Archive for the 'Contracts of Employment' Category

Sir Fred’s pension - protected by Human Rights?

Published
by
Usefully Employed
on March 2, 2009
in Contracts of Employment and Rambling
. 14 Comments

Most lawyers felt unease as they watched Harriet Harman tell Andrew Marr that:

Sir Fred should not be counting on being £650,000 a year better off as a result of this because it’s not going to happen. The Prime Minister has said it’s not acceptable and therefore it will not be accepted. It might be enforceable in a court of law, this contract, but it’s not enforceable in the court of public opinion and that’s where the government steps in.

A video of the interview can be found here.

So what if the contract is legally binding? What if the parliament has to specially legislate to recover the money? At present the government cannot simply seize your money (or anything else) just because they want to. Lawful authority is needed. This isn’t merely an effect of new human rights legislation, it’s a fundamental part of English law. In the first-year law student case of Entick v Carrington (1765) 19 Howell’s State Trials 1030, it was said:

The great end, for which men entered into society, was to secure their property. That right is preserved sacred and incommunicable in all instances, where it has not been taken away or abridged by some public law for the good of the whole. The cases where this right of property is set aside by private law, are various. Distresses, executions, forfeitures, taxes etc are all of this description; wherein every man by common consent gives up that right, for the sake of justice and the general good.

This is one of the cornerstones of the British constitution - the executive can only do what the legislature has given it lawful authority to do. So Harriet Harman taking away Sir Fred Goodwin’s pension entitlement would be the modern equivalent of Lord Halifax, himself a Secretary of State, signing an unlawful warrant to seize Entick’s seditious newspaper articles.

So will they legislate? If parliament did pass such an Act, English law falls away as parliament is supreme. This is where European human rights would surely come into play. Article 1 to the First Protocol to the European Convention on Human Rights:

Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.

So any Act will need to be in ‘the public interest.’ Does anyone seriously expect that the European Courts will find that it is in the public interest to retrospectively void a lawful contract to recover an economically insignificant sum of money because it doesn’t seem particularly fair that he should receive it and the public are a bit cross? 

This was an exceptionally foolish time for the government to suddenly stick its heels in, because unless Sir Fred throws in the towel the government will lose, however much it sticks in the throat. And by the time the government do lose, it’ll have had all the factual (and probably embarassing) evidence heard in court, risked adverse findings of fact over Lord Myners’ role, been to Europe, had years’ worth of newspaper headlines against it, and spent many many times Sir Fred’s pension entitlement into the bargain.

The employment law lesson here is that the government committed a basic mistake - negotiate someone’s severance all at once, because afterwards is too late…

Finally, it’s worth quoting Sir Fred’s letter in full, because no-one else seems to be doing so and it gives him more dignity that you’d imagine, whatever you might think of him.

Dear Lord Myners,
You telephoned me yesterday and asked me to consider voluntarily taking a material reduction in my pension entitlement as a “gesture” to acknowledge the level of Government support being made to Royal Bank of Scotland (RBS).
You highlighted that the absence of such a gesture would give rise to significant adverse media comment.
I outlined to you my view of the matter, but as I had not been expecting your call and as you expressly requested me to do so, I undertook to reflect on the matter again.
You emphasised that I would need to provide you with an answer ahead of the publication of the Group’s annual report and financial statements sometime next week.
It came therefore as something of a surprise to find that both details of forthcoming 2008 financial statement disclosures relating to my pension and the substance of our telephone conversation had been placed in the public domain a few hours after we spoke.
In the circumstances, I feel that an earlier response to your request is necessary, and the purpose of this letter is to provide that.
Whilst my pension is the current focus of attention, there were a number of other aspects of my departure from RBS which need to be considered at the same time, particularly in the context of “gestures” and appropriate behaviour.
My contract of employment provided for a 12 month notice period, which I voluntarily waived in October of last year.
This amounted to a loss of 1 years’ (sic) salary, and I discussed this with you at the time, when you indicated that it was both an appropriate and sufficient recognition of the circumstances.
Subsequent to this, you approached the chairman of the group remuneration committee to suggest that I should waive certain share related awards which would otherwise have vested upon my leaving the group.
Whilst difficult to value with precision, these had a value equivalent to about 3 months’ salary at that time.
During these discussions, I am told that the topic of my pension was specifically raised with you by both the chairman of the group remuneration committee, and the group chairman, and you indicated that you were aware of my entitlement, and that no further “gestures” would be required.
On this basis, I agreed to waive my entitlement to the share related awards and proceeded to subscribe for my full allocation of shares in the ensuing share issue.
Like you, I believed that these gestures were appropriate in the circumstances, and sufficient, and revisiting the position today, I believe that they remain so.
I accept responsibility for that which I was responsible for, and recognise that my actions must be consistent with this.
I believe that they have been, and to voluntarily accept a reduction in a pension entitlement which has been built up over many years and in other employments in addition to RBS, is not warranted.
It is important to recognise that my pension arrangements have not fundamentally altered since I joined the group in 1998.
Whilst the quantum of the “pension pot” figure has increased, this is principally as a result of the assumption used last year about retiring at age 60 no longer being appropriate. The amount which I am due to receive as a pension continues to be calculated in a manner consistent with prior years.
Whilst I suspect that you will not now agree with it, I hope you can understand my rationale for declining your request to voluntarily reduce my pension entitlement.
In conclusion, since our private conversation yesterday is now in the public domain, I have no objection to the complete content of this letter being made public.
Yours sincerely,
Sir Fred Goodwin

Discretionary bonuses for bankers could still be payable

Published
by
Usefully Employed
on February 21, 2009
in Contracts of Employment
. 1 Comment

There has been much outcry over whether or not bank employees will receive their bonuses this year, especially those at bailed-out Royal Bank of Scotland and Lloyds TSB. The government claims it is intending to halt almost all “discretionary bonuses” but must still pay bonuses to those who have a cast-iron contractual claim to them. The news coverage seems to have thus polarised between discretionary bonus and contractual bonus.

The legal situation is much more complicated. A discretionary bonus is not subject to absolute and unfettered discretion. A line of cases ended at the Court of Appeal in Cantor Fitzgerald International v Horkulak [2004] EWCA Civ 1287, (recently applied in Small & Ors v The Boots Co Plc & Anor [2009] UKEAT, interestingly in relation to obligations on TUPE transferees), where it was held that:

“it is presumed to be the reasonable expectation and therefore the common intention of the parties that there should be a genuine and rational, as opposed to an empty or irrational, exercise of discretion.”

Potter LJ seemed to place particular emphasis on the bonus in that case being part of the overall remunerative structure - just like many of the bank employees.

Clearly in many cases the bank will be able to lawfully assess a discretionary bonus at nil pounds, especially where the employee concerned played some part in the downfall of the bank. But what about an employee who worked very hard and very successfully, in an area of the bank that wasn’t tainted by the surrounding collapse? Perhaps the wording or context of the discretionary bonus might even refer to individual performance. This class of employee is far from inconceivable, and might well have a good claim to receive a bonus as usual this year.

Lying on your CV

Published
by
Usefully Employed
on February 5, 2009
in Contracts of Employment and Recruitment
. 7 Comments

The One Show had a feature today on CV falsehoods - reckoning that as vacancies disappear applicants will become more willing to embellish their accomplishments. You can watch it for the next 7 days on BBC iPlayer here, and that feature is at the very start of the programme.

Lying on CVs can be costly, a material falsehood on a CV could well be a fair reason for subsequent dismissal, even if discovered a long time afterwards. What’s more a serious lie earning you a job you would not have otherwise obtained might well be a criminal offence under s.2 of the Fraud Act 2006 -which replaced the traditional offence under the Theft Act of obtaining a pecuniary advantage by deception.

Even more dramatically, you might be sued in a civil court for the money lost by your employer. At the moment Cheltenham Borough Council is treading new territory by bringing a £1 million claim against its former chief executive for alleged fraudulent or negligent misrepresentation. The local authority alleges that during its recruitment procedure Ms Laird answered questions on her medical history incorrectly, concealing her previous bouts of depression which ultimately led to an ill-health retirement payment of around £450,000. The case is currently being tried in the High Court - more news when it comes in, but I’m playing in my mind whether there are DDA issues here.

Link to Times article

Working time opt-out at death’s door once more

Published
by
Usefully Employed
on January 5, 2009
in Contracts of Employment, Rambling and Working Time Regulations
. 2 Comments

Personnel Today reports on the alarm expressed by businesses on the European Parliament’s vote to end the maximum working week opt-out. The statistics quoted are telling enough as to how its end would effect the UK workforce - around 1 in 10 employees work more than the 48 hour working week, but for more than 9 in 10 employers.

By way of reminder, a maximum working week of 48 hours applies to European workers, unless they opt-out in writing. Employees cannot be compelled to opt-out, or treated less favourably if they do not. Britain has fiercely defended its citizens’ right to opt-out, a right chosen by very few other countries.

The idea of a maximum working week is anathema to many British workers, even those who would never approach the number of hours. Although other Europeans have long used it as a method of increasing employment levels, here it is seen by many as a socialist policy and even, gulp, a bit French. Simply on a tabloid-sniggering level, the British are no fans of French working practices.

The worse thing is that the perception of a Europe exceeding its remit in a way that dictates against contractual freedom will add fuel to the fire of Euro-scepticism already so rampant in the UK. The rapporteur appointed by the Parliament to report on the measure said that the vote was an opportunity to reconnect with citizens. Indeed: and on these shores it will have the opposite result. This is a great shame, as much of the good work and benefit done by the European institutions goes unnoticed and uncelebrated. Votes such as this, especially given the absolute failure by the EU to recognise that the rejection of the EU constitution was a statement on its failure to engage with its electorate, demonstrate the arrogant blindness of European legislators. Stephen Hughes, social policy spokesman of the European Parliament Socialist Group, speaks volumes as he talks of “our European nations making a great civilization”, “British citizens [being] allowed to enjoy the civilised standards of their fellow Europeans”, compared to “Korean conditions in our factories.” He imposes a social agenda imported from other countries onto a vocally unwilling public who would hold no truck with him at home. He is also disingenuous enough to say all this, then represent the move as health & safety legislation, despite a raft of existing laws which already prevent employers working their employees until they’re so tired injury results.

Freedom of contract is central to the common law system and British working sensibilities. There may be one or two more US readers of this post than usual (thanks to Charon and Blawg Review), and this level of state intervention would (I’m guessing, and would love to be told) be absolutely unacceptable there. To them, and to many British workers, this is the European Union at its worst, and could well be looked at in many years’ time as a first development in a move away from Europe for Britain. The huge promise for peace and prosperity presented by the European institutions could be thrown away on the back of social engineering by policitians who don’t even begin to recognise how utterly disengaged they are from their electorate.

I’m not a Euro-sceptic, and don’t usually use this blog as a soapbox, but some years ago I was talking to an MEP’s agent at a barbecue and asked him what it was an MEP actually does, day-to-day. He responded by taking offence, and the incident has rankled with me ever since. Europe is a Very Good Thing, but won’t last much longer over here if it doesn’t get very smart, very fast, to how it is perceived.

Sorry everyone for the rant, the blog will be back to dry and fusty law reporting soon.

Agency workers gain employment rights

Published
by
Usefully Employed
on November 25, 2008
in Contracts of Employment
. 1 Comment

Agency workers in the UK currently have few rights, as they are not employees under employment legislation. The chief remedy from which this bars them is that of unfair dismissal - there have been some well known cases involving workers having no rights on losing a job they’ve performed for some years in a manner more or less identical to an employee. The most well known of these was perhaps Mrs Dacas; the poor woman worked for four years cleaning for Wandsworth Council, through Brook Street Bureau agency, and got absolutely nothing when she was sent packing for querying her holiday pay and an isolated incident of rudeness. No investigation, no dismissal process, no pay-off, just a withdrawal of work. It was the judgment in that case that set the cat amongst the pigeons.

Employers’ groups see the short-termist hire-and-fire nature of agency work as vital to many businesses’ flexibility and operation, whereas other groups are concerned over reports of widespread exploitation. Several attempts have been made to imply employment relationships into the traditional tripartite agency/employer/worker relationship, but they have failed. The Court of Appeal case of James leads the way, and has been applied robustly since.

Legislation is now moving to fill the gap, but only after a huge amount of negotiation at a domestic and European level. The government reached an agreement in May with the TUC and CBI that agency workers would gain equivalent rights to employees, but only after 12 weeks’ service. The problem was that rights for agency workers was an approaching storm in Europe as well, and the government managed to broker a deal where it said yes to the Agency Workers Directive, subject to the 12 week qualification, and (separately) the retention of the right of UK workers to opt out from the 48 hour working week. This latter exception for the UK - most of Europe having 48 hours as an unalterable maximum - is of great political sensitivity. The notion of a maximum working week is anathema to British employers, and I would say anecdotally many of its employees too. It just seems a bit, well, French. 

The agency worker directive presently exists only as European Law - the full copy is available here, and must be implemented by UK legislation. There is currently no word as to when this will happen.

Sick pay and benefits shake-up

Published
by
Usefully Employed
on October 26, 2008
in Absence and Contracts of Employment
. 0 Comments

From tomorrow - Monday 27th October - agency workers and those on fixed term contracts of less than three months will gain entitlement to statutory sick pay, something with which they’d previously had to live without.

Also, income support and incapacity benefit are merged and renamed Employment and Support Allowance. More details on those at the DWP here (including yet another extension of the term ‘customers’), and the full regulations concerning the SSP extension here.

On-call time - Minimum Wage & Working Time Regulations

Published
by
Usefully Employed
on October 5, 2008
in Contracts of Employment, National Minimum Wage and Working Time Regulations
. 0 Comments

This blog is getting a little minimum wage-centric at the moment, but there’s a recent EAT case that re-emphasises what must, by now, be well settled law. Mrs Hughes worked in a care home, which provided her with a flat on-site. In return for a £150 per month rent subsidy, she was required to be on call for any emergencies that occurred, apart from when she was on annual leave. Furthermore, the provision and occupation of the flat were terms of the employment contract.

This type of arrangement is common, and furthermore is very useful. Many care homes are too small to employ sufficient waking night staff to deal with all situations that might arise. Mrs Hughes was called out around twice each month. Relations must have soured however, as she raised a grievance. Her employer’s response was to pay her for the time she was working during the call outs. However, whether due to this grievance or a further deterioration in the relations, they served notice to quit from the flat. This was constructive dismissal, so closely were the flat occupation and employment relationship tied.

She also brought actions claiming that she should be entitled to National Minimum Wage for the on call periods (9pm to 8am), and breach of her Working Time Regulations entitlements to rest breaks every six hours, and daily rest breaks. She won on most points: it has been established since the ECJ cases of SIMAP and Jaeger (all about junior doctors) that if you’re required to be on the premises then it’s working time, even if you’re asleep. The NMW is only payable when you’re awake. For a similar decision with a hotel caretaker required to stay in the hotel on some nights, see this case.

The present case of Hughes v Jones & Anor [2008] UKEAT can be found here, and the law is certainly correctly interpreted, but it’s a shame that employing live-in on call staff is effectively rendered impossible by the WTR.

Director / shareholder status claims stayed

Published
by
Usefully Employed
on September 19, 2008
in Contracts of Employment and Status
. 0 Comments

All Employment Tribunal claims depending on the status of majority shareholders / directors are being stayed until the Court of Appeal gives its judgment in Secretary of State for BERR v Neufeld. My prediction is that the court will uphold the notion that these people can be treated as employees where the contractual relationship is explicit, consistent with the parties’ situation, and not a sham. But we’ll wait and see!

A link to the Practice Direction is here (pdf).

Imposing annual leave during a notice period

Published
by
Usefully Employed
on September 14, 2008
in Contracts of Employment, Garden Leave and Working Time Regulations
. 0 Comments

Employers frequently do not wish an employee to stay at work during his notice period. Although everyone would accept that there is an obligation to pay notice even if the employee is sat at home, it can irk employers that they have to pay for the notice period, and then pay accrued holiday on top. Contracts of employment thus frequently contain a term that the employer can direct that accrued annual leave is to be taken during notice periods. 

This type of provision is perfectly lawful: the only statutory restriction on when an employer can require an employee to take his holiday is found at reg 15 of the Working Time Regulations 1998, which provides thatthe  notice to take holiday must be at least twice as long as the period of leave in question. These provisions can be excluded by agreement however. This is exactly what happened in Industrial & Commercial Maintenance Ltd v Briffa [2008] UKEAT, and employers are well advised to have this provision in contracts and ensure it is enforced.

Apprenticeships

Published
by
Usefully Employed
on September 9, 2008
in Contracts of Employment, Disciplinary and Status
. 1 Comment

Apprentices aged under 19, or who are in the first year of their apprenticeships, do not qualify for the minimum wage. There has a been a de facto minimum of £80 per week for the last couple of years, simply as a matter of contract between employers and the Learning & Skills Council. Still, this isn’t much! A joint announcement by BERR and the Department for Children Schools and Families at the TUC Conference has announced that this will be increased to £95 per week. This is designed, says Ed Balls, to boost the earnings of workers such as carers and hairdressers. Apprentices in the construction industry already earn an average of around £175 per week - my opinion is that higher rates in construction are driven by labouring work being available at comparatively high pay, meaning that pay for apprentices is needed to make them attractive as set against a proper wage. The Low Pay Commission are studying whether the minimum wage exemption should be maintained.

Apprenticeships are very important to the government’s plans. They are seen to benefit school leavers by providing a career structure and a route to qualification, and of huge benefit to industry for much the same reasons, since recruitment and training is supported by government at relatively little cost to the employer. The government plans to raise the school leaving age to 18, but will include vocational training programmes such as apprenticeships. Balls further states that this will necessitate the creation of a further 150,000 apprenticeships over the next five years, which will come on top of the already impressive£1bn in funding available for these programmes.

It is difficult to argue with this policy. I always had a sense of unease over the goverment’s push in the late nineties to hugely increase the amount of students going on from school to do a degree, which had seemingly little focus on the resulting future career benefits, if indeed there were any for some. This new focus on apprenticeships, by comparison, can guide school leavers into their first job. Leaving school at 16 gives a school leaver sudden freedom of choice at a young age, and the stark difference between school and work means some of them inevitably don’t handle the change - to say that some unemployment, crime,and antisocial behaviour are possible consequences is not, I think, unreasonable. 

Download the press release here: Denham & Balls TUC Speech News Release

However, employers beware. I once dealt with an employer who had been delighted at the prospect of employing five workers for the price of one. But when they weren’t actually very productive, and required more supervision than this very small company had envisaged, the employer was shocked to be referred to the case of Flett v Matheson [2006] EWCA Civ 53. This case overturned previous authority, and held that a modern style tripartite apprenticeship was to be treated the same in law as a traditional common law apprenticeship, such as have existed for hundreds of years. The difference is important - if I wrongfully terminate an employee’s contract, I must pay him the balance of notice that I should have given him, subject to his duty to mitigate his loss by finding another job. If I wrongfully dismiss my apprentice, heads of damages bold and shocking to employment lawyers come to the fore. A contract of apprenticeship will not normally enable the employer to terminate it before its completion (save for gross misconduct, which of course is a contractual repudiation). In the Denning case of Dunk v George Waller & Son Ltd [1970] 2 All ER 630 (no link I’m afraid) it was held that damages can include diminution of future prospects, as well as loss of earnings and training for the remainder of the contract. This first head can be huge: see the operation of the principle in all its glory in this case, as an apprentice sacked three years into a four year apprenticeship was awarded £20,000 for wrongful dismissal.