Employee Shareholders

From 1^st September new rules are in force to permit the establishment of a novel category of employee: “the Employee Shareholder”.

 

I read today in one on-line piece that these new contracts will bring new talent flooding into the UK, as entrepreneurial employees the world over rush to take advantage of a scheme that robs them of their essential employment rights in exchange for some pretty unclear financial incentives.

 

It would be fair to say that we at Morrish are pretty sceptical about the new rules.

 

At heart this is a measure further to reduce worker protection.  We have been blogging for many months about the unprecedented rate and extent of changes that have been wrought to employment rights in the last year or two.  Readers will not be surprised to hear that we remain concerned that, once again, the rights of workers are being sacrificed at the altar of “business flexibility”.

 

But leaving aside questions about the relative bargaining power of the parties to the contract of service, we have real doubts about whether – for most employers and employees – there is going to be any practical call for these new Employee Shareholder contracts.

 

Employee Shareholder status is conditional on the employer providing a written statement setting out the employee’s rights and obligations – and on the employee receiving independent legal advice about those rights and obligations.

 

There are a host of issues to be considered.  How will the shares be valued?  What type of shares will they be (some companies have lots of different classes of shares, with different voting rights associated with each)?  What provisions exist for sale of the shares?  What if the company goes bust?  Will the employee have to enter into a Shareholder Agreement?  What will govern the relationship between majority shareholders and minority classes?  What provisions exist in the Articles of the company in relation to shareholder rights?

 

It seems to us that any advisor worth his salt is going to take more than a few hours to look at all the relevant documents and to ensure that the potential Employee Shareholder is given proper advice about their future rights.  That is going to cost a not insignificant sum of money.  Will the employer pay?

 

And what is the employer’s interest?  Principally, he benefits by avoiding claims for unfair dismissal and redundancy. 

 

But since last year, the qualifying time limit for unfair dismissal has been extended to 2 years – and by coincidence the redundancy payment regime only applies to employees with more than 2 years’ service.

 

Are many employers really going to want to part with shares, to grant possible rights to future employees, to pay potentially significant legal costs both to their own lawyers and the lawyer advising the employee – all for protection from a pair of rights that won’t apply to the employee until 24 months have passed, in any event?

 

We’ll see.  Given that none or almost none of the respondents to the Government’s consultation on the topic thought that Employee Shareholder status was a good idea – and the negative responses were both from employee and employer groups – we tend to think that this may end up being a flash in the pan.  And a good thing too.

 

Paul Scholey - Senior Partner

 

For further information on Employment Rights, please visit our website or call 0033 3344 9600 and ask to speak with our Employment Rights team.

 

An extraordinary day in the life of an Employment Lawyer – 29th July 2013

We blogged last month about the legal changes that were expected, but now they have arrived. The 29^th July has brought change – fundamental change. It has also brought with it... mayhem!

Last Monday, for the first time ever, Claimants now have to pay a fee to lodge their claim. A Claimant will pay £160 for a “type A” claim and £250 for a “type B” claim. Hearing fees for those claims are £230 and £950 respectively. Type A claims are meant to be the easier ones, type B the more difficult sort. But which claims are which? Good question – as of this past Monday, we didn’t have a final copy of the Fees Order – it was only in draft form. The final draft didn’t arrive until one day after implementation!

We also had an email from the Ministry of Justice who wrote to us to clarify that, astonishingly, Equal Pay claims, which can be some of the most complex litigation in employment law, are still type A claims – the simpler ones! However, ministers are expected to announce a change to that position shortly. So if anyone has a claim for equal pay they would be wise to issue it now whilst it’s at the cheaper rate. This could add to the surge of claims already issued before Monday by Claimants trying to avoid paying a fee altogether (although that could not be done on-line because the system was down).   We hear that over 500 claims were lodged in the Leeds Employment Tribunal alone on Friday! I think we can expect to wait many weeks for any of the Tribunals to acknowledge our claims. Claimants – expect delays.

Equal pay claims aren’t the only anomaly. A claim for a Protective Award for failing to consult about redundancies is a type B claim, yet the same claim for failure to consult under TUPE (when employees transfer to another employer) is a type A claim! In addition, the guidance suggests that TUPE failure to consult claims and working time claims fall within Band B whereas the fee Order clearly still lists them within Band A. Let’s hope for some clarity on the fee types as soon as possible.

And then we have brand new Claim Forms. We also have a brand new remission scheme, so that people can apply to pay no fee at all or only part of the fee. After road-testing these forms, whilst they look at first ok, we see there are real problems. First of all, it’s not easy for a Claimant to find their form on the Tribunal’s website. You then only have 20 minutes on each page when completing online, otherwise you lose your data. The fee type seems to (wrongly) set itself after only a few questions. It has crashed several times during our tests. There is no way of attaching documents such as additional particulars of claim and there is no way of saving the completed form – you have to print it for your records!

The PDf version of the form is no better. It can’t be saved without a ‘signature’ and once it’s signed it doesn’t seem to let us change it! It doesn’t seem as though we’ll be able to email a copy to our clients for approval and if any changes are required, the full form will need to be retyped. It is going to take some getting used to.

And this is in today’s age of technology!

A further issue that doesn’t seem to have been thought through is the problem of how to pay a fee. The Tribunal system would prefer for us to lodge claims on-line and pay the fee at the same time by debit or credit card.  Claimants themselves might be able to do this but what about law firms paying the fees on behalf of their clients, where the client has a source of funding e.g. a union? There was talk of a Paypal account but no sign of it. If we are to pay a fee on behalf of a client, we will need to send a cheque and rely on the postal system or hand-deliver it with the claim form! If your office is near to one of the allocated hearing centres, hand-delivery seems to be the best option and it guarantees the claim form and fee is received. However, when you act for clients nationally, a trip to Cardiff, London or Glasgow on the day limitation expires is going to be messy!

And aside from fees and new claim forms we have new rules of procedure, a new cap on unfair dismissal compensation, pre-termination negotiations in unfair dismissal cases are inadmissible and compromise agreements are now ‘settlement agreements’ with a new ACAS code of practice.   

What a landscape the government is creating! And what an interesting way of doing it...

Daniel Kindell - Solicitor 

For further information on Employment Rights, please visit our website or call 0033 3344 9600 and ask to speak with our Employment Rights team.

 

Regulation, Regulation, Regulation!

The Government is very worked up at present about regulation. 

 

I dislike red tape.  I think it is laudable that we should seek to regulate sensibly and proportionately. 

 

But there’s not a lot of joined-up thinking going on. 

 

So, in the midst of a set of Employment Law and Tribunal reforms that unashamedly aim to reduce the number of people bringing claims in respect of their employment rights to Tribunals, we see some bizarre anomalies:

 

• On 29^th July the Employment Tribunal fee regime begins – we have blogged about it before, but now we are getting to grips with the detail of what the scheme will mean in practice.  The rules and regulations are, in short, a nightmare.  You may have to pay a fee.  You may be exempt from fees.  You may have disposable monthly income at a level that means you get partial remission from fees.  You will have to complete endless forms and supply endless evidence to show just where your disposable monthly income falls.  The public will be confused.  Lawyers will ask, “who will pay us to fill in these new forms?”

 

And if a Claimant gets it wrong, chances are they might lose altogether their chance to enforce the rights that successive Governments have been so keen to trumpet on their behalf.

 

• To our astonishment, the Government is pushing ahead with the idea of “selling” your employment rights in exchange for shares on the commencement of employment.  The devil is again in the detail – the hoops through which employer and employee will need to jump, to qualify under the new scheme, are an exercise in how not to do red tape and regulation.  As a matter of principle, it can’t be right that you might have to sell your rights to get employment.  But in practice we tend to think that very few people are going to bother – it is more trouble than it is worth.

• Also from 29^th July we have a complete overhaul of the Employment Tribunal rules of procedure.  Not more regulation, necessarily, but certainly a sea change to existing regulation – and the two are pretty much the same thing.  Time to learn a new set of rules and procedures.

 

None of these changes were necessary.  In our view none of them are desirable.  All of them add directly and/or indirectly to the burden of red tape both as it affects individuals and as it affects businesses. 

 

Here we see the law in practice – and in this case, it is the law of unintended consequences.

 

Paul Scholey - Partner

 

For further information on Employment Rights, please visit our website or call 0033 3344 9600 and ask to speak with our Employment Rights team.

 

 

Health & Safety & The Boer War

The recently enacted Enterprise and Regulatory Reform Act contains a number of disturbing provisions, including the frankly bonkers proposals in relation to share incentives for employees who are prepared to sign away their employment rights. 

 

But hidden away in there, and most disturbing of all perhaps, was Clause 61, a last minute amendment that snuck into the Bill under the auspices of the Government’s clamp down on regulation red tape and compensation and the so-called compensation culture.

 

It is significant to note that:

 

• Clause 61 was never subject to any form of public consultation; and
• It was introduced to the Bill after the Bill had been through its Committee stage in the House of Commons (in effect, it was hardly scrutinised at all).

 

What was the effect of Clause 61? 

 

In terms, it rolled back the statutory Health and Safety framework for civil claims so that now in 2013 an employee injured at work is in essentially the same boat in which he or she would have found themselves in 1897.

 

That’s right, 1897.

 

116 years of progress in Health and Safety has been abolished in an eye blink. 

 

My colleagues who support workers who make claims in respect of work related injuries always say this: our clients have never, ever expressed as great an interest in compensation as they have wished to be free from injury or disease. 

 

And the strides made in the last 20 years in improving safety at work have been enormous.  They have been driven, by and large, by employers who have improved their standards of care at work, in response to claims brought by injured victims – since for many employers the finest incentive to improve good practice at work is a positive impact on the bottom line (i.e. a reduction in insurance premiums relating to workplace claims).

 

The details of the change in the law are dry.  In its broadest sense, it might be said that it will now be substantially more difficult for injured employees to recover compensation for those injuries.

 

Insurance Companies will save money. 

 

But the NHS will not.  Historically we have recovered rehabilitation costs from Insurers; now those costs will be distributed back to the State. 

 

And isn’t the point of insurance after all to try to spread amongst us all the impact of one devastating event upon an individual? 

 

The Government concedes that up to 70,000 claims a year might be adversely affected by their changes to the law. 

 

We were not asked about it.  There is no evidence base for the changes that have been made.  Yet more (see our previous Employment Law Blogs) false claims of “perception of over regulation” are spouted by the coalition. 

 

It’s about time we started to legislate to deal with real problems, rather than “perceptions”.

 

Until we do, more people will suffer without redress, Health & Safety standards will slip, families will be devastated by death and injury – and eventually (since I think sometimes these things go in cycles) someone will have to face front and say that Health & Safety laws are there for a purpose.

 

By then those now in power may be enjoying lucrative consultancy contracts in the Lords.  I wonder who will apologise to the injured and the families of the dead then.

 

Paul Scholey - Partner

 

For further information on Employment Rights, please visit our website or call 0033 3344 9600 and ask to speak with our Employment Rights team.

 

‘More Redundancies – Less Time’; the reduction in the period for collective consultation

Perhaps one of the most draconian of the 2013 changes to employment law is the reduction in the period for consultation, effective from 6th April 2013, when an employer proposes to make large-scale redundancies.  

As we have seen in the news in recent months, the downturn in the economy has hit even established businesses hard and we have read how the likes of Comet, HMV and Blockbuster have entered administration and have been forced to reduce their workforce.

As a firm we have also noticed an increase in the number of protective award claims - where employers fail in their duty to consult with their employee’s representatives, such as recognised Trade Unions, when mass redundancies are proposed - as businesses continue to struggle in the current economic climate.

Previously, under the Trade Union and Labour Relations (Consolidation) Act 1992, if an employer planned to make 100 or more redundancies within one organisation it had to consult the representatives of those affected employees for at least 90 days before the first dismissal took effect, providing there were not extenuating and unforeseen circumstances.

However, as of 6th April 2013, the 90 day consultation period has been cut to just 45 days, although where between 20 and 99 employees are earmarked for redundancy, the consultation period remains 30 days.

It was stated by the Employment Relations Minister, Jo Swinson, that the change in the law was because the previous 90 day period caused “unnecessary delays for restructuring and made it difficult for those affected to get jobs quickly”. It is therefore the government’s position that this change, along with all others planned for later in 2013, will create growth and flexibility by allowing businesses to easily respond to volatile and changing market conditions.

We however prefer the opposition view put forward by the Labour MP, John McDonnell, when he said; “the reduction means that the opportunity for consultation is hopeless. It will not happen and will be meaningless as there will not be the time for the employees to work with the employers to look at alternative plans for that company”.

This view, which we share, is supported by the example of Jaguar Land Rover who in 2009 announced that they were to make up to 1000 employees redundant, before £70 million was identified towards the end of the 90 day consultation period which ultimately prevented any job losses.

It is therefore doubted whether this change to the law does indeed “strike an appropriate balance between making sure employees are engaged in decisions about their future and allowing employers greater certainty and flexibility to take necessary steps to restructure[1)”...

[1] – Announcement by Jo Swinson, Liberal Democrat Employment Relations Minister, 6th April 2013

Chris Ridley – Solicitor

For further information on Employment Rights, please visit our website or call 0033 3344 9600 and ask to speak with our Employment Rights team.

De-regulating employment law, what’s it all about?

Now, we’ve made it clear many times that we have massive concerns not only about the content of the changes to employment law that are coming but also the reasons behind them. It seems that the Government’s own recent research now completely supports our concerns.

 

The Government said we are over-burdened by ‘red tape’ and regulation – yet the current Minister for Employment Relations wrote last week that “the UK...has one of the most lightly regulated labour markets in the world” and ”burdens from employment law (in the UK) are low by international standards”. She confirmed that we are the third least, yes least, regulated major economy, just behind the US and Canada and we have less employment law than every other European economy as well as South Africa, Australia, Russia, Chile, Korea, Brazil, India, China and the list goes on and on. The OECD figures (which the Government agrees with) confirm that we have one third of the employment protection of China and half that of Germany[1]. A previous Government report accepted that UK employment regulation was already in “good shape”[2]. I should make clear that the above research was done before the majority of the Government’s changes are due to take effect just after this Easter.

 

They said we have too many Tribunal claims – the latest ET statistics show new ET claims have dropped 15% on the previous year[3]. Other Government statistics show that in 2011 96% of UK workplaces had no claims made to a Tribunal by any employee; in other words the percentage of workplaces in which an employee made a Tribunal claim was 4%[4]. Further, the Government’s report accepts that Tribunal claims are “relatively rare”.

 

They say that the Tribunal’s compensation is far too high – the most common award for Unfair Dismissal is only £4,560[5].

 

It seems that recently even the Government has accepted the fact that the truth does not support their case for change. Their new tack is to argue that in fact it is the “perception” of business (which they admit “may often be misconceived”) that has “given rise to perceptions that employment law is costly, time-consuming and over-bureaucratic” (this is the Minister again)[6], hence why change is required.

 

But does business really have such a perception? Back to the Government’s own research – this has found that business says “employment regulation was generally considered both necessary and fair” and it concluded that any perception of employment law as burdensome has been worsened by the ‘anti-regulation’ debate (which itself has been heightened by the Government!)[7].

 

So, at best the evidence for change is based on perceptions, which may not really exist and are “often misconceived” - surely a weak basis on which to drive massive Government changes to the law?

[1] Page 11 BIS Employment Law 2013: Progress on reform, March 2013

[2] BIS Employment Regulation Report, September 2012

[3] Employment Tribunal and EAT Statistics for1 April 2011 to 31 March 2012

[4] Page 25 BIS Employment Law 2013: Progress on reform, March 2013

[5] Employment Tribunal and EAT Statistics for 1 April 2011 to 31 March 2012

[6] Page 3 BIS Employment Law 2013: Progress on reform, March 2013

[7] BIS Employment Relations Series 123, Employment Regulation, March 2013


David Sorensen - Partner

For further information on Employment Rights please visit our website or call 0113 245 0733 and ask to speak with our Employment Rights Team.

 

A Positive Government Change for Employees - Shared Parental Leave

In Scandanavia they call them “latte pappas” and in Sweden most fathers get at least one month of baby care and they can share their leave with their partners. So why not try it in the UK?

The UK is changing. Whilst businesses might not yet be operating at true levels of equality when it comes to women’s rights, figures quoted in May last year by the BBC suggested that 31% of the most senior positions across 11 key sectors are occupied by women. In 2004 this was just 19%. The number of women in senior positions can only increase, and this can only be a good thing. But in a world where everything seems achievable, how does raising a child fit in?

Well, as you may already know it was recently announced that the Government would be changing the rules on parental leave so that by 2015 a mother will be able to return to work very shortly after childbirth and share the rest of her maternity leave with her partner. This week the Government published more details, which are under currently consultation.

The idea is great. Not only will the mother be able to make a real decision about the balance between her career and home life, but it will give fathers the opportunity to get much more involved in their child’s upbringing. In turn this must be good for a child’s development. But a scheme of shared parental leave must be truly flexible and easy to use.

Having looked at the initial proposals, the system is promising and the requirements to take leave do not seem insurmountable.

There will be a statutory right for fathers and partners to have unpaid time off work to attend up to two ante-natal appointments, capped at 6.5 hours per appointment. The right to two weeks’ paid paternity leave will remain.

Parental leave of up to 52 weeks can then be shared between the parents and hopefully may be taken together. Eligibility depends on parents meeting minimum requirements of actually being in work for a minimum number of weeks and receiving certain levels of income, but the eligibility requirements at present don’t seem unreasonable or unduly onerous.

As with any statutory right to time off work, there will be notice requirements to comply with; the employer needs to be able to manage the situation with sufficient notice, but these also seem fairly straightforward. 8 weeks’ notice will be required of an intention to take shared parental leave or pay and parents will be able to fill out a form, which we hope will be easy to follow. It seems employees won’t have to set out their plans for the entire entitlement to leave when they request their first period of leave, which shows genuine flexibility in the government’s approach.

A 2 week discussion period will then be granted once the 8 week notice is given by the parent/s so that the employee and employer can discuss the pattern of leave before it is signed off. The employer will therefore have at least 6 weeks to plan before leave starts. The patterns of leave and amount of leave can be changed and at present, the number of times parents can transfer leave and pay entitlements between them won’t be limited.

It does seem that the Government will be moving us towards a truly flexible system of parental leave, which subject to finalising the specifics of administration, will no doubt be welcomed by most employees with open arms in 2015.


Daniel Kindell - Solicitor

For further information on Employment Rights, please visit our website or call 0113 245 0733 and ask to speak with our Employment Rights team.