Category Archives: Allegations

Sports Direct: Use of Zero Hours Contracts – A Business Model With Exploitation at its Heart? (Part 2)

11578822 - 3d human charcter holding green zero, 3d render, isolated on whiteSUMMARY: 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, at the beginning of this month, it was announced that shareholders will be asked to vote on whether there should be an independent workplace review; and this week it was reported that Sports Direct is to pay £1million to its workers for breaches of the minimum wage legislation.

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 Created a culture of fear throughout its workforce due to arbitrary and outdated disciplinary practices; and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.

In the first article of a two part series, we deal with the allegation concerning a breach of national minimum wage legislation; the first article can be accessed here.

In this second article, we explore the allegation that Sports Direct sought to increase its profit margins by engaging workers on zero hours contracts and short term hours agency agreements in order to avoid many of the legal obligations of employing staff. We also review the legal considerations that your business should take into account when using either zero hours contracts or being supplied with temporary workers via an agency.

THE ALLEGATIONS

Reports revealed that nearly 80% of Sports Direct’s workers are not employees but, instead, workers engaged via zero hours contracts or short term hours agency worker agreements. During the Select Committee’s evidence session on 7 June 2016, Steven Turner, the Assistant General Secretary of the Unite Union, remarked that this practice has created a “business model that has exploitation at its heart.”

In May 2015 the Government banned exclusivity clauses in zero hours contracts; clauses that prohibit a worker from taking up work under another contract, or which require the worker to get the company’s consent beforehand can no longer be included.

However, alternative work arrangements, specifically the arrangements adopted by Transline and the Best Connection Group, who supply Sports Direct with agency workers, could be placing workers in a worse position compared to if they had been engaged via a zero hours contract post the May 2015 change.

The reason behind this claim is that the Transline and the Best Connection Group do not have an obligation to offer these agency workers any work over and above a minimum of 336 hours over a 12 month period.

However, the agency workers must accept any suitable assignment offered to them unless there is “just cause,” and if assignments are not accepted, it is likely that the worker will not be offered another.

In addition, the workers are effectively forbidden for looking for additional hours elsewhere; workers who have done so have not been offered any further assignments – this is effectively an exclusivity clause in disguise.

WHAT IS A ZERO HOURS CONTRACT?

Zero hours contracts are contracts between a company and a worker and/or an employee, which specifies that the company is not obliged to provide the worker or employee with any minimum working hours, and that the company only pays for work undertaken. Similarly, the worker or employee is not obliged to accept any of the hours offered to them.

CAN ZERO HOURS CONTRACTS STILL BE USED?

Yes, zero hours contracts can still be used by companies.

The change in the law in May 2015 did not ban companies using zero hours contracts completely, instead it prohibits zero hours contracts containing exclusivity clauses.

WHY WOULD A COMPANY USE A ZERO HOURS CONTRACT & WHEN IS IT APPROPRIATE TO DO SO?

The key benefits of a zero hours contract are that a company using these contracts:

  • does not have to guarantee a minimum amount of work, and
  • only pays for work undertaken.

This is useful if your company is a start-up business and you are unsure of your people requirements. Alternatively, zero hours contracts may be useful if a company wishes to engage staff for seasonal work, or to cover absence and holidays.

The other benefit to companies is that the relationship between the company and the worker does not have to be one of employment. However, the worker will still benefit from the right to receive the National Minimum Wage, paid annual leave, rest breaks and will be protected from discrimination.

WHAT SHOULD THE BUSINESS CONSIDER WHEN ENGAGING AGENCY WORKERS?

If like Sports Direct, your company is supplied with workers via an external agency, you should be very clear as to the employment status of these workers because this will affect their rights.

Usually, the arrangement dictates that workers supplied by an agency are classed as workers of the end user client and not as their employees.

From day 1, agency workers are entitled to access to collective facilities (such as canteen facilities, child care facilities and transport facilities) and access to information about employment vacancies. Agency workers are also entitled to take rest breaks, receive the National Minimum Wage, receive Statutory Sick Pay (if they satisfy the relevant qualifying conditions set out in the legislation), take paid annual leave and benefit from protection against discrimination.

Following 12 weeks with the Company, agency workers are entitled to receive the same pay and other basic working conditions as equivalent permanent staff; this can include the auto enrolment pension obligations.

This is a relationship which often gives rise to uncertainty of employment status and, consequently, there are many reported cases on this very issue. Companies are therefore advised to ensure that, when engaging agency workers, they have in place the appropriate documentation with both the agency supplying the worker and the agency worker.

COMMENT:

Exclusivity clauses in zero hours contracts, which could exploit the most vulnerable of workers, are now unenforceable. However, this protection does not address the real issue for zero hours workers, which is the practice of ceasing to use workers who have turned down an assignment because they have accepted an alternative assignment and are unavailable.

In addition, as is evident from the Sports Direct review, Companies are now taking advantage of other working models such as the arrangements adopted by Transline and the Best Connection Group; although these arrangements are not prohibited by law, they raise questions of morality.

Only time will tell if the ongoing review by the BIS Select Committee will result in recommendations for change. In the meantime, we would recommend carrying out a review of the arrangement that your Company adopts for the supply of its staff to ensure that any legal obligations are being met.

CONTACT DETAILS:

If you would like more information on this topic 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.

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.

___________________________________________________________________________

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.

Thank you for attending our Seminar!

Effective Discipline & Grievance Processes

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:

fgmedia@fgsolicitors.co.uk

+44 (0) 808 172 93 22

Performance Management Seminar – 15 September 2015

Performance Management

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:

fgmedia@fgsolicitors.co.uk

+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.

Religious Belief v Sexual Orientation

150619 Religious belief v Sexual Orientation - Protected CharateristicsSUMMARY: When two protected characteristics clash, an employer must tread carefully. The recent case of Mbuyi v Newpark Childcare demonstrates some of the hurdles an employer must overcome before dismissing where the protected characteristics of religious belief and sexual orientation conflict.

Background

Under the Equality Act 2010, individuals are protected from detrimental treatment because of their religious belief or sexual orientation (amongst other characteristics).

Religious belief and sexual orientation are two characteristics which have the potential to conflict, as some religious groups have strong beliefs on homosexuality. An employer has the unenviable task of balancing these competing rights.

The Tribunal Decision

The tribunal held in the case of Mbuyi v Newpark Childcare that Miss Mbuyi had been discriminated against because of her religious belief.

Miss Mbuyi was dismissed for gross misconduct, being her harassment of another employee (“LP”). The dismissal letter referred to her entering into a conversation in the workplace with LP and the topic moved on to the issue of homosexuality… during that conversation Miss Mbuyi stated that homosexuality was a sin. The dismissal letter also upheld an allegation that Ms Mbuyi had, 4 months previously, made “inappropriate comments” to LP concerning her being a lesbian.

Miss Mbuyi did not have the required 2 years’ service to bring an unfair dismissal claim.

Where did the employer go wrong?

The tribunal identified a number of ways in which the employer acted, which lead to its conclusion that the employer discriminated against Miss Mbuyi. The following are key for employers to note:

  1. The employer did not conduct an investigation.

    The employer invited Miss Mbuyi straight to a disciplinary hearing without having conducted an investigation. If the employer had conducted an investigation it might, for example, have seen an email from an employee which put forward a version of events of a conversation about religion and sexual orientation. The tribunal commented that this email had not, however, found its way to a director at the disciplinary hearing by the time of the disciplinary hearing or the time of the dismissal.

    The employer could also (amongst other matters) have investigated Miss Mbuyi’s contention that the other employee had approached her, not vice versa, but it did not do so.

  2. The employer did not put all of the allegations it relied upon to dismiss Miss Mbuyi to Miss Mbuyi.

    For example, the employer asked Miss Mbuyi in the disciplinary hearing “Do you think LP is wicked?” Miss Mbuyi responded “yes we are all wicked”. The employer later linked this to homosexuality in the dismissal letter, but did not do so at the time of the disciplinary hearing. It did not appear that Miss Mbuyi was ever asked if she stated in terms that homosexuality was, in her belief, a sin.

  3. The employer did not appear to take into account the evidence that LP approached Miss Mbuyi to ask her about religion, rather than Miss Mbuyi approaching LP.  Miss Mbuyi was clear in this case that LP had:

    a. first raised Miss Mbuyi’s church;
    b. first raised her own sexuality and lifestyle;
    c. asked if she would be welcomed at church; and
    d. specifically asked what Miss Mbuyi believed God thought about her living arrangements.

  4. The employer did not take any action against LP. The tribunal commented that both could have been asked to confirm that discussing matters of religion, sex and sexuality at work was inappropriate and would not be repeated.
  5. The employer did not refer to Miss Mbuyi’s gift of another religious book to another employee, which the tribunal commented would tend to support the proposition that Miss Mbuyi would take opportunities to share her faith with anyone.
  6. The employer’s reasoning in the dismissal letter did not appear to be supported by evidence. It stated that she had specifically targeted LP because of her sexual orientation and that this constituted harassment. The tribunal commented that this was “an untenable finding on the evidence of [Miss Mbuyi], which was allegedly all the [employer] considered”. The employer should ensure that the evidence supports its conclusion.
  7. The employer did not give Miss Mbuyi a warning.
  8. The same person was heavily involved in both the dismissal and appeal.

What should an employer do?

Following this case, top tips for an employer who is considering dismissal where a protected characteristic is an issue are as follows:

  1. Carry out a reasonable investigation.
  2. Put all allegations to the employee which may be relied upon when dismissing.
  3. Do not make any stereotypical assumptions.
  4. Ensure that points in the employee’s favour, as well as those which go against the employee, are taken into account and referenced in any dismissal letter.
  5. If a response in a disciplinary hearing could be a reason for dismissing an employee, this allegation should be put to the employee before a decision to dismiss them is taken.
  6. Treat employees consistently; if two employees are involved in an inappropriate conversation, consider whether disciplinary action should be taken against both of them.
  7. Be clear about the behaviour that is expected from employees and try to seek agreement about appropriate behaviour going forwards.
  8. Consider whether a warning should be given to an employee rather than dismissing them.
  9. If dismissal is a possible outcome, ensure that the employee is aware of this before the disciplinary hearing takes place.
  10. Ensure that the reason for dismissing the employee is supported by evidence.
  11. Different people should hear the disciplinary hearing and any appeal.

Final thoughts

The reason for dismissal is absolutely key when concepts of religious belief and sexual orientation are in issue. It is interesting that the tribunal commented in this case that it may be that the employer would have been justified in dismissing for Miss Mbuyi’s refusal to actively engage in reading certain literature or otherwise promoting family units other than those formed by husband and wife. Whether this could be justified would depend on all the circumstances.

It should be noted that this case is only an employment tribunal decision and is therefore not binding. A case with similar facts could be decided in a different way.

Cases

Mbuyi v Newpark Childcare (Shepherds Bush) Ltd ET/3300656/14

Contact Details

For more details about issues of religion, belief, sexual orientation or other protected characteristics 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.

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.