UK Employment Law Update - January 2013

Welcome to the latest issue of the Steptoe Employment Law Update.

The Employment Law Updates are aimed at providing information on recent developments in UK employment law. It is our desire to provide you with not only an update of the law, but also a practical insight in managing workplace issues on a proactive basis. To achieve our objectives and to continuously improve the Updates, it is important that we receive feedback from you. Please e-mail any comments or suggestions you may have to employmentgroup@steptoe.com. We look forward to hearing from you.

  1. Statutory benefit increases

    Standard rates for statutory maternity pay, paternity pay and adoption pay will increase with effect from 7 April 2013 to £136.78. Statutory sick pay will increase with effect from 6 April 2013 to £86.70.

  2. Compensation limits

    Annual rises for compensation limits have been announced for all dismissals which take effect from 1 February 2013. The cap on a week's pay rises to £450 and the maximum unfair dismissal basic award rises to £13,500. The maximum compensatory award rises to £74,200.

  3. Key UK employment issues for 2013

    The Government has put in place ambitious plans for growth in 2013 to create the most competitive tax system in the G20, to make the UK the best place in Europe to start finance and grow a business, to encourage investment and exports as a route to a more balanced economy and to create a more educated workforce that is the most flexible in Europe. As a result, consultation on compensation, changes to parental leave, collective redundancies, tribunal reform, income tax, whistleblowing and diversity are all likely to become law during 2013. To view resumé, please click here.

  4. Internships

    The Private Members' Internships (Advertising and Regulation) Bill 2012-13 was introduced on 5 December 2012. It will prohibit the advertising of long term unpaid internships and regulate the conditions of employment for paid internships.

    It was agreed that this bill will be second read, and that is due to occur on 1 February 2013.

  5. Sickness benefits

    From December 2012, people on sickness benefits are to be offered work experience to help them back into a job. Short periods of work experience at an appropriate employer will help people with limited employment history get a flavour of the workplace environment, gain new skills and boost their confidence.

    People who fail to carry out any agreed work related activity without good reason may face sanctions.

    Source: Department of Work and Pensions.

  6. Fuel Rates and Car Allowances

    HMRC has published new advisory fuel rates for company cars with effect from 1 December 2012. The rates are to be used only where employers either reimburse employees for business travel in their company cars or require employees to repay the cost of fuel used for private travel. The next review will be 1 March 2013.

    Car allowance payments

    Cheshire Employer and Skills Development Ltd (formerly Total People Ltd) v HMRC [2012] EWCH Civ 1429

    Total has won a long running dispute with HMRC regarding its reclaim of NIC's for the last 6 years on car allowance payments. The Court of Appeal reaffirmed the conclusion of the First Tier Tribunal that allowances designed to do no more than compensate employees for business travel are not earnings and therefore should not have been taxed as earnings. Total operated a scheme whereby staff either claimed 40p per business mile if they drove below 2,500 business miles per annum or they received an annual sum paid monthly to cover car running costs plus a 12p or 13p per mile payment. The question was whether those lump sums were earnings subject to NIC. The judgment did not consider whether or not the car allowances were relevant motoring expenses under the Social Security (Contributions) Regulations.

    Key point: The decision could lead to a flood of claims for NIC refunds. Companies should consider revisiting their car policies and car allowance documentation going forward whether or not a claim for refund is made.

  7. Religious beliefs and Article 9 of the European Convention on Human Rights

    The judgments have now been delivered from the European Court of Human Rights in the combined appeals of Ladele and Macfarlane v United Kingdom [2011] ECHR 737 and Eweida and Chaplin v UK [2011] ECH 738. These are claims that UK domestic law failed adequately to protect their right to manifest their religion, in Ms Ladele's case her refusal to carry out civil partnership ceremonies, Mr Macfarlane's refusal to provide psycho-sexual counselling to same sex couples and Ms Eweida and Ms Chaplin for wearing crosses at work. It was held that the State had breached Ms Eweida's Article 9 rights when she was denied the right to wear her cross at work but not Ms Chaplin's rights who was a nurse where the protection of health and safety on the hospital ward was more important.

    Ms Ladele and Mr Macfarlane's Article 9 rights were also found not to have been breached. The 3 unsuccessful parties may appeal further.

    Ms Eweida was awarded £2,000 non pecuniary damages and £30,000 for her costs and expenses.

    Key point: The decision does not change the general law on discrimination on the grounds of religion or belief.

  8. When is a contract terminated?

    Geys v Société Générale, London Branch [2012] UKSC 63

    By a majority decision, the Supreme Court agreed with the High Court's decision that an employee's contract continued until the date he received his employer's unequivocal notice that it was exercising its contractual right to terminate summarily his employment by making a payment in lieu of notice. Mr Geys was told at a meeting in November 2007 that his employment was to end with a PILON being made in December 2007 for his 3 months' notice. He reserved his position but only received his payslip for the PILON in January 2008. When did the dismissal take effect? The date was important as his termination payment was just under €8m if he was terminated in 2007, or €12.5m if he was terminated in 2008. If it was in 2007, then his dismissal was when the Bank paid approximately £32,000 into his bank account without more. Or it was in 2008 when the Bank wrote to Mr Geys finally saying that it had given notice to terminate and that his PILON had been credited to his bank which letter Mr Geys did not see until 6 January. The High Court decided the terminated date was 6 January 2008 as did the Supreme Court. He was terminated on 6 January 2008 when he received the Bank's letter of 4 January in which the Bank confirmed that the contractual right to terminate under paragraph 8.3 of the Handbook by the PILON had been validly exercised.

    The majority of the Supreme Court held that it was "an obviously necessary incident of the employment relationship that the parties notified the other in clear and unambiguous terms that the right to bring the contract to an end is being exercised and how and when it is intended to operate". Simply making the PILON was not sufficient to bring the contract to an end. If the Bank have given Mr Geys a cheque for his PILON when it met him on 29 November 2007 and told him that he was being dismissed with immediate effect, his dismissal would have taken effect on that date.

    Key point: Employers need to ensure that when they are making a PILON they notify the employee that a PILON is being made to them in exercise of the contractual right to terminate the employment with immediate effect. In Mr Gey's case his effective date of termination for the purpose of any unfair dismissal claim was 29 November 2007, although for contractual purposes the date of termination was 6 January 2008. To achieve greater certainty, summary dismissal should be clearly communicated in person so employees know their employment is being terminated in this way.

  9. Lap dancer not an employee

    Stringfellow Restaurants Ltd v Quashie [2012] All ER 229

    The Appeal Tribunal in this case held that Ms Quashie who was a lap dancer at Stringfellows was an employee and there was a contract on the nights she danced because she was required to provide her work personally and the club was obliged to provide her with work. Stringfellows had a degree of control over her because she was subject to the disciplinary regime of fines. However, this was overturned by the Court of Appeal who found that she had not been engaged under a contract of employment because of the manner in which she had been paid by which it was clear that Stringfellows had been under no obligation to pay her anything at all.

    Ms Quashie negotiated her own fees with clients and took the risk of being out of pocket on a particular night as she took cash or vouchers from customers attending the club and was paid for each dance. Although Stringfellows took a commission from the earnings she received she was also obliged to pay a daily fee to the club and fees for other services.

    This was an arrangement whereby Ms Quashie paid Stringfellows to be provided with an opportunity to earn money by dancing for their customers. The Court was therefore entitled to find that the lack of obligation to pay had precluded the establishment of any employment contract. The contract that she did have required her to accept that she was self-employed which was not a sham.

    Key point: Unless there is sufficient mutuality of obligation, employment status for unfair dismissal purposes will not be established.

  10. Criminal record checks

    The Home Office has announced a new service whereby employees and volunteers requiring criminal records checks will be able to make one application and have access to an online certificate check rather than have to make new applications for each job they apply for. The service will be free for volunteers. The new system will be launched by the disclosure and barring services on 1 March 2013.

  11. Statutory Residence Test

    HMRC has published draft guidance on how the draft Statutory Residence Test legislation published on 18 December 2012 is...

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