Thursday, August 26, 2010

Roy Hodgson Raises Employment Law Issue Shocker!

The new Liverpool manager Roy Hodgson has accused his predecessor Rafa Benitez of reneging on an agreement that he would not try and "poach" players after his departure earlier this year.

Rafa is now the manager at Italian giants Inter and that club have made offers for Liverpool players Javier Mascherano and Dirt Kuyt, both of which have been rejected. The interest in Mascherano has ended and he is now being linked with a move to Barcelona.

Whilst the details of Benitez's severance agreement with Liverpool are naturally confidential (assuming that there was one and it is more than a "gentleman's agreement") it does raise an interesting employment law issue.

Contracts of employment, mainly but not exclusively those of senior employees, not uncommonly include covenants against seeking to "poach" fellow employees. Usually this consists of a requirement not to offer employment to such people and/or not to encourage them to leave.

Restrictive covenants are a "restraint of trade" and a Court will therefore start from the position that they are likely to be unenforceable. They will only be upheld if they are reasonable in their scope and duration and go no further than protecting a legitimate business interest of the employer.

A well drafted such covenant can survive. This will typically be one which is for a limited period of time (say 6-12 months - or one might say 1 or 2 transfer windows here), cover a limited range of employees and relate to people with whom the person entering into the covenant has actually dealt.

If the whole senior sales team leaves en masse it could hole a company below the waterline. A court is unlikely on the other hand to prevent the office cleaner being poached.

Whether such covenants would work in a football context is an interesting point. Unlike the typical situation a transfer fee would of course be due on the purchase of a player and the value of that fee is likely to adequately compensate the selling club.

There are of course FA and UEFA rules against "tapping up" although in the honourable world of football it would be outrageous to suggest that this ever occurs. It should be stressed that this is not the case here where perfectly open and legitimate bids have been made for the players in question.

Wednesday, August 25, 2010

Holiday Pay - A Victory for Employers (At Last?)

The House of Lords ruled last year that (contrary to the wording of the UK legislation) employees were entitled, as a result of European Law, to carry over holiday they had been unable to take because of illness.

This led to anxiety on the part of employers that they could be faced by large claims for holiday back pay stretching back several years in the case of employees on long-term sick.

The holiday pay rules in the Working Time Regulations state that holiday pay entitlement on termination of employment is limited to the year in which termination takes place.

The House of Lords ruling strictly speaking only applies to "emanations of the State", for example public authorities, but some Employment Tribunals have been creatively interpreting the regulations so as to award holiday pay to private sector employees.

However there has recently been a small victory for employers in the Employment Tribunal case of Khan v Martin McColl . This is only a first instance decision and does not set a binding precedent, at least until it is upheld by a higher court, but it may carry some weight with other Tribunals.

When Mr Khan's employment was terminated after a lengthy sickness absence he was only paid holiday for the current holiday year. He then claimed holiday pay for the 2 previous years.

His claim failed. The Tribunal held that because he had been paid for this holiday year he could not show that there was a deduction or series of deductions from his wages less than 3 months before presenting his claim, and he was therefore out of time.

This suggests that an employer faced with a claim for large amounts of back pay can defeat it simply by paying the holiday pay for the current year, as long as they do it before the Claim is presented and as long as more than 3 months have elapsed since last year's holiday pay was due.

The Tribunal also found that he had not been entitled to carry his holiday forward anyway as he had not been denied the right to take it in the previous years - he had simply not asked to take it.

This latter reason is open to question - the House of Lords case had suggested that an employee who was off sick could not nominate part of their sickness absence as holiday, as the purpose of holiday is to rest from work not to recover from illness. If that is right then Mr Khan could not have asked for the holiday anyway.

Expect to see this or a similar case in the Employment Appeal Tribunal before long.

Tuesday, August 24, 2010

Social Media and the Recruitment Process

With the increasing use of social networking sites like Facebook, and the large amounts of personal information being found on these, it can be increasingly tempting for employers to use these as a tool in the recruitment process.

After all, what could be easier than typing the name of the prospective recruit into a search engine and seeing what comes up?

41% of recruiters in a 2009 survey claimed to have rejected candidates based on their online reputations. Interestingly only 15% of job applicants interviewed felt that information published online could affect their chances of getting a job.

But there are dangers to using this method - suppose the female applicant's Facebook status update is announcing to the world that she is expecting a baby. She does not get the job and alleges this is because of her pregnancy, and that this is unlawful sex discrimination.

If the evidence shows you have looked at her site, you could be facing an unlimited damages bill (including compensation for hurt feelings) from someone who has never worked for you - even if this was not the reason for preferring another candidate. Once a prima facie case of discrimination has been established the onus is on you to disprove it.

Remember that doing a search will create an audit trail on your computer system and that you will be obliged to give disclosure of the relevant records in any proceedings.

There may also be privacy issues - if someone is putting something on an openly accessible part of the world wide web then arguably they can have no expectation of privacy, but if you have to "join" a group in order to access the information then there may be arguments that doing so amounts to an invasion of privacy.

In addition by looking at this information for the purposes of considering whether to employ someone you are almost certainly "processing" data as defined by the Data Protection Act and have a duty to comply with the data protection principles. Although the Information Commissioner's Office has not offered specific guidance on this topic, this is likely to mean that you need to tell applicants that you are doing such a search and what it reveals, and will have to give them a chance to comment on whether the information is accurate (for example, are you looking at the right "John Smith"?)

It is not necessarily the case that a prudent employer will never employ such methods, but caution should be exercised and a policy should be adopted and communicated to all potential recruiters within the organisation to avoid any expensive mistakes.

Friday, August 20, 2010

Substitute Me For Him... The Who would say.

The Employment Appeal Tribunal (EAT) has recently ruled that if a contract provides that someone providing services has the right to substitute someone else to do that work on their behalf they are not a "worker" as defined by the Employment Rights Act 1996.

The Employment Tribunal below had held that a dentist who was entitled to appoint a locum to carry out the work on his behalf was still a "worker" and could therefore pursue an unpaid wages claim.

The EAT said this was wrong because in those circumstances he was not, as required, "obliged to perform personally any work or services" even if it was his obligation to organise the locum.

This may come as something of a surprise. Based on previous case law it was widely considered that whilst someone in this situation would not be an "employee" they would come within the wider definition of a "worker."

Whilst only "employees" have certain rights, such as the right to claim Unfair Dismissal, the trend in more recent legislation has been to give the rights to "workers" - for example in respect of the National Minimum Wage and to holiday pay.

Since a potential effect of the EAT decision would be to reduce the entitlements of what are often called "atypical workers" there may be a temptation for Employment Tribunals to try and find ways of distinguishing it from the cases they hear.

One possible way of doing so will be to hold that a contractual provision which allows for substitution is a "sham" and does not reflect the actual relationship between the parties. Another argument will be that there are "fetters" on the right which mean that it is in fact the case that the worker is expected to do the work personally.

This is highly unlikely to be the last case on the eternally vexed question of employment status.

The case is reported in full at

Thursday, August 12, 2010

Work Until You Drop

The Government has announced that it intends to scrap the default retirement age of 65 with effect from 1st October 2011. This is not entirely a surprise as in a case last year the legislation was somewhat reluctantly upheld on the footing that it was to be reviewed in any event. It was however thought that the policy might be to increase the age to, say, 67, so doing away with it all together is more radical than had been expected.

At present employers can give notice to employees who are approaching (or have past) 65 of the intention to compulsorily retire them. Although the employee has a right to make a request to continue to work beyond 65, provided the employer follows the correct procedure as specified in the applicable Regulations the employee can be compelled to retire (without any reason for the refusal of the request being given) without being liable for unfair dismissal or age discrimination.

It is these provisions that are being scrapped.

The move is being presented as a progressive one – allowing people who are still fit and able to work to maximise their potential rather than being thrown on the scrap heap simply because of their age. A cynic might suggest that given the state of the public finances and an ageing population the Government is merely keen for more of us to work until we drop rather than funding pension provision, and that many people who work on beyond 65 do so out of economic necessity rather than lifestyle choice.

It will still be possible to retire someone compulsorily but this would have to be “objectively justified.” This involves showing that the retirement is an “appropriate” (and, based on the European legislation and case law, “necessary”) means of attaining a legitimate objective.

Whilst establishing a legitimate objective such as ensuring the business performs effectively may not be difficult, deciding whether a retirement is an “appropriate and necessary” means of achieving that objective is always going to be subjective to at least some extent. This change in the law will therefore undoubtedly increase the uncertainty for businesses and might well lead to situations which would previously have been dealt with by way of retirement having to be addressed through capability procedures, which will almost inevitably be more confrontational.

Some possible guidance in this area however may come from the recent Court of Appeal decision in the case of Seldon v Clarkson Wright Jakes. That case confirmed that the compulsory retirement of a partner in a firm of Solicitors at 65 could be “objectively justified.” This was on the basis that it would allow younger partners to come through and take up partnership and that it would facilitate workforce planning.

What could not be used as a justification was that this would avoid older partners having to be performance managed out, as the Court of Appeal said that this was based on a stereotypical assumption that performance (in the workplace!) deteriorates with age.

As an aside, this case is a useful reminder that discrimination legislation applies, albeit sometimes with adjustments, to partners as well as to employees – you may have rights as well as responsibilities!

The detailed legislation has not yet been published but it is anticipated that it will not be possible to give notice of intended retirement at 65 after 6th April 2011 (which is 5 days after the earliest date someone could be given notice to compulsorily retire on 1st October 2011) and that there will be transitional provisions covering notices already given before that date.