Thursday, 23 January 2014

Recruitment Industry - Restrictive Covenants and the Internet

Can restrictive covenants still be enforceable when so much information about candidates and recruiting clients is available on the internet?  Yes, said the High Court in a recent case about the education recruitment market but it has  broader relevance for the recruitment industry.

In East England Schools v Palmer and Sugarman Group Ltd the education recruitment market was said to be “promiscuous”, i.e. with no loyalty between candidate teachers nor schools with the recruitment agencies they deal with. The case highlighted how the internet has profoundly changed the way agencies, recruiters and candidates operate. The question was whether the change has been so dramatic that agencies can no longer claim to have close business connections protectable from recruitment consultants’ activities when they switch jobs.

The High Court Judge hearing the case found that after the defendant employee had moved jobs she had solicited and dealt with (directly and indirectly through her new colleagues) teacher candidates and school clients that she had made connections with whilst working for her old employer. The Judge found her activities to be in breach of  her restrictive covenants.  

However, the employee and her new employer (also a defendant in the case) argued that the restrictions were not enforceable in the first place as the old employer had no property in those connections worthy of protection. This was because the information about candidates and recruiting schools was widely available on the internet and through social media sites. Nor was there any loyalty between candidates and schools to the agencies as they each registered with multiple agencies and shopped around for an agency who could meet their immediate needs on a case by case basis. 

Digging deeper into the workings of the market – important because each restrictive covenant enforcement case is decided on its specific facts  – the Judge recognised that relations between candidates and/or recruiters and recruitment agencies were “fragile” but held that a relationship  between a  recruiter (or job seeker) and the recruitment consultant could still be the deciding factor on who they chose to help make a match. The consultant can acquire knowledge  not publicly available, such as likes and dislikes, special requirements etc. Looking at the particular role and ways of working of the defendant employee and the relationships with the old agency’s clients, the Judge found that she could have such relationships and upheld the restrictions in principle. They were also drafted in a way that was enforceable.  

As a result, the employee and her new employer were ordered to pay damages to the old employer for the catalogue of placements made in breach of the restrictions. 

Employment Law in 2014: What to Expect - Equal Pay

Equal Pay

Expected that employment tribunals will be required, in accordance with the Enterprise and Regulatory Reform Act 2013, to order pay audits where an employer is found guilty of breaching the equal pay provisions under the Equality Act 2010. 

Employment Law in 2014: What to Expect - National Minimum Wage

October 2014 - National Minimum Wage

Potential rise in national minimum wage depending on recommendations of the Low Pay Commission and the economic climate.

Employment Law in 2014: What to Expect - Sickness

Spring 2014 - Sickness

Introduction of a new government funded independent assessment service to assess ill health. The aim is to introduce this in April, but it may be towards the end of 2014. Its remit will include free assessment by occupational health professionals for employees who are off sick for four weeks or more, and advice for employers on how to assist employees who are long term sick to return to work.

Employment Law in 2014: What to Expect - Statutory Sick Pay

6th April 2014 - Statutory Sick Pay
Increases from £86.70 per week to £87.55 per week.
Abolition of the strict record keeping requirements, however employers will still be required to maintain records but in a more flexible way and for a shorter duration. 

Employment Law in 2014: What to Expect - Financial penalties

6th April 2014  - Financial penalties
Tribunals will have the power to impose a financial penalty on losing employers of 50% of the value of the award, with a lower threshold of £100 and an upper limit of £5,000. It is not automatic. 

Employment Law in 2014: What to Expect - Discrimination

6th April 2014 - Discrimination
Abolition of discrimination questionnaires – the procedure by which an individual is able to obtain information from his or her employer about discrimination, and then subsequently use that information as evidence at an employment tribunal hearing. 

Employment Law in 2014: What to Expect - Flexible working

6th April 2014 - Flexible working

The right to request flexible working is extended to all employees with 26 weeks’ service, and not just those employees who have children or are carers. The statutory procedure for dealing with flexible working requests is replaced with a duty to deal with requests in a reasonable manner. 

Employment Law in 2014: What to Expect - ACAS

6th April 2014 - ACAS

Introduction of mandatory conciliation – the Enterprise and Regulatory Reform Act 2013 makes it a requirement that claimants must lodge details of their proposed employment tribunal claim with ACAS before initiating proceedings. ACAS will offer pre-claim early conciliation with a conciliation officer for a period of one month. 

Employment Law in 2014: What to Expect - Statutory Maternity, Paternity and Adoption Pay

6th April 2014
Statutory maternity, paternity and adoption pay increases from £136.78 to £138.18 per week.

Employment Law in 2014: What to Expect - Pensions

1st April 2014 - Pensions

The time period for employers to auto-enroll eligible jobholders into a qualifying pension scheme increases from one month to 6 weeks. 

Employment Law in 2014: What to expect - TUPE

31st January 2014 - TUPE
The Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 (SI 2014/16) makes changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (TUPE). 

The key changes which will come into effect are as follows:

Clarification that where there is a service provision change, the activities carried out post-transfer must be “fundamentally or essentially the same” as those activities carried out pre-transfer.

A change in location of the workforce post-transfer can be an economic, technical or organisational reason entailing changes in the workforce. This prevents a genuine place of work redundancy from being automatically unfair. 

The obligation to provide employee liability information to the transferee will be extended from 14 to 28 days before the transfer. 

Micro-businesses (less than 10 employees) will be allowed to inform and consult directly with affected employees, where there is no recognised union or existing appropriate employee representatives.

Collective agreements - transferees may renegotiate terms derived from collective agreements one year after the transfer, provided the changes are no less favourable to the employee. In addition, a transferee will not be affected by any subsequent variations or new collective agreements relating to the transferor following the transfer.
The Trade Union and Labour Relations (Consolidation) Act 1992 will be amended to make clear that consultation on collective redundancies can start before the transfer provided the transferor and transferee agree and the transferee has carried out meaningful consultation.

Tuesday, 21 January 2014

Buying and Selling Businesses – Changes to the Employment Rules

There is some good news for those buying and selling businesses – the Government is easing some aspects of the ‘TUPE’ employment protection legislation that applies on the transfer of a business although the Government is not going so far as some business campaigners had hoped. 

What is changing? 

The changes relate mainly to redundancies and altering employees’ terms and conditions.  
From 31 January 2014 it will be easier for in-coming employers to have a dialogue with the out-going employer’s staff about possible redundancies. Crucially, time spent by the new employer consulting with the old employer’s staff before the transfer takes effect will count towards the requirement  to consult employee representatives about redundancies – if the old employer agrees and all the safeguards are met. 

The law is also being altered so that it will be less risky in future to make staff redundant where the new employer wants to relocate the acquired operation.

The TUPE legislation is also triggered when there is a change in the contractor providing services as well as on a more conventional sale of a business.  Despite intense lobbying from some business representatives, a switch in service provider  (for example, on an out-sourcing or  re-tendering exercise) will still be covered by TUPE but only where the services provided are fundamentally the same post transfer, bringing the legislation in line with recent case law.                                     
The law is being amended in other ways, which are intended to widen the circumstances where in-coming employers can make changes to employees’ terms and conditions, including those derived from collective agreements. 

What will be the impact?

The headline change, facilitating in-coming employer consultation about redundancies before a transfer takes place, is likely to cut some of the risk associated with many transfers. 

However, the changes intended to make it easier to implement post-transfer changes to terms and conditions tread a sometimes tortuous path between reform and complying with overriding European Community law. As a result, there is likely to be substantial satellite litigation testing the new law. The changes, therefore, do little to reduce the need for in-coming and outgoing employers to rely, where they can, on warranties and indemnities to meet their business needs. 

Further advice

For further advice on the practical implications of the new TUPE law, please contact FWJ

Developments in Employment Law 2013: An Overview

2013 was a year that kept employment lawyers and HR professionals on their toes with a number of significant developments. The purpose of this article is to give an overview of those key changes. In future reports we will be examining the most noteworthy in further detail.

February kicked off the year with a rise in the cap for unfair dismissal compensation (the “compensatory award”) to £74,200. In most cases, this is the maximum amount the Tribunal can award taking into account the loss suffered by an employee, such as for lost wages. There is a second element to an unfair dismissal award called the basic award, this is a statutory calculation and is currently capped at £13,500, From July 29th, an additional cap was added to compensatory awards so that the maximum compensatory award for unfair dismissal is now the lower of £74,200 or 52 weeks' pay. The cap does not apply to dismissals in relation to whistleblowing, for certain health and safety reasons or where there is unlawful discrimination. This new development should make it easier for employers to quantify the actual value of a claim, particularly as most employees do not earn anything close to £74,200 per year. However Compromise Agreements Ltd, a London based law firm, has sought a judicial review of the one year salary cap claiming that it indirectly discriminates against older people. The argument is that older people are more likely to be unemployed for longer than one year, so the cap restricts their access to justice. We are awaiting an outcome on this.

On March 8th, unpaid parental leave rose from 13 to 18 weeks. This means that any employee who is the parent of a child under the age of 5 may take up to 18 weeks’ unpaid parental leave up until the child’s 5th birthday. The right also applies to adopted children. For those children who are disabled, the right extends up until that child’s 18th birthday and remains unchanged from before.

Redundancy grabbed headlines last year, and not just because of the state of the economy. April 6th saw changes to collective consultation obligations. Previously where an employer was proposing to dismiss as redundant 100 or more employees within a 90 day period, the requirement was to consult for a minimum of 90 days before the first dismissal took effect. From April, the consultation period was reduced to 45 days. This is a significant benefit to employers. 

In May, employers were then thrown into confusion with the Employment Appeals Tribunal case of USDAW v Ethel Austin Ltd (in administration) and another case UKEAT/0547/12; 0548/12 (known as the “Woolworths case”). Section 188 (1) of the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”) states that the duty to consult applies only where 20 or more dismissals are proposed at one establishment. However, there is a discrepancy between TULRCA and the Collective Redundancies Directive which it purports to implement. The Directive contains no "establishment" requirement.  Consequently the Employment Appeals Tribunal held that, owing to the fact that TURLCA is incompatible with the Directive, the words "at one establishment" must be disregarded for the purposes of any collective redundancy exercise involving 20 or more employees. This is very bad news for employers. 

Previously an employer could avoid collective consultation obligations if it was not proposing to dismiss as redundant 20 or more employees at any one location, and each location could be shown to be a distinct entity. Now if an employer is proposing to dismiss as redundant 20 or more employees across their business as whole, no matter where their staff are located or how disparate, collective consultation will be triggered. 

The Government has been granted leave to appeal against this decision.

June saw a number of significant developments brought in by the Enterprise and Regulatory Reform Act 2013, most notably changes to whistleblowing protection. Employees had increasingly been using the Public Interest Disclosure Act 1998 (“PIDA”) to bring complaints against their employers about breaches to their own employment contracts, rather than reporting serious wrongdoing within their organisation. There was nothing specifically preventing this in the legislation, but it was not the original aim of PIDA. It is an attractive route for employees as whistleblowing claims do not have a compensatory cap nor does the 2 year qualifying employment period to bring a claim apply. In an effort to discourage this practice, PIDA has been amended to make clear that in order to obtain protection under the act, an individual must reasonably believe that a disclosure he or she makes is in the public interest. 

There was a previous requirement that any disclosure had to be made in good faith. In an effort to move away from focusing on the motivation of the individual making the disclosure, this requirement has been removed. Instead, compensation can be reduced by up to 25% where it can be shown that a disclosure was not made in good faith.

There are often genuine concerns from individuals that if they do “blow the whistle”, not only will they be unfairly targeted by their employer, but also picked on by their colleagues. From June, employers can now be held vicariously liable where their employees victimise a colleague because he or she made a protected disclosure. The employer will be deemed to have carried out these acts unless it can show that it took all reasonable steps to prevent the victimisation occurring. 

Also from June, employees no longer need the normal minimum qualifying service of 2 years to be able to claim unfair dismissal where the reason for dismissal is their political opinions or affiliation.

July brought in a whole host of changes, one of the most useful for employers is the introduction of pre-termination negotiations. The aim is to allow an employer and an employee to have confidential discussions; that is “off the record”, to end employment on mutually agreed terms without fear of reprisal in the Employment Tribunal. An employer may have a conversation with an employee about a performance or capability issue, without there being an existing dispute, and raise terms of proposed settlement. These conversations will not be admissible at a subsequent ordinary unfair dismissal hearing. There are a number of pitfalls to be aware of, such as these provisions do not apply to discrimination issues or automatic unfair dismissal (e.g. participation in trade unions activities) but it is nevertheless a useful tool for a manager when used correctly. 

July also marked a historic shift in the employment law landscape with the introduction of fees into the employment tribunal system. When the industrial tribunals were originally established the idea was that it would be informal, cost effective, anyone could represent him or herself and have access to justice. However, as the years have gone by, there is a strong perception that there are many vexatious litigants and the system itself is bogged down. The hope is that fees will encourage the use of alternative means of settlement, discourage unmeritous claims and provide a way of funding the tribunal system.

There are now two levels of claims. For level 1 claims, such as holiday and redundancy pay, the issue fee is £160 and the hearing fee is £230. For level 2 claims, which are the more complex such as discrimination and unfair dismissal, the issue fee is £250 and the hearing fee is £950. There are additional fees for the Employment Appeals Tribunal. There is a widespread remission system in place, so those receiving certain benefits or below a specified income threshold, will not have to pay. This may well apply to many claimants, as a significant number will be unemployed.

It is a little too early to ascertain whether the fee system will lead to a long-term decline in the number of employment claims, however early indications are that it has had an noticeable impact.  UNISON has launched a judicial challenge to the fee regime, and we will keep you posted on developments.

September heralded the introduction of a new type of employment relationship called “employee shareholder”. In return for shares within a company, employees give up some of their employment rights, most notably unfair dismissal (except in health and safety cases, automatically unfair cases, or where the dismissal is discriminatory) and the right to claim a statutory redundancy payment. The first £50,000 worth of shares (value at acquisition) is free from capital gains tax on disposal. So far, take up has been poor but it is hoped that it will appeal to start-ups and high growth businesses. 

October marked the annual increase in the national minimum wage. For workers who are aged 21 or over, the rate is £6.31 per hour. The youth rate for workers who are aged 18 but under 21 is £5.03 per hour. The young workers' rate, for those workers who are aged under 18 but who are no longer of compulsory school age, with apprentices excepted, the rate is £3.72 per hour. The apprentice rate, for apprentices who are aged under 19 and apprentices aged 19 or over but in the first year of their apprenticeship, the rate is £2.68 per hour.

The year concluded with the publication of the draft TUPE amendment regulations.

2013 has been an extremely busy year. In future articles will be exploring the issues raised here in more detail. We will also be looking at some important 2013 cases and their practical impact, such as the calculation of holiday pay and overtime, how to deal with holiday for those who are on long term sickness absence and the right to be accompanied at disciplinary /grievance hearings. 

If you would like assistance or further advice on any of the matters raised in this article, or any other employment issue, please contact Sally Bradshaw.