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ANDREW JACKSON & CO
Solicitors
EMPLOYMENT LAW NEWSLETTER: MAY 2014
Financial Penalties in the Employment Tribunals
On 6th April Section 16 of the Enterprise and Regulatory Reform Act 2013 was brought into force.
This adds a new section 12A to the Employment Rights Act 1996 which gives Employment Tribunals the power to order employers to pay a penalty if the employer has breached any of the worker’s rights to which the claim relates and has one or more aggravating features.
The amount of the penalty is 50% of the amount awarded to the employee subject to a minimum of £100 and a maximum of £5,000.
The Tribunal must have regard to an employer’s ability to pay in deciding whether to order the employer to pay a penalty.
There is nothing in the Act which says what would amount to an aggravating features, but the guidance notes published by the government suggest that relevant factors might include the size of the employer, the duration of the breach of the employment right and the behaviour of the employer and of the employee, whether the action was deliberate or committed with malice rather than a genuine mistake, whether the employer had a dedicated human resources team, or where the employer had repeatedly breached the employment right concerned.
If the Tribunal makes a financial award, all these factors will only result in a “yes or no” decision by the Tribunal in deciding whether to impose a penalty.
In the situation where a Tribunal finds against the employer, but makes no award (e.g. where they allow the parties to agree compensation between themselves following a judgment that the Employer is liable) the Tribunal can use its discretion to set the amount of the penalty (subject to the £100 minimum and £5,000 maximum).
This represents just the latest in a series of changes which mean the employer who loses at an Employment Tribunal hearing could end up paying out far more than the employee has lost.
1. First of all, if the Employment Tribunal makes a compensatory award in an unfair dismissal case, the recoupment provisions apply. This means that if the Tribunal makes a compensatory award for unfair dismissal, the employer will pay part of that to the DWP in respect of benefits paid to the employee. If the parties settle (even if it is after the Tribunal have found the employer liable), there is no need for anything to be paid to the DWP, but if the Tribunals give the parties the opportunity to do this in future, it will not necessarily avoid the Tribunal ordering the Employer to pay a financial penalty.
2. Secondly, if an employer is found liable and has not complied with section 1 of the Employment Rights Act (provision of written particulars of employment), the Tribunal can award 2 or 4 weeks gross pay to the employee.
3. Thirdly, if the Employee was dismissed in breach of the ACAS code of Practice, the Tribunal can award up to 25% more to the employee.
4. Now, the Tribunal can also impose a financial penalty.
5. The Tribunal can also order the employer to pay the Fee incurred by the employee in bringing the claim, which could be as much as £1,200.
To take a hypothetical example, suppose an employee on £400 per week who has worked for the employer for 5 years is awarded 15 weeks loss of earnings. They are out of pocket by £4,550, as they received £1,450 in Job Seekers Allowance. Suppose they had to pay the Employment Tribunal fees of £1,200 because of their partner’s earnings.
If they win their unfair dismissal claim the Tribunal could make the following orders:
1. A basic award of £2,000
2. A compensatory award of £6,000
3. An extra £2,000 for breaching the ACAS Code of Practice
4. An order to refund the employee £1,200 Employment Tribunal fees
5. A further £1,600 for failure to provide written terms and conditions
6. A financial penalty of £5,000
TOTAL = £17,800
This shows how it can be extremely beneficial for an employer to attempt to negotiate in appropriate cases, and this example is a clear illustration of how the new legislation is encouraging the parties to settle or failing that securing up to £6,200 (including the Tribunal fees paid by the employee) for the public purse.
This is the legislative provision and guidelines have been published.
Extension of the Right to Request Flexible Working
Under section 80F of the Employment Rights Act 1996 Employees have the right to request flexible working if they have been employed for 26 weeks and have childcare responsibilities or responsibilities to care for an adult relative and there is a specified procedure which an employer must follow when such a request is made.
From 30th June 2014 all employees who have been continuously employed for 26 weeks or more will have a right to ask their employer for a change to their contractual terms and conditions of employment to work flexibly.
The requirement to follow the regulations when considering an application for flexible working will be replaced by a requirement to “deal with the application in a reasonable manner.”
From 30th June if an employer receives a request from an employee for flexible working, the request should set out the change that the employee is seeking, when they would like it to take effect, the effect that the employee thinks the change will have on the business and how that effect can be dealt with.
The employer must then consider the request and arrange to meet the employee as soon as possible.
At the meeting, the employer should discuss the request in private but the employee should be allowed to be accompanied by a work colleague or a Union representative if they wish.
The employer must then consider the request. If the employer rejects the request it can only be on the basis of one or more of the following business reasons:-
1. The burden of any additional costs is unacceptable to the organisation
2. An inability to reorganise work among existing staff.
3. Inability to recruit additional staff
4. The employer considers the change will have a detrimental impact on quality
5. The employer considers the change would have a detrimental effect on the business’s ability to meet customer demand
6. Detrimental impact on performance
7. There is insufficient work during the periods the employee proposes to work
8. Planned structural change, for example where the employer intends to reorganise or change the business and considers the flexible working changes may not fit with these plans.
The employer should inform the employee of the decision in writing. If the request is accepted either as proposed or subject to some modifications then the implementation of the proposals should be discussed. If the request is rejected then the employee should be informed they have a right to appeal the decision.
There should be a fresh discussion of the application at the appeal stage.
The whole process should be dealt with within 3 months, or to a later date by mutual agreement.
An employee has the right to bring a claim to an Employment Tribunal if the employer does not deal with the application in a reasonable manner, or did not notify the employee of the decision within 3 months (or the date which they have agreed if the 3 months is extended), or that none of the 8 specified business reasons applies.
Although anyone can apply for flexible working, if a person with caring responsibilities for either a child or disabled adult applies then, in addition to the above claim, an employee could claim that they have been indirectly discriminated against contrary to the Equality Act. Such a claim would fail if a Tribunal accepts that the reason for refusal of the request was a proportionate means of achieving a legitimate aim.
The legislation is here.
ACAS have produced a draft code of practice.
There is a guide produced by ACAS.
July 2014
Decline in Employment Tribunal Claims
Recent news has highlighted a decline in the number of people taking claims to employment tribunals since fees were introduced last year.
The latest figures broken down by regions shows drop of between 51% in London to 67% in Wales. Whilst organisations such as the Welsh TUC and The Law Society of Scotland claim this is pricing workers out of justice, Employers organisations suggest it is the weaker claims which are not being brought. The government has focussed on justifying fees through requiring users of Employment Tribunals to contribute to the cost of Employment Tribunal as part of their objective of controlling public expenditure. See BBC Articles on claims in Wales and Law Society of Scotland’s call to urgently review fees. According to the HMCTS annual report fee income generated in the first 8 months following the introduction of fees is on target to raise about £6.7 million to offset the annual cost of about £74 million. This is short of the government’s own estimate of £10 million, but could be affected by a number of claims being submitted earlier than they might have been immediately before fees were introduced.
Increase in Sex Discrimination Claims?
An Article in the London Evening Standard suggests that the number of sex discrimination claims has risen when compared with this time last year and is at its highest level in 4 years, whereas an Article in the Independent draws the opposite conclusion!
June 2014
TUPE
The Information Commissioner’s Office has published Guidance Notes on Disclosure of Information under TUPE.
Earlier in June ACAS published new guidance on handling TUPE transfers as well as a flowchart.
When a Tribunal can order the losing party to pay the successful party’s fees?
The Employment Tribunal and Employment Appeal Tribunals have the power to order the Respondent to pay the amount paid for Tribunal fees to the person who brought the claim or appeal. a recent Appeal Judgment in the case of Horizon Security Services Ltd v PCS Group laid down guidelines for the Employment Appeal Tribunal giving them a broad discretion in considering whether or not to require the unsuccessful party to pay for the fees incurred. Although in general it would be expected that if the appeal was successful, the losing party would have to pay for the fees, this may not always apply, for example where the appeal was only partly successful or where the means of the paying party would render it unjust.
Forthcoming Legislation
The Small Business, Enterprise and Employment Bill has recently been published which will:-
1. Introduce an “Enforcement Officer” to assist in enforcing unpaid Employment Tribunal awards. They will be able to issue a “penalty notice” of 50% of the unpaid award. This will be paid to the government as a “fine” and not to the employee who is owed the award. (s136)
2. Make any term in a “zero hours contract” which prevents an employee working for someone else void. (s139)
3. A power will be introduced to limit the number of postponements available to a party and an obligation on the Tribunal to consider making a costs award if the postponement application is late. (s137)
4. The Treasury will be given the power to require repayment of some or all of a termination payment in a public sector exit in some circumstances. (s140-142)
5. A framework will be introduced to require prescribed persons under the whistleblowing legislation to publish details of disclosures made to them. (s135)
The BIS has made an announcement regarding the enforcement of forthcoming legislation in relation to zero hours contracts
Employment Tribunal statistics
The Ministry of Justice has recently published employment Tribunal statistics for the first quarter of 2014.
A separate publication of Findings from a Survey of Employment Tribunal Applications 2013 has also been published. It has found that:-
1. 21% of small employers had been involved with an Employment Tribunal claim in the last 2 years
2. 67% of employers used a representative, whereas 33% of employees used a representative.
3. In 79% of cases a settlement was achieved, whereas 17% went to a full hearing
4. The median Employment Tribunal Award was £3,000
Agency Workers Regulations
The regulations apply to agency workers who are defined in the regulations as workers who:
So, if a business or organisation is provided with temporary workers by an agency and that business supervises those workers but does not contract directly with the workers, those workers are likely to fall within the ambit of the regulations [and the business or organisation will be the “hirer” under the regulations].
Those workers who are not covered by the regulations include:
Also, workers who are engaged directly by a business through an in house temporary staffing bank are unlikely to be covered by the regulations. Note that such staff may fall within the ambit of the Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations.
What Rights are provided to an Agency Worker?
Agency workers will be entitled to the same basic working and employment conditions as they would have been entitled to if they had been recruited for the same job by the hirer directly.
From the start of his or her engagement the agency worker is now entitled to
The Regulations state that “collective facilities and amenities” include canteen and “similar facilities”, childcare facilities and transport services.
A comparable worker is defined as an individual who at the time of any alleged breach of the regulations:
After the agency worker has worked for the hirer for 12 continuous calendar weeks in the same role, the agency worker acquires further rights. There are detailed regulations as to how the qualifying period is to be calculated (e.g. what time taken off during an assignment must be counted towards the qualifying period or the circumstances in which breaks in an assignment will not have the effect of setting the qualifying period back to day one).
The worker will be entitled to the same terms and conditions as a person who has been recruited directly by the hirer in relation to the following:
Pay includes bonuses, commission, holiday pay or, as the regulations state, ‘other emoluments referable to the employment.’
However, the definition of pay does not include:
Access to Employment
During the period of his or assignment the agency worker has the right to be informed by the hirer of any ‘relevant’ vacant posts with the hirer, and to be given the same opportunity as a comparable worker to find permanent employment with the hirer.
Right to Receive Information
The regulations contain procedures which the worker can follow to request a written statement from the agency or the hirer if the worker believes that his or her rights under the regulations have been infringed.
Unfair Dismissal / Detriment Claims
An agency worker who is an employee can make a claim for unfair dismissal if he or she is dismissed for
An agency worker (both employees and ‘workers’) can make claims if they suffer a detriment for doing one of the above. In the case of a worker a detriment can include the termination of his or her contract.
Holidays and Holiday Pay
Who is entitled to paid annual leave?
Most ‘workers’ are entitled to paid holiday under the Working Time Regulations. Note that it is workers and not just employees who are entitled. The term ‘worker’ (as legally defined) includes employees but it can sometimes also include people who are described as self-employed.
How much holiday is someone entitled to?
The Working Time Regulations permit all ‘workers’ to a minimum of 5.6 weeks’ holiday in any holiday year. So, for someone who works 5 days per week, that person is entitled to 28 days’ holiday per year (i.e. 5 x 5.6).
Under the statutory scheme, the maximum entitlement is for 28 days holiday per year. So, if someone works 6 days per week, his/ her entitlement is still 28 days.
The statutory entitlement to annual leave includes Bank Holidays.
Workers in their first year of employment accrue their holiday entitlement at a rate of one twelfth of their annual entitlement on the first day of each month of their first year.
What happens when someone leaves?
If someone’s contract is terminated (for whatever reason) they are entitled to a payment in lieu of their statutory annual leave which has accrued to the date of the termination of the contract, less any holiday actually taken.
For example, if someone leaves on 30th June and the holiday year started on 1st January and that person has taken no holidays, he or she would be entitled to a payment equivalent to 14 days’ pay (i.e. half his or her entitlement). If that person had not worked bank holidays and been paid for those days, then he or she would be entitled to a payment equivalent to 9 days’ pay (14 days accrued holiday less 5 bank holidays taken).
Can an employer state when holidays are to be taken?
The short answer is yes. However, there are some limits on the employer’s discretion.
Firstly, the employer must allow statutory holiday entitlement to be taken.
Secondly, a worker can request a period of holiday by giving notice to the employer. This notice must be given twice the number of days in advance of the period of leave as the worker proposes to take. For example, if the worker asks for to 2 weeks’ leave, he or she must give notice of intention to take that leave at least 4 weeks in advance of the first day of that leave.
If such a notice is given, the employer can refuse the period of leave by giving notice equivalent to the number of days which the worker has proposed to take. So, if the worker wanted 2 weeks’ leave, the employer must give notice refusing the request for leave at least 2 weeks in advance of the first day of the proposed period of leave.
Thirdly, if an employer wants to instruct a worker to take leave, he or she can give notice to the worker instructing the worker to take leave provided that the notice is twice the number of days of the period of leave which is to be taken.
Some employers stipulate times of the year when employees must take holiday (e.g. if there is a shut down in the summer or between Christmas and New Year). This is acceptable provided that the notice provisions are complied with. One way of ensuring that notice provisions are complied with is to stipulate in a contract that annual leave is to be taken at certain times.
Fourthly, workers and employers can agree when holiday is to be taken and do not have to follow the notice provisions. An employee might ask for leave at short notice, and the employer can agree. If an employer does not adhere to such an agreement that could amount to a breach of contract.
Special rules apply to workers in their first year – see above.
What happens to employees or workers who are on long term sick?
Employees or workers on long-term sick leave still accrue their statutory holiday entitlement. This means that if, say, an employee has been on sick leave for a long time, and his or her contract of employment is terminated because he or she is no longer considered capable of work, then the employer will have to pay a sum in lieu of any holiday which has accrued during the sick leave period. This will include holiday which accrued during the sick leave period but in the previous holiday year.
How much holiday has to be paid?
Calculating holiday pay for people who work the same hours and are paid the same amount each week or month should not be difficult, as they are entitled to the pay which they would normally receive had they been in work.
It is a little more complicated for those workers who do not have set contractual hours or who, for example, are paid on a piece work basis.
There are specific rules as to how to calculate a week’s pay (Employment Rights Act 1996 Sections 221-224) in such circumstances. In summary, it is often necessary to calculate an average based on the worker’s previous 12 weeks wages.
Contractual Entitlements
So far only statutory entitlements have been discussed. Many employers provide more generous holiday entitlements than those provided for in the Working Time Regulations. Care, therefore, should always be taken to ensure that you are adhering to the employee’s or worker’s contract.
A contractual term, which allows for fewer days’ holiday than the statutory minimum, or entitlements less generous than provided for by the Working Time Regulations, will not be enforceable.
It is generally advisable to set out details relating to holidays in a contract, particularly if you want to set down rules restricting when holidays can be taken.
Women on maternity leave
Contractual and statutory annual leave accrues whilst a woman is on statutory maternity leave.
Automatic Unfair Dismissal
If an employee is dismissed for attempting to enforce a right under the Working Time Regulations, or for refusing to forgo any rights under those Regulations, the employee is likely to have a claim for unfair dismissal (this will also apply to employees who do not have one year of continuous service).
A worker who suffers a detriment for trying to enforce a right under the Working Time Regulations or for refusing to forgo any such rights can make a claim to a Tribunal. In the case of a worker who is not an employee this can include a claim that his or her contract was terminated for seeking compliance with the Working Time Regulations.
Can holiday pay be clawed back?
An employer can only claw back holiday pay upon termination of an employee’s or worker’s contract (if more holiday has been taken than has accrued at the date of termination) if there is a written agreement permitting this.