"A pocketful of mumbles, such are promises"

Posted by David Whincup, London on May 16, 2012

So sang Simon and Garfunkel in The Boxer, continuing perceptively “All lies and jest.  Still a man hears what he wants to hear and disregards the rest”.  

Never was this more true (OK, save for small children and sweets) than in relation to positive noises made by employers to staff about “looking after” them if they stay with the employer in troubled times.  Employees can sometimes hear only the upside and not little words like “discretionary” or “subject to” or “conditional upon”.  Equally, however, employees in troubled times sometimes hear only those words and consequently form the view that the upside promise will never be fulfilled.  As a result, the motivation or retention effect hoped for is lost and the assurance is ineffective.  Foreseeing this latter risk, the employer may soft-pedal on the caveats and conditions, doing all it can to make those promises appear real to the employees.   

Such was the problem in last week’s “bankers’ bonus” case, Attrill & Others –v- Dresdner Kleinwort, a £40million claim for bonuses allegedly promised but then withheld when the extent of the employer’s financial woes became clear.  Despite the “greedy bankers” overtones to the press coverage, the Attrill case was a very simple contractual dispute at its heart – were the representations made to the bankers by DK sufficiently clear and unequivocal to (a) override the notionally discretionary nature of the bonus scheme and (b) become contractually enforceable?  

Very much paraphrased, the High Court found that in troubled waters DK had wanted to retain its best people, people who could and possibly would otherwise abandon ship. It had said all the usual things about looking after them if they stayed, but that did not provide the degree of security or certainty the at-risk population were thought to need.  As a result, DK management made more specific commitments which were argued by the employees to be akin to a statement that “If you stay at least until x date and perform to y level we will pay you at least £z”. There were no relevant conditions or caveats to that commitment, such as DK remaining solvent, making profits of not less than £xxx, not being taken over, the markets not falling over, etc.   

The claimants did stay until x date and did perform to y level, and so on any view kept their side of the bargain. The question was then whether those commitments by DK were as clear as the claimants argued or were closer to a “look after you” sentiment. On the facts – these cases are all very fact-sensitive – the Court held that the statements made were precise enough to be enforceable, and that the bankers’ squandering their resistance by not leaving when they could have done constituted acceptance of and valid consideration for that offer.   

The devil is of course in the detail of those conditions – as employer, ensure that you have thought ahead to as many eventualities as you can, to every set of circumstances, almost however doomsday, that would lead you not to want to honour that upside promise. The courts will not imply in such terms later merely because they would have been a good idea or because you are sure that is what you intended at the time, or that is what market practice would dictate. If the payout would vary for any reason then the contract or offer needs to say so and the burden is squarely on the employer to make sure that it does.  

What we are left with for employers is a simple message in two parts  

1.   Do not make assurances to staff which go beyond the equivalent of “we will look after you”, “it will all be fine”, “you won’t regret it”, etc, OR  

2.         If you have to make such reassurances as a condition of retaining or securing key staff, then make sure that any applicable conditions or caveats are clearly stated at the same time (you will not be able to add in such caveats later as that would be an attempt to vary unilaterally a contract already made), ideally in writing.

The Shareholder Spring

Posted by Angus Ackroyd – London on May 15, 2012

A year after the “Arab Spring” saw a revolutionary wave of bloody protest and conflict across the Arab world, the spirit of revolution is now widely reported to have reached the UK.  

Of course, Trafalgar Square is not currently full of demonstrators; the Prime Minister is not ordering tanks onto the streets of London and (as yet) there are no plans for UN sanctions or NATO air strikes against UK targets, although if the Tube drivers threaten more industrial action this may have to be looked at again.  The “revolution” engulfing UK PLC is limited to disgruntled shareholders protesting and voting against “excessive” executive remuneration packages.  It has accordingly been dubbed the “Shareholder Spring”.  It is not about deposing hated despots enriching themselves  at the cost of the people under them.  No, wait, hang on.  

Anyway, whilst shareholder activism and protest voting at company general meetings does not compare to the violent demise of the Gaddafis, the Shareholder Spring is not without significant impact.  

Last week Aviva boss Andrew Moss stepped down after embarrassingly losing a shareholder vote on executive pay at the company’s annual general meeting.  This followed similar shareholder revolts at Barclays, Xstrata and Trinity Mirror.  Most recently, William Hill’s Chief Executive narrowly hung on to his £1.2m retention bonus following 49.8% of shareholders voting against it.  

Company boards, concerned about the spread of this activism, will also have noted new Government proposals to increase shareholder powers to monitor executive pay.  The Queen confirmed during her speech on 9 May that the Government will introduce measures to give shareholders binding votes on future pay policy, director’s notice periods longer than one year and exit payments over one year’s salary (currently shareholder votes on these matters are only advisory).  

The Government was moved to introduce these changes as it saw too much “reward for failure” amongst senior executives, who are popularly perceived to receive generous bonuses despite company failures.  The current wave of activism suggests that shareholders may use these new powers not only to monitor pay which does not reflect performance, but to question pay generally when it appears excessive (it has not, for example, been reported that William Hill’s Chief Executive was not meeting his performance targets).  Like many recent Government utterances, however, the proposals look better in theory than they might in reality.  What is “excessive pay”?  More than mine?  Or yours?  Or the Prime Minister’s (less than £150,000, though with some very decent perks)?  Or Wayne Rooney’s?  And how will PLC Boards justify £800,000 as against £900,000 for example, when both sums are beyond the imaginings of most mortal men?  

This could lead to companies facing a dilemma when setting executive pay.  Should they appease shareholders and cut remuneration, but potentially lose valued senior staff to better paying competitors perhaps in overseas jurisdictions without the same constraints?  Or, should they maintain current trends in pay, but at the risk of isolating shareholders further, with the potential embarrassing outcome we saw at Aviva?  

The Shareholder Spring may be short-lived and end as quickly as it arrived with a return to economic growth and stability in share prices.  However, it would be imprudent to assume this.  It may be that until recently, companies have taken the indifference of their shareholders for granted.  Such inertia support can no longer be assumed and steps need to be taken to re-engage with shareholders.  Companies are already required to prepare detailed reports on what they pay their directors.  It is perhaps time to go beyond preparing these reports for formality’s sake, and to start using them to engage shareholders and help them understand how and why decisions on remuneration are made and how they benefit the company as a whole, not least the individual shareholder. 

Dress codes - a question of respect?

Posted by David Whincup, London on May 15, 2012

Obviously a quiet afternoon at BBC News’ Online magazine http://www.bbc.co.uk/news/magazine/ last week, hence the full page enquiry as to whether it matters that Facebook founder Mark Zuckerberg had worn a black hooded top for his presentations about his company’s flotation, rather than a suit.  Similarly, was Apple’s Steve Jobs also breaching the unwritten laws of business dress by his traditional black roll-neck and tired tennis shoes?   The Times editorial today reports that a number of Wall Street executive noses were put out of joint by Zuckerberg’s attire, on the basis that he had work a suit to meet the US President.  Yes, and?

Supporters of both men have pointed to their enormous talent and even more enormous wealth as if that is somehow mitigation of the impression which might be given that neither could be bothered to don a suit now and again, even for such important occasions.  It is a hard argument to contest in their particular cases, just by dint of their success.  However, the point is not limited to them – one wonders how many would-be Jobs and  Zuckerbergs have never got their brilliant ideas off the ground at all because bank managers and investors were unconvinced that trainers and shapeless tops reflected creative genius rather than indifference or idleness.

Leaving Jobs and Zuckerberg on one side, can the employer even in “young” or “creative” industries like IT, entertainment or fashion, impose a rather more traditional or conventional dress code if it wishes?  Definitely yes – you are not bound by the suggestion that if a black hooded sweatshirt is OK for Mark Zuckerberg, it is also OK for Kevin from Accounts, even if he is socially-networked up to the eyeballs and terribly good at Call of Duty III.  However, we have to be careful here – everybody knows that it is possible to look a dreadful mess even in a suit, and I have colleagues whose ties alone would constitute cruel and unusual punishment in a Turkish prison.  You can take a horse to water, and all that, but issues of taste or any sense of sartorial self-awareness are a different question altogether. 

Take as an example the vacation student I interviewed recently for his dream role as a City solicitor – call me shallow if you wish, but I could not get past the contrasting lapels on his suit or the brown shoes.  This was not because he looked bad but simply for what it said about his lack of research into and understanding of the world he sought to join.  You can dress down perpetually when you own the whole shop and/or could pay off the National Debt out of your lunch money, but until then your wish to shake off the fetters of tired convention and soar on the currents of sartorial indifference must sadly be subject to your employer’s reasonable requirements to dress like a professional as well as act like one.  Sorry.

Lap-dancing laid bare

Posted by David Regan, London on May 15, 2012

You must learn a lot as an Employment Judge, daily granted glimpses into the inner workings of all sorts of industries and businesses.  Some of it is undoubtedly pretty grim but in not many other judicial roles could you come into work one day and go home with more knowledge of lap-dancing than would be easy to explain over dinner.  

And all in connection not with harassment or misconduct or discrimination, but with the issue of employment status.  The question for you today – are lap-dancers employees?  

In this case, an individual who worked at a lap-dancing club in London received no pay or other remuneration from the club itself, being tipped or paid by clients directly in the house currency, ‘Heavenly Money’.  From this sum deductions were made to pay towards a ‘House Mother’ who looked after the dancers, their hair and make-up each night; a DJ; hairdresser; and other facilities.  In addition, the club would deduct a nightly ‘house fee’ and ‘commission’ from the sums received by the dancer, as well as any fines that fell due under the ‘house rules’, e.g. for being late for a shift or a dance or for the weekly ‘team meeting’.  Dancers would choose and supply their own routines and costumes, subject to the club’s guidelines.  If a dancer did not wish to work, she would simply notify the club in advance and would not be put on the rota for that week, although any absence from the rota greater than 4 weeks would give rise to a requirement to ‘re-audition’.   

In this case, there was no dispute that the dancer was required to perform her services personally.  Given the house rules, the requirement to attend meetings and the ability to levy fines, it was held that the club had a sufficient level of control over the dancer to potentially give rise to a contract of employment.  The final question was whether or not sufficient mutuality of obligation existed between club and dancer so as actually to give rise to such a contract.  The Employment Tribunal initially found that there was no mutuality of obligation in the relationship, as the dancer was not paid by the club and did not have to put herself forward for the rota if she did not wish to.  Indeed, the Judge viewed her being on the rota as simply being offered a facility to dance in, with the club rules in part being necessary to enable the club to retain its licences.  

On appeal, the Employment Appeal Tribunal disagreed.  It found that there was sufficient mutuality of obligation to found a contract of employment with the dancer – she was required to attend when she was on the rota, she had to perform at the direction of the club’s management and she could be fined for poor performance or attendance.  In addition, the EAT disagreed that the Claimant was remunerated directly by her clients, pointing out that, although she collected the ‘Heavenly Money’, she was, in effect, paid her ‘cut’ by the club once deductions had been made – the fact that she had physically collected the proceeds herself was irrelevant.  

The point of this case, other than to demonstrate a surprising link between the man who washes your car in the supermarket (the subject of the last leading case on employment status) and a lap-dancer, is that employment status is a matter of law, not of contract.  The Courts are very willing to delve into the facts to determine someone’s true employment status.  Indeed it will be very hard for employers to convince a Tribunal that anything other than a genuine freelance situation is not an employment relationship.  If it looks like a duck, walks like a duck and quacks like a duck…..

Employment Mediations - an Insider's Guide, Part 10

Posted by Caroline Sheridan, London on May 15, 2012

Not all mediations settle.  The Employment Tribunal mediation system boasts a success rate of 70%, while CEDR's experience is that of about 85% of its employment mediations result in an agreement.   Those who do not settle can go off to fight another day, and best of luck to them with that, but for those who do reach an agreement, what are the rules about wrapping up the process? 

That depends very much on what the mediation is about.  If it is a matter which is or could be the subject of Employment Tribunal proceedings, then the employer is still safest requiring the completion of a statutory compromise agreement.  The fact that the agreement is reached via a mediation does not vary the usual rule that an ordinary letter of agreement is not effective to waive statutory claims. 

However, many mediations are about resolving tensions between colleagues which will otherwise explode, the shrapnel causing who knows what damage to those individuals, the colleagues around them and the employer's business.  The terms of settlement in those cases (also called “facilitations”) can often be little more than an increased mutual understanding of the other's position or sensitivities, or perhaps an apology (more likely when reframed as an “acknowledgement”) or some express commitment to deal differently next time with any issues arising.  CEDR recommends that all settlements should be in writing, but I have found in cases like this that the process of reducing this mutual understanding to paper can do more harm than good.  This is because the parties then inevitably focus on the precise words used and not on the behavioural changes which they have agreed.  If the protagonists are genuinely content to resolve the matter on a handshake, then it is not for the mediator to require otherwise. 

Even where there is to be a written agreement, the mediator cannot advise on its detailed terms for fear of being perceived to have lost his/her neutrality.  The most I can do is to remind the parties of the different components of the settlement at the close of the bargaining stage, but it is up to them to determine what goes into the final agreement.  For this reason at least, it can make sense for the employer to have its advisors available in person or on the phone towards the back end of the mediation day.

Going home after a failed mediation is a deeply depressing business, and that is just for me, let alone the actual parties.  Sometimes they are just miles apart from the start and failure is always on the cards, but equally mediations occasionally founder on a last-minute moment of fatigue, temper or intransigence (the parties, not me!) when they had seemed just about to do a deal.  In those circumstances, a good mediator will let the parties reflect overnight on the wasted cost and lost opportunity to put it all behind them, and will contact both again the next day to see if something can be snatched from the jaws of defeat.   A meaningful proportion of mediations which do not succeed on the day are resolved soon afterwards in this way.  All part of the mediation service!

This is the last in my series of Insider's Guides to Employment Mediations.  Thank you for reading them.  I hope you have found them useful and that you will take from them some of my own conviction that for all employers (except those few for whom principle is everything), mediation is truly the way forwards for employment disputes.  If you have any queries about this series or the services which CEDR provides, please contact me on csheridan@cedrsolve.com.

Squire Sanders UK Business Immigration Breakfast Seminar

Posted by Supinder Sian, London on May 11, 2012

On 6 April 2012 new Immigration Rules put into place the majority of the changes previously outlined in the Home Office Statement of Intent affecting Tiers 1, 2, 4 and 5 of the Points Based System, Settlement, Domestic Workers and Visitors.

On 24 May Squire Sanders presents an overview of what the new rules mean for Sponsor Licence holders, with an in-depth look at the different restrictions of which employers will need to be aware when recruiting migrant staff under Tier 2 General and Intra-Company Transfer.

Join us in our City of London office when Supinder Sian, Rose Carey and Shanti Faiia from Squire Sanders’ UK Business Immigration team will consider the practical implications of the new Immigration Rules, including:

  • Tier 2 (General) 6 year limit and changes to the criteria for settlement
  • ‘cooling off’ periods
  • the resident Labour Market Test
  • raising the Skill Level required for Tier 2
  • students and Tier 1 Post-Study Work
  • visitors carrying out Permitted Paid Engagements

This seminar (for which there is no charge) is suitable for HR professionals within organisations that hold a Tier 2 Sponsor Licence and other professionals with responsibility for managing migrant staff.

The seminar will last approximately 1 hour, with registration from 8.30am.

Registration
Online registration is also now available.

Questions?
For questions related to the event, please contact Kirsty Tod at +44 20 7655 1789

Supreme Court brings redundancy relief for French employers

Posted by Pauline Pierce, Paris on May 11, 2012

The Social Chamber of the French Supreme Court has just handed down an important decision for French employers in the case of Viveo.   In doing so it overturned the Paris Court of Appeal which controversially ruled in May 2011 that if the economic reasoning relied on by an employer to justify proposed collective redundancies was not valid then the subsequent redundancies were also null and void.   The Reims Court of Appeal had earlier given a similar ruling.  

Fortunately for employers, the Supreme Court held on May 3rd 2012 that redundancies will only be null and void if there are no (or no adequate) redeployment measures contained in the Safeguard of Employment Plan, and not for the want of an “economic motive” objectively justifying the redundancies. This judgment is in line with the French Labour Code which only provides for a collective redundancy procedure to be cancelled if no redeployment plan (“plan de reclassement”) in the Safeguard of Employment Plan is presented by the employer to the employee representatives, who must then meet and be informed and consulted with about it.  

In troubled economic times, this decision comes as a great relief to employers in France.

The NLRB's "Ambush Election" Rule Is Now In Effect

Posted by Kathleen Portman on May 02, 2012

On December 22, 2011, the National Labor Relations Board (“Board”) adopted a final rule which significantly modified, in certain respects, the procedure for processing representation petitions. The “ambush election” rule, which represents a scaled back version of a more comprehensive overhaul of election procedures proposed by the Board in June 2011, went into effect on April 30, 2012 and will apply to all representation cases filed on or after that date.

In proposing the new rule, Board Chairman Mark Gaston Pearce explained that the amendments were not likely to impact the majority of NLRB-supervised elections as: “about 90 percent [of NLRB-supervised elections] are held by agreement of the parties…[and t]he amendments…would not affect those agreed-to elections.”

Under the new rule, which seeks to reduce unnecessary litigation and enable expeditious resolution of questions concerning representation, the Board: 

  • Focused pre-election hearings on only those issues relevant to determining if there is a question concerning representation;
  • Provided hearing officers with the authority to limit the presentation of evidence;
  • Provided hearing officers with discretion on whether to allow for post-hearing briefs after pre-election hearings;
  • Eliminated pre-election appeals to the Board and consolidating appeals into a single, post-election review request;
  • Made Board review of post-election regional determinations discretionary;
  • Eliminated duplicative regulations;
  • Eliminated the practice of not scheduling an election for approximately 25 days after a decision and direction.

Although the new rule does not specify how soon a pre-election hearing should be held, most Regions issue the Notice of Representation Hearing on the day the petition is filed and schedule the initial hearing for 7-10 days thereafter. Thus, employers are likely to only have a seven-day window under the new rule in which to prepare for a pre-election hearing once they have received notice. Opponents of the rule point to the increase in union control over the timing of election hearings and their ability to “ambush” the employer’s ability to educate their employees about the disadvantages of unionization.

With the new rule in effect, employers should take immediate steps to increase awareness of workplace grievances and employee unrest, both of which could result in a union organizing campaign, and to make sure that they are adequately training supervisors on how to lawfully respond once an organizing campaign has been initiated. In addition, employers are advised to take a second look at wage rates, benefits packages and employment policies to ensure that they are both fair and competitive. 

For more detailed information, the Acting General Counsel issued a guidance memorandum [pdf] on April 26, 2012 explaining how Regions should implement the new rule. Likewise, the General Counsel’s office has issued a set of Frequently Asked Questions, which provide a quick and easy explanation of the revised rule and the procedures for its implementation. 

Employers lack sparkle for Diamond Jubilee holiday

Posted by Laura Walsh, Leeds on May 02, 2012

As employees look forward to a long Jubilee weekend and additional holiday at the start of June, employers are finding it an extra headache and that's before the party even begins.  Not only has the Government declared an additional Bank Holiday to celebrate the Queen's Diamond Jubilee on 5 June, but it has also moved the traditional end of May Bank Holiday to 4 June, meaning an extra-short week of working time for employers in June and no doubt a huge number of requests for holiday as employees seek to take an extended holiday using only a small amount of their annual leave.  

So what should employers be doing? Making some decisions NOW. Decide now how you will manage time off and leave requests in a fair and consistent manner.  

For a start, are your employees entitled to take even the Jubilee Bank Holiday itself off? And if not, are you going to allow them to do so anyway?  

There is no statutory right to bank/public holidays, so the announcement of the Jubilee Bank Holiday does not vary entitlements to holiday under the Working Time Regulations.  Therefore you need to consider the employee's contract. Does it say that employees are entitled to "bank holidays" or "public holidays"?  For example, any wording along the lines of "you are entitled to 20 days’ annual leave plus all statutory, bank and public holidays"?  In such cases an employee will be able to argue that he is entitled to paid time off for the Jubilee Bank Holiday. If the contract simply refers to "statutory holiday", the Jubilee holiday is not covered. Nor is it covered in a contract which names each public holiday (and therefore of course will not name the Jubilee one).  

If the contract does not give the employee a right to the break, should you refuse it? The choice is yours.  Weigh up the pros (profits, maintaining service to clients) and the cons (lack of motivation, disgruntled employees). If you go for the latter, perhaps consider an incentive? Your employees won't thank you for having to attend work whilst friends and family are attending street parties and swaying faintly to Vera Lynn, up to their ears in Pimms and bunting.  

And what if everyone wants an extended holiday taking advantage of the two Bank Holidays? Or if you don't treat it as annual leave and everyone requests to take it as annual leave? The only fair way is likely to be a "first come, first served" approach. But consider how much staff cover you will actually need.  Will it be reduced if clients/customers are not at work either?  Try to be as flexible as you can within the context of your business – offices may be quiet but leisure and retail operations can expect to be at full stretch.  

And finally, pay?  There is no statute which says that an employee is entitled to be paid extra for working a Bank Holiday, but many employers do offer incentives, such as time and a half. You must check whether this is in your contracts and treat the Jubilee holiday as any other Bank Holiday from that perspective.

KEEPING U.S. IMMIGRATION LAW FEDERAL: "YOU CAN SEE IT'S NOT SELLING VERY WELL

Posted by Greg Wald, San Francisco on April 30, 2012

So were the words of Supreme Court Justice Sotomayor to the Solicitor General Donald Verrilli during last week’s oral argument in Arizona v. United States,  as she challenged the government’s position that the Constitution and the doctrine of preemption prevents states from mandating their law enforcement officers to conduct immigration status checks.  Such a challenge to the government’s position, from one of the more liberal Justices, may foretell a possible outcome where the U.S. Supreme Court permits at least some of Arizona’s landmark immigration law, S.B. 1070, to take effect.

What is this case about and what does it mean for employers doing business in Arizona and other states that have adopted similar legislation?

The case arose from the State of Arizona’s appeal of an injunction blocking four parts of the immigration law.  The four provisions are summarized as follows: 

  • Requiring local law enforcement to verify the immigration status in any lawful stop, detention, or arrest any time in which they have “reasonable suspicion” that someone is unlawfully present.  This  has been labeled as the “show me your papers” provision;
  • Authorizes warrantless arrests for individuals presumed (based on “reasonable suspicion” ) to have committed a deportable offense;
  • Creates a state crime for failure to carry immigration status papers at all times (this provision mirrors a longstanding but seldom enforced federal law); and
  • Creates a state criminal penalty for those found working while unlawfully present. 

While reading the oral argument tea leaves is never a foolproof way to predict the likely outcome of a case before the U.S. Supreme Court, the majority of commentators and court observers seem to conclude that the first two provisions have the strongest chance to survive constitutional scrutiny.  The impact of such a holding could be significant because states such as Alabama, Georgia, South Carolina and Utah have enacted similar provisions.  Moreover, a ruling in favor of Arizona is likely to lead to further proliferation of state immigration laws.

Should the Court uphold any of the four provisions, then individuals and employers alike will be put on notice that state immigration law is here to stay.  Such an interpretation would be an extension of last year’s Supreme Court decision in Chamber of Commerce v. Whiting which permitted state enactment of laws requiring employers to register with the federal government's web-based E-Verify program for I-9 employment authorization verification purposes.    As the well-publicized arrest of a legal foreign national auto executive in Alabama for failure to carry immigration papers demonstrated, those visiting and conducting business in multiple states will have yet another set of divergent laws to follow.