12 March 2007

NEWS

Debate on Bill to Protect Agency Workers Runs Out of Time for Vote

The debate of the Private Members' Bill to prohibit direct discrimination against agency workers ran out of time in the House of Commons.  Read more

More than 3.5 Million Workers Guilty of Workplace Crimes

A report by Protiviti, an internal auditing and risk consulting group, has revealed that up to 3.6 million employees were guilty of one or more workplace offences in the past 12 months, with many of the crimes going unreported.   Read more

Employers' and Insurers' Calls for Changes to Age Discrimination Laws Rejected

Calls for changes to the age discrimination laws to prevent the costs of insuring older workers against death and long-term illness from soaring have been rejected by Ministers.  Read more

New Super Union Approved by Amicus and T & G Members

Members of Amicus and T & G have approved a merger of the two unions in a move that will create Britain and Ireland's largest trade union with around two million members.  Read more

One Million Workers Set to Benefit From National Minimum Wage Rise

The Secretary of State for Trade and Industry, Alistair Darling, has accepted the recommendation by the independent Low Pay Commission to raise the National Minimum Wage from £5.35 to £5.52 an hour from October 2007.  Read more

Government Publishes Strategy Paper on Enforcing UK Immigration Laws

The Government has issued an enforcement strategy paper setting out how it intends to achieve one of the objectives identified by the review of the Immigration and Nationality Directorate (IND) in July 2006.  Read more

LEGISLATION

There is no new legislation to report this week.

CASES

Payments in Lieu of Unexpired Notice Taxable as Earnings

The High Court has held that payments made on redundancy in respect of unexpired notice and provided for in an agreement with a trade union were taxable in full as earnings.  The employer had been wrong to treat them as redundancy termination payments and not deduct tax and National Insurance.  Read more

Court of Appeal Rules on Meaning of Qualifying Disclosure

The Court of Appeal has overturned part of the much criticised decision in Kraus v Penna and has decided that it is enough for an employee reasonably to believe that a criminal offence or legal obligation exists when making a "qualifying disclosure" under the whistleblowing legislation.  It is not necessary for that criminal offence or legal obligation actually to exist.  Read more

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NEWS

Debate on Bill to Protect Agency Workers Runs Out of Time for Vote

The debate of the Private Members' Bill to prohibit direct discrimination against agency workers ran out of time in the House of Commons.

As reported in our Briefing dated 5 February 2007, the Temporary Agency Workers (Prevention of Less Favourable Treatment) Bill received the support of a coalition of trade unions.  However, at the proposed second reading the Bill was "talked out" by MPs, preventing a vote.   

Supporters of the Bill have vowed to continue to pursue its implementation and have criticised the government for not offering its support.  In a joint statement, the leaders of Amicus, GMB, Transport and General Workers, Unison and Communication Workers' unions said: "Unfortunately the government has chosen not to support the Bill, and for this reason it is not likely to proceed, but they need to be aware of the extent of the problem, and the devastating impact it is having on many people's lives and those of their families.  This is not the end of our campaign, it can only be the beginning."

If implemented the Bill would give agency workers the same rights to pay, sick leave and overtime as directly employed staff.

The debate is not now due to resume until 19 October 2007.  (Personnel Today, 6 March 2007)

To view our earlier Briefing on the proposed Bill click here.  Back

More than 3.5 Million Workers Guilty of Workplace Crimes

A report by Protiviti, an internal auditing and risk consulting group, has revealed that up to 3.6 million employees were guilty of one or more workplace offences in the past 12 months, with many of the crimes going unreported.  

Protiviti's survey of 1,546 workers discovered that 3 million employees are thought to be guilty of workplace theft each year, while a further 500,000 committed complex fraud which employers find difficult to detect.  The cost to British businesses of workplace fraud was estimated at £50 million, though an accurate figure is likely to be considerably higher. 

The more complex and serious offences included false expense claims, theft of intellectual property, accepting bribes from suppliers and falsely adjusting company accounts.

The director of Protiviti, Sean Holohan, said: "Most fraud in the UK goes unreported, as businesses seek to settle matters away from the public eye, or undetected because their processes and controls are just too weak.  This should serve as a warning to employers that they need to have robust systems in place to mitigate fraud risk at all levels."  (Financial Times, 7 March 2007)  Back

Employers' and Insurers' Calls for Changes to Age Discrimination Laws Rejected

Calls for changes to the age discrimination laws to prevent the costs of insuring older workers against death and long-term illness from soaring have been rejected by Ministers.

The current age discrimination rules, brought into force in October last year, prevent employers from offering different terms and conditions to their staff based on their age.  The Employers' Forum on Age, the Association of British Insurers and Group Risk Development had asked that the laws be amended to allow employers to "place an upper age limit for providing benefits payable on death, long-term illness or sickness".  They warned that increased premiums for workers who remained employed beyond the normal retirement age would force employers to reduce benefits for all employees or stop them from employing older staff.

In response the employment minister, Jim Fitzpatrick, said: "It would not be justified to provide for employers to set an upper age limit on the provision of insurance-based benefits."  Mr Fitzpatrick argued that employers would still be able to limit the availability of benefits provided they could provide "objective justification, for example, if it meant that they would otherwise have insufficient funds for research and development necessary to keep the business competitive."

Mr Fitzpatrick did, however, concede that the cost and unpredictability of employment tribunals might make employers reluctant to pursue an "objective justification" approach. 

The DTI has acknowledged the concerns and said that it will "monitor closely the effectiveness of the legislation."  It said: "If experience of the regulations in practice reveals particular problems in this area we shall consider whether further action is necessary."

However, the proponents of the amendments claimed the DTI's monitoring of the legislation will not respond to the urgency of the request.  As many companies are due to make decisions as to the renewal of premiums in the next few months, any conclusions from the DTI at the next meeting in September will be too late.  (Financial Times, 6 March 2007)  Back

New Super Union Approved by Amicus and T & G Members

Members of Amicus and T & G have approved a merger of the two unions in a move that will create Britain and Ireland's largest trade union with around two million members. 

The merger was approved by members of Amicus and T & G in a ballot on 8 March 2007.  With both unions achieving a turnout of 27 per cent, T & G members voted 80.4 per cent in favour of the merger and Amicus members voted 70.1 per cent in favour.

The currently unnamed new union will cover a huge range of industries and services including transport, manufacturing, aviation, food and farming, the financial sector as well as public service and the voluntary sector. 

Following the results of the ballot the General Secretary of the T & G, Tony Woodley, said: "The new union will be a progressive, organising, fighting back industrial giant focussed above all on winning for our members in the workplace and taking trade unionism to the millions who need it."

Amicus leader, Derek Simpson, said: "The new union will be the greatest campaigning force on behalf of ordinary people that has ever existed.  It is a precursor to the creation of a single global trade union movement capable of challenging the might of multinationals who seek to play workforces and governments off against each other to reduce jobs and hard won pay and conditions."

The new union will officially exist from 1 May 2007 (subject to the completion of legal requirements) and the current General Secretaries of T & G and Amicus, Tony Woodley and Derek Simpson, will serve as Joint General Secretaries of the new union.  A sole General Secretary will be elected in a membership ballot in 2010.  (Amicus Press release, 8 March 2007)  Back

One Million Workers Set to Benefit From National Minimum Wage Rise

The Secretary of State for Trade and Industry, Alistair Darling, has accepted the recommendation by the independent Low Pay Commission to raise the National Minimum Wage from £5.35 to £5.52 an hour from October 2007. 

The acceptance of the Low Pay Commission's recommendation will also mean an increase from £4.45 to £4.60 for 18-21 year olds, and an increase from £3.30 to £3.40 for 16-17 year olds.

Mr Darling said: "More than a million workers, two thirds of them low paid women will benefit from this announcement.  It means the minimum wage has gone up by almost 30 per cent more than inflation since 1999, with the number of jobs in the economy increasing by almost 2m in the same period.  It is right for workers and employers."

"I am proud of the minimum wage, proud of how it is helping families and proud of the role it plays in the modern economy we are delivering."  (DTI Press Release, 7 March 2007)

This latest increase in the National Minimum Wage follows the introduction of tougher penalties for breaches of the National Minimum Wage.  To view our earlier Briefing on the new penalties click here.  Back

Government Publishes Strategy Paper on Enforcing UK Immigration Laws

The Government has issued an enforcement strategy paper setting out how it intends to achieve one of the objectives identified by the review of the Immigration and Nationality Directorate (IND) in July 2006. 

The objective being addressed involves ensuring and enforcing compliance with immigration laws by removing the most harmful people first and denying privileges of Britain to those who remain here illegally.

The Home Secretary, John Reid, identified the background to the objective.  He said: "In Britain the majority of people work hard, play by the rules and get on through merit.  We have a proud record of integrating immigrants from around the world, and Britain has become home to many individuals fleeing persecution.  Most people who come to this country wish to comply fully with our immigration laws, but where they don't we are committed to blocking the benefits and privileges that should be enjoyed by those here legitimately.  That’s why the time is now right to tackle the root cause of the problem – exploitation."

Mr Reid summarised how the strategy paper would address the objective.  He said: “Today’s strategy outlines how we plan to tackle those who commit the most serious harm first, by developing local partnerships allowing IND to respond to the individual needs of communities.  We will also make it easier to obey the rules through enhanced checking services for employers and the introduction of a new system for managing migration requiring sponsors to support applications.  This new approach will make life in this country ever more uncomfortable and constrained for those who come here illegally.”  (Home Office Press Release, 7 March 2007)

To view a copy of the strategy paper click here.  Back

LEGISLATION

There is no new legislation to report this week.

CASES

Payments in Lieu of Unexpired Notice Taxable as Earnings

The High Court has held that payments made on redundancy in respect of unexpired notice and provided for in an agreement with a trade union were taxable in full as earnings.  The employer had been wrong to treat them as redundancy termination payments and not deduct tax and National Insurance. 

The employees' contracts provided for termination by notice and did not contain any provision for a payment in lieu of notice (PILON).  However, the employer entered into an agreement with the union (the "Memorandum of Agreement for the Protection of Employment and Compensation for Redundancy") which provided that payment would be made for any unexpired period of notice at the date of termination.  On making redundancies, the employer paid PILONs calculated in accordance with the terms agreed with the union.  It did not make any deduction for tax and National Insurance. 

The case came before the High Court on appeal from the Special Commissioners.  There was no appeal against the Special Commissioners' finding that the terms of the agreement with the union were incorporated into the individual contracts of employment.  The High Court held that on a proper construction of the contract (incorporating the redundancy terms from the Memorandum), there was a contractual entitlement to payment in lieu of unexpired notice in redundancy situations and this entitlement applied irrespective of whether employment was terminated unilaterally by the employer (ie in breach of contract, without notice) or by agreement with the employee to accept short or no notice.  As such it was taxable in full as earnings and subject to deductions for National Insurance. 

This case demonstrates that where redundancy or other termination arrangements include provisions for payment in lieu of unexpired notice and these provisions are incorporated into the contract of employment, any payments made in respect of unexpired notice will be taxable in full as earnings under section s62 Income Tax (Earnings and Pensions) Act 2003 (ITEPA).  They cannot be treated as termination payments taxable under s403 ITEPA (with the first £30,000 being exempt from tax).

The Revenue also argued before the Special Commissioners that even if there was no contractual entitlement to the PILON, the payment was taxable because it was made as an automatic response to termination (an automatic PILON), without any critical assessment as to whether to make the payment.  The Special Commissioners rejected this argument, holding that HMRC's view on automatic PILONs was incorrect.  PILONs were only taxable if they were contractual, either as an express or implied term. A term will only be implied if it is "reasonable, certain and notorious" – a stricter test than that used by the Revenue for automatic PILONs. The Revenue did not appeal the Special Commissioners' decision and so the issue did not fall to be determined by the High Court. Unfortunately, unlike High Court decisions, decisions of the Special Commissioners are not binding and so the Revenue remains free to argue the point in future cases.

SCA Packaging v HM Customs & Excise  Back

Court of Appeal Rules on Meaning of Qualifying Disclosure

The Court of Appeal has overturned part of the much criticised decision in Kraus v Penna and has decided that it is enough for an employee reasonably to believe that a criminal offence or legal obligation exists when making a "qualifying disclosure" under the whistleblowing legislation. 

Under the whistleblowing provisions of the Employment Rights Act 1996, a qualifying disclosure is one which "in the reasonable belief of the person making the disclosure, tends to show", amongst other things, that a criminal offence has been committed or that a legal obligation has not been complied with. 

In Kraus v Penna, the EAT held that, in a case where a whistleblower relies on a reasonable belief that the disclosure tends to show that a legal obligation has not been complied with, protection is lost if, as a matter of law, there is no legal obligation. The fact that the whistleblower reasonably believed the legal obligation existed did not matter.   

The Court of Appeal has now overturned this point, stating that there is nothing in the whistleblowing provisions which requires the whistleblower to be correct in his reasonable belief that a criminal offence had been committed or that a legal obligation existed.  Wall LJ stated that "the fact that (the whistleblower) may be wrong is not relevant, provided that his belief is reasonable and the disclosure to his employer is made in good faith". 

This is clearly a sensible decision.  As the Court of Appeal pointed out, there are sound policy reasons for this interpretation of the legislation as the purpose of the statute is to "encourage responsible whistleblowing".  It would not be reasonable to expect every potential whistleblower to have a "detailed knowledge of the criminal law sufficient to enable them to determine whether or not the particular facts which they reasonably believe to be true are capable, as a matter of law, of constituting a particular criminal offence".  The interpretation previously given had the potential to deter potential whistleblowers as they could lose protection from dismissal/detrimental treatment if it turned out that they were wrong to believe, however reasonably they held that belief, that a legal obligation existed or that a criminal offence had been committed.

Babula v Waltham Forest College  Back

© Pinsent Masons 2007

This bulletin is not intended to be a definitive analysis of legislative or other changes and professional advice should be taken before any course of action is pursued.

Should you have any questions please contact your usual Pinsent Masons advisor, your local office (see below) or hrnetwork@pinsentmasons.com

National Head of Employment

Chris Booth