SUMMARY: The Sports Direct founder, Mike Ashley, faced the Business Innovation and Skills (“BIS”) Select Committee on 7 June 2016 for an evidence session into the working practices adopted by Sports Direct. A month later, it was widely reported that Sports Direct’s profits had been hit. Mr Ashley’s fortunes have not improved as this month it has been announced that shareholders will be asked to vote on whether there should be an independent workplace review – we will have to wait until September to see how this latest chapter unfolds.
But how did it come to this?
To recap, Mr Ashley received intense criticism stemming from the Guardian Newspaper’s investigation at the end of 2015, which uncovered allegations that his Company:
- Failed to pay its workers the minimum wage;
- Engaged a significant proportion of staff via zero hours contracts and short term hours agency worker agreements;
- Created a culture of fear throughout its workforce due to arbitrary and outdated disciplinary practices; and
- Conducted daily physical security searches of employees.
On the back of the ever increasing publicity of how some high profile companies treat their employees, we have produced a two part series to enable you to assess whether your company is inadvertently making the same mistakes as those reportedly made by Sports Direct. The first in this series explores the allegation that Sports Direct failed to pay its workers the minimum wage and sets out the law behind this complex issue.
HM Revenue and Customs (“HMRC”) are currently investigating allegations that Sports Direct paid its workers less than the National Minimum Wage (“NMW”) effectively saving the Company millions of pounds per year.
The underpayment allegedly arose as a result of workers being forced to undergo compulsory rigorous security checks at the end of their shifts as a theft prevention measure, adding as much as 15 minutes onto their working day (or up to one hour and fifteen minutes to their working week), which is unpaid.
In addition, it is also alleged that workers faced a 15 minute deduction from their pay for “clocking on” 1 minute after their designated start time, even if they actually arrived on site on time.
WERE THE SPORTS DIRECT STAFF WHO WEREN’T EMPLOYEES ENTITLED TO NMW?
All employers are obliged to pay the NMW regardless of their size, and the NMW applies to all “workers” ordinarily working in the UK who are over compulsory school leaving age, not just employees. This includes agency workers and apprentices.
WHAT ARE THE CURRENT NMW RATES?
From 1 April 2016, there are now 5 rates of NMW:
|National Living Wage
||Workers aged 25+
|Standard Adult Rate
||Workers aged 21-24 (inclusive)
||Workers aged 18-20 (inclusive)
|Young Workers Rate
||Workers aged under 18 but above the compulsory school age
- Under the age of 19; or
- Aged 19 or over, but in the first year of their apprenticeship
HOW DO I DETERMINE IF MY COMPANY IS PAYING THE NMW?
In order to determine whether the NMW is being paid to your workers, you will need to determine their average hourly rate of pay.
On the face of it this calculation seems quite a simple one – sadly, this is not so. The average rate of pay is calculated by dividing the total amount of “money payments” that a worker earns across the relevant reference period, by the number of hours the worker has worked during that same reference period. However, what amounts to a “money payment” frequently trips up the uninitiated – see below.
The number of hours worked (known as “working time”) can also prove a tricky area for companies and one which has given rise to a raft of case law on its own. This is dealt with below.
Turning then to the relevant reference period, this is usually one month and cannot be greater than one month. However, if the worker is paid weekly or daily, then this is their reference period.
What Money Payments Should Be Considered?
Companies must exercise caution as some payments cannot be included as “money payments” for NMW purposes:
|EXAMPLES OF INCLUDED PAYMENTS
|Bonus**An annual bonus paid for example in December, will usually only count for the December reference period
|Commission/Incentive Payments Based on Performance
|Allowances Paid by HMRC Dispensation Agreements
EXAMPLES OF EXCLUDED PAYMENTS
|Benefits in Kind
|Loans Given by the Company
|Advances of Wages
|Lump Sum Payments on Retirement
|Premiums Paid for Overtime/Shift Work
|Tips and Gratuities
What About Deductions From Pay?
Certain deductions from a worker’s pay can reduce their pay for NMW purposes, including deductions made by a company in respect of expenditure in connection with carrying out their duties (e.g. the cleaning or purchase of uniforms). After these deductions have been taken into account the worker must still be left with at least the NMW.
Another famous retailer, Monsoon, was ordered to pay more that £100,000 to its employees in 2015 as a result of its practice of requiring staff to wear Monsoon clothes at work and deducting the discounted cost of the clothes from their wages. After the deduction, staff were left with less than the NMW.
Conversely, certain deductions do not reduce a worker’s pay for NMW purposes such as a deduction permitted by the contract between the Company and the worker due to misconduct.
In the case of Sports Direct, it has been reported that deductions were made from workers’ pay for lateness. If the deductions were not permitted by contract, the deduction would reduce the workers’ pay for NMW purposes.
A deduction of this nature could also amount to an unlawful deduction of wages, allowing the worker to bring a claim in the Employment Tribunal.
What Is Classed As Working Time?
Finally, a key issue for the Sports Direct case is what is actually classed as working time?
Working time is defined as any time during which a worker is working, at their employer’s disposal and carrying out their duties. There has also been recent case law demonstrating that, for those workers without a fixed placed of work, travelling time to their first assignment of the day and travelling time from the last assignment of the day may count as working time.
Against this legal backdrop, should the time spent by Sports Direct workers undergoing compulsory security checks be considered working time that is counted for NMW purposes? It is highly likely that the answer to this question is “yes”. This is because workers are not free to leave the company’s premises until the compulsory security checks are completed.
How Can Your Company Avoid A Similar Fate?
Those companies operating in sectors where payment of the minimum wage is prevalent often adopt a proactive stance and schedule annual reviews to ensure legal compliance in this respect. These reviews can be linked to annual pay reviews or can form part of wider audits which align HR strategies to deliver the businesses’ objectives.
In any event, and at the very least, all companies need to:
- have an awareness of the current NMW rates which are updated twice a year;
- understand what payments can be included for NMW purposes; and
- understand what counts as working time for NMW purposes.
This then enables a company to identify any risks which may arise on the back of the publicity surrounding high profile NMW cases such as Sports Direct; at the very least this will enable that company to tackle those risks head on.
If you would like more information on this topic, audits or would like to discuss a specific concern in relation to your business, please contact us:
Call: +44 (0) 808 172 93 22 Email: email@example.com
This update is for general guidance only and does not constitute definitive legal advice.
On the 8th day of Christmas my employee said to me…. “I didn’t enjoy the Christmas party as one of my colleagues kept harassing me.”
With the ever increasing demands of work the Christmas party is a great way to say thank you to staff. Most employees, when entering into the party spirit, will remember that there is a need to convey some semblance of good behaviour; sometimes, however a small number of staff are forgetful of this and lose all sense of propriety. In most instances their behaviour will be mildly amusing or annoying but in some cases it can become offensive and distressing.
Regardless of whether the party is away from the workplace and/or not in work time, employment law will still apply. This means employees who behave inappropriately towards their colleagues can be held accountable for their behaviour. Additionally, employers can be held responsible for the conduct of an employee towards a colleague where bullying, harassment and discrimination is involved.
It is therefore important to take seriously complaints of this type and not treat them any differently because the behaviour complained of occurred at a social event. Ignoring such a complaint could lead to a costly employment tribunal claim and reputational damage. Key considerations for an employer wishing to minimise these risks include:
- Ensuring the complaint is dealt with quickly and impartially under the grievance procedure – the procedure should include the usual stages such as an investigation, meetings and an appeal.
- Taking disciplinary action if the complaint is upheld.
However, proactive employers can also take preventative steps to minimise the risk of complaints in the first place, such steps can include:
- Implementing and communicating an equality and harassment policy.
- Providing equal opportunities training.
- Dealing with complaints fairly and effectively.
Implementation of these simple steps should enable everyone to focus on the true purpose of the event and have fun at this time of year.
For more details about the issues in this article please contact:
+44 (0) 808 172 93 22
This update is for general guidance only and does not constitute definitive advice.
Thank you to all those who came to our Effective Discipline and Grievance Processes Seminar, which was held on 15 September in association with the CIPD Bedfordshire Branch.
The event was well attended and provided an opportunity for organisations to meet up and obtain a useful insight into effective discipline and grievance processes as well as gain practical guidance on difficult cases.
Floyd Graham was the featured speaker and struck a chord with many of the attendees from whom we have received some great testimonials via our feedback questionnaire.
If you missed the event and would like to receive a copy of the presentation slides for the event then please contact us via the details below:
+44 (0) 808 172 93 22
Effective Discipline and Grievance Processes for Performance Management: Practical Guidance on Difficult Cases - in association with: CIPD Bedfordshire Group
Date: Tuesday 15th September 2015
Time: 9:30am – 13:00pm
Venue: Elstow Playing Field Association Main Hall, Wilstead Road, Elstow, Bedford, MK42 9YP/YF
Cost: Free with buffet lunch included
In association with the Bedfordshire CIPD Branch we will explore how you can apply the law effectively to support performance management particularly focusing on dealing with difficult cases. The session will provide insights into how investigations and disciplinary hearings should be managed when allegations of unfair discrimination, harassment or bullying are being considered. We will then explore best practice guidelines when hearing grievances arising from protected disclosures/ whistle-blowing.
To book your place at our Performance Management seminar, please contact us using the details below:
+44 (0) 808 172 93 22
If you feel this seminar would benefit other colleagues or companies please feel free to forward the details on.
SUMMARY: A council in Wales has been warned about its future conduct after carrying out covert surveillance of an employee in breach of the Data Protection Act 1998
Circumstances of the warning
The ICO (Information Commissioner’s Office) has reported that the following occurred at Caerphilly council, resulting in a warning:
- An employee was off work for 4 weeks with a sick note for anxiety and stress when covert surveillance was authorised.
- The employee had told a few people that she felt housebound and the employer believed that she would use the absence to avoid attending meetings she was required to attend at work.
- There was no medical indication that the employee was housebound.
- No other measures were taken to discuss the employee’s sickness absence and potential attendance at meetings before resorting to covert surveillance.
- There had been no evidence to suggest that the employee would use the sickness policy as a basis for not attending the meetings she was required to attend. In fact the employee attended a meeting which took place shortly after the surveillance had been carried out without being aware that the surveillance had been conducted.
- The report which was produced by the surveillance company was never used despite the report verifying that the employee was not housebound.
Breach of the Data Protection Act 1998 (“DPA”)
The Commissioner’s view was that there were not sufficient grounds at this early stage of the employee’s sickness absence to justify the authorisation of covert surveillance. The Commissioner therefore considered that the covert surveillance of the employee’s activities was unfair and in breach of the First Data Protection Principle (which is to process personal data fairly and lawfully).
How can employers comply with the DPA when carrying out CCTV surveillance of employees?
The ICO has made it clear that covert surveillance to monitor employee behaviour can be justified in some circumstances. However the employer must:
- be satisfied that there are grounds for suspecting criminal activity or equivalent malpractice (i.e. serious but non-criminal employee misbehaviour such as fraudulently claiming sick pay);
- be satisfied that notifying individuals about the monitoring would prejudice its prevention or detection. Keep records of these details; and
- consider alternatives to covert surveillance which respect the employee’s privacy and keep a record of the reasons why these alternatives are not viable/appropriate. The ICO Employment Practices Code advises conducting a written impact assessment which must:
- clearly identify the purpose(s) behind the surveillance and the benefits it is likely to deliver;
- identify any likely adverse impact of the surveillance;
- consider alternatives to surveillance or different ways in which it can be carried out;
- take into account the obligations that arise from the surveillance; and
- judge whether the surveillance was justified.
Particularly consider whether a medical report should be obtained and whether a discussion should take place with the employee – both of which we would advise carrying out in most cases; and
- only use covert surveillance in exceptional circumstances as a last resort when all the above points have been satisfied. Covert surveillance should only be authorised by senior management.
When authorising and following the authorisation of covert surveillance, after the above steps have been completed, the employer must:
- ensure that any such surveillance is strictly targeted at obtaining evidence within a set timeframe and that the surveillance does not continue after the investigation is complete;
- not use covert audio or video monitoring in areas which workers would genuinely and reasonably expect to be private;
- if a private investigator is employed to collect information on workers covertly ensure there is a contract in place requiring the private investigator to only collect information in a way that satisfies the employer’s obligations under the DPA. The contract should impose requirements on the investigator to only collect and use information on workers in accordance with the employer’s instructions and to keep the information secure.
- Disregard and, where feasible, delete information collected in the course of monitoring unless it reveals information that no employer could reasonably be expected to ignore or is used for the prevention or detection of criminal activity or equivalent malpractice.
Employers can find further information on surveillance in the ICO’s Employment Practices Code.
If you are considering covertly monitoring an employee or conducting an impact assessment in relation to covert surveillance we can advise – please contact:
+44 (0) 1604 871143
This update is for general guidance only and does not constitute definitive advice.
Date: 13 June 2013
Venue: Floyd Graham & Co offices
Staff misconduct or employee complaints?
Effective investigations and hearings which follow a fair and legal process are key to avoiding costly tribunal litigation in these types of cases.
Join us to observe active role play which will expose some of the common pitfalls.
Take away practical advice and learn about:
- What an investigation should consist of including evidence gathering
- Holding a hearing
- Complying with the ACAS Code of Practice on Discipline and Grievance
- Handling problem areas such as reluctant witnesses and absent employees
- How to avoid costly tribunal claims
To avoid disappointment reserve your place by email: firstname.lastname@example.org.
We look forward to welcoming you to our next seminar.
Welcome to the latest edition of FGazette! The quarterly newsletter of Floyd Graham & Co – Lawyers for today’s employers.
Our second edition of 2013 focuses on disciplinary issues. Click the FGazette image to read more.
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