to put in further written submissions and to have an oral hearing. The Employment Judge decided that she would proceed on the basis of the written material submitted by both sides and would not consider the possibility of oral evidence.

The Employment Judge struck out most of Mr Zeynalov’s claims and the others were dismissed on withdrawal.

Mr Zeynalov appealed the strike out on the grounds that the Employment Judge was not permitted, under Employment Tribunal (Constitution and Rules of Procedure) Regulations 2004 to strike out his claim without an oral hearing. These Regulations provide that if one of the parties requests an oral hearing of a strike out application, the party which asks for that hearing is entitled to one.

The EAT agreed with Mr Zeynalov, the case was remitted to a fresh Employment Judge to determine the issues regarding the strike out amongst other things.

The implications of the Regulations which have been applied in this appeal are both time consuming and costly to the employer. Even where an employee brings an obviously frivolous or vexatious claim which in all likelihood will be struck out by the tribunal, where that employee requests a hearing as a result of a strike out application, an employer will suffer the inconvenience and cost of having to attend at tribunal to put forward its case for that strike out.

Employers should therefore beware, when an employee threatens a claim, even where the employer is confident the claim would be struck out by a tribunal, it will have to be prepared to defend such a claim.

www.hrmguide.co.uk, 29 September, 2008

Harsher punishments for lack of health and safety provision will come into force in January.

The new Health and Safety (Offences) Act 2008 has achieved Royal Assent and means from January the maximum fine that can be imposed on health and safety offences has been raised to £20,000 for most offences and a custodial sentence for more serious offences.

Lord McKenzie, parliamentary under-secretary of state in the Department for Work and Pensions, said: “Good employers and diligent managers and directors have nothing to fear from the Bill. Indeed they have much to gain as it tackles the commercial advantage that unscrupulous businesses gain from non-compliance.”

The British Safety Council is in support of the act. Its CEO, Brian Nimick, said: “(The act) highlights the importance of the use of best practice in the workplace and sends a very clear message to employers that neglecting health and safety regulation is not acceptable and will be punished.”

www.humanresourcesmagazine.com, 20 October, 2008

As from 1st October, 2008 the hourly National Minimum Wage rate is increased as follows:-

• adult rate for those aged 22 or more the increase is from £5.52 to £5.73;
• for 18-21 year olds the increase is from  £4.60 to £4.77;
• for 16-17 year olds the increase is from  £3.40 to £3.53.

When setting these rates the Government specifically rejected a recommendation from the Low Pay Commission that the age for entitlement to adult rate NMW should be reduced from 22 to 21. We understand that union pressure combined with threats to reduce funding to the Labour Party later led to a change of party policy in this respect. It is therefore probable that the age for entitlement to the adult rate will be reduced to 21 when the next increase in NMW takes place (likely to be October 2009), assuming the present government is still then in power.

Apprentices aged 16-18 and those aged 19 and over in their first year as an apprentice are not entitled to the National Minimum Wage. However in 2005 the Learning and Skills Council introduced a requirement that employers pay apprentices a minimum of at least £80 per week and the Government announced in September that this minimum will be increased to £95 a week in 2009. As the average wage paid to apprentices is stated to be £170 a week, this is unlikely to have much effect in practice.

Special rules govern the minimum wage payable to agricultural workers. For this purpose agricultural workers are graded into 6 separate grades.

www.emplaw.co.uk, October 2008

One effect of the Employment Equality (Age) Regulations 2006 is that enforced retirement of an employee on age grounds is generally unfair dismissal. However an exemption allows enforced retirement of employees at age 65 or over, subject to specified procedures being followed.

As an aside it is worth noting that a partner in a partnership is not an ‘employee’. The starting off point in the context of a business partnership is thus that requiring a partner to retire on age grounds is always unlawful – it will only be lawful if it can be ‘objectively justified’.

Campaigners on behalf of the elderly have argued strongly that it is wrong that employers should be able to require an employee to retire simply on grounds of age. As Parliament is supreme and Parliament has legislated to allow enforced retirement at age 65 the only avenue open to the campaigners has been to argue that the British rules contravene EU law. So in July 2006, even before the British regulations came into force, the National Council on Ageing, which runs the Age Concern charity but for this purpose is operating under the banner ‘Heyday’, announced that it would take the British government to court.

It did so. This led to the High Court in England referring specific questions to the European Court of Justice in July 2007.  The processes of the ECJ involve an official known as the Advocate General providing a formal ‘opinion’ to the court before a decision is reached. In September 2008 the Advocate General gave his opinion in this case. It is usually the case, but certainly not always, that the ECJ judges follow the recommendation of the Advocate General.

The Advocate General’s opinion here is essentially that there is no fundamental objection in EU law to a Member State allowing employers to require employees to retire at a specific age provided this can be objectively justified as “a proportionate means of meeting a legitimate aim”. There was insufficient information made available for the Advocate General to form a view on whether the British ‘compulsory retirement at age 65’ provision could be justified so it follows that this question would have to be be remitted back to the national courts to decide.

This is clearly a set back to the campaigners but not a knock out blow.

A decision by the judges of the European Court of Justice is expected by the end of 2008. If the ECJ follows the recommendation of its Advocate General, presumably the campaigners will try to persuade a British court that conditions in the UK are such that allowing an enforced retirement age of 65 is not a proportionate means to achieve a legitimate aim. So the position may not be finally resolved for some time yet.

From a practical point of view, any employee who is required to retire against his will at age 65 or over would be well advised to consider making a claim to avoid falling foul of the time limit rules, usually 3 months from enforced retirement. All such claims are currently stayed pending the decision of the European Court of Justice (under the terms of a practice direction issued by the President of the Employment Tribunals) but as a general rule only claims which were formally lodged within normal time limits will be able to go ahead if the eventual outcome of the case is that the campaigners win.

www.emplaw.co.uk, October 2008

The next stage of the recently introduced ‘Points Based Immigration System’ comes fully into operation in November. This is the new system for assessing whether to allow a non-EU worker into the UK. The parts introduced in November will cover what are known as ‘Tier 2’ (skilled workers with a job offer) and ‘Tier 5’ (youth mobility and temporary workers). All immigrants from outside the EU in either of these two tiers will require a ‘sponsor’.

The sponsor will usually be an organisation or an educational institution in the United Kingdom that wishes to employ the migrant or has accepted him/her onto a course. In order to become a sponsor, the organisation will need to be licensed by the Home Office (UK Border Agency). This involves making an application to the UK Border Agency which will carry out checks before deciding whether to grant the licence. A licensed sponsor will be able to issue certificates of sponsorship, which it will allocate to migrants who wish to come to or stay in the United Kingdom to work or study.

To be licensed from the November 2008 start date for Tier 2 and Tier 5 workers, applications must be lodged with the UKBA by the beginning of October 2008. The form of the application, or more accurately the list of documents required to be attached to the application, varies according to the type of organisation applying to be a sponsor – the details are set out in Appendix A to a Home Office document called ‘Sponsor Policy Guidance’. Application fees for a sponsor licence vary between £300 and £1,000 but are typically £400.

www.emplaw.co.uk, October 2008

COMPANY DIRECTORS

As a preliminary, it can sometimes be difficult to be sure whether a company director is in law an employee – some obviously are and some non-executive directors obviously are not. In between there can be a grey area. For those in this grey area it is important to establish their legal status, which is currently a ‘hot potato’.

An important case (Neufeld v A&N Communication in Print Ltd and BERR) concerning the circumstances in which a director whose is also a majority shareholder can be technically an ‘employee’ is due to be heard by the Court of Appeal in early December and other cases involving the same issue have been put on hold pending the Court of Appeal’s ruling (the President of the Employment Tribunals issued a ‘stay of proceedings’ direction in respect of such cases in September). As a practical matter, similar ‘time limit’ considerations for making claims apply for company directors as apply for employees compulsorily required to retire at age 65 or over, set out in our noted above on age discrimination/retirement.

EMPLOYEES (who can include company directors – see above).

If a company is insolvent and is wound up (or a receiver is appointed) an employee whose employment is terminated can apply in writing to the Secretary of State for certain payments to be made to him from the National Insurance Fund to cover some amounts which the employer has failed to pay. An example is unpaid wages at the rate of a week’s pay for up to 8 weeks, (maximum of £330 per week from 1st February, 2008 giving a maximum of £2,640). Other examples are unpaid notice pay for the minimum statutory notice period (which varies between one and twelve weeks depending on length of service) and up to six weeks unpaid holiday pay in respect of the last 12 months.

On the winding up of a company, wages of up to £800 for up to 4 months, holiday pay, commission, contractual sick pay and maternity pay and pay for time off work for trade union duties are preferential debts and so are payable ahead of ordinary creditors.  Redundancy pay and unfair dismissal compensation are not preferential debts but subject to statutory limits can be recovered from the National Insurance Fund if unpaid.

Liability for payment of statutory maternity pay and statutory sick pay moves from the employer to the Secretary of State if an employer is insolvent.

The State Pension Protection Fund can provide some compensation for members of occupational pension schemes in the event of the insolvency of the scheme’s sponsoring employer if the pension scheme has been under-funded.

If at least 20 employees at one establishment are dismissed as redundant within a 90 day period and have not been consulted as required statute, they will be entitled to substantial compensation (called a ‘protective award’).

www.emplaw.co.uk, October 2008

A London Underground employee who was awarded £125,000 in a racist bullying case has been accused of intimidating a white station supervisor.

Daniel Jean-Marie, a black member of staff, was awarded £125,000 in an out-of-court but London Underground settlement after accusing two members of staff for taunting him by “joking about biting the heads of black jelly babies”.

A jury cleared the other employees, Vic Cooney and Carlos Rozza, of racially aggregated harassment in a case costing tax-payers £250,000.

However Tom Mahoney, a station supervisor, has launched a case against London Underground, saying he was victimised by his bosses after making claims about Jean-Marie’s “frightening” behaviour towards him.

Jonathan Maude, employment partner at Hogan & Hartson, said: “Employers should not be ‘paralysed’ from dealing with employees who may be bringing claims against them. Robust management by employers should prevent this sort of thing escalating.”

“The strength of feeling these claims generate is bad for business, morale and profile – it’s better to nip them in the bud rather than drag them out.”

www.humanresourcesmagazine.com, 02 October, 2008

Animal lovers will not be pleased to learn of pay-outs to disgruntled employees by pet charities. This includes the RSPCA: one of its inspectors was awarded constructive dismissal damages after a saga that included attempting suicide with medication designed to put down animals.

Dimity Crowley alleged she had suffered various forms of maltreatment during her employment, including sexual harassment and bullying (over 18 months in 2003-04) and a gross invasion of privacy while working for the charity in the South East.

According to her lawyer, Will Clayton of Hill Dickinson, her case against the RSPCA was based on two claims: that the unreasonable behaviour of the RSPCA amounted to a serious breach of contract and that Crowley also suffered a fundamental variation of contract by the RSPCA that made continued employment impossible for her as it would have involved a gross invasion of her privacy.

The tribunal dismissed the former but found the second claim was proven and that Crowley had suffered constructive and unfair dismissal. Both parties agreed a sum of £30,000 in compensation.

The case hinged on the RSPCA’s wish – on the advice of an occupational health adviser – that Crowley’s contract be altered so that her GP could report directly to the charity on any signs of psychological illness on Crowley’s part. This followed a 2004 suicide attempt by Crowley when she took barbiturates issued to her by the RSPCA for putting down animals.

Clayton argued the RSPCA’s request to change her contract was a “fundamental variation of her employment contract” and therefore “a gross invasion of privacy”. Since the case ended, Crowley has packed up and moved to Australia.

Another animal charity, the PDSA, has settled a dismissal dispute with former employee Catherine Goldie, a vet, before it reached tribunal in Glasgow. Reports, disputed by the PDSA, claimed she’d been paid almost a six-figure sum. The PDSA told Employers’ Law, the figure published was inaccurate but it will not say what it paid. Goldie was dismissed for alleged misconduct.

www.personneltoday.com, 8 October, 2008