A copy of the strategy paper is available at

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1 ESSENTIAL INFORMATION FOR EMPLOYERS May 2006 IN THE NEWS Bank holidays The Government has announced its intention to add bank holidays onto the minimum 4 week paid holiday entitlement under the Working Time Regulations, instead of being included in it. This is part of its new employment relations strategy, which also includes extending enforcement of the national minimum wage and simplifying employment law by reviewing discrimination provisions, redundancy payments and the statutory dispute resolution procedures. A copy of the strategy paper is available at NEW LAW Age discrimination The final Employment Equality (Age) Regulations 2006 have been published, and will come into force on 1 October We are producing a Guide to the new age discrimination law. The Guide will be sent to all recipients of Online Update, but please contact Anna West (Anna.West@TraversSmith.com) if you would prefer not to receive a copy. New TUPE New TUPE came into force on 6 April 2006 (see the March 2006 edition of Online Update for more detail). We have produced a summary of the key effects of new TUPE. If you would like a copy, please contact Anna West. Pension consultation Also on 6 April, new rules came into effect requiring employers to consult scheme members before making certain changes to occupational pension schemes, or to personal pension schemes to which the employer contributes (see the March 2006 edition of Online Update for more detail). We have updated our Employee Consultation Guide to cover these new rules. Please contact Anna West if you would like a copy of the Guide. The information and expressions of opinion in this guide are not intended to be a comprehensive study, nor to provide legal advice, and should not be treated as a substitute for specific advice concerning individual situations.

2 CASE WATCH Rolling over on rolled-up holiday pay The European Court has ruled that rolled-up holiday pay arrangements breach the Working Time Regulations (WTR) because the effect is that the worker is being paid for holiday in advance, rather than during the time that he actually takes holiday. The ruling allows employers some limited flexibility to set off any previously rolled-up holiday pay against any employees' claims under the WTR. However, it seems unlikely that the set-off option will remain available indefinitely. Following this case, the DTI is now advising employers to renegotiate rolled-up holiday pay arrangements as soon as possible. Employers should replace these arrangements with a system which ensures that all workers are able to take leave and will be paid in respect of this at the time it is taken. For example, allowing casual workers to take a proportionate amount of paid holiday after they have worked a certain number of days. Robinson-Steele v RD Retail Services Limited, Clarke v Frank Staddon Limited, Caulfield and others v Hanson Clay Products Limited Part-time workers - lowering the hurdle for claims Part-time workers who are treated less favourably than full time workers who: 1. work under the same type of contract and 2. do the same, or broadly similar, work can claim compensation, unless the employer can objectively justify the difference in treatment. A recent case has explored the meaning of "same type of contract" and "same or broadly similar work". Part-time fire fighters claimed that they had less beneficial employment terms than full-time fire fighters. The Employment Tribunal decided that the part-timers and full-timers had different terms and conditions, so they were not employed under the "same type of contract". Also, the part-timers spent most of their time responding to emergencies, while the full-timers spent more time on other duties like community fire safety work, so they were not doing the "same or broadly similar work". After two unsuccessful appeals by the part-timers, the case reached the House of Lords. The Court decided that the part-timers and full-timers worked under the same type of contract, ie a contract of employment. It did not matter that there were differences in terms and conditions. As to whether they were carrying out the same or broadly similar work, the Court emphasised the need to focus on how much of the work done by part-timers and full-timers is the same, and the importance of that work to the employer. Just because there are extra duties carried out by full-timers, this does not mean that their work is not the same or broadly similar. (The question of whether they were carrying out the same or broadly similar work was sent back to the Employment Tribunal to decide.) 2

3 This decision is likely to make it easier for part-time workers to find a full-time comparator, which they need in order to bring a claim in the first place. It does not necessarily mean that more claims will succeed. Employers can seek to justify less favourable treatment of parttimers, and a difference in the work carried out by each group could potentially justify different treatment. Matthews and others v Kent & Medway Towns Fire Authority and others Expired warnings - not to be relied upon The employee, a factory operator, caused a chemical leakage by failing to comply with safety procedures. He was given a written warning with a "life" of twelve months. Four months after the warning had expired, there was another chemical leakage, this time resulting in a fatality. An investigation found that the employee had failed to follow the safety procedures, and had also falsified records in relation to these procedures. The employer took into account the fact that the employee had already received a previous warning for the same conduct, and dismissed him. The employee's unfair dismissal claim succeeded. The Court decided that expired warnings should not be relied on in any subsequent disciplinary process, and the employer would not have dimissed the employee had it not been for the previous warning. The ACAS Code of Practice on Disciplinary and Grievance Procedures (which Employment Tribunals are entitled to take into account when deciding unfair dismissal claims) recommends that warnings should expire after a specified period. ACAS suggests six months for a first written warning and twelve months for a final written warning (although longer periods may be appropriate in some circumstances). The letter to the employee containing the warning should state clearly when the warning will expire and confirm that after expiry the warning will not be used in any disciplinary action. Diosynth Ltd v Thomson Disciplinary action - inconsistent sanctions can be fair Generally, employers should take a consistent approach when deciding the sanction for misconduct, but in some circumstances it may be reasonable to issue different penalties for the same offence. Two employees were dismissed for doing private work in their employer's time, using their employer's equipment. They claimed that their dismissals were unfair, because one of their colleagues had recently only been given a final written warning for the same offence. The Employment Appeal Tribunal (EAT) decided that the employer was justified in treating these two employees differently to their colleague. The colleague who was only given a warning had thirty years' service and immediately admitted his wrongdoing. In contrast, the employees each had only three years' service and throughout the disciplinary and appeal proceedings they had continued to insist, dishonestly, that they had the employer's permission to do the private work. It was reasonable for the employer to take these factors into account and dismiss the employees instead of giving them a warning. Employers who decide to give different sanctions to different employees for the same offence should ensure they have good reasons for doing so. It is also important to explain to the employee why the sanction is considered appropriate, and keep a record of the decision making process. Enterprise Liverpool Plc v Bauress and another 3

4 Statutory grievances and settlement letters A recent case confirms that a "without prejudice" letter from an employee's solicitor can amount to a statutory grievance. The employee resigned following the sale of the employer's business. The employer subsequently received a letter from the employee's solicitor, alleging various claims. The letter, which was marked "without prejudice", stated the value of the claims and threatened legal proceedings if the employer did not agree to pay the compensation requested. When the employer denied the allegations, the employee commenced proceedings. The employer argued that the employee was not entitled to bring the claim because he had not raised a statutory grievance first. The employee relied on the solicitor's letter as his statutory grievance, and this was accepted by the EAT. The EAT emphasised that the only requirement for a grievance is that it is in writing. It does not matter if the complaint is aggressive, or contained in a letter threatening proceedings or in a "without prejudice" letter. This decision is consistent with the very wide approach that Tribunals have been taking in relation to statutory grievances (see the January 2006 edition of Online Update). Employers who receive any written complaint by or on behalf of an employee are advised to reply saying that they intend to treat the complaint as a grievance and inviting the employee to attend a meeting to discuss it (notifying of the right to be accompanied). Failure to deal with the grievance in accordance with the statutory procedure means that any compensation awarded to the employee by the Tribunal could be increased by up to 50%. Arnold Clark Automobiles v Stewart and another Agency worker or employee? An agency worker can be an employee of the end user client, even where he works through his own services company. After he was made redundant, the individual continued to work for his former employer through his own services company. Subsequently, the employer's business was sold to Cable & Wireless (CW) which insisted that the individual worked via an agency as well as his own services company. The agreements between the agency and CW, and between the agency and the services company, both stated that he was working as an independent contractor not an employee. He worked under the direction of CW managers and using equipment paid for by CW. He was also identified as an employee within the CW department structure. When his contract was terminated, he claimed unfair dismissal, on the basis that he had been an employee of CW. The Court decided that the individual was an employee of CW because CW managed and controlled the work that he did, and he was an integral part of the organisation. It did not matter that there was a services company and an agency between the individual and CW. What was relevant was the nature of the relationship between the individual and CW, which was one of employment. This decision is not surprising, given that the individual had originally been an employee and his day to day working arrangements had stayed the same after the services company and agency were brought into the picture. However, the case still reiterates the risk that an agency worker can be treated as an employee of the end user client. Muscat v Cable & Wireless Plc 4

5 CONSULTATION PAPERS Additional paternity leave The Government has launched a consultation on proposals for additional paternity leave and pay (which will be separate from the current two week paternity leave provision). The new arrangements would allow fathers to take up to six months' paternity leave after the baby has reached the age of twenty weeks. The father's entitlement would depend on the mother being entitled to statutory maternity leave and pay herself, and her having returned to work before the father takes leave. Additional paternity leave would be paid at the statutory flat rate (currently ). Consultation closes on 31 May We will be responding to the consultation and we welcome views on the proposals. Please contact Anna West or your usual employment department contact, with any comments. The consultation paper is available at: OUR WORK Since the last edition of Online Update, our work has included: advising employers on the practical implications arising from the recent European Court ruling on rolled-up holiday pay (see Case Watch in this edition of Online Update), including the likely timeframe for compliance winning the defence of an Employment Tribunal claim by an employee dismissed for gross misconduct on grounds of suspected theft of company property advising on a switch in outsourcing contracts in the light of new TUPE (see New Law in this edition of Online Update) including the new duty to supply the incoming employer with information about the transferring employees running training courses on managing performance and diversity for around 40 senior managers advising on practical tips to prepare for the forthcoming age discrimination law including job advertisements, interview questions and retirement advising on the employment aspects of Macquarie bank's successful 1.8 billion bid to acquire Moto, motorway services, working closely with our corporate/banking, commercial and property colleagues. SEMINAR Our next seminar, Employer's Question Time, will take place at our offices on Friday 19 May The seminar will give attendees the option to raise specific questions, and will also cover recent employment developments, restrictive covenants and the new pension consultation obligations (see New Law above). For more information about our seminar (for which there is no charge), please contact Anna West or your usual employment department contact. 5

6 TRAINING Following our training workshop on Recruitment last month, our 2006 training series continues in July and October On 6 July, Dorothy Henderson will lead a workshop on Employment Contracts, Handbooks and Changing Terms; and, on 5 October 2006, Andrew Lilley will lead a workshop on Dismissals and Compromise Agreements. If you would like more information about these workshops, please contact Anna West. If you have any queries on this edition of Online Update, please contact any member of the Employment Department: Partners: Dorothy Henderson, Andrew Lilley, Siân Keall Richard Baty, Anna West, Ed Bowyer, Russell Lamb, Tim Gilbert, Ed Mills, Martin Luff, Jane Wheeler, Kathryn Lloyd, Rebekah Naisbitt If you have a colleague, or a friend in another organisation, who you think would like to receive Online Update, please send his or her details to Brenda.Goodhew@TraversSmith.com Travers Smith is regulated by the Law Society of England and Wales. We are not authorised under the Financial Services and Markets Act 2000 but we are able, in certain circumstances, to offer a limited range of investment services to clients because we are members of the Law Society. We can provide these investment services if they are an incidental part of the professional services we have been engaged to provide. LONDON 10 Snow Hill London EC1A 2AL Tel: +44 (0) Fax: +44 (0) PARIS 21 place de la Madeleine Paris Tel: +33 (0) Fax: +33 (0) BERLIN Unter den Linden Berlin Tel: +49 (0) Fax: +49 (0) Travers Smith 2006