Controversial Blanket-Ban Policy Receives CJEU Clarification

With the Court of Justice of the European Union’s opinion in the case of Achbita v G4S Secure Solutions recently announced, now seems to be an apt time to address religious freedoms at work and the possible impact of this case on them.

In this case a Muslim woman employed as a client-facing receptionist announced to her employer that she would be starting to attend work wearing a religious headscarf. Her employer objected to this stating that there was an unwritten rule requiring all client-facing staff to dress neutrally and avoid wearing “political, religious or similar signs”.

The woman insisted on wearing her headscarf and was dismissed; as a result she subsequently brought a claim of direct discrimination. This case was then referred to the CJEU by the Belgian Courts for clarification on whether or not an employer’s blanket requirement for its workforce to dress “neutrally” could constitute direct discrimination.

The CJEU has now returned its verdict on this case stating that the circumstances did not amount to direct discrimination as all customer facing employees were subject to the same requirements and it prohibited “all religious and political signs” not simply the signs of one faith or political group. The CJEU have left it to the Belgian courts to decide on indirect discrimination but have offered their view on the matter which seems to indicate they may find the policy legally sound.

Indirect discrimination, unlike direct discrimination, is defendable if it is objectively and reasonably justified. The CJEU seems to believe the Respondent met the threshold of objective justification in this case by citing that the Respondent’s aim to produce an image of neutrality was a legitimate aim as it only applied to customer facing roles. The judgment has, however, left the decision on reasonableness for the Belgium courts to decide by indicating the possibility of reinstatement of the Claimant in a non-customer facing role instead of dismissal.

Looking at the wider implications of this judgment it is important to consider what kind of impact allowing businesses to use this policy would have on workplace diversity. If this policy did become wide-scale practice, then it would arguably lead to a fall in people of faith working in customer facing roles. It is worth considering that for many people of faith wearing religious dress is not optional, it is often an important if not integral part of their faith. This would effectively make customer-facing roles unsuitable for some people of faith and seems to be a very restrictive precedent.

I personally find the company’s reasoning in this case troubling, and fail to see how independent religious or political beliefs of individuals working at a company offend neutrality. The idea that a person may see an employee respectfully expressing their belief through their dress and then attribute that particular faith or organisation to the employer of said employee seems to require some rather large assumptions. It would seem logical that neutrality is best shown, not in restricting all forms of religious and political expression for fear of association, but in having equal indifference towards them all.

The final judgement of the Belgian courts on the issue of indirect discrimination is still awaited.

James Battle - Legal Assistant

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Future world of work and rights of workers inquiry

The Business, Energy and Industrial Strategy Committee has launched an inquiry into the ‘future world of work’ and in particular, the 'gig economy' – agency workers, zero-hours work, the use of ‘self-employment’, worker status, low pay and poor working conditions. They refer to the recent Sports Direct scandal and also other organisations with similar poor working conditions.

This is good news. Hopefully, whatever its outcome, turning the lamp onto these types of employers can bring some heat on these organisations with more public attention drawn to the growth of the ‘precariat’ – individuals who work in poor conditions with weak terms and conditions, be it low pay, the absence of paid holiday, sick pay and the like.

My view is that the rise of the ‘precariat’ is nothing new – this country has a history of shoddy employers treating working people poorly and of governments legislating to either counter this, with increased protections (the introduction of redundancy pay in the 1960s, unfair dismissal in the 1970s and the recent(ish) minimum wage in the 1990s) or to aid it, by reducing employment rights (the scrapping of wages councils, the introduction of ET fees of up to £1,200, limits on compensation – all within the last 3-4 years). Since 2010, the move has been to reduce employment protection and to restrict trade unions. My view is that this has encouraged shoddy employers and weakened the position of employees.

Evidence suggests that as a result of the reduction in protections, the equal pay gap is now growing and certain sectors of the workforce, such as disabled people and pregnant women or women on maternity leave, are suffering more, not less, discrimination. I also believe that it has encouraged the growth of the ‘gig economy’ – individuals working in sham ‘self-employment’ situations or in weak zero-hours roles with little control or say about the number of hours they work. This causes illness, harms the economy and damages lives, not least children of adults who work for low pay, on horrendous hours and with uncertain futures.

I’m pleased that the Committee have this on the agenda. Let’s hope for all concerned, not least our children and grand-children, that whatever recommendations are made, they are followed by those in power and a more secure workforce results with more (not less) permanent, well-paid jobs. After all, apart from shoddy employers and obscenely profitable multinationals, how do we as a nation benefit from the rise of the precariat?

The Committee is seeking comments – please do so at:

http://www.parliament.uk/business/committees/committees-a-z/commons-select/business-energy-industrial-strategy/news-parliament-2015/the-future-world-of-work-and-rights-of-workers-launch-16-17

David Sorensen - Partner

For further information on Employment Rights please visit our website or call 0033 3344 9603 and ask to speak with our Employment Rights team.

The EU debate – thoughts on holiday rights

There is a lot of fairly heated discussion on the “Brexit” debate.  The claims and counter-claims by each side have begun, I suggest, to border on the silly.  Hyperbole is the order of the day.

I want to look, in the next couple of weeks, at just a handful of what I think are concrete matters (in so far as law is ever so dependable) that relate to the legal effect of our participation in the EU.

First off: holidays.

My clients were always surprised when, early in my career (nearly 30 years back), I advised them that they were not automatically entitled to paid holidays.  Indeed, they were not entitled, unless their contract provided otherwise, to any holidays at all.  Not even bank/public holidays.  It was perfectly possible to agree to work 52 weeks a year, with no holiday; or to find that such holidays as one might take, were unpaid.

That held true till 1998 and the Working Time Regulations (WTR).  Under those Regulations, as subsequently amended, employees are now entitled to 5.6 weeks a year paid holiday.  Also rest breaks, and a limit (usually honoured in the breach) on working hours.

The WTR arose directly out of Europe’s health and safety based Working Time Directive.  I doubt many people now think it’s a bad thing, to have a legal entitlement to paid time off.  But UK governments have not all agreed.

So it’s worth bearing in mind that the UK government:

• took 2 years longer than it ought, to implement the WTR
• challenged the legality of the Directive in the ECJ
• campaigned against it
• took advantage of derogations from it (e.g. the individual opt-out for the maximum working week)
• framed the WTR so that regular overtime and e.g. commission payments were all ignored in calculating holiday pay

Michael Ford QC, in his excellent advice to the TUC* on the implications of a Leave vote (and whether you agree with him or not, it’s an impressive piece of work), says this:  “In  the  event  of  Brexit,  substantial changes to or wholesale revocation of WTR is predictable.”  That can’t be far wrong, given the above mentioned approach of the UK to the WTR/Directive historically.

We can see more recent evidence of this in relation to the “Bear Scotland” series of cases on calculating holiday pay.  As soon as it became clear that a European approach to calculation was appropriate (so that e.g. overtime would be included in holiday pay), the government legislated almost overnight a) to put a 2-year “long stop” on claims for historical back pay and b) to prevent aggregation of claims where there existed any 3-month or longer gap between underpayments.

And to get an idea how politicians are already thinking, you can do worse than looking here: http://www.publications.parliament.uk/pa/bills/cbill/2015-2016/0046/cbill_2015-20160046_en_2.htm#l1g1 – a link to the Private Members’ Bill supported by C R Coope, MP for Christchurch.  There is already a move to water down our holiday rights – it’s not realistic to think that will change on a Brexit event.

None of the above will be much controversial to employment lawyers.  It is a shame that the debate (on both sides of the fence) hasn’t been put in more factual (and less frenetic) terms.  I’d welcome views from readers, especially if expressed in reasonable terms.

* https://www.tuc.org.uk/sites/default/files/Brexit%20Legal%20Opinion.pdf

Paul Scholey - Senior Partner

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Mind the Gap – Gender pay reporting rules

The government has published in draft The Equality Act (Gender Pay Gap information) Regulations 2016. These set out the framework for the new gender pay reporting requirements.

So who will this impact?

The reporting obligation will apply to private, voluntary and public sector employers in the UK with at least 250 employees.

What are the requirements?

Employers will be required to publish the following information:-

1. The overall mean and median gender pay gap across their workforce, using an hourly pay rate for each relevant employee. “Pay” for these purposes is defined broadly and includes basic pay, paid leave, maternity pay, sick pay and most allowances such as car allowances, shift premium pay and bonuses. However overtime, the value of salary sacrifice schemes and benefits in kind will not be included as part of the calculation.
2. The difference between the mean bonus payments made to men and women. The number of men and women in each quartile of the employer’s pay distribution. This is intended to illustrate whether female employees are concentrated in a particular way in terms of their remuneration, which would potentially indicate impediments to career progression.
3. Employers will have the option to publish a narrative to accompany the pay gap information.

Where is the information to be published?

The information must be published on a searchable UK website that is accessible to employees and the public and then maintained for at least three years to allow progress to be tracked. The information must also be uploaded to a government website.

Is there to be any ‘penalty’ for non-compliance?

The plan to introduce a civil penalty in the form of a fine has been replaced with a focus on ‘naming and shaming’ the employers who fail to comply. There is no specific penalty for non-compliance at the moment but this will be kept under review.

So what happens next?

The draft regulations are subject to a consultation that will close on 11 March 2016. The draft regulations are scheduled to take effect on 1 October 2016. Employers will be required to prepare a preliminary data snapshot showing the gender pay position as at 30 April 2017 and the detailed pay information must then be calculated and published on a date of the employer’s choosing but by April 2018 at the latest.

It will be interesting to see how the implementation of the Regulations is carried out, if the website will be up and running on time, and also how many Employers will actually feel threatened enough by the “naming and shaming” to even comply with the Regulations.

Samantha Simpson - Trainee Solicitor

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Religion vs the Secular State

In Ebrahimian v France, the European Court of Human Rights has delivered a powerful blow against the individual’s right to manifest their religious beliefs.

Ebhrahimian was a social worker in the public sector.  Her contract was not renewed when she refused to stop wearing religious headgear.

She lost her case.  It was important, said EctHR, that the freedom of religion of her patients should be respected – and that meant that she should do nothing that might convey a particular religious world view to others.

I think it’s a surprising decision – although the reluctance of Europe’s judges to interfere with the discretion of member states is becoming more and more plain.

You may recall the case of Ms Eweida, a BA employee whose legal campaign for the right to display a cross became a cause celebre for the right to freedom of religion and belief.

In Eweida, ECtHR said this: “On one side of the scales was Ms Eweida’s desire to manifest her religious belief. As previously noted, this is a fundamental right: because a healthy democratic society needs to tolerate and sustain pluralism and diversity; but also because of the value to an individual who has made religion a central tenet of his or her life to be able to communicate that belief to others. On the other side of the scales was the employer’s wish to project a certain corporate image.”

Yet in Ebrahimian the value of communicating the claimant’s “central tenet of her life” was trumped altogether by the nature of secular society in France.

The judgment is in French only, at present, but I’ve seen a translation of the single dissenting judge’s opinion and it includes this: “A principle of constitutional law or a constitutional ‘tradition’ may easily end up by being deified, thereby undermining every value underpinning the Convention.”

The point has elsewhere been made – if we must refrain from any manifestation of our religious views, must our public servants become nameless, identified only by initials?  Since the perception of a patient might well be that “Mohammed” isn’t a Christian name, nor David a Hindu one.

Is the decision limited to France, with its constitutional guarantee of secularity?

I think not.  If the ECtHR wants a level playing field (i.e. no manifestation by anyone) then that must apply with equal – or perhaps greater – force in a society where Christianity is an established religion (how else to protect minority rights?)

Europe’s jurisprudence has never been terribly easy to follow.  In this case I suspect the baby has been thrown out with the bathwater.

Paul Scholey - Senior Partner

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MP's briefing about Employment Tribunal fees

Well, I know we’ve banged the drum many times about ET fees but I think a recent briefing for MP's is worth a mention. The report is located at:

http://researchbriefings.files.parliament.uk/documents/SN07081/SN07081.pdf.

In a nutshell, the report confirms that:

• ET claims had been in a long-term decline before ET fees were introduced in July 2013; they rose at the height of recession in 2009/2010 but were declining again three to four years before ET fees were introduced

• Claims dropped by 67-69% after ET fees were introduced

• Fee remission (whereby a person can have the ET fees reduced in full or part, for example because they have a low income) was only applied for in 1/3^rd of ET claims (for issue fees) and of those applications, it was only granted in 39% of applications. This shows that the majority of Claimants have to pay full ET fees of as much as £1,200.00.

This again illustrates the drastic impact of ET fees on access to justice. It also reiterates our previous concern about the need for ET fees in the first place; with falling ET numbers, what rational basis was there for implementation?

David Sorensen - Partner

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The Enterprise and Regulatory Reform Act 2013

The Enterprise and Regulatory Reform Act 2013 introduced a new power for tribunals to order a losing employer to pay a financial penalty of up to £5,000 where the case has "aggravating features".

Against a background of a government doing its best to undermine employment rights across the board, there was much trumpeting from Westminster about how “rogue employers” would get some harsh treatment too.

We were always suspicious that this was too little, too late.  Was it really going to deter employers?  Why was the money going to the state, not the injured party?  Would Tribunals want to take on the role of “fine imposition”?

It turns out our suspicions were not without merit.

On 8 June 2015, Caroline Lucas MP asked how many financial penalties have been imposed.

The Government’s reply: three fines have been imposed to date.

Three.

Thousands of ET cases, and the new power has been used three times.

It gets better.

Only one of the three has been paid.

Paul Scholey - Senior Partner

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A new Government – where to, employment law?

Whilst we await further announcements, our David Sorensen has reviewed the Conservative manifesto and other policy documents to work out the 6 steps most likely to be taken by the new Government in employment law:

1. Scrap the Human Rights Act and replace it with a British Bill of Rights – this will inevitably affect e.g. the way in which Employment Tribunals conduct themselves and the sort of arguments about privacy in email use/social media/misconduct cases in the unfair dismissal context.

2. Restrict strike laws further – bringing in a minimum turnout for industrial action of 40% of the workers entitled to vote within certain sectors (fire, transport, health and education), criminalisation of certain types of picketing, an extension in the length of a union’s required notice of industrial action from 7 to 14 days, a reduction in the ‘life span’ of industrial action ballots so as to require regular fresh ballots to be called, allowing employers to use agency workers to provide cover during a strike etc. All of these steps will inevitably make it even harder for unions to support workers who strike and increase the (already enormous) red tape unions face in these cases.

3. Restrict trade unions in other ways – increasing the regulation of union members’ subscriptions, reducing union representatives’ facility time in the workplace, reforming the Certification Officer’s role etc.

4. Keep ET fees – despite the evident unfairness (e.g. Vince Cable said just before the election “there is enough evidence to suggest that this was a very bad move and should be reversed. It is highly suggestive that the fees are discouraging people - particularly low paid women - from pursuing their rights”) it seems that, subject to any adverse Court of Appeal ruling in the ongoing Unison judicial review, ET fees may now be here to stay.

5. Pull out of the EU? The big question – if so, what happens to all the EU-sourced legislation such as the anti-discrimination laws, Equal Pay, TUPE, Collective redundancy consultation? Does it stay or also have to go?

6. There are some potentially positive measures (assuming they are implemented fairly and appropriately) – the ‘tackling’ of illegal working; the ‘encouragement’ of businesses to pay the ‘Living Wage’; a tax-free minimum wage by increasing a worker’s tax free personal allowance to £12,500; 3 days’ paid volunteers’ leave for employees in businesses with 250 employees or more or those employed throughout the public sector.

The direction of travel is clearly going to be anti-union and anti-industrial action. Access to justice for workers and employees is not going to be a priority. There are bound to be more employment law changes coming as well – will they revive the previous Adrian Beecroft report? That recommended cuts to maternity rights, a reduction in TUPE protection for transferring employees, increases to ET fees (e.g. from the currently high £1,200 to the extreme £3,750) as well as the removal of unfair dismissal protection and replacement with ‘No Fault Dismissal’. Time will tell.

David Sorensen - Partner

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Fashion Victim

I was interested to receive an e-mail from ACAS advising that new guidance had been published on dress codes, tattoos and piercings in the workplace.  It made me reflect on my own attire for our charity dress down days at the end of the month – how much could I really get away with? Flip-flops and shorts in summer? Woolly hat indoors in the winter? Could I now get that tattoo I wanted when I was a teenager? 

So I read the guidance hoping there’d be some clear instructions to help me tailor my wardrobe to suit - but I was disappointed.

There are some key principles employers must adhere to but no detailed rules. It is for the employer to set the standards that will apply. 

ACAS says employers must - 

• avoid unlawful discrimination in relation to any dress code,
• consider health and safety,
• apply the dress codes to men and women equally and
• make reasonable adjustments for disabled people when dress codes are in place.

These are all very sensible suggestions. But I still wasn’t sure what I could and couldn’t wear.

A number of Tribunal cases have given more specific examples. In Smith –v- Safeway Plc (1996) a male employee of Safeway on the deli counter was dismissed because the length of his pony tail fell below his deli hat. This contravened his employer’s rule, which required employees to dress in a smart and conventional way. Mr Smith thought it was unfair and argued sex discrimination but he failed. The Court of Appeal decided that since the dress code was applied equally to persons of both sexes (i.e. both sexes were required to dress in a conventional way) it was not discriminatory.

So employers might be allowed to apply different standards to female and male employees if the dress code enforces a common principle.  However, it isn’t always easy to get the balance right.  In DWP v Thompson the Claimant received a warning for refusing to wear a collar and tie, when female employees were not required to wear them. The Tribunal confirmed the proper approach was whether the level of smartness required by the employer could only be achieved by requiring men to wear a collar and tie. If it could be achieved by other means the inflexibility might amount to sex discrimination.

Azmi –v- Kirklees Metropolitan Council reminds us of the potential for religious discrimination issues to arise. In this case a Muslim woman was not allowed to wear a veil at work when teaching (but was allowed to wear it at other times).  When she refused to comply with the request, the school suspended her and she pursued claims of discrimination on grounds of her religion and belief. Ms Azmi’s claims failed - the rights of employees to manifest their religion at work are subject to their being able to perform the role they are employed to carry out. The employer in this case had evidence of a detrimental impact on teaching and their request was proportionate.  

ACAS emphasises that any restriction on clothing or jewellery that manifests religious faith must be based on a legitimate business or safety requirement. Employees might be allowed to demonstrate their religious faith through their dress by wearing an unobtrusive cross symbol to denote religious faith (clear reference to Eweida –v- British Airways Plc). However, where health and safety is concerned, it might lead to a different outcome (for example in the Chaplin case where a risk of infection and patients grabbing a necklace outweighed the right of this nurse to manifest her religion by wearing a necklace with a cross symbol). Tackling these thorny issues of religious and sex discrimination is not really made any easier by the ACAS guidance.  

Some cases might be straightforward. One can imagine how necklaces or dangly body piercings in some industries (e.g. manufacturing) might not be allowed. Nobody wants to find an earring in their pasta salad and no worker would want to risk the danger of their necklace getting caught in a conveyor belt. Wearing flip flops on a construction site is just silly. What the ACAS guidance does at least achieve is prompting employers to think about it. Employees should know why the employer believes it is dangerous or unhygienic or unprofessional to wear certain jewellery or items of clothing and this can be written in a policy. ACAS even suggests employees get involved in helping the employer create such policies. But once the employer thinks about it, will it be put off by the complications? Once it is in writing, etched like a tattoo permanently in their policy booklet, the employer might lose the element of discretion which can create a more relaxed and pleasant working environment.  

But there is no doubt that an employer’s image is important – and when it comes to tattoos, it’s all about image. Footballers, film stars, music stars – everyone seems to have tattoos. Apparently one in five British people are thought to have tattoos and they’re most popular in 30 to 39 year olds. ACAS guidance suggests employers need a ‘sound business reason’ for asking that tattoos be covered up. Given their popularity and prominence are they really a problem? Do they really give the impression a person is less professional or less competent than the next or does it show artistic flare and creativity? It’s tricky and the guidance from ACAS is brief. Ultimately it is for the employer to decide on its tattoo policy and I expect it would in most cases be difficult for an employee to take action if the same policy is applied to men and women.

Dress codes aren’t easy to get right – they need to be tailored to suit the business. But I think I’ll be happy to leave my shorts and flip flops for the beach, my woolly hat for winter walks and tattoos for the celebs. 

Daniel Kindell - Associate Solicitor

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Should Overtime Be Accounted For In My Holiday Pay?

In anticipation of the Employment Appeal Tribunal’s (“EAT”) imminent decision in the holiday pay cases of Bear Scotland Limited v Fulton & Baxter, Hertel (UK) Limited v Wood & Others and Amec Group v Law & Others, regarding whether voluntary overtime must be taken into account when calculating holiday pay, we thought it appropriate to provide an overview of the legal issues in the case. To assist we will first look at the way holiday pay is currently calculated.

Under the Working Time Regulations 1998 (“The Regulations”) workers are currently entitled to a minimum of 5.6 weeks’ paid holiday each year (inclusive of bank holidays). The first 4 weeks of this are required by the Working Time Directive (“The Directive”). The additional 1.6 weeks are solely provided under the Regulations. The way employers calculate holiday pay varies; however, it is widespread practice not to include voluntary overtime in such calculations. The result is that workers who regularly work voluntary overtime are placed at a disadvantage when taking holiday because they receive less pay than they would if they were not on holiday (and working voluntary overtime). Following recent decisions by the European Court of Justice in Williams and others v British Airways and Lock v British Gas Trading, the question has arisen as to whether such practice is in line with the intentions of current legislation.

In the Bear Scotland v Futon & Baxter appeal, the Tribunal ruled that voluntary overtime must be included in the calculation of holiday pay for the entire 5.6 weeks of holiday provided for under the Regulations. By contrast, in the Hertel (UK) Limited v Wood & Others and Amec Group v Law & Others appeals, the Tribunal ruled that voluntary overtime should be included in holiday pay calculations, but only for the 4 weeks required by the Directive – not the 5.6 weeks provided for under the Regulations.

We would hope that the EAT reject all of the appeals and rule that voluntary overtime must be included in holiday pay calculations. Further, we would hope that the EAT confirm that it should be included for the full 5.6 weeks provided for under the Regulations. In our opinion, any other decision would clearly act as a disincentive to taking holiday for those workers who regularly work voluntary overtime. It is the writer’s opinion that if the EAT confirms that overtime is to be included in holiday pay, it is more likely that it will just be for the 4 weeks required by the directive.

If the EAT confirms that voluntary overtime must be included in the calculation of holiday pay (either for 4 weeks of 5.6 weeks) we would envisage many claims, for unlawful deductions from wages, being commenced in the Employment Tribunals by workers who have not had overtime accounted for in their holiday pay.

If you regularly work overtime (or receive regular pay from your employer that is not part of your ‘basic pay’ e.g. commission, bonuses, shift allowances etc.) and such pay is not accounted for in your holiday pay we would advise you to contact our Employment Right’s Department to seek advice. There are short time limits within which these claims can be commenced so do not delay in contacting us – if you do, you may lose your opportunity. All enquiries should be directed to holiday@morrishsolicitors.com

Tony Ridley

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Judicial Review on Unfair Dismissal Cap Dismissed

On 29 July 2013 the Unfair Dismissal (Variation of the Limit of Compensatory Award) Order 2014 came into effect. 

The upshot of this Order is that the compensatory award in unfair dismissal proceedings will now be limited to 1 year’s gross salary (or to the statutory cap on compensation, £76,574 (as of 6^th April 2014), whichever is the lesser amount). 

At the end of 2012 the London-based employment law firm Compromise Agreements lodged a Judicial Review Application for this Order to be reconsidered.

The founder of the firm, Mr Alex Monaco of Counsel, asserted that the new cap on compensation would disproportionately affect older people as they were, previously, most likely to receive more than a year’s salary in compensation due to increased difficulty in finding another job and thereby mitigating their loss.    

However, on Tuesday 13^th May 2014, the High Court dismissed the Judicial Review Application at a Permission Hearing.

In a recent statement Mr Monaco stated that he is currently “looking at options and looking at appealing [the decision]”. 

As a firm, we are of the collective opinion that the new cap is yet a further example of the current government’s deliberate erosion of fundamental employment rights.

In other news the Trade Union, Unison, is also currently challenging a High Court ruling (made back in February 2014) which rejected a request for a Judicial Review of the Government’s decision to introduce Tribunal fees, (fees which also came into effect on 29 July 2013.)

Recent statistics show that, since the introduction of Tribunal fees, the number of employment law claims has dropped sharply, with a 79% fall in the final quarter of last year compared with the same period in 2012. 

A recent written answer in the House of Commons has also revealed that only 24% of remission applications (i.e. applications for reduced fees) made between the introduction of Tribunal fees on 29th July and 31st December 2012 were granted (in full or in part). To place this in context, these figures evidence that remission has been granted in only 5.5% of the 9,305 single claims and 1,519 multiple claims that were issued in the same period. This is significantly lower than the Ministry of Justice’s initial prediction, prior to the onset of fees, when they stated that around 69% of Claimants would qualify for remission, either in full or in part.

Chris Ridley - Solicitor

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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.