Category Archives: Misconduct

Sports Direct: Failure to Pay National Minimum Wage – A Business Model With Exploitation at its Heart? (Part 1)

14184143 - green grass  uk pound symbol against blue skySUMMARY:  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:

  1. Failed to pay its workers the minimum wage;
  2. Engaged a significant proportion of staff via zero hours contracts and short term hours agency worker agreements;
  3. Created a culture of fear throughout its workforce due to arbitrary and outdated disciplinary practices; and
  4. 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.

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THE ALLEGATIONS:

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:

CATEGORY   RATE (£)
National Living Wage Workers aged 25+

7.20

Standard Adult Rate Workers aged 21-24 (inclusive)

6.70

Development Rate Workers aged 18-20 (inclusive)

5.30

Young Workers Rate Workers aged under 18 but above the compulsory school age

3.87

Apprentice Rate Apprentices either:

  1. Under the age of 19; or
  2. Aged 19 or over, but in the first year of their apprenticeship

3.30

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 Basic salary
Bonus**An annual bonus paid for example in December, will usually only count for the December reference period
Commission/Incentive Payments Based on Performance
Accommodation Allowances
Allowances Paid by HMRC Dispensation Agreements
 

EXAMPLES OF EXCLUDED PAYMENTS

Benefits in Kind
Loans Given by the Company
Advances of Wages
Pension Payments
Lump Sum Payments on Retirement
Redundancy Payments
Tribunal/Settlement Awards
Premiums Paid for Overtime/Shift Work
Expenses
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.

CONTACT DETAILS:

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: fgmedia@fgsolicitors.co.uk

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

Football Hooliganism – Can You Dismiss?

FG_Soccer-01

Media continue to focus on football hooliganism at Euro 2016 – what’s that got to do with your staff?

Most individuals will support their chosen nation from the comfort of their armchair over the coming weeks, but some will be lucky enough to have time off work to travel to France to indulge their passion for live football.  Whilst in the minority, there will be others whose only goal will be to indulge their passion for football hooliganism.

The French authorities have shown zero tolerance towards to any bad behaviour; the response has been and continues to be swift. Depending on the severity of the offence, guilty fans have been fined or given custodial sentences irrespective of nationality.

What is your response if one of your employees is one of these guilty fans who is incarcerated in France?  

Your immediate reaction may be to dismiss the employee, but is this fair if their imprisonment arose from actions that were completely separate to their employment?

The answer is that where there is misconduct outside of the workplace, it might be fair to dismiss where the misconduct affects (or could affect) the employee when they are doing their work.

Be aware there is no automatic right to dismiss

An employer cannot automatically assume that an employee can be dismissed because they have been convicted of a criminal offence, even where they are given a custodial sentence – see below.  An employer would need to consider:

  • what effect the conviction has on the employee’s suitability to do their job; and
  • their relationship with their employer, work colleagues and customers.

Cases involving violence, such as hooliganism, are more likely to affect the employment relationship either because of:

  • the nature of the work (if an employee’s job is working with children or vulnerable people any form of violence is unlikely to be tolerated); or
  • damage to the employer’s reputation (no employer is likely to want to be associated with football hooliganism and this could cause more damage to some organisations than others.  If there is significant negative publicity in the media, this is more likely to damage an organisation’s reputation).

An employer who dismisses in response to an employee’s criminal conviction without having considered the elements above, should expect swift receipt of an unfair dismissal claim (unless the employee has less than 2 years’ service, and so will not usually be able to bring such a claim).

What if the employee is in prison?

If an employee is in custody, the employer must also consider whether, in light of the needs of the organisation, the employee’s job can be held open.  The longer the period of imprisonment, the more likely it is to be a fair decision that the employee’s job cannot be held open.

In some cases where there is a particularly long duration of imprisonment, employment may end by reason of “frustration”, which mean the contract can no longer be performed.  In theory, no process needs to be followed if frustration applies.  Employers should always seek legal advice on whether this could apply rather than assuming that it will; frustration is a concept employment tribunals often struggle with as a reason for concluding the employment has ended.

Follow a reasonable process

When there is a criminal charge or conviction, a reasonable and fair process should be followed, as with any misconduct dismissal, which should consist of a reasonable investigation followed by a disciplinary hearing where the employee has a reasonable opportunity to respond to the allegations against them.  If, however, the employer cannot contact the employee or the employee will not co-operate, this does not mean the employer cannot continue with the process; an employer could offer to conduct the process in writing or based on the information they have.

Contact Details

For further advice on dismissing employees who have been charged or convicted with a criminal offence – 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.

Misconduct & Punishment in Employment

Punishment at workSummary: Disagreement between employer and employee is as old as the very concept of Master and Servant itself. As a general rule, where disagreement ends with an employer forming the view that an ending of the relationship is the outcome it desires, there are some mandatory steps that will need to be addressed.

An employer seeking to dismiss an employee will generally have to consider 2 key areas of law:

  1. the first answers the question, what if anything is owed to the employee as a result of the ending of the employment? – the contractual question;
  2. the second, is the dismissal fair in all the circumstances? – the protection afforded to the employee by Parliament; the statutory question.

The first question is arguably the one to answer. Consider the case of an employer wishing to terminate the employment of an employee for misconduct who has a contract entitling them to 6 months’ notice. Except for where the misconduct is of such an extreme nature that it amounts to gross misconduct, ending the employment without payment is likely to give rise to a successful breach of contract claim.

In a recent case, the High Court decided that an employee who sent a pornographic e-mail from a work account had committed an act which entitled his employer to dismiss him without paying him the 12 months’ notice to which he was entitled. This was in spite of the fact that the sending of the e-mail was discovered some 5 years after it had been sent and only as part of a fishing exercise conducted by the employer, specifically to find a reason to dismiss.

It is extremely important that an employer intending to dismiss in these circumstances does not, after discovery of the conduct, behave in a way that would lead to a view that it had waived its right to dismiss in these circumstances.

By contrast, whether or not the dismissal was fair, in all the circumstances, would largely depend on the procedure leading up to the decision to dismiss. In short, did the employer have a reasonable belief in the guilt of the employee based on the employer having undertaken a reasonable investigation? Finally, whether the decision to dismiss in those circumstances, as opposed to applying some other sanction, was reasonable.

Tackling the risk of a successful unfair dismissal claim is a juggling act requiring an employer to engage in a fair procedure free from bias, permitting the employee an opportunity to properly understand the allegations, to address them and to be accompanied if requested.

Having managed all of that, dismissing the employee as a result of the allegations must, on an objective view, be action that a reasonable employer would take. Applying this thinking to the case mentioned above, while the age of the offence might not matter, particularly if the employer had no knowledge of it, the decision to go on a fishing expedition to find misconduct that would allow an employer to dismiss for gross misconduct and in so doing avoid the obligation to pay notice, may very well be considered unfair. This is so even if in so doing the employer would not be in breach of contract.

Other considerations:

  • Ensure that if contemplating dismissing for gross misconduct, and your policies define types of conduct that you consider fall within that category, the current offence does not fall outside it. In a recently decided case where a tribunal found the dismissal of an employee to be unfair, one of the factors that influenced the finding that the dismissal was unfair was the fact that the employer’s policy stated that the offence which the employee was facing would be dealt with by a maximum sanction of a written warning.
  • Ensure that you follow your own laid down procedures.
  • Ensure your investigation is thorough, including follow up investigations.
  • Ensure the process is well documented including witness evidence and statements.
  • Wherever possible, ensure that each level of the process is chaired by someone different.
  • Permit an appeal.

Above all, obtain proper advice and support.

Contact Details

For more details 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.

FGWorks December 2015

FGWorks Dec 2015

This latest edition of FGWorks is packed with key employment law updates and includes issues such as misconduct and punishment in the workplace, key employment law changes for 2016 and information about our latest seminars.

We hope you will find our Newsletter a useful source of information but your feedback is always welcome and important to us as we continually strive to improve and develop the services we offer. Feedback can be sent to fgmedia@fgsolicitors.co.uk.

For further news updates and topics visit us on: www.fgsolicitors.co.uk

 

When The Office Party Packs a Punch….

Xmas PunchSUMMARY: MBNA Limited v Jones considers the issue of consistent treatment in relation to dismissal where employees are involved in the same misconduct incident.

The office Christmas party season is looming and no doubt plans will already be underway for staff to be able to celebrate the end of the year together; the party season will also be a great opportunity to thank staff for their hard work during 2015.

Undeniably an office party can boost morale. Improved morale can be beneficial to the business but employers are more aware than ever of the potential pitfalls that can arise from their generosity. Previously well behaved employees can become uninhibited and reckless after consuming too much alcohol, forgetting that the same standards of workplace behaviour need to be adhered to at work functions or social events.

How would you deal with an employee who punches a colleague at the office social event? Dismissal will usually be reasonable for this type of behaviour, even if it occurred outside the workplace. Here’s the twist though, the victim subsequently sends threatening texts to their assailant. Would you still dismiss the assailant? Would you also dismiss the victim?

Many employers are aware of the need to treat employees consistently when it comes to dismissal. Otherwise, the dismissal could give rise to a costly unfair dismissal claim in the Employment Tribunal.

In the recent case of MBNA Limited v Jones, the Employment Appeal Tribunal had to consider the scenario described above and whether the dismissal of the assailant was unfair due to inconsistent treatment; the victim was only given a final written warning. The employer was found to have acted reasonably when deciding to dismiss the assailant as the leniency shown to the victim was irrelevant. The justification for this conclusion was that it would have been perverse to have treated a deliberate unprovoked punch as sufficiently similar to the texts subsequently sent as a response to being hit.

Recommendations for dealing fighting and violence in the workplace

When dealing with disciplinary issues and particularly those relating to fighting and violence, employers should be mindful of the following:

  • Ensure that employees know the type of behaviour which is unacceptable in the workplace; violent behaviour should be prohibited. Make it clear that conduct rules are equally applicable at work related functions and social events, even if off site.
  • Whilst it may be tempting to take short cuts where violence is involved and move straight to dismissal without further enquiry, always follow the Disciplinary Procedure. A thorough investigation is essential, particularly where a number of employees are involved in the incident.
  • If considering dismissing only some of the individuals involved, ensure that the difference in treatment can be justified. In the case described above there was a clear distinction.
  • When considering whether dismissal is an appropriate sanction, take into account long service, previous good conduct and provocation.

Case

MBNA Limited v Jones UKEAT/0120/15

Contact details

If you would like advice on any of the issues raised in this article, 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.

Apprenticeships – Learn Before They Earn

Apprenticeships - Learn Before You EarnSUMMARY: The rise in the number of apprentices shows what a great asset they can be but what do you need to learn before your apprentice starts to earn?

Background

Apprenticeships are paid jobs that incorporate on-and off-the-job training leading to nationally recognised qualifications. Apprentices earn as they learn and gain practical skills in the workplace.

Since 2009/2010, the number of apprenticeships has generally been increasing and in the academic year 2013-2014 there were 440,400 apprenticeship starts.

These figures are unlikely to change as the government views apprenticeships as playing an important role in the long term development of the UK’s workforce as well as contributing to enhanced productivity.

Status

From a legal perspective apprentices are employees and as such have the same rights as any other employee.  However, in some cases additional rights and obligations may arise and it is important that organisations understand what these are.

Regulating the apprenticeship

It is essential that an appropriate written agreement is in place with an apprentice to govern the working and training arrangements.

There are two main types of agreement:

  • a modern “apprenticeship agreement”; and
  • a traditional “contract of apprentice”.

There are important differences between these types of agreement, which will also determine what rights the apprentice has, which we explain below.

Apprenticeship agreements

This is the more modern type of agreement and the one that is most often used today.

For an agreement to constitute an apprenticeship agreement, currently it must.

  • be in writing;
  • contain the basic terms of employment required to be given to employees;
  • include a statement of the skill, trade or occupation for which the apprentice is being trained under the relevant apprenticeship framework;
  • state that it is governed by the law of England and Wales;
  • state that it is entered into in connection with a qualifying apprenticeship framework,

and the apprentice must undertake to work for the employer.

Reform of apprenticeship agreements

From 26 May 2015, apprenticeship agreements will be replaced with “approved English apprenticeships” in England.

An approved English apprenticeship will take place under an “approved English apprenticeship agreement” or will be an “alternative English apprenticeship” and, in each case, must satisfy certain conditions which will be specified in regulations. It must:

1)    provide for an individual to work as an apprentice in a sector for which the Secretary of State has published an approved apprenticeship standard; and

2)    provide for the apprentice to receive training in order to assist the apprentice to achieve the approved apprenticeship standard in the work done under the agreement.

It must also satisfy any other conditions set by the Secretary of State. Without exception, all new apprenticeships must last for at least 12 months.

Advantages of apprenticeship agreements

As is currently the case with apprenticeship agreements, approved English apprenticeships will be contracts of service.  This means that:

  • apprentices under approved English apprenticeships/apprenticeship agreements can be dismissed in the same way as ordinary employees; and
  • employers can effectively performance manage under-performing apprentices under these agreements as they would any employee in the business.

However, if the relevant criteria for an approved English apprenticeship (or current apprenticeship agreement) are not met, the individual may be engaged under a common law contract of apprenticeship.  This can present an employer with a number of legal issues, which we consider below.

Contracts of apprenticeship

This is the traditional type of agreement, often called the common law contract of apprenticeship, and gives the apprentice greater rights.  A common law contract of apprenticeship is different to an apprenticeship agreement or approved English apprenticeship:

  • It does not have to be in writing.

This means that if employers do not have a written agreement with an apprentice, it is possible they have inadvertently created a common law contract of apprenticeship.

  • It is usually for a fixed term and employers have only a limited right of dismissal before the end of the term.

This means that it is more difficult to dismiss an individual engaged under a common law contract of apprenticeship than a normal employee or an apprentice engaged under an apprenticeship agreement.

If it can be avoided, it is usually advisable for employers not to engage individuals under this type of apprenticeship.

Problems with a contract of apprenticeship

Due to the nature of a contract of apprenticeship employers can often be faced with problems where for some reason they are considering dismissing the apprentice. For example:

  • Misconduct in the normal employment context will not be sufficient to justify dismissal, unless the apprentice’s actions are so extreme that the apprentice is effectively unteachable.
  • Unless there is a closure of the business or the employer’s business undergoes a fundamental change in its character an apprentice cannot be dismissed by reason of redundancy.

There can therefore be serious consequences if the contract is not lawfully terminated as the apprentice would be entitled to damages for loss of earnings and training for the remainder of the term of the apprenticeship; damages would take into account any impact on future earnings.

This means that the damages which could be claimed by an apprentice whose common law contract of apprenticeship is terminated could be significantly greater than any compensation claimed by an apprentice under an apprenticeship agreement.

What should employers do?

Before recruiting an apprentice, employers should consider whether they can provide the apprentice with work under an apprenticeship agreement or approved English apprenticeship. In advance of the individual commencing their apprenticeship, the employer should provide the relevant written agreement to the apprentice and ensure that it has been returned signed before the start date.

If employers already engage certain individuals as apprentices, they should check what type of agreement they are engaged under – we can advise employers on this in the case of uncertainty.

Contact Details

For more details about apprenticeships 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.

Follow the ACAS Code

Yellow Brick Road

SUMMARY: A recent case has emphasised that if in doubt, employers should follow the ACAS Code of Practice, even if the dismissal is for “some other substantial reason”. Continue reading