HMO Quarterly Employment Bulletin – September 2010

Minimum Wage

The new Government has confirmed that the new national minimum wage rates, which come into force on 1 October 2010, will be:-

•    £5.93 per hour for workers aged 21 and over;
•    £4.92 per hour for 18 to 20 year olds and;
•    £3.64 per hour for 16 to 17 year olds.

There is a minimum for apprentices of £2.50 per hour.  This applies to apprentices below the age of 19 or those 19 and over but in the first year of their apprenticeship.


Employed or Self Employed?

HMRC continue to probe those who declare themselves to be self employed but whom the Revenue believe are for all intents and purposes employed.  The Tax Commissioners, the recently established First-tier Tribunal and the Courts continue to refine the matters to be considered when making this distinction. Every case is considered on its own facts but, the case of Weight Watchers (UK) Limited and others v. HMRC has led to great interest on the part of those who wish to be regarded as self employed but, fear being regarded as employed for the purpose of a payment of tax.  The importance from the employer’s point of view, of course, is that it needs to know whether it has a duty to operate the PAYE system.  Further, although not definitive, if an employer operates the PAYE system, he invites the argument that this is a recognition that he is dealing with an employee rather than a self employed independent contractor with all the implications of that if it comes to termination.

In the Weight Watchers case there was a detailed examination of past law.  Briefly, however, for tax purposes at least a contract of employment is likely to be found to exist if three conditions are fulfilled:-

•    Personal service in exchange for pay;
•    A sufficient degree of control to make one party the employer and the controlled party the employee;
•    The other terms of the contract being consistent with an employer/employee arrangement.

As an employer you do not want to be faced with a back claim for failure to have deducted tax.  Has the time come to inform that “self employed” member of your staff that he/she is to go onto the PAYE payroll?  On a number of occasions we have been asked to assist in this delicate process.  

Who is a worker

Most would regard a worker as being an employee.  As a matter of law, however, that is not necessarily the case.  Why does it matter?  Because the Working Time Regulations (and a number of others) refer to workers rather than employees.  As an employer you therefore have to think beyond purely whom you would regard as an employee and consider whether you have responsibilities in law towards others who fall into the definition of a worker.  In the case of Parkes v. Yorkshire Window Company Limited, the Employment Appeal Tribunal laid down detailed criteria to assist in assessing who was a worker, the last of which was that a worker was one who “held an intermediate position between an employee and someone who carried on his own business undertaking”.  That is clear then isn’t it!

The practical point, however, is do not assume that worker is synonymous with employee, particularly in the field of working time, holidays etc.  Seeking advice could help prevent you facing a claim to the Employment Tribunal.


Benefits in kind:  Pool cars

Where an employer provides a car for an employee this will generally constitute a taxable employment benefit.  There can be an exemption if the employee has access to a pool car.  We say can because the pool car exemption applies if the car is not available for private use.  The car will be regarded as available for private use if it is normally kept overnight at any residential premises where any of the employees in the pool resides, unless the premises are occupied by the employer.

In the case of Yum Yum Limited v. HMRC of July of this year the Revenue argued successfully that the fact that the residential premises were provided for a Director of the Company by the Company did not amount to occupation by the company as to enable the pool car exemption to apply.  The Company, the First-tier Tribunal said, had failed to show that it, rather than its Director (who used the car) had possession or control of the Director’s house (where the car was parked) or any power to exclude persons from it.  Therefore the pool car exemption did not apply.


Part payment of salary in vouchers:  The VAT implications.

In July of this year the European Court of Justice decided a dispute between two heavy weights, HMRC and Astra Zeneca UK Limited.  Astra Zeneca paid part of their salary to employees in vouchers.  Astra Zeneca had not treated these vouchers as a supply for consideration for VAT purposes.  The finding, however, was that they should have done.  Therefore, the position now is that when such schemes are operated the employer will get credit for the input tax incurred when buying the vouchers, but they will also have to account for VAT on the supply of those vouchers to their employees.  Astra Zeneca, therefore, will no longer achieve the gain of a net VAT repayment by adopting the voucher scheme.  We suspect that there will be a sudden loss of popularity of such voucher schemes amongst large employers!


Equal pay:  Treatment of unsocial hours payments

There had been previous cases which had led to some confusion as to how pay should be compared when considering an equal pay claim.  A general rule had been established that equal pay claims required a term by term comparison but then a subsequent case decided that a more general view should be taken by lumping together various elements of pay and looking at an overall comparison.  The most recent case in the Employment Appeal Tribunal has decided that when looking at unsocial hours payments the correct approach was to focus just on the terms of weekend and night work supplements paid to the female claimants, with the more generous supplements paid to the males with whom they sought to compare terms.

As the Equality Act comes into force (see later) you might think that this is an appropriate time to conduct an audit with a view to warding off potential claims.


Equal pay:  The friction with TUPE

If you have acquired another business and have transferred a group of employees into your business, you will come across TUPE –the regulations which seek to protect the transferring workers.  A standard scenario which arises, is that those workers are better paid than your existing workers.  You take advice as to whether you can harmonise pay by bringing the transferring workers inline with yours and your lawyer tells you that harmonisation based upon the transfer alone is illegal.  We should add that there may be circumstances which entitle you to impose harmonisation but, equally (if you will excuse the pun) there may not.

You therefore grit your teeth and continue to honour the terms of the incoming employees hoping that the result is not a claim by your existing employees under the equal pay legislation.  If you do face such a claim, your adviser tells you that there is a “genuine material factor defence” and that with a fair wind the prohibition on harmonisation under TUPE would amount to a genuine material factor.  That would be good advice – to a point.  The additional advice should have been that the prohibition on harmonisation would only last for so long.  The longest period that had been sanctioned by the Courts so far was 2 years.  

In a recent case, an employer tried to use the genuine material factor defence 6 years after the transfer.  The Employment Tribunal found that the pay disparity could not be justified by relying upon the TUPE regulations.  The reason for the disparity in pay was no longer the TUPE transfer.  Too long had passed for that to be the case.


‘You have been on sick leave and you want extra money for holiday accrued?’

An Employment Tribunal recently refused a claim by an employee for a payment in lieu of holiday accrued during sick leave on two bases.  The first was on a technicality, namely that he was too late to claim an unlawful deduction of wages (which is how he put his case).  The second, however, was that whilst on long term sick leave he had not requested holiday, had therefore not been denied it, and therefore had not accrued holiday.  This is an interesting decision which unfortunately does not create a precedent.  It is of guidance but not necessarily definitive.  Treat this with caution.


Redundancy during maternity leave

If you are in the unhappy situation that you have to consider redundancies amongst your workforce, always bear in mind that any of your staff who are on maternity leave have generally enhanced rights to be considered for any suitable alternative vacancies.  An employee on maternity leave complained to the Tribunal (and took her case to the Employment Appeal Tribunal) that her employer was obliged to offer to relocate her from London (where the redundancies were to take effect) to Cheltenham.  The EAT disagreed.  Referring to the Maternity and Parental Leave etc. Regulations 1999, it found that whilst looked at in isolation the work available at Cheltenham was suitable and appropriate, the location was much less favourable to her. The employer had been entitled to take the view that this did not amount to a suitable alternative vacancy under the legislation.  Always, however, take advice when an employee in the selection pool is on maternity leave.


Unfavourable references:  The risk for employers

Most employers are now wary of giving anything other than a factual reference for fear of being sued by a disillusioned employer who relies upon a glowing reference, only to find that the employee does not live up to that reference.  In a recent case, however, the position was somewhat different.  Here an employee at a Care Home was dismissed and subsequently sought new employment.  The prospective employer asked for a reference from the former employer.  The former employer gave a damming reference centring around allegations that she was rough with the residents.

The employer made a claim to the Employment Tribunal for Unfair Dismissal.  She was found to have been automatically unfairly dismissed upon the basis of procedural unfairness.  She went on to say that in assessing her compensation she should receive compensation for being stigmatised in the care industry.

She got compensation for the unfair dismissal, with an uplift for a failure to follow the statutory procedures (now defunct, of course).  The Employment Appeal Tribunal decided, however, that to have any hope of obtaining compensation for stigma, the stigma would need to have arisen from the dismissal.  The stigma did not arise from the dismissal but from the reference.  The Tribunal found that whether the employer dismissed fairly or unfairly, it would have given a damming reference in any event.  The stigma therefore arose from the reference and no stigma damages would be awarded.


The Equality Act 2010

This Act comes into force on 1 October 2010 and replaces all existing discrimination laws including the Disability Discrimination Act 1995.  Under the Act employers are not allowed to discriminate on grounds of individuals’ physical or mental disabilities.  The Act also requires employers to make reasonable adjustments to help those suffering from disabilities (which reflects the current position).  One quirk (which we are obliged to Daniel Barnett, Employment Barrister, for bringing to our attention) is that the Government has felt it necessary to bring before Parliament regulations which will specifically state that the tendency to steal, or set fires, exhibitionism and voyeurism are excluded from the definition of “disability”!  Daniel Barnett comments “This law makes it clear that employers are not required to make special adjustments to welcome voyeurs or exhibitionists into the workplace.  Nor are employers required to make allowances for any mental disability if an employer wants to dismiss someone who turns out to be a voyeur or a flasher.  Similarly, individuals with heavy tattoos and body piercings are excluded from the protection of the Equalities Act 2010”.

He goes on to comment that a “disability” is a physical or mental impairment which:-

•    lasts for more than 12 months: and
•    has a substantial impact on an individual’s abilities to carry out normal day to day activities.  However for this purpose “substantial” simply means “more than trivial”.

 
Employment claims increase

The Employment Tribunals have published statistics for 2009/2010.  These show an increase of 50% by comparison with the previous year. Claims are at their highest levels yet.  

Hand Morgan & Owen can provide you with an Employment Protection Scheme which assists you in preventing claims and deals with claims made including covering the costs of awards made by the Tribunal against your business.  Click on the following link for details of this Scheme.

If you would like to read other articles, fact sheets and bulletins on Employment Law go to http://www.hmo.co.uk/content/view/87/93/

For advice and assistance in respect of Employment matters contact Nigel Pepper, Consultant or Patrick Nelson, Associate on 01785 211411.

09 September 2010

Disclaimer
The contents of this article are for the purposes of general awareness only.  They do not purport to constitute legal or professional advice.  The law may have changed since this article was published.  Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.