Employment essentials: April 2016's top 5

29 April 2016


Gowling WLG's employment, labour & equalities experts bring you the latest top five employment law developments that may affect your business - what they are, and what you can do about them.

  1. The 'Brexit sextet'
  2. Non-compete views & innovation cues
  3. National Living Wage - the controversy continues
  4. New penalties for non-payment of tribunal awards
  5. Small rise in tribunal award limits but statutory payments frozen

At number 1: the 'Brexit sextet'

On the face of it, 'Brexit' could give the UK power to repeal or reshape areas of employment legislation that some businesses dislike. Leaving Europe might give political cover for structural reform, but it will not be easy. Some areas of employment law such as unfair dismissal, whistleblowing and individual redundancy rights, are purely UK provisions that will remain unaffected by the outcome of referendum. In other areas, such as discrimination legislation, the UK leads the way.

So to what extent would existing laws be affect by a 'Brexit'? In Brexit Untangled: the  employment law implications, we consider six areas which may be affected to varying degrees should the UK vote to leave the EU - the employment law "Brexit sextet" of working time, agency workers, TUPE, discrimination, family friendly measures and collective redundancy consultation.

At number 2: non-compete views & innovation cues

On 24 April, Business Secretary Sajid Javid announced that the Department for Business, Innovation and Skills will shortly launch a call for evidence on whether post-termination restrictions in employment contracts act as a barrier to employment, innovation and entrepreneurship preventing British start-ups from prospering.

The Business Secretary states he is launching a call for evidence on "non-compete" clauses. Mr Javid uses the term "non-compete" in a broad sense. While the usual definition of such clauses is those which prohibit the former employee from working in a competing business, Mr Javid also refers to restrictions on a former employee approaching former clients, more commonly known as non-solicitation clauses.

Mr Javid states that there have been suggestions that "non-compete" clauses can hinder start-ups from hiring the best and brightest talent and act as a barrier to innovation and employment. However, he does not indicate where the complaint has come from. It would be surprising if this has come from businesses across the board. A small start-up may very well complain about non-compete clauses at a time it is seeking to recruit experienced staff. But no doubt, it will also be seeking to protect its business interests when getting said new recruit to sign on the dotted line in the eventuality that same individual is later recruited elsewhere. Whether non-compete clauses are viewed as good or bad for business will very much depend on which end of the employment cycle you are on at any given point in time.

Businesses will, for good reasons, want to protect their legitimate interests. On the other hand, an individual is entitled to earn a living and those with marketable skills can’t be expected to simply remove themselves from the job market because it suits their current employer. It is already the case (and has been for decades) that the courts will consider contractual restraints on a former employee's freedom to work as void and unenforceable unless they can be shown to be no wider than reasonably necessary to protect the employer's legitimate business interests. It is all about fairly balancing an individual's freedom to work for who they wish, with a business's right to protect its legitimate interests.

We wait to see what the call for evidence, yet to be published, actually brings.

The announced call for evidence is part of the wider National Innovation Plan: call for ideas also announced on 24 April. The Business Secretary wants firms up and down the country to contribute views on how government can work with them to create new opportunities. The Department for Business, Innovation and Skills is particularly keen to have brief views on seven areas:

  1. Making regulation work for business
  2. Access to data
  3. Access to finance
  4. Using government procurement to kick start development of new tech
  5. Supporting new and dynamic businesses
  6. Maximising opportunities to deliver infrastructure that unlocks wider economic opportunities
  7. Intellectual Property

There is a very short window for responding to the call for ideas which closes on 22 May. The results will feed into the Government's "Innovation Plan".

At number 3: National Living Wage - the controversy continues

On 1 April, the National Minimum Wage (Amendment) Regulations introduced the new national living wage rate of £7.20 for adults aged 25 years or older, a rise of 50 pence per hour. And the controversy began.
On 18 April 2016, Members of the House of Commons debated the national living wage, with Joan Ryan MP stating that some employers are cutting overall remuneration packages to offset the cost of its introduction, leaving thousands of low-paid employees significantly worse off.

Numerous newspaper reports now abound of workers seeing perks and pay rates cut as companies try to offset the cost of the national living wage. Examples include Sunday and overtime rates being reduced, staff discounts being cut and increases to administration charges for employers' handling of tips left via credit and debit cards. One might have thought MPs would have anticipated this would happen, given that the sectors impacted most by this increase, such as retail and hospitality, operate on very tight margins.

Nick Boles, MP, added: "Members in all parts of the House: please bring to me...any case of a company that seems to be trying to evade the spirit of the legislation in any unreasonable way...and I promise honourable Members that we will use the full force of our office, little though it sometimes feels to be, to put pressure on those companies to live up not only to their legal obligations, which are our job to set out in making legislation in this House, but to their moral obligations, which are the ones we feel matter a great deal more."

At number 4: new penalties for non-payment of tribunal awards

Employers who fail to pay tribunal awards made on or after 6 April, or settlement sums due under a settlement agreement following ACAS conciliation, may have a non-payment penalty imposed upon them as well.

If an individual has not received an employment tribunal award within 42 days after the judgment was made and there is no outstanding appeal (for an Acas conciliated settlement by the date specified in the settlement), they can submit an employment tribunal penalty enforcement form.

Submission of the form will lead to the Employment Tribunal Penalties Team contacting the employer regarding the outstanding payment of the award. A warning notice will be issued to the employer informing them that they may have to pay a financial penalty to the government if the award is not paid within 28 days.

If the employer does not pay the award, they may be issued with a penalty notice. The penalty will equal half of the outstanding award at the time the notice is issued, subject to a minimum of £100 and a maximum of £5,000. If, within 14 days of the penalty notice, the employer pays both the unpaid relevant sum and the penalty, the amount of the penalty will be reduced by 50%. Penalties will be payable to the Exchequer.

At number 5: small rise in tribunal award limits but statutory payments frozen

6 April brought the annual revision of the limits on tribunal awards and statutory payments. This year there is a slight increase to tribunal award limits following the 0.8% increase in the retail prices index.

Statutory limits on tribunal awards increased to:

  • Limit on a week's pay - £479 (previously £475).
  • Unfair dismissal basic award/statutory redundancy payment - £14,370 (previously £14,250).
  • Unfair dismissal compensatory award - the lower of £78,962 or 52 weeks' actual pay (previously £78,335 or 52 weeks' actual pay).

Note: The new rates apply where the “appropriate date” occurs on or after 6 April (e.g. for unfair dismissal the effective date of termination) and not the date of the corresponding tribunal hearing.

However, statutory payments (e.g. statutory maternity pay) are frozen as they are instead revised in line with the consumer prices index which had a 0.1% fall.

  • The standard rates of statutory maternity, paternity, shared parental and adoption pay remain at £139.58 per week.
  • The standard rate of statutory sick pay remains at £88.45 per week.

Look after the pennies...

In 2014, changes to the statutory formula for the annual revision of rates in England, Wales and Scotland, which allows rounding up to the nearest £1 rather than the nearest £10 or £100 pounds, came into effect.

However, Northern Ireland has never been subject to the change. Two years on, the growing impact of the change can be seen. While the limit on a week's pay is now +£479 in Great Britain, the 2016 increase in Northern Ireland which took place on 1 February increased a week's pay to £500. So, a long serving employee made redundant in Northern Ireland may be entitled to up to £650 more than those in the rest of the UK.


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