Briefings
Employment: News Round
Employment law continues to dominate the news pages. Whether it's fat cats, sex discrimination in the City or the march towards European Federalisation, it all makes good copy. This month, we are going to look at a few highlights.
The rumours had been circulating for a while that the statutory dismissal and grievance procedures, which form part of the Employment Act 2002, will now not come into force before October 2004, rather than the promised date of April 2004. The delay is now official and so you will have a further six months to decide how you are going to ensure compliance. Draft regulations will be published soon for consultation and we will report further at that point.
In any event, even when the regulations are in force, do not think that compliance with them will be enough to win an unfair dismissal claim. ACAS have said that they will not water down their codes of practice on disciplinary or grievance matters to meet the lower standards set out in the regulations. Whilst they will probably issue revised codes to coincide with the regulations coming into force, do not expect to see them reflecting the content of the regulations. Just to make matters worse, a number of Chairmen of the Employment Tribunals have also made the point that compliance with the regulations will not mean that dismissals are fair, just that employers will avoid paying up to a further 50% of the compensation claim as additional damages. So that's clear then…..
Whilst the press had a frenzy of activity over fat cats, the DTI has waded in with a report on directors' remuneration and in particular proposals to try to limit the compensation that is paid to directors on termination of employment. At present, this is aimed at directors of listed companies, but the trickle down effect means that what starts out as being standard practice in listed companies ends up affecting the way private companies do business. Included in the proposals at the moment are:
- Having a maximum statutory notice period (one year is the most commonly suggested period)
- Including underperformance criteria
- Allowing the Board to determine what an outgoing director should be paid at the time of termination
The problem with the Government's current ideas on limiting compensation paid to outgoing directors is that none of them truly deal with the supposed "fat cat" problem. Notice periods are rarely the issue - one-year rolling contracts are the usual arrangement in listed companies and have been for some years. How performance criteria can be set at the outset of an employment relationship is difficult to determine. One director can rarely be blamed for the entire problems of a company - market trends, competition and the performance of the other senior managers will often be of equal importance. Which sensible director is going to agree to have his performance judged on criteria that are not entirely within his control? And as for the idea that the Board will decide on a pay off when the director is leaving, this idea is fanciful in that it relies on the director trusting the Board to treat him fairly at precisely the moment trust is most likely to have left the relationship. The truth of the matter is that a lot of the large pay offs to directors have not been predicated by contractual notice periods, but the unwinding of historic bonus schemes, allowing the director to keep options and making payments into pension schemes. If fat cattery is your concern, the easiest way to meet your shareholders concerns is to have payment in lieu of notice apply to basic salary only, for bonus schemes never to become payable in the year that employment ends and to only allow options to be retained if the director is terminated for retirement, ill health or redundancy. However, there are other things that you can do and we would be happy to advise you further.
The House of Lords have been busy too. They decided a number of cases in June relating to employment matters, the most significant one of which was Relaxion Group plc v Rhys-Harper (and two other joined cases). This held that employers can be held liable for discrimination against former employees on the grounds of race and disability. This brings the race and disability discrimination laws in line with the existing position in sex discrimination. The most common way that employers discriminate against former employees is in the references that they give. If you give a poor reference because an ex-employee has complained of discrimination, you may then be liable for a victimisation claim. As ever, care must be taken in this area.
In addition, the Lords decided the case of Macdonald v Advocate General for Scotland (and one other). Mr Macdonald had been arguing that the Sex Discrimination Act covered discrimination on the grounds of sexual orientation. This was one of a long line of cases on the point and the Lords decided again that homosexuals do not have protection from discrimination. Of course, the new law which will make discrimination on the grounds of gender orientation unlawful will be in force in December of this year, so the decision will only have a short effect.
Finally, new regulations are due to come into force on 19 July 2003, amending parts of the Race Relations Act 1976. The regulations will implement the EU Race Directive to the extent that UK legislation is not already compliant with the Directive. The regulations are still in draft form but the following main amendments are expected:
- New definitions of indirect discrimination and harassment will be introduced, which will widen the scope for potential claims and bring race discrimination legislation in line with discrimination legislation relating to sex.
- There will be a new exception which will apply where being of a particular race or ethnic or national origin is a genuine and determining requirement for the employment in question.
- The burden of proof will now be the same as in sex discrimination cases. If the employee can show facts from which the Tribunal could conclude that discrimination has taken place, the Tribunal will uphold the complaint unless the employer can prove that discrimination did not occur. This will put a much heavier burden on employers in defending race discrimination claims.
So, there is no time to rest over the summer months and plenty more change is still to come with the new TUPE regulations expected imminently and new discrimination laws on religion also arriving in December.