Pothecary Witham Weld Solicitors

One of the most radical recent developments affecting employers and employees is the Employment Act 2002 (Dispute Resolution) Regulations 2004 which came into force on 1st October 2004. Under these Regulations all employers regardless of size are obliged to operate minimum statutory grievance and disciplinary procedures and the small employer exemption from the need to provide employees with details of such procedures is abolished.

Employees generally have to go through the statutory grievance procedures as a precondition of being allowed to bring claims to an Employment Tribunal (ET). Likewise, employers are required to go through formal disciplinary/dismissal procedures (including for example redundancy) before dismissing staff, failing which dismissals will invariably be automatically unfair. In a recent case dealt with by the firm, the Employment Tribunal ruled that if the claim is that the dismissal was unfair on the grounds of unlawful discrimination, the disciplinary procedure applies but the employee does not additionally have to initiate a grievance about the discrimination aspect. However the employee must then restrict his claim to unfair dismissal tainted by discrimination. Any other complaints about discrimination would have to be subjected to by the employee to the internal grievance procedure before the ET would have jurisdiction to consider them.

In most cases the procedures are straightforward. Step 1 is a written statement, usually in the form of a letter, setting out the employee grievance or employer disciplinary or redundancy concern. Following the step 1 letter there should be a meeting which is Step 2, after which, the employer must inform the employee of his decision and of the right of appeal. Step 3 comprises the appeal meeting if the employee notifies a wish to appeal.

Employees can suffer severe penalties by failing to use the statutory procedures in that an Employment Tribunal may not consider their claims at all. Likewise, if employers fail to use the statutory procedures they will be penalised by rulings of automatic unfair dismissals and increases in the compensation awards by up to 50 percent.

In cases of constructive dismissals, that is where the employee quits and claims that he was forced to do so by the employer’s fundamental breach of contract, the dismissal procedures are inapplicable but the employee is still required to try to initiate the grievance procedure before referring to the Employment Tribunal even though the employment will already have ended at that time.

Dealing with some specific questions raised by members of the BSBC:

1. “What are the changes with regard to taking people on a probationary period”?

There are no specific changes in the law relating to probationers for normal employments without specific regulations such as those affecting the police or armed forces.

Employers are entitled to employ staff on a probationary basis during which employment may be ended by either party usually on a week’s notice expiring at any time. The probationary period however is subject to the normal law relating to unfair dismissal which usually applies after 12 months continuous service and to the laws against discrimination which apply from the job advertisement, interview stage through to day 1 of the employment onwards. The effect of the latter is that employers which dismiss employees for reasons which are unlawfully discriminatory will be liable for compensation for claims of unfair dismissal/discrimination irrespective of the probation period.

Probationary periods tend to be useful firstly for making plain to employees and employers, that the initial employment is for a trial period and secondly for ensuring that during that trial period, any contractual notice that would normally be required to be given for example two or three months or more in the cases of schools would not be applicable during the probationary period when one week’s notice will be substituted. The latter advantage continues to apply up to two year’s service although the employee will have the right not to be unfairly dismissed irrespective of the length of notice given after 12 months.

2. “What are the Regulations regarding jury service and what and how can you claim people’s time”?

Surprisingly, no statute specifically requires an employer to allow employees time off work for jury service although with effect from 6th April 2005, dismissing an employee for taking time off work for jury service would in most cases render the employer liable for an automatic unfair dismissal decision. Even before that an employer might be liable to be fined for contempt of court for refusing absence for jury service. Employers are not required to pay the salaries of such absent staff but many do. No payment to employers is made by the state or court in respect of staff absent on jury service but individual jurors are entitled to a payment for loss of earnings and benefits. Application forms for affected employees are available at the court or where the jury service is served.

3. “What to look out for when employing freelancers and sub contractors”?

This is the most difficult and controversial of the question put to Richard Fowler in advance of this meeting. The key points for employers to consider are first regardless of what may be agreed in writing between the individual and the employer about self employment, their status may be interpreted by Employment Tribunals when looking also at the work actually done by the individual, as creating an employment contract. This Employment Tribunal’s interpretation of employment may apply even in cases where the Inland Revenue accept that the individual is self employed. In such cases, the employer may become liable to pay national insurance/PAYE for the individual. Specific provision is made for the construction industry. Under the construction industry scheme, a flat deduction on account of tax and NI contribution is made from payments by employers to any self-employed sub contractors in the trade who do not have gross payments certificates. The government has made available new information packs for the scheme which was updated in April 2007.

The criteria for deciding whether someone is an employee or not were detailed as long ago as 1968 in the case of Ready Mixed Concrete (South East) Limited v Ministry of Pensions and NI (1968 1 ALL ER 433). For the worker to be an employee he must be paid; have agreed expressly or impliedly to carry out at least some of the work personally that is, with his own hands and the employer must exercise some degree over the worker’s work. Work permits and immigration are also possible issues to consider in this area. Asylum seekers have no automatic right to work in the UK and must obtain specific permission to do so from the Immigration & Nationality Directorate, Lunar House, 40 Wellesley Road, Croydon, CR9 2BY or a Regional Office. The Home Office has wide powers to require employers to supply information about employees who are suspected of having committed immigration related offences.

4. “What changes affect a company when they employ five or more staff”?

On 6th May 2003 the EC made recommendations regarding the definition of micro, small and medium sized employees along the following lines: Micro – are less than 10 employees and less than 2million Euro balance total or turnover.

Small companies are those with fewer than 50 employees and less than 10million Euro balance total or turnover and other small employers are those with fewer than 250 employees and less than 43million Euro balance total or 50million Euro turnover.

Employees do not include apprentices or students for those purposes.

Statutory maternity, paternity and adoption pay can be reclaimed by small employers. For the purposes of SMP a small employee is defined as one whose NI contributions do not exceed £45,000 for the qualifying tax year.

The small employers exemption as regards maternity and adoption leave has been removed as from 1st April 2007.

Small employers are exempted from some health and safety documentation rules.

There is a general unfair dismissal requirement for courts and Employment Tribunals to take into account “the size and administrative resources of the employers undertaking” when considering the fairness of dismissal.

Under the pre-April 2007 law relating to “maternity and adoption” leave, the provisions making dismissals automatically unfair if an employee was not allowed to return to work after maternity or adoption leave did not apply to small employers who satisfied certain conditions. Small employers in that context meant five or fewer employees.

Employers’ Liability Insurance: With effect from 28th February 2005 companies which only have one employee and that employee also owned 50% or more of the issued share capital are exempted from the requirement to have employers’ liability compulsory insurance.

Disability discrimination exemption for small employers was removed on 1st October 2004.

Likewise, the special rules for small employers in respect of disciplinary and grievance procedure came to an end on 1st October 2004.

Small employers can pay PAYE and Class 1 national insurance contributions quarterly whereas larger employers must pay monthly.

Industrial training levy in the construction and engineering industry for the purposes of raising money towards the expenses of relevant training boards do not apply to smaller employers.

Trade Union Recognition: The rules requiring employers to recognise trade unions in some circumstances only apply where at least 21 workers are involved.

Stakeholder Pensions: Employers with fewer than five employees are exempt from employer’s obligations under the “stakeholder pensions” scheme notably the obligation to facilitate employees’ access to a scheme. Employers increasing staff to five or more have three months from the date of taking on a fifth employee to comply with the regulations.

Companies with fewer than 15 employees are exempt from the requirements of the Information and Consultation of Employees’ Regulations 2004 – the relevant threshold will be 50 employees from 6th April 2008 (currently 100).

Employers with fewer than 5 employees are exempt from record keeping rules as regards certain fire safety regulations.

Special rules for small firms under Redundancy and Sex Discrimination Legislation were abolished some years ago.