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Employment Law Worldview

Webinar: Employment Law Worldview Webinar Series – Australia

Posted in Recruitment

Squire Patton Boggs presents a series of webinars focusing on the key labour and employment issues in countries throughout Europe, the Middle East, Asia Pacific and the United States.

Presented in English by our local labour and employment law experts, each 60-minute webinar comprises a 50-minute presentation covering key “hot topics” in the featured jurisdiction, followed by a 10-minute online question and answer session.

Intended to help you manage labour and employment law risk across your international operations, the webinars will be of interest to both HR professionals and in-house counsel.

On 9 September 2015 at 9.00 am BST (UK) (8.00 am GMT, 10 am CEST, 4 pm AWST, 6 pm AEST), the featured country is Australia. Join Anna Elliott from Squire Patton Boggs’ Sydney office and Dominique Hartfield from our team in Perth who will provide updates on the hiring and firing of employees in Australia:

Hiring employees:

  • Recruitment process – avoiding discrimination issues and claims
  • Options for engaging workers: permanent, fixed-term, casual or independent contractor – essential features addressed
  • Spotlight on key employment terms and conditions
  • Modern Awards – what they are, when they apply, plus an update on the recent Modern Award review and proposed legislative changes
  • Restrictive covenants and avoiding inducement of breach of contract at the hiring stage
  • Employing foreign workers in Australia – what to watch out for

Firing employees

  • Notice and procedural requirements
  • Types of claims and liabilities
  • Poor performance issues – ensuring a fair process and avoiding claims
  • Serious misconduct – when summary dismissal is justified
  • Redundancies and restructurings – consultation processes and entitlements
  • Protecting confidential information and enforcing post-termination restrictions

Register now for this webinar.

No real shocks in high-tension ECJ decision on indirect discrimination

Posted in Discrimination, Recent Cases

Reflecting perhaps a quiet summer in domestic UK employment law terms, much energy has been expended in recent weeks by commentators on the possible ramifications for HR of a European Court of Justice Case on Bulgarian electricity meters.  In reality, however, there may be rather less to this in practical terms than meets the eye.

By way of background, a Ms Nikolova claimed indirect race discrimination against her local electricity supplier, CHEZ Razpredelenie Bulgaria AD, which we will refer to for obvious reasons as CHEZ.  In the area where Ms Nikolova lived, CHEZ fixed its electricity meters some 20 feet off the ground, while elsewhere in the same town they were little more than waist-high.  Ms Nikolova’s area had a high proportion of Roma inhabitants, and CHEZ said that this practice was a necessary precaution against high levels of tampering and unlawful connections to its network.  Ms Nikolova was not of Roma origin but obviously suffered the same claimed disadvantage, i.e. greater than usual difficulty in checking her meter and establishing her electricity usage.

The extension which this case is said to have made to UK employment law is the ECJ’s acceptance that one can suffer not just direct but also indirect discrimination by association – so if  Ms Nikolova has suffered a detriment (reduced access to her meter) through the imposition of a provision, criterion or practice (putting meters 20 feet up in Roma areas) which disproportionately affects people of a particular racial group (Roma), and cannot be justified, then she can claim compensation even if she is not a member of the racial group in question.

But the reality is that such a PCP would already be vulnerable to challenge by the affected Roma population.  The ECJ noted disapprovingly that CHEZ had not brought any evidence to it about actual tampering or unauthorised connections (as opposed to the fear of it) or of any analysis of the extent of the problem in the various areas, Roma and not, to which CHEZ supplied electricity.  On the facts of this case, therefore, CHEZ was badly exposed anyway.  All that this ruling does is increase the number of people it might be exposed to.  If the PCP had been properly evidenced by objective analysis of the established facts it could well have been found justified and that would leave Ms Nikolova with no more claim than her Roma neighbours.

The case therefore emphasises the importance to the employer of being able to evidence why it did what it did.  In CHEZ for example, the company could have established at least a statistical link between a predominantly Roma local population and increased criminal activity on its infrastructure.  It might have been useful to consider the cost of alternative security precautions which didn’t place the meter out of easy reach, and/or how effective a deterrent to the determined tamperer a 20 foot climb really was.

Therefore this case does not make unlawful that which was previously lawful, or unjustifiable that which could previously be explained satisfactorily.

The same is true in relation to other protected characteristics under the Equality Act – if your PCP could affect people of a particular age, gender, faith or orientation such that your employees in those populations might claim to have been discriminated against, then CHEZ suggests that your other employees can do so also.  But it does not expand the list of protected characteristics and as before, if the PCP is justifiable, no-one has a claim in the first place.

Whether your PCP is compulsory Sunday working, limits on part-time or home working, the handling of certain grocery products or a minimum level of physical agility, therefore, the position post-CHEZ is the same as it has always been.  If you can show a good reason for doing something in a particular way and a reasonable review of the other options, you should have nothing to fear from indirect discrimination claims.  CHEZ does not alter that.

NLRB Expands Its Definition Of ‘Joint Employer’

Posted in NLRB, Recent Cases, Union

In a highly-anticipated decision, a divided National Labor Relations Board (NLRB) significantly expanded its definition of “joint employers.”  The new standard portends to have substantial implications to employers across a broad spectrum, but most significantly in the franchisor-franchisee and temporary labor context.  In Browning-Ferris Industries, three members of the five-member Board did away with the long-standing requirement that a putative joint employer must not only possess, but also exercise, authority to control the terms and conditions of employment of employees alleged to be jointly employer with another employer.  Under the new standard, an employer must only possess that authority, even if it chooses not to exercise it.  The new standard also will allow for a finding of joint employer status based on nebulous concepts of “overall circumstances” and “industrial realities.”

The case before the Board involved Browning-Ferris Industries (“BFI”), which operates a recycling facility in California, and Leadpoint, a temporary labor provider that supplied certain employees to BFI’s facility. The agreement under which Leadpoint supplied employees to BFI specified that Leadpoint was the temporary employees’ sole employer. Leadpoint handled all discipline of Leadpoint employees, hired and fired them, and determined their wages (with the caveat that certain Leadpoint employee wages could not be higher than similarly-situated BFI employees).  BFI did not have the authority to fire Leadpoint employees, though it could prohibit them from continuing to work at BFI facilities.

The International Brotherhood of Teamsters sought to represent BFI employees as well as the temporary employees provided by Leadpoint in the same bargaining unit, alleging that, despite the facts described above, BFI and Leadpoint jointly employed the Leadpoint employees.  The regional director rejected that theory under the now-former joint employer standard, but the Board’s decision today overturned that decision and found BFI and Leadpoint to be joint employers of the Leadpoint employees under its new, broadened standard.

The Board majority justified its decision on shifting needs in American companies.  “As the Board’s view of what constitutes joint employment under the [National Labor Relations] Act has narrowed, the diversity of workplace arrangements in today’s economy has significantly expanded,” the Board stated, citing shifts toward greater use of temporary workers.  The majority’s decision explained that its decision returns to what it viewed as a more appropriate definition of joint employer, more firmly grounded in common law principles of control, rather than continuing to apply the requirement that a company actually exercise its control over putatively jointly-employed employees in order to be considered a joint employer.

“The Board may find that two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment,” the decision stated. “In evaluating the allocation and exercise of control in the workplace, we will consider the various ways in which joint employers may ‘share’ control over terms and conditions of employment or ‘codetermine’ them, as the Board and the courts have done in the past.”

The two Republican members of the Board dissented from the majority opinion, accusing the majority of “rewrit[ing] the decades-old test” for identifying a joint employer “in the most sweeping of recent major decisions.”  “This change will subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity, including what have heretofore been unlawful secondary strikes, boycotts, and picketing,” the dissenters wrote.

Although the specific implications of this decision will vary depending on the facts of each case, the decision almost certainly will lead to more findings of joint employer status by the NLRB and thus greater obligations on the part of employers who use temporary and other contingent workers.  It also stands to redefine the extent of the relationships between franchisors and franchisees.

Top Ten Tips on new UK Slavery and Trafficking Obligations

Posted in Legislation
  1. What is the Modern Slavery Act 2015 and why do businesses need to know about it?

The Act deals with a variety of matters relating to slavery and human trafficking.  The most relevant section for businesses is section 54 which will require commercial organisations over a certain size to disclose what activities they have undertaken to eliminate slavery and human trafficking from their supply chains and their own business.

  1. What is this new disclosure obligation?

Affected businesses will be required to produce a so-called “slavery and human trafficking statement” every financial year that sets out the steps they have taken during the financial year to ensure that slavery and human trafficking is not taking place in any of their supply chains or in any part of their own business.  If they have not taken such steps, this must be expressly stated.

Although it will be entirely possible for businesses to comply with this new duty by simply stating that they have taken no steps during the relevant financial year to ensure that their business and supply chains are slavery-free, the Government hopes that the risk of negative publicity (from consumers, the public, investors, etc.) will be sufficient to ensure that affected businesses do feel compelled to take some steps in this direction.

Businesses will be required to publish this statement on their website, if they have one, and there must be a prominent link to the statement on the homepage.  If a business does not have a website it must provide a copy of the statement to anyone who requests one in writing, within 30 days of the request.

  1. What is “slavery and human trafficking”?

The term covers a number of specific offences under the Act but in very general terms slavery is where ownership is exercised over a person, where individuals are coerced into providing their services or do so under threat of a penalty and human trafficking covers arranging or facilitating the travel of individuals with a view to exploiting them.

Slavery and human trafficking are acknowledged to be a global problem, with the UN and other supranational organisations estimating that the modern slavery and human trafficking trade is worth a minimum of US$32 billion per year. Those sectors most likely to be affected are construction, agriculture, textile, security, food processing and packaging, and hospitality and tourism.

  1. What businesses will be affected by this new disclosure obligation?

Businesses will be affected if they:

  • are a commercial organisation, i.e. a business or partnership (whether or not incorporated or formed in the UK) which carries on a business or part of a business in the UK. It will therefore catch foreign businesses and not just UK businesses;
  • supply goods or services; and
  • have a total annual turnover of not less than £36 million – how total turnover is to be calculated is to be determined by separate Regulations which have yet to be issued, but we understand that it will include the turnover of subsidiaries and will apply to global and not just UK turnover.

The Government has estimated that at least 12,260 companies will be affected by this new disclosure obligation. It is targeting large businesses initially because it believes they have the resources to undertake the necessary due diligence and also sufficient purchasing power and influence to create effective change within a supply chain.

  1. What information must be included in a slavery and human trafficking statement?

The Act does not set out what form a slavery and human trafficking statement must take. Instead it sets out six suggestions as to what information should be included:

  •  The organisation’s structure, business and its supply chains;
  • Its policies in relation to slavery and human trafficking (so creating an implicit pressure to introduce such policies);
  • Its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
  • The parts of its business and supply chain where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk;
  • Its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate; and
  • The training about slavery and human trafficking available to its staff.
  1. Is there any guidance available for businesses on what they need to do?

The Government has confirmed that it will be producing a more detailed guidance on the new duty, including on the sort of information that should be included in a slavery and human trafficking statement. This will be published to coincide with the new duty coming into force in October 2015.

  1. Who within the business will be responsible for producing this statement?

This will be a matter for each business to decide.  The statement will, however, have to have the appropriate support and approval from senior management.  For companies this means the Board of Directors must approve the statement and it must be signed by a director.  There are equivalent provisions for partnerships.

  1. When does this new obligation come into force?  

The Government intends to bring the new disclosure obligation into force in October 2015.  To give businesses sufficient time to prepare there will apparently be transitional provisions so that statements will not be required where a business’s financial year end is very close to the date that the obligation comes into force.  We await further details on these transitional provisions.

  1. What are the implications for businesses if they do not comply?

There will be no financial or criminal penalties for failing to comply with this new disclosure obligation.  The Government will, however, have the ability to bring proceedings in the High Court for an injunction requiring an organisation to comply.  It remains to be seen to what extent the Government is prepared to take such a step, especially given that it is the anticipated flak from the absence of the statement which is intended to be the incentive to comply.

In practice the most likely implications for businesses that do not set out the steps they have taken to eliminate slavery and human trafficking from their supply chains and their own business is the risk of negative publicity, the threat to brand value, company reputation and investor relations.  Such statements may well become a pre-requisite for tenders for certain work from Government and other concerned bodies.

  1. What should businesses be doing now?

Whilst we are still awaiting further guidance from the Government on the information that will need to be included in any slavery and human trafficking disclosure statement, businesses should be thinking now about how they are going to satisfy this new obligation.  Steps should include:

  • deciding which senior individual(s) within the business will be responsible for compliance;
  • thinking about what information will need to be included in the statement and pulling this together;
  • auditing the business and supply chains to help determine the level of exposure, whether or not slavery and human trafficking is a potential issue for the business and where exposure is greatest;
  • developing or updating supplier codes of conduct, tender requirements and supplier contracts to account for the issue including, for example, requirements on meeting minimum labour standards in their supply chain;
  • putting in place policies and codes of conduct to combat slavery and human trafficking in the business and supply chains;
  • identifying who will require training on the new obligations, for example directors and employees who have direct responsibility for supply chain management and procurement;
  • consulting with individuals in the workforce who may potentially be affected; and
  • ensuring there are effective grievance and whistleblowing mechanisms in place so that concerns over slavery and human trafficking may be raised.

HR Departments can play a key role in introducing policies and training as well as implementing risk analysis audits, due diligence, hotlines and monitoring processes.

NLRB Punts In Northwestern University Football Case, Declines To Decide Whether Scholarship Athletes at Private Universities Can Join A Union

Posted in NLRB, Recent Cases, Union

With the college football season about to get underway, on August 17, the National Labor Relations Board (NLRB) issued its highly-anticipated decision involving Northwestern University’s scholarship football players’ attempt to unionize.

As background, the National Labor Relations Act guarantees the right to organize and join labor unions.  This right, however, applies only to employees employed by private sector employers.  Last year, an NLRB Regional Director concluded that Northwestern’s scholarship football players are more employees than students, and held that, because Northwestern is a private university, those players have the right to seek union representation.

Northwestern sought review from the NLRB in Washington, D.C.  The NCAA, the Big Ten, and a number of other prominent universities joined in Northwestern’s challenge to the conclusion that scholarship athletes are employees.  They also raised a number of a practical and policy-based arguments why allowing student-athletes to be represented by labor unions would adversely impact the nature of college athletics.

Those arguments appeared to be carry the day, as rather than deciding whether scholarship athletes at private universities are in fact employees, and thus have the right to organize, the NLRB instead declined jurisdiction over the case, finding that it “would not effectuate the purposes” of the NLRA to assert jurisdiction.  The NLRB specifically noted its decision was “primarily premised on a finding that, because of the nature of sports leagues (namely the control exercised by the leagues over the individual teams) and the composition and structure of FBS football (in which the overwhelming majority of competitors are public colleges and universities over which the Board cannot assert jurisdiction), it would not promote stability in labor relations to assert jurisdiction in this case.”

The NLRB’s decision is not subject to appeal, and thus ends this case, although the Board’s decision left open the possibility that it could reexamine the issue again in the future “if the circumstances of Northwestern’s players or FBS football change such that the underpinnings of our conclusions regarding jurisdiction warrant reassessment.”

Noel Canning, Part Deux? Kind of… D.C. Circuit Rules NLRB Complaints Issued By Former Acting General Counsel Are Voidable (But Not Void)

Posted in NLRB, Recent Cases, Union

With last year’s Supreme Court decision in Noel Canning only slightly in the rearview mirror, another court has ruled that the NLRB made yet another unlawful end-run around the laws that limit its authority to act.  In a case involving an Arizona ambulance company, the U.S. Court of Appeals for the D.C. Circuit ruled on August 7 that a complaint issued by the NLRB’s Acting General Counsel against that employer was void because, at the time he issued that complaint, he had been improperly appointed to that position in violation of the Federal Vacancies Reform Act.  As a consequence of the D.C. Circuit’s decision, all complaints issued by the Acting General Counsel between January 5, 2011 and November 4, 2013 may be deemed void, and thus cannot be the basis for the finding of any unfair labor practices, if – and this is a very big if – the defendant challenged the NLRB’s authority to issue the complaint in the first instance based on the FVRA.  The court was careful to explain that its decision did not mean that all NLRB complaints issued during that nearly two-year period are void.  Rather, it explained that its decision opens the door to success on an FVRA defense for those employers that had the foresight to raise the issue in litigation before the NLRB.

To put this all in context, some background is necessary.

The FVRA and Presidential Appointments

Congress passed the FVRA in 1998 to tighten control over the appointments process. Officers of the United States (such as the General Counsel of the NLRB) must be appointed by the President and approved by the Senate before they may take office.  The FVRA and its predecessor vacancy acts were passed to regulate presidential appointments of interim officers and keep agencies operating during what can become a very long confirmation process.

In the event of a vacancy under the FVRA, if the President appoints someone to serve as in an interim capacity, that person may only serve as an acting officer for 210 days, or until the President nominates that person for the permanent position.  Generally, any actions taken by the interim officer serving in violation of the FVRA’s requirements are void.

In June 2010, the NLRB’s General Counsel resigned, and President Obama appointed Lafe Solomon to serve as Acting General Counsel on an interim basis. The President then nominated Mr. Solomon for the permanent position on January 5, 2011. The Senate rejected Mr. Solomon’s nomination and ultimately a different candidate, former NLRB Member Richard Griffin, received a nomination and was confirmed as the NLRB’s new, non-interim General Counsel on October 29, 2013. Mr. Solomon, however, continued to serve as Acting General Counsel during the entire nomination-rejection-second nomination-confirmation process, issuing complaints against employers until leaving the post on November 4, 2013.

The D.C. Circuit Case: SW General v. NLRB

The D.C. Circuit case decided last week involved a provider of ambulance services to hospitals in Arizona. Its paramedics, nurses and technicians are unionized and had a longevity pay clause in their collective bargaining agreement. When that agreement expired, and before a new one was in place, the employer stopped making longevity payments. The union immediately filed an unfair labor practice charge with the NLRB, and the agency, based on Mr. Solomon’s purported authority as Acting General Counsel, issued a complaint on January 31, 2013 – more than two years after Mr. Solomon had been officially nominated (but not confirmed) to serve as the NLRB’s permanent General Counsel.

An administrative law judge ruled for the union on the merits, but the ambulance provider challenged the ALJ’s decision on numerous theories, one of which involved the FVRA. Specifically, it argued that the NLRB’s formal complaint was void on its face because it was issued by Mr. Solomon, who it contended was serving in violation of the FVRA when the agency issued the complaint.  If Solomon was serving in violation of the statute, it argued, then he had no authority to issue the complaint in the first instance, and thus not only was the complaint issued by him against the ambulance provider void, but all complaints issued under his authority were void.

The NLRB rejected the ambulance company’s arguments, ignoring the FVRA claim, and adopted the ALJ’s recommended order in May 2014.  The employer then appealed to the D.C. Circuit, again raising the FVRA issue.

Last week’s D.C. Circuit decision vacated the NLRB order and held that (1) Mr. Solomon was serving in violation of the FVRA from January 5, 2011 (the date he was nominated to the permanent post) until he left the position on November 4, 2013; and (2) that violation rendered the decision voidable and required a finding for the employer, as it had timely raised the issue below in the proceedings before the NLRB (and not for the first time on appeal).

The appellate court reviewed the text of the FVRA and determined that it clearly supported the employer’s position. The NLRB attempted to rescue its position by relying on an exception in the FVRA to the rule that decisions made by officers serving in violation of the statute are automatically void.  The court however held that in the NLRB context, those decisions are voidable if there is harm to the party challenging the decision.

In the ambulance company’s case, the circuit court held that the harm done was structural – if there had been no General Counsel, the NLRB could not have filed a complaint against the company; therefore, the company only faced the harm of a complaint because of the statutory violation that improperly allowed Mr. Solomon to remain in office, invalidly issuing complaints charging unfair labor practices.

Although much of the case seems to read like NLRB v. Noel Canning, in which the Supreme Court voided 18 months’ worth of NLRB decisions by overturning several of the President’s recess appointments to the Board, the D.C. Circuit put an important limitation on its decision in an attempt to avoid causing similar problems. The court specified that a challenging party must meet two criteria before succeeding on an FVRA defense to an NLRB complaint issued under Mr. Solomon’s purported (but invalid) authority: (1) the party must raise the issue, whether as a separate claim or as a defense, “at or around” the time of the challenged government action; and (2) the agency must have had “reasonable notice” of the claimed defect in the official’s title to office.

The court held that the ambulance company had raised the defense of an FVRA violation at the proper time in the proceedings against it and that the NLRB had reasonable notice of the defect. Thus, the court held for the employer, and vacated the NLRB ruling.

The Bottom Line

SW General v. NLRB does not ensure victory for employers who are defending NLRB complaints issued between January 5, 2011 and November 4, 2013.  However, if the employer raised an FVRA violation as a defense before the ALJ or as an exception to adverse ALJ findings before the NLRB, then under this ruling, the complaint against it likely would be declared void.  In most cases, that should end the matter, as the National Labor Relations Act’s six-month statute of limitations should prohibit the refiling of a defective, voided complaint.  With the NLRB suffering yet another embarrassment at the hands of the federal courts, perhaps the agency finally will get the message that there is a correct way to do things, and it will exercise more restraint going forward, rather than engaging in self-serving maneuvers (such as improper delegations of authority) that evade the laws that exist to reign in what has become its regrettable practice of administrative overreaching.

#Cecilthelion – would you fire Mr Palmer?

Posted in Termination

Cecil the Lion has become something of a household name since his expiry at the hands of Minnesotan dentist Walter Palmer last month, and Mr Palmer too has been reluctantly thrust into the media spotlight.

But what do Mr Palmer, Mr Qadar (the Stockbroker who tweeted “Think I just hit a cyclist. But I’m late for work so had to drive off lol”) http://www.employmentlawworldview.com/broker-told-to-get-on-his-bike-after-twitter-joke-falls-flat/ and Mr Chaudhry (the Clifford Chance trainee who filmed a controversial video message which went viral within days of the Charlie Hebdo attack) http://www.employmentlawworldview.com/jury-still-out-on-uk-lawyers-rights-to-freedom-of-speech/ all have in common? Aside from their appearance in this blog, they have all been the subject of social media campaigns calling for their dismissal.

Given that Mr Palmer is the owner of his dental practice this is of course entirely hypothetical, but whether you are for, against, or merely indifferent to his hunting pastime, if he were one of your employees in the UK and his conduct had stirred up this level of public outcry, what would you do? Would you dismiss him? Could you fairly dismiss him for his conduct?

This is clearly a case of out of hours conduct – he was on holiday enjoying an activity which he had engaged in for a number of years without incident or media attention. Mr Palmer acknowledges that his chosen pastime was one that he kept quiet. In a letter to his patients after the events he is reported to have said: “I don’t often talk about hunting with my patients because it can be a divisive and emotionally charged topic,” and “I understand and respect that not everyone shares the same views on hunting.” Lion hunting is legal in parts of Africa and Mr Palmer asserts that he was on a lawful hunting trip at the time. However, the degree of public outcry which his conduct has sparked and the impact that this has had on his dental practice (which has been closed since he was outed as Cecil’s killer) has without a doubt had an impact on the business.

Local residents suggest that his dental practice is all but finished. It remains to be seen whether it will weather the media storm. Undeniably however, as Mr Palmer has said, he has been in the news “for reasons that have nothing to do with my profession or the care I provide for you”. Quite. His conduct has no impact on the professional service he provides, although there are undoubtedly some people (myself included) who might feel some trepidation sitting in that chair.   But why?  Objectively this doesn’t touch upon Mr Palmer’s professional abilities in any way – indeed, if having a steady hand is a good thing for a dentist, his ability to face a lion with only a bow and arrow might be seen as a positive commendation.  On the other hand, if your employee is forced into hiding, as Mr Palmer has apparently found himself, and if threats are made against him and his practice/employer, then this clearly would impinge on his work.  If those threats would put other staff at risk through someone lunatic enough to carry them out, then the employer would have a pretty strong hand.

What if Mr Palmer were in an altogether different business, one whose major clients said that they would cease to use it if it continued to employ him? This would of course depend on the particular circumstances, but if the employer could demonstrate that a material number of its clients would no longer work with him, there may also be some scope for a fair dismissal.  The burden would be squarely on the employer to show something more than a transient public outcry, even if it did include (as on Cecil’s behalf) “high profile” figures like Piers Morgan and Cara Delevingne.  There would have to be some concrete tangible adverse impact on the business, or some behaviour by Mr Palmer which compounded the problem or showed a blatant lack of regard for the public view.  If visitors to the office were greeted by Cecil stuffed and mounted in Reception, for example, the heat under Mr Palmer’s hypothetical employer would go up materially.

And so I end where we began #cecilthelion RIP

Informal not casual in new Acas guidance on responding to discrimination complaints in the UK

Posted in Discrimination, Employment Relations, Mediation

New Acas guidance on handling discrimination allegations in the workplace has been issued this week http://www.acas.org.uk/media/pdf/i/t/Discrimination-what-to-do-if-it-happens.pdf.  This is particularly interesting because of the degree of prominence which it gives to informal resolutions of discrimination complaints in place of the often process-driven guidance which Acas has issued in the past.

Seeking an informal resolution of a discrimination complaint is a fraught area for employers. There is the ever-present risk of being accused of not taking the matter seriously, of ignoring misconduct, of leaning on the complainant to go away quietly, of a cover-up and generally of your approach to try to do the right thing blowing up in your face. The recognition in the Acas Acas guidance that an informal resolution can be a legitimate way forwards is therefore very welcome.

As to the means of actually getting to that agreement, however, the guidance is slightly less helpful. The various booby-traps touched on above are all very much real concerns and treading clumsily or over-eagerly towards an informal resolution could well set them off. So here are some thoughts for those initial steps:

  • Ask the complainant what he wants by way of resolution. Secretly, this may well be an exit, cash and his accused’s head on a spike, but most people will limit themselves to restoring a decent working relationship if the question is asked early on.
  • The very least likely means of achieving that decent working relationship tends to be formal grievance proceedings, especially if either of the parties or their lawyers insist on fighting the whole thing from entrenched positions like an artillery duel on the Somme.
  • The guidance implies that mediation should usually take place only following an initial investigation of the complaint. I have mixed feelings on this. It is often said that a properly-informed mediation stands a better chance of success. Equally, the investigation process can itself be almost as gruelling and confrontational as the full blown grievance. The purist approach to mediation would say that what matters is what the parties can agree facing forwards, and not what happened behind them. Perhaps best to decide the point on the circumstances of each case, but without any assumption that there must necessarily be a prior investigation every time.
  • If the investigation finds evidence suggesting such a [discrimination] complaint may have basis [in fact]“, says the guidance, “it is very likely to require a formal approach“. If that is intended to imply that informal dispute resolution only has a place where the allegation is considered ill-founded, I think that would be wrong. Especially where the complaint arises from inadvertent misunderstanding or a moment’s acting out of character, an informal resolution would seem to have many advantages.
  • Aside from mediation, the guidance refers to an informal process whereby the manager hears what each party says and then proposes a solution. I think this is to be avoided at almost any cost – the line between such an approach and an inadequately-conducted formal process is too thin. It would also debar that manager from participation in the later formal process on the grounds that he has clearly made his mind up already.
  • Acas says that ultimately any participation in a mediation process must be voluntary, and that is clearly correct. However, it is surely a reasonable management request that the employee at least consider means of dispute resolution less destructive of work relationships than a formal grievance process. If his refusal even to explore that possibility could be seen as unreasonable, therefore, the employee’s stubborn stance could be taken into account by the employer in its final decision.

Last, how to broach the loaded question of an informal resolution to someone potentially very wound up about actual or perceived discrimination? There are no magic words here, but you will stand the minimum risk of being hoist by your own good intentions if the question is posed neutrally and ideally in writing. How about something like: “You are welcome to pursue this formally if you wish, but would you be interested in seeing if we can resolve it informally first?”.  The worst you can get back is a no, and then you have to drop it and carry on with the formal process, whatever your finer feelings on the merits of doing so.

UK Government consults on tax treatment of severance payments. Do you want the bad news or the bad news?

Posted in Severance Pay, Tax

I know that over the years we have said some pretty harsh things in this blog about assorted government proposals and consultation exercises, but I take it all back.   There is a new kid in town, the HM Treasury/HMRC consultation document on Simplification of the Tax and National Insurance Treatment of Termination Payments https://www.gov.uk/government/consultations/simplification-of-the-tax-and-national-insurance-treatment-of-termination-payments and to say that this appears grossly under-thought just doesn’t capture it, somehow.

The stated aim of the exercise is to make the tax and NI treatment of termination payments “simpler and fairer”.  It does neither.  On its face the paper represents instead a naked attempt to bring more money into the Treasury regardless of the level of disadvantage and cost which that entails for both employers and employees.

Let us deal with the fairness point first.  Ultimately this boils down (paragraphs 2.5 and 3.5) to the suggestion that richer people can pay for better advice about maximising their tax position.  That has always been true, will always be true (tax avoidance has been around as long as tax itself) and appears not to concern HMRC in relation to any other single aspect of the UK tax regime.  However, the solution proposed on the employment front is the introduction of changes whose principal adverse impact will be on the less well off.

As to simplification, the consultation document refers repeatedly to “complexities” in the current system.  Again, on closer reading this is primarily confusion over the tax treatment of pay in lieu of notice.  This is a confusion largely generated by HMRC itself through its “auto-PILON” concept blurring the otherwise relatively clear line between contractual and non-contractual.  The proposed solution to this is to tax both.  Simple, yes.  Fair?  Not necessarily.  Confused in its conception?  Certainly – paragraph 3.2 refers in shocked tones to “cases where employees and employers argue that a payment in lieu of notice is actually a payment for breach of contract” – but it is, unless provided for by contract.  This particular problem is compounded by the express view that pay in lieu of notice should be taxable while damages for wrongful dismissal (i.e. failure to give proper notice) should not, even though they are in fact the same thing.  The need to distinguish between contractual and non-contractual arises in many contexts in the employment relationship, and there is no real case (apart from HMRC’s self-interest) for suggesting that it is particularly problematical on terminations.

So far so simplified, but then in ride the proposed replacement tax exemptions.  To remove complexity, one would assume a blanket easily-understood number, tax-free below and taxable above, whatever the reason for the termination.  What we have instead is an allowance which:

  • increases with length of service;
  • is only payable on termination by reason of redundancy; and
  • applies only if you have more than two years’ service.

The figure is proposed to be £6,000 after two years’ service, increasing by £1,000 per year thereafter seemingly without upper limit.  An example is provided: Pat is made redundant after 10 years.  He gets £13,750 made up of notice pay, ex gratia, statutory redundancy pay and holiday pay.  The length of service formula gives him a £14,000 tax exemption so he gets the lot tax free, including the holiday pay which would currently be taxable.   So the taxable status of one’s accrued holiday pay would depend under this new system on:

  • your length of service;
  • what other payments were made in connection with the termination, whether or not at the same time; and
  • whether you are redundant or not within the statutory definition.

Simplified, you say?

The limiting of the tax exemption to circumstances of statutory redundancy seems particularly misguided.  There is a thinly-disguised moral driver to this, in that paragraph 4.23 refers to the government’s wish to “support those who lose their employment through no fault of their own”.  This obviously overlooks the numerous other no-fault reasons besides redundancy for which employees can lose their job – incapability, illness, SOSR/restructure or in some cases, illegality.  In addition, the exemption will also cover voluntary redundancy, a circumstance in which it is the employee’s own actions which cause the employment to end.  What this will generate is obviously a pressure on employers even greater than exists already to describe as redundancy circumstances which are not – poor performance, sickness, etc.  It will also mean that employers strong enough to resist that pressure will automatically find settlements far harder to reach, causing both parties additional stress and cost.  Who could blame them if the point were then “fudged”?  What qualifies HMRC to determine, perhaps years later, whether a particular termination fell within or without that statutory definition is unclear.  How far would the employer have to go to demonstrate its thinking at the time, its business plans, its pooling and selection processes in relation to each individual?

At paragraphs 4.39/40, the government thinks that there is a strong case for exempting from tax those payments made “in connection with compensation for unfair or wrongful dismissal”.  We have to assume that very few employers pay termination compensation wholly without regard to buying out some actual or anticipated unfair dismissal claim, hence the usual requirement of a settlement agreement in return.  On that basis, it would appear that if I pay my employee any compensation figure up to the unfair dismissal maximum, he can have both that and his notice pay tax-free, even though this might far exceed the length of service formula and even though this flatly contradicts the consultation paper’s stated position that pay in lieu should be taxable.   You presume that this is not the intention, but it is what is says.

Paragraph 4.26 of the paper suggests that severance payments would become taxable if the employee were re-engaged to do a similar job for the same company or an associated company within twelve months from his redundancy.  This is clearly aimed at public irritation over senior civil servants leaving with big payments and then being rehired, but it equally clearly misses that target by miles.  The employee still gets the big severance payment disproportionate to his actual losses, but now at least HMRC gets something out of it too.  This also means that neither employee nor employer actually knows the final tax status of the severance payment for a full year post-termination.  That twelve month shadow (seemingly applied even though the employee’s losses in that year may far have exceeded the severance payment, such that he makes no “windfall” at all) is totally incompatible with the Government’s wish (paragraph 3.2) that “people should have certainty that they have paid the correct amount of tax when they leave a job”.

However, the crowning failure of these proposals is the suggestion that any money awarded by an Employment Tribunal in respect of discrimination would be tax-free, seemingly without limit.  Nothing is said about the tax treatment of awards or settlements for other alleged wrongs, such as detriment or whistleblowing, or whether this would depend on the employee having 2 years’ service.  Nor is there any rationale put forward for distinguishing between compensation for loss caused by unfair dismissal (which the parties appear to be able to settle without a tax charge) and that caused by discrimination (which they can’t).  In other words, while employee and employer may be willing to settle a discrimination claim, some or all of the sum will be taxable unless they first go to all the trouble, expense and drain on the Tribunal system of fighting it. Simple?  Fair?

The only single glimmer of good news in this is the proposed abolition of foreign service relief which is indeed complicated, applies to very few terminations and would be no real loss to the statute books.  However, without wishing to criticise for the sake of it, the rest of this paper reads as a series of ill-considered, disjointed and mutually inconsistent proposals based on a depressingly limited understanding of both law and employment practice.  Both employers and employees are entitled to expect better than this.

Can you discriminate against a company on age grounds?

Posted in Age Discrimination, Discrimination, Recent Cases

Just when you think you have mostly got a grip on the scope of UK discrimination law, along comes a whole new avenue of legal debate.

Gerry Abrams Limited -v- EAD Solicitors LLP is the first reported case of a claim for direct discrimination by a limited company.  In brief, Mr Abrams was a member (partner) in EAD Solicitors LLP.  It was a term of the LLP Deed that a member would retire on his reaching 62.  In 2011, Mr Abrams set up his own limited company, the unsurprisingly-named Gerry Abrams Limited, and with EAD’s agreement it became a member in his place and was paid fees equivalent to the profit share he would have received as an individual member.  When Mr Abrams reached 62 in 2014, EAD discontinued GAL’s fees, and it was effectively “retired”.

If Mr Abrams had still been an individual member then his compulsory retirement would probably have been lawful following the Seldon saga (fixed retirement age in law firm Partnership Deed upheld as justified).  However, to take the perhaps obvious point, although Mr Abrams was 62, he was no longer the member.  GAL had replaced him, and it was scarcely 2, not 62.

On the face of it, this was a breach of the Membership Deed.  However, surely this was not a point anyone would take, given that Mr Abrams, as owner of GAL, knew full well that he would have to stop working at that point?  Alarmingly, however, GAL started Employment Tribunal proceedings for associative discrimination, i.e. discrimination by A (EAD) against B (GAL) due to the protected characteristic (here age) of C (Abrams).

His claim relied on the definition of “direction discrimination” in Section 13 Equality Act.  A person (A) discriminates against another (B) if because of a protected characteristic (though not necessarily B’s) A treats B less favourably than A treats or would treat others.  In addition, there was a rare public outing for the specific provisions in Section 45 Equality Act, i.e. that an LLP must not discriminate against any of its members.  Neither Section 13 nor Section 45 require that the person or member be a natural individual.  It could very easily be said that this is the product of the Government’s failure to conceive that anyone would try this sort of case, rather than of any deliberate consideration.  Nonetheless, the Liverpool Employment Tribunal concluded that this omission meant that both sections could apply to protect corporate entities as well as individuals.  However, said the Tribunal, this would only be the case where “the corporation in question reflects the characteristics of one individual (or possibly the protected characteristics of more than one individual or a group of individuals) where the grounds upon which the actions taken towards the corporation are claimed to be based on the individual’s (or group’s) protected characteristics“.

Within the pure employment sphere this is less significant than it sounds.  Many individuals supplied to an end user by their own company will potentially be workers and so protected against discrimination in their own right anyway.  However, in the world outside employment (genuine consultancy, supply of goods and services, etc.), the consequences could be critical.  If I choose not to deal with your company (or only on less favourable terms) because I have taken against your staff on racial or religious grounds, for example, then the individuals can do nothing about it because they are not my employees or workers.  Your company, on the other hand, could now sue me for its loss arising from my choice not to use it.  There is still the Liverpool Tribunal’s pre-condition that the company should “reflect the protected characteristics of the individuals”, but logically I am not sure that this is correct – if I refuse to deal with a company because the individual salesman it sent me offends my religious or racial convictions, why is that not still treating that company less favourably on the grounds of a protected characteristic?

Next step in Gerry Abrams is a hearing on the merits of the actual discrimination claim.  It will be very much worth keeping an eye on that one!