People Law in Brief - February 2011

Focus Point

The draft Employment Equality (Repeal of Retirement Age) Provisions Regulations 2011 were published this month.  This is the catchy title for the regulations which will govern the removal of the default retirement age.  Whilst the Regulations have a very unassuming name, they are likely to affect nearly every organisation and employer in the country.  As many of you know from 1 October 2011 retirement will not be a fair reason for dismissal, the default retirement age of 65 will be removed and the statutory procedure for requesting to work beyond the retirement age will be abolished.  Therefore, unless the transitional provisions contained in the Regulations apply to make a retirement over the next 6 months fair, there is a clear danger that any dismissal will be both unfair and age discriminatory, if the retirement cannot be objectively justified.

It is thought that the purpose of the Regulations is to allow employers to give notice of retirement up to 6 April 2011 to employees who are already 65 or whom will turn 65 before 1 October.  However, there is a major problem with the wording of the Regulations.

Regulation 5 states that the transitional regulations allow fair retirement to apply to employees who “will attain the age limit during the period of time that begins with that date and ends with 30 September 2011”.  Here “that date” is thought to mean the date of the commencement of the regulations which is 6 April 2011.  Therefore, on the face of it, the regulations will only apply to employees who have their 65th birthday between 6 April and 1 October 2011.  It is therefore currently thought that this will prevent employers from retiring employees who are already over 65 or who will turn 65 before 6 April.  [Read more]

We think that regulation 5 should state that the Regulations apply to employees who “have attained the age limit” rather than “will attain the age limit”.  The crucial difference in the wording has produced greater uncertainty for employers who are already grappling with this massive change to employment law.  It is thought that this was not the intention of the Government when these Regulations were drafted and it is hoped that the drafting problem will be amended before they receive Royal Assent. 

We will keep you fully informed of developments in relation to this important issue in the next edition of People Law in Brief.  If you would like more information on how the removal of the default retirement age and the drafting problem in the Regulations will affect your business please use the links on the left hand side of this page to contact one of our experienced solicitors and watch out for our seminar on this subject which will take place in May. 

It is also worth pointing out that there has been some further confusion amongst commentators about the final date on which a notice of retirement can be given under the current statutory retirement procedures.  Many commentators have used the date of 5 April 2011, because this is the final date before the transitional provisions come into effect.  There are complicated situations in which notice can be given, right up until this time.  However, we are encouraging all of our clients to use the date of 30 March 2011 as the final date on which notice of retirement can be given, as this allows for the necessary 6 months’ notice ahead of 30 September 2011 which is the last date on which employees can be retired under the old regime.  Whether or not the notice will be effective will depend on when the employee turns 65 and whether the drafting issue with the Regulations is ironed out by Parliament.

The Regulations are however not all bad news for employers.  It is confirmed in Regulation 2 that it will not be age discrimination to restrict insurance benefits to those employees under 65 where insurance policies themselves have this restriction. 

Brief Case News

TUPE

Last week, the President of the Employment Appeal Tribunal (EAT) Judge Underhill produced his decision in the case of OTG Ltd v Barke [2011] UK EAT 0320/09/1602.  The conclusion of this judgment is that a company in administration proceedings can never qualify as “insolvency proceedings with a view to the liquidation of the assets of the company” within the meaning of regulation 8(7) of the TUPE regulations.  This means that the sale of a business out of administration will often amount to a TUPE transfer.  [Read more]

Regulation 4 of the TUPE regulations states that contracts of employment will transfer from one business to another where there is a relevant transfer.  An exception to this is contained in Regulation 8(7) where the transferor (the organisation selling the business or part of the business) is subject to insolvency proceedings “which have been instituted with a view to the liquidation of the assets of the transferor”.  When deciding whether an administration process falls within the meaning of regulation 8(7), some Employment Tribunals have been applying the law as set out in the case of Oakland v Wellswood (Yorkshire) Ltd [2009] IRLR 250.  This case stated that a “fact based approach” should be applied to whether or not a specific administration process fell into the regulation 8(7) exception.  The case of OTG Ltd v Barke states that an “absolute approach” should be used instead.  The absolute approach being that no administration can amount to insolvency proceedings for the purpose of regulation 8(7) and therefore where a transferor goes into administration (as opposed to liquidation) then the contracts of employment of those employed by the transferor at the time of the transfer will transfer under regulation 4. 

The position is different in relation to employees who are dismissed prior to the transfer.  The contracts of these employees are unlikely to transfer even where the company subsequently goes into administration, unless there is a specific attempt to circumvent the TUPE regulations. 

Volunteers

In an entirely different area of employment law, recent clarification has been provided by the case of X v Mid Sussex Citizens Advice Bureau & another [2011] EWCA Civ 28 on the rights (or lack of them) enjoyed by volunteers. 

In this case Mrs X was a volunteer at a Citizens Advice Bureau who brought a claim for unfair dismissal and disability discrimination.  It was found by the Court of Appeal that she could not bring either of these claims, because she did not have the necessary employee status.  This is not however a definitive position as the Court of Appeal did take into account that volunteers could in certain circumstances become employees.  They stated that “volunteers come in many shapes and sizes and it cannot be assumed that all will have the same legal status”.  Indeed there is a Tribunal case from 2009 in which a volunteer was held to be an employee.  The Mid Sussex case does however provide useful confirmation that in a situation where the employee was under no obligation to work and undertook a wide range of advice work and often failed to attend when she was expected meant that no employment relationship was in evidence and therefore she did not have the right to bring a claim.

How not to conduct disciplinary proceedings...

Employment law was again in the headlines this month with the case of an employer who believe one of his employees was stealing from him.  The employer marched the employee through the streets of their town with a sign around his neck saying “Thief.  I stole £845, am on my way to police station”.  The employee was dismissed and sued for aggravated damages in relation to the method of his dismissal.  The case was settled out of court for £13,000 and acts as a reminder to employers to follow the disciplinary process set out in the ACAS Code of Practice rather than more imaginative alternatives!

Watch this Space

Rumours have been swirling about the possible changes to the Tribunal system which the Government is considering.  Finally the Government has take steps to end the speculation by publishing proposals for consultation on reforming access to the Employment Tribunal system.  A number of measures are being proposed to save costs, whilst maintaining fairness and reducing the administrative burden on employers.  The proposals include the following:

a) An increase to the qualifying period to bring a claim of unfair dismissal to 2 years.  This proposal is not new and was mentioned in November’s People Law in Brief however, its inclusion in the consultation document confirms that the Government is seriously looking at this option. 

b) A fee to lodge a Tribunal claim. This would make the Tribunal system much more like the County Court where payment of court fees are common. 

c) Compulsory pre-claim conciliation through ACAS with financial penalties for parties who do not agree to conciliation.

d) A 50% additional penalty on employers who do not follow correct procedures payable directly to the Exchequer, to cover the cost of the Tribunal process.

e) Extending the types of claim where Judges can sit alone in both Employment Tribunals and the Employment Appeal Tribunal (to include unfair dismissal claims).

f) Reviewing the limits on redundancy payments. It is not known whether the Government intends to increase or reduce these payments. 

g) A payment into court system – this could involve cost penalties for employees if they receive less in compensation than has been previously paid into court by their employer.

The consultation is part of the austerity measures and cuts to public funding for the judicial system being implemented by the Coalition Government.  Many of the suggested changes have received a mixed reception and we would be grateful for your feedback in relation to the proposals. 

We will of course keep you updated in relation to any changes in the law that result.  For anyone who wants to join in with the consultation, it closes on 20 April 2011.

And finally...

The limit on a weeks’ pay for the purposes of calculating the basic award and the level of a statutory redundancy payment has increased where the date of dismissal is after 1 February 2011.  This has increased from a maximum of £380 to £400.  The maximum statutory redundancy payment has therefore increased to £12,000 and the maximum compensation for unfair dismissal has increased to £68,400.