Blog: When is self-employed not self-employed?

You will hopefully have read by now our newsflash on the Supreme Court’s Pimlico Plumbers judgment. I’d like to clear up a couple of myths about that case that have been circulating in the media.

First of all, this it is not a gig economy case. Mr Smith was not engaged via an app or any sort of online platform.

The next myth is that this judgment will have a significant legal impact. I don’t think it will, certainly not in legal terms.  It is so fact-specific that it won’t really create any important legal precedents.

What this case does do, however, is raise the issue of employment status very prominently in the news and signals to employers and workers alike that this is an issue to pay attention to. And it also confirms very clearly, and in the highest UK court, the direction of travel of recent cases on worker status.

If any of you were lucky enough to see me speak at our recent legal update seminars, you will recall that I pointed out that worker status is to be found somewhere on the line between employed and self-employed status.

The main conclusion from cases like Uber, Deliveroo, King v Sash Windows, City Sprint and Pimlico Plumbers is that the bar is now set rather low for contractors being able to persuade Tribunals that they are at the very least ‘workers’, if not full employees.

Employment status cases are very close to my heart. Not long after I qualified as a lawyer I was involved with one of the lead cases on employment status that was decided in the Court of Appeal. The proposition that emerged from that case (which we won) was that personal service is at the heart of the employment relationship. It follows that if there is no requirement to provide your services personally then you cannot be an employee or a worker. In that case we had drafted a very clear and unambiguous substitution clause that allowed the contractor to provide a substitute of their choice at any time for any reason. The choice of substitute and when to use them was entirely that of the contractor. The rest of the arrangements between my client and the contractor pointed to him being at the very least a worker but the substitution clause was the key factor.

Over the years, the case law has moved away from the position under scrutiny that case, but my view remains that if you have a substitution clause in its purest form, and it is not a sham, then there will be a good argument that the contractor is genuinely self-employed.

Tellingly, in all of the ‘worker’ cases mentioned above, there is only a limited right to provide a substitute, a typical example of which (including in the Pimlico Plumbers case) is that the substitutes have to be provided from a pool authorised by the company.

What this boils down to is that if you have been using a contractor for a period of more than a few months you should urgently carry out an audit into the true nature of their status. The labels that you and the contractor have placed on them and their tax treatment are basically irrelevant. What really matters is whether they need to provide their service personally, how much control you exercise over the contractor and whether they are obliged to work when asked.

Why is it so important to get it right? Two words: Sash Windows. That case in the European Court of Justice decided that if someone had been treated as self-employed (and therefore not given paid holiday) but was in fact a worker then they could claim compensation for annual leave back to when they first provided their services. Given that the right to paid holiday was introduced in the UK in the late 1990s, the compensation awarded in such cases is considerable.

If you are concerned you may have some holiday pay time bombs, we strongly suggest that you take advice ASAP. And I’d naturally be delighted to help.

Simon Martin
Partner

Email Simon or call 0117 325 0929

Blog: Beware the delay!

Once again the world of professional cycling has given me a thought for a blog. This time it is the Chris Froome situation. As an update, on Stage 18 of the Vuelta a Espana (Tour of Spain) in September 2017 he gave an “adverse analytical finding” – essentially his urine test showed double the permitted level of Salbutamol. Salbutamol is a permitted substance (it’s the active ingredient in Ventolin inhalers, which are used by asthma sufferers) under the rules provided that (a) you don’t exceed the permitted amount of puffs that you take and (b) you don’t exceed the permitted levels of it in your urine.

Slow progress

This details of this case have been leaked to the media, which is why the cycling world is now talking about it. The position is that the ball is now in Chris Froome’s (and his team: Team Sky’s) court to explain how this happened but there is no deadline by which he needs to provide his explanation and they are suggesting it could take months before they respond. Under the rules, Chris Froome is still allowed to compete while the case is progressing, this means that in theory he could complete most of or the whole season and win all of the major races that he is going to compete in, including the Giro D’Italia (Tour of Italy) and the Tour de France.  He is one of the firm favourites in both those races.

The problem then is if Chris Froome cannot make a persuasive argument when his case is eventually heard, he will almost certainly receive a ban that will essentially annul last year’s Vuelta result and any events that he competes in this year. This means that there will be an air of farce hanging over any events in which he is riding this year, as you can imagine the race organisers and cycling’s governing body are not particularly happy, to say the least, about Chris Froome and Team Sky’s approach.  There is now talk of other teams boycotting races in which he is going to ride, it’s all getting rather silly.

Meanwhile in Employee Relations…

The current Chris Froome situation is a rather extreme example, therefore, of the problems caused by delay in dealing with important matters relating to allegations and conduct. The world of HR is a dynamic, fast moving environment and our experience is that delay in dealing with such issues is the enemy. This is for three main reasons.

First, delay can mean that the original incident often gets overtaken by events. For example, there will typically be an incident of alleged misconduct but if that is not promptly addressed then the “accused” may raise a grievance and it becomes gradually more difficult to see the wood for the trees.  You can find that the employee is then effectively setting the agenda.

The next reason is that memories fade, so the longer you take to deal with it, the weaker the evidence becomes.

The last and probably the most important reason is how an Employment Tribunal regards delay. Each alleged incident in a workplace effectively has a “use by” date.  If you allow matters to drift then you will have to explain to the Tribunal (months after the incident) why you are seeking to persuade them that you took matters seriously when your delay at the time perhaps indicated otherwise.

We are not suggesting that you rush things when dealing with disciplinaries and grievances, but it’s worth bearing in mind that a Tribunal will be expecting you to explain both your actions and your inaction, and delays are a powerful way of criticising you and your processes.

As ever, the best thing to do when a potentially significant incident happens is for you to call your friendly, knowledgeable employment lawyer ASAP and we help you stick to the right path and progress robustly through fair processes at a decent pace, which ultimately is best for all concerned.

Simon Martin
Partner

Email Simon or call 0117 325 0929

Blog: Leaving ‘gifts’ from employees

We learned that in the early hours of Friday, 3 November something remarkable happened. Donald Trump’s twitter feed was “deactivated” for 11 minutes. Some wags have said that it rendered the President uncharacteristically mute for a short period. After some initial flannelling by Twitter it emerged that Trump’s account had been deliberately deactivated as a parting shot by an employee at Twitter during their final day of employment.

We often have to advise companies about employees who are departing and who may want to cause difficulties on their way out.  The key is to try to anticipate problems in advance rather than having to mitigate them afterwards.

A very good weapon in an employer’s armoury is the Garden Leave provision.  If you have concerns that a disgruntled employee may try to cause you some problems before they leave then it is a good idea to invoke the clause. You need to balance the desire/need to have your employees work up until the last minute so that they are earning their money, against reducing the risk for them creating problems. The other advantage of a garden leave clause is that they are a much more effective way of preventing an employee from competing with your company than post termination restrictive covenants.

I imagine that over the last two weeks there has been a post mortem carried out at Twitter and some red faces which could possibly have been avoided by a judicious use of a garden leave clause, or for that matter by the making of a payment in lieu of notice.

For advice on your options so you don’t find yourself in a similar position to Twitter you should give us a call, or tweet us if you prefer. Unlike the US President’s, ours works.

Simon Martin
Partner

email Simon or call 0117 325 0929

Simon Martin, Specialist Employment Lawyer at Menzies Law

Blog: A tour around decision making

This is the second in my very occasional series of blogs on the overlap between the worlds of professional cycling and employment law.

The Tour de France has recently finished and while I wait for the Vuelta (the tour of Spain) to start I have been reflecting on one incident. It was on Stage 4 (between Mondorf les Bains to Vittel to be precise). In the finishing straight Mark Cavendish made a move to overtake Peter Sagan (who is the world champion and arguably the most popular cyclist in the world today).  As Cavendish was drawing level with Sagan, Sagan moved right and appeared to move his elbow towards Cavendish (see the picture). The movement and possibly the elbow caused Cavendish to hit the barriers. As a result Cavendish fell off at about 40 miles an hour which unsurprisingly caused him to break his shoulder and therefore he abandoned the race the next day.

 

The race jury reviewed the TV footage and 20 minutes after the incident decided to deduct some points from Sagan, but allowed him to stay in the race. Then came the surprise, just over an hour later the jury reviewed its own decision, decided it wasn’t harsh enough and decided to disqualify Sagan from the race. This is where my employment lawyer antennae start to twitch.

The question is what changed? The first, and crucial thing is not the evidence.  The evidence is the TV footage, there are about three different camera angles and it is the same footage that the rest of us saw and watched repeatedly and were debating.  It’s also not the swirling hysteria that was the reaction to the crash on social media. The jury are isolated from social media we understand.  So the question is what or who changed the jury’s mind to increase the sanction so steeply. We do know that the jury was visited by both Sagan and Cavendish’s teams in the intervening period (although interestingly they didn’t interview either rider) and some commentators have pointed out that the main sponsor of Cavendish’s team is also one of the sponsors of the race itself. It wasn’t even really the consequences of the crash that changed as it only became apparent after the decision to disqualify Sagan the true extent of Cavendish’s injury.

We will probably never know why the jury changed their decision so markedly but what we do know for certain is that changing decisions (particularly if they become more severe) does create problems as it creates an impression that an injustice has happened.  Sagan’s team appealed against the decision but that appeal was doomed because by the time it was heard another couple of days racing had taken place and to allow him to re-enter the race would have been unprecedented.

We see situations and there are reported cases about managers changing their minds, or having them changed for them, and they rarely end well for employers. This all casts into sharp focus what a Tribunal will be looking at, they want to know what was in the decision maker’s mind when they arrived at their decision.  When I am taking a disciplinary manager’s witness statement it’s the question I keep asking, what was the process you followed, to whom did you speak and what was your thought process.

We sometimes see managers who have delegated much if not all of the decision making process to a HR representative or have allowed themselves to be persuaded by a colleague (usually someone more senior) to change their mind. The key thing to appreciate is that it almost certainly won’t be the HR representative or that senior colleague who is sat at the Tribunal witness desk. This means that when you are deciding who should hear a disciplinary hearing, that may result in dismissal, you should choose someone who has the training and gravitas to be able and prepared to make their own decision and to “own” that decision and not to be swayed.

Simon Martin
Partner, Solicitor
email Simon or call 0117 325 0929

 

Simon Martin, Specialist Employment Lawyer at Menzies Law

June 2017 Newsletter – Manufacturing & Engineering Sector

It’s June and the month of warm (some of them too warm!), long, sunny days or, failing that, at least there’s been the Election and the wacky hats of Royal Ascot for a bit of light entertainment! However, we’ll try to compete for your attention with our update on HR/Employment law news. This month we keep you informed with a ‘back to basics’ FAQ session on Apprenticeships and also the Levy and a reminder and update on the General Data Protection Regulations due to come into force this time next year.

Our case update this month focuses on the rights of workers mistakenly labelled as self-employed to carry over of statutory annual leave entitlement, making an employee redundant following a period of long term sickness absence and whether it is discriminatory to pay at different rates for a man taking shared parental leave than a woman taking maternity leave.

What we’ve been doing in the Manufacturing & Engineering sector recently…

We have recently been assisting a number of our manufacturing clients who are managing employees who are absent due to sickness following an accident at work. This throws up a couple of issues on which we have developed experience over the years. The first is whether to discipline the employee for having caused the accident in the first place. Whilst it may seem harsh, if the employee was not, for example, following the Health and Safety rules and that led to the accident then disciplining is the correct thing to do. This is obviously only once you have established that there is a case to answer following a thorough investigation. Did we mention that we have recently done some very well received, modestly priced investigation training sessions for a number of manufacturing clients? Strongly recommended!

The other common issue is that if the employee threatens to bring, or actually starts a personal injury claim against you for the injury. This will mean that you really ought to involve your Employer’s Liability insurer before you take any steps that could affect the value of your employee’s claim. The main things that can affect the value of the claim are reducing the employee’s sick pay or dismissing them due to the length of their absence. Our experience is that insurers take a variety of approaches in such cases and it’s much better to have them on board in these situations. Although it may seem fair and obvious to you that when an employee’s entitlement to (full) sick pay runs out, you just apply your normal rule. However, if you are facing a PI claim then your insurer may take a different view and get upset if you just proceed as normal in reducing sick pay. Worth checking. We are of course very happy to support you with any such issues – just call us on 0117 325 0526.

Simon Martin
Partner, Solicitor
email Simon or call 0117 325 0929

 

Simon Martin, Specialist Employment Lawyer at Menzies Law

May 2017 Newsletter – Manufacturing & Engineering sector

It’s May, named after Maia, the Greek goddess linked to spring and growth.  We think it fitting therefore that this month we were all, including employers, asked to open up our minds during Mental Health Awareness week (from 8 to 14 May) and take a fresh look at mental health.  We’re doing our bit to take part in this Newsletter, by looking at the impact of mental ill-health in the workplace and what employers can do to support staff suffering from the condition.   We also update you on the Government’s Response to the ‘High heels and workplace dress codes’ report and the latest update on the ongoing saga of holiday pay – although it’s good news for employers this time!

Our case update this month focuses on whether a poor attitude to organisational change can amount to gross misconduct, despite procedural failings; whether TUPE Employee Liability Information needs to include detail as to whether employees’ entitlements are contractual; and the EAT’s decision that it is discriminatory on grounds of disability to make a job applicant with Asperger’s syndrome sit a situational judgment test (multiple choice test) as part of the recruitment process.

What we’ve been doing in the Manufacturing & Engineering sector recently…

By the time this newsletter arrives in your inbox we will be just over one week away from our event, “Getting the best out your trade union relationships” which is set to be our most well attended this year.  We’ve clearly hit a pain point for many businesses and it can be very easy to lose sight of the fact that both your company and the union are striving for the same objective, to improve organisational performance, as this benefits both the business and the employees.  We’ll be looking at the ways you can reduce the ‘us and them’ or even worse the ‘us vs them’ feel to union negotiations and remind both sides that that your aims which relate to improving working conditions, increasing performance and the sustainability of the business will in turn mean greater job security and a better place to work. In our view, things work better if the business and the trade union both acknowledge that the other has a legitimate and valued purpose and we’ll be demonstrating how this can be achieved.

If you’d like to know more about this event or seek advice on anything to do with trade unions then please get in contact.

Simon Martin
Partner, Solicitor
email Simon or call 0117 325 0929

 

Simon Martin, Specialist Employment Lawyer at Menzies Law

Blog: IR35 and the new Public Sector duty

The IR35 legislation has been with us since 1999 but has just hit the headlines again and may become a live issue for a number of our public sector clients.

IR35 was introduced by HMRC as a measure to prevent the tax avoidance situation whereby a contractor who would otherwise have been deemed to be an employee sets themselves up as a limited company, the idea being that they would then have a “commercial” (or B2B) relationship with their “client” (a.k.a. their employer).

The IR35 legislation effectively said that HMRC should look at what the true nature of the contractor/client relationship is, and ignore the limited company that sits between them and any other agencies who are sometimes involved .

HMRC’s test of whether someone is an employee or not is more or less the same as an Employment Tribunal will apply, the key tests being whether the person provides personal service, whether there is ‘mutuality of obligations’ and the extent to which the client supervises, directs and controls what the contractor does. This is an area that is close to my heart, as when I was a junior lawyer I was involved in one of the leading cases in the Court of Appeal on employment status.

From the contractor’s perspective, IR35 is bad news as not only do they have to pay their own tax and national insurance but they also are responsible for a payment equivalent to employer’s National Insurance.

A few years ago there was a spate of cases about whether particular engagements were “caught by” IR35, but then they went quiet in 2011 and IR35 rather slipped from the headlines.

The government has more recently noticed that the number of incorporations of limited companies has increased rapidly and they have apparently have become concerned about the possible loss of income tax revenue, so their response has been to tighten up the IR35 regime with effect from the start of April 2017.

This tightening-up is focused at the moment on the public sector. The change in the law now requires  each public sector body or intermediary agency to decide whether IR35 applies to each relationship, rather than relying on the contractor themselves.  It also requires the public sector body to deduct income tax and NICs at source, as if the contractor was an employee.  Some commentators are saying that this approach will eventually be rolled out across the private sector as well.

This is clearly quite an onerous obligation on public sector bodies, so HMRC have launched a website that helps organisations decide whether their relationship with a contractor will be caught by IR35, and it’s here: https://www.gov.uk/guidance/check-employment-status-for-tax.  HRMC have said that, provided the information supplied to the website calculator is correct, then they will agree to be bound by the decision given.  That sounds very helpful for clarity, but the problem I am hearing anecdotally is that several times the website calculator’s response comes back as “we don’t know”.  Not so helpful.

This uncertainty has led some public bodies (Transport for London, for instance) to decide that they are going to err on the side of caution and treat all their contractors as if IR35 definitely does apply to them.   Apparently with TfL this has led to problems, as contractors are apparently refusing to provide their services and so TfL is currently rethinking its approach.

We’re also aware that the MoD has decided to withhold 20% of its contractors’ fees for 12 months, just to provide them with a pot of money from which to meet some or all of the PAYE demanded from HMRC if it turns out that a contractor should have been taxed at source after all.

From a contractor’s perspective, IR35 is the worst of all worlds, since they get taxed like an employee but get very limited employment rights.  This is because an Employment Tribunal is likely to say that someone trading through a limited company is not going to be an employee for the purposes of, for example, unfair dismissal claims and the right for redundancy pay.

The change this April is meaning that apparently contractors are leaving the public sector in droves, which in turn could have an impact on the provision of services in some areas.  This may well mean that organisations will need to consider employing more staff, rather than engaging contractors.

This is a developing story and one we are going to have to keep a close eye on. If anyone wants to discuss this then please contact me using the contact details below and I would be more than happy to help.
Simon Martin
Partner

Simon Martin, Specialist Employment Lawyer at Menzies Law

Blog: Is employment law currently failing pregnant women?

Yes it is, according to a report recently issued by a Committee of MPs, known as the Women and Equalities Committee.  They say that  “urgent action” is needed to give pregnant women and new mothers more protection at work after a “shocking” increase in discrimination.

The Committee is calling for a German-style system, where it is harder to make women redundant during and after pregnancy.   In Germany, from the beginning of pregnancy until four months following childbirth, employers can only dismiss such an employee in very rare cases, such as the company becoming insolvent and, even then, the employer needs government approval to do so.

In the UK, although pregnancy/maternity related dismissals are usually unlawful because they amount to sex discrimination, employers can and do still dismiss such employees, usually by reason of redundancy. The Committee said that the number of expectant and new mothers forced to leave their jobs has almost doubled to 54,000 since 2005.  In these last 11 years, the number of women who work has not changed significantly, and nor has the number of them having babies.  But what has changed is that twice as many of them now, compared with 2005, are finding that their pregnancy leads fairly swiftly to them losing their job.

Now that’s a pretty appalling statistic.  Not only on the face of it, but also because it is moving in the opposite direction of travel from almost every other aspect of equality in the workplace and society as a whole.

The report quoted research from the Department for Business, Innovation and Skills and also from the Equality and Human Rights Commission, which found that 11% of working women who were pregnant or on maternity leave reported being either dismissed, singled out for redundancy, or being treated so poorly that they felt they had to leave their job.

The Committee also recommended:

  1. more protection for casual, agency and zero-hours workers, such as making it easier for women to attend antenatal appointments;
  2. a “substantial reduction” in the £1,200 application fee for women bringing a pregnancy-related discrimination case to an Employment Tribunal; and
  3. the three-month time limit on taking cases to a Tribunal should be doubled to six months, to allow them more time.

A few thoughts occur to me arising out of this report.  The first is the recommendation regarding Tribunal fees.  There appears to be a recognition that the Tribunal fees have put off employees from bringing reasonable claims. This is contrary to the standard line from the Government which is that the Tribunal fees have only weeded out the time-wasting/spurious claims.

From a legal adviser’s perspective, I’d suggest that the existing legislation already provides significant protection for employees on maternity leave. For instance, there already is a rare example of lawful positive discrimination for employees on maternity leave. Essentially, in a redundancy situation when an employer has two equally qualified redundant employees it is required to offer any suitable alternative vacancy to the employee who is on maternity leave.  I recently advised a disabled (male) client and he was dismissed for redundancy because the other employee in the selection pool was a female who was on maternity leave and she was given the alternative employment on that basis, in preference to him.  He was at least as well suited for the new role (in fact, he had more experience) but the employer was mindful of its obligations to female workers and so it was difficult to persuade it  otherwise.

Given the result in the recent referendum, I feel it is unlikely that the current Government will be taking steps to mirror the significantly enhanced protection enjoyed by German employees.  In fact, if and when we ever do trigger Article 50 and leave the EU, my guess is that the likely direction of travel is likely to be for a watering down of employee rights.  That however is going to have to be the subject of another blog…

Simon Martin
Partner

Email Simon

Simon Martin, Specialist Employment Lawyer at Menzies Law

Blog: Sometimes it helps when your owner is a billionaire

I should start by declaring an interest.  I am not a Chelsea fan.  However, I will do my best to be as dispassionate as possible in this blog as I consider the settlement for Chelsea’s ex-club doctor, Eva Carneiro, in her Employment Tribunal sex discrimination claims against them.

The incident

As you may well have heard, the case arose out of an incident on the opening  day of the 2015/16 football season. Dr Carneiro went on to the pitch to treat Chelsea player Eden Hazard. She claimed that Mr Mourinho shouted the Portuguese phrase “filha da puta” at her, which means “daughter of a whore”, as she ran on to the pitch.  Because she was treating him, Hazard had to leave the pitch. This left Chelsea with only nine men on the pitch. Following the game Mourinho publicly criticised both Dr Carneiro and first team physio Jon Fearn for being “impulsive and naive”.

Dr Carneiro resigned about a month later, after being demoted.  I’m sure many of you spotted at the time that the demotion seemed particularly unwise and likely to cause the club to end up being sued.   The chance of Dr Carneiro’s contract of employment allowing the club to forcibly demote her seems slim.

Dr Carneiro brought claims of constructive dismissal and sex discrimination.

The deal

A few days prior to the hearing it emerged that Chelsea had made an offer to her of £1.2 million to settle the case.  Dr Carneiro rejected that sum and then, on the morning of the first day of the hearing, the case settled for an undisclosed sum in a confidential deal.

It is unlikely that we will ever know the terms of the settlement agreement but it is highly likely that there will be two things in the document:

  1. The settlement figure will be higher than the previous offer. I have seen some speculation in the media that the figure was £5 million. I imagine that was a pure guess (see below); and
  2. There will be a carefully drafted confidentiality clause, with no doubt a repayment provision if Dr Caneiro, or any of the limited pool of people with whom she is allowed to discuss the agreement, were to disclose any of the details of the settlement.
The interesting bits

There are a couple of points of interest in this case for lawyers and hard-working HR people.

The first is that the terms of the initial settlement offer were made public. Normally all such negotiations and offers are made on a confidential ‘without prejudice’ basis, which means that they cannot be disclosed, and I’m sure you were as surprised as I was to hear it being discussed in the media. It appears in this case that it was Chelsea who deliberately disclosed the offer. This will have been done to put pressure on Dr Caneiro to settle her case.

This sort of open offer is usually made with the intention that, if the claimant rejects it and fights the case and either loses or gets awarded less than the amount of the open offer, the respondent can then raise the argument that the claimant acted unreasonably in rejecting the offer and should therefore be ordered to pay the respondent’s legal costs from the point the offer was made up, to and including the hearing.  ‘Unreasonable behaviour’ during the course of bringing a claim is one of the rare occasions that a party to an Employment Tribunal claim can be ordered to pay any of the respondent’s costs.

As Chelsea’s solicitors (who would no doubt have been a lot more expensive, but of course no better(!) than Menzies Law) had instructed a QC and no doubt a more junior barrister then it is a safe bet that their legal costs would be in the hundreds of thousands of pounds.

These sort of open offers can be very helpful in bringing about a settlement but they need to be used with great caution by employers. This is because some Employment Judges can regard them as a bullying tactic, brought by employers with deep pockets, to pressurise Claimants into settling their case.  Also, while they are well established in the civil (mainstream) courts, there is not currently a rule that requires an Employment Tribunal to order a claimant in this situation to pay the respondent’s costs if she rejects a decent offer.  It is simply something that can be asked for, at the judge’s discretion.

The other point of interest is why Chelsea would want to make such a significant offer.  If we drill down into the figures, we know that the maximum injury to feelings award is £30,000. Therefore, even based on the settlement offer (i.e. the one we know about, which is probably lower than the subsequent offer) the compensatory element of that figure represents over 4 years’ salary (according to reports in the media Dr Caneiro earned £280,000 per annum).  It is not impossible, although possibly unlikely, that a Tribunal could award that.  However I suggest that the offer was not driven by Chelsea’s worst case scenario in terms of Tribunal award.

It was probably motivated more by Chelsea and Jose Mourinho (who is just starting his new managerial role at Manchester United) wanting to avoid embarrassment and potential damage to their reputations.

Jose Mourinho was due to give two days of evidence and faced a considerable amount of statements and documents,  including texts and emails, being made public.  It is telling that the settlement came about on a day that he attended the Tribunal in person, albeit on a day that he was not expected to give evidence.

Worst case scenario

We are often asked by clients who are facing a Tribunal claim, or even considering the consequences of dismissing an employee, about what the worst case scenario is for them. It is possible to give a rough estimate on the potential award that an employee could get if the claim succeeds in the hearing.  However, there are often other factors that can be more important in determining the true “cost” of a claim.  Those other elements include the legal costs and the opportunity cost of the management time that will be used in dealing with the claim.

Typically the Claimant’s colleagues and managers involved in the matter and one or more members of the HR team will be spending time on the case; plus there is also likely to be one or more Directors with, at least, a passing interest in the case. Those opportunity costs will often dwarf the legal costs, the big difference of course being that many companies will not be putting a figure on what a day’s time for a HR manager or Director costs the company.

Next comes the potential external cost:  this is the damage to reputation with colleagues, potential employees, customers, potential customers and so on. In the brave new world of social media, this is an aspect that is not to be ignored or belittled.   The risk of damage to reputation is difficult to quantify but there are a few factors that are fairly well established. The identity of the company or employee involved can lead to heightened media interest. A household name will guarantee media interest in the case.

The nature of the claim is also going to have an impact. A claim about a technical error in a redundancy exercise will only be of interest to employment law anoraks (of which I am proud to be one) whereas a discrimination claim will usually generate more interest.  If you combine a household name with a discrimination claim you can virtually guarantee it is standing room only in the public area at the back of the Tribunal hearing room.  When a company considers that scenario it is often largely irrelevant whether their lawyers tell them they have a strong case or not. They simply will not want the publicity and it can be worth a considerable amount of money to settle the case before too many headline grabbing details emerge.

We are certainly not encouraging you to settle Tribunal claims that you may face but, just as Chelsea have clearly done, there is more than just the potential award to consider when reflecting on the likely costs of a claim.

Simon Martin
Partner

Email Simon

Simon Martin, Specialist Employment Lawyer at Menzies Law

Blog: What Brexit would mean for employment law

Unless you have been stuck in a cave for the past few months, it can’t have escaped your notice that we are a few short weeks away from the EU referendum.

The polls indicate that the result is too close to call, but given the woeful performance of the pollsters  in the run up to the General Election we need to take all opinion polls with a very healthy pinch of salt (is a pinch of salt healthy? Ed).

We should think about what would happen to UK employment law if the Leave side prevails.  The short point is that no one knows what will happen but we can have a few educated guesses.

A vote to leave the EU (‘Brexit’) could in theory mean that some EU employment laws being rolled back fairly shortly after the vote. Last week Michael Gove said that a Leave vote would mean that “we wouldn’t have all the EU regulations which cost our economy £600million every week”. According to a recent study, the Working Time Directive is the third most expensive regulation and the Agency Workers rules are the fifth most expensive.  This gives us a fairly good idea of where a successful Leave campaign would focus its attention.

The likely scenario is that, following a Leave vote, we would face a possibly lengthy period of uncertainty, followed by piecemeal change.  The divorce process we know will take at least two years (possibly many more) so it’s likely that not much change would happen straight away.

There is one factor that makes us think that there could be some major changes, and other factors that indicate that there may not be too much change following a Leave vote.

The factor that could lead to major change is the composition of the UK government following a Leave vote. There is a general consensus that, if the Leave campaign wins, David Cameron would resign fairly shortly afterwards, which would result in a leadership contest.  It is likely that other prominent Remain campaigners would step down.  One assumes that the new leader would be someone who was a leading light in the Leave campaign.  Front runners to lead the Conservative party would therefore be Michael Gove and Boris Johnson.  Many commentators think a shift to the right in the government will mean that there will be a more ruthless pruning of employment rights that derived from Europe.

The reality is, however, that regardless of the political will, any changes to UK employment law will depend on the terms the UK agrees to, possibly reluctantly, to secure trade deals with the remainder of the EU. In those negotiations the UK may come under EU trade pressure to maintain employment rights if we were seen to be unfairly undercutting them for a competitive advantage.

Another limiting factor on any changes is that UK laws which originate from the EU have become well established in UK domestic law,  so it would be a determined government who would go for wholesale repeal.  Examples of such rights would be in relation to part-time and fixed term workers’ rights, some equality laws and TUPE.  If the Leave campaign do win then they may not repeal a lot of such legislation, instead perhaps opting for reform. The CBI, for instance, has been lobbying for a cap on awards for discrimination claims and we could see something like that.

We must also not lose sight of the fact that not all UK employment law derives from the EU. The unfair dismissal rules are a UK creation and would not be affected by Brexit.  Even the rights that derive from Europe have often been “gold plated” by UK governments.  Take annual leave for example: the European Working Time Directive requires that all workers be given 4 weeks’ annual leave  (20 days for a full time worker), but the UK parliament has added a further 1.6 weeks’ (8 days) leave on top.  It feels rather unlikely (although perhaps not impossible)  that a UK government would have the political will to repeal UK law too, in order to chip away at these established rights.

Changes to UK employment case law

At present, the final court of appeal is the Court of Justice of the European Union (CJEU, formally  known as the ECJ). This means that UK courts tend to follow the decisions of the CJEU.

In the event of a Brexit vote, UK courts would no longer have to follow the rulings of the CJEU.  However, in the short term, that probably would not make too much difference.  Take decisions on TUPE cases for instance; many UK Tribunals and higher courts (i.e. Employment Appeal Tribunals,  Court of Appeal and Supreme Court) have made decisions about TUPE matters that follow the CJEU decisions. That means that there is a large body of TUPE cases decided by our own UK courts which would still be binding on UK employers even after a Brexit.

Over  a period of time, however, there could well be a move away from the CJEU decisions. This could lead to problems for  employers with establishments across Europe. They could be faced with markedly different rules affecting its workforce in different countries.

End of free movement of workers?

We all know about the right of EU citizens to freely live and work across the EU, which supports employee mobility, labour supply and flexible recruitment practices. It’s possible, following a Leave vote, that citizens of other EU Member States would no longer enjoy an automatic right to travel to and work in the UK (and UK citizens would no longer enjoy rights of freedom of movement in the EU). In reality, it would form part of the negotiations for a new relationship with the EU, following a Leave vote, with the EU expected to demand some form of free movement of people in return for the UK enjoying free movement of goods.  We can’t predict the result of those important negotiations but we can be certain that they will be fraught and lengthy!

Will my EU workers be deported?

It’s certainly reasonable to assume that there would be transitional arrangements for EU citizens already working in the UK. No-one is really suggesting that anyone will be deported on 24 June in the event of a Leave vote. It would seem likely that EU nationals already working in the UK would be permitted to stay, at least for a period, in return for similar arrangements for UK citizens working in other EU countries.

Conclusion

There are apocalyptic threats from both sides of the debate about the consequences of a vote to Leave and Remain. If there is a Leave vote then we will be entering into a lengthy period of uncertainty, the status quo in employment law will prevail for a couple of years and it’s only really at the end of that period that we will know the real consequences of such a vote.  We suggest that it will come down to a question of UK political will, counterbalanced by the deal that the UK strikes with the rest of the EU.

Whatever your views, do make sure that you exercise your right to vote and encourage all your colleagues to do so too.  It’s a huge decision, and we all must have our voices heard.

Simon Martin
Partner

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Simon Martin, Specialist Employment Lawyer at Menzies Law