A sorry state of affaires – sack your mistress or lose your family

By Squire Patton Boggs on Posted in Recent Cases, Sex Discrimination, Termination

Back in January 2013, my colleague David Whincup published a blog about an Iowa dentist who dismissed his assistant because of the threat which his wife considered her to pose to their marriage. For those happy few who have spent the last 17 months wondering what would happen in similar circumstances in the UK, wonder no more. The Telegraph reported last week that a UK Employment Tribunal awarded £35,000 to a PA dismissed by her property company boss following his wife’s discovery of their affair.

During her affair with the Chief Executive the PA had been treated to a car, flat and holidays to Australia, Cuba and Mexico. However, the course of an office romance never did run smooth. Mrs Chief Executive received an anonymous letter about the affair and details of the flat and holidays. She subsequently pressured her husband to sever ties with the PA and he therefore asked her to leave, a request which she refused. Despite his request for her to leave her £40,000 job, the Chief Executive was clearly somewhat conflicted and continued to sleep with the PA, although she said that she now felt she had little choice if she wanted to keep her job, car, flat, etc.

After she rejected a £50,000 voluntary “redundancy” package offer apparently made as a result of pressure on the Chief Executive by his children, he finally phoned her to dismiss her.  The conversation did not go well, ending when he told her in a moment of special eloquence “Don’t you f***ing come back”. It is unclear whether he followed this up in writing.

Unsurprisingly, the PA brought proceedings for unfair dismissal, harassment and sex discrimination and was successful on all but the last count.  Whilst I have not seen a copy of the judgement, the dismissal of the sex discrimination claim is interesting. It is likely that the Chief Executive’s representative argued that the dismissal was not on the grounds of her sex since, had the Chief Executive had an affair with a male PA, that male PA would have been treated in the same way. This is an argument that has also been successful in previous cases.

It would be interesting to see if a “some other substantial reason” argument was used in relation to the unfair dismissal claim – “I had no choice as my wife was going to leave me and my children would not speak to me”. As David mentioned in his blog, many employers would choose their marriage over their business when threatened by their spouse. If he tried SOSR, it failed.  This is not exactly surprising; SOSR dismissals are notoriously difficult to argue.  The size of the award also suggests that the unfairness was found to be more than just procedural.  This case probably clears up the argument of whether the threat of divorce is going to be enough to justify a fair dismissal, though I am sure it will not be the last time we see it argued.  The other issue here which could have been of interest (part salacious, part academic) is how you argue the quantum of a mistress’ injury to feelings when a clearly illicit relationship from which she has personally benefitted very substantially finally comes unravelled.  Maybe next time?

Impact of claimant’s dishonesty on injury to feelings compensation

By David Whincup on Posted in Harassment, Recent Cases, Sex Discrimination

So here is Friday’s teaser – let us suppose that an Employment Tribunal has just decided that you have been sexually harassed by your former boss, that he was fixated by your breasts, habitually stared at them and frequently addressed them while in conversation with you.  He has also touched you, uninvited and unreciprocated, on bottom and thigh.  Unpleasant, not to mention unlawful, and unquestionably deserving of some compensation for injury to feelings.

However, let us also suppose that the Tribunal concluded at the same time that you had invented further and more serious allegations against your boss, that he had promised you promotion if you slept with him, for example, and that he had propositioned you and a colleague “for a threesome”.  These were not findings that his interpretation of certain facts was preferred over yours, or that you had exaggerated a little in the heat and stress of Tribunal proceedings, or that you had made a mistake, but that you and a colleague had deliberately and maliciously conspired to present what you knew to be false evidence to the Tribunal by way of retaliation against him.

So no-one comes out of this with any credit.  That takes us to the question of what compensation you should receive for the harassment you suffered and of how far that money should be affected by the findings against you.  “Women win big pay out over sex pest boss” blares the front page of yesterday’s Evening Standard, but is that right?

A range of options will present themselves to the Tribunal when it reconvenes in September to consider your remedy:

(i)         your lies do not affect the level of injury to feelings which you suffered and so your compensation should not be affected;

(ii)        hearing and disposing of those lies in the Tribunal took up x hours and so incurred £y of cost for your former employer.  Therefore you should receive unreduced injury to feelings compensation but also get a costs award against you for the time wasted.  It sounds counter-intuitive at first blush, but there is no legal reason why you should not both win part of your claim and be found to have conducted another part vexatiously or unreasonably at the same time;

(iii)       the Tribunal could reflect its disapproval indirectly, making a broadly unappealable finding that your lies require a degree of scepticism to be applied to your evidence about the extent of your upset, and so setting the compensation at a lower level than it would otherwise have done;

(iv)       or the Nuclear Option.  The Tribunal could make a stand for the necessity of respect for the judicial system, and decide that you should not only not benefit from lies told to a Tribunal, but should be actively penalised for them.  In circumstances where your untruths have been found not to be trivial exaggerations or hyperbole but an active conspiracy to mislead, would it be within the Tribunal’s power to award no compensation for injury to feelings, even where some such injury had undoubtedly been caused?  No doubt your boss would favour this as some small recompense for the damage which your untrue allegations had caused him.  However, even if it is technically within the Tribunal’s power (which is far from certain) it seems very unlikely as an outcome.  Your boss had done himself quite sufficient damage by the things he did do, thanks very much, and public policy dictates that harassers should not escape scot-free even if the harassee has been less than honest.

Ultimately I go for (iii) – this would be a demonstrable poke in the eye all round and the least challengeable at law.  No disrespect to you and your genuine upset, of course, but in the end you should not have lied to the Tribunal.

Labour Court flushes out toilet tips from German cleaning company

By Squire Patton Boggs on Posted in Wage and Hour

The claimant was an employee of a cleaning company and until June last year worked as a so-called “sitter” at a large shopping center in Oberhausen.  Her principal duties were to supervise the collection plate in the entrance area of the public restrooms where those using the facilities could voluntarily leave a small amount of money on entry or exit, and in the traditional manner to look both needy and faintly threatening at the same time.  She was not assigned any actual cleaning duties but she was not allowed to disclose this fact to the restroom visitors – if anyone asked who got the money left on the collection plate, she was supposed to say that it was used to finance her job position, amongst other things.  However, signs to that effect in the restroom facilities were later removed and there was no record that anyone had asked the question.  

As a “sitter,” she received an hourly wage of € 5.20.  She was supposed to accept gratefully any money left on the collection plate, but then regularly remove the money from the plate except for the scant few coins necessary to create the moral pressure on visitors to add more.  It then had to be given to the cleaning company.  

The claimant had filed suit against the cleaning company because she wanted a share in the collection plate earnings.  She argued that she and her colleagues were entitled to the revenue generated through the collection plate because visitors were allowed to believe that their voluntary tip would go to the cleaning and supervisory personnel.  The claimant estimated that several hundred Euros on normal days and several thousand Euros on peak shopping days (can you imagine the queues?) were generated through the collection plate.  She therefore demanded from her employer detailed information on those earnings and her share in such earnings.  

The cleaning company contested that the money left on the collection plate was really a tip.  It said it was a “voluntary user fee” used in part to finance the restroom personnel.  It therefore refused to provide that information.   

The Labour Court in Gelsenkirchen has now confirmed the view of the claimant.  The employer was ordered to provide information on the amount of money left on the plate.  According to the Court, the claimant had a claim for payment against the cleaning company, though the amount is still uncertain.  The Court determined that based on the overall circumstances the visitors’ likely understanding would be that the money was a tip for the restroom personnel and not a “voluntary user fee” or other subsidy for the employer.  As a result, the restroom staff would be entitled to share between themselves the tips received and the employer was not entitled to use them to defray its costs of employing them unless and until it made clear to restroom visitors that this was where their loose change was going.

Premier League email scandal misses out on penalties

By Squire Patton Boggs on Posted in Discrimination, Sex Discrimination

The recent revelations as to the content of some of Premier League CEO Richard Scudamore’s emails have generated a feeding frenzy for the English media.  He has admitted and sort of apologised for engaging in email correspondence with a lawyer who advises the Premier League which, at best, was inappropriate and leadenly sexist in its content.  

It was confirmed last month that the Premier League had decided not to take any disciplinary action against him. That decision was apparently taken by representatives of 17 current Premier League Clubs.  A cynic might say that they may well have had their own commercial priorities, based on the largest-ever TV rights deal brokered by Mr Scudamore in their favour, firmly in mind. Whether or not that is correct, the Clubs were possibly more appropriate investigators than the Premier League’s Audit & Remuneration Committee, made up of 4 individuals who were apparently appointed to that committee by Mr Scudamore himself (perhaps they did consult the ACAS Code just in time). In any event, the outcome has divided the public and the media into three camps: those who say that (i) it is no big deal; (ii) he should swing for it; and (iii) whatever the merits of the position, nothing is going to happen anyway due to Mr Scudamore’s very effective negotiations with the television companies.  But who is right?  

I found myself engaged in a Twitter discussion with Philippe Auclair, a well-respected French football journalist based in England, on this subject. We disagreed on the very notion that Mr Scudamore should be facing any investigation at all. Mr Auclair’s argument was that the emails were ‘private’ and as such should not be accessed at all. I tend to believe that is an opinion borne out of French law (which is very strict on privacy and access to employee emails), and so not something that (at least in the court of public opinion) holds much sway in the UK.    

Many people are surprised that no action has been taken against Mr Scudamore given that equality and diversity issues are far more in the public eye now than ever before, especially when it comes to professional sport.  Is it too much to expect those whom we entrust to be the custodians of our sport, expressly including women’s sport, to refrain from such behaviour?  Any woman involved in football as a player, coach or Premier League employee can be justifiably dismayed by the attitudes espoused by arguably the most important man in football in England.  

It is not suggested in this post that the inappropriate emails warranted his dismissal. His admission, apology, the fact that he clearly did not intend anyone else to see the messages, and his unblemished disciplinary record could all count in his favour. Yet there is a feeling that (even when set alongside commercial considerations) he has brought his employer into disrepute, and that there was an opportunity here for the Premier League to acknowledge its role in supporting and encouraging women’s participation in football (which it does), and the fact that this episode appears to run contrary to that aim (which it has failed to acknowledge).   After all, had Mr Scudamore used racist language as overt as his email about women, he would certainly have been heading for the early bath.  A really serious warning would not seem inappropriate “for the record”, particularly since the chances of his using such terminology again (and hence of its being triggered) would seem close to zero.   

We then have to decide what we would (hypothetically) be penalising Mr Scudamore for, both as a matter of law and to avoid mixed messages.  Starting at one end of the question, there had been no suggestion before this blew up that he had been in any way in default of his duties to women’s sport, so this becomes an issue of what he thinks rather than what he does about it, already quite dangerous ground on the civil liberties front.  So does he genuinely think of women in such adolescent and priapic terms or merely that it is funny to give the impression of doing so?  Although neither is really acceptable, does that not take us to the nub of the problem, that it is not what someone thinks which is the problem, but his being caught doing so.  If Mr Scudamore wants to use crude language in a private exchange with a close contact whom he knows will not be offended, who else’s business is that?  The real focus of disquiet in this case should therefore be not that a grown man might in private conversation use words better suited to a hormonal teenager but that he was foolish enough to do so on an email account to which a third party could gain access.  Mr Scudamore might say that in using a non-work account he had taken sufficient precaution against his exchanges being unearthed,  but as we have said before on this blog, nothing put online is lost forever except your privacy, dignity and re-employment prospects, so that is not really good enough.

Practical Implications for French Employers of Recent Changes to SYNTEC National Collective Bargaining Agreement

By Squire Patton Boggs on Posted in Employee Welfare, Health & Safety, Resilience, Wage and Hour

On 11 April 2014, we published an Alert concerning a new addendum to the SYNTEC National Collective Bargaining Agreement in France.  This change generated extensive worldwide media coverage, including reports that the agreement “involved a million French employees”, that working after 6pm “had become illegal” and that French employees were now “forced to switch off their phones” after this time, etc.

As we flagged in our Alert, the new addendum does not mean that all French employees have to “switch off” after 6pm, but it does have implications for French employers, and not just those who are members of the two federations that have already signed the new addendum.

To supplement our post of 2 May https://www.employmentlawworldview.com/french-disconnection-2-the-next-instalment/, we set out below a summary of the recent changes, together with the steps that French employers should be taking now to deal with the new addendum.

  1. The SYNTEC National Collective Bargaining Agreement (CBA) applies to all   employees of companies governed by it, and in particular to a specific category of executive-level employee with a “forfait jour” (a flat rate salary for working a fixed number of days – 218 – per year).
  2. The new addendum to the existing SYNTEC CBA was introduced on 1 April 2014 in response to the French Supreme Court’s ruling in April 2013 that the existing agreement on employees with a “forfait-jour” was not compliant with EU law requirements, in particular that it did not adequately protect the health and safety of employees.
  3. The new addendum has introduced various additional health and safety measures.  For example, although it does not prohibit employees from checking their work emails after 6pm, it does state that employees must “disconnect” from remote working devices (e.g. mobile telephones, laptops, tablets, email, etc.) during rest periods and that employers should put in place the necessary measures to ensure employees are able to do this.  What it means by “necessary measures” is currently unclear, but it is likely to mean such things as changing internal rules to prohibit managers from sending emails which require an immediate response after a certain time (e.g. 6pm), unless there are health and safety reasons for doing so.   “Disconnection” must be taken as meaning the lack of an obligation to pay attention to your emails etc. at a particular time, rather than anything technical or electronic.
  4. For companies that are governed by the SYNTEC CBA: This new addendum is only binding for companies that are members of the SYNTEC organisation.  It is important that they take steps now to comply with the new addendum, e.g. putting in place measures to ensure that employees “disconnect” from remote working devices during rest periods.  Under the terms of the CBA, they have only 6 months within which to put in place these additional health and safety measures. Once the addendum is extended by the Ministry of Labour, it will become binding for all companies who apply the SYNTEC CBA, even if they are not members of the SYNTEC organisation
  5. For other French companies: It is probably only a matter of time before the provisions in the new addendum are replicated in other national, regional or in-house collective bargaining agreements, as they too are arguably not currently compliant with French case law.  It would therefore be advisable for other French companies to start thinking now about what changes may need to be introduced to ensure compliance.
  6. For practical advice on implementing these changes in your organisation, please contact Jean-Marc Sainsard in our Paris office.

Employment and Mental Health in the UK – Student Edition

By David Whincup on Posted in Mental Health & Wellbeing

According to some of my older lecture notes, there is or used to be a stress-relieving service available in Tokyo’s business district which involved dogs.  An assistant would arrive at the office festooned with small dogs on leads, and hyper-stressed businessmen could spend a calming few minutes stroking their tensions away and into the dog instead.  The animals would then be carted off, by now obviously completely demented, and the executive could return to his desk in a state of Zen-like tranquillity, ready to face the afternoon.    

This would never happen in the UK, you might think, but as awareness of the causes and damaging impacts of stress grows, do not be so sure.  The employer which does not take sufficient precautions against the deleterious effects of stress on its workforce could well be exposed.  Some of our clients already have “play areas” containing ping-pong or football tables, trendy furniture and gentler lighting, though they are perhaps ignorant of the stress caused to their older workers by the fear of not being able to exit their beanbag without outside help.   

So top marks to the University student population for shedding a light on the next generation of must-have stress-beaters.  Leicester University students, says the BBC Online, have ordered hundreds of yards of bubble-wrap on the basis that popping it brings an “instant gratification” (really?) more immediate and effective than meditation or yoga.  In an eerie echo of Tokyo practice, the Leicester Students Union will apparently also be shipping in puppies, though who will clear up afterwards has not been disclosed.  Early trials with geese, chickens and a cow had seemingly not lived up to expectations, at least so far as the students were concerned.   

Bath Spa University also opened its own pre-examination petting zoo last week, allowing students a brief break from revision to stroke goats and feed ducks.  One student stated earnestly that many people “may feel too ashamed to speak out about exam stress”.  No need to talk about it, therefore – just go and sit outside the Library fondling a goat and no one will have any concerns for your mental health at all.   

Let us be clear here – there is no prospect of animals becoming a necessary or indeed wise anti-stress measure  in the workplace.  Animal rights campaigners Peta have suggested back massages and/or bouncy castles as alternatives, but the potential for legal claims there seems almost endless.  The wisdom of the old adage about not working with children or animals was proven conclusively in Missouri earlier this month where a student in a University petting zoo (sorry, visiting the petting zoo) was bitten by a bear.  Far more sensible to adopt the University of Canberra’s reported approach to stress management, i.e. a pop-up pub.   

Actually none of this is terribly sensible.  It is much better for a University or an employer to recognise that some roles or some times of year impose considerable pressure (good) but also stress (less good) on their people.  They cannot make the exams/work go away, but they can and should make it clear that a brief break from work now and again will not hurt, that it is OK to feel under pressure and there is someone who is confidential, qualified and genuinely empathetic to talk to if and when the need arises.  It does no one any good to be led to believe that the mental health management arsenal of the modern employer has any real room for bubble-wrap or chickens.

First Stop Bullying Orders made by Australian Fair Work Commission

By Squire Patton Boggs on Posted in Bullying, Litigation, Recent Cases

On 1 January 2014, the Fair Work Commission (FWC) gained the jurisdiction to make “stop” orders in relation to bullying.    

In March, the FWC handed down its first Stop Bullying Orders. The Orders, made by Senior Deputy President Drake in the case of Applicant v Respondent PR548852, were made by consent following a conference between the two parties. The names of the parties were not published (hence the rather unimaginative case name) and unfortunately there are no reported details of the background facts.  We do know, however, the content of the Orders made, which was as follows:    

The alleged bully:

  • Shall complete any exercise at the employer’s premises before 8 a.m.;
  • Shall have no contact with the applicant alone;
  • Shall make no comment about the applicant’s clothes or appearance;
  • Shall not send any emails or texts to the applicant except in emergency circumstances; and
  • Shall not raise any work issues without notifying the Chief Operating Officer of the respondent, or his subordinate, beforehand.   

The alleged victim:

  • Shall not arrive at work before 8:15 a.m.    

The parties were also granted leave to approach the FWC to have the matter relisted for a further conference should there be any difficulty with the implementation of the Orders.   

The content of these Orders demonstrates the potentially significant impact that a Stop Bullying Order can have on your workplace. The orders demonstrate that the FWC, through its workplace bullying jurisdiction, has the capacity to actively regulate the daily interactions between employees and how they conduct their working life. Not only may this have a real impact on the employees themselves, but it could also create difficulties for employers in the management of their workplace environment.   

These orders highlight the value for employers of instituting policies to proactively prevent bullying, and the importance of investigation and, where warranted, action when a bullying complaint is made.   The more the employer can show that it has taken reasonable steps to address bullying, both as a generic risk and also in specific cases, the stronger should be its voice in determining the terms of any Order made and so in minimising its adverse impact upon daily operations.   

What this case also shows, given that the Orders were made by consent, is that there is always some sense in trying to discuss (or more formally, mediate) resolutions of this sort.  There seems nothing in the Orders as made in this case that should objectively have taken more than 5 minutes to agree, but in all probability the heat and emotion and increasing legal costs surrounding the initial complaints (you get a sense of their general thrust from the Orders, don’t you) will have prevented the dispassionate and pragmatic approach which was needed at the time.  If these Orders are representative of what degree of intrusion and granularity may be expected in future, employers should consider inserting a strong encouragement to internal or external mediation in their anti-bullying policies.   As a side-issue, it must also follow that if an employee both acts in breach of employer guidance on behavioural standards and then also refuses to adopt a constructive approach to resolving the resulting mess, he/she may more easily be disciplined or dismissed without legal challenge.

Queen in bullying shock – a nation reels

By David Whincup on Posted in Employment Relations, Harassment, Suspension

My word, I hope somebody has a good explanation for this one.  London Underground bosses have apparently required the removal from Tube offices in Essex of two small photos of the Queen, unwitting subject of bullying allegations made by a member of one rail union against a member of another.  RMT and ASLEF union representatives have leapt to their respective barricades to fire charge and counter-charge against each other, pausing only to make snide and entirely gratuitous remarks about London Mayor Boris Johnson in the process.

So what did the Queen do to deserve being carried out of the office after a full year in place at the Loughton Central Line depot?  Apparently, reports Monday’s Evening Standard, her picture there was alleged to create “a hostile working environment” for one employee, though the complainant has had the grace to admit that it was “not solely” about her that his grievance was brought. Not solely? His complaint is that the other employee had bullied and intimidated him, that there had been threats against his family and his home and that he had been made ill by it all.  Serious stuff, but quite where the Queen fits into all of this is, putting it mildly, unclear.  The two men have “vastly differing political allegiances”, says the Standard, but even if one is an ardent monarchist and the other a rabid republican, so what?  This is a person whose image is on every stamp, every coin, every note that the complainant handles – how can an A4 photo of her conceivably, in anyone’s wildest imagination, contribute to a hostile working environment?  There is clearly more to this story than has been reported, but that particular aspect of the grievance would make interesting reading indeed.

Which creates a question for the discerning Central Line user: why even before a full investigation has London Underground management chosen to remove the Queen’s photo, rather than telling the complainant to get a grip and focus on behaviours which, here on Earth, could actually be argued to have some gravity and substance?  He is obviously fully entitled to make a complaint about bullying and threats, etc., and the employer is equally clearly entitled in those circumstances to suspend the alleged perpetrator, as it has.  But the decision to confiscate a photo of the Queen seems, with respect, an excessive pre-emptive response to a breathtakingly silly complaint, and the sort of entirely predictable process-above-reason PR blunder not seen on the railways since, ooh, here.

Where an employer reacts in what appears to be such a knee-jerk way, it does a dis-service not only to itself and to the employee bringing the grievance, but also to the public respect for the law.  The article on the front page of the Evening Standard (“Read by more than 2 million every day”) leaves the lay person wondering what employment law has come to.  Is an employee really allowed to complain about a small photo of the Monarch as contributing to a hostile working environment?   Is the employer genuinely obliged to remove it just because he does?   Is it no longer permissible to pause and engage with reality even briefly before applying process?

Nobody comes out of this with any credit, but please believe me, dear Standard reader, this is not what employment law is supposed to be about.

UK Business Immigration Update on the Prevention of Illegal Working – Part 2

By Annabel Mace on Posted in Business Immigration

Following our update last week regarding the Home Office’s Code of Practice on Preventing Illegal Working and the Civil Penalty Scheme for Employers, updated Guidance explaining the changes to employer right to work checks has now been published.

On 16 May 2014, as previously advised, the Home Office’s Code of Practice on Preventing Illegal Working and the Civil Penalty Scheme came into effect.  In addition, the Home Office has published a number of additional Guidance documents with the catchy title: ‘Information to help employers prevent illegal working and understand the fines (civil penalties) they face when they employ illegal workers’.  These new Guidance documents include (amongst others):

  • Right to work checks: an employer’s guide
  • Preventing illegal working: frequently asked questions
  • Right to work checklist
  • Carry out a right to work check
  • Avoiding discrimination while preventing illegal working: code of practice
  • Civil penalty scheme for illegal working: code of practice
  • Illegal working civil penalties: an employer’s guide

Of particular note in the new Guidance (but not obvious from the Code of Practice) is that from 16 May 2014, passports other than those held by a British Citizen (or a citizen of the UK and Colonies having a right of abode in the UK) or a national of a European Economic Area (EEA) country or Switzerland must not have expired in order to provide a statutory excuse against a civil penalty for illegal working.  An indefinite leave to remain stamp in an expired passport is not now acceptable because it is considered to be insecure, easily forgeable and the person might no longer have their indefinite leave through subsequently remaining overseas for more than two years.  Prior to 16 May 2014, on the other hand, employers were able to accept indefinite leave to remain stamps and valid unexpired visas even in expired non-EEA passports as evidence of the right to work.

To steer you through the practical implications of these and other quirks of the new Guidance, please join us at our breakfast seminar on 24 June 2014 – ‘Essential Immigration Compliance Update: Important Changes to Employer Right to Work Checks and Tier 2 of the Points Based System’.

Contact

Annabel Mace, Partner
Head of UK Business Immigration Team
+44 20 7655 1487
annabel.mace@squiresanders.com

Reed Employment PLC –v- HMRC

By Squire Patton Boggs on Posted in Tax

For any employer the ramifications of the Upper Tier of the Tax and Chancery Chamber upholding the decision of the First Tier in Reed Employment PLC –v- HMRC are worth consideration. You will remember that Reed provided daily travel and subsistence for 500,000 of its temporary workers under a salary sacrifice arrangement over the period 1998-2006. HMRC were claiming £158million of unpaid PAYE and NICs over this period on those allowances.   

The Tribunal concluded that the salary sacrifice was not effective because in reality no salary was actually sacrificed and no benefit was actually received by the worker (this was all a result of a complex scheme used by Reed to deliver the ultimate benefit to themselves). Additionally the Tribunal found that that in reality the temps worked at a series of job-by-job locations and not under an “overarching contract” of employment with the result that the travel expenses were to a permanent workplace and were therefore not deductible and so were in fact part of the worker’s wages which nullified the effect of prior dispensations granted by HMRC on the arrangements.   

There have been murmurings that this case spells the end for salary sacrifice arrangements.    

This is surely not the case and therefore worth a quick blog post! What Reed does of course prompt is a sanitation check of any existing salary sacrifice arrangements, ensuring that they are valid as well as a review of any prior PAYE dispensations paying particular attention to the level of disclosure given when the dispensation was originally applied for and approved by HMRC. You can imagine the scrutiny that all the paperwork came under before the Tribunal in this case.  If anything less than full disclosure of the relevant arrangements was made at the time, HMRC may well be able to use this to invalidate its original consent, as in Reed.   

If a salary sacrifice arrangement is to be effective for tax purposes an employee must actually (contractually) agree to work in the future for the reduced salary (and understand the arrangements which are communicated in a clear manner) and additionally the employer must provide some other identified benefit to the employee in a form that is not readily convertible into cash. As in Reed it will not be effective if there is any opportunity for the employee to opt out of the arrangement at will. It is vital that any documentation is robust and that all employees fully understand the implications of the salary sacrifice.   

Reed Employment have already expressed disquiet about this decision, accusing HMRC of going back on a previous concession, so no doubt we will see an appeal on this £158m question before the end of the summer.

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