HMO QUARTERLY EMPLOYMENT BULLETIN
February 2007

New Companies Act

With effect from April 2007 certain provisions of the Companies Act 2006 will be brought into effect. The whole of the new Act will come into force by October 2008. The provisions cover pretty rarefied stuff but if you are a director you need to be aware that the Act:

• Reduces the period of long term service agreements requiring shareholder approval to 2 years or over.
• Repeals the prohibition of fixing a director’s remuneration with reference to income tax (effective from April 2007).
• Widens the types of termination payment which can be made with shareholder approval, notably including compensation for loss of employment in a management capacity.

Codifies a director’s main common law duties requiring a director to :

• Act within his powers
• Promote the success of the company
• Exercise independent judgment
• Exercise reasonable care skill and diligence
• Avoid conflicts of interest
• Not accept benefits from third parties
• Declare their interests
• Tax Liability: PAYE/self-employment

The Special Tax Commissioners have backed the draconian powers of the Revenue and Customs where an employer and an employee have been paying the wrong amount of tax and national insurance because they both falsely believe that the employee was self-employed. The Special Commissioner has found that the employer can be required to pay the full amount of back tax and national insurance owing. That is perhaps not surprising but the Commissioner went on to find that the Revenue and Customs are not obliged to offset any payments that the employee made under the self-employed regime during this period!

Disability Discrimination and Sick Pay

In the case of O’Hanlon the Employment Appeal Tribunal has come up with a decision which many employers will welcome in the sensitive field of the inter-relationship between the payment of contractual sick pay and disability discrimination.

Where an employee has been on long term sickness absence as a result of illness related to a disability, employers have been wary of exercising sickness provisions in such a way as to invite disability discrimination claims.

Here it was found that although a sick pay policy which failed to provide for full pay for a disability related absence might be construed as indirectly discriminatory against disabled employees it could still be justified. So the employer was not required to keep an absent employee on full pay even for periods of absence that were connected with the employee’s disability. In making the decision the Employment Appeal Tribunal suggested that to order otherwise would act as a disincentive for a disabled employee to return to work.

We would not put money on this principle being written in stone, however.

Flexible working

The elegantly named New Flexible Working (Eligibility, Complaints and Remedies) (Amendment) Regulations come into effect on 6 April 2007. Now carers for adults can request flexible working subject to meeting qualifying criteria. Similar rights are extended to parents and people who care for children, again subject to qualifying criteria.

Smoke free work places

The Health Act 2006 will ensure that with effect from the 1 July 2007 smoking will be restricted in public places and work places in England (a different and earlier date is likely to apply in Wales).

The legislation regulates smoking in enclosed work places, enclosed public places, in restaurants, cafes, pubs and clubs, on business vehicles and public transport. Therefore work places will need to be smoke free. Not only will a person commit an offence if he smokes in a smoke free place but it will also be an offence for an employer to fail to prevent smoking in a smoke free place. Prepare for some short fuses after the 1 July 2007!

Statutory Compensation Rate Changes

With effect from the 1 February 2007 a week’s pay (for example when calculating a statutory redundancy payment) increases to £310.00.

The unfair dismissal compensatory award increases to a maximum of £60,600.00.

Statutory Redundancy Pay increases to a maximum of £9,300.00.

Guaranteed payment for a day’s work increases to £19.60 (maximum payment is now £98.00 ie 5 days in any three months).

Hand Morgan & Owen – Employment

Nigel Pepper, Partner    Patrick Nelson, Solicitor
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Telephone: 01785 211411   

This article is for the purpose of general awareness only and the law may have changed since it was originally published.  It does not constitute legal or professional advice and readers should not act on the basis of the information included.  Readers should take appropriate advice upon their own particular circumstances.