Date: 01/08/09 Duration: 00:30:19
This podcast was recorded at the CIPD Employment Law conference on 1 July 2009. Two legal experts, Ian Smith who’s a barrister at Clifford Chance Professor of Employment Law at the Norwich Law School the University of East Anglia and Dominic Regan a solicitor and trainer, answer listeners’ questions on employment legislation and its impact on HR practices.
: In this month’s podcast we’ll be answering your questions on employment law. We have had a lot of questions so thanks very much to everyone who sent one in.
We’re joined today by two legal experts, Ian Smith who’s a barrister at Clifford Chance Professor of Employment Law at the Norwich Law School the University of East Anglia and Dominic Regan a solicitor and trainer. We’ll be trying to get through as many questions as possible in the time we have, so Ian and Dominic thank you very much for joining us.
We’re going to kick off with some legal questions arising from the current economic situation and it’s impact on employers. Ian, our first question comes William Sullivan.
William Sullivan: If an employee has been required from a five day week to a four day week, is he or she entitled to a redundancy payment on the one day a week his or her services are no longer required?
Ian Smith: No, unfortunately, and this is a well known bear trap for employees going onto short time working. The problem is that if they are made redundant, after a certain period of time, whilst on the reduced hours, the statutory redundancy payment is based on that terminal salary. In fact, the only way you can even average is over the twelve weeks before the final date of employment. Now the only way around this isn’t under the statute. If an employee is faced with this, what they might want to try and do – and certainly solicitors would tend to advise this – is to try to get the employer to agree, by contract, that if they’re later made redundant, then by contract the employer will give them the amount they would have had had they still be on the full amount but that I’m afraid is the only way round it, statutorily there isn’t one.
Dominic Regan: And of course the other basic point is that you have one contract of employment and either you have the job or you don’t have the job, you’re redundant or you’re not redundant. The concept of being redundant for one day a week is a no-no.
PL: Now our next question comes from Angela Crawley.
Angela Crawley: How much information about second jobs is an employer entitled to receive? If for example there is a workplace accident, so the employees had an accident due to tiredness because they’ve got a second job, is the employer himself to blame because the employers tried to get information to ascertain the total working hours but has been met with refusal?
PL: Dominic, your thoughts on that.
DR: First, again most fundamental point in all of that is that just because people have accident doesn’t mean that the employer is to blame and the issue of whether the hours had anything to do with the accident is of course another matter entirely. Coming into mainstream employment law, employers are entitled to ask questions and, indeed, the employer has a duty to look after the health and safety of their employees. If an employee refuses to give information then that patently is something that is going to count against the employee but it would not be an answer to a claim if an employer were to cause an accident in the workplace, then it’s no answer to say that the person was doing long hours or refused to divulge information. I think there are a number of strands to that question.
IS: Yes I agree with that. There would have to be the causation link to the long hours but even if there was, again the employers only obligation is to act reasonably. Now it’s an interesting point because it is up to an employer to find out or at least try to (in the words of the question) find out what the true position is. Obviously the employer has got a lie in response or a brick wall and the employer has done all that is reasonable. In fact it would almost be the same, I think, under working time. This is one of the problems because they’re only supposed to work 48 hours (unless opted out) in all employments. Now this is a well known problem but on the other hand if for example the employee was keeping that employment quiet (the second employment) all under the working time regulations you have to do is to take reasonable steps to make sure that they do actually go with the 48 hours. Again I think probably the same point would arise.
PL: Just to be clear, the employee is under no legal obligation to reveal a second or third job?
DR: Employees have no duty as such to reveal anything. Where it could get interesting is if it puts them in direct conflict with another job but that is a very elaborate area of law but the basic point is if you don’t ask questions you’re not entitled to information.
PL: And employers have to take all reasonable steps.
DR: They do. If the employer wants to know something the employer should ask the question specifically “Are you doing other work?” and of course in many contracts of employment, particularly for senior individuals, there will be a clause saying ‘You will not take on other work without our prior written consent’ because that’s the way the employer can police this because the last thing you want to do is being paying somebody a vast sum of money and them coming staggering into work every morning shattered because they’ve got another two or three jobs.
PL: But of course now this has gone lower down the scale hasn’t it with ordinary people having reduced hours and taking extra work to make up the difference.
DR: It has gone lower down the scale and it is a concern and in fact lower down the scale it’s less of an issue in that if people are doing humble, menial work many employers will say well if that’s what they want to do but of course if you’ve got somebody who’s highly paid in a position of real importance you would not want them being distracted by outside activity.
IS: One thing the employer could say if it was a problem and employees were getting a bit shirty about answering questions like that (and it’s not too far from the truth) but one thing the employer could say is “I have an obligation to the working time regulations to make sure your total work is within hours, I therefore have that obligation and therefore you should actually reply”.
DR: Or indeed if the individual signs the opt out, which they’re entitled to do, and if they sign the opt out then they can work as many hours as they want to work, end of story.
PL: We’ve had an email from an employer who’s about to go through a big restructure, many of the employees affected by the restructure are used to earning overtime on a regular basis, in some cases over many years, now the new arrangements will increase hourly pay but will also significantly reduce the need for overtime. The employer tells us he will be consulting on the changes and if he proceeds will give three months notice of what they’ll be but he’s keen to know whether the regular nature of the overtime means it has become custom and practice and therefore if he’s obliged to pay compensation or perhaps take into account the regular and enduring nature of the overtime payments in any other way. Ian?
IS: The starting point is that the employee can always try this argument. It tends to crop up perhaps more if they are collectively organised, because obviously trade unions quite rightly have very strong view of custom and practice; it’s difficult. It tends to crop up where it’s successful, not in the area of things like overtime, but in areas such as where you get discretionary payments on severance and redundancy which have been made many times and this time the employer says sorry chum no money in the pot. Now sometimes it works there, it’s a very complex law, it’s very difficult indeed. Overtime, I think my own view would be it would be very difficult indeed. The great tradition of overtime in this country is voluntary, on both sides. It is very rarely ever defined and I think it would take a hell of a lot of custom and practice to overturn that.
DR: Yes because overtime traditionally has been ‘as and when required’ and that’s the very point, it is flexible, it is not a contractual right. So even though they’ve done it for a long time, just because people do things a long time does not in itself render it a contractual entitlement, and indeed the fact that the employer is consulting and presumably has a good business base for making the decision I think puts the employer in an even better position to say well this is how it’s going to be.
PL: As you say if it doesn’t apply to overtime it may apply to other issues. Is there some sort of test for custom and practice?
IS: No, that’s the problem. Well there are but people don’t agree on it. It’s got to be notorious, general and certain. It was much more common in the days before written contracts when basically you had nothing but custom and practice. Again much more common in smoke stack industries, heavily unionised, everyone knew what was done and God help you if didn’t do that. These days with more written contracts, more flexible working, it’s much more difficult to prove.
PL: We have a similar question on pay increments in the public sector. Employees often received an incremental pay increase each year, does the fact they’ve come to expect such an increase confer any rights on them and if they then don’t receive an automatic increase in a subsequent year – same sort of territory isn’t it?
IS: It’s very much similar yeah. There is the old saying better those ‘who expecteth little because they shall surely receive it’. The expectation is an interesting one. Again it can be argued but unless the employer has said something really quite stupid in the past, which is always possible of course, or given very strong indications this will happen, given representations that could be sued upon, again if it’s clear that that is discretionary, even if it says you will normally go up, that again would be a difficult one for the employee to make stick.
DR: And the whole of the law now on discretion is that the employer should exercise discretion in a rational manner not in an arbitrary manner. A very good reason for saying “Look, we’re not going to give people pay rises this year is because there’s no money around” and courts and tribunals are not there to start working out what peoples salary should be. The only way that the courts can delve into this area is if they can be persuaded there is a breach of contract. If there’s no contractual right to a pay rise it therefore follows that the courts cannot move in and say well we think you should give this person and extra £5 or £10 a week. So, contract apart, if the employer has a discretion and they’re exercising it on good grounds then the matter is beyond doubt. Yes people are used to pay rises but it is not a God-given right, subject of course to what the contract actually says.
PL: Nicki Lincoln has a question about a recent House of Lords ruling.
Nicki Lincoln: What was the ruling on the recent case relating to the accrual of holiday leave whilst on sick leave and what do you think the implications of this ruling are?
IS: It’s a very interesting one this one, it’s the Ainsworth/Stringer litigation. We’ve just had the House of Lord’s decision as it came back from the European Court and the House of Lord’s decision is on a tiny point and not on most of it and so there is in fact an awful lot to be decided yet. The European Court basically said that you can accrue holiday leave while on sick leave. Now the question as to whether you can actually take it during your sick leave is again a difficult one because it’s not actually directly approached in the European Court judgement. What the European Court judgement is about – and certainly the House of Lords judgement – is where the guy is on sick leave, say for a whole of a year, a holiday year and then into the next year and then is dismissed, now those are the facts of the case. Now what they were really talking about is whether sick pay goes forwards, not the holiday itself, it’s the sick pay going forwards. The House of Lords picking up the ECJ have just held that they can claim the taken forward pay into the next year. Now that’s principally what it means, there’s all sorts of other issues about it but that’s principally what it means. You then ask the question does that mean therefore that you can simply not pay them while they’re on sick leave because obviously they may run out of sick pay. I still think it’s possible for the employer to dig heels and say no you can’t take it. The old assumption used to be that if then they ran out of their holiday year they lost it but now we’re being told you can actually carry it forwards. What that may mean of course is a very interesting set of discussion when you finally sack the bloke and he’s been on sick for a long time so exactly how much? So in fact the practical advice might really be to allow it, pay it at the time because you’re going to have to pay it later. There is a real problem with legislation on this. English law, the working time regulations, say you can’t carry forward from one year to the next. That now appears to be illegal and the government almost certainly are going to have to remove that. On the other hand there is a problem that both English law and European law say you can’t buy it out and then we get this awful problem, what if they don’t take it but then ask for the money the following year? No one knows the answer to that, it’s simply open.
DR: The House of Lord’s judgement leaves far more unanswered questions than before.
PL: So the advice to employers is?
IS: To be perfectly honest just pay it. Pay as you go, you’re going to have to pay it later anyway and just avoid the disputes later on.
PL: Now we have had quite a few questions in about the new ACAS code on disciplinary and grievance procedures. As people will probably remember, the government’s rather ill-fated statutory dispute procedures were repealed in April of this year and the new code replaced them. Now obviously we don’t have time to cover all the questions we’ve had but let’s just do a few tasters. One of our listeners wants to know how the new code has actually changed things and specifically how it affects redundancy and dismissal procedures. What do you think Dominic?
DR: Right. Well the major thing is, as your question anticipates, is the abolition of the ghastly complexity of the old statutory and grievance procedures. What we now have are guidelines which tribunals must have regard to but that they have that inherent flexibility about them and a failure to follow that would not in itself render any dismissal unfair. But of course, tribunals are still entitled to look at what the employer did and I think really we’ve gone back to good old fashioned reasonableness. They’re very shortly stated, what the new guiding principles say is you act promptly, you give people the opportunity to explain themselves, you allow them representation and it’s just good old fashioned common sense and that’s back where we are. Ian, would you agree?
IS: Yes I agree and also, of course, although the supplementary guidance technically speaking isn’t a code of practice it is very important. Don’t underestimate it, it often goes along with the code of practice and is tantamount to one. One specific point, however, about your question. You mentioned redundancy, for the very first time ever the code of practice states it does not apply to a redundancy dismissal, neither does it apply by the way to the termination of a fixed term contract. The way that the head of ACAS (Ed Sweeney) has explained the exclusion of redundancy is that the code is primarily about misconduct and other areas such as ill health and so on. Basically speaking there’s enough law on redundancy anyway, it’s all there in the case law and did not need to be so for heaven’s sake don’t start thinking that they’ve abolished the requirement of fair handling of redundancy, quite the opposite, but it’s not in the code.
DR: And one point buried in the forward and not mentioned in the substance of the new guidance is the reference to mediation which I think ACAS is very excited about and we’ve heard about that at the CIPD Conference here this morning, the whole idea that people should be trying to mediate their way out of problems if possibly they can, it’s not been built into the code itself because I think concerns are lawyers might try and use it and steamroller opponents and say you must mediate but it is certainly something that we’re going to hear an awful lot more about in employment dispute resolution. Gibbons of course who is the architect of the new rules himself a mediator and very keen on trying to avoid going to tribunal hearings and mediation, a way of trying to avoid that outcome.
PL: It’s interesting you bring up mediation because we’ve had a question about that. Can I ask you about larger organisations in this context, would they be expected to use mediation more widely because they have greater resources because the code also stated that internal mediators can be used but who are these people, is there anything covering them, do they need to be accredited, checked for consistency, neutrality?
DR: There’s no magic about being a mediator, there is (as yet) no overriding requirement to have a particular qualification, there are many entities that provide mediation training. Obviously the mediator would need to be seen to be impartial and I think answering the question directly, there’s no special rule about large organisations, no. It may well be, in practice, that large organisations have the assets, the wherewithal, the recourse to mediators but there is no special rule that says that if you are a large entity that you’ve got to provide mediation. I suppose the converse of that is smaller employers might not be familiar with the concept and therefore would shy away from mediation but there’s no special rule that says if you’re of a particular size you shall have mediation worked into the process.
IS: Yes, Dominic mentioned the point that it’s only in the introduction to the code it’s mentioned. Now apparently, as I understand it, that was quite deliberate because neither side – the trade unions or the employers organisations – wanted to go down the route of the ordinary civil courts where it’s sometimes the case that if you do fail to mediate you can have a cost sanction and they were very very worried about that, they wanted that out. That’s why, in fact, the code is remarkably bland about mediation although it is really quite important and so on that basis again I would agree that even a large organisation wouldn’t be penalised for not doing it. On the other hand, a large organisation may have more to gain by it and also be able to use internal mediation more, which would possibly keep the costs down quite considerably.
PL: It’s interesting the code hasn’t been tougher on that because, as you say, it’s very central to the whole process isn’t it?
IS: How can I put this tactfully? The code had to be produced fairly quickly and there was a large element of negotiation about it; I’ll say no more than that.
PL: Do you both think that the code will actually make much difference to the number of employment tribunal claims that we see?
DR: The claims are always going to be there, the code may be highly instrumental in determining the outcome of a tribunal application, I don’t think it’s going to stop claims being pursued and all the evidence is that tribunal claims in our current circumstances are rising dramatically. Even, as you mentioned quite rightly mediation, that is still something that everybody talks about but it’s not really enshrined in the system yet, apart from ACAS of course which I suppose is the ultimate mediator. ACAS has always been there to try and help people sort out their disputes but I certainly don’t see that it’s going to stop claims and what it is going to stop is the ghastly legal argument that we’ve had over the last five years in terms of procedural matters and who said what to whom and did a letter count as a grievance. All that nonsense, thankfully, is behind us.
IS: Amen to that.
PL: Now moving onto an international issue, we had an interesting question about the application of law across borders – you both look nervous at this point.
IS: We were dealing with the Isle of Man law of employment about an hour ago.
DR: Oh we are international.
PL: Okay well try this one then. If a UK organisation hires a Dutch person, living and working in The Netherlands, do they need to comply with UK employment laws with respect to leave entitlements and national insurance and so on, or, does the organisation need to comply with the laws in The Netherlands and/or have a business operating there to pay taxes and so on?
IS: This sounds remarkably like a university law exam question, an area called conflict of laws which is like four dimensional chess. The simple answer, I’m afraid to that, you’ve got to see a lawyer because it’s not at all clear which system of law applies. There’s even a difference between statutory law and contract law and they’ve governed by different rules. My gut feeling from just the little bit that you’ve told us there it almost certainly be something that was Dutch rules but there could be an issue as to where the contract is. There could be an issue of what is the proper law of the contract, there could be an issue as to whether the contract actually governs what’s called forum, which is where proceedings have to be abroad. It is a phenomenally difficult area, even within the EU, in fact the EU rules don’t particularly help in this area.
PL: And even worse further afield presumably.
DR: Oh yes and the leading text book is so thick that if you jumped off it you would die.
IS: You’re absolutely right. I shall copy down your question for use at the university. One thing I would add actually is that when we do questions like that using Holland we always use one particular name for the Dutch employee in question which is Hertz Van Rental.
PL: Let’s move onto default retirement age; this is going to be a very vexed question I suspect. We’ve been asked if an employee requests to work beyond their default retirement age of 65 for say a further five years and the organisation agrees, can the organisation then change their mind and break the agreement a year later?
IS: There’s no answer to that in the regulations. The argument to be very very wary about doing that is that you have in fact used the regulations, the form of a dismissal called retirement once and you got an answer out of it. Now the employee wouldn’t have much difficulty I think arguing that therefore until that was finished any dismissal would not be for retirement. I can’t point to chapter and verse on that, it doesn’t say so actually in the regulations, but funny enough I did talk about this question with a lawyer friend of mine asking if she’d come across this and funny enough she hadn’t but her view was the same as mine, be careful. Having said that, the fact that you have, I suspect to your now regret agreed five years (because most people will not do that at all, they will want one year at a time) but the fact you’ve done it does not mean you can’t get rid of them within that five years by using the other heads of fair dismissal but I’m pretty wary as to whether you’d be able to use the retirement head.
PL: So if you just simply decide you don’t want them anymore that’s too bad.
DR: It is rather and, or course, it opens up a whole separate argument about if they say right you’re going to have five years have they got, in effect, a contractual right to a five year agreement? If they’ve got a five years they’ve got a right to do the five years and because you know what their age was when they entered into it so I think therefore that’s incredibly dangerous. Frankly the best advice for employers, with the statutory scheme as it is, is if they decide that at age 65 they call it a day there is nothing the employee can do about it, as long as the employer procedurally gets it right. The individual can say I want to stay on, the employer can say right I’ve thought about it, you can’t, the individual has the right to appeal, the employer has the right to say I’m turning down your appeal and that is the end of the matter. If to say to somebody okay you can stay for five more years I think they’re going to start saying I’ve got the right to five years work and if you terminate me prematurely I’ve got the right to damages for breach, substantial damages.
IS: Even the legislation, there’s a further point. I think I’m right in saying they could even try and argue you have set a new normal retirement age, in which case there are separate rules on that as well if you want to retire them before that. I think it’s real danger territory.
PL: So what should employers do if they’re looking at an employee in this situation and thinking well we might actually want them for another year or two, we don’t want to lose them right now but we don’t want to lock ourselves in – annual contracts?
DR: They could do a one year agreement and six months into that they could say look we’re not going to renew and we’ll look then to terminate at the end of that one year period but it is folly because no one can predict what’s going to happen five years ahead.
PL: This is what is the legal status of terms and conditions of employment as specified by an employee handbook, so essentially, are they contractual even if a company by a statement to the effect that the company considers them non-contractual?
IS: The company handbook is a wonderful thing until you fall out over it. It’s strongly suggested by ACAS, always has been, been flavour of the month for many many months in fact, but there is this one problem – which bits are contractual and which bits aren’t? Bits to do with sick pay sometimes people put in, probably fairly clearly contractual, the bits about where the loos are probably aren’t so it’s a huge ragbag. I know what this person means by saying the employer will try and say it’s non-contractual. The problem is that parts can be what is called incorporated from the handbook into the individual contracts of employment. If the employer says this is not contractual – and again I’d be very wary about simply one clause at the end saying none of this is contractual, that just looks silly – but if the employer wants to try and keep something contractual, okay that’s where you start, if they’ve done it right. There are arguments they haven’t done it right and one of the leading case (in fact about the only case) on company handbooks was a case of whether there was an entitlement to a non-statutory extra severance payment which was mentioned in the company handbook. The employer of course says oh no it’s all discretion and on this occasion there’s no money, you’re not having it. Then, I think Counsel for the employee, yes two rather interesting questions. The first question, “How did you refer to this?” “Oh as an entitlement”, and the second question “Where did you put it?” “Oh we put it under the chapter employee rights”. The court had very little difficulty in saying to hell with what you’ve called it, that’s contractual, so you must be careful. Discretion is difficult these days, it’s got to be discretion in reality not just what you’ve put and so I’m afraid we the lawyers tend to get round it, it doesn’t help very much, it gives you a flavour. It’s the same problem with collective agreements, is the clause in question apt for incorporation and what they will tend to do is to look at what the parties were intending and if basically you can show really it was meant to be intentional, it was in there, it’s the sort of thing that’s normally contractual and you’ve just put some half-cocked clause at the end saying by the way you can’t have any of this stuff it would look very bad.
DR: As ever the point in employment law is that whatever people say does not necessarily count and merely to say this is not contractual, a court or tribunal can step back and say well actually it is. The label put upon things, as we always say in employment law, is not going to be conclusive and if a court or tribunal looks at it and says this is fundamental to the working of this it must be contractual. The fact that you’ve got great big four inch letters saying this is not contractual, not worth the paper it’s written on.
PL: Finally can I just ask you both what you think is going to be really big on the employment law front in the coming year. What is going to hit the headlines.
IS: One that I think is interesting because it has a very strong political element to it, under the present government, i.e. before the next election whatever may or may not happen then, is family friendly policies. We know the Equality Bill is coming, that’s all there, but what we don’t know is what the government are going to do about more family friendly. The original idea was that 2010 was going to see the increase of statutory maternity pay up to a full year, effectively perfecting the system, and that is why although the government enacted a right for additional paternity leave and pay where the man would be able to take over some of the woman’s rights if she comes back early, it hasn’t been brought into force. It was going to be brought into force at the same time as statutory maternity pay. Now the assumption tended to be that new Labour were so wedded to this sort of area it would go ahead and the usual new Labour mantra is very simply that family friendly are for an opportunity for business and impose no burdens. That, however, was then shot down a few weeks ago by the Business Secretary (Lord Mandelson of everything and everywhere) who came out suddenly to say that from the point of view of the business department the government (for whom he appeared to be speaking at the time)…
PL: Not for the first time.
IS: Not for the first time, yes. Have you ever noticed what his initials are? PM – but apart from that. He came out with this government apparently initiative saying that in times of recession further family friendly reforms have been put on hold because he did not want to put burdens on business. He was then apparently taken behind a screen in Downing Street by two female cabinet ministers and given a good kicking and they then said he didn’t really mean it but of course that was before the cabinet reshuffle when he seemed to become rather powerful. One fascinating point is going to be are we going to see more family friendly or it’s on hold because of the recession.
DR: I think in the next year (we are going back to a topic we touched on earlier), I think we’re going to see a big big push for mediation and for mediators coming in trying to sort things and, indeed, in the courts there’s a parallel movement at the moment about whether mediation should be made compulsory without suggestion that will happen in the tribunal. I think we’re going to see an awful lot more emphasis on mediation and trying to avoid matters going to the tribunal which is very expensive for all concerned.
PL: Thank you both very much indeed for answering all those questions.
If we haven’t managed to answer your questions please visit the employment law area of the CIPD website where you’ll find plenty more information on employment legislation and indeed forthcoming changes to employment law.
Employment law is, of course, always a popular subject at our annual conference and exhibition and that moves to Manchester this year. You can find advance information on the conference atwww.cidp.co.uk/ace.
Next month we’re going to be joined by a panel of experts to take a closer look at the highly topical area of executive remuneration. Join us then