Employment Briefing – September 2013
Print newsletter27/09/2013

Employee Shareholder Contracts guidance published
In our July employment briefing, we reported on the new employee shareholder status contracts that […]
In our July employment briefing, we reported on the new employee shareholder status contracts that came into force on 1 September 2013. In stark contrast to the amount of publicity and debate on this subject, reported take up so far has been negligible! The Government has now published guidance on the new contracts as well as separate guidance on the income tax and capital gains tax rules and exemptions applying to awards of shares under the new status. Interestingly, the guidance states that if an employee shareholder sells their shares, their employment status does not automatically revert back to that of ‘normal’ employee so it would appear that there is no requirement that an individual employed as an ‘employee shareholder’ must actually continue to hold shares after the initial grant and any subsequent disposal.

Employment case law round-up – September 2013
Clift (PO-2066) Trustee time-barred with recovery of overpayments The Deputy Pensions Ombudsman (DPO) has held […]
Clift (PO-2066) Trustee time-barred with recovery of overpayments
The Deputy Pensions Ombudsman (DPO) has held that, in recovering overpayments made incorrectly to a pension member, going back to the late 90s (but only discovered in 2011) the trustees were time barred under statute from seeking recovery of such overpayments.
The DPO held that, in accordance with section 32(1) of the Limitation Act 1980, the trustees should have been able to identify the incorrect overpayments in 1998/99. Consequently, the six year limitation period back to the late 90’s had been exceeded, and trustees were time barred from making a claim.
Important to also note is the DPO only partly upheld the complaint by the member who agreed he had altered his financial position in respect of the incorrect overpayments. The DPO held the member had only changed his financial position based on the lump sum element of the overpayment but not in relation to the incorrect monthly overpayments. The trustees were, therefore, able to recover such overpayments that had been paid in the six years prior to them notifying the member of the error in 2011.
The determination brings to light how easy things can go wrong for trustees when trying to recover overpayments from members. The legislation in respect of limitation periods is complex, especially in respect to pensions where there is a degree of uncertainty about when the limitation period as set out in the Limitations Act 1980 applies. We therefore recommend that you seek legal advice on this issue if the matters similar to this one rise.
Jardine (PO-2465): Ill-health early retirement medical experts need to be more thorough with their examinations
The DPO held that the employer British Telecommunications plc (BT), in response from a member to an application for ill-health early retirement, based its decision on incomplete and insufficient information from a registered medical practitioner (RMP) which resulted in maladministration. The member was refused an ill-health early retirement pension based on the RMP’s opinion that the member’s condition was not permanent, and other treatments were available to treat his condition.
The DPO held that the RMP had reached his findings without procuring vital information regarding the treatments which the member had tried. The RMP also rejected findings from a previous medical report for this member which suggested viable treatments had been exhausted. Furthermore, the RMP failed to provide reasons for why he had rejected the previous report.
As a result, the DPO directed BT to request a new medical report from the RMP and also directed BT to compensate the member for the sum of £250 for the distress and inconvenience caused to the member by BT’s maladministration.
The key points to take away from this determination are that when a medical practitioner advises on a member’s health and incapacity, it is not enough for such practitioner to only raise concerns or highlight possible untried treatments. Instead the medical practitioner must expressly identify them in the medical report for completeness.
In addition, decision makers (employers and trustees) should be conscious of the above when reviewing medical evidence and in making a decision as to whether such a member is eligible for an incapacity pension. If the medical report is vague and indecisive, the decision maker should go back to medical practitioner who produced the report and request clarification prior to making a decision.

Legislation due into force in October 2013
Directors’ remuneration in quoted companies From 1 October 2013, the directors’ remuneration report in quoted […]
Directors’ remuneration in quoted companies
From 1 October 2013, the directors’ remuneration report in quoted companies (N.B. not ‘AIM’ listed companies) will need to contain information about the company’s directors’ remuneration policy and how it was implemented for that year. Once a remuneration policy has been approved, a company will only be able to make remuneration and loss of office payments which are permitted within the limits of the policy, unless the payment has been approved by a separate shareholder resolution. Moreover, from 1 October 2013, companies will need to publish a statement setting out what payments an exiting director has received or may receive in future.
Discrimination and 3rd party harassment
From 1 October 2013, the Equality Act 2010 will be amended so that employers are no longer potentially liable for their employees being harassed by third parties in the course of their employment.
So where are employees likely to turn if harassed by a third party during their employment? There are a number of avenues that might be pursued.
The Health and Safety at Work Act 1974 requires employers to provide a safe working environment including undertaking risk assessments which could encompass employees’ contact with third parties. Breach of this duty could form the basis of a negligence claim.
An employee may bring a constructive dismissal claim arguing that the employer’s failure to protect them from harassment amounted to a fundamental breach of contract. This would, however, be a high hurdle for the employee to clear.
The general harassment provisions under the Equality Act provide that:
“A person (A) harasses another (B) if A engages in unwanted conduct related to a relevant protected characteristic which has the purpose or effect of either (a) violating B’s dignity; or (b) creating an intimidating, hostile, degrading, humiliating or offensive environment for B”.
It would be possible for an employee to bring a claim under these existing provisions if the employee could show that the employer was aware, had sufficient control over the harassment carried out by the third party and was in a position to control whether or not that harassment occurred. It follows that this is only likely to apply to an ongoing course of harassment by the same third party.
Employment tribunal fee remission scheme
The Ministry of Justice has published its response to consultation on fee remission in courts and tribunals. In addition to an eligibility test based on receipt of certain benefits and a monthly income test, a new disposable capital test will be introduced. In short, those under 61 with a disposable household capital of between £3,000 and £8,000 will be required to spend up to one third of their disposable capital on fees. Those with £8,000 or more in savings will be required to spend up to half their disposable capital on fees. These changes are set to come into force on 7 October 2013 and, together with the new employment tribunal fee regime, are likely to factor in an anticipated drop in overall claims lodged.
On the subject of employment tribunal fees, the Judicial Review challenge to the fee regime brought by the trade union, Unison, is due to be heard by the High Court in October. We will report on the outcome as soon as it is known.

TUPE – Government response to consultation
In early September, the Government issued its response to consultation on TUPE. The once threatened […]
In early September, the Government issued its response to consultation on TUPE.
The once threatened ‘service provision change’ rule has been given a reprieve and will not be abolished. This is welcome news, as it avoids a return to the pre-2006 legal uncertainty as to whether or not a service provision change fell within TUPE. The TUPE regulations will be amended to confirm that for there to be a TUPE service provision change, the activities carried on after the change in service provision must be “fundamentally or essentially the same” as those carried on before it (this basically confirms the position that has been well established by case law so has little impact in practice).
The rules on employee liability information will also be retained and the timescale for provision of this information will be extended from 14 to 28 days pre-transfer. This is still likely to be too close for comfort for most transferees and we envisage that many will request a longer period in the commercial heads of terms. In the case of second and subsequent generation outsourcing, tendering contractors will want to establish what timescale the customer negotiated with the incumbent contractor.
In addition, the Government’s response confirms that TUPE will be amended as follows:
To allow transferees to re-negotiate terms of employment derived from collective agreements one year after the transfer even though the reason for seeking to change them is the transfer, provided that overall the change is no less favourable to the employee. It goes without saying that much legal wrangling is anticipated over the question of whether changes are ‘no less favourable’!
To provide expressly for a ‘static’ approach to the transfer of terms derived from collective agreements (i.e. the transferee will not be bound by collectively agreed terms post transfer if it is not able to be involved in the negotiating process). This confirms the approach of the ECJ in the recent case of Alemo-Herron and others v Parkwood Leisure Ltd on which we reported in our July employment briefing.
To provide that changes in the location of the workforce following a transfer can be within the scope of economic, technical or organisational (ETO) reason entailing changes in the workforce, thereby preventing genuine place of work redundancies from being automatically unfair. The logistical issue will still arise as to how transferees will manage a consultation process with employees located some distance away.
On the point of redundancy consultation, the Government will amend the Trade Union and Labour Relations (Consolidation) Act 1992 to make it clear that TUPE consultation which begins pre-transfer can count for the purposes of complying with the collective redundancy rules, provided that the transferor and transferee agree and where the transferee has carried out meaningful consultation. This is a common-sense move and will be welcome news for HR practitioners as it will help to smooth the consultation process for all involved where redundancies are envisaged post-transfer.
The draft regulations are expected to be published in December 2013 and brought into force in January 2014.

Woolworths’ case on collective redundancy – BIS granted permission to appeal
We reported on the case of USDAW v Ethel Austin Ltd (in administration) and another […]
We reported on the case of USDAW v Ethel Austin Ltd (in administration) and another case UKEAT/0547/12; 0548/12 (otherwise known as the ‘Woolworths case’) in our recent business insight. The case was a landmark decision on collective redundancy law holding that the words ‘at one establishment’ should be totally excised from the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) so that, once it is proposed that 20 or more employees in a single business are to be made redundant, their location is entirely irrelevant and the obligation to collectively consult with all affected employees will be triggered regardless.
The Government has now been granted permission to appeal this decision to the Court of Appeal although it seems likely that the appeal will be stayed pending the outcome of a referral to the European Court of Justice in a Northern Ireland Industrial Tribunal case concerning the same issue (i.e. the meaning of ‘establishment’). This is undoubtedly ‘one to watch’ given the huge implications for collective redundancy law and we will report on further developments as soon as they are known.

Zero-hours contracts 2013
September’s TUC conference fixed the spotlight on zero-hours contracts. In the UK, around 1 million […]
September’s TUC conference fixed the spotlight on zero-hours contracts. In the UK, around 1 million workers are employed on such contracts under which they remain ‘on-call’ but with no guaranteed work. At the TUC conference, the Labour party outlined proposals to outlaw such contracts in their current form, notably to give anyone working for a single employer for more than 12 weeks on a zero hours contract the automatic right to a full-time contract based on the average time worked over that period.
In the meantime, the Government has launched a consultation on zero-hours contracts aimed at tackling abuses particularly those involving requirements of exclusivity. It seems that zero-hours contracts are high up on the political radar at the moment and employers using these contracts would be well advised to keep a watching brief on developments in this area.