Employment Law

In today’s difficult economic climate, large numbers of people are either losing or are likely to lose their job.

Andrew Egan

Andrew Egan, an employment specialist with law firm Charles Lucas & Marshall explains the role of compromise agreements when negotiating redundancy terms.

If you are being made redundant, have recently been involved in a dispute with your employer or are possibly parting on amicable terms, then you may be invited to a ‘without prejudice’ meeting to discuss a compromise agreement. You may be asked to sign such an agreement in exchange for a monetary payment over and above payments and other benefits you would normally receive on the termination of your employment.

You may have claims against your employer under either your contract of employment or under statute. In many cases, your employer will want to make a payment to you in return for receiving an effective waiver of you making any such claims, so that you do not take your employer to court or pursue your claims in an Employment Tribunal.

Compromise agreements to settle any claims or potential claims can be drawn up in circumstances where employment may still be continuing but are far more commonly used when employment has terminated or is about to do so.

Any agreement to settle or waive most statutory claims will be void unless it is recorded in a compromise agreement which must comply with certain statutory requirements, set out in section 203(3) of the Employment Rights Act 1996):

• The agreement must be in writing
• The agreement must relate to a ‘particular complaint’ or ‘particular proceedings’
• You, as the employee, must have received legal advice from a relevant independent adviser on the terms and effect of the proposed agreement and its effect on your ability to pursue your employment rights before an employment tribunal
• The independent adviser must have a current contract of insurance, or professional indemnity insurance, covering the risk of a claim against them by you in respect of the advice
• The agreement must identify the adviser
• The agreement must state that the conditions regulating compromise agreements have been satisfied

Where there is a breach of the terms of a compromise agreement, it can be enforced by way of a claim for breach of contract in the civil courts or as a contract claim in an employment tribunal – provided the compromise agreement is made before termination.

The agreement is important as it will cover such things as: payment of your salary and other benefits to termination; payment of the compensatory or ex gratia sum and any tax liabilities and indemnities; confidentiality of its terms; the waiver of the claims you are or may be making; payment of your legal costs for taking independent advice (usually paid by your employer); the return of your employer’s property and restrictive covenants affecting your future ability to work. The basic purpose of a compromise agreement then is to achieve a clean break in the employment relationship.

In essence, the employee agrees not to make any employment related claims against the employer and signs away the right to make claims such as unfair dismissal, breach of contract, unpaid wages, redundancy, unlawful discrimination, etc and cannot later submit a claim to the employment tribunal or a court.

If you think you may have an employment tribunal case and you decide not to enter into an Agreement to compromise that claim, you will need to act quickly, as there is generally a three month time limit for bringing most employment tribunal claims.

There is no legal or other obligation on you to sign a compromise agreement if you are not happy with it. If you choose not to sign the agreement between you and your employer, you are free to make a claim to the employment tribunal. In redundancy cases, however, this could mean that your employer would refuse to pay you the full enhanced package and will instead pay the minimum state entitlement. In non-redundancy cases, what you are putting in jeopardy is the ex-gratia payment being offered. Many compromise agreements are, however, capable of being negotiated upwards.

Your solicitor will consider the terms and conditions of your compromise agreement and provide you with written advice on your agreement. If there are amendments needed, the solicitor will contact your employer and negotiate amendments.

If you have any specific questions you will be able to speak to a solicitor concerning the wording of the agreement, for example in relation to the taxability of the payment or payments to you and whether these have been made in the most tax efficient way.

If the wording is agreed and acceptable in your solicitor’s opinion, then arrangements will be made for the agreement to be signed by you and by your solicitor and then forwarded to your employer for their signature.

For further information, please call 01635 521212 or andrew.egan@clmlaw.co.uk

Employment Tribunal - Legal Costs

Andrew Egan, an employment lawyer with Charles Lucas & Marshall suggests employers weigh up the costs before defending claims in employment tribunals.

I have recently been approached by several employers wanting to defend claims in employment tribunals.
Solicitors fees vary and paying for more experienced legal representation or a larger firm does not necessarily make sense -  nor may it be appropriate if the claim is small and the case not particularly complex.

Employers need to remember that the more preparation a legal firm carries out then the larger the bill.  A commercial and practical decision needs to be taken – it may not mean settling the claim but it may mean do not fight it at any cost. A balance needs to be struck.

Employers will want to consider the message being sent to other staff and will be keen to protect the business and its reputation. An employer may not see any reason for paying anything to an ex-employee whose claims have no merit.

As a tribunal approaches, the expense associated with contesting the claim increases, with witness statements prepared and exchanged and information disclosed.

It is impossible to make sensible decisions about fighting or possibly settling a claim without looking at three crucial factors:

• the chances of success
• the likely remedy
• any wider impact a successful claim would have (in terms of reputation, precedent or employee relations).

Allowances always have to be made for the unexpected. However, it is usually possible to predict the chances of success. When the claim is weak, an employer should be able to keep the legal costs under control and not spend too much money in disputing allegations which are improper or untrue. An employer making a settlement offer in this situation would be in a strong position to offer a smaller sum.

It is important to focus on how much will be awarded if the employee wins. Compensation for unfair dismissal is based on lost earnings and does not include payment for injury to feelings. In discrimination claims there is no cap on compensation and injury to feelings awards are made. The higher paid the employee, the higher the stakes in the tribunal.

Many employers worry about negative publicity if they go to a tribunal although the likelihood of this is sometimes exaggerated. The facts of the case are usually not that newsworthy.

Parties often have unrealistic expectations of what an employment tribunal can actually do. Employees may seek a chance to clear their name or force the employer to recognise the error of their ways. Employers may seek vindication or to send a clear message to other employees that it does not pay to take them to the tribunal. Full vindication for either party, however, is rare.

For further information contact Andrew Egan on 01793 511055 or andrew.egan@clmlaw.co.uk

The core provisions of the Equality Act 2010 came into force on 1 October 2010. Andrew Egan, an employment lawyer with Thames Valley firm, Charles Lucas & Marshall, sums up the key points.

The Act replaces a number of major pieces of discrimination legislation and other measures which have been introduced over previous years to protect people from: unfairness and discrimination on the grounds of age; disability; gender reassignment; marriage and civil partnership; pregnancy and maternity; race, religion or religious belief; sex and sexual orientation.
These are now called ‘protected characteristics’. The Act covers the same areas safeguarded by existing law but also extends legislation to areas not included before – while introducing changes to current law.

The scope of the Act covers not just employment law but also laws governing the provision of goods and services and beyond. It harmonises current equality laws and extends some protection to areas that were not previously covered eg, associative discrimination, where a person is treated differently because a peer or colleague is someone covered by a protected characteristic, which applied only to three groups previously but has now been extended to seven.

Some employers already fear a fresh waive of discrimination and harassment claims and a rise in trivial claims and associated costs, potentially resulting in greater disruptive impact for small business and employers.
Under the legislation, workers can claim discrimination by association, and Employment Tribunals have been given wider powers to order changes in the workplace eg ordering management to undergo equality and diversity training.
Employers are barred from asking questions about a prospective employee’s health.  As well as limiting the questions employers can ask, the new legislation shifts the burden of proof on to the employer. It also covers a number of other areas including gender pay discrepancies, pay secrecy and protection for breastfeeding mothers.
The legislation is aimed at creating one uniform concept across different types of legislation.

As with the application of all new employment legislation, it is the large percentage of small and medium sized businesses which make up the business community who may be less able to cope and have fewer financial and other resources to adapt to the changes. If the legislation adds to the cost of employing people, then this will greatly impact upon small businesses, which are already fighting to adapt to difficult economic times and move to some economic recovery.

Smaller businesses are less likely to have comprehensive anti-discrimination and harassment policies already in place and are more likely to be affected. They do not have a large human resources departments, if at all, and will find it difficult to keep up with the changes, especially as a recent survey showed that a substantial percentage of HR managers do not fully understand the new legislation. As a result, employers will need to review and update their employment practices and should ensure their equal opportunity and recruitment policies are legally compliant.

Employers should not treat the legislation as requiring a bit of adjusting of the odd policy and then carrying on as normal. HR will need to revise policies and practices, provide training and ensure all levels of line management appreciate the standards expected of them to minimise risk and maximise opportunities – and to get the best out of the workforce and avoid extensive and expensive litigation.

As we have seen with previous legislation, time will tell for age discrimination for example, where the predicted outbreak of claims did not materialise initially and an increase in claims took some time to filter through.

There has already been a substantial increase in Tribunal claims of over 50 per cent in the last 12-18 months so the Tribunal system will be heavily stretched if an increase in claims follows.

The Act provides a single piece of legislation which will deliver consistency in a way that has been lacking and which should iron out the real anomalies which have arisen because of the different approaches there have been to different types of discrimination. This has been confusing and has generated litigation.

While it may mean extra work for employers, it should ensure that both employers and employees benefit from a fairer and more transparent workplace.

For further information please contact Andrew Egan on 01635 521212 or andrew.egan@clmlaw.co.uk

The recent case of Simpson v Endsleigh Insurance Services Ltd shows that a woman on maternity leave, working for a company making redundancies, does not have an automatic right to be offered a suitable, alternative role.

Regulation 10 of the Maternity and Parental Leave Regulations 1999 states that, if it is not practicable by reason of redundancy for an employer to continue to employ a woman on maternity leave, the employee is entitled to be offered a suitable available vacancy with her employer (or an associated employer) and not just invited to apply for that role).

The Regulation states that this right to a vacancy depends on two conditions:

• the work to be done must be both suitable for the woman and appropriate for her in the circumstances.

• the terms and conditions of her new job, including the capacity and place in which she is to be employed, must not be ‘substantially less favourable.’

This gives a woman on maternity leave priority over other employees who are at risk of redundancy, even if they are better qualified for the job.

The employer company in this case closed a number of branches including Mrs Simpson’s place of work in London, while she was on maternity leave. During the redundancy consultation process, she was invited to apply for a position in Cheltenham. She did not apply and claimed that the  correspondence had piled up at home while she was recuperating elsewhere. She argued that she should have been offered the new role in Cheltenham.

Endsleigh accepted that the new position was suitable for her, but argued that it was less favourable in relation to its terms and conditions; she would have to relocate and do a seven day shift. It argued therefore, that there was no obligation to offer her that new role.

The employment tribunal held that Mrs Simpson had not been unfairly dismissed and she appealed.

Mrs Simpson claimed that if there was a suitable post, this should have been offered to her even if the terms and conditions of the contract were less favourable.

The Employment Appeals Tribunal confirmed that both conditions under Regulation 10 had to be met. Further, the matter of the job’s suitability was one for the employer to determine and there was no requirement for the employee to be involved in this process.

The employer would have to consider what it knew about the employee’s personal circumstances and work experience, but it was up to the employer to decide whether or not that vacancy was suitable.

Despite this decision, employers still need to consider alternative vacancies in these circumstances very carefully. It may not always be clear what is suitable and favourable.

Employers should ensure they have evidence of why they consider a new role is not ‘suitable and appropriate’ and document their reasoning in case their decision is challenged. Ultimately, if an employer breaches Regulation 10 and then dismisses the employee on maternity leave, the dismissal will be automatically unfair.