HMO QUARTERLY EMPLOYMENT BULLETIN

May 2007

NEW LAW

With effect from April 2007
The Government has indicated an intention to bring new legislation into effect at set times of the year, April and October.

Statutory Pay and Allowances increased

On the 1 April 2007 the basic rate of statutory maternity pay, maternity allowance, statutory adoption pay and statutory maternity pay increased from £108.85 to £112.75 per week.

Further rights for parents

The Work and Families Act 2006 gives employees on maternity or adoption leave where the expected week of childbirth or placement for adoption falls after the 1 April 2007 new rights.

Statutory maternity or adoption pay will now last for 39 rather than 26 weeks and employees are entitled to do up to 10 days work during leave without prejudicing their entitlement to statutory leave or pay. Also now employees who qualify for ordinary maternity leave are automatically entitled to additional maternity leave.
Employees now have to give 8 instead of 4 weeks notice of an intention to return to work before the end of their maternity leave period.

Flexible working for carers

The right to request flexible working has been enlarged. Previously limited to parents with children under 6 years (or under 18 if disabled) now under the Flexible Working (Eligibility, Complaints and Remedies) (Amendment) Regulations 2006 the rights are extended to those who care for adults. The person cared for must be a spouse, civil partner, or relative who lives at the same address as the carer.

RECENT CASE REVIEW

Can a controlling shareholder be an employee?

In the case of Gladwell v Secretary of State for Trade & Industry the Employment Appeal Tribunal (EAT) found that although a majority shareholder would generally not be an employee it is a question of fact
in each case and the fact that the majority shareholder has actual control of the organisation does not preclude him or her from being an employee.

What precisely is the employer’s obligation so far as trust and confidence is concerned?
This is a case for those who enjoy semantics. In Baldwin v Brighton & Hove Council the EAT effectively amended the obligation of an employer so far as his duty of mutual trust and confidence is concerned. The employer must not engage in conduct “calculated or likely to destroy or seriously damage the relationship of trust and confidence”. Previous cases which have suggested that the employer was required to refrain from conduct “calculated and likely to destroy or seriously damage the relationship” were wrong to imply a two stage test. In other words the duty is now easier to establish against an employer.

Can an employer be penalised just for failing to provide a written statement of particulars of employment?
In Scott-Davies v Redgate Medical Services the EAT found that a failure to provide written details to the main terms and conditions of employment to all employees whose employment lasted for at least one month did not on its own give rise to a remedy. For an employee in these circumstances to have a remedy the claim had to be attached to another substantive claim such as a claim for unfair dismissal.

Staff Handbook : Are terms contractual or not?

In Keely v Fosroc International Limited the Court of Appeal (CA) took the view that the use of the word “entitled” with regard to enhanced redundancy payments in a Staff Handbook  indicated that the term should properly be regarded as conferring a right, that is had contractual effect.

Directors Fiduciary Duties

In Foster Bryant Surveying Limited v Bryant & Others the CA had to decide the extent of a director’s duty of faith in the following circumstances. The general principle has been known to be that a former director may not pursue a business opportunity previously pursued by his former company where the reason or part of the reason for resigning was to take advantage of that business opportunity or where the business opportunity arose because of his role as a director. The CA has said now that this duty may not apply where the former director does not produce to the business opportunity. So in this case the director had to resign from the company. The director having resigned the main client of the company contacted him and invited him to work for them as a consultant. This had the effect of reducing the business opportunities for the company. The Court held that since the initiative had come from the main client of the company and not from the former director himself the director was not in breach of his duty of faith to the company.

Restraints and restrictive covenants : an example of an intention to compete.

In Shepherd Investments Limited and Another v Walters and Others the High Court (HC) dealt with an employee’s duty to serve his employer with good faith. If an employee sets up a business in direct competition with his employer whilst he is employed that will usually be regarded as a breach unless any preparations towards the new business were preliminary only. In this case employees created business plans, financial predictions, cash flows, contacted lawyers and began marketing to customers of their existing employers not surprisingly they were held to have been taking more than preliminary action and were in breach of their duties of fidelity towards their employer.

Discretionary Bonuses

In Commerz Bank AG v Keen the CA made it clear that although an employer was under a duty when implementing a discretionary bonus to act rationally and in good faith it would take overwhelming evidence to persuade a Court that an employer who had a wide contractual  discretion had acted irrationally. The Court said that it had to decide upon the legal parameters with regards to discretion and not stand in the shoes of the employer in reviewing the precise amount.

A male manager in the female toilets!

If you are an employer you may think that this case emphasizes that if you are going to be nasty you must make sure that you are nasty to both male and female employees. The EAT in Kettle Produce Limited v Ward heard that a male manager who believed that a woman employee was taking an authorised break entered the female toilets to shout at her. The EAT found, however, that a female manager of the employer would have acted similarly towards a male in the male toilets and therefore there was no discrimination.

Statutory Dispute Resolution Procedures

There continues to be a flow of cases around the disciplinary and grievance procedures. In Scott-Davies v Redgate Medical Services the EAT was asked to find that there was not qualifying service period for bringing a claim for an order requiring proper procedures to be followed where the employer had failed to follow the statutory procedure notwithstanding that the employee had only six months service. His line of argument was that failure to follow the statutory procedure makes a dismissal automatically unfair – and therefore the qualifying period was overridden. The EAT dismissed this argument, however, stating in effect that there was no stand alone right to enforce the statutory procedures if the employee had no substantive claim to bring for example a claim for unfair dismissal. The twelve month qualifying period was fundamental and so the employee could not bring a claim for unfair dismissal.

What is in the pipeline?

Look out for even more extensions to the rights to request flexible working, but more imminent is the extension of annual leave. Consultations have now closed and with effect from the 1 October 2007 statutory annual leave is likely to increase from 20 to 24 days and to 28 days from the 1 October 2008. The regulations are also likely to enable workers to carry forward four days (from the 1 October 2007) and subsequently 8 days (from the 1 October 2008) of untaken statutory entitlement from one year to the next.

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.