Los hebreos en Egipto

On acquiring or setting up a business or company in the UK, there will inevitably be employees and it is important to understand some of the key UK employment law issues that apply in England and Wales. (Although most statutory and contractual employment rights in Scotland and Northern Ireland are the same as in England and Wales, there are occasional differences which are not covered in this guide.)

Sources of employment law

Much UK employment law comes from EU legislation, so one might expect the position to be similar throughout Europe. However, there are significant differences: UK law emphasises the individual agreement between employer and employee with an overlay of statutory rights, whereas in many EU countries employment is regulated by industry sector collective agreements.

One key point to note is that UK statutory employment rights will continue to apply even if the employment contract is expressed to be governed by a foreign law. Likewise, clauses requiring employees to refer disputes to arbitration will not be effective to prevent them bringing claims for breach of statutory rights.

Statutory claims must be brought in the Employment Tribunal; contractual claims can be brought in the Employment Tribunal (subject to certain limits) or in the civil courts. Tortious claims (eg for negligence) must be brought in the civil courts.

The contract of employment

Where are the terms found?

• Employers must give employees a written statement of the main terms of their

employment within two months of the job starting. If they fail to do so, the employee may apply to an Employment Tribunal for a declaration of terms (or, if they have an additional claim, for compensation of up to a (current) maximum of £1,720). In practice most employees will be given a fuller employment contract, setting out a whole range of terms covering remuneration, duties, termination provisions and so on.

• The courts will also imply certain terms into an employment contract, such as the requirement to give reasonable notice of termination (if there is no express term), the employee’s duty of confidentiality, fidelity and good faith, and the duty on both employer and employee not to conduct themselves in a manner calculated and likely to destroy the relationship of trust and confidence between them. A term can also be implied if it is a custom or practice.

• Employment terms may also derive from collective bargaining with a recognised trade union. Recognition of unions can be voluntary or compulsory (if the majority of employees support it); the latter entitles the union to bargaining rights in relation to pay, hours and holidays.

Terms applying post-termination

• Contracts will often contain express prohibitions on what an employee can do after leaving the employment. Without such provisions, employees are not prevented from competing or poaching customers or employees, only from using or disclosing trade secrets. UK courts will only enforce express restrictive covenants (even if governed by a foreign law) if they are reasonable and no wider than is necessary to protect a legitimate business interest (eg confidential information or customer connections), provided the employer has not itself fundamentally breached the contract.

• An alternative means of keeping departing employees out of the marketplace is the use of an express garden leave clause, enabling the employer to make an employee stay at home during their (paid) notice period.

Termination

UK employees have both statutory and contractual rights on termination. Notice rights

Under statute, employees are entitled to a minimum period of notice prior to dismissal once they have worked for at least a month, unless dismissed for gross misconduct. Minimum notice by the employer is one week (where the employee has worked less than two years), then one week per year of service up to a maximum of 12 weeks; notice by the employee is one week (once the employee has worked for one month). However, employers and employees often agree longer notice periods and/or provide that the employer can pay an amount in lieu of notice. Payment in lieu provisions enable an employer to terminate immediately without breaching the contract (thereby retaining the benefit of any restrictive covenants), but do have tax disadvantages. Notice periods of between six and 12 months are commonplace for senior executives.

Failure to give notice (or exercise a contractual payment in lieu provision) entitles employees to claim damages for wrongful dismissal representing lost salary and benefits during what would have been the notice period, subject to the employee’s duty to mitigate his loss by seeking new employment.

Unfair dismissal

After one year of service (or two years for those starting employment on or after 6 April 2012) an employee has the statutory right not to be unfairly dismissed. A failure to renew a fixed-term contract is treated as a dismissal. An employee can also resign and claim that he has been constructively dismissed where the employer has fundamentally breached the contract (eg a breach of the implied duty of trust and confidence). Employees working outside the UK may in some circumstances be able to claim unfair dismissal in the UK if they have a sufficiently strong connection with the UK.

A dismissal will be fair if the principal reason for the dismissal and the procedure adopted in dismissing are both fair. There are five potentially fair reasons:

• lack of capability or qualifications; • misconduct;

• redundancy;

• the employment could not lawfully be continued; or

Dismissals for certain inadmissible reasons (eg reasons relating to pregnancy or family leave, whistleblowing, raising health and safety concerns, asserting certain statutory rights, during official industrial action up to 12 weeks etc.) are automatically unfair and do not require any minimum period of service. A dismissal on certain grounds can also be unlawful discrimination (see below).

There is a statutory Code of Practice on disciplinary and grievance procedures applicable to misconduct and performance dismissals. An unreasonable breach of this Code may lead to compensation for a successful Tribunal claim being adjusted up or down (depending on which party is at fault) by up to 25%.

The most common award by a Tribunal in cases of unfair dismissal is compensation, although occasionally an employer is ordered to re-employ the employee. Compensation includes a basic award of up to £12,900 (currently) depending on age and length of service and a compensatory award to reflect loss, currently capped at £72,300. The cap does not apply to dismissals for whistleblowing or raising health and safety concerns.

Redundancy

An employee dismissed for redundancy will be entitled to a statutory redundancy payment if he has two years’ service. Larger employers often provide enhanced redundancy packages over and above the statutory amount (although there can be age discrimination issues depending on the type of scheme). The statutory payment is broadly equal to the basic award for unfair dismissal and is set off against that award if the redundancy dismissal is unfair. A fair redundancy procedure will involve using fair selection criteria and applying them fairly, looking for alternative jobs, and consulting with the employee. Where 20 or more redundancies are proposed, there are also obligations to consult collectively – see below. Discrimination

On 1 October 2010 discrimination laws were replaced and harmonised by the Equality Act 2010. Discrimination because of nine protected characteristics is unlawful in relation to recruitment, employment and certain post-employment conduct (eg in giving references). The protected characteristics are sex, pregnancy, marital status, race (including colour, nationality, national or ethnic origins), disability, gender reassignment, religion/belief, sexual orientation and age. The law prohibits direct discrimination, indirect discrimination (where a practice applied to all staff disadvantages a minority group), harassment (including harassment by a third party) and victimisation (treating someone less favourably because of their involvement in a Tribunal claim) on grounds of an employee’s protected characteristic. Direct discrimination and harassment because an employee is perceived to have, or is associated with a person who has, a protected characteristic is also prohibited. Employers can only justify direct discrimination which is on grounds of age (and this will be rare); objective justification is a potential defence to all forms of indirect discrimination. Positive discrimination in favour of minority groups is unlawful, but limited types of positive action can be taken, particularly in relation to recruitment and promotion.

Until 6 April 2011 employers were able to lawfully force an employee (but not a partner) to retire at the default retirement age of 65 without having to objectively justify this, provided the correct statutory procedure was followed (involving giving the employee at least six months’ notice). Notices of retirement under the old regime can no longer be given, and any subsequent retirement notices – or retirements of employees turning 65 after 30 September 2011 – will be unlawful unless objectively justified (likely to be difficult). A fair procedure will also need to be followed.

In relation to disability discrimination, there is a duty to make reasonable adjustments to accommodate a disabled employee. This duty is quite extensive, eg in some circumstances an employer could be required to offer a suitable vacancy to an employee no longer able to do his job or, if its own failure to adjust the workplace means a disabled employee has to take sick leave, to continue to pay full salary during the sick leave (even if contractually entitled to reduce or cease payment). Employers are also prohibited from asking pre-job offer health questions save for limited purposes.

Pay secrecy clauses in employment contracts are unenforceable where a disclosure is sought or made in order to check whether pay discrimination has occurred.

Employers will be liable for their employees’ discriminatory conduct unless they can show that they took reasonable steps to avoid the conduct occurring. Simply having an equal opportunities policy, without ensuring the workforce is properly trained on it, will not be enough.

The Equality Act has no express provisions setting out when employees working abroad can bring discrimination claims in the UK. The position will be uncertain until tested in the Tribunal, but an employee who has done some work in the UK is likely to be eligible. It may even be enough that the contract of employment is governed by English law, at least where the employee is working in Europe.

There is no statutory limit to the size of compensation awards for discrimination claims. In addition to economic loss, Tribunals will usually make an award for injury to feelings (which case law has established should be between £500 and £30,000, split into three bands depending on the seriousness of injury) and can also award compensation for any personal injury caused. Aggravated damages can also be awarded to reflect unacceptable behaviour by the employer eg in the way the employee is treated after having made a complaint. It is also unlawful to treat part-time workers or employees on fixed-term contracts less favourably because of their part-time or fixed-term status, unless objectively justified. Less favourable treatment on grounds of union membership is unlawful and there are also protections for military reservists.

Whistleblowing

It is unlawful to subject an employee to detriment or dismiss him for making a protected disclosure, ie a disclosure which, in the reasonable belief of the employee, tends to show, for example, the commission of a criminal offence or a failure to comply with a legal obligation, a miscarriage of justice or danger to the health and safety of any individual. The disclosure must be made in good faith and not because of a personal grudge. Usually it must be made to the employer, although there are circumstances where the employee can disclose to a third party (this will be less likely if the employer has an internal whistleblowing procedure). A whistleblowing dismissal is automatically unfair with no minimum service requirement and no cap on the compensation that can be awarded.

Bribery Act

From July 2011 the Bribery Act 2010 introduced a corporate offence of failure to prevent bribery by those acting on behalf of a business. UK and non-UK companies carrying on at least part of the business in the UK may be found guilty of an offence, even where the bribery and/or benefit accruing occurred outside the UK. Penalties for the company include an unlimited fine, confiscation of the benefit and a bar on engaging in public sector contracts

for up to five years. A defence is available to a company if it has put adequate procedures in place to prevent bribery, such as an anti-bribery policy and staff training. In addition the Bribery Act creates other offences which could be committed both by individuals and corporates (corporate liability would only occur in respect of these latter offences if a senior member of the corporate was liable for the same offence).

Employee protection on business transfers

TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006) is the UK version of EU rules protecting employees in the event of a transfer of a business or part of a business to another party. Mergers, outsourcings or insourcings of services, changes of contractor providing services, and intra-group transfers can all be covered, depending on the circumstances. It is not possible to contract out of TUPE. However, TUPE does not apply to simple transfers of some assets nor to share sales (although if the subsidiary’s business is subsequently integrated into the parent company’s business, there may be a TUPE transfer at that point). TUPE applies to (i) a business or part situated in the UK prior to the transfer and (ii) an organised grouping of employees in Great Britain whose principal purpose is to carry out a service for a client (provided the service is not a single short-term task nor wholly or mainly for the supply of goods). The Employment Appeal Tribunal has given its opinion that TUPE can apply even if the business or service-provision is transferred outside the EU. Where TUPE applies, the protection includes:

• trade union or employee representatives must be informed and consulted in advance about the proposed transfer; if there are no appropriate representatives in place, elections must be held; the penalty for failure to inform and consult is up to 13 weeks’ pay per employee and there may be joint and several liability for both transferor and transferee; • the employment contracts of employees in the transferring business automatically pass to

the transferee, save for certain pension rights; continuity of service is protected;

• the transferee inherits accrued rights and liabilities in relation to the transferring employees; the transferor is obliged to provide the transferee with specific information about

employment liabilities at least two weeks before the transfer;

• any dismissal connected with the transfer will be automatically unfair (although employees will only be eligible to bring an unfair dismissal claim if they have the usual qualifying period of service of one year, or two years where the employment commenced on or after 6 April 2012), unless the employer can show an economic, technical or organisational reason entailing changes to the workforce (this generally means that there must be a genuine redundancy situation);

• changes to the transferring employees’ terms and conditions will be unenforceable if made in connection with the transfer, even if the employees agree to them; harmonising the newly-acquired workforce’s terms with those of an existing workforce will usually be seen as transfer-connected and ineffective; there is greater flexibility to change terms where the transferor is insolvent;

• employees have extended rights to resign and claim unfair dismissal, eg where a transferee proposed making changes without breaching the employees’ contracts but which would involve a substantial change to employees’ working conditions to their material detriment; and

• employees can object to the transfer of their employment, which would then terminate on the transfer with no right to compensation; however, the enforceability of restrictive covenants may then be affected.

These protections increase the importance of identifying possible TUPE transactions at an early stage, carrying out careful due diligence on human resource issues, and negotiating appropriate warranties and indemnities to reflect an acceptable allocation of risk. Obligations to inform and consult

TUPE transfers are not the only occasion when UK employers are required to inform and consult their staff. An employer (of whatever size) who proposes to make redundant 20 or more employees at one establishment within a period of 90 days must inform and consult with trade union members or elected employee representatives, starting at least 30 days before the first dismissal, and must also notify the government. The 30 day period is increased to 90 days if 100 or more dismissals are proposed. Failure to inform and consult can lead to an award against the employer of up to 90 days’ pay per employee.

There are also obligations to consult employees in relation to health and safety matters. Some companies may also have European or domestic works councils, which they will be required to inform and consult about matters that could significantly affect employment. As a result, there could be obligations to consult at an early stage of many proposed corporate transactions, including share sales.

Finally there are obligations to inform and consult employee representatives about certain changes to pension entitlements, for employers of 50 or more employees in the UK. Other statutory rights

UK employees enjoy a wide range of other statutory rights, including: • working time rights:

• employees may not work more than 48 hours a week (usually averaged over 17 weeks) unless they expressly agree to opt out of this or are senior employees with autonomous decision-making powers;

• records of hours worked must be kept; • there are minimum rest requirements;

• there are also additional working hour protections for night workers and workers under 18 years old;

• employees are entitled to statutory minimum paid holiday of 5.6 weeks (including bank (public) holidays);

• family-friendly leave:

• all employees are entitled to 52 weeks’ maternity leave; those with 26 weeks’ service at the relevant time are entitled to statutory maternity pay (90% pay for the first 6 weeks followed by 33 weeks at a flat rate, currently £135.45 per week);

• fathers with 26 weeks’ service are entitled to two weeks’ leave paid at the flat rate and may take additional paternity leave if the mother returns to work during the second six months of her entitlement;

• adopters can take leave equivalent to maternity and paternity leave but are required to have 26 weeks’ service at the relevant time;

• parents with one year’s service are entitled to 13 weeks’ unpaid parental leave to be taken before the child is five years old (this is due to increase to 18 weeks from March 2013);

• all employees have a right to paid time off for ante-natal care and unpaid time off to cope with incidents involving dependants;

• parents of children aged 16 or less (18 if disabled) or carers of dependent adults, provided they have 26 weeks’ service, have the right to request flexible work (eg reduced hours);

• employees have various time-off rights (eg for jury service, etc.), some of which are paid;