what's in the news

http://www.telegraph.co.uk/travel/travelnews/9053615/Hoteliers-welcome-TripAdvisor-rebuke.html
 
It speaks volumes that the co-founder of TripAdvisor Steve Kaufer has responded to the ASA ruling by stating in the Daily Telegraph that “The Ruling has little impact on our site and won’t change how we operate”.
 
Hoteliers concerned with the TripAdvisor website will have little comfort from reading Steve Kaufer’s comments and the relatively small changes to the TripAdvisor website required by the ASA Ruling. Whilst many seasoned travellers will appreciate the pitfalls of the review system provided by TripAdvisor, there is still a proportion of the millions of user of this popular website who could be unknowingly misled by false reviews. False reviews that until now TripAdvisor has appeared unwilling to remove at the request of the businesses concerned.
 
David Loosemore
Solicitor
T: +44 (0) 118 957 0240
E: dloosemore@pitmans.com

The Office of Rail Regulation (ORR) is the independent safety and economic regulator for Britain’s railways and has prosecuting powers and prosecuted Network Rail for breaches of health and safety law which led to the deaths of Olivia Bazlinton and Charlotte Thompson at Elsenham station footpath crossing in December 2005 had its first hearing today at Basildon Magistrates’ Court.

Network Rail pleaded guilty to two charges under The Management of Health and Safety at Work Regulations 1999, and guilty to one charge under the Health and Safety at Work etc. Act 1974. The court has committed Network Rail to Chelmsford Crown Court where a sentencing hearing will take place on 15 March 2012 and an update will follow when sentence is passed.

For further information, please contact:

Alan Davies
Partner, Defendant Insurance
T: +44 (0) 118 957 0300
E: alandavies@pitmans.com

Jonathan Durrant
Director, Dispute Resolution
T: +44 (0) 118 957 0270
E: jdurrant@pitmans.com

In the recent case of Avocet Industrial Estates LLP v Merol and another [2011] EWHC 3422(CH) the High Court has decided that a tenant did not validly exercise a break clause in a lease which was conditional on there being no outstanding payments at the break date.  In this case, whilst rent had been paid up to the break date, the tenant had on certain occasions previously paid the rent after the due date provided for in the lease. The lease contained a standard provision entitling the landlord to charge interest on overdue rent. The landlord contended that there was an outstanding payment of the interest at the break date even though the landlord had not issued any demand for the interest. It was held that the condition for exercising the break had therefore not been satisfied. Even the Judge conceded that the outcome was “a harsh one” for the tenant.

In the light of this decision, tenants will need to check carefully through all previous payments due under the lease,  whether rent or other sums, to ascertain whether the landlord could validly charge interest.

The High Court refused permission to appeal. However an application for permission to appeal is due to be heard in the Court of Appeal in March 2012.

Please note that the above is a summary only of the above case and its implications and is not intended to be fully comprehensive. Each matter will depend on its own particular circumstances and we therefore recommend that legal advice is sought on each occasion.

For further information regarding property matters, please contact Pitmans Real Estate team.

Sally Sharp
Partner
T: +44 (0) 118 957 0362
E: ssharp@pitmans.com

The Pension Protection Fund and Contingent Asset Certification 2012/13 – New Requirements and greater flexibility.

Background

In recent years Contingent Assets have become an increasingly common method by which sponsoring employers have managed the cost of occupational pension schemes, the availability of a contingent asset to a scheme’s trustees usually resulting in a reduction in the Pension Protection Fund levy, a cut in the funding level a scheme needs to aim for or both.

To ensure that an existing contingent asset or a new contingent asset is recognised by the Pension Protection Fund (“PPF”) for the 2012/13 levy year Trustees need to recertify the existing contingent asset or certify the new contingent asset via the Pension Regulator’s online Exchange service by no later than 5 pm on 30 March 2012.

Before they commence this process both trustees and employers should be aware that the PPF has introduced a new requirement for certification with regard to Type A contingent asset (guarantees from other group companies) and has announced new proposals on how it intends in future to analyse the strength of guarantors in relation to the guarantees that they provide.

The Revised Contingent Asset Guidance 2012/13

The PPF Final Levy Determination for 2012/13 was published on the 13 December 2012 and includes a number of key changes on how the PPF shall approach Contingent Assets from 1 April 2012.

1. The Board of the PPF has introduced a new requirement for both the certification of new Type A contingent assets and the recertification of Type A contingent assets for the levy year 2012/13. For these assets certified on the Exchange no later than 5 pm on 30 March 2012 Trustees will now have to certify that they:
 
“have no reason to believe that each guarantor, as at the date of the certificate could not meet its full commitment under the contingent asset”.

The PPF guidance confirms that trustees will not usually be expected to conduct a covenant review for each certification. However, the PPF does expect the trustees to take “proportionate and reasonable steps” to reassure themselves as regards the guarantor’s financial standing “as at the date of the certificate”.

As a minimum we recommend that trustees should note this new requirement and make a formal decision on whether further information or advice is required with regard to the financial strength of the guarantor.

2. For the levy year 2012/13 trustees now have the option of certifying a lower amount than the face value of the Type A contingent asset, or of only reporting the most substantial guarantors if they do not feel that can provide the new certification as highlighted above.

This more flexible approach by the PPF recognises that the re-certification of contingent assets could be difficult in those circumstances where the guarantor’s position has changed. However, Trustees should approach this option with caution and seek advice if they consider this approach as the PPF retains the discretion to refuse the partial recognition of a contingent asset.

3. From 1 April 2012 the PPF will commence its own analysis of guarantor strength based on publicly available financial information, comparing it with the deemed value of a Type A contingent asset for levy purposes. If the PPF consider the guarantor to be of limited strength, it will seek additional evidence from the trustees, before deciding whether to reject a contingent asset.

In this first year the PPF will give the benefit of the doubt to schemes and their guarantors and will only challenge guarantees where the guarantor’s net assets are somewhat below the sum guaranteed. It is the PPF’s expectation that requirements for future years will be tightened.
 
4. The definition of “Employer’s Associate” has been amended so that an entity which satisfies the PPF Board of a sufficiently strong connection to an employer, independent of the existence of the contingent asset, would be recognised as an associate. This represents a relaxation of the PPF’s former requirement that the guarantor to a contingent asset must be an “associate” of a scheme employer as defined in section 435 of the Insolvency Act 1986 and will allow more companies to provide Type A contingent asset guarantees.  The new definition can be found at paragraph 4 of the Contingent Asset Appendix.
 
If you are preparing to recertify a Type A contingent asset or plan to enter in to a new Type A contingent asset for the levy year 2012/13 we would be happy to review the new PPF requirements in respect of your specific requirements. Please contact Pitmans Pensions team or your usual Pitmans contact.

David Hosford
Partner
T: +44 (0) 118 957 0363
E: dhosford@pitmans.com
 
David Loosemore
Solicitor
T: +44 (0) 118 957 0240
E: dloosemore@pitmans.com

1. Annual leave

The Supreme Court has held that employers who have shutdown periods can stipulate that annual leave be taken during those periods.

What does this mean?
Employers can insist on their employees taking their paid annual leave during periods when they are not required to work. This will be relevant to off-shore workers, teachers who are required to take their annual leave during non-term time, professional footballers, Parliamentary staff, and people who work full-time during the season in the tourist industry.

What should employers do?
Employers who have shut down periods are entitled to insist on their workers taking their annual leave during those periods. However, they should handle requests for annual leave fairly and consistently.

2. Marriage discrimination

The Employment Appeal Tribunal has held that an employer acted unlawfully when it treated an employee less favourably, not just because she was married, but because she was married to a particular man.

What does this mean?
Employees have the right not to be discriminated against by reason of their status, not only of being married, but also of being married to a particular person. The same applies to those in a civil partnership.

What should employers do?
Employers should avoid discriminating against married employees and those in a civil partnership.

3. Discrimination and Harassment

The Employment Appeal Tribunal has held that a culture of tolerance of racist banter which continues after established acts of racial harassment have taken place is capable of amounting to a continuing breach of mutual trust and confidence and, therefore, giving grounds for a claim for unfair constructive dismissal even if an employee resigns some time after the original incidents.

What does this mean?
Employers have a duty to prevent harassment in the workplace and can be liable to their employees if they do not take action.

What should employers do?
Employers should take steps to prevent discrimination and harassment in the workplace.  This may be by ensuring that clear written policies relating to discrimination and harassment are in place, by providing staff with training in these areas and by promoting a culture of compliance with such policies.

4. Bulgarian and Romanian workers

Restrictions on the rights of Bulgarian and Romanian workers to work in the UK have been extended until 31 December 2013.

What does this mean?
Bulgarian and Romanian nationals have no automatic right to work in the UK despite their countries being members of the EU. Those seeking to work in the UK are in most cases required to apply, before commencing work, for an ‘accession worker authorisation document’ and to work in accordance with the conditions in that document.

What should employers do?
Employers who wish to employ Bulgarian and Romanian workers should continue to comply with requirements such as work permits and, if necessary, take legal advice before doing so.

5. Equal pay

The Court of Appeal has held that claims for equal pay can be brought either through an Employment Tribunal or through ‘the ordinary courts’ (the County and High Courts) and that when an ordinary court exercises its discretion to strike out a case the fact that an employee would be deprived of their right to pursue a claim is a relevant factor which should be taken into account and given considerable weight in most cases.

What does this mean?
Employees only have six months to present an equal pay claim in an Employment Tribunal but six years to bring a claim through the ordinary courts. In most cases an employee will still be able to bring an equal pay claim through the ordinary courts even though the time for presenting a claim in a tribunal has expired.

What should employers do?
Businesses who acquire employees under TUPE should obtain appropriate indemnities to protect themselves against liability for any potential equal pay claims arising in the six years prior to the acquisition of the employees.

6. Equal Pay
The Employment Appeal Tribunal has held that a pay differential between employees at the time of their recruitment can justify the continuing differential in subsequent years.

What does this mean?
Employers are free to pay staff who are recruited into similar roles different amounts where there is good reason for it as long as the decision is not tainted by sex. It is, therefore, permissible to pay different amounts where one of the individuals has more experience than another. Having made the decision to pay different rates there is no obligation on the employer to harmonise the levels of pay at a later date.

What should employers do?
Employers should base decisions on pay on objective grounds and be prepared to justify their decisions should the need arise.

7 . National Minimum Wage: Live-in Domestic Staff

The Employment Appeal Tribunal has held that live-in housekeepers  may be  exempt from the National Minimum Wage  if  they live in their employer’s home and are treated as a member of their employer’s family.

What does this mean?
Domestic workers do not need to be paid the National Minimum Wage if they live in their employer’s home and are treated as a member of the family. As to whether a worker is integrated into a family there is no one factor that is decisive but particular regard will be had to the provision of accommodation and meals and the sharing of tasks and leisure activities. Other matters such as the general dignity with which the domestic worker is treated could be taken into account, as could the degree of privacy and autonomy they are afforded and the extent to which, if at all, they are exploited.

What should employers do?
Employers who employ live-in domestic staff and wish to pay them less than the National Minimum Wage should genuinely treat such workers as part of the family. Domestic workers who are exploited are unlikely to be regarded as being family members and would, therefore, be entitled to be paid the National Minimum Wage.

8. TUPE

The Court of Appeal has held that a transfer on an administration cannot be caught by TUPE rules, unlike on insolvency proceedings. As such administrations will not be “insolvency proceedings” for the purposes of the exemption to TUPE.

What does this mean?
Businesses who purchase companies who have been placed into administration will take on the liability under TUPE for the company’s employees. Employees will transfer under TUPE and  will be protected from transfer- connected dismissals.

What should employers do?
Businesses who are considering purchasing a company in administration should be aware of their potential liabilities in relation to staff and take specific legal advice where necessary.

9. TUPE
The Employment Appeal Tribunal has held that for there to be a service provision change under TUPE, the activities carried out by different providers before and after the transfer must be for the same client.

What does this mean?
There will be no service provision change where there is not only a change in contractors, but also a change of client.

What should employers do?
Businesses  who are considering selling should be aware that a change of client may mean TUPE rules do not apply and take specific legal advice as to their liabilities where necessary.

10. TUPE
The Employment Appeal Tribunal has held that there can be no service provision change under TUPE where the activities carried out by the subsequent contractor for the client are not fundamentally the same as those carried out by the first contractor.

What does this mean?
There will only be a service provision change where the activities carried out by an organised grouping of employees remain fundamentally the same. In Enterprise Management Services Ltd v Connect-Up Ltd and the Claimants, a company entered into a framework agreement with the Council which gave them preferred bidder status amongst certain schools. The result was that the Company ended up providing services to the local schools in the area. The contract came to an end and another company was awarded the contract. The crucial difference being that this contact excluded service cover in relation to a matter which had accounted for 15% of the work carried out by the original company. This company also lost 40% of the schools which the original company had provided services to. The EAT held that there were significant differences between the activities and so there was no transfer under TUPE.

What should employers do?
Businesses should be aware that TUPE may not apply where any service provided after transfer is fundamentally different from the one provided before transfer. If in doubt, specific legal advice should be sought.

11. TUPE

The Court of Appeal has held that a particular transfer does not need to be in contemplation at the time that a dismissal is effected in order for the dismissal to be caught by  TUPE.

What does this mean?
Dismissal of staff by an administrator in order to achieve a sale of a company at a future date is sufficient for TUPE to apply and such dismissals will be automatically unfair as they will be for a reason connected with the transfer.

What should employers do?
Businesses who are considering purchasing another business from an administrator should take specific legal advice as to their liabilities under TUPE and consider what indemnities to seek.

12. Employment Tribunal Awards Increase

From 1 February 2012 the limits for employment tribunal awards will increase. The maximum compensatory award for unfair dismissal will rise to £72,300. The maximum basic award for unfair dismissal will increase to £12,900 and the maximum week’s pay for basic award and redundancy pay purposes will rise to £430.

For further information on this article, please contact Pitmans Employment team.

Mark Symons
Partner, Head of Employment
T: +44 (0)118 957 0340
E: msymons@pitmans.com

Abolition of Protected Rights from 6 April 2012

1. Background:

1.1 In 2005, the Pensions Commission recommended abolishing the option for schemes to contract-out of the State Second Pension (‘S2P’) on the protected rights basis.  The reasons were the complexities caused by administering protected rights and the lack of member understanding.

1.2 The result is that protected rights will be abolished on 6 April 2012 and this applies to all pension schemes.   All rules and references to “protected rights” in pensions-related legislation will either be repealed, or where appropriate, amended.

1.3 On abolition, protected rights will cease to exist.  They will become ordinary money purchase scheme benefits.   

1.4 Contracting-out in final salary schemes on the reference scheme basis is not subject to change.

2. Why abolish contracting-out on the protected rights basis?

2.1 By removing the option of contracting-out of S2P, it is hoped that complexity in the pensions system will be removed.   There will no longer be the need to track protected rights separately and scheme administration will become more manageable, simplifying record keeping and the processing of benefits and transfers.

2.2 In addition, there are currently a number of restrictive rules applying to protected rights.  For example, the annuity bought with protected rights funds must include an attaching survivor’s pension of at least 50% of the member’s pension. These requirements will disappear from 6 April 2012, providing welcome flexibility for members.

3. Increased NI costs and impact on employer contributions

3.1 When contracting-out on the protected rights basis, employees and employers pay reduced NI contributions in exchange for giving up accrual of the S2P. The contracted-out scheme then invests the rebates on behalf of each employee. The current rebates mean that employees pay 1.6% lower NI contributions and employers pay 1.4% lower NI contributions. In addition, HMRC pays further age related rebates into the scheme.
 
3.2 With effect from 6 April 2012, NI contributions will revert to standard rates and the rebates from HMRC will cease. Employer and Employee contribution rates usually include the contracted-out rebate.

3.3 This means that contributions into DC schemes after 6 April 2012 will reduce, with a corresponding reduction in the rate at which funds accumulate.

3.4 For DB schemes, this which means that after 6 April 2012 employer contributions will increase. Employers are likely to wish schemes to continue contracting-out on the COSR basis after 6 April 2012 in order to maintain the rebate.

3.5 Employers may therefore wish to review contribution rates that apply to their scheme after 6 April 2012.

4. What will trustees need to do?

4.1 Where scheme rules have incorporated the protected rights provisions into the rules themselves rather than just referring to the relevant legislation, the scheme rules will have to be amended to remove any such references.  The DWP has issued draft regulations for consultation providing an amendment power under section 68 of the Pensions Act 1995 without the necessity to consider restrictions on changes affecting accrued rights under section 67 of the 1995 Act or the scheme amendment power. It is proposed that the amendment power to remove scheme rules relating to protected rights is exercised by the trustees by resolution. 

4.2 The draft amendment power is very wide but there might be cases where it is not sufficient to amend scheme rules.  Accordingly, scheme rules will need to be reviewed to determine if any changes are required, and if so, whether the statutory amendment power provided by the DWP will be sufficient.

4.3 The power provided is time limited; trustees will have until the end of a three year transitional period (6 April 2015) to make amendments to their rules.  The draft regulations permit the trustees’ resolution to be signed now or after 6 April 2012 – in each case the effective date can be 6 April 2012. 

4.4 The three year transitional period will allow for the payment of final year’s rebates and the late payment or recovery of recalculated rebates due to adjustments to individuals’ NI records.  At the end of this transitional period,  HMRC will no longer track protected rights, so trustees should ask their administrators to ensure that all records are correct prior to this date.

4.5 Under the amended Disclosure Regulations, trustees must inform members that the scheme is no longer contracted-out within one month after 6 April 2012.  Trustees will also have a period of four months following 6 April 2012 to inform members of the effect of the abolition of contracting-out, namely, the removal of protected rights and basis for future accrual of scheme benefits.  Alternatively, this information can be provided by the trustees within the year leading up to the abolition date.

4.6 Trustees may want to consider additional information to include in this announcement, for example, explaining in more detail why protected rights are no longer referred to.

4.7 Member booklets will also need to be reviewed to make sure they are appropriate following the abolition.

5. Do contracting-out certificates need to be varied or surrendered and how do schemes elect to contract-out on the COSR basis?    

5.1 For DB or DC schemes ceasing to contract-out on the COMP basis, there is no need for trustees to formally surrender their contracting-out certificate; they will all be cancelled automatically on 6 April 2012.

5.2 If a DB or DC scheme currently contracted-out on the COMP basis wants to become a COSR scheme, the normal “election” processes apply.

5.3 If a COMB scheme ceases to contract-out on a COMP basis, there is no need to surrender or vary the mixed benefit contracting-out certificate in relation to the DC section or to obtain a DB only contracting-out certificate. The existing certificate will remain valid for that section of the scheme which remains contracted-out on a COSR basis.

5.4 Practical assistance in managing the run-up to April 2012 is being publicised via HMRC’s series of ‘Countdown Bulletins’.

This note only applies to pension schemes that are currently contracted-out of the State Second Pension on the protected rights basis.

Summary and action points for trustees

• Protected rights in all schemes to be abolished from 6 April 2012; schemes will no longer be able to contract-out on a money purchase basis from that date.
• Seek legal advice as to whether the scheme rules need to be amended. If yes, pass trustees’ resolution to remove protected rights provisions from the scheme rules.
• For schemes ceasing to contract-out, inform members that the scheme will no longer be contracted-out after 6 April 2012, and the effect that this will have.
• Ask the scheme administrator to ensure that all records relating to protected rights benefits are up to date.  
• Consider the need to update the member booklet and other member literature.

We would be very happy to review your scheme rules on this issue. Please contact Pitmans Pensions team or your usual Pitmans contact.

David Hosford
Partner
T: +44 (0)118 957 0363
E: dhosford@pitmans.com

Symon Rowley
Director
T: +44 (0)118 957 0301
E: srowley@pitmans.com

Limited liability is not complete protection for directors and they must carefully consider their actions and, indeed, failures to act in order to avoid “piercing the corporate veil”.  Directors may be ordered to contribute to the assets of the company even where they have not acted dishonestly.

Wrongful trading is often called “trading whilst insolvent” but this is only half the story. Directors may find themselves personally liable for wrongful trading where, at some point in time, they should have concluded that the company would not be able to avoid insolvent liquidation but continued to trade. In those circumstances the director may be ordered, by the court, to contribute to the assets of the company for the benefit of its creditors.

A director will be able to raise a defence to such a claim if he took every step to minimise losses to creditors that he ought to have taken.

The acts and omissions of the director are considered both subjectively and objectively. The court will take into account the facts and matters that a reasonably diligent director ought to have known or been able to ascertain and steps that he ought to have taken. The fictional “reasonably diligent person” will be taken to have the general knowledge, skill and experience expected of a person carrying out the same functions as the director and the general knowledge, skill and experience that the director actually had. Ignorance is not a defence.

This is not the only pitfall that a director of an insolvent company may face.

The Court has wide powers to order that a director should make a contribution to a company’s assets where a director has misapplied, retained or become accountable for company property or has been guilty of any misfeasance or breach of any fiduciary or other duty.

Duties of directors have been developed through common law over many years and were codified by the Companies Act 2006.  Directors and the board must remember that a company is a separate legal entity of which they are merely employees and custodians but their role and position of trust means that they must achieve high standard of responsibility and duty of care and act in good faith at all times. 

Directors’ duties are to:

• promote the success of the company;

• exercise reasonable care, skill and diligence;

• exercise independent judgment;

• avoid conflicts of interest.

Ordinarily these duties are owed to the company and its shareholders but directors of insolvent companies owe these duties to the creditors. A failure to observe these duties may lead to personal liability.
Each legislative provision that a director may fall foul of cannot be considered in isolation.  Any act or omission could lead to claims under a number of statutory provisions or common law and support an application by the Secretary of State for a director to be disqualified from acting as such.

Misapplication of company property may also lead to a clawback from the recipient, whether that is a director or third party, where assets are transferred less than their market value.

Directors should avoid paying any creditors, including themselves, in priority to other creditors since such payments may be clawed back if they are a “preference” made (or deemed to have been made) with a view to putting the recipients in a better position on insolvency than they would otherwise have been.

Transferring assets and preferring creditors would also be circumstances that would support an application by the secretary of state to disqualify a director from acting as such in the future.

What should directors do when their company may be insolvent?

Directors should:

• ensure that up to date and accurate management information is available and monitor the company’s finances and cash flow on a regular, at least monthly, basis and more regularly if the financial situation worsens;

• prepare cash flow statements so that they can anticipate the times when the company may not be able to pay creditors and plan for them e.g. through communication and negotiation with creditors;

• if insolvency cannot be avoided, consider whether the company can continue to trade. This should only be considered an option if the board determines that insolvent liquidation is not inevitable and creditors will not be prejudiced e.g. a continued period of trading will improve the company’s fortunes or a cost cutting exercise and/or turnaround strategy will return the company to solvency.  Directors should record their decision to continue to trade and the reasons for them in the form of board minutes and a review of the decision should take place regularly;

• take professional advice and have that advice recorded in writing;

• consider whether to continue to take a salary at the level currently awarded or at all and reduce or suspend remuneration is necessary. Directors should be aware that HMRC and the Secretary of State will take a dim view of directors who effectively “bank roll” their company with “credit” from HMRC unless an agreement has been reached, particularly in circumstances where funds that could have been used to pay HMRC have instead been used to pay the directors;

• treat all creditors fairly and equally. New supplies should not be ordered unless they can be paid for nor should new contracts be entered into unless they can be performed;

• avoid transferring assets of the company away from it, including intangible assets such as intellectual property, without taking advice and ensuring that full market value is paid;

• consider whether to invoke an insolvency process, such as a liquidation or administration or seek a formal arrangement with creditors through a Company Voluntary Arrangement.

Resigning as a director will not absolve a director from liability.  Further non-directors may be liable as if they were a director where their behaviour, in controlling the affairs of the company and the actions of the board, is akin to that of a director such that they may be considered to be “shadow directors”.

For further information contact Pitmans’ Insolvency & Restructuring team in London or Reading.

Suzanne Brooker
Partner
T: +44 (0)118 957 0516
E: sbrooker@pitmans.com

Nicola Kirk
Partner
T: +44 (0) 118 957 0226
E: nkirk@pitmans.com

Denise Fawcett
Partner
T: +44 (0)207 634 4642
E: dfawcett@pitmans.com 

David Archer
Partner
T: +44 (0)207 634 4651
E: darcher@pitmans.com

1. Dismissing an employee for negligence

The Employment Appeal Tribunal has held that in cases of gross negligence dismissal will only be appropriate if the employer has carried out a reasonable investigation into the alleged negligence; if it was reasonable on the basis of that investigation for the employer to believe that the employee had been negligent; if the employer did in fact believe that the employee was negligent; and if dismissal was a reasonable sanction.

What does this mean?
A dismissal on grounds of negligence will be unfair if the employer fails to carry out a proper investigation into the allegations and fails to treat the employee fairly and reasonably.

What should employers do?
Always take specific legal advice before dismissing an employee or taking action short of dismissal, whether for negligence or for some other reason.

2. Payment in lieu of holiday leave

The Employment Appeal Tribunal has held that an employee is only entitled to holiday pay under regulation 16(1) of the Working Time Regulations if he or she has actually taken the leave in respect of which they seek to be paid, and has given notice of their intention to take leave in accordance with regulation 15.

What does this mean?
Employees accrue statutory holiday leave entitlement during periods of sickness absence. However, they will only be entitled to payment in lieu of holiday leave if they have given notice of their intention to take leave.

What should employers do?
Employers are, as a general rule, under no duty to advise their employees of their legal rights. Employers are, therefore, not required to advise their employees that if they don’t request time off they will lose any entitlement they may have to receive payment in lieu.

3. The Pensions Act 2011

The Pensions Act 2011 was passed on 3 November. The Act accelerates the timetables, set out in previous legislation, for increasing the state pension age to 66 and for equalising the state pension ages of men and women. The Act also contains a number of measures which amend the automatic enrolment provisions for workplace pension schemes.

What does this mean?
From April 2016 the state pension age for women will rise, equalising with the state pension age for men of 65 by November 2018. Between December 2018 and October 2020 state pension ages for both men and women will be increased from 65 to 66. In addition to these changes, the Chancellor announced on 29 November 2011 that the increase of the state pension age to 67 has been brought forward and is now set to take place between April 2026 and April 2028 instead of between 2034 and 2036.

Subject to employer staging dates, employees aged 22 years or older who have not reached pensionable age will need to be automatically enrolled into a workplace pension from 1 October 2012 if they earn £7,475 or more. However, there is an optional waiting period of up to 3 months before the duty to automatically enrol an employee commences.

What should employers do?
Employers should check their staging date. (Employers with fewer than 50 persons in their largest PAYE scheme will not be staged in until after the end of this Parliament.) More information on staging dates can be found here.

In the meantime, employers should start thinking about updating their employment documentation such as contracts of employment so as to allow for employee and employer pension contributions.

4. Disciplinary proceedings

The Employment Appeal Tribunal has reminded employers, in giving judgment in a recent case, of the need to act reasonably both when initiating and conducting disciplinary proceedings.

What does this mean?
Employers who make allegations against their employees without there being an adequate basis for making such allegations and who do not act reasonably when conducting disciplinary proceedings may be liable for unfair dismissal.

What should employers do?
Employers should always take specific legal advice before dismissing an employee or taking action short of dismissal.

5. Whistle-blowing

The Employment Appeal Tribunal has held that dismissal is fair where misconduct was the reason for dismissal and the dismissal was not connected with the making of a protected disclosure by the employee.

What does this mean?
Where a dismissal is connected with the making of a protected disclosure by the employee the dismissal will be automatically unfair. However, employees who make protected disclosures are not entitled to blanket protection and can still be dismissed for misconduct or other fair reasons.

What should employers do?
Employers should objectively assess the circumstances and consider whether they have grounds for a fair dismissal. Always take specific legal advice before dismissing an employee or taking action short of dismissal.

6. Vicarious liability

The High Court has held that there need not be an employment relationship for vicarious liability to exist.

What does this mean?
A party can now be vicariously liable for the wrongdoings of another, even if they are not employer and employee, as long as there is a close relationship between the two of them. Where the question of vicarious liability is an issue it will be necessary to look at all the surrounding facts and circumstances when considering the nature of the relationship. In particular, it will be necessary to consider the nature and purpose of the relationship, whether tools, equipment, uniform or premises are provided to assist the performance of the role, the extent to which the one party has been authorised or empowered to act on behalf of the other, and the extent to which the wrongdoer may reasonably be perceived as acting on behalf of the authoriser. The extent to which there is control, supervision, advice and support will be of relevance but not determinative.

What should employers do?
Employers should bear in mind that in theory they could now be vicariously liable for the actions of third parties such as independent contractors if the relationship is a particularly close one. Employers who are concerned that such liability may exist should take legal advice and, where appropriate, ensure that they have adequate insurance and indemnities in place to cover such liability.

7. Equal pay

Comparators who work at different places but are employed on common terms and conditions are able to bring equal pay claims before the Employment Tribunal. The employment judge’s decision that employees and their comparators who were employed on common terms and conditions could bring a claim for equal pay was upheld by the Inner House of the Court of Session. The employees in question were people who worked in schools, hotels, libraries and their comparators were gardeners, gravediggers and road workers.

What does this mean?
If a claimant can show that a comparator could move to the claimant’s place of work and continue to work on existing terms and conditions, common terms and conditions would apply and so could give rise to an equal pay claim.

What should employers do?
Employers should be careful when employing people at different establishments to ensure they are not comparators, or if they are, that they are paid equally. Legal advice should be taken when looking at this in relation to equal pay.

8. Trade union activities

Trade Union officials are entitled to special protection (automatic unfair dismissal rights) when conducting trade union activities. The Employment Appeal Tribunal has held that opinions expressed by a trade union official, at a meeting during a redundancy consultation process and, which were made on behalf of other workers as well as himself amounted to trade union activities.

What does this mean?
The employee was found to be dismissed for an automatically unfair reason as the reason for his dismissal was due to his trade union activities.

What should employers do?
Employers should treat disciplinary cases involving trade union officials with caution and always take specific legal advice before making a dismissal.

9. Employment Status

The Upper Tribunal dismissed an appeal from Weight Watchers (UK) Limited (the “Company”) regarding the status of their Weight Watchers leaders. The Company believed them to be self employed and not an employee for tax purposes. The Upper Tribunal disagreed and found they were employees. The Upper Tribunal looked at the degree of control the Company exercised over the leaders and the reality of the situation, not just the documentation in place.

What does this mean?
People who Weightwatchers thought were self employed are actually employees and thus they now face a huge tax bill. The Employment Tribunal has given a clear warning that they will ignore any documentation if they do not accurately reflect the true position.

What should employers do?
Employers should ensure they regularly review their documentation to ensure they reflect what is actually happening in practice. Employers would also be well advised to ensure they have provisions in place that ensure they can recover tax and national insurance contributions from their employees.

For further information on this article, please contact Pitmans Employment team.

Mark Symons
Partner, Head of Employment
T: +44 (0)118 957 0340
E: msymons@pitmans.com

As part of its continuing efforts to stimulate the UK’s ailing economy and halt the trend towards increasing levels of unemployment, the Government has turned its attention to making wide-sweeping changes to the regulation of employment relations.

The aim is to make UK labour law more business-friendly by easing employers’ fears about the consequences which might arise should the employment relationship turn sour. It has been argued that increased flexibility and confidence will encourage employers to employ more people and thus boost the economy.

The latest part of this process saw the Business Secretary, Vince Cable, announcing plans which will, if implemented, “radically reform employment relations”.

The proposed reforms are as follows:

Reform
Introducing a fee tier system when filing a claim at the Employment Tribunal. The system will either be one of the following:

• A fee paid when a claim is lodged and then a further fee prior to any subsequent hearing; or
• A fee paid when a claimant is seeking more than £30,000.

We say
- It is unusual to impose fees which restrict access to the courts or Tribunals for that purpose rather than funding the courts or Tribunals. Such a system would, it is hoped, discourage employees from engaging in so called “fishing trips” to see what financial benefit they might squeeze out of their employer by using the threat of an Employment Tribunal claim as leverage; the requirement to pay a fee is likely to put off such Claimants. However, there are a lot of very determined individuals who are likely to find the money to do this.

Reform
- Increasing the qualifying period for unfair dismissal to two years on 6 April 2012. This will give employers more time to identify potential under-performers or trouble-makers and weed them out of their organisation with less fear of reprisal.

We say
- There must be doubt whether this will achieve its objective because one suspect’s employers may still let people slip over the two years and discrimination claims could still be brought by employees with shorter service.

Reform
- Closing a “loop hole” in the law on whistle blowing by ensuring that employees will no longer be able to “blow the whistle” on breaches of their own employment contract.

We say
- This would be a major change and protect employers from a sizeable proportion of the whistle blowing claims that are currently raised. The move will have even greater resonance due to the increase in the unfair dismissal qualification period. This is because where an employee is able to prove whistle blowing, their dismissal is automatically unfair and there is no need for them to establish the necessary period of continuous service; for this reason alone, for some time there has been a substantial benefit in employees pursuing whistle blowing claims.

Reform
- Consulting on the possibility of introducing “protected conversations”. This will provide employers with a level of comfort as they will be able to discuss certain issues with their employees, such as performance, without it being able to be used against them.

We say
- It will be interesting to see how protected conversations will interact with discrimination issues; if a protected conversation includes evidence of or an act of discrimination, will the conversation still be protected? One would expect that it would not protect acts of discrimination but will such a conversation protect evidence of discrimination? The Government has said discrimination will not be protected but until the Consultation is launched it is unclear how they will do this. There are too many ifs and buts at present to know whether the introduction of protected conversations could be a good thing.

Reform
- Seeking evidence on introducing a no fault dismissal for micro firms (those with less than 10 employees).

We say
- This would effectively allow such businesses to dismiss staff without justification providing that they pay affected employees a standard settlement. No comment has been made about when evidence is to be submitted yet; however it has been reported that Mr Cable is himself not a supporter of this reform.

Reform
Other measures set out by Mr Cable that are aimed at cutting employment related red-tape include:

- Seeking evidence on the possibility of simplifying TUPE.

- Seeking evidence on the merits of reducing the statutory consultation period required for when making collective redundancies to either 60, 45 or 30 days. Currently it is 90 days.

- The deadline for submitting evidence to both measures above is 31 January 2012.

- Consulting in relation to Compromise Agreements with a view to simplifying them.

- Reviewing and simplifying 17 National Minimum Wage regulations. These regulations will be merged into one consolidated set.

- Making CRB checks available online from 2013 and allowing them to be kept up to date subject to a fee.

- Reviewing and amending the laws on paternity and maternity leave to reflect the modern era. Parental leave is now shared and so the rules on parental leave need to be amended to allow flexibility.

We say
It is all very well considering bringing in all these changes to try to make life easier for employers but one of the main problems that employers have faced is the constant stream of legislation and case law on employment issues. Having to deal with further changes will impose its own burden.

Reform
- Enforcing a rule that all claims must go through ACAS first before they can be lodged at an Employment Tribunal, the aim being that most claims will be settled by conciliation.

- The possibility of a “Rapid Resolution Scheme”. A full consultation will take place before any decision is made.

- The Tribunal will also have the power to impose financial penalties on an employer who loses a claim. This is in addition to any damages awarded and can be up to £5,000 (with a 50% reduction if paid quickly). Any penalty will be payable to the Exchequer. This is hopefully not as unwelcoming as it sounds as it is down to the Tribunal’s discretion and is likely to only be awarded where exceptional circumstances are present.

We say
We see lots of evidence of the Employment Tribunals being stretched. Claimants may be keener to settle through ACAS if they can avoid a fee. It is hoped the overly-burdened Employment Tribunal system will be given some respite with the implementation of the above changes.

For further information about these proposals or if any of the proposals will affect you or your employees then please do not hesitate to contact Pitmans Employment team.

Mark Symons
Partner, Head of Employment
T: +44 (0)118 957 0340
E: msymons@pitmans.com

The ECJ has held that an order imposed by a Belgian court, which required an internet service provider (“ISP”) to filter and block access by its customers to files containing infringing copies of musical works, was incompatible with EU law. (Scarlet Extended SA v Société belge des auteurs, compositeurs et éditeurs SCRL, Case C-70/10, 24 November 2011.)

The case concerned questions referred by the Brussels Court of Appeal to the ECJ regarding Scarlet, an ISP. Scarlet was ordered by a Belgian court to make it impossible for its customers to share files that infringe rights held by members of SABAM, the Belgian Society of Authors, Composers and Publishers.

In 2004, SABAM established that users of Scarlet’s services were downloading works in SABAM’s catalogue from the Internet, without authorisation and without paying royalties, by means of peer-to-peer networks (a transparent method of file sharing which is independent, decentralised and features advanced search and download functions).
 
Upon application by SABAM, the President of the Brussels Court of First Instance ordered Scarlet, in its capacity as an ISP, to bring those copyright infringements to an end by making it impossible for its customers to send or receive in any way electronic files containing a musical work in SABAM’s repertoire by means of peer-to-peer software.

On appeal to the ECJ, it held that EU law precludes the imposition of an injunction by a national court which requires an ISP to install a filtering system with a view to preventing the illegal downloading of files. It concluded that such an injunction does not comply with the prohibition on imposing a general monitoring obligation on such a provider. The filtering system would mean that the ISP was required to monitor data relating to its customers, which is explicitly prohibited by Art 15 of the E-Commerce Directive.

The ECJ also ruled that the injunction did not comply with the requirement to strike a fair balance between, on the one hand, the right to intellectual property, and, on the other, the freedom to conduct business, the right to protection of personal data and the freedom to receive or impart information – fundamental rights safeguarded by the Charter of Fundamental Rights of the EU.

The case follows an earlier UK ruling where BT became the first ISP to be forced by a court order to block its customers from accessing a website on grounds of copyright infringement. The site in question, www.newzbin.com, allowed users to share data files, predominantly pirate films, TV show downloads and music. The case was brought by six major film studios.

Scarlet was held distinguishable in that the film studios were not asking for an unlimited filtering system for all customers, but rather for a clear and precise injunction requiring BT to implement an existing technical solution which BT itself had accepted would be technically feasible and the costs would not be excessive. Therefore, it was not in breach of Article 10 of the European Convention of Human Rights.

It is clear the scope of the injunction sought and the technical feasibility of achieving it will be relevant in each case. This also does not bode well for any orders which the Secretary of State may make under the Digital Economy Act (DEA), as any such orders to prevent unlawful file sharing may be unenforceable under EU law for similar reasons.

The online infringement provisions of the DEA oblige ISPs to assist in identifying copyright infringers and allow enhanced measures to be taken against copyright infringers, including an ability to require ISPs to suspend internet connection to persistent offenders. Following a recent Judicial Review (JR) by BT and Talk Talk, the High Court has held that the provisions of the DEA are compatible with EU law; so, whilst copyright owners and the government are relieved by the JR decision, the issue still very much remains open in light of Scarlet.

For more information, please do not hesitate to contact Pitmans’ Intellectual Property Team.

Philip James
Partner
T: +44 (0)207 634 4655
E: pjames@pitmans.com