Potental Changes to Legislation

This month we have the usual review of significant cases and we also look at some potential changes to legislation.

Compromise Agreements

Many employers will be familiar with the use of compromise agreements to settle potential claims by employees before, and sometimes after, an employment claim is made. Basically, a compromise agreement is a written agreement under which an employee agrees not to bring or continue with a claim in return for a sum of money. However, an employee can only contract out of their employment rights (for example, a claim for unfair dismissal or discrimination) provided that the agreement satisfies the requirements set out in the Employment Rights Act 1996 and other relevant legislation.

In particular, the agreement must specifically state the claims being settled and the employee must receive independent advice from a solicitor or other appropriate advisor, such as a trade union official. In the case of Lunt v Merseyside it was held that the agreement must relate to a named complaint and that a blanket settlement, such as “in full and final settlement of all current or future claims” was not permitted.

As a result of the Lunt decision it is standard practice for a compromise agreement to list a wide range of possible claims which an employee may have and the Tribunals began to take a more liberal approach to interpreting compromise agreements.

In Hinton v University of East London, the Employment Appeal Tribunal decided that H could not bring a claim under the whistleblowing provisions of the Employment Rights Act 1996 even though the compromise agreement he had signed did not specifically exclude such a complaint. This was on the basis that the potential whistleblowing claim had been referred to by the parties before the agreement was signed.

However, the Court of Appeal disagreed with the Employment Appeal Tribunal’s decision. It said that even though the issue of whistleblowing had been raised by the parties, as it had not been expressly referred to in the list of claims within the agreement, the employee could still bring a claim in the tribunal.

This is an important decision and emphasises the importance of covering all potential claims in a compromise agreement and tailoring the agreement to the particular circumstances. It is advisable that legal advice is taken in respect of a compromise agreement and that the agreement is drawn up by a solicitor who needs to be made aware of the full facts so that potential claims can be identified and properly excluded.

Modern Apprenticeships

Under The Employment Rights Act 1996, an employee is defined as someone who works under a contract of employment. A “contract of employment” is either a contract of service or a contract of apprenticeship. In addition, apprentices have favourable contractual rights due to the fixed term nature of the relationship (usually 4 years) during which the employer is obliged to provide the apprentice with education and training. If the contract is ended by the employer before the end of the fixed-term, the apprentice will have a claim for breach of contract. Such a claim could lead to a high level of compensation as the apprentice could claim loss of earnings for the remainder of the fixed-term. The apprentice could also be compensated for the fact that his earnings capacity will be diminished as he will not have qualified into the particular trade.

The Government introduced Modern Apprentices as a means to provide access and training for a particular job. Under such agreements (which are between the ‘apprentice’, the employer and the training agency), the period of training is expected to last for a certain period of time but there is not actually a fixed period. Also, the employer only has to provide access to training rather than the training itself.

For those reasons, in the case of Flett -v- Matheson [2005] the Employment Appeal Tribunal decided that an individual working under a Modern Apprenticeship agreement was employed under a contract of employment, not a contract of apprenticeship. In that case, the apprentice was dismissed without notice. He sought compensation for the remainder of the fixed term and also the fact that his earning capacity would be reduced due to not completing his apprenticeship. In total, he was claiming in the region of £50,000. However, due to the Employment Appeal Tribunal’s decision that the apprentice was not working under a fixed term – he just had an indication as to how long the training would last – and the fact that the employer did not have to provide the training, he was only entitled to statutory notice of 1 week.

Therefore, employers taking apprentices on under a Modern Apprenticeship are in a more secure position. However, if the apprentices are employees they will have unfair dismissal protection after a year’s service and their notice entitlement will increase depending on the number of years they have worked for the employer. It may also be possible for the apprentice to argue that they should be entitled to “reasonable notice” which is likely to be more than one week but this point was not considered by the Employment Appeal Tribunal.

Changing Contracts of Employment

A contract of employment, whether written or oral, cannot be changed by the employer without the employee’s agreement. This can cause the employer difficulties if the needs of the business change. For example, it may be beneficial for a business’s opening hours to coincide with the opening hours of its clients. However, changes in the way the client operates, such as opening earlier or later, may result in the business not being able to offer the same level of service with obvious consequences.

The best and easiest way to change the contract of employment is to obtain the employee’s consent. A new contract can be drafted, or a letter setting out the changes, and given to the employee to sign. If the employee signs the contract or letter then the contract will have been lawfully varied. However, if this is not dealt with appropriately, it could lead to poor working relations and tribunal claims. Therefore, it is best practice to explain to the employee why the changes need to be made and to consult with the employee over the proposed changes.

However, even after the employer has explained and consulted with the employee, the employee may still refuse to agree to the changes. If the employer was to force the changes through, he would be breaching the employee’s contract. This would entitled the employee to leave and claim constructive (unfair) dismissal.

The only option the employer may have would be to dismiss the employee and immediately offer to re-employ them on the new terms and conditions. Provided that the employer has genuine reasons for making the changes, has consulted with the employee on the changes and has followed the statutory dismissal procedure, the employee will have difficulty bringing an unfair dismissal claim. This is because a potentially fair reason for dismissal is “some other substantial reason” which covers business reorganisations and the need to change terms and conditions.

Arguments, however, can arise as to whether the reason for the proposed change is a substantial reason. This issue was considered in the case of Scott & Co v Richardson. In that case the employers, a debt collecting firm, wanted to change the terms and conditions of it’s employees so that they could be required to work in the evenings rather than during the day. The reason for this was that the people they had to visit would be more likely to be in during the evening.

R objected to the change on the basis that he wanted to be paid overtime if he worked in the evenings. Eventually he was dismissed. The employment tribunal held that the employer had not established a substantial reason for the dismissal as they had not been able to demonstrate that the evening work would have more advantages. However, the Employment Appeal Tribunal decided that when considering this issue, the employer did not have to prove that the change had the advantages expected, only that he reasonably believed that the change had those advantages. So long as the reason for the change was not trivial, some other substantial reason would be made out.

Forthcoming Legislation

In the recent Queen’s Speech it was confirmed that the Government plans in relation to parental rights, outlined in our March Bulletin, will be introduced. Briefly, those plans include the extension of paid maternity leave to 9 months (and eventually a year), the transfer of maternity leave to fathers, and the right to request flexible working for carers.

The Government also plans to introduce civil penalties for employers employing illegal workers. At the moment, only criminal sanctions can be imposed although those sanctions can be severe, including imprisonment and fines. The new civil penalties will further encourage employers to carry out the appropriate checks on all those individual it intends to employ. Useful guidance on preventing illegal working can be found on the Home Office website: www.homeoffice.gov.uk.

However, it is important that all employees are treated equally. Checks should be carried out on all potential employees, not just those an employer suspects may not be entitled to work in the UK. To do otherwise could lead to a potential race discrimination claim.

Working Time Opt Out

Under the Working Time Regulations 1998 an employee can opt out of the maximum 48 hour week if they sign an agreement to this effect. Such an agreement must entitle the employee to “opt back into” the maximum working week, although can specify a notice period of up to 3 months.

However, this right to opt out is under threat. The Committee of Employment and Social Affairs of the European Parliament has voted to abolish the UK’s right to have an opt out. This would mean that the 48 hour week would apply to all workers. This would have a significant impact on employers who rely on their workers working longer hours and also on the earning capacity of the employees who work under an opt out agreement.

But before this can become law the proposal will have to be approved by both the European Parliament and the Council of Ministers. If the proposals are approved, then the right to an opt out will be removed within 3 years of the new European Directive coming into force. We’ll update you on this issue in future bulletins.

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