Monthly Archives: March 2015

Holiday Pay Must Include Commission

FG Solicitors - Holiday Pay CommissionSUMMARY: The Employment Tribunal has decided that, by adding a new provision, the Working Time Regulations 1998 (“WTR”) can be interpreted so that holiday pay must take into account commission.

Background

Mr Lock received a basic salary and was entitled to benefit under a commission scheme where payment was made for sales achieved.   Whilst on holiday, Mr Lock’s rate of pay was calculated with reference to his basic salary; he was also paid commission earned during previous weeks.  He was not however able to generate commission during his period of annual leave, so when he returned to work he received reduced remuneration. Mr Lock brought a claim for unlawful deduction of wages for unpaid holiday pay in the employment tribunal; he argued that holiday pay should be calculated to include all payments he would normally receive.  As the exclusion of commission from the holiday pay calculation appeared to be inconsistent with European law, the Employment Tribunal referred the matter to the Court of Justice of the European Union (“CJEU”).

Decision of the CJEU

For those of you who were keeping pace with the issue of what payments other than basic pay should be included in the calculation of holiday pay, you will remember that the CJEU concluded that Mr Lock’s commission payments must be taken into account when calculating holiday pay for the first 4 weeks of the 5.6 weeks statutory holiday period.

The following were key in relation to the CJEU coming to its decision: Mr Lock’s commission payments were directly and intrinsically linked to the performance of the tasks he was required to carry out; during annual leave Mr Lock could not generate any commission and, as a consequence, on his return would receive reduced remuneration; and the financial impact of this on a worker may deter them from taking their annual leave.

The CJEU referred the case back to the Employment Tribunal to consider how the decision sits alongside our domestic law.  Basically the tribunal would have to consider how holiday pay should be calculated.

Decision of the Employment Tribunal

The Employment Tribunal has concluded that the WTR can be interpreted so that commission must be included in holiday pay.  In order to arrive at this position the WTR should be read as if they contain a new Regulation 16(3)(e), which effectively confirms that, for the purposes of calculating holiday pay, a worker with normal working hours whose pay includes commission or similar payments shall be treated as having remuneration which varies with the amount of work done.

What Does this Mean for Employers?

In terms of calculating holiday pay, this means that a week’s pay for the purposes of calculating holiday pay will be calculated using the employee’s average remuneration to include commission payments over the 12 weeks before the calculation date. This calculation method will only apply in respect of the first four weeks’ leave not the whole of the 5.6 weeks maximum statutory holiday entitlement.

Any commission previously earned which falls due whilst the employee is on holiday will also need to be paid. 

Case

Mr S J Lock (and others) v British Gas and others ET case number 1900503/2012 & others 

Contact Details

For more details about this decision and what payments should be taken into account when calculating holiday pay please contact:

 fgmedia@fgsolicitors.co.uk

+44 (0) 808 172 93 22

This update is for general guidance only and does not constitute definitive advice.

Social Media in the Workplace Seminar – 23rd April 2015

SOCIAL MEDIA

Date: Thursday 23rd April 2015

Time: 8am – 10am

Venue: FG Solicitors’ Offices

Cost: Free & breakfast provided

To book your place at our Social Media in the Workplace seminar, please contact us using the details below:

info@fgsolicitors.co.uk

+44 (0) 808 172 93 22

We look forward to hearing from you.

Zero Hours Contracts Exclusivity Proposals

FG Solicitors -  Zero Hour ContractSUMMARY: The government has proposed a ban on exclusivity clauses in zero hours contracts supported by draft regulations aimed at preventing employers from circumventing the ban.

Background

The government has decided to ban exclusivity clauses in contracts which do not guarantee hours of work (zero hours contracts). There is a clause in the Small Business, Enterprise and Employment Bill (“SBEEB”) which would render the use of exclusivity clauses in zero hours contracts unenforceable.

The government’s most recent consultation included consideration of how to prevent employers seeking to avoid the ban on exclusivity clauses.  The government will have powers under the SBEEB to make regulations to deal with avoidance of the ban, widen the scope of who should be protected by the ban and provide routes of redress for an affected individual.

The government was concerned that if the ban solely related to exclusivity clauses in zero hours contracts, employers could avoid it relatively easily by guaranteeing workers, for example, 1 hour of work per week.

Although originally there were suggestions that zero hours contracts should be banned entirely, this is no longer proposed.

Proposals

The proposed anti-avoidance regulations deal with the following:

a)    Introducing a right for zero hours workers (or low income workers – see below) not to suffer detriment on the grounds that the worker has done work or performed services under another contract or arrangement.

b)    The prohibition on exclusivity clauses in zero hours contracts would extend to all contracts of employment or worker’s contracts under which the individual is not guaranteed a certain level of weekly income.  This is to address the concern that employers would avoid the ban by offering workers a very low minimum number of hours.

The weekly income threshold would be set in the following way:

[Y] number of hours per week multiplied by the adult national minimum wage (currently £6.50 per hour).  We do not know what “Y”, the number of hours per week, is at this time and therefore do not know what the threshold will be.

If, for example, Y is set at 10 hours per week, the weekly income threshold will be 10 x 6.50 = £65.00.  If a worker earned £10 per hour and was guaranteed work for 6 hours per week, they would fall below this threshold and so the prohibition on exclusivity clauses would apply.  If the same worker was guaranteed 7 hours per week, they would be above the threshold and therefore the employer could require them to work exclusively for them.

By way of another example, if an employee aged 16 was paid £3.79 per hour in accordance with the national minimum wage, they would have protection under the proposals if they worked up to 17 hours per week (based on the example of a £65 weekly income threshold).

c)    If the worker’s hourly rate of pay is at least £20 it would not matter how many hours they worked – the ban on exclusivity clauses would not apply to them.  This means, using the above example, that if a worker earning £20 per hour was guaranteed work for 3 hours per week they would be earning under the amount set out in the threshold above (£65).  However, the employer could still demand that they work exclusively for them because they are being paid £20 per hour.

d)    The affected worker would have 3 months (plus appropriate ACAS early conciliation time) after suffering a detriment for working under another contract/arrangement to bring a claim in the employment tribunal and receive compensation.  The employment tribunal would also be able to impose financial penalties in certain cases.

The government has also indicated it will improve its guidance on zero hours contracts.

Practical steps

Businesses may be concerned about their ability to engage the staff they need and have a flexible workforce if these proposals come into effect.  In particular, if workers fall below the low weekly income threshold, businesses will not be able to prevent them from working for direct competitors. There are a number of practical steps that businesses could take to evaluate and mitigate possible adverse effects from the proposals and ensure future compliance once these proposals are finalised and a date set for them coming into force.

For now, businesses should be aware that if they have exclusivity clauses in their contracts and engage low income workers, these proposals are likely to affect them.  If businesses are not concerned about exclusivity, these proposals should not concern them.

Businesses could also put in place procedures for ensuring that reasons are noted for choosing not to offer work to workers who are not guaranteed work (or only guaranteed a small number of hours of work).  This is because if the reason an employer does not offer a worker (whose guaranteed income falls below the weekly income threshold) work is that they have worked for another business, the worker could bring a claim on the basis they have suffered a detriment, under the proposals.  Such procedures would be useful in any event in relation to defending potential discrimination claims.

Businesses could also be checking whether they are offering the appropriate benefits, including holiday entitlement, to workers with no or few guaranteed hours.

Only proposals

It is important to remember that these are proposals and, particularly given the imminent general election, they may not come into force and/or they may be substantially amended.  No date has been set for this legislation to come into force.  It is also unknown when guidance on zero hours contracts will be reviewed or improved.

There is considerable uncertainty in relation to the level of the weekly income threshold, which is likely to ultimately determine the extent of the impact of these proposals on businesses.

What are the next steps?

We will keep businesses informed as to the likely date legislation will come into force and any amendments to the proposals including the likely level of the weekly income threshold.

Businesses who have exclusivity clauses in contracts are likely to require advice on varying these when and if the proposals come into effect.

If you would like any advice on taking any of the practical steps outlined above, please contact us using the details below.

Contact Details

For more details about the proposals on banning exclusivity in zero hours contracts and advice on practical steps businesses can take please contact:

fgmedia@fgsolicitors.co.uk

+44 (0) 808 172 93 22

This update is for general guidance only and does not constitute definitive advice.

Biggest National Minimum Wage Increases Planned for October 2015

 

National Minimum WageSUMMARY: From 1 October 2015 changes to the national minimum wage will come into effect. The biggest real-term rise in 7 years to the adult rate.

The Changes

The Government has announced the following changes to the national minimum wage which will take effect from 1 October 2015:

From 1 October 2014 to 30 September 2015 From 1 October 2015
Standard Adult Rate £6.50 £6.70
Development Rate £5.13 £5.30
Young Workers Rate £3.79 £3.87
Apprenticeship Rate £2.73 £3.30

The increase in the adult national minimum wage rate is reported to be the biggest real-terms rise in 7 years.

The Categories

The Standard Adult Rate
This rate applies to workers aged 21 or over.

The Development Rate
This rate applies to workers aged between 18 and 20 inclusive.

The Young Workers’ Rate
This rate applies to workers aged below 18 but above the compulsory school age but who are not apprentices.

Apprenticeship Rate
This rate was introduced in October 2010 and applies to all apprentices under 19 years of age or those aged 19 and over but in the first year of their apprenticeship.

Contact Details

For more details about the national minimum wage changes please contact:

fgmedia@floydgraham.co.uk

+44 (0) 1604 871143

This update is for general guidance only and does not constitute definitive advice.

Investigating Conduct – to what lengths should I go?

Investigations - FactsSUMMARY: Those of you who have had to conduct an investigation into an allegation of misconduct will be familiar with the ACAS Code of Practice on Disciplinary and Grievance Procedures and the requirement for a reasonable investigation. Failure to carry out a reasonable investigation can render any dismissal unfair.

What does ACAS say?

The key legal principle of any disciplinary process is fairness; and, thus, it follows that the investigation, which enables an employer to decide whether dismissal is justified, must be conducted fairly. What is fair will be dependent on the circumstances of each case but, in any investigation, the employee must be given an opportunity to respond to the allegations against him/her.

What lengths do employers need to go to?

Although it is difficult to give any guarantees about the lengths that will render an investigation fair and reasonable a recent Court of Appeal case – Shrestha v Genesis Housing Association Limited has given some guidance on this. In this case the court provided employers with reassurance that, where the employee gives a number of explanations for why the allegations are not true, it is not incumbent on the employer to go to the lengths of investigating each and every explanation.

The investigation into Mr Shrestha’s mileage expense claims

Genesis Housing Association Limited (Genesis) employed Mr Shrestha as a “floating” support worker, which meant that he was regularly travelling by car to see clients at various locations. Accordingly Mr Shrestha submitted mileage expense claims to Genesis for those journeys. In 2011, due to increasingly high mileage expense claims submitted by Mr Shrestha, Genesis conducted an audit of those claims. The audit included a comparison of the miles Mr Shrestha claimed he travelled for each journey against the miles given by an on-line AA route finder. This comparison established that Mr Shrestha’s claims appeared excessive. For example, in July 2011 he claimed that his journeys undertaken that month totalled 197 miles whereas, the AA’s suggested mileage for those same journeys totalled 99 miles.

Genesis therefore conducted an investigation into the allegation that Mr Shrestha had falsified his expense claims. At the investigatory meeting Mr Shrestha was asked about some of the journeys he had claimed for. He gave a number of explanations for the discrepancy between the miles he claimed he had driven and the AA’s suggested miles for those journeys. These explanations included.

  • diversions travelled due to road closures;
  • difficulties with parking; and
  • one way road systems.

Despite his explanations, Mr Shrestha was subsequently dismissed for gross misconduct. He claimed unfair dismissal on the basis that Genesis had not put every mileage discrepancy to him nor had it investigated every explanation Mr Shrestha put forward for those discrepancies, which were discussed during the disciplinary process.

The Court’s decision

The court decided that it was not necessary to put every journey to Mr Shrestha, nor was it necessary to investigate each of the explanations he gave as to why he was claiming for far more miles than the AA suggested for each of those journeys. This was because the audit had identified that each journey he claimed for significantly exceeded the AA’s suggested mileage for that journey, and it was therefore unrealistic that there could be a credible explanation for Mr Shrestha’s claims to exceed the AA’s suggested mileage in each and every instance. The court also paid attention to the fact that Mr Shrestha had claimed fewer miles for the same journey some 12 months or so ago and that the AA mileage took account of one way systems.

The court therefore concluded that it is not necessary for an employer to extensively investigate each line of defence advanced by an employee and that, ultimately, the key to deciding whether it is reasonable is to look at the investigation as a whole.

What does this mean for employers?

Although this case is to be welcomed by employers it is imperative that investigations are carefully planned in terms of what they should encompass to ensure reasonableness. This is particularly so in cases where dismissal as the outcome is a real possibility.

Case

Shrestha v Genesis Housing Association

Contact Details

For more details about conducting investigations and, more generally, disciplinary procedures please contact:

fgmedia@fgsolicitors.co.uk

+44 (0)808 172 93 22

This update is for general guidance only and does not constitute definitive advice.