Category Archives: Business

BUILDING A SHIELD AGAINST NON-COMPETE

Non-compete clauses may be banned

In our recent article regarding the Department for Business, Energy and Industrial Strategy’s consultation on reforming the use of non-compete clauses, consideration was given to what may lie ahead for employers including the possibility of an outright ban on employers preventing employees from working for competitors.

Consultation has now closed but it will be some time before we know whether legislation will be introduced to limit or ban the use of non-compete restrictions and whether there will be a call for the removal of other restrictions from contracts of employment.
Given the agenda is promoting a shift away from employers being able to protect their businesses towards creating more opportunities in the labour market, employers will need to consider how they can restock their armoury to protect against competitive activities when the changes arrive.

Proactive risk management

In assessing what might work for your business, the starting point should be to identify where the risks are and what impact they would have on the commercial and financial aspects of the business if they became a reality.
Suggested areas for review would be customer connections, the workforce, key personnel and those that are highly skilled and your confidential information. The question to consider is what damage would arise if any of these key components of your business ended up in the hands of your competitors?

In the absence of any legislation or otherwise prohibiting the use of non-compete clauses and other post-termination restrictions, there is no reason why employers cannot for the time being remain faithful to the practice of having restrictions in the contracts of employment. However, any covenants in place should be reviewed to identify if they are fit for purpose and would withstand the scrutiny of the courts. A one size fits all approach to restrictions in contracts of employment is never a good place to start. From a risk management perspective, there is little point in having restrictions in place if they are badly worded or have no relevance to the role the employee is currently undertaking.

Apart from non-compete clauses what other options are there?

There are other ways of protecting the business’ interests and preventing competition that do not involve direct post-termination restrictions. Some possible options are considered below:

• Consider strategies for staff engagement and retention.
Staff who feel engaged and have career development opportunities are more likely to stay with you. This can decrease the risk of the business being exposed to competitive activities. Employee questionnaires are a good way of obtaining staff feedback about what they value about working for you and areas for improvement, which will assist to inform your strategies.

• Understand what other contractual provisions may have value.
Employees who are on garden leave during their notice period are out of your business, which allows for time to manage and strength client relations. By the end of the garden leave period, confidential information may have lost its commercial sensitivity. Garden leave clauses can be used in conjunction with other restrictions. Setting off a period of garden leave against the duration of a direct post-termination restriction can result in the court finding the restrictions is a reasonable restraint of trade.

A properly drafted confidentiality clause that clearly sets out what confidential information and trade secrets are in the context of the business and employee’s work is a powerful tool against competition. Without such a clause, an employer can only rely upon the implied obligation to protect trade secrets following an employee’s departure, which for many businesses does not go nearly far enough to protect against the sort of mischief the misuse of for example, pricing lists or a tender submission can create if in the hands of a competitor.

• Do not give an employee a good reason to challenge the remaining clauses.
If the contract of employment is breached by the employer, then the contract comes to an end. This means that the employee’s continuing obligations after their departure will no longer be valid. Employers can minimise the risk of this scenario as follows:

o If dismissal is on the cards, ensure that the employment ends in accordance with the contractual terms.

o Avoid situations where the employee may argue that there has been a fundamental breach of their contract entitling them to resign and treat themselves as dismissed. For example, not addressing a grievance properly.

o Watch out for the “tactical” employee who knows they are unlikely to be any continuing obligations if the above scenario arises. A job offer from a competitor or a desire to set up in competition on their own account may just lead to an employee attempting to construct a scenario, which would allow them argue the contract has been breached and they are not bound by any post-termination restrictions.

• Introduce rights or obligations that deter employees from leaving.

There is a lot of scope here with the deterrent being that the employee is likely to lose out on cash or shares if they leave. For example, a long-term incentive plan may have a forfeiture clause triggered on the employee’s departure, a share plan may have its own restrictive covenants, a bonus payment may be dependent on being in employment on a specified date or subsidised training costs may become repayable on exit. While these types or arrangement have their own advantages in the war against competition, employers need to ensure that if challenged they would be able to demonstrate they are not an unreasonable restraint of trade or in the case of clawing back any training costs, the amount recovered would not be found to be a penalty.

Even if employers will not have as many options available to them in the battle against competition in the future, a broader more bespoke approach which reflects the nature of the business and its specific risks may achieve a similar outcome to that which can be achieved solely with post-termination restrictions.

FGS’ legal team are experts in helping its clients to safeguard their businesses, so that they have a greater certainty over their financial and operational outcomes.

If you require further advice about protecting your business from ex-employees’ new work activities or strategies to retain your talent, please feel free to call us on 0808 172 9322 for a no obligation discussion.

For further details about all our commercial legal services for businesses, please click here. 👇

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This update is for general guidance only and advice should be taken in relation to a particular set of circumstances.

THE TOP 7 TUPE RISK AREAS

Does TUPE apply? 

At the outset, the business should determine whether TUPE applies. Wherever possible this should be agreed with the other party before the business transfers or the contract moves to a different service provider. The risk arises when the parties cannot agree.

Failing to comply with consultation obligations

This is an issue where there are 10 or more employees in a non-unionised business/organisation, where there are no existing employee representatives who have been elected for the purpose of the transfer. In such instances the business/ organisation must arrange for the election of employee representatives – the regulations governing these elections, as well as the functions and responsibilities of those representatives are detailed, and financial penalties will be incurred if the regulations are breached. Both the transferor and the transferee may be liable for these penalties.

Identifying those who are to transfer and those who are to remain

This is an exercise that should be dealt with at an early stage of the planning process and should be able to withstand close scrutiny. Historically, this is an area that has given rise to a substantial raft of case law especially in specific problem areas, for example, where there are employees absent from the business due to long-term sick leave or furlough leave prior to the transfer taking place.

Dealing with the restructuring of the workforce post transfer

This is a risk area for both the transferor and the transferee. Restructuring which results in changes in headcount needs to be carefully handled in the light of the added protections offered by the TUPE regulations.

Ensuring pension rights are established

This is a particular issue for the transferee, especially when on-boarding staff who have previously enjoyed generous pension schemes with the transferor – a key example of this being on the award of a contract by a public sector organisation.

Changing terms and conditions post transfer

Identifying when change is permitted and the mechanism for change in terms and conditions of employment.

Relocating staff post transfer

This is now allowed but there are processes to be followed which can prove costly if breached.

FG Solicitors are experts in all areas of Employment Law and HR. Feel free to call us on 0808 1729 322 for a no obligation discussions.

This information is for general guidance only and does not constitute definite advice.

COVID-19, data protection and common concerns

COVID-19, data protection and common concerns

The ICO has indicated that in these challenging times employers should adopt a proportionate approach to data protection giving guidance on the following key areas of concern:

Do data protection laws prevent employees from working at home?

Data protection laws should not prevent homeworking during the pandemic.

Does the current situation negate the need for data security measures when employees are working remotely?

No. Employers should introduce the same security measures as they would usually adopt for all homeworkers.

It is our view that employers implementing widescale homeworking should introduce clear guidelines to manage expectations, control health and safety and protect confidentiality and data.

In the case of data security and confidentiality for homeworking, we would recommend as a starting point that employers:

  • Assess the risk of a data breach arising from homeworking. This will assist to identify what measures and controls need to be introduced.
  • Ensure employees are aware that data security and confidentiality is their responsibility. Now is the time to direct them to your policies governing IT and communications, data protection and data retention. Consideration should be given as to whether these may need to be updated to reflect homeworking.
  • Issue specific guidance relevant to the business regarding data security in the context of homeworking. For example, the mandatory use of encryption and passwords, keeping all papers securely and not allowing household members to use company IT equipment.

Make sure employees know what to do and who to contact if they discover a security or data breach.

Can we tell employees about cases of COVID-19?

Yes. Staff should be kept informed about cases of COVID-19. This is on the basis employers need to satisfy their duty of care regarding health and safety. Individuals must not be named and no more information than is necessary should be provided.

What if we are asked by the public health authorities to share employee health information?

Organisations may share employees’ health information with authorities for public health purposes.

FG Solicitors are experts in all areas of Employment Law and HR, including Data Protection and we can provide guidance around the issues that may arise if you are currently transitioning from office-based working to homeworking. Feel free to call us on 0808 172 9322 for a no obligation discussion.

The Rio Olympics Are Approaching…What Should Employers do to Prepare?

22444484 - sport icons on computer keyboard buttons original illustrationThe countdown to the Olympics is now in earnest with the opening ceremony just a few days away. Over the coming weeks 306 events are scheduled to be held in Rio. If they have not done so already employers should be considering the potential effects of this four yearly event on their business.  A key priority is ensuring employee attendance. Unlike the 2012 Games in London, few employees will have tickets, but many will intend to watch the Rio Games on the television or internet.

What can employers do to prepare?

  • Decide on a policy for dealing with annual leave requests during the period the Games are on.  If the normal holiday request procedure is to apply, employers should remind employees of this.  If new procedures are to be put in place which simply cover the period the Games run for, highlight these to employees and ensure they are applied consistently.
  • Issue a general reminder of the absence notification/management procedures. That reminder to include a warning that employees could be subject to disciplinary procedures if they are not genuinely sick but provide sickness as the reason for their absence.  Absence levels should be closely monitored to enable the early identification of any high levels of sickness absence.
  • Flexible working may be a consideration which may enable employees to come in later or finish earlier. Considerations can also be given to whether employees can be permitted to swap shifts. Any flexible working arrangements should be carefully handled and recorded to ensure consistency of treatment and to ensure they run for the duration of the Games only.
  • Consider making available a television in a communal area to permit employees to view the Games at work.  This could offer an alternative to employees tempted to either “pull a sickie” to watch the games or to view them at work on the internet.  A number of employees simultaneously watching the games via an internet connection could cause disruption and negatively impact business continuity.  If making a communal television available, employers should highlight that employees will be expected to make up the time spent viewing the Games.
  • There may be an increased use of Social Media such as Facebook or Twitter or websites covering the Games. Employers should ensure that they have a clear policy regarding web use setting out that monitoring will take place, what use is permitted and what the likely sanctions are for a breach of the policy.

In summary…

In aiming for business continuity, it makes sense for employers to be:

  • Flexible – in altering working hours to accommodate viewing
  • Clear – in relation to expectations of leave requests, absence and performance
  • Communicative – discuss these matters with employees as soon as possible and continue to remind them of policies as the Games approach
  • Fair and Consistent  – in particular with respect to the way in which requests for time off are dealt with

Contact Details

If you would like more information or advice on business continuity planning for the Games, absence management or 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.

Working Out Working Time

working-timeSUMMARY: Are your working practices in line with the Working Time Regulations?

Any organisation will want to manage its hours to meet the needs of the business.  In doing so it will, however, always be important to ensure that the statutory requirements under the Working Time Regulations are satisfied.  Our quick guide below will help you to check if you are doing what you need to do.  It is important to remember these rights apply to both employees and workers.

Holiday

Workers are entitled to take 5.6 weeks (28 days) of paid holiday each year – this entitlement is calculated on a pro-rata basis for those working part-time.

For a more details on holiday entitlements please click here for our fact sheet on holiday entitlements.

Rest periods

Workers are usually allowed the following rest periods:

  • 11 hours’ uninterrupted rest per day;
  • 24 hours’ uninterrupted rest per week (or 48 hours’ uninterrupted rest per fortnight); and
  • an unpaid rest break of 20 minutes when working more than 6 hours per day.

In some cases it may be possible to require a worker to work during a rest period; compensatory rest will usually have to be given.

Average working time

Average working time should not exceed 48 hours per week, unless the worker has opted out.

Night workers

  • Night workers’ normal hours of work should not exceed 8 hours per day on average.
  • No night worker doing work involving special hazards or heavy physical or mental strain should work for more than 8 hours in any day.
  • All night workers should have the opportunity of a free health assessment when starting night work and at regular intervals when working nights.
  • If a doctor advises that the night work is causing health problems, transfer a night worker to day work where possible.

Young workers

Young workers (those under 18 but over compulsory school age) have additional protection.  They:

  • are entitled to a 30 minute unpaid rest break if they have worked for more than 4 hours 30 minutes,
  • must not work more than 8 hours per day,
  • must not work more than 40 hours per week; and
  • must not generally undertake night work.

Opt-outs/agreements

A worker can agree to work more than 48 hours each week by signing an opt-out agreement; young workers cannot opt out.

Other limits, for example relating to night working, rest breaks and rest periods can be modified by agreement.  Usually, this must be done with a collective agreement or workforce agreement.  If such modifications are required, we would recommend you take legal advice.  There are some strict rules which must be complied with to ensure the workers’ rights are validly modified.

Records

Record keeping is important as it will show workers’ rights are being complied with.  Equally, it is a strong indicator of good health and safety practices.

Special rules

Note that there are special rules in relation to certain groups of workers, such as the armed forces, which we have not covered here.

Contact Details

If you would like more information on working time obligations, including how to modify them – 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.

Commission Payments Add Value to Holiday Pay!

FG Solicitors - Holiday Pay CommissionSUMMARY: Employers will need to take into account commission payments when calculating holiday pay.

The Employment Appeal Tribunal (“EAT”) has handed down its decision in the case of British Gas Trading Limited v Mr Z J Lock & Secretary of State for Business, Innovation and Skills.

The issue for the EAT, in the Lock case, was whether holiday pay must take into account elements of normal pay such as commission. In October 2014, the EAT was already scrutinising how employers calculated holiday pay and ruled in Bear v Fulton that employers must take into account non-guaranteed overtime payments when calculating pay for the basic four week holiday entitlement under regulation 13 of the Working Time Regulations 1998. Unsurprisingly, in Lock, the EAT has decided that workers’ remuneration for annual leave periods must also include both commission and basic pay, if this is what they are normally paid.

The Law:

Under the Working Time Regulations 1998 (“WTR”) all workers have a statutory holiday entitlement of 5.6 weeks’ annual leave and they are entitled to be paid at the rate of a week’s pay for each week of statutory holiday. This entitlement is pro-rated for part-time workers.

The WTR derives from the European Working Time Directive (“WTD”), however, the WTD only entitles employees to 4 weeks’ holiday, which is 1.6 weeks’ less than the WTR entitlement.

The Facts of the Lock case:

Mr Lock, who was employed by British Gas as a salesman, had a remuneration package that included a basic salary plus commission which was based on the number and type of contracts he persuaded customers to enter into.  However, the remuneration that he received when he took holiday consisted of basic salary and any commission which he had earnt prior to his leave commencing but that fell due during his period of holiday. This meant he could not earn commission when he was on leave and, as his basic pay was significantly less than his normal pay, this was a disincentive to take annual leave.

In April 2012, Mr Lock claimed to an Employment Tribunal (“ET”) that the failure to pay him commission for the period that he was on holiday leave was contrary to the WTR. As the WTR derive from European law, the ET referred the matter to the Court of Justice of the European Union which ruled that the WTD provides that results based commission should be taken into account when calculating holiday pay. The ET subsequently held that the WTR could be interpreted so as to include commission payments in the calculation of holiday pay for the four weeks’ annual leave provided by Regulation 13 of the WTR.

The ET’s decision was appealed by British Gas. The EAT dismissed the appeal.

Implications for businesses:

  • If workers’ remuneration ordinarily comprises basic pay and commission businesses will need to calculate holiday payments for a worker’s 4 weeks’ statutory holiday entitlement (pro-rated for part-time workers) so that it includes commission which would have been earned but for the taking of leave.
  • Businesses may choose to pay the remaining 1.6 weeks’ statutory entitlement excluding commission, which would have been earned but for the taking of leave.
  • Failure to include commission when calculating holiday pay for the 4 weeks’ entitlement means the worker may apply to the ET for any underpayments provided that the claim is made within 3 months of that underpayment being made. If a claim involves a series of underpayments, any claims for the earlier underpayments will fail if there has been a break of more than three months between such underpayments.
  • Any claims presented to the ET for a series of backdated deductions from wages, including any shortfall in holiday pay, will be limited to cover a period of a maximum of 2 years.

British Gas Trading Limited v Mr Z J Lock & Secretary of State for Business, Innovation and Skills UKEAT/0189/15

Contact Details

For more details about the issues in this article or if you would like advice on how to calculate 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.

Fast & Furious!

And The Winner Is…

Ben Baxter from Altodigital Networks Ltd who achieved the fastest lap time of 10.52 seconds around the FGS Scalextric track, winning a bottle of bubbly and a free contract review!

All lap times are below:

Leaderboard

We hope that you enjoyed the event and we look forward to seeing you soon for our next FGS challenge!

Contact details:

fgmedia@fgsolicitors.co.uk

(0) 808 172 93 22

HOT OFF THE PRESS: Commission to be included in holiday pay

Megaphone - Hot Off the Press (123rf ref 8981071)The Employment Appeal Tribunal (“EAT“) has given its decision in the Lock case today.

In summary, the EAT has decided that workers’ remuneration for annual leave periods must include both commission and basic pay if this is what they are normally paid.

We will be producing a full update on the decision and its implications for businesses. However, if you have any questions in the meantime, please do not hesitate to contact a member of our employment law team.

Contact details:

fgmedia@fgsolicitors.co.uk

+(0) 808 172 93 22

Case Study: Competitor steals star employee!

Competitor stealing employeeThis could happen to any business. In this case, it’s a recruitment company, Recruit4stars. The company was set up ten years ago and Ima Moneymaker started out as an administrative assistant. However, she turned out to have exceptional recruitment skills and quickly made her way up the ranks and was promoted to head recruiter two years ago. Ima handed in her notice a month ago and said that she wanted to move to pastures new.

Recruit4stars has just discovered that Ima has been offered a job by another recruitment agency around the corner, SuperRecruit. Ima is an avid user of social media and has over time added all her client contacts to her LinkedIn account. Recruit4stars is concerned that SuperRecruit will now be able to make use of these.

What can Recruit4stars do to protect its position in the market place?

  1. Look at the contract of employment – are there enforceable post-termination restrictions?

    Unfortunately, Recruit4stars gave Ima a basic statement of terms and conditions when she started with them in 2005. These were not updated when she was promoted and do not contain any post-termination restrictions.

    If Recruit4stars had provided Ima with a contract of employment which included well-drafted restrictive covenants, it could have prevented her from working for a competitor for a certain period after her employment ended. Recruit4stars could have reminded her of these covenants and ultimately applied to the Court for an injunction to prevent her from working for SuperRecruit at the time she resigned.

    Although there is a general rule against post-termination restrictions being enforceable because they are a restraint of trade, well-drafted restrictions taking into account all the circumstances of the business are likely to be enforceable.

  2. Consider garden leave.

    Ima has 10 weeks’ notice because that is the minimum she is entitled to under statute. Recruit4stars could have agreed a longer notice period with her when she was promoted, but it did not do so. It also did not make provision for putting Ima on garden leave.

    If Recruit4stars had agreed a longer notice period, this would have enabled Recruit4stars to keep Ima out of the grips of her new employer for a longer period; garden leave would have allowed Recruit4stars to have taken her out of the market place for that time. This would enable Recruit4stars to build relations with her clients and candidates; confidential information may also start to become stale. Therefore, whilst it may still be possible to put Ima on garden leave, the shorter notice period means the benefit of so doing will not be as great as would have otherwise been the case.

  3. Consider the LinkedIn account.

    The law in relation to LinkedIn and contacts made during employment is a developing area. Unfortunately for Recruit4stars, the following do not assist them:

    a)   Ima set up her LinkedIn account on her own initiative and has a mixture of personal and business contacts.

    b)   Recruit4stars does not have a social media policy and has never given Ima direction about what it expects her to do with her LinkedIn account.

If Recruit4stars had:

a)   introduced a social media policy which set out its expectations in relation to LinkedIn; and

b)   included a clause in its contracts of employment setting out that any contacts made during the course of employment belonged to them,

it would be in a better position to prevent Ima from using those contacts.

As it stands, Recruit4stars would probably be able to dismiss her for gross misconduct if she tries to use contacts for the benefit of SuperRecruit while she is still employed by Recruit4Stars, but if she only carries out work for SuperRecruit when she is employed by them, there is little Recruit4Stars can do.

Three months later, SuperRecruit has increased their turnover by 25% and Recruit4stars has watched its turnover drop.

It could have been so different …

Recruit4stars would have been in a strong position when they discovered Ima’s plans if they had the following:

  1. Specially drafted post-termination restrictions, garden leave, intellectual property and confidentiality clauses in the contract of employment.
  2. A social media policy and/or contract clause relating to how contacts made through LinkedIn and Facebook are treated at the end of employment.
  3. A longer notice period.

Get in touch with us to make sure this does not happen to your business!

This case study is not based on any existing business and is a fictional scenario based on elements upon which we have advised over many years.