Date: 30/07/07 Duration: 00:18:04
In this podcast we take a look at the latest developments in employment law, through interviews with top legal experts: Ian Smith, Clifford Chance Professor of Employment Law at the Norwich Law School, University of East Anglia, Dominic Regan, solicitor and leading legal trainer, Rachel Dineley, partner and head of the National Diversity and Discrimination at Beachcroft LLP and David Farmer, Head of Pensions at Beachcroft LLP.
Philippa Lamb: Welcome to our employment law podcast. I’m Philippa Lamb. In this episode we will be looking at recent legislative changes and the impact they have on HR professionals. We’ll be focusing on particular aspects of employment law including employee status, bonus schemes, harassment, age discrimination and pensions. If you’d like to know more about these issues or any other employment law issue then please visit cipd.co.uk/employmentlaw and there you’ll find our full range of resources
To start us off I asked Ian Smith, Barrister and Clifford Chance Professor of Employment Law at the University of East Anglia about the latest developments.
Ian Smith: Employment lawyers always say this but it’s been a particularly interesting year. One year hopefully it won’t be, but this year it has been. We’ve been plagued by the statutory procedures. The Government have said they’re going to go, but it’s going to be a couple of years, so we don’t know what’s happening in the meantime. We’ve had the latest tranche of family friendly policies. We’ve had, coming on stream, areas of discrimination law we haven’t seen before, and of course, as Dominic will doubtless talk about, we’ve had all the continuing areas of harassment and stress levels.
PL: Lets kick off with family friendly legislation. As you say, we’ve seen developments on that in the past year, what’s happening?
IS: Well, we seem to have had a bit of a settlement in the work and families act but in fact we’re seeing some of that unraveling anyway. A lot of it came into force on the 1st of April of this year and so the obvious headline was the statutory maternity pay going up from six months to nine months but even there, you see, the government are saying it’s transitional and it’s going to go up to a year eventually which is also, of course, when they’re going to bring in this really rather difficult idea of statutory paternity pay where the mother is going to be able to give to her partner or father or whatever, part of the pay. That’s under consultation at the moment and as often is the case it’s a good idea but the problem is going to be working out how it’s going to work.
PL: What can we expect in the future on the family friendly legislation front, because as I understand it, politicians of all hues have stepped up and said, ‘yes we need more of this’?
IS: That’s right. I think the big one is probably going to be still flexible working which is ironic because of course it’s not a maternity right. It’s a parental right which has recently been extended to carers for the elderly and infirm. And that one, of course, can be a very big one indeed because quite simply, making a very simple point, if you have a provision that says you can have flexible working if you have a child up the age of six, you know when it stops. If you’re going to start looking after an elderly parent, aged say 70 who could live until 95, then there’s a real problem with that.
PL: A great overview there. Next I chatted with Dominic Regan, solicitor and leading legal trainer about the ever complex area of employee status.
Can we move on to a bit of a vexed question? Employee status – it seems to be rather a fluid issue, when is an employee not an employee?
Dominic Regan: The question of employee status is the oldest question in the history of employment law and we have continuing problems. It’s a very important point because major rights are enjoyed by employees: unfair dismissal, redunancy, TUPE protection. So to be on the right side of the fence is important for the individual. The courts and the tribunal struggle with this because as employment gets more sophisticated and methods of employment get more complicated it gets increasingly difficult to draw a divide and identify determining factors between the two.
PL: Are you able to offer any practical guidance to practitioners and identify whether people they have on their books are indeed employees or not.
DR: The difficulty arises with those on the cusp: agency workers, so-called, perceived contractors who may be in for a few months perhaps and perhaps they outstay their welcome, they’re there a long time and suddenly they turn around and say ‘you know what, I am an employee.’
PL: Well there’s no doubting that employee status is a very difficult area but Ian Smith had a great way of summing it up.
IS: You could put it rather more cynically and say it’s an example of the duck test and that is, if it looks like a duck, waddles like a duck, and quacks like a duck, it is a duck. Basically, the way the courts are going at the moment, if it looks like a duck they’ll say it’s one and they won’t let clauses in contracts saying ‘this is not a duck’ get in your way.
PL: Subsequently Dominic talked to us further about why he feels more clarity is needed on employee status.
DR: The constant calls from the judiciary for legislation to address the point of agency workers but nothing’s been done about it. The case law on who is an employee, going back to the 1950s, is still relied upon. We do need clear guidance and we don’t have it.
PL: Lets move on to the issue of bonuses and commission schemes. It’s difficult territory, I think, for a lot of organisations and I think the real problem here is that increasingly employers have to be careful about relying on what their contracts say.
DR: Yeah, that’s right. Putting it very simply, you can’t always rely on having said it’s discretionary – that’s the problem. If you went back little more than about ten years ago and someone tried to sue for a bonus under a clause that said ‘this is our discretion as management’ they’d have been laughed out of court. Simple as that. ‘You’ve signed it, it’s policy to do so, you now live with it. We can give you a million, we can give you nought, it’s up to us.’ It’s those cases now, however, where the courts suspect dodgy dealings, bad faith, trying to wriggle out of obligations where the courts are starting to intervene…
PL: So are employers on safer ground if they always make their bonus schemes related to perfomance?
DR: Yeah – this is interesting – it’s actually safer to try and, actually, quantify it. So, for example if you had somebody who said ‘Oh, it’s bad faith’ but the employer’s saying ‘no, well actually it isn’t, it’s just you haven’t done anything in the past year.’ Well, if of course you have a performance related one have a perfomace related one and can justify it you’re on ten times stronger ground. The only other point I would make is that what seems to act as a red rag to a bull to a judge – it’s only in some of the earlier cases – it wasn’t only the last bonus, particularly when the guy had left, it wasn’t just that it was less, it was nil, and nil smacks of revenge.
PL: So far we’ve looked at recent changes and what’s on the horizon particularly in terms of employee status around obligations and bonuses. Now we move on to harassment and how a landmark case is influencing decisions.
IS: The Protection from Harassment Act of 1997 has suddenly exploded because of a House of Lords decision in the summer of 2006 in a case called Majrowski. In that case they decided that employers are answerable where one employee harasses another employee or indeed a customer or a client if in the course of the business. So Mr Majrowski’s story very briefly: his case, he alleges – and the case is still going on – he alleges that a woman at work gave him a hard time because he was a homosexual. This was before sexual orientation rights existed. He did nothing about it at the time. Years later he comes forward and sues his employers and the single point in the case of Majrowski is the employer answerable to pay compensation if indeed the man can go on and prove his allegations. And they unanimously decided employers are to blame for harassment. You can bring a claim up to six years after the event occurred. You can get compensation for simply being upset. You don’t need to be injured and the employer does not have the benefit of a statutory defence. No good for the employer to say ‘we told them not to do it therefore we’re not to blame.’
PL: So how are employers to protect themselves against harassment cases in the future?
IS: Right, harassment, first and foremost, as you rightly indicated, it can’t be harassment unless you have two or more occurrences. So straight away, if employers can make employees appreciate that if they think there is a problem, if they perceive a problem, they should report it, that gives the employer the chance to resolve the issue without there ever being in law harassment coming into being. Two or more occurrences in order for it to be harassment. And generally, I think, to warn employees that that sort of conduct would not be tolerated. It would be seen as a very serious disciplinary issue, it could result in dismissal and also the culprits could personally be sued themselves for compensation.
PL: Would that be any sort of defence for the employer though, if they had made it perfectly apparent to the staff that they shouldn’t behave in such a way and yet it had still happened.
IS: It is not a defence sadly under the harassment act for the employer to say ‘sorry, we told you not to do it.’ It is a form of strict liability and the employer can talk until they’re blue in the face saying ‘don’t you do it,’ if it happens, the employer is going to be liable.
PL: If you’d like to hear more from Ian Smith and Dominic Regan they’ll both be speaking at our annual conference in Harrogate in September. Visit cipd.co.uk/annualconference to find out more.
Interlude: ‘You’re listening to the CIPD podcast series’
PL: Perhaps one of the most fluid areas of employment law is discrimination. I asked Rachel Dineley, partner and head of the National Diversity and Discrimination Unit at Beachcroft LLP for an outline of what to expect next.
Rachel Dineley: We now have six strands of discrimination law and we have a green paper that says that we may have in due course a single equality act whereby the law will be harmonised, simplified, modernised and we will all be able to understand what it is that is expected of us. And one hopes that that will be so not only for the HR professional but the workforce as a whole.
PL: The recent introduction of age discrimination has had a huge impact, not least because it affects every stage of an employee’s relationship with their employer. Rachel talked us through the considerations.
RD: There’s actually very little said on the subject of recruitment at all and it’s a common misconception that you can’t now, for example, request dates of birth and information of that kind or ask for a chronology of education and work experience. The guidance however is that you need to take an approach where you are looking for pertinent information about skills, competencies, qualifications and so on. And age, of course, in itself is not relevant for finding the right person for the job. So don’t ask for information you don’t need and shouldn’t be using.
PL: What about contracts? When you’ve actually got people on board, what do you have do or say diffferently now in relation to contracts?
RD: It maybe that the contract that you have is absolutely fine as it stands but it’s worth reviewing to see if as part of the provisions on termination there is anything said about retirement age bearing in mind that retirement age for employment purposes may be quite different to retirement age under any relevant pension scheme. There is now a default retirement age of 65 so if you have a provision in a contract which says that the employment will terminate by reason of retirement before that age, you know that you need to amend the contract.
PL: We do tend to think of the age discrimination legislation as relating primarily to older people don’t we, but of course it is the other end of the scale as well isn’t it? So in terms of younger employees are there issues there now that weren’t there before?
RD: An illustration of how the legislation might be used is that previously discrimination legislation’s been targeted at specific groups – might be related to gender, it might be related to race and so forth. But because everybody has an age, everybody can benefit from this legislation and of course everybody can complain under it if they perceive that they are being mistreated and I do think that with time, and particularly with an ageing workforce, and different age groups competing for jobs we will see the legislation being used as a means for complaining from all age groups.
PL: Where has the age discrimination left employers in terms of how they structure pay and benefits because obviously, traditionally, they have been very closely related to the age of employees?
RD: It’s generally the rule that one should not gear pay to age at all – that would plainly be directly discriminatory and very difficult to justify. Where you operate pay scales that maybe linked to length of service there is an exemption under regulations when no more than five years service is taken into account and where more than five years is taken into account it must reasonably appear to the employer that he’s fulfilling a business need in rewarding his employees in that way.
PL: So I’m assuming that the safest way forward from an employers’ point of view is to link pay and benefits to specific performance and outcomes on the part of the employees.
RD: It would be utopian if we could do that but we all that it is very difficult in practice to measure performance. It tends to be a rather subjective exercise and of course in some jobs that are fairly mechanical and routine in nature there isn’t really anything to distinguish the way one person may perform that job to another, for example, on an assembly line. And therefore one needs to look very carefully at the nature of a job and what is appropriate. There maybe market forces at work too but one needs to particularly careful with market forces because they in themselves can be ageist in certain sectors.
PL: So I’ve heard all the caveats now, what are they to do? It sounds like an extraordinarily difficult conundrum.
RD: It is indeed and it’s certainly not the case that one should rely upon what’s worked in the past necessarily being right for the future, but examine it, test it, if you’ve perhaps got competitors, get together with them and discuss what works in the sector and why, what’s an appropriate course. Share information. It may even be in some sectors, even if you don’t have collective bargaining with trade unions, that you make have an employee forum where you can have a healthy debate about what is the best way to recognise people’s effort and reward it.
PL: So is the nub of matter here that employers have to be very careful to be seen to be reasonable and fair about this? What ever solution they come with, as long as they’ve been through a reasonable process of trying to work out what’s even handed, then will they be protected?
RD: It’s a very good question because perception is all. If people perceive that they are being treated fairly, if in fact there are some inequalities in the system but everybody’s reasonably comfortable with it you’re not going to get the issues. If you operate a system that is not clear and transparent but not fair in practice you can looking at issues simply because people don’t understand how they’re being treated, how they compare with other people and they will challenge it on that basis.
PL: So yet again good communication – always key?
PL: What would your advice be to an HR practitioner, sitting in his or her office, a head of a meeting with an aggrieved member of staff who’s claiming discrimination?
RD: The individual may be trying to rush all the fences at once, so the advice to HR is always to take it a step at a time. Make sure you understand; what it is that’s being complained of; what they want you to do about it; promise that you will consider carefully what it is that they have raised; you will consider what is the appropriate course of action; you will come back to them and let them know what you’re proposing to do, so that they go away feeling that they have been heard, reassured that something is going to happen and that you’ll be dealing with it. So you keep control, and they feel comforted.
PL: Rachel’s colleague David Farmer, Head of Pensions at Beachcroft LLP helped us navigate one of the many employment law complexities, the link between age discrimination and pensions.
PL: Would I be right in saying that final salary schemes are the most likely to run into difficulties now?
David Farmer: Absolutely right. And really the reason for that is that you’re agreeing to provide a defined benefit so it’s a fraction of pay times by service payable at normal retirement age and effectively you have complicated ways of assessing benefits if someone retires late or retires early. And it’s those complicated rules that apply in pension schemes which cause the difficulties.
PL: So what’s the way forward for the HR professionals dealing with pensions here? What do they need to think about in terms of how they’re going to cope with this into the future?
DF: First and foremost, I think, a review of their policies and procedures, the rules of their pension scheme and, just as importantly, any explanatory booklet which has been issued to employees describing the rules of the scheme to see whether or not there is something there which is age discriminatory. For example enhanced early retirement benefits payable to someone who is now a new starter after the 1st September 2006. That wouldn’t benefit from the exemptions. You’d want to assess all the other benefits to see whether or not they do benefit from the exemptions.
PL: Well, as ever with legal matters, there was plenty to take in there, but that concludes our overview of some of the most topical employment law issues. For more on every aspect of employment law visit cipd.co.uk/employmentlaw where CIPD members can access information on recent developments and download the answers to a wide range of frequently asked legal questions. With the announcement of Gordon Brown’s draft legislative programme, the Queen’s Speech due in October and the court and tribunal systems continuing to create new case law there are many more employment law developments to come. You can keep up-to-date on those on our website too.
Next time, we’ll be exploring the value of learning, looking at how to determine the contribution that learning and development makes to organisational performance.
For now though, goodbye.
You’ve been listening to the CIPD podcast series.