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Coronavirus (COVID-19) Planning for Employers

Coronavirus (COVID-19) Planning for Employers

On 21st February, the Prime Minister confirmed the removal of all Covid rules in England and unveiled plans for how the country will Live with Covid going forward.

From 24th February, all Covid regulations in England are lifted, including the legal requirement to self isolate following a positive test.

The remainder of this article sets out the position as it stands now, and what the changes mean for employers.

An end to the work from home guidance was announced on 20th January as the Plan B’s measures were lifted, and with them ended compulsory mask-wearing and the mandatory Covid-passes.

Living with Covid plan: Key points for employers

  • From 24th February 2022:
  • Legal duty to self isolate ends. Those testing positive and their close contacts (regardless of vaccination status) are no longer required by law to self isolate. However the Government is still advising self isolation following a positive test for at least 5 days and until there has been 2 negative test results on consecutive days.

  • Routine contact tracing ends. Contacts will no longer be asked to self isolate or advised to take daily tests. Instead guidance will set out precautions for those who live in, or have stayed overnight in, the same house as a positive case, in order to reduce risk to others. Other contacts will be advised to take extra care in following generic public health guidance on ‘safer behaviours’
  • Individuals are no longer legally required to tell their employers when they are required to self isolate – or indeed have tested positive.
  • The end of the self isolation support payments for those on low incomes that are asked to self isolate. People who were required to self isolate before February 24th have 42 days from the first day of their isolation to apply.
  • The Health Protection (Coronavirus Restrictions) (England) (No.3) Regulations are revoked.
  • From 24th March
  • The Covid 19 changes to the Statutory Sick Pay provisions will end – SSP will no longer be payable from day one if people are unable to work because they are self isolating due to Covid 19. The Small Employer Rebate will also end. SSP will revert to pre pandemic rules.
  • From 1st April
  • The Government will remove the Health & Safety requirement for every employer to explicitly consider Covid-19 in their risk assessment. The intention is to let businesses decide the appropriate steps they need to take to limit the risk of Covid-19 in their workplaces.
  • Free lateral flow and PCR tests will no longer be available to the general public, except to the over 75s and those with weakened immune systems.
  • The existing “Working Safely” guidance by specific sector, will be replaced by new public health guidance. “Employers should continue to consider the needs of employees at greater risk from Covid-19, including those whose immune system means they are at higher risk of serious illness from Covid-19.” The Government will be consulting with employers and businesses to “ensure guidance continues to help them to manage the risk of Covid-19 in workplaces”.

In essence, the Government plans to consolidate the guidance it gives to the public and to businesses, in line with public health advice. It will also update guidance setting out the ongoing steps that people with Covid-19 should take to minimise contact with other people. This will align with the stopping of testing, so from 1st April 2022. So not much more guidance to look forward to then! In addition, there will be ongoing focus on good workplace / indoor ventilation, (CO2 monitors anyone?). The Government has already commissioned research into this and a report on how buildings can be made more infection resilient will be published in May. It will continue to encourage employers to identify poorly ventilated spaces and take steps to improve air flow. It’s clear then that despite its overall aim of a looser reign, the Government will continue to advise employers on the steps they can take to mitigate the risks of Covid-19 for a while yet.

What does this mean for employers?

The removal of the Covid-19 specific Health & Safety requirements does not change employers’ legal duty to take reasonable care and steps to ensure the safety of their workers at work – whether in the workplace or at home. This includes physical safety and can include mental wellbeing.

Even though all signs are that the pandemic is easing, there is still huge uncertainty and workers may still be concerned. Employers will need to make some important decisions, and to be flexible in these, for example:

  • People who were clinically vulnerable / shielding, or caring for someone in this category, may still be very reluctant to come back to work. We look at this below, in more detail.
  • Bearing in mind that free tests will become harder to obtain and then no longer available, form April 1st, employers will need to decide who covers the cost of testing if the business requires staff to test before coming into the workplace. This may seem less pressing in the coming spring and summer, but may need to be revisited in the autumn and winter months when, as with seasonal flu, cases will inevitably rise.
  • As Covid-19 Statutory Sick Pay allowance reverts back to pre pandemic rules, after 24th March, employers will need to decide if they will assist and/or encourage staff to stay at home if they are feeling unwell with additional contractual sick pay. Whether and how long to continue to ask staff to self-isolate if testing positive/symptomatic, or a close contact of someone testing the same.
  • What updates to make to their health and safety risk assessment and health and safety measures in the workplace.
  • How to respond to people who refuse to return, and/or request remote or flexible working, given the inevitability that some will see the change from mandated restrictions to the new Living with Covid environment as increasing the risks of returning to the workplace.

Most employers will by now have adopted varieties of hybrid working. Continuing with these arrangements for these situations listed above may be the solution. It is also worth noting that the Government recently published a consultation document, Making flexible working the default, proposing various reforms to the right for employees to request flexible working, taking into account changes in working practices brought about during COVID-19 pandemic. The main change would be making the right a “day one” right, removing the requirement for 26 weeks qualifying service, further details are expected in the later half of 2022.

Workers who have been shielding / those reluctant to return to the workplace

If you have a member of staff who was clinically extremely vulnerable, or caring for someone who is vulnerable, and he/she is reluctant to come back to the workplace, it is unlikely you will be able to force them to do so.

Employers will still need to take that person’s individual situation into account. This is because of the health and safety risk of forcing them back with the risk of them contracting Covid-19 at the workplace. Individual discussions should always take place with these categories of workers. After over a year of being asked to shield due to Covid-19, the clinically extremely vulnerable may allege disability discrimination protection and request reasonable adjustments be made.

Agree a return plan with the employee, taking account of the employer’s policies in relation to Covid-19 and any necessary adjustments to enable the employee’s return. The employer should update their Risk Assessments for these changes and for these particular groups of staff.

The NHS will maintain the Shielded Patient List and, should levels of Covid-19 increase in communities, those at highest risk may be advised to take more restrictive measures to keep themselves safe. Employers should therefore plan for these employees having to work from home again.


Posted in: Corporate and Business law for CEOs & CFOs, General

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Redundancy procedures & alternatives to redundancy

Redundancy procedures & alternatives to redundancy

The end of the furlough scheme, on 30th September 2021, so far has not resulted in the cliff edge of redundancies many feared. With confidence that things will pick up, negotiations between employers and furloughed employees are focused more on how to bring people back, through flexible working and reduced hours, rather than redundancies as a default.

There are many more options for employers to consider before starting a redundancy process. These can save cashflow on redundancy payments and maintain skills and experience in the business as demand takes off once more. We have put together a checklist of these below.

The aim for the business may be to retain the skills with less ongoing expenditure rather than the disruption and immediate extra cost of redundancy. It is estimated the average redundancy costs £12,000 per person and it takes a business 9 months to consolidate afterwards and regain any benefit. The skills are then permanently lost for the upturn.

If redundancies are necessary, we have included a short list of the main considerations for collective consultation and individual consultation procedures. Legal advice must be taken on these procedures, as they are complex and often lead to employee litigation at Employment Tribunals.

Alternatives that are easiest to implement 

1. Non-contractual/discretionary arrangements

  • Imposing holiday when work is slow
  • Removing overtime
  • Changing discretionary bonus scheme
  • Reducing discretionary sick pay – go back to just Statutory Sick Pay
  • Change personal objectives/targets to match the changing objectives of the business, and review quarterly.
  • Check that there are no job vacancies being offered or outstanding job offers which (subject to checking) it may be possible to withdraw or consider deferring new joiners
  • Check for any non-permanent staff and whether agency, temporary or casual staff are actually required
  • Recruitment freeze 
  • Reduction of workforce or natural wastage
  • Removal of temporary or contract staff
  • Temporary office/factory shutdowns/home working
  • Lay-offs if the contract already permits them

How best to go about making these changes

  • Impose changes on reasonable notice and follow consultation with employees as necessary.

2. Contractual arrangements where employer may have the ability to change terms

NB Check bonus schemes and employment contracts to see if the employer can change them without employee agreement.

  • Cutting/changing contractual bonus schemes and commission arrangements – eg whole/part of commission only paid on company receiving money from customer
  • Agreed downgrading or removal of benefits
  • Redeployment to other parts of the business (changing locations and/or duties and/or responsibilities) possibly with retraining.

How best to go about making these changes

  • Impose changes by giving reasonable notice to the employee and consult with employees
  • It may be appropriate to seek prior written consent before making these changes if they are unfavourable to employees.

Alternatives that are hardest to implement

3. Contractual arrangements where the employer has no ability to change

  • Short-term or flexible working (reduction in working hours – e.g. four day working week)
  • Salary sacrifice schemes which can reduce NICs for employers but also have income tax benefits for employees
  • Lay-offs 
  • Pay freezes or cuts
  • Job Sharing
  • Pay deferral schemes
  • Sabbaticals (paid or unpaid – e.g. on 30% of base salary for 4 to 12 weeks)
  • Unpaid leave (probably shorter than a sabbatical)
  • Cutting/changing pension payments
  • Secondments to other companies
  • Changing/cutting bonus schemes without reasonable notice
  • Redeployment to be self-employed

How best to go about making these changes

  • Explain the seriousness of the business situation so that employees realise that they have to agree to the changes so this avoids breach of contract and unfair dismissal claims at the Employment Tribunal.

Other methods of making these changes

  • Imposing changes unilaterally but there is a risk of breach of contract and unfair dismissal claims
  • The safer way to achieve the same aim is to dismiss and re-engage the employees on new terms, but this again carries a risk of unfair dismissal claims. This is done as follows. If employees do not agree to the changes then the employer may have to impose changes by giving equivalent notice which the employer is required to give to the employee to terminate the employment contract and issue a new employment contact alongside consultation with employees. This is the so the called “fire and rehire” process. There is the risk that employees with over 2 years service still bring an unfair dismissal claim at the Employment Tribunal for an unfair process or reason. If the correct notice has been given then employees cannot bring a breach of contract claim.
  • Commence a genuine redundancy process and the above options may be alternatives which can be agreed with employees but there is need for collective consultation (see below).

Redundancy procedure

Companies are expected to adopt the following 3 steps when implementing redundancies:

  1. to give as much advance warning of the impending redundancy as is reasonable in the circumstances that the role is “at risk”
  2. to consult individually with the affected employees to consider and, if applicable, offer any available vacancies
  3. to pay redundancy payments (both notice pay and statutory redundancy payments for employees with 2 + years’ service)

It’s vital to follow a full and fair procedure when making employees redundant and keep copies of all letters and emails sent and minutes of meetings. If your don’t follow these mandatory steps, the redundant employees can bring claims for unfair dismissal.

Redundancy procedures for collective consultations (over 20 staff)

If an employer is considering making 20 or more employees redundant within a period of less than 90 days, then the employer must also run a collective consultation procedure, in addition to consulting with the affected employees individually, before making any dismissal decisions.

In a collective consultation procedure, employers must

  1. notify to the Secretary of State of the potential redundancies
  2. collectively consult with all affected staff
  3. individually consult which each affected member of staff

Collective consultation requires the election of employee representatives. This takes time and is more complex when staff are homeworking or not regularly attending the office. If the workplace has a recognised Trade Union, the Trade Union reps can act as employee representatives.

There are set periods of time required for the various stages. As an example, where the employer proposes to dismiss 20 to 99 employees within a 90-day period, the notification to the Secretary of State must be at least 30 days before the first dismissal takes effect. A proposal just to change terms and conditions of employment which if not accepted by the employees would lead to dismissal also requires collective consultation if 20 or employees are affected.

There are fines and criminal offences for management for failure to notify the Secretary of State and there is the ability for employees to seek a ‘protective award’ from the ET of up to 90 days gross pay each in the event that there is a failure to consult. 

Both the collective and individual consultation processes involve decisions by employers about the size and type of the pool of selected employees (looking at roles where similar work is carried out), the process and criteria for selecting employees for redundancy and the process for allocating alternative jobs. There is numerous case law at the various Employment Tribunals about these other issues. Please seek legal advice while planning this process.

Compensation for redundancy

An employee may be entitled to some or all of the following when dismissed for reasons of redundancy:

  • statutory redundancy pay
  • enhanced/company redundancy pay
  • pay in lieu of notice
  • time off for job hunting

If an employer thinks an employee will be difficult, obtain a signed settlement agreement as part of the package for the payments made.

The information set out in this article is correct at date of publication (26th October 2021).

Posted in: Employment law for HR Directors, General

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Gig economy and Workers’ rights: latest updates and implications for employers

Gig economy and Workers’ rights: latest updates and implications for employers

Supreme Court rules that a company’s actual level of control, not what is expressed in the contract, ultimately determines the employment status of its workers.

Employers will need to reconsider carefully whether their freelancers and contractors are genuinely self employed, or merely disguised workers, in the light of the latest ruling in the long running Uber case.

Following the Supreme Court’s undoubtedly landmark ruling in Uber v Aslam, employers will need to update employment contracts if they have terms which, in practice, do not reflect what is happening ‘on the ground’, and/or which seek to deny workers their basic statutory rights, for example National Minimum Wages, holiday pay and pension. 

The ‘Uber’ case finally reached the Supreme Court. In a keenly anticipated judgment on 19 February 2021, the Supreme Court unanimously upheld the original Employment Tribunal’s decision that Uber drivers were workers for the purposes of the Employment Rights Act 1996, the National Minimum Wage Act 1998 and the Working Time Regulations 1998. Uber had asserted that its drivers, who could log into the app as much or as little as they liked, were independent contractors working for themselves.

The case now returns to the Employment Tribunal to determine the compensation due to Uber drivers in respect of their claims for holiday pay and unlawful deductions from wages. 

Uber has responded to the judgment by saying that from 17 March 2021, all their drivers will be workers, with entitlement to minimum wage, holiday pay, sick pay and pensions. As a result of the way in which ET cases work (with the next step being for the case to return to the ET for a decision on final compensation this pronouncement from Uber seems to be, in effect, an offer to the drivers to settle.

The pay rate, amounting to £8.72 per hour, will create an earnings floor (not an earnings ceiling) and has been introduced alongside automatic enrolment into a pension plan, to which both Uber and its drivers will contribute. All drivers will be paid for their holidays, based on 12.07% of their earnings, paid on a fortnightly basis, as well as free insurance to cover sickness. This insurance cover was introduced in 2018. Uber has confirmed that drivers will still be able to choose when and where they drive.

Uber’s offer however falls short in respect of the Supreme Court’s ruling that the worker rights should commence for drivers as soon as they log onto the app. Uber’s offer only provides these worker rights once the driver accepts a fare.

The Independent Workers Union of Great Britain (IWGB) is calling on HMRC to enforce the Supreme Court ruling and ensure that Uber drivers receive a minimum rate of pay from the moment they log onto the app, not only when they are carrying out trips.

The problem for Uber is that it has never wanted to control the supply side of the business. Speculation is that Uber could be flooded with new drivers, attracted by the better terms and conditions, where just logging onto the app affords a driver these worker rights. If driver numbers increase, but demand doesn’t, simple economics means this ultimately this leads to less business, and less profitable fares, for each Uber driver. To balance demand with supply, Uber will probably need to control the number of drivers available (logged onto its app) at any one time. This would represent a major change in how Uber function; it may lead some drivers to be unhappy with the new status quo, and to have preferred the very flexible situation that existed before the case was won.

The Supreme Court took the view that, when considering cases involving employment legislation designed to protect vulnerable workers, the starting points is not the contract itself: courts should look beyond the stated terms in the contract and focus first on whats happening on the ground, the every day reality of the work.

Uber had gone to considerable lengths to create a contract for drivers that avoided them being classed as workers or employees of the company. However, in reality Uber exerted significant control. Uber set the rates that passengers pay, that drivers are paid, (and the commission it takes) as well as driver performance targets that required drivers to achieve a minimum average star rating from customers, a high ride acceptance rate, or a low cancellation rate, or risk deactivation from the platform. It is precisely because of this level control that its drivers are indeed workers and not self-employed. It will now follow that where a business effectively holds the power in these situations, the law will step in to give protection and will look at what is actually going, on rather than simply what the contract says. 

We can see already the knock on effects of this ruling on the UK gig economy sector. Fund Managers said they would decline to invest in food delivery app Deliveroo at its IPO on 31st March 2021, amid concerns over workers’ rights. Deliveroo, whose riders were found to be self employed and not workers (for the purposes of a union’s application for compulsory recognition under TULRCA, back in November 2017) scaled down its share price before its IPO in the light of these concerns.

Claimants in the Uber case relied on existing laws for drivers to win their claim for worker status: but it took a long time, over 5 years, to get there. With the ruling will come renewed calls for changes in the law, to award these protections without the need for long drawn-out litigation.

These calls will meet with resistance in the UK from employers whose business models rely on the flexibility of a fluid, largely self-employed workforce, and from gig economy workers want to retain the freedom to work as they have. Structural changes in the UK, and global workforces, as a result of Covid-19, and the harsh light the pandemic cast on the precarious conditions of many gig and lower wage workers, are bound to speed on developments.  Meanwhile, Spain, a highly unionised economy, is to be the first European country to bring in laws giving employee rights to gig economy workers. This follows a Spanish supreme court ruling in 2020 that people working for, notably, a food delivery app, were in fact employees.  The move in Spain maybe an indication that the ‘free for all’ labour market that UK employers have enjoyed, and many gig workers have endured, has perhaps had its day.

If you need advice on auditing and assessing the employment status of freelancers and contractors in your business, please get in touch. Details are below.

Posted in: Employment law for HR Directors, General

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The UK immigration system, key points for employers

The Brexit transition period ended on 31st December 2020,  meaning the end of free movement of people between the EU and the UK, and the introduction on 1st Jan 2021 of a new points-based UK immigration system for the UK.

We have summarised the main changes and key points that employers and HRs need to know, below. As the Government has said, the system will develop, so keep an eye on the pages highlighting the latest developments as they are announced here: New Immigration System, what you need to know.

The new immigration system applies equally to EU and Non EU citizens. It ends the easy availability of low, and medium and high wage, labour from EU (excluding Ireland), and it lowers the bar to entry for Non EU citizens. It does allow UK business, especially large organisations and those who currently recruit beyond the UK for roles at graduate and A level, a big opportunity to look globally for their people and to attract younger talent earlier in careers, in a broader range of roles

Main changes to the UK immigration system

The end of free movement between the UK and the EU has given the Government an opportunity to overhaul the immigration system. It represents a major change for many employers who will now need a sponsor licence to hire most eligible employees from outside of the UK. The UK points based immigration system an introduction for employers, article on .gov.uk covers the changes in detail. In summary:

There is no longer a general route for employers to recruit for temporary work or work paid at or below the minimum wage.

  • The old Tier 2 (general) visa category now becomes the new Skilled Worker Visa, with a few tweaks
  • The skill and salary thresholds have been lowered, meaning organisations can look overseas for many more types of roles than previously, and have more scope to bring on people in lower skilled roles than before
  • The Government has introduced tradeable points, applicants will be able to trade characteristics, such as qualifications, against a lower salary to get the required number of 70 points to be eligible
  • and removed the resident labour market test, speeding up the process of hiring from overseas
  • Employers will need to have a sponsor licence to hire most workers from outside the UK. This does not apply when hiring Irish citizens or EU citizens eligible for status under the European Settlement Scheme, of which more below
  • The cost of hiring workers from the EU becomes significant: £9,500 for the visa alone for a 5 year Skilled Worker visa. This represents a weighty investment for smaller organisations looking to hire a limited number of roles at a mid salary level.
  • There will be no cap on the numbers of people who can come to the UK on the Skilled Worker route.
For employers who are heavily reliant on EU workers, the immediate priority is to apply for a UK Visa Sponsorship Licence to de risk your business against a potential drop off in EU candidates.
Employers can call the sponsorship, employer and education helpline for advice on:
0300 1234699 Monday – Thursday 10am – 3pm
Most employers will have already ensured the EU, EEA and Swiss nationals on their teams have applied for settled status in the UK under the European Settlement Scheme.
The deadline for applying to the European Settlement Scheme is 30th June 2021.
Check that all the EU, EEA and Swiss nationals on your teams know about the deadline, know how apply to the European Settlement Scheme.
The Government has published an EU Settlement Scheme toolkit for employers. Sign up for email alerts about the scheme here.

The new Skilled Worker Visa

From 1st January 2021, under the Skilled Worker route, anyone you want to hire from outside the UK will need to demonstrate that :

  • they have a job offer from a Home Office licenced sponsor (their prospective employer)
  • the job offer is at the required skill level (Recognised Qualification Framework RQF level 3 or above (A Level and equivalent)
  • they speak English to the required standard.

In addition to this, the job offer must meet the applicable minimum salary threshold. This is the highter of either:

There are some exceptions. The salary threshold is lowered further to £20,480 for migrants with:

  • a job offer in a specific shortage occupation (as listed on the Government’s Shortage Occupation Lists (SOLs).
  • a PhD relevant to the role they are looking to take up
  • a PhD in a STEM subject relevant to the role they are looking to take up

The lower salary of £20,480 p.a equates to a minimum hourly rate, in force from April 6 2021, of £10.10 for non UK national on a Skilled Worker Visa, based on a 39 hour working week.

There are different salary rules for workers in certain health or education jobs, and for ‘new entrants’ at the start of their careers.

The Shortage Occupation List (SOL)

The salary threshold of £25,600 p.a is lowered for ‘shortage occupations’:

listed in the Government’s UK wide general Shortage Occupations List (SOL), such as engineers, software developers and similar, and

those listed in the Shortage Occupations List for Healthcare and Education, including care home and healthcare workers & managers, nurses & nursing assistants, medics and secondary school language and science (Physics) teachers.

This means that a nurse on £22,000 a year could still enter the UK as a ‘shortage occupation’.

The Government will carry out frequent reviews of the SOLs. Eight occupations in the health and care sector as well as modern language teachers have been added to the SOL following MAC recommendations published in September 2020. Sector trade groups and federations, such as the construction and hospitality trade bodies, lobby to have roles included in the SOL. Expect lots of activity from farmers, hospitality and food and drink lobby groups going forward, and keep an eye on the SOL pages linked here.

Identifying whether a job meets the required skill level

All jobs have a corresponding Standard Occupational Classification (SOC) code. Each SOC code has a designated skill level. This determines whether the job meets the requirements of the Skilled Worker route.

As we have highlighted, the minimum skill level has been lowered under the new system, so that A-level grade jobs, such as plasterers, plumbers, carpenters, (but not waiters or waitresses) are now classed as Skilled by the Government’s Migration Advisory Committee (MAC). Chefs have been removed from the Shortage Occupations List (SOL) but continue to be eligible for the Skilled Worker Visa route due to the changes in what is classed by the MAC as Skilled roles, and the new lower salary thresholds.

The full list of occupation codes allowed under the Skilled Worker route can be found here in the further details section of the points-based immigration system guidance on gov.uk.

How the new UK points based immigration system works

The new regime is a points based system in part.

Applicants must fulfil the mandatory a job offer and language requirements (in Test 1) to score 50 points. They can then score at least 20 points (in Test 2) to reach the necessary 70 points required to be eligible for the Skilled Worker Visa. At Test 2 stage, applicants can trade characteristics, such as their qualifications, against a lower salary, to get the required number of points.

Gov.uk has full details on the points based system for the Skilled Worker Visa, with examples and case studies. There are also full details of the other types of visa available, worth checking, at the same link.

The Government is intending to introduce a a Highly Skilled Worker Visa, allowing workers rated as “global talent” such as scientists and academics, musicians and artists, to enter the UK without a job offer if they have the required points and are sponsored by a relevant professional body. Their numbers will be capped. The Government is consulting on this and it is not anticipated until at least 2022.

Short term business traveller visas: Frontier Worker Visa

A note about the Frontier Worker Visa. For businesses who have EU nationals frequently travelling to the UK for work (outside times of covid-19 restrictions), the Government is keen for organisations to use the new Frontier Worker Visa. This allows EU nationals to continue to travel regularly to work in the UK, and to do more work wise than they would be allowed under a visitor visa, providing some continuity in this period.

Details of all the visa types can be found here.

What are the costs involved in obtaining a sponsor licence

The costs involved of applying to the Home Office for a licence to become an approved sponsor are outlined here. The costs vary depending on the size of the organisation, but for SME’s the licence fee is currently £536. The Government says that most applications can be dealt with in less than 2 months, you may be able to get a faster decision for an additional fee of £500.

Remember that this is just the fee for the licence. There will also be costs for issuing certificates to each individual migrant under the licence, and additional application costs such as, immigration skills charges, immigration health surcharge, before the costs of the visa application itself.

European Settlement Scheme

The European Settlement Scheme allows EU, EEA and Swiss nationals and their families to continue to live, work and study in the UK beyond June 30th 2021. Given the concerns about the supply of EU nationals in the UK post-brexit, in the context of this article, it perhaps worth ending on this note. According to provisional figures, at the end of January 2021, the Home Office had received 5 million applications to the European Settlement Scheme since the scheme opened. More than 2.4 million of those have been granted settled status, allowing them permanent leave to remain. A further 2 million have been granted pre-settled status.

The new immigration rules represents a big learning curve for organisations that have, so far, not needed to recruit EU nationals formally in this way. It is important to refer to the Government pages highlighted in this article, because they change regularly. Good planning is vital, make sure you know the main immigration rules as they relate to your business, the risks if your business relies on temporary, ad hoc EU workers, and the opportunities the new scheme presents. Do get in touch if you need help.

Posted in: Employment law for HR Directors, General

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Employers’ guide to tackling sexual harassment at work

Employers’ guide to tackling sexual harassment at work

Practical guidance for employers on how to tackle sexual harassment at work.

With homeworking due to Covid-19 still the norm,  its very easy for employers to take the view that sexual harassment ‘at work’ is not a current worry. But of course remote working does not provide immunity for employers. Sexual harassment can still take place on meeting platforms and discussion groups, and employers can be liable.  Consider all online platforms used by your company, both the formal and the informal, effectively as the ‘workplace’ .

Remind employees that ‘ if they don’t want to read it on social media or meeting platforms, don’t write it down’. It’s sensible to include a policy about employees’ use of digital platforms and social media in your company handbook, and make sure this is in the homeworking policy also.  Please get in touch if you need advice on these.

This article will help you understand the risks, to employees as well as employers. We explain the law, how to deal with a complaint, how to protect your staff from sexual harassment, how to help employees feel comfortable reporting issues and how to put the business in the best position to defend a claim.

Employers can be vicariously liable for any acts of harassment.  Employees too can have a personal liability. Both the employer and the individual accused of the harassing behaviour can be sued. You will see cases taken against both employer and the individual.

It is therefore really important for every business to deal correctly with any complaints of, or concerns about, sexual harassment. A possible defence is available to an employer if it can show it took all reasonable steps to prevent the harassment (see the section below on Liability and Reasonable Steps Defence).

What is sexual harassment?

General harassment occurs when person A harasses another person B, by engaging in unwanted conduct related to sex (or any of the other protected characteristic)
which has the purpose or effect of:
violating B’s dignity or creating an intimidating, hostile, degrading, humiliating or offensive environment for B.

Sexual harassment occurs when a person engages in unwanted conduct of a sexual nature that has the purpose or effect of
violating someones dignity or creating an intimidating, hostile, degrading, humiliating or offensive environment for them.

Less favourable treatment occurs when A or another person engages in unwanted conduct of a sexual nature or conduct that is related to gender reassignment or sex,
that has the purpose or effect referred to above
and because of B’s rejection of, or submission to, the conduct,  A treats B less favourably than A would treat B if B had not rejected or submitted to the conduct.

(For example, Beth’s line manager Adam ensures Beth is not put forward for promotion because she rebuffed his advances in the pub after the office away day).

 It’s important to remember that it is the effect of the behaviour on the recipient that counts – and not how it appears to the person doing the behaviour, or anyone else.”

Sexual harassment: once is enough


A one-off act of harassment is sufficient, there does not need to be repeated behaviour or a pattern of behaviour. Be aware that you may receive a compaint about somone who does not work for the business (for example, a client, trainer, cleaner; third parties who visit the premises or are involved with the business and with your staff).

Don’t ignore it!

Potentially unlimited compensation is available to victims of sexual harassment who take successful legal cases.

Employment Tribunals can make public declarations against businesses which would create embarrassing and damaging publicity and make the business less attractive to customers, clients and of course future staff. Working in a culture where sexual harassment, however subtly contrived, is present and seen as going unchecked or dismissed creates a prevailing mood of fear and futility that is ultimately damaging for staff and business alike.

Some examples of sexual harassment

  • Propositioning and making sexual advances
  • Unwelcome touching, hugging, massaging or kissing
  • Sending sexually explicit emails and text messages
  • Suggestive looks, staring or leering
  • Criminal behaviour, including sexual assault, stalking, indecent exposure and offensive communications
  • Watch for office banter also, sexual harassment couched as office banter can be quite subtle and closely related to culture of an organisation.

This is not an exhaustive list but gives you an idea of some of the types of behaviour that may appear in a complaint.

Dealing with complaints of sexual harassment

In January 2020 The Equalities and Human Rights Comission (EHRC) published its latest technical guidance for employers on sexual harassment in the workplace.

It advises e
mployers to take seven steps – develop an effective anti-harassment policy, engage staff, reduce risks, make reporting simple, provide training, act immediately when a complaint is made and take steps to protect staff from harassment by a third party such as a customer.

The guidance can be used as evidence in an employment tribunal and EHRC hopes it will become a statutory code of practice when the Government announces the results of its consultation into the current laws.

As part of an anti-harassment policy employers will be expected to warn their workers that it is unlawful and to provide definitions and clear examples.

Some previous suggestions made by EHRC with regards to managing, complaints of sexual harassment are listed below, with our comments:

  • Deal with any complaint in a fair and timely manner.
    Early engagement is vital, as is your reassurance from the outset that those involved will be listened to and heard.
  • Provide for quick and informal resolution of less serious complaints.
    Don’t always insist a complaint is put in writing if this means any delay in getting on with the investigation or getting to the nub of the issue quickly.
  • Make sure it is clear to those involved that disciplinary action up to and including summary dismissal may be taken if a complaint of sexual harassment is upheld.
    Ensure that harassment on the grounds of any protected characteristic is listed in the company disciplinary policy as one of the acts of potential gross misconduct.
  • Suspend the alleged perpetrator during the investigation – depending on the seriousness of the complaint.
    Explain to the alleged perpetrator that the suspension is a neutral act, necessary because the Employer is under a duty to investigate quickly the complaint and the suspension allows the necessary focus to take place, it protects the complainant and prevents interference in the investigation, which must be fair.
  • Ensure the confidentiality of all involved, subject to any requirement to involve external agencies.
  • Offer informal support to the complainant, including counselling in serious cases.
  • Guarantee that the complainant will not be disadvantaged by making the complaint.
    A common barrier to employees coming forward with a complaint is fear of losing their job if they speak up.
    This could amount to victimisation and is illegal. Despite this, the fear may be very real, so giving reassurance that the complainant will suffer no disadvantage by speaking up is extremely important.
  • Make adjustments to enable the complainant to participate in the disciplinary process without fear of victimisation. Allow a complainant to be accompanied to any investigatory meeting by a family member in order to provide support.
  • Where an employer believes that a criminal offence may also have been committed, provide for the matter to be reported to the police and provide appropriate support to the complainant.

Acas recommends that those investigating such complaints have special training. The Acas guidance on sexual harassment makes it clear that the process can also be distressing for the alleged perpetrator and so support should also be offered to them also, without impeding the fairness of the process. However, employers should not be seen to be favouring the alleged perpetrator, as this may give the appearance of bias and lack of impartiality in the investigation process. Read more ab
out supporting those involved in a sexual harassment below.

Liability and Reasonable Steps Defence

As the employer, you want to be able to protect your staff from sexual harassment, and to show that you took all reasonable steps to prevent such behaviour or reduce the risk of it as far as was possible.

To be protected by the Reasonable Steps Defence, employers must:

  • ensure the business has appropriate policies and procedures to explain what inappropriate conduct is.
    Policies and procedures alone aren’t enough, employers must also
  • provide training so that staff understand what constitutes inappropriate conduct, the implications of breaches and that line managers know how to deal with complaints
  • impose disciplinary sanctions for non-compliance.

Consider staff training and awareness which spells out what behaviour is appropriate and what is not. It is always best to assume this distinction is not obvious to all! Cultural differences for example may mean that examples of appropriate and inappropriate conduct need to be provided. Make training more than just an annual seminar, consider how, where, and how often, to keep the training firmly in mind and current for staff as time goes on. In support of training, some companies run “dignity at work” days or weeks.  Set the tone from the top: involving the leadership and upper management in training and in embedding a culture of zero tolerance of sexual harassment will influence employee behaviour and help staff to feel more comfortable about reporting issues.

The Legal Partners regularly run training sessions and feedback tells us that these sessions are well received and appreciated. As well as helping employees be more aware of their own behaviour, and better equipped to detect incidents, it can help create an environment where disclosure can happen more easily.

Policies and procedures aren’t enough. To be protected by the reasonable steps defence, Employers must provide training so that staff understand what behaviour is ok, and what behaviour is not.

You may also have to consider whether there is a knock on impact on other office cultures eg drinking in the office, perhaps on Fridays or when people are working late. Is it appropriate? Is it increasing a risk in terms of behaviour?

It won’t necessarily help your defence if the person complaining about the harassment also engaged in office ‘banter’ or seemingly put up with the situation for longer than might on the face of it seem acceptable before making a complaint.

In the case of Munchkins Restaurant Ltd v Karmazyn and others, waitresses at a restaurant had for a long time put up with the manager’s requirements that they wear short skirts and his subjecting them to talk of a sexual nature including talk about sexually explicit photographs left around the workplace. It took some time for the women to raise their complaints and in the meantime, as a coping mechanism, the women had at times asked the manager about his sex life as they found this to be a potentially successful way of deflecting his attention from them. Neither of these issues resulted in a successful defence for the employer and the women were awarded compensation.

In summary, don’t ignore the complaint, don’t sweep it under the carpet – investigate.

Even if, as can happen, the process of dealing with a complaint leads to an employee moving on by mutual agreement, once a complaint of sexual harassment has been made, its still important to investigate it. You must get to the bottom of what has happened, consider what needs to change in order to prevent a reoccurrence in the future.

Your investigation needs to be thorough. The courts will pick up on half-hearted or token investigations.

In the case of Southern v Britannia Hotels Ltd and another, the employer failed to conduct anything like a thorough investigation and the ET commented that the employer “did not appear to have the slightest interest in getting to grips with what had actually happened”. Miss Southern successfully sued for harassment committed by her Line Manager. The court awarded her £19,500 for injury to feelings and stated that the lack-lustre approach to their investigation contributed to the amount of damages awarded.

Non-disclosure agreements (NDAs) and confidentiality clauses in Settlement Agreements (Confidentiality Clauses)

NDAs and in particular Confidentiality Clauses do regularly appear to protect a company’s business interests, information, intellectual property or trade secrets.

Don’t however automatically use an NDA, or Confidentiality Clauses without taking advice. This is because in reported cases of sexual harassment, it has come to light that there has been a widespread and inappropriate practice of using NDAs or Confidentiality Clauses to silence employees about the sexual harassment they have experienced at work. The inappropriate use of NDAs as “gagging orders” was exposed by the Equalities and Human Rights Commission to the women and equalities committee in March 2018 following a call for evidence into sexual harassment in the workplace.

Just to emphasise how important this point is, on 12 March 2018 the Solicitors Regulation Authority (SRA), published a warning notice indicating that it would amount to professional misconduct for a Solicitor to prepare an agreement for use by a client that contains an inappropriate NDA which prevents an employee from, for example informing the Police or whistleblowing.

If you do need an NDA or a Confidentiality Clause, it must to be carefully and specifically worded, so do take advice from The Legal Partners.

Supporting an employee who has made a complaint of sexual harassment

In its guidance, Acas offers this advice on supporting victims who come forward:

Experiencing sexual harassment is often extremely emotional and distressing for the worker involved. This means an employer should make reporting such a matter as stress-free as possible. In most cases this involves simple things like making sure there is plenty of time to discuss the matter and finding a private space to meet and making sure they have a family member to support them in meetings on the subject.

We would add that keeping in regular communication and ensuring those involved feel listened to and heard at each interaction and stage in the process is key to handling the issue sensitively and effectively.

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Explaining National Living Wage, National Minimum Wage rates, increases for 2022

Explaining National Living Wage, National Minimum Wage rates, increases for 2022

These terms and the changing age bands cause much confusion. This article explains the difference between the National Living Wage and the National Minimum Wage and outlines the new increased rates from 1st April 2022. We also highlight the penalties for employers for non compliance, where common mistakes occur, and how to avoid these.

New wage rates from 1 April 2022

From 1st April 2022, all workers aged 23 and over are legally entitled to be paid at least £9.50 per hour. This is the National Living Wage (NLW). The new rate represents an increase of 59p per hour (6.6%).

Last year the the National Living Wage age band was widened to include 23 and 24 yr olds. By 2024 it will apply to all workers aged 21 and over.

Apprentices are entitled to the apprentice rate if they’re either:

  • under 19 or
  • aged 19 or over and in the first year of their apprenticeship.

So in 2022, an apprentice aged 21 in the first year of their apprenticeship is entitled to a minimum hourly rate of £4.81.

Apprentices are entitled to the minimum wage for their age if they :

  • are aged 19 or over AND
  • have completed the first year of their apprenticeship.

So an apprentice aged 21 who has completed the first year of their apprenticeship is entitled to a minimum hourly rate of £9.18.

What is the National Minimum Wage? (NMW)

The National Minimum wage (NMW) is the minimum pay per hour that workers are entitled to by law. This includes all employees and workers, including part-time, flexible, agency workers, those on zero hours contracts and those working under apprenticeship schemes; everyone in fact except the genuinely self-employed.

There are different rates for each age group, from school leavers (16yrs) upwards. The government sets these rates and reviews them yearly. The rates change in April each year and are advised by the independent body Low Pay Commission.

All employers are legally obliged to pay the National Minimum Wage, irrespective of their size. The Government has published information on how to ensure you are paying your workers at least the minimum wage, and updated guidance on calculating the minimum wage.

What is the National Living Wage? (NLW)

The National Living wage is simply the highest band of the National Minimum Wage which staff should be paid if they are (from 1st April 2021) aged 23 or over.

There are penalties on employers for failure to pay the correct National Minimum Wage or National Living Wage amount, these are outlined below.

The Government publishes a name and shame list of employers who fail to pay staff the National Minimum Wage. In the latest round in August 2021 191 employers were exposed, amongst these were household names (John Lewis, Welcome Break, Body Shop, Pret a manger) . HMRC found that these 191 owed over £2.1m to over 34,000 workers for breaches going back to 2011. The culprits were ordered to bay back what they owed plus a total of £3.2 million in fines.

Mistakes can occur, and any organisation employing staff at the lower end of the pay scale need to take extra care. Amongst the 191 employers fined in August 21, mistakes come when deducting wages for expenses and uniforms, when calculating variable hours and overtime hours worked, and when applying the (wrong) apprenticeship rate. With age ranges for the National Living Wage being extended, (last year in 2021 and again in 2024) check carefully the ages of staff, and ensure these are logged correctly on payroll information.

NLW, NMW Wage rates, penalties for non compliance:

HMRC enforces the NMW and NLW. They can enforce non payment by issuing a notice of underpayment. This will calculate the arrears of pay to be paid and the penalty, set at 100% of the total underpayment of the NMW, with a minimum penalty of £100 and a maximum penalty of £20,000. If an employer does not comply with the notice of underpayment, the enforcement officer can:

  • issue civil proceedings in the civil courts or in the employment tribunal to recover the sums that should have been paid. If, following the judgment, the debt remains unpaid, HMRC will take steps to enforce the debt.
  • prosecute the employer to seek a criminal conviction.

A package of measures was introduced back in 2015 with the aim of improving employers’ compliance with the NMW and the NLW.

  • Penalties increased from 100% of arrears to 200% of arrears (halved if employers pay within 14 days). The maximum penalty of £20,000 per worker remains unchanged.
  • Increasing the budget for enforcement of the NMW and NLW.
    A dedicated HMRC team now pursues the most serious cases of employers deliberately not paying the NMW and NLW. The HMRC team can impose fines, refer cases for criminal prosecution and, of course, name and shame worst-offending employers. HMRC’s current approach is to target the high-risk areas for non-payment of the NMW, which are currently the social care, hairdressing, retail and franchising sectors.
  • Individual employers can be disqualified from being a Company Director for up to 15 years for the non-payment of the NMW and the NLW.
  • The creation of a new position called the Director of Labour Market Enforcement and Exploitation, which will oversee enforcement of the NMW and NLW, the Employment Agency Standards Inspectorate and the Gangmasters Licensing Authority.

Employees concerned they are not being paid the NLW or NMW are advised to check the Check your pay website, check with Acas then speak to their employer in the first instance and raise a grievance if necessary. They can report an employer to HMRC and take their employer to a tribunal (following early conciliation through Acas) if the situation remains unresolved.

Finally, what’s The Living Wage?

The Living Wage is a voluntary hourly rate, independently calculated each year by  Living Wage Foundation to meet the real cost of living. It’s voluntarily paid by over 10,000 UK employers. Don’t confuse the Government’s National Living Wage with this voluntary Living Wage. The Living Wage is a benchmark and a recommendation of what it will take to improve living standards now, not in 2, 3 or 5 years time.
The Government’s National Living Wage and National Minimum Wage of course is enforceable by law. The Living Wage Foundation’s Living wage is voluntary. 
The current living wage is £9.90 per hour across the UK and £11.05 per hour in London.
In order to become an accredited Living Wage Employer employers need to pay all of your employees at least a living wage, and to have a plan to extend this wage to regular on-site subcontracted staff as well.

Navigating the National Living Wage and National Minimum Wage payments correctly can be difficult, if you are in any doubt, please get in touch.

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Handling an employee grievance, 5 key actions

Handling an employee grievance, 5 key actions

With the challenges of remote working and employee concerns and worries about returning to workplace post Covid, confident handling of employee grievances must be a key part of every line manager’s skill set. This is a 5 step guide to handling an employee grievance swiftly and effectively in order to save management time, preserve employee relations and keep the business out of Employment Tribunals. It includes two golden rules of handling employee grievances to successful resolution.

Grievances are concerns, problems or complaints raised by an employee about workplace issues such as their work, workload, where they work or who they work with.  These grievances are best dealt with at an early stage informally, but employers must be prepared to handle employee grievances that cannot be resolved informally using a formal employee grievance procedure.

In the current Covid situation many employees have additional worries and concerns about being in the workplace again or travelling to and from work. They may have specific medical or situational reasons for these concerns, for example that they or someone they live with is vulnerable in medical terms. The employer will not and cannot be expected to solve all such worries, but employers will be required to consider in a reasonable way any such concerns raised via a grievance process. 

It is also possible that issues have become magnified whilst people have been working remotely. For some employees, isolation from their colleagues may have led to heightened unhappiness with issues and employers may find themselves dealing with more grievances than usual. Conversely, for some employees, working remotely may have been a more positive situation and it will be the return to the office environment that causes them more concern. 

It’s important for every business, whatever its size, to have a formal grievance procedure in place, which takes into account the ACAS Code of Practice.  The Acas Code of Practice on disciplinary and grievance procedures is recognised by Tribunals as the best practice way of handling a grievance situation and can be used alongside the Acas step by step guides on formal grievance and disciplinary procedures. Include your formal grievance procedure in the staff handbook, and, importantly ensure your staff are aware of it. Employers have a duty to provide staff with details of any workplace disciplinary and grievance procedures.

Discipline and Grievance – Acas Code of Practice

The procedure should require the employee to set out in writing the nature of their grievance and for employers to deal with the grievance fairly and consistently.  Do not ignore any concern or complaint raised by an employee, however casual the manner in which it was raised.

These are the 5 steps:

  1. Informal Action. Initially and as soon as they can the line manager should have a quiet word with the employee making the complaint. Problems can often be settled quickly and informally in the course of everyday work. This may be one of the problems that has arisen during lockdown – the lack of normal day to day interaction at work to resolve issues as they arise. Employer can respond to verbal grievances with a verbal response, but keep a note of what is said.  

    However, if the grievance is not settled at this stage or circumstances make this route inappropriate, then, if they have not already done so, the employee should be requested to submit a formal grievance letter.

  2. Invite employee to a formal meeting. This should be held in a private and confidential room between the Manager designated to hear the Grievance and the employee who may be accompanied by a work colleague or Trade Union official.  This is the opportunity for the grievance to be thoroughly discussed and any witnesses called.
  3. Investigation. Depending on the complexity of the grievance it may be necessary to adjourn the meeting so that further investigation may take place before any decision is taken.
  4. Communicate Decision and complete records. After the grievance meeting and any investigations have taken place, the employer needs to decide whether to uphold or dismiss the grievance and communicate this decision to the employee in writing without unreasonable delay, usually within 10 working days. The HR Director or Manager handling the employee grievance must ensure that the minutes of all formal grievance meetings are taken and copies given to the employee for information. The minute taker should not be part of the discussions about the outcome of the grievance or appeal other than to record the key points of the discussion.
  5. Appeal. if the Grievance is rejected or partially rejected then the employee has the right to appeal against that decision. The appeal should be heard promptly and wherever possible by a Manager not previously involved in the case.   The employee may be accompanied as before and notified in writing of the decision, again within 10 working days is standard practice.

Two golden rules when handling employee grievances to successful resolution

  1. A very helpful question to ask an employee raising  a grievance is “what outcome do you want from this grievance?” This tends to focus the employee’s mind on the solution he or she is looking for rather than just the problem.
  2. Be prepared for a grievance.  Check that there is an up to date procedure in place, published in the handbook, that supports the resolution of grievance issues in your workplace.

Please also note an employee can raise a grievance during a disciplinary process.  The disciplinary process may be temporarily suspended or if the grievance and disciplinary cases are related it may be appropriate to deal with both issues concurrently. The size of the business may require an expert outside advisor e.g experienced HR professional to hear the Grievance, the Appeal or even the Disciplinary.

Bear in mind also that where the Grievance Procedure itself is not appropriate then with the employee’s consent an external Mediator might be more suitable.
Click here or view our presentations for the slide share on this topic.

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Coronavirus Job Retention Scheme: How to Furlough workers

Coronavirus Job Retention Scheme: How to Furlough workers
Furloughing workers. Applying for the grant template letter agreeing changes to employment contract image

Wednesday 11th November 2020.

This article was written in May 2020 and is now out of date. If you have landed here, (via a cached or bookmarked page), please follow the link to our latest article that explains the extended CJRS furlough scheme from 1st November 2020, containing information on how to apply for the scheme and a template furlough agreement letter to send to employees to gain their agreement prior to being put on the scheme.

Furlough scheme to end 31st October

HMRC Portal for claiming the grant: here,
and at GOV.UK www.gov.uk/guidance/claim-for-wages-through-the-coronavirus-job-retention-scheme,
refresh the page and click the ‘how to claim’ link.

This HMRC step by step guide, outlines the specifics of what you need to do to claim for the grant.

HMRC has produced updated guidance for employers on how to calculate your claim, it explains different pay and grant reclaim scenarios.

So far HMRC has been processing claims and making the grant payment to employers within 6 working days.

On 20th March the Government introduced The Coronavirus Job Retention Scheme (CJRS) where an employer designates a worker as being on leave from the business (furlough leave). Under the scheme, all UK employers, regardless of size or sector, can claim a grant from HMRC to cover 80% of the wages costs of employees who are not working but are kept on the payroll (‘furloughed’), of up to £2,500 a calendar month for each employee. Employers can choose to top up the remaining 20% if they wish, but do not have to do this.

Guidance for employees can be found on GOV.UK check if your employer can use the CJRS scheme.

There is also a recorded webinars explaining the CJRS on HMRC’s youtube channel.

The Q&A below explains the scheme, what you need to do in order to furlough workers and how to apply for the CJRS grant.

We are advising employers to communicate with staff first, and seek their agreement to be designated as furloughed workers, before sending a second letter formalising the decision.

We have put together this template of a second letter that, following initial discussions with employees, employers should customise and send to employees,  seeking their agreement, showing the exact changes to their salary and other benefits and confirming that they have been furloughed and keep a record of this communication. 
Download the template letter. 

This letter is a template only, and will need customisation. There may be well be questions from your employees and almost certainly variations required, so please do get in touch if you have queries, if you need a word copy of the letter, or to discuss your particular situation and what you need.

The only way for Employers to make a claim is online. Employers will be able to claim for:

  1. – Wage costs, plus
  2. – the employer’s NI contributions, plus
  3. – the minimum automatic enrolment employer pension contributions on that wage.

How do I make a claim for furloughed staff under CJRS?

Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, for example, 20 or more, it may be necessary to start a collective consultation to gain agreement to the changes to staff terms of employment.

Information you need before making a claim

You will need to have the following:

  • a Government Gateway (GG) ID and password.
    If you don’t already have a GG account, you will need one and you can apply for one here. (Please note, this process is taking at least 10 days or so, and the letter (!) HMRC sends confirming your Gateway ID and password will be send to your business address, so make sure you have a way of getting your hands on it!
  • Be enrolled for PAYE online. If you aren’t registered yet, you can do so now, or by going to GOV.UK and searching for ‘PAYE Online for employers’.

Information you will need to make a claim

You will need to provide the following information to make a claim:

  1. The bank account number and sort code you want HMRC to use when it pays the claim.
  2. The name and phone number of the person in your business that HMRC should contact with any queries.
  3. Your employer Self-Assessment UTR (Unique Tax Reference), Company UTR or CRN (Company Registration Number).
  4. The name, employee number and National Insurance number for each furloughed employee.
  5. Your employer PAYE reference number.
  6. The number of employees being furloughed
  7. Payroll/employee number for the furloughed employees (optional)
  8. The claim period (start and end date)
  9. Amount claimed (per the minimum length of furloughing of 3 consecutive weeks).

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.

Employers with less than 100 furloughed staff will be asked to enter details of each employee they are claiming for directly into the system (yes, really) – these details will include:

  • the employee’s name,
  • National Insurance number,
  • claim period and claim amount,
  • payroll/employee number (optional)

Employers with more than 100 or more furloughed staff will be asked to upload a file with the information rather than input it directly into the system. HMRC say that they will accept the following file types: .xls .xlsx .csv .ods

Likewise, this file should include the following information for each furloughed employee: their name, National Insurance number, claim period and claim amount, and payroll/employee number (optional).

If you want an agent to make the claim for you

If your business uses an agent who is authorised to act for your business for PAYE purposes, the agent will be able to make a claim on behalf of your business using their ID or password. So please speak to your agent now.

However, if your business uses a file-only agent (files your RTI return but doesn’t act for the business in other matters), the file-only agent won’t be able to make a claim on your behalf. Your file-only agent can assist you in obtaining the information you need to claim (which is listed above). You will need the information listed above in order to make the claim directly.

HMRC have said they cannot provide your employees with details of claims you make on their behalf. They have asked that businesses help by keeping their employees informed, answering any questions that they might have. Please ask your employees not to contact HMRC.

  • a Government Gateway (GG) ID and password.
    If you don’t already have a GG account, you will need one and you can apply for one here. (Please note, this process is taking at least 10 days or so, and the letter (!) HMRC sends confirming your Gateway ID and password will be send to your business address, so make sure you have a way of getting your hands on it!
  • Be enrolled for PAYE online. If you aren’t registered yet, you can do so now, or by going to GOV.UK and searching for ‘PAYE Online for employers’.

Employers should retain all records and calculations in respect of your claims.

HMRC confirms that the CJRS will be in place for at least 3 months from 1 March.

Which employees are covered?

The HMRC guidance states that CJRS will cover employees who have been on the payroll since 28th February this year, on any type of contract including:  

  1. full-time and part-time employees
  2. employees on agency contracts, and
  3. employees on flexible for zero-hour contracts

An employee is considered furloughed under the scheme only if he or she does no work for the employer. The scheme does not therefore cover the wages of employees whose hours are reduced.
Note furloughed employees are allowed to undertake training for their current employer, and this training has to be paid at their full salary rate.

In recent updates to the CJRS scheme, employees who are unable to work because they have caring responsibilities resulting from COVID-19 can also be furloughed.

How to put employees on furlough leave?

Employers need to:

  • Decide which employees to designate as furloughed workers.
  • Notify those employees of the intended change.
    The HMRC guidance states that it is important to take legal advice on this because the changes will affect each worker’s contract of employment and need the workers’ agreement.
  • Consider whether you need to consult with employee representatives or trade unions.
    For example, where the employer intends to vary the contracts of 20 or more employees, and it intends to dismiss employees who do not consent to the change in their terms, for the purposes of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), those employees who do not consent to the change in their terms will be classed as dismissed by reason of redundancy.

    The employer will therefore have a duty to inform and consult appropriate employee representatives and notify the Secretary of State using form HR1.

    The HMRC guidance states that employers will need to follow this process before placing employees on furlough leave.

  • Agree the change with the furloughed employees.
    Most employment contracts will not permit an employer to reduce an employee’s pay, provide them with no work, and change their employment status without agreement – otherwise there is the risk of a constructive/unfair dismissal, wrongful dismissal/breach of contract claims and unlawful deductions of wages claims.

    Technically under the employment contracts each employee should be given the period of notice in their employment contract (e.g. one month for most employees or the number of weeks equivalent to the years of service if longer) before the change takes effect.

    However, faced with the alternatives, which are likely to be unpaid leave, lay-off, or redundancy, the majority of affected employees are likely to agree to be placed on furlough leave.

  • Confirm the employees’ new status in writing. Ideally, the employer should advise how long it expects furlough leave to continue, however this may be difficult in the current climate. Employers may wish to put employees on furlough leave for an initial period, subject to review.
  • Submit information to HMRC about the employees that have been furloughed and their earnings through the new online portal, (see above).
  •  Ensure that the employees do not carry out any further work while they are furloughed.

What wages should employers pay during the period of furlough leave?

  • During the period of furlough leave, the employer should pay the employee at least the lower of 80% of the employee’s salary or £2,500. In each case PAYE (Income Tax) and NI is deducted before the salary is paid to the employee.
  • The HMRC guidance states that employers can choose to top up wages to 100%, but are not obliged to do so.
  • For full-time and part-time salaried employees, the employee’s actual salary, before tax, as at 28 February 2020 should be used to calculate the 80%. 
  • The employee’s wage will be subject to income tax and other deductions e.g NI and workplace pension contributions.
  • The HMRC guidance notes that fees, discretionary commission and bonuses should not be included. 
  • HMRC states it will issue further guidance on how to calculate claims for employers national insurance contributions and the minimum automatic employer pension enrolment contributions before CJRS goes live.
  • Where an employee’s pay varies, the employer will be able to claim for either:

    -the higher of the employee’s earnings in the same month the previous year, or

    -the employee’s average monthly earnings in the 2019/20 tax year. 

  • In the case of an employee who has been employed for less than a year, the employer will be able to claim for an average of the employee’s monthly earnings since he or she started work. 
  • In the case of an employee who only started in February 2020, the employer will be required to pro-rate the employee’s earnings so far.
  • The Guidance also covers the application of the national minimum wage (NMW) to furloughed employees. 

It states that, since employees are only entitled to the NMW while doing work, furloughed employees, who are not working, must be paid at the 80% rate (or £2,500) even if, based on their usual working hours, this would be below the applicable rate of NMW. 

However, the Guidance goes on to state that if employees are required to, for example, complete online training courses while they are furloughed, then they must be paid at least the NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

The National Minimum wage from April 2020 is £8.72 for those aged 25 and over.

What happens if an employee is on Statutory Sick Pay?

Employees who are on sick leave or self-isolating should get statutory sick pay but can be furloughed during this time. We therefore think that an employee on contractual sick pay could also be placed on furlough leave.

Employees who are shielding in line with Public Health Guidance or at home looking after children can be placed in the Coronavirus Job Retention Scheme.

What should I say to employees and what should I ask them to sign?

The Guidance recommends that employers discuss furloughing with their staff and make any changes to the employment contract by agreement

The template letter above, that you can download, is the second letter to send to your staff, after you have notified them initially that the business is considering furloughing. The second letter is the workers agreement to change their contract so that their salary is reduced and they are on furlough leave.

If the employer is planning to reduce the salary and any benefits related to salary (eg pension) to the 80% level, then under employment law this is an unlawful deduction from wages for the 20% of salary and benefits, and could be constructive (unfair dismissal). This is why it is important to get the workers agreement by signing the second letter.

Overall it is important to meet/speak with the worker to explain what the business is proposing to do and to seek their agreement. In effect this is consultation.

Please note that this second letter assumes that March salary and benefits were paid in full.

If this is not the case then please speak with us, as a more detailed letter will be needed explaining what is happening.

This second letter will need to be counter-signed by the employee and it is safest to get the second letter counter-signed even if there has been agreement by email. Under employment law it is important to have a counter-signed letter evidencing the change. If the employer is maintaining 100% of salary and benefits and just designating the employee as a furloughed worker a different letter will be sent. HMRC recommends that copies of these letters are kept for at least 5 years.

It is important to maintain good communication with employees and be available to speak as needed. 

You should expect ongoing questions from your teams about this and returning from furlough leave, we advise using these to produce your own Q&A to help them. Please contact us if you need a return from furlough leave letter.

Are employers obliged to top up the remaining 20%?

The guidance for employees states that ‘your employer could choose to fund the differences between this payment and your salary, but does not have to’.

Withholding 20% of an employee’s salary will, however, amount to breach of contract and unlawful deduction of wages, unless the employee gives their consent. It is expected that the majority of employees will consent since furlough leave is a better alternative than unpaid leave, lay-off, or redundancy.

What happens to pension, holiday and other benefits?

Each employer will have different arrangements. This second letter needs careful customisation, as we’ve said, to reflect what is happening to these benefits. Employers can claim for the employers workplace pension contribution as under the grant, and when paying workers employers will deduct the worker’s workplace pension contribution and pay the contributions into the relevant pension scheme as normal.

Employees will continue to accrue the basic 20 days and 8 public holidays (5.6 weeks) Working Time Regulations statutory holiday over the furlough leave period, and employers will need to pay this at 100% salary (because it is a benefit accrued when the employee was receiving full salary) even if employers are only planning to pay 80% salary.

Can an employee request their employer puts them onto furlough leave?

Yes, an employee can request this, but the employer does not have to agree.

It is the employer’s decision which employees to place on furlough leave, if any. It seems that it is also the employer’s decision whether to place employees on furlough leave, or make them redundant.

Potentially redundant employees do not have a right to require their employer to place them on furlough leave as an alternative to redundancy. However, it is hoped that many employers will see the new scheme as preferable to business closure and making redundancies.

How do I choose which employees are placed on furlough leave and which are not?

Employers will make a commercial judgment about which critical business functions will need to carry on (e.g. Board or senior management oversight, IT support teams, finance teams, HR, legal, facilities management/security etc). Choosing who needs to be placed on furlough leave, and who must continue to work may prove a challenging task for some employers. 

This is especially difficult if you intend to pay staff on furlough leave their full pay, while other staff are being asked to work as normal for their pay. Staff who were delivering services on-site, are likely to be natural candidates for furlough leave.

The starting point is to consider business needs as stated above. Keep records of why that decision was made showing which roles were critical to the business functioning during the coming three months. 

The HMRC guidance states that equality and discrimination laws continue to apply to the selection process for employees to go on furlough leave. Take care to avoid direct or indirect discrimination in the selection process. Make contact if you need help or have queries on this.

Where an employer must select between staff doing identical business critical roles, the first step is to ask for volunteers to remain working, or use a random selection policy for large teams. 

For clients we are advising who have employees who are no longer needed to deliver a service on site (e.g restaurants, leisure facilities, bars) as the site is shut, these clients have asked for volunteers to be placed into the Coronavirus Job Retention Scheme. They have received very positive response and large numbers of workers accepting the re-designation in order to preserve their employment.

For the functions which are critical for the business (referred to above) employers could consider having enough staff available if a team member should go sick or have access to temporary worker support from home where possible so that critical function can continue.

What happens if the employer is planning to furlough 20 or more staff?

This letter is designed where less than 20 staff are employed by one legal entity at one establishment are to be included in the CJRS. 

If there are more than 20 staff and the employer would have to consider redundancies if the employees did not accept the furlough leave at 80% salary, then the collective consultation paragraph in this letter needs to be included.

The Guidance makes specific reference to these risks and the need to take overall legal advice.

What happens to employees who have been made redundant, can they be furloughed and be in CJRS?

If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages through the scheme. This applies to employees that were made redundant or stopped working for you after 28 February, even if you do not re-employ them until after 19 March. This applies as long as the employee was on your payroll as at 28 February and had been notified to HMRC on an RTI submission on or before 28 February 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 28 February 2020

What happens to employees hired after 28 February 2020?

In the important change to the scheme we stated at the beginning, employees hired after 28th February are now eligible to join CJRS, if they were employed as of 19th March and were on your PAYE payroll on or before that date.

What is the minimum time that an employee can be furloughed?

Furlough leave runs for a minimum of 3 weeks. The scheme is open 1st March until end of October 2020. Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made to furlough, nor when the employee is written a letter confirming their furloughed status.

Can an employee volunteer or do training work during furlough leave?

A furloughed employee can volunteer e.g as an NHS volunteer, as long as he/she does not provide services or generate revenue for the organisation.

If an employee is required to complete online training courses whilst they are on furlough leave then they must be paid their 100% salary (which must be of course at least National Living Wage/National Minimum Wage) for the day/s spent training.

Can an employee work for different employer whilst on furlough leave?

in another important change to the scheme ,that we mentioned above, if contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough leave.
For any employer that takes on a new employee, the new employer should ensure they complete the HMRC new starter checklist form correctly. If the employee is furloughed from another employment, then Statement C of this starter checklist need to be ticked.

What happens to an employee who is on maternity leave, contractual adoption pay, maternity pay or shared parental pay?

The normal rules apply and they are entitled to claim the usual statutory pay or allowances.

For example an employee who qualifies for statutory maternity pay will still be eligible for 90% of their average weekly earnings in the first six weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower).The statutory flat rate is currently hundred and £148.68 a week, rising £151.20 a week from April 2020.

If the employer offers enhanced (earnings -related) contractual pay to women on maternity leave this is included as wage costs and can be claimed through CJRS.

The same principle applies to contractual adoption, paternity or shared parental pay.

Recapping what need to claim under CJRS?

It’s worth repeating these important details. To claim the grant employers will need:

  • a Government Gateway (GG) ID and password.
  • If you don’t already have a GG account, you will need one and you can apply for one here. (Please note, this process is taking at least 10 days or so, and the letter (!) HMRC sends confirming your Gateway ID and password will be send to your business address, so make sure you have a way of getting your hands on it!
  • Be enrolled for PAYE online. If you aren’t registered yet, you can do so now, or by going to GOV.UK and searching for ‘PAYE Online for employers’.

  1. The bank account number and sort code you want HMRC to use when it pays the claim.
  2. The name and phone number of the person in your business that HMRC should contact with any queries.
  3. Your employer Self-Assessment UTR (Unique Tax Reference), Company UTR or CRN (Company Registration Number).
  4. The name, employee number and National Insurance number for each furloughed employee.
  5. Your employer PAYE reference number.
  6. The number of employees being furloughed
  7. Payroll/employee number for the furloughed employees (optional)
  8. The claim period (start and end date)
  9. Amount claimed (per the minimum length of furloughing of 3 consecutive weeks)

How frequently can an employer submit a claim?

An employer can only submit one claim every three weeks.

Can an employer backdate the claim to 1 March 2020?

The Guidance says yes if applicable, provided the claim only starts from the date the employee stopped working. HMRC has reserved the right to audit all claims. For cash flow planning we suggest being prudent and waiting until the CJRS portal is active to see exactly what statement/information needs to be provided to HMRC in order to verify the date of the furlough leave.

Can I still make employees redundant whilst they are on furlough or afterwards?

Yes, and your employees have their normal rights to redundancy protection and payments in this situation.

Can I change an employee to be back to work after they have completed the minimum 3 weeks furlough leave?

Yes, employers can place employees on furlough leave more than once, and one period can follow straight after an existing furlough period, while the scheme is open. The scheme will be open for at least 3 months.

What happens when CJRS ends?

Employees that have been on furlough leave have the same rights as they did previously. Returning employees will still have their usual rights to statutory sick pay, maternity rights, other parental rights and rights against unfair dismissal and suffering discrimination. Please contact us if you need a return from furlough leave letter.

What happens if the business can no longer receive back all employees when their furlough leave ends?

Employers will need to make a decision, depending on the business situation at that time, whether all employees can return to their duties.

If the business is not in a situation to receive employees back when their period of furlough leave ends, it will be necessary to consider termination of employment through a fair and reasonable redundancy process.

It is not yet clear whether the furlough leave scheme will allow people to alternate periods of work, with periods of furlough leave. If this is the case, obviously the flexibility will help employers and employees alike.

Please contact us by email or phone, number below, if you need advice or you want to discuss what to do next. We are here to help.

Posted in: Employment law for HR Directors, General

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Practical tips for an effective BYOD policy (Bring Your Own Device)

Practical tips for an effective BYOD policy (Bring Your Own Device)

In this article we highlight the potential risks and benefits for businesses of allowing employees to use their own personal mobile devices (tablets, smartphones, laptops or notebook computers) for business purposes. We talk through the important issues to consider when putting together an effective Bring Your Own Device(BYOD) policy, to maximise the upsides whilst limiting the risks.

Fuelled by the surging use of smartphones, high speed internet services and 4G as well as the growth in remote and flexible working, staff today have come to expect to use their own devices to conduct business. Employers of every size have been quick to adopt a BYOD approach.

Although the following figures are from the USA, the BYOD statistics below show impact of BYOD in the workplace and its widespread adoption.

  • The BYOD market is on target to reach nearly $367 billion by 2022, up from just $30 billion in 2014 (Research report by Global Markets Insights Inc 2016).
  • 59% of organisations allow employees to use their own devices for work purposes. Another 13% had planned to allow use within a year (From Tech Pro Research published in 2016).
  • 87% of companies rely on their employees using personal devices to access business apps conducted on a survey of 409 respondents among CEOs, CFOs and CIOs who work for companies with >100 employees,  published in 2016).
  • As of 2016, six out of 10 companies had a BYOD-friendly policy in place (from the same Research by Syntonic).

BYOD benefits

BYOD can bring a number of benefits to businesses, including:

  •  Increased flexibility and efficiency in working practices.
  •  Improved employee morale and job satisfaction.
  •  A reduction in business costs as employees invest in their own devices.

BYOD risks

The boom in BYOD has been matched with an upsurge in activity by criminals trying to exploit the data and intellectual property stored on personal mobile devices. The use of personal mobile devices for business purposes increases the risk of damage to a business’s:

  • IT resources and communications systems.
  • Confidential and proprietary information.
  • Corporate reputation
  • Customer and employee data

    The General Data Protection Regulation (“GDPR”) which became law on 25th May 2018, has increased the risks of BYOD through:

    enhancing the rights of individuals with regards to their data (e.g right of access, correction, deletion),
    increasing the legal responsibility on businesses (the data controller in this context) to keep data secure, and
    allowing the ICO to fine organisations for breaches and non compliance.

Obviously allowing employees to use their own devices to conduct business comes with an increased risk of data breaches, both physical (such as leaving a device on the train) or electronic (such as hacking or malware).

The research cited above showed that even before GDPR came into force, companies and CIOs were well aware of the security implications of a BYOD approach: 61% of respondents in the Syntonic survey viewed mobile devices as less secure than fixed devices such as desktop personal computers, but said that security measures aren’t always consistent.

Ownership of the device

Personal mobile devices are owned, maintained and supported by the user, rather than the business. This means that a business will have significantly less control over the device than it would normally have over a corporately-owned and provided device. But the business remains responsible for protecting company data stored on those personal mobile devices.

Issues to consider in a Bring Your Own Device (BYOD) policy

A BYOD policy brings with it unique challenges which employers must address, such as:

  • How will the business record and keep track of the devices used to access company data?
  • What security measures will be installed on employees’ devices?
  • What are the steps required if a device is lost or stolen?
  • Will an employee be required to a return a device to the company for wiping on termination of employment?
  • Are company emails stored on the employee’s device? If so particular care should be taken when an employee leaves the business, as company emails and data will remain on their device.

The tone of the BYOD policy should be varied depending on whether the BYOD policy is voluntary (and the employer offers an alternative company-owned device) or whether using their own device is the only option available to the employee. If the policy is purely voluntary, then the employer may impose stricter limitations on usage and more stringent monitoring requirements. If employees are required to use their own device for business purposes, then there is likely to be less scope to impose limitations, particularly if there is an associated cost for employees.

How to manage the risks associated with a BOYD scheme

To de-risk the business when adopting a BYOD scheme, employers should:

  • Audit and assess the risks, including assessing:
    where the data is held?
    what type of data is stored?
    how will the data be transferred?
    what is the potential for leakage ?
    how easily employees may blur personal and business use?
    and how cloud-based services will affect security?
  • Ensure that security measures impose controls on access to data, encryption and PIN numbers, and verify the device’s security features.
  • Keep pace with advances in the features of devices and maintain a list of approved models. Choose Your Own Device (CYOD), is becoming more popular, where employees choose from a list of models pre-approved by the business.
  • Insert safe and secure deletion methods on the device.
    Note that the ICO guidance recommends that portable devices used to store and transmit personal data should be encrypted. A failure to protect data using encryption software may lead to the ICO taking enforcement action against an employer.
  • Consider how the use of company data on the device can be monitored. The ICO guidance recommends using technology to monitor the device to assess data leakage and loss, but reminds employers to consider employee privacy; a careful balancing act must be maintained and employees should be informed of the monitoring.
  • Have a well-publicised BYOD policy.

Before implementing a BYOD policy, an organisation should look at the strategic and business case for it, and conduct a privacy impact assessment. In particular, employers should consider:

  • Compliance with relevant laws – the GDPR 2018 we have already mentioned, and the Data Protection Act 2018. Privacy impact assessments are a legal requirement under the GDPR in some circumstances. Implementing a BYOD policy will almost certainly require employers to carry out a privacy impact assessment.
  • Whether consultation with any staff forums, employee bodies or trade unions are required before implementation of a new BYOD policy.
  • Whether BYOD will save the company enough money, taking into account the potential hidden costs such as employee reimbursement, licensing, infrastructure and support to justify a potential reduction in control over the processing of company data (particularly if employees are using a variety of makes and ages of device which may have varying degrees of security sophistication).
  • Whether there are any technical limitations to implementing a BYOD policy. An example of this might be capacity restrictions on the internal Wi-Fi network, or a lack of sophistication in the IT team with respect to technical security measures.

Securing data stored on a device

  •  A business is responsible for protecting company data stored on personal mobile devices. Businesses should consider implementing security measures to prevent unauthorised or unlawful access to the business’s systems or company data, for example:
    • Requiring the use of a strong password to secure the device.
    • Using encryption to store data on the device securely.
    • Ensuring that access to the device is locked or data automatically deleted if an incorrect password is inputted too many times.
  •  The business should ensure that its employees understand what type of data can be stored on a personal device and which type of data cannot.

Mobile Device Management for BYOD

Mobile Device Management software allows a business to remotely manage and configure many aspects of personal mobile devices. Typical features include:

  • Automatically locking the device after a period of inactivity.
  • Executing a remote wipe of the device (make sure employees are aware which data might be automatically or remotely deleted and in which circumstances).
  • Preventing the installation of unapproved apps.

Monitoring use of a device

Employers should also consider how, and to what extent, they will have access to and monitor company and personal data contained on employees’ personal devices. Employees have a reasonable expectation of privacy under Article 8 ECHR. Steps should be taken to ensure that company and personal data are segregated on personal devices, and access to personal data by the employer is minimised.

Loss or theft of a device

  • The biggest cause of data loss is still the physical loss of a personal mobile device (for example, through theft or by being left on public transport).
  • Loss or theft of the device could lead to unauthorised or unlawful access to the business’s systems or company data. The business must ensure a process is in place for quickly and effectively revoking access to a device in the event that it is reported lost or stolen.
  • Businesses should consider registering devices with a remote locate and wipe facility to maintain confidentiality of the data in the event of a loss or theft.

Transferring data

  • BYOD arrangements generally involve the transfer of data between the personal mobile device and the business’ systems. This process can present risks, especially where it involves a large volume of sensitive information. Transferring the data via an encrypted channel offers the maximum protection.
  • Employees should be encouraged to avoid using public cloud-based sharing which have not been fully assessed. Businesses should provide guidance to employees on how to assess the security of wi-fi networks (such as those in hotels or cafes).

Departing employees

A business needs to think about how it will manage data held on an employee’s personal mobile device should the employee leave the business.

BYOD and the ‘Always on’ culture

There is increased commentary around the potential negative consequences of remote working and mobile device usage and its impact on employees’ wellbeing as a result of the ‘always on’ culture. Particularly where use of personal devices is voluntary, employers may wish to consider including the optional ‘work-life balance’ sub-clause in any BYOD policy, to help evidence a commitment to their duty of care towards employees and counter claims in connection with, for example, stress-related illnesses from employees.

BYOD and registering employees’ devices

A key aspect of an effective BYOD policy is ensuring that the employer is aware of the data processing activities that are being conducted in respect of company data. To mitigate against the risks of unlawful processing and undisclosed data breaches, employers should require all employees to register their devices with the employer before using it for business purposes. Employers should also take this opportunity to set up the device with appropriate security software, and register it with remote locate and wipe technology in the event a device is lost or stolen.

BYOD and unauthorised access and repairs

There is a risk of data breach if an employee arranges for a device to be repaired by an unknown third party who may be able to access company data. Requiring that all repairs are arranged through the company will allow for greater control over who has access to the device. If this approach is adopted, the company should also meet or contribute to the cost of repairs. Therefore, the company must balance the costs of contributing to repairs against the risks of a data breach.

ICO guidance on BYOD

The Information Commissioner’s Office has published guidance on bring your own device and the data protection issues for employers who adopt a BYOD approach. The guidance has not yet been updated to take into account GDPR but many of the practical points it makes are still valid and useful. It highlights:

the importance of  having a clear BYOD policy that is regularly audited and monitored for compliance

that staff connecting their devices to the company IT systems fully understand their responsibilities

that alongside a BYOD policy, employers create and maintain an Acceptable Use Policy (to provide guidance and accountability of behaviour) in order to minimise the risk of unauthorised or unlawful processing of data or the accidental loss or destruction of personal data.

NCSC guidance on BYOD

The National Cyber Security Centre, part of GCHQ, has published a useful infographic as part of its summary of the key security aspects for large and public sector organisations.

Choose Your Own Device (CYOD) is likely to offer employees an advantage to select one among several enterprise-approved systems and this is predicted to eliminate standardization and security challenges of BYOD system.

This article seeks to spotlight the key issues around BYOD and how adopting a BYOD approach may affect your business and HR practices.

Posted in: Employment law for HR Directors

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Joint Ventures: 25 FAQs – a guide for CEOs and CFOs

Joint Ventures: 25 FAQs – a guide for CEOs and CFOs

Joint Ventures 25 FAQs – a guide for CEOs and CFOs

1  What is a Joint Venture? 
A “Joint Venture” is a structure where two (or more) businesses create a separate Joint Venture business to pursue a common goal. But any kind of collaboration with another company could be described as a  Joint Venture.
2  What types of Joint Ventures are there? 
There are many examples of collaborations between businesses – common ones are the following structures where two or more people share resources and risk:

  1. setting up a separate Joint Venture company where each party has a shareholding and can appoint directors to carry out a specific (and often finite) project such as development of a new product
  2. contractual arrangements such as entering into a distribution agreement
  3. forming a partnership
  4. merging two businesses.

The rest of this article covers the first structure above where each person in the Joint Venture has a shareholding and appoints directors
3  Who will be part of the Joint Venture?
The people contributing the assets to the Joint Venture, or JV, will all be parties to the Joint Venture Agreement.
4  Will the Joint Venture company or other vehicle itself be a party to the Joint Venture agreement?
Usually, Yes so that shareholders can enforce against the company.
5  What issues do I need to consider when looking for a Joint Venture partner?
Look for a JV partner with complementary strengths: eg a software product which you can distribute through the Joint Venture.
Take time to understand fully what your partner’s purpose and objectives will be from the JV.  You will need to be able to agree objectives that suit both of you.
You will also need to reach agreement on a whole range of other issues as well as the JV agreement.
Consider at the outset what happens when the JV comes to an end. This  can make it difficult to collaborate with a competitor or with a business that is likely to compete with you in the future.
6  How do I start negotiating a Joint Venture

  • •You can ask for a period of exclusive negotiation so you do not waste time and costs negotiating the JV if the other party pulls out?
  • •You can agree a Confidentiality Agreement (know as a Non-Disclosure Agreement or NDA in the US) to ensure all negotiations are kept confidential.
  • •You can undertake a feasibility study and/or valuation first.
  • •You can negotiate a Heads of Terms first.

7  How do I negotiate Heads of Terms? 
The Heads Terms document sets out the main principles for the Joint Venture and the steps and documents required to get it set up. Read more about negotiating Heads of Terms Agreements.
8  How do I protect myself while I am negotiating a Joint Venture? 
You should:

9  What is the Business of the Joint Venture ? 
You and your Joint Venture partner should agree answers to these questions:

  • What will be the nature of the activities carried on by the Joint Venture ?
  • Is the purpose of the Joint Venture to carry out a specific project or a continuing business?
  • What is the likely turnover or market share?
  • Where will the business be based?
  • Will there be geographical limitations placed on the  Joint Venture’s operations?
  • What are the parties’ objectives?
  • When do the parties want to exit and how?
  • What regulatory consents, approvals and licences will be required for the formation and business(es) of the Joint Venture ?

10  What is the best way to structure a joint venture?

  • Usually the JV parties form a separate limited company for the Joint Venture  so each has limited liability (up to amount of share capital invested) should the Joint Venture  not work and become insolvent.
  • However the tax position must be assessed to start with because transferring significant assets into the Joint Venture can have unwanted tax consequences. You should check with your tax advisers.
  • Sometimes a partnership or a limited liability partnership is used instead.
  • If you do not require management involvement in the  Joint Venture, it may be best to use contractual arrangements rather than to create a separate Joint Venture  entity. For example, a designer could simply license his or her intellectual property rights in the design to another business to exploit in return for royalty payments.
  • You should identify what other agreements are needed between the Joint Venture and the shareholders – eg licences to use software, brand names, premises, secondment of staff etc?

11  What about financing Joint Ventures
You and your Joint Venture partner will need to agree:

  • What proportion (if any) of the initial finance will the parties themselves provide and how much will be provided from external sources.
  • If third party funding is being sought, what security and/or recourse to the parties themselves will the lender(s) require.
  • Will the parties’ initial investment be in cash and/or by contributing assets.
  • If the funding will be through debt rather than equity, or vice versa.
  • What arrangements will there be for funding, on a continuing basis:
    •  the working capital requirements
    •  losses incurred by the joint venture; and/or
    •  development and expansion costs
  • Will each party be required (or entitled) to contribute to continuing calls for funding, pro-rata to its original investment or otherwise
  • What happens if one of the parties defaults.

12  What assets can be put into Joint Ventures?

  • Any asset can be put into a Joint Venture e.g. employees, intellectual property, offices, customers and suppliers and their related contracts.
  • Contributions can be by outright transfer, or by a lease or licence to the Joint Venture for a fixed or indefinite term. Separate documents will be required for the transfer of each asset to the Joint Venture .
  • The contributed assets will need to be valued and agreed with the Joint Venture partner.
  • You will need to agree if all contributions of assets can be made simultaneously, if you need any regulatory approvals or consents third parties (including lessors, licensors and lenders) or how required for any transfer. If not, the availability of all or any particular asset(s) can be a condition precedent to the establishment of the Joint Venture.

13  What due diligence is needed in Joint Ventures?
Due diligence will include checking:

  • your  Joint Venture partner’s legal status,
  • that they have the right to enter the Joint Venture,
  • that they own assets they will be putting into the Joint Venture
  • that they have enough funding to complete the Joint Venture
  • that they have the knowledge and experience you need for the market in which the Joint Venture will operate.

More broadly, due diligence aims to ensure that any agreements you enter into are valid, and to minimize risk of future legal problems. So,
14  What legal agreements are needed  to set up a Joint Venture?
If you are forming a new Joint Venture  company, a Joint Venture Agreement and the new company’s articles of association are crucial. Points that may be covered in these documents or in separate agreements include:

  • the financing arrangements for the Joint Venture
  • agreements not to compete with the Joint Venture
  • arrangements for licensing or transferring intellectual property in inventions, brands, designs or copyright works such as plans or manuals to the Joint Venture
  • agreements on any services or supplies you will provide to the Joint Venture
  • confidentiality agreements
  • how any disputes will be handled
  • how the partners can exit the Joint Venture
  • any agreements that will continue after the Joint Venture is terminated.

15  What is a Shareholders Agreement? 
A Shareholders Agreement can be another name for the Joint Venture Agreement. It sets out the agreement between the shareholders showing how they will operate the Joint Venture, how they will make decisions and vote as the shareholders and directors.
16  What are non-compete or non-competition or restrictions on Joint Venture parties?
These prevent the shareholder competing with the Joint Venture.  The shareholders will need to agree answers to these questions:

  • Will the parties be prohibited from competing with the Joint Venture ? If so, what geographical or other limitations should apply?
  • Will the parties be prevented from soliciting customers and employees from the Joint Venture ?
  • How will the business of the Joint Venture be defined for the purposes of such restrictions?
  • Will the parties have obligations to refer business to the Joint Venture?

Usually the parties agree in the Joint Venture Agreement what restrictions apply to each of them, to prevent the scenario where the Joint Venture is set up and then the parties immediately compete against it.
17  What is the Board of directors in a Joint Venture? 

  • The board of directors includes representatives of each Joint Venture  partner. The Joint Venture Agreement will state:
  • What rights each party will have to appoint directors (and if the board or company in general meeting have rights to appoint any additional directors)
  • What quorum and notice requirements will apply for directors’ meetings
  • What particular matters will be reserved for decision by the board itself (and be incapable of delegation) or to the shareholders?
  • What particular voting arrangements will apply to matters specifically reserved to the board and/or to any other matters
  • What will be the specific requirements concerning the frequency and/or location of board meetings
  • How the appointment of the chairman will be determined and if the chairman has a casting vote or not, or other special powers or rights
  • Who will determine the appointment of any managing or other executive directors
  • If the directors will have the power to resolve conflict, or potential conflict situations of a director or should such power be reserved for the shareholders.

18  What are the shareholders rights in a Joint Venture?
The shareholders will need to agree:

  • How will ownership of the Joint Venture will be divided and what voting rights the parties will  have as shareholders
  • If there will be separate classes of shares – eg because each class of shares will have different ownership, dividends and or voting rights
  • If shares of the same class will be capable of being held by more than one person
  • If there will be any special voting rights attached to any or all shares
  • What quorum and notice requirements will apply for shareholder meetings
  • if there be any limitation on possible locations for shareholders’ meetings

19  What is minority shareholder protection in a Joint Venture?
If a shareholder owns less than say 50% of the Joint Venture it may want to protect itself in the following circumstances:

  • The majority shareholder forcing through voting on certain important issues at shareholder meetings ( e.g. changing the business, adding new shareholders, issuing new shares, buying new businesses or selling parts of the business)
  • Similar protections and any remedies can apply to board and/or director level voting as well.

20  What are restrictions on transfers of shares in the Joint Venture? 
The Joint Venture parties will need to agree:

  • Should shares be transferable or not
  • What happens if any one party wants to sell out
  • If transfers are permitted, should other parties have pre-emption rights (rights of first refusal) before any sale to a third party takes place
  • To what extent will the identity of any third party purchaser be relevant to arrangements for permitting transfers or the terms of any pre-emption rights?
  • Should any transfers (for example, intra-group transfers or transfers to family trusts) be permitted free of pre-emption rights
  • Are any special terms appropriate, for example:
    • “shotgun” or “Russian roulette” provisions, by which other parties can elect either to purchase from, or to put their own shares on, an intending transferor; or
    • “drag-along” or “piggy back” (“tag along”) provisions, by which the intending transferor must endeavour to require a potential third party purchaser to acquire the other parties’ shares in addition to its own
  • How will shares be valued for the purposes of the transfer provisions
  • Will any new shareholder be required to become a party to the Joint Venture agreement
  • Will the  Joint Venture’s name have to be changed if shareholdings are transferred
  • What will happen to any arrangements between a leaving shareholder and the Joint Venture (such as intra-group loans, intellectual property licences, supply agreements, management services, and so on)

It is common for shareholders to agree that shares may only be transferred in certain circumstances. If a shareholder wants to transfer shares it has to offer the shares first to the other shareholder(s) – this is called a pre-emption right. The shareholders will try and agree the price for the transfer of the shares. If they cannot agree on the price it is common for an independent valuer (accountant), experienced in valuing companies in their industry, to value the shares.
21  Can intellectual property be transferred to a Joint Venture? 
Yes. A separate licence or transfer agreement will be agreed. The agreement will need to answer the following questions:

  • Are any intellectual property rights to be given to the other Joint Venture party?
  • Who will own the intellectual property rights developed by the Joint Venture and (if any) by the Joint Venture parties?
  • Who will undertake exploitation of the intellectual property, including both production and distribution? Will there be any compensation for this?
  • To what extent will the parties have access to, or rights over, confidential information, know-how and other intellectual property rights concerning or accruing or belonging to the Joint Venture itself?
  • What will happen to the intellectual property rights on termination of the  Joint Venture?
  • Will any of the parties require a licence of any intellectual property from the other, following termination?
  • Will there be different methods of dealing with intellectual property rights depending on the exit route used?

22  Can Employees be transferred to a Joint Venture?
Employees can be transferred to a Joint Venture for a short term (secondment) or permanently. The parties will need to agree answers to the following questions:

  • Will the Joint Venture need employees and, if so, how will it get them?
  • Will the employees be seconded from any of the Joint Venture parties and, if so, will it be necessary to make any changes to the terms of their employment?
  • If the employees are to be transferred from any of the Joint Venture parties, will the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply ? If so, will it be necessary to make any changes to the terms of employment of the transferring employees? (It is only possible to make changes to the employees’ terms on a TUPE transfer in certain circumstances.) How will any liabilities relating to the employees be apportioned? Will there be any consultation obligations? For further information on when TUPE applies, read www.thelegalpartners.com/transfer-undertakings-tupe-process-explained
  • If the employees are to be new recruits, are there particular individuals with key roles in the Joint Venture calling for special treatment?
  • Is any particular form of management structure envisaged?
  • What (if any) share option or incentive schemes are proposed?
  • What pension arrangements will apply?
  • Will any of the Joint Venture parties have to make redundancies as a result of the creation of the  Joint Venture? If so, how will the cost be borne by the parties?

23  Can the shareholders continue to provide assets or services to the Joint Venture?
Yes. The parties will agree the answers to these questions:

  • Will any of the parties second staff to the Joint Venture and, if so, on what terms? (Read over Can Employees be transferred to the Joint Venture? above)
  • Will any of the parties be responsible for providing the Joint Venture with office or other accommodation, support services or facilities, or training for staff?
  • Will there be continuing trading arrangements between any of the parties and the Joint Venture (for example, distributorship agreements or agreements for the supply of goods, materials or services)? If so, will these be independently audited?
  • How do continuing arrangements between the Joint Venture and any of the parties impact on:
    • the entitlement of each of the parties to the profits of the  Joint Venture, or responsibility for its losses?
    • the business risks and legal liabilities assumed by each of the parties in relation to the Joint Venture ?
    • the rights of the Joint Venture and/or the parties to assets or revenues over which any one party maintains direct control or ownership?
  • What will be the procedure for the flow of information and for reporting from the Joint Venture to the parties?

24  How do I terminate or end a Joint Venture?
The parties can agree to end the Joint Venture either by following the process they have agreed in the Joint Venture Agreement or by agreeing a new procedure. It is important to agree:

  • Is the Joint Venture for a fixed term or indefinite in duration?
  • Are there any circumstances in which the Joint Venture will automatically terminate, for example:
    • the loss of any regulatory approval;
    • the loss or destruction of a particular asset;
    • the insolvency of any party;
    • loss of software licence; or
    • the transfer of any party’s shares?
  • Are there any circumstances in which any party will be entitled to terminate the  Joint Venture, for example:
    • a change of control of any other party;
    • a material breach of the Joint Venture agreement by another party;
    • by notice of termination given after the expiry of a minimum fixed term?
  • What arrangements will apply on termination for:
    • the distribution of the assets, including intellectual property and know-how of the Joint Venture ;
    • the discharge of outstanding contracts of the  Joint Venture; and
    • the assumption or discharge of any other liabilities of the  Joint Venture?

Usually, one partner will buy out the other. The key is to plan for the termination of the Joint Venture from the outset. For example, the original agreement can include provisions that allow you to force your partner either to sell you their stake or to purchase your stake from you.
25  How do we take profits from the Joint Venture? 
Profits from Joint Venture companies are commonly distributed through dividends.
Of course, the ability of the Joint Venture  to pay dividends will depend on its cashflow position. Depending on the circumstances, there may also be other more tax-effective ways of realizing part of the value of your investment in the Joint Venture. Where a Joint Venture is structured as a partnership, profits are automatically shared between the partners as specified in the partnership agreement. The partnership agreement should also specify what cash payments partners can take from the partnership. If there is no separate joint venture entity, there will be no need to ‘take’ profits from the joint venture – the profits will in any case arise within your (or your Joint Venture partner’s) business.

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When do you need a Heads of Terms Agreement?

When do you need a Heads of Terms Agreement?

You need a Heads of Terms Agreement when you have a complicated, detailed project to negotiate and you need to get the main points set down  in writing at the beginning of discussions, to ensure there is a deal to be done so to speak, and to avoid undue time wasting by delving too far into the detail in the early stages.

A Heads of Terms Agreement Document, also known as a Memorandum of Understanding (or MOU) is extremely useful to show that the main points are now “agreed” and cannot be renegotiated.

A Heads of Terms Agreement (MOU) is important when you need to:

1 Record what are the main critical points of the deal such as price, what is being bought / sold, timescales, conditions to be satisfied and shareholder approvals to be obtained; and/or

2 Get those main points signed by the other side so they are “morally” committed; and/or

3 Have evidence that those main points are “agreed” so the other side will find it difficult to renegotiate them later on.

Although, if the other side are well advised by their lawyers, it is unlikely that the Heads of Terms will be legally binding, they are extremely useful to show that the main points are now “agreed” and cannot be renegotiated.

If the other side will not negotiate and sign a Heads of Terms document then this it’s likely that they are not serious about your deal, it’s a signal to pull out, you will save time, legal fees and other costs by not proceeding until the agreement is signed.

You need a Heads of Terms Agreement when negotiating complex transitions such as  Joint Ventures, Shareholders Agreements, Business Acquisitions,  Mergers, Acquisitions and other major Business transactions.

Do you need Heads of Terms Agreement at all?

Yes, and for the following reasons:

  • To stop the back and forwards e-mail trail!
  • If the “deal” cannot be written in one simple agreed document, is there actually a “deal”?
  • Getting all parties to sign Heads of Terms Agreement shows from a negotiation point of view that progress is being made! Moral commitment.
  • Use it to sell the “deal” to a third party eg other shareholders, bank.
  • Tactical advantage for the Seller, because the Buyer is morally committed to proceed. It helps to answer the question in the Seller’s mind “does this person, party really want to buy? Are they serious?”

    Note, people use different terms for this type of document; ‘Heads of Terms’, ‘Heads of Agreement’, ‘Memorandum of Understanding’, ‘MOU’  and ‘Letter of Intent’: they all refer to the same document 

What to put in your Heads of Terms Agreement?

Think about your objective, e.g to get all the principle and major points agreed in one document.

  • State the principle and defer the detail.
  • Take professional advice before making significant concessions (such as on structure, (e.g. share or asset sale) tax or governing law) even where the concession is expressed to be non-legally binding.
  • Identify the key conditions to exchange and completion of the contract.
  • Road Map to completing Heads of Terms Agreement.
  • Allocate the main procedural and drafting responsibilities see – Table below
Document  Timescale Responsibility
1st Draft Share Purchase Agreement 5 days after signing the   Heads of Terms The Legal Partners
Financial Due Diligence to be finished 21 days after Heads of Terms signed Accountant
  • Acknowledge where appropriate that the heads are not exhaustive.
  • Use assumptions where necessary.
  • Use a worked example to clarify a formula.
  • Make it clear that the Heads of Terms Agreement are not intended to be legally binding (except as otherwise specified).
  • Do not let the negotiation of the Heads of Terms Agreement become a full dress rehearsal for the main document.
  • Are any provisions intended to be legally binding? Eg confidentiality, exclusivity.

Contents of your Heads of Terms Agreement

  • The agreed deal:
  • Who, What, How, How much?
  • key assumptions on which material issues (such as price) were agreed.
  • principal conditions to exchange of contracts
  • due diligence (list any specialist reports and investigations required -such as accountants’ long form- and which of the seller’s key employees will need to be informed)
  • updated financial information (audited and/or management accounts)
  • buyer’s financing
  • third party consents/agreements
  • regulatory approvals or tax clearances
  • board approval
  • no material adverse change
  • no material contracts terminated or adversely changed
  • new service contracts signed by the target’s key employees
  •  satisfactory restrictive covenants
  • agreed loan facilities and documentation (if necessary)
  • satisfactory final documentation
  • principal conditions to completion e.g board/shareholder approval
  • statement of any other material issues any party may want recorded and need more detail
  • procedures or timetable for period to exchange of contracts and responsibility for drafting main documents
  • exclusivity agreement (or refer to separate agreement)
  • allocation of costs in the event the deal does not proceed
  • confidentiality (or refer to separate agreement)
  • clearly distinguish those provisions in the heads which are intended to be binding (such as the confidentiality and exclusivity provisions, payment of “failure” costs/ governing law) 
  • governing law.

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Avoid workplace claims with these golden rules

Avoid workplace claims with these golden rules

There has been a dramatic increase in the numbers of claims being brought to Employment Tribunals against Employers since fees were abolished in July 2017. In January to March 2019 single claims – defined as being claims made by a sole employee against their employer for a breach of their employment rights – were running at 10,000 per quarter, compared to an average of 4,250 claims per quarter throughout 2016.

This means that single claim receipts are running at approx 40,000 per year now, compared to around 18,000 per year prior to fees being abolished.

From years of experience working alongside HR Directors and solving thousands of HR problems, we have compiled these golden rules to help you de risk your business against claims, and to put you in the strongest position to defend a claim should it arise.

# Avoid workplace claims by having good employment contracts and keep them up to date

This is a legal requirement. The penalty is up to 4 weeks pay awarded by an Employment Tribunal. Tailor the employment contracts for different staff, for example CEOs and Senior Sales Directors need Restrictive Covenants so they do not poach customers once they leave.

# Tailor your staff handbook to your business

Include all the policies you need to show to staff what is good and bad behaviour. Include for example a Social Media Policy and Data Protection Policy (or Privacy Standard) in your handbook to show what is acceptable and unacceptable use of Social Media and personal data.  Set out examples of misconduct in your disciplinary policy. For more information on this, read our article on how to avoid social media misuse and protect from liability.

# Follow all UK Visa and Immigration rules

This is so important for the current Tier 2 visa programme to avoid fines of upto £20,000.

# Communicate the New Employment Laws fast and first

Communicate new employment laws to your team before they happen and before your team learn of them from other sources. It is of course easy for Staff to be right up to speed on their rights. So be pro-active, it demonstrates that your business is thinking about its people.  A typical example would be introducing and explaining the new employment laws or Flexible Working policies as they become available. Here is our slideshare which explains flexible working.
We keep track of the latest changes in Employment Law, here to help you

Take advantage of these changes to prepare policies, communicate and explain these changes to your Staff.
We can keep you and your teams abreast all the new laws on the horizon and what they mean for your business before they come into force. You can subscribe to our newsletter: just click here, or in the footer below.

# Follow your formal procedures (e.g disciplinary/ grievance/ redundancy),  Follow what the business states in the staff handbook and employment contracts

Employment Tribunals generally take a dim view of Employers who don’t follow their own policies. Policies are there to be used. Often an employer who simply starts without planning will get into difficulty. Most employees will obtain their own legal advice and will challenge the policy when possible. It’s critically important to get the process right. If you don’t start the process correctly from the beginning,  it is very difficult to go back and start it again.  Employers can and do earn respect from other staff who see them dealing with an issue properly and fairly in accordance with the policy in the handbook and with employment law.
If employers fail to follow a valid disciplinary or grievance process, an Employment Tribunal can increase the Award by upto 25%.

# Don’t be afraid to use Settlement Offers

At any time employers can make a settlement offer to an employee to leave and receive a reasonable settlement. The employee cannot refer to the settlement offer or any conversations regarding it at an Employment Tribunal. These “protected conversations” and are confidential. There is more know-how in this article which outlines the correct way to make and manage successful settlement offers.

# Avoid workplace claims by using Mediation to resolve staff problems and grievances early

Mediation is a voluntary and informal process where a trained mediator helps the employer and member of staff resolve a dispute.
Long established in family law and in commercial dispute resolution, employers are turning to Workplace Mediation as a cost effective and fast way to resolve issues between colleagues. If unresolved these dipsutes can seriously undermine their own and the employer’s performance and staff morale.
The benefits of Workplace Mediation The Legal Partners
Workplace Mediation can resolve:
– personality clashes and employees at loggerheads, including issues between Senior directors and at Board level
– communication breakdowns
– relationship breakdown within a team
– bullying and harassment
– cultural misunderstandings due to different nationalities working in the same workplace.

The HR Director is not involved so remains neutral.  Here is more detail explaining how Workplace Mediation can solve conflict at work and which UK companies already use it extensively.
We offer a fixed price Mediation service, at prices ranging from £950 plus VAT to £2,000 plus VAT depending upon the complexity of the situation. In our experience, effective resolution can usually be gained within a day, albeit an intensive day for those involved. Some follow up support is included and available if this becomes necessary. Mediation is much more cost effective when compared to the expense of an Employment Tribunal Case. The average legal fees of an ET case for the employer are between £15,000 and £20,000.

# Establish a transparent pay, promotion, bonus and share option structure to help avoid equal pay claims and to reward those employees who contribute

Once again, take the opportunity to outline and explain the benefits of these schemes to your teams. Explain the changes to your teams as they occur e.g in overtime and holiday pay, workplace pensions so employers can plan.

Establish enterprise management incentive (EMI) share schemes to share the value creation with key staff.

although the Gender Pay Gap laws only apply to employers with 250 or more staff this principle will influence any employer’s staff when they consider their future prospects.

# Bring an HR specialist onboard and ask us for legal advice

Hire or consult with an HR Director.  Experienced HR s
pecialists see it as their role to help run the business run more effectively.  Give your HR Director authority for all HR issues and make sure he/she is responsible for this area. He/she should update the CEO/CFO and Operational Directors on law changes and the action to take on HR problems so that the business acts consistently and knowledge is shared. We work closely all the time with our HR Directors to make their roles as efficient as possible and together solve HR disputes

# Make it a habit to communicate with Staff in order to avoid workplace claims

It may sound straightforward, but this practice is so often overlooked by employers. When you see a problem developing, talk with your employee(s) on an informal basis at the earliest opportunity.  This stops the dispute escalating into a situation which could result in complicated and time consuming grievance, worse still an Employment Tribunal claim. Remember to keep detailed notes of every conversation however informal.

Even more golden rules to avoid workplace claims

  • They may go in and out of fashion, but its good practice to have regular appraisals. Agree with the employer how regularly they take place. There are a number of elements to cover on appraisal forms and in appraisal meetings that will help protect your business from workplace claims. For more details, do get in touch; details below.
  • If an employee has raised a grievance, at the first grievance meeting take the opportunity to ask the employee what is the solution that he/she wants and listen.  The clue to a speedier, cleaner resolution is often revealed in the responses to this simple question.  You may not be able or willing to meet the solution an employee requires, but don’t let that stop you asking. This sets a solution orientated framework and can fast track to the underlying issue and ultimately resolving the problem better. It may be the employer can propose a modified solution back to the employee which solves the grievance.
  • In Stress Cases: offer confidential counselling with a trained expert.
  • Know when to use an Informal Meeting and when to use a Formal Meeting.

     

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Directors' guide to the new Register for Persons with Significant Control (PSCs)

Directors' guide to the new Register for Persons with Significant Control (PSCs)

From the 6th April 2016, all UK non-listed companies and LLPs will be required to identify and register all persons with Significant Control over the company. These are also called registers of Beneficial Ownership.
This register will need to be included in all UK Company Annual returns from April 2016 onwards.
The government has published guidance for companies and LLPs on the register of people with significant control requirements.

It is a criminal offence for Directors to fail to comply with the new disclosure laws or to register Persons with Significant Control (PSCs) in the annual return.

The new requirement is set out in the Small Business, Enterprise and Employment Act 2015.
Control is broadly defined and includes:
• individuals who directly or indirectly hold more than 25% of the shares or voting rights in the company,
• are able to appoint or remove a majority of the board; or
• otherwise have the right to or actually exercise significant influence of control over the company.
The aim of this new disclosure law is to increase transparency over who are the beneficial owners and controllers of UK companies. Why the need for such transparency?  Apart from helping to inform investors, the new registers will help law enforcement agencies, HMRC, SFO, and the Police to find information quicker, and in their efforts to weed out money laundering and tax evasion.  The Panama Papers leak is a timely example this practice of hiding income by using shell companies whose ultimate beneficiaries are unclear.
This new law was introduced as a result of a commitment made at a G8 summit hosted by the UK Government in 2014. The remainder of the G8 will follow soon. There will be similar rules forcing companies across the rest of the EU to disclose their registers of beneficial ownership/ Persons with Significant control by June 2017.
Person with Significant Control explainer infographic The Legal partners
 
 
 

I am a Company Owner: what do I need to do as a beneficial owner of shares?

An officer of the company will be required to do the following:

  • Identify and then record all people with significant control in a register. Such persons may be individuals or an immediate holding company if in a group.
  • Establish the register by 6th April which needs to be kept with the Company’s other statutory books at its head office. This register will be open for inspection. Contact us for a free register to use.
  • Provide this information to Companies House from June 2016 as part of the company’s Annual Confirmation Statement. Annual Returns are being renamed to include this statement.
  • Keep the register updated to the extent there are any changes to PSCs.No PSC register may be left blank so every UK Company will have to make a disclosure.

Establishing who has control should be fairly straightforward in a single company. It might however be less straightforward for companies in groups. Directors of each UK company are obliged under the new legislation to make reasonable enquires of parent companies to establish who to record in the register who controls the company.
Directors have to look through corporate structures and trust arrangements to find out who is the ultimate Person or People with Significant Control.
There will always be a disclosure of an individual name unless the ultimate holding company is listed on a stock exchange where there are already sufficient disclosure requirements or is another private UK limited company.
 

I am a Director/Company Secretary: what do I need to do about registering Persons with Significant Control?

  • Understand the rules and their application
  • Review the company structure and be able to identify all beneficial owners of shares. If the company is in a group ask the Directors of your
  • Holding Company who are the beneficial owners and who is a Person with Significant Control.
  • Create a new Person with Significant Control register for 6 April 2016. This must be open to inspection at your company registered offices for free. Contact us for a free register to use. Anyone can ask for a copy by paying the £12 fee.
  • File PSC details on your company’s next Annual Return when due after June 2016

What happens if a Director or PSC does not disclose the correct details?

It is a criminal offence if Directors fail to comply with the new disclosure laws. Directors can be imprisoned for up to 2 years. Both the Directors and the Person(s) with Significant Control have obligations to report the PSC’s shareholding and disclose it.
Sanctions can also be imposed on the shares of a Person with Significant Control and could stop the payment of dividends or sale of the shares.
Need more information on the new register for Persons with Significant Control?
The rules are complex and intricate and applying the rules can be confusing, time consuming and costly.
If you need more information or assistance on registering Persons of Significant Control or issues relating to Beneficial Ownership, or wish to:
1. Protect yourself as a company director and ask the right questions to find out who is the Person or People with Significant Control,
2. Complete the new PSC registers and file your next Annual Return,
please contact Nicholas Eldred or Richard Mullett at The Legal Partners.
Or call us on 0203 755 5288.
We are already advising global companies and their Boards about how to comply with the new regulations on registering Beneficial Ownership/Persons with Significant Control.

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Consumer Rights Act, do your Ts & Cs comply?

Consumer Rights Act, do your Ts & Cs comply?

If your business deals with consumers or sells over the internet, you need to know about the Consumer Rights Act 2015 and make sure your business Terms and Conditions (Ts and Cs) comply with the latest consumer rights laws. These laws came into force on 1 October 2015.  If you haven’t reviewed your Ts and Cs in recent years, or were unaware of the changes in consumer rights laws, this Q & A will bring you up to date and explain what changes you must make to ensure your Business Terms and Conditions comply.

These new laws increase consumers’ rights, most notably giving consumers the right to a 30-day refund.

From 1st October 2015, everyone selling goods, services, digital content to consumers must comply with new laws protecting Consumer Rights.

Regardless of your company status, sole trader, company, partnership etc, you must honour the consumer’s rights in your terms and conditions and in your dealings with customers.
To shortcut the whole process, we have created a Consumer Rights Act toolkit which includes reviewing and updating your Ts and Cs to ensure you comply with the news laws, consultation and advice. Find details here, or at the end of this article.

When did the Consumer Rights Act 2015 start?

1 October 2015. It applies to all consumer contracts and transactions from that date.
The old law applies to transactions and contracts before 1st October 2015.

Where can I get a copy of the Consumer Rights Act?

Find it here.

What are the penalties for failing to comply with the Consumer Rights Act 2015?

Consumers can claim compensation at the Court as well as writing unhelpful reviews online, complain to Trading Standards and other enforcement bodies. They can seek a court order and bring civil and criminal provisions under the Consumer Rights Act 2015. If the trader fails to comply with a court order it can lead to a maximum penalty on conviction of an unlimited fine and 2 years’ imprisonment.

Who is a trader under the Consumer Rights Act 2015?

All businesses will be a “trader” under the CRA and have to comply. A “trader” covers anyone in business as an individual, sole trader, company, partnership, multi-national or Government department.

Are Business to Business contracts affected by the Consumer Rights Act 2015?

The CRA does not affect business to business (B2B) contracts or business to business (B2B) deals.

Are consumers’ statutory rights affected by the Consumer Rights Act 2015?

Yes. Consumers shopping online, in store, by telephone or by mail order have rights which are often called “statutory rights” and the CRA increases consumers’ statutory rights.

What must I do to comply with the Consumer Rights Act 2015 when I am selling goods?

If your business is selling goods you must ensure the goods meet these 5 Tests.
The goods must be:
1.  yours to sell
2.  of a satisfactory quality eg:
(1) fit for all the purposes for which goods of that kind are usually supplied (2) have a satisfactory appearance and finish (3) be free from minor defects (4) be safe and/or (5) be durable
The law assesses “quality” by looking at all relevant circumstances including price, description and your or the manufacturer’s advertising
3. fit for a particular purpose. Eg where the consumer indicates that goods are required for a particular purpose, or where it is obvious that goods are intended for a particular purpose
4. match the description, sample or model.
5. installed correctly, where installation has been agreed as part of the contract

What can a consumer do if there is a problem with goods?

If the goods do not meet any of the 5 Tests above the consumer can:

  1. reject them within 30 days of purchase – this is referred to as the

    right to a 30-day refund under the Consumer Rights Act 2015

  2. return the goods
  3. claim a refund and be paid the refund within 14 days.

The consumer is released from any other obligations under a contract e.g. released from paying further instalments under a hire purchase agreement.
For online purchases: the trader is responsible for the reasonable cost of returning the goods
For shop purchases: the customer must incur the costs of returning them unless the consumer has unexpected costs eg where a motor vehicle breaks down and the consumer has to pay for a recovery service to return it.

What are the consumers’ rights to repair or replacement of faulty goods under the Consumer Rights Act 2015?

After 30 days if the goods fail any of the 5 Tests the consumer can claim a repair or replacement. The trader must do this at no cost to the consumer, within a reasonable time and without causing significant inconvenience.
Where repair or replacement fail, the consumer is entitled to further repairs or replacements or he can claim a price reduction or reject the goods and claim his money back.

What are the consumers rights to a price reduction or to reject the faulty goods under the Consumer Rights Act 2015?

If repair or replacement is not available or is unsuccessful, or is not provided within a reasonable time and without significant inconvenience to the consumer, then the consumer can claim a price reduction or reject the goods and claim his money back.
If the consumer keeps the goods, then his claim will be for a reduction in price; if he returns them, he is rejecting them and entitled to some or all of his money back.
A price reduction must be an appropriate amount, which will depend on all the circumstances of the claim. It can be any amount up to the whole price.
If the consumer rejects the goods, then he/she is entitled to a refund. This refund may be reduced to take account of any use the consumer has had from the goods. However, no deduction can be made for the consumer having the goods simply because the trader has delayed in collecting them. Nor can a deduction be made where goods are rejected within six months of supply, except where the goods are a motor vehicle.

What can a consumer claim under the Consumer Rights Act 2015 if goods are lost or damaged in transit?

If the trader arranges for goods to be delivered to a consumer, the goods remain at the trader’s risk until delivery. Therefore it is the trader’s responsibility to ensure that goods are not lost or damaged in transit and/or to take out appropriate insurance.

What additional compensation can a consumer claim for faulty goods under the Consumer Rights Act 2015?

Whatever remedy the consumer chooses or ends up with, he may also be able to claim compensation for losses that have been incurred. These losses might include the cost of any property damage caused by the goods, compensation for personal injury and compensation for the additional cost of buying equivalent goods if they are more expensive elsewhere.

What evidence is needed to claim compensation 2015?

If the consumer chooses repair, replacement, price reduction or the final right to reject, and if the defect is discovered within six months of delivery, it is assumed that the fault was there at the time of delivery unless the trader can prove otherwise or unless this assumption is inconsistent with the circumstances (for example, obvious signs of misuse).
If more than six months have passed, the consumer has to prove the defect was there at the time of delivery. He must also prove the defect was there at the time of delivery if he exercises the short-term right to reject goods. Some defects do not become apparent until some time after delivery, and in these cases it is enough to prove that there was an underlying or hidden defect at that time.

What should a trader do if the goods have defects when they are sold?

A consumer cannot claim for defects that are brought to his attention before the sale, or if the consumer examines the goods before purchase and any defects should have been obvious. The trader should make any defects clear to the consumer.

What rights does a consumer have under the Consumer Rights Act 2015 if he changes his mind?

A consumer cannot claim for damage if he simply changes his mind about wanting the goods. He should have cancelled the contract within 14 days of purchase

Where can I get more information about the Consumer Rights Act 2015 for faulty goods?

Find more information here
Consumers also have additional rights under these existing laws.

What are the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013?

They give all consumers 14 days to change their mind and cancel the contract for goods, services or digital content. They will need to return the goods.

What are the other rules affecting consumer contracts?

Misrepresentation
A misrepresentation is a false statement of fact made by a person or their agent that induces someone else to make a contract with them.
Dependent upon whether the misrepresentation was made fraudulently, negligently or innocently, the party who has relied on the misrepresentation will be entitled to a remedy that may include rescission (which means unwinding or cancelling the contract), refund and/or compensation.

What is consumer protection under the Unfair Trading Regulations 2008?

Since 1 October 2014, these Regulations have provided an additional and alternative right of redress for consumers. Where a trader has used misleading or aggressive selling practices, the consumer may be entitled to claim compensation and/or a reduction in price or to cancel the contract completely.

What is Consumer Protection Act 1987?

This law allows a person to claim compensation if he is injured by a defective product. Depending on the circumstances, a claim might be made against anyone in the supply chain from manufacturer / importer to retailer.
Compensation can also be claimed under this Act for damage to personal property (but not damage to business property).

What is the Contracts (Rights of Third Parties) Act 1999 and why does it matter?

This law gives rights to anyone who was intended to benefit from the transaction. For example, if someone buys a gift for a friend and the gift proves to be faulty, either the recipient or the buyer of the gift can take action for breach of contract (as long as it was made clear that the goods were to be given as a gift). Traders can use contract terms to exclude the rights of third parties, but in practice it will often be simpler (and provide a better customer experience) for the trader to deal directly with the recipient of a gift. The Ts and Cs produced by The Legal Partners give this protection to the trader.

How can consumers find a trader’s identity?

The consumer needs to know, or be able to find out, who he is dealing with. A trader’s identity and address must be displayed at their place of business, on key business documents and on websites. This information must also be made available to consumers before a contract is made and whenever a consumer requests it.
If a trader fails to disclose that they are a limited company and there is then a breach of contract, the consumer may be able to claim against the directors of the business as individuals. If a trader fails to disclose that they are acting as an agent for someone else, then the consumer may be able to make any claim directly against that trader.

What are consumers’ rights when they buy services under the Consumer Rights Act 2015?

A trader supplying a service must meet the following 4 Service Standards:

  1. The service must be carried out with reasonable care and skill eg as a competent person in that trade or profession would do. Note: The law does not imply that any particular result will be achieved (for example, a competent doctor will not necessarily be able to treat every patient successfully) but many contracts will have express terms as to what result the customer can expect from the service. To minimise the risk of disagreement, it is advisable to state clearly where a particular result has been agreed and where there is a risk of the desired result not being achieved.
  2. Information said or written and given to the consumer is binding where the consumer relies on it. This will include quotations and any promises about timescales or about the results to be achieved. This applies if the consumer takes account of this information in deciding whether to buy the service, or to make any decision about the service subsequently.
  3. The service must be done for a reasonable price. A contract will often specify a price, or it will be clear about how the price will be calculated (for example, an hourly rate). Where the price is not agreed beforehand, the price must be reasonable. Typically, this will be judged against the prices that other similar traders might have charged.
  4. The service must be carried out within a reasonable time. Often, a contract will specify a date or time for the service to be performed or completed. Where there is no agreement about time, the timescale must nevertheless be reasonable. What is reasonable depends on the type of service and all other relevant circumstances

What are a consumer’s rights if the service is poor?

If the trader fails to meet any of the 4 Service Standards the consumer can demand that the service is performed again or there is a price reduction.

What is the “right to repeat performance” of a service under the Consumer Rights Act 2015?

This remedy is available where either of the 1st 2 Service Standards is not met.
The consumer can require the trader to repeat the service in order to complete it properly. This work must be done at no cost to the consumer, within a reasonable time and without causing significant inconvenience to the consumer.
The consumer cannot ask for repeat performance where it would be impossible to finish providing the service to the required standard

What is the right to a price reduction for poor service under the Consumer Rights Act 2015?

The consumer can claim a price reduction where repeat performance is impossible or cannot be done within a reasonable time and without causing significant inconvenience. A price reduction can also be claimed where the service is not done within a reasonable time or where the trader breaches a requirement arising from information they have given about something other than the service itself.
The amount of the price reduction will depend on how serious the breaches were, and it can be anything up to 100% of the price. If the consumer has already paid in full or in part for the service, he may therefore be entitled to some money back.

Where can I get more information under the Consumer Rights Act  2015 about poor service?

Find more information on poor service under the CRA here.

How must a trader deal with consumer complaints?

Under the Provision of Services Regulations 2009, traders are under a legal duty to respond to consumer complaints for service problems as quickly as possible, and to make their best efforts to resolve those complaints. This means that traders must respond to emails and letters of complaint and that they must return phone calls. Where a complaint appears to be valid, the trader should put things right promptly. If the trader disputes liability, they should give a clear explanation of their reasons.

What is negligence and how can consumers claim against a negligent supplier?

Where a trader supplies a service, they owe a duty of care to the consumer and to others who might be affected by their work. If their work is substandard, the duty of care may be breached and the person who suffers a loss may be able to make a claim. This applies even where there is no direct contract between the parties – for example, where the claim is made by one of the consumer’s friends or relatives, or where the trader is a subcontractor who is not working directly for the consumer. The duty of care is similar to the standard of ‘reasonable care and skill’, and it applies to the standard of work rather than guaranteeing a particular outcome.

What are consumers rights under the Consumer Rights Act 2015 for faulty ‘digital content’?

This is a brand new right to ensure consumers are protected when they buy digital content.

What is digital content in the Consumer Rights Act 2015?

Digital content is ‘data which are produced and supplied in digital form’.
It includes:
• computer games
• virtual items purchased within computer games
• television programmes
• films
• books and ebooks
• computer software
• mobile phone apps
• systems software for operating goods – for example, computers, phones, domestic appliances, toys, motor vehicles, etc
In many cases digital content is supplied in a format that can be physically touched such as a Blu-ray disc containing a film. Increasingly, however, digital content does not have a tangible form – for example, a film downloaded to a computer or a virtual car purchased when playing a computer game.
Digital content is not to be confused with the ways by which digital content or goods and services are chosen, purchased, supplied or transmitted. If a trader sells products online using a website, the use of the website to sell those products is not digital content, it is just a virtual shopping place. The supply, for example, of a mobile telephone contract (calls, texts and data) is not digital content. It is a service for customers to use.
Of course digital content, such as a mobile ringtone, may be sold on a website; once purchased that digital ringtone product will then be transmitted and downloaded into the consumer’s mobile phone.

What are a consumer’s statutory rights for faulty digital content under the Consumer Rights Act 2015?

The digital content must satisfy these 3 Tests and be:

  1. satisfactory quality
  2. fit for a particular purpose
  3. as described

What is “satisfactory quality” under the Consumer Rights Act 2015?

Satisfactory quality is determined by the Courts who decide what a reasonable person would expect is ‘satisfactory’ by looking at:

  • any description of the digital content
  • the price paid
  • all other relevant circumstances, but in particular public statements in advertising and labelling fitness for all the purposes for which digital content of that kind is usually supplied
  • freedom from minor defects
  • safety
  • durability

Quality does not include the consumer’s subjective judgements such as whether he liked a downloaded piece of music or not.
Most computer systems’ software, games and apps have minor defects that are corrected over time with fixes or upgrades. Therefore a ‘reasonable person’ might expect the defects to be present and judge any items containing them to be of satisfactory quality.
A trader is not liable for the unsatisfactory quality of a product if any of the following circumstances apply:

  • The customer’s attention was drawn to an unsatisfactory aspect of the digital content before a contract was made
  • The consumer examines the digital content before the contract is made and that examination ought to reveal the unsatisfactory aspect
  • A trial version is examined by the consumer before the contract is made and a reasonable examination of the trial product ought to make the unsatisfactory aspect apparent.

What is fit for a particular purpose under the Consumer Rights Act 2015?

Where, before a contract is made, a consumer makes known to the trader a particular purpose that he intends to use the digital content for, this becomes a contract term. The consumer may make this particular purpose known to the trader directly or by implication. This fitness for purpose is the case whether or not that purpose is one for which that digital content is usually supplied. Similar requirements ensure that where digital content is hired or purchased on credit, the creditor or hirer is liable for fitness for purpose.
There is an exemption to this requirement if it can be shown that the consumer did not rely on, or it was unreasonable for the consumer to rely on, the skill or judgement of the trader – for example, if a consumer emails the trader and then immediately downloads the app before the trader has had the opportunity to reply to him.

What does “as described” mean when you but digital content under the Consumer Rights Act 2015?

Digital content must match any description the trader gives to the consumer about it. Every contract to supply digital content has ‘as described’ as a contract term.
It does not matter if the consumer examines a trial version of the product before the contract is made and the final product matches the trial product or is even better – it is the description that is given to the original digital content that is important.
Certain digital products are upgraded over time. The digital content must continue to match the description but it can contain additional or enhanced features that are not part of that description.
Certain specific information about the main characteristics, functionality and compatibility of digital products must be given to consumers before they buy. Where information needs to be provided it is to be treated as a term of the contract and effectively becomes part of the product description.

How is ‘free’ digital content regulated under the Consumer Rights Act 2015?

All of the statutory rights for the supply or intended supply of digital content apply only if the consumer has to pay a monetary price as part of the contract.
Payment may be directly made using money or indirectly by means of some other facility for which money has been paid – for example, a gift voucher, a token or virtual money in a game. Digital content can be sold as an item requiring a single payment or by means of an ongoing subscription allowing access to the digital content over a period of time.
If digital content is given away (for example, free computer system software) the statutory rights do not apply. This does not mean that the trader is not liable if the digital content causes damage – please see “What are a trader’s liabilities for digital content given away under the Consumer Rights Act 2015?” below
Some digital content may be described as ‘free’ but the way it is supplied means that the statutory rights will still apply to it. This is to cover situations where, for example, a £500 computer is supplied that contains free anti-virus software of poor quality.
If a trader supplies digital content to a consumer and both of the following conditions are met then the digital content is not ‘free’ and is part of the contract:

  • the free digital content is supplied with goods or services or other digital content for which the consumer pays a price
  • the free digital content is not generally available to consumers unless they have paid a price for it or for goods or services or other digital content

In the example given regarding the £500 computer with free anti-virus software included, the software (digital content) is supplied with the computer (goods). To obtain the software separately you would generally have to either buy it or buy other goods or services or other software with which it came ‘free’. For the purposes of the Act it is supplied as part of a contract costing £500.

What are the protections under the Consumer Rights Act 2015 if digital content is modified or updated?

If the original contract for the supply of digital content allows the trader or a third party to modify that content (for example, software upgrades, fixing minor glitches, etc) then the contract’s terms regarding quality, fitness for a particular purpose and description apply equally to the modified digital content as they did to that supplied after the original contract.
If an upgrade is not satisfactory quality, the problem is treated as occurring at the date of the original contract for supply and not the modification date. The importance of this is in relation to the six-year time limit that applies for breach of contract claims to be made.

Why must a trader check that it has the ‘right to supply’ under the Consumer Rights Act 2015?

For most digital content a consumer and trader do not own the product fully. The intellectual property rights in the digital content remain with the originator of the product, or someone else who has bought some or all of those rights. Therefore if you are a trader who does not have permission from the intellectual property rights owner you do not have the ‘right to supply’ it. The Act creates a contract term that where digital content is supplied under a contract, and the consumer pays for it, it is as if the trader did have the ‘right to supply’ it, even if they do not.
There are severe criminal and civil sanctions for the breach of intellectual property rights so you should ensure that you do have the right to supply each particular piece of digital content before you do so.

What are consumers’ rights for faulty digital content under the Consumer Rights Act 2015?

Depending on the nature of the problem the minimum remedies are, initially, the right to repair or replacement, and secondly, the right to a price reduction.

What are the rights to repair or replacement of faulty digital content under the Consumer Rights Act 2015?

This is the consumer’s first step; if he decides that he wants the quality defect remedied by means of a repair or replacement the trader must:

  • do so within a reasonable time and without significant inconvenience to the consumer
  • bear any necessary costs incurred in doing so, including, in particular, the cost of any labour, materials or postage

However, the consumer does not have the right to remedy a quality defect by means of repair or replacement if it is either:

  • impossible to do so; or
  • disproportionate compared to another available remedy

For example, a consumer downloads a film on to his device, which has no sound, and the trader agrees that they are responsible for the quality defect and re-supplies.
For the consumer to request a repair to the digital content on his device it would be disproportionate compared to the trader providing a replacement download to resolve the problem.
The nature of the digital content and the purpose for which it was obtained or accessed by the consumer determines what is a ‘reasonable time’ and ‘significant inconvenience’.
If a consumer has requested or agreed to a repair then he cannot request a replacement until a reasonable time has been given for the repair to be carried out, as long as significant inconvenience is not caused. The same logic applies if the consumer has requested or agreed to a replacement and then requests a repair.
If the consumer shows that the digital content is defective within six months of its supply, it is to be taken as being defective on the day it was supplied.

What are the rights to price reduction for faulty digital content under the Consumer Rights Act 2015?

The ability for a consumer to have the right to require a price reduction is only triggered if either:

  • the remedies of repair and replacement are not possible; or
  • the remedy for either repair or replacement has been requested by the consumer but this has not been carried out within a reasonable time and without significant inconvenience to him

Where the right to a price reduction is triggered then this must be refunded without undue delay, and in any event within 14 days of the trader agreeing that the consumer is entitled to a refund.
The remedy must be an appropriate reduction in price and may be the full cost of the digital content in appropriate circumstances. If only part of the full price has been paid by the consumer then the refund would be any money already paid above the reduced price.

What are the other remedies a consumer can take for faulty digital content under the Consumer Rights Act 2015?

Provided the consumer is not claiming twice for the same loss, he can take any of the following remedies in addition to, or instead of, the remedies for breach of satisfactory quality and right to supply:

  1. claim for compensation
  2. receive a refund of money paid if he has not received the product
  3. seek to force the trader to fulfil the contract
  4. not pay for the product

However, a consumer is not able to treat a contract as ended purely on the basis of a breach of the statutory-quality or right-to-supply term in a contract.
In most cases the consumer is entitled to a full refund of all money paid for the digital content where there is a failure of the ‘right to supply’. The requirements for this refund are the same as those for when a price reduction is triggered as detailed above.
The only exception to the above full-refund remedy is if the failure of the right to supply only affects some of the digital content purchased. For example, a consumer purchases access to ‘streamed music’ and the trader loses the right to supply music from a particular record label. The consumer would only be entitled to a refund proportionate to the amount of music that record label made up of the whole volume of streamed music originally provided.

What are a consumers rights where goods & digital content supplied together under the Consumer Rights Act 2015?

For the vast majority of retail transactions on the high street the digital content that is supplied is included with goods that can be physically handled – for example a car, washing machine, music CD, etc. The goods and digital content are mixed together as a ‘mixed contract’.
Where this is the case the test to be applied is whether the digital content fails to meet the statutory rights that apply to digital content as detailed above.
If the digital content does not meet the quality requirements then the goods and digital content are treated as a whole item that does not to conform to the contract. The remedies that the trader should offer, and the consumer can request, then become the remedies that are provided for as if the item were goods. This is an important difference as the remedies for breach of quality requirements in relation to goods include the right to reject, which is not a remedy available for defective digital content alone.

What are a trader’s liabilities for digital content given away under the Consumer Rights Act 2015?

There has always been liability for digital content that is either given away or paid for if that digital content causes damage because of negligence.
That option still exists if a consumer wishes to use it. For example, a free mobile phone app containing a virus that damages the consumer’s mobile phone can lead to a claim of negligence against the trader who supplied the app.
However, the Consumer Rights Act 2015 enables a consumer to be able to rely directly on the remedies provided by it for faulty or damaging ‘free’ digital content without having to rely on civil law precedents. For the consumer to be able to do this the digital content must be supplied under a contract where the consumer has to pay for goods, services or other digital content to get the ‘free’ item – for example, a computer magazine that comes with free anti-virus software.

What are consumers rights under the Consumer Rights Act 2015 if digital content causes damage to devices eg smart phones, i-pads, tablets etc?

Where digital content is supplied and all of the following apply:

  • the digital content causes damage to a device or to other digital content
  • the device or digital content that is damaged belongs to the consumer
  • the damage is of a kind that would not have occurred if the trader had exercised reasonable care and skill

…the trader must offer, and the consumer can request, either of the following remedies:

  1. repair of the damage, which must be done within a reasonable time, without significant inconvenience and without cost to the consumer
  2. payment of compensation, which must be given without undue delay, and in any event within 14 days of the trader agreeing to pay the compensation. The trader cannot charge the consumer a fee for this.

If it is necessary, the Act gives the consumer the ability to take Court action to enforce these rights on the trader.

Where can I get more information under the Consumer Rights Act 2015 about remedies for faulty digital content?

Find more information about remedies for faulty digital content here

What information must a trader supply before selling digital content?

The Act provides a term in every contract for digital content that the pre-contractual information required by the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 be provided to consumers. If this information is not provided before the consumer enters into the contract he has the right to recover any costs that he has incurred as a result of the failure to provide the information.
The costs that can be recovered are the sterling value of the price paid for the digital content regardless of whether it was paid in real money or some payment facility for which money has been paid – for example, a token, virtual jewels, etc within a computer game. The refund must be in real money.

What terms can a trader put in B2C contracts? What are unfair contract terms?

The Consumer Rights Act 2015 also covers the use of unfair terms in consumer contracts.
Any attempt to mislead the consumer about his rights is an offence under the Consumer Protection from Unfair Trading Regulations 2008.
In particular, price/subject matter contract terms are only exempt if transparent and prominent
Prominent means brought to the consumer’s attention in such a way that the average consumer (a consumer who is reasonably well-informed, observant and circumspect) would be aware of the term.
All written terms of a consumer contract must be transparent. Transparent means in plain and understandable language and (if written) legible.
The grey list set out in Part 1 of Schedule 2 of the Consumer Rights Act 2015 includes the following three new grey list terms which are outlawed:

  1. Disproportionately high charges where the consumer decides not to conclude or perform the contract or for services which have not been supplied.
  2. Terms which allow the trader to determine the characteristics of the goods, services or digital content to be delivered after the consumer has entered the contract.
  3. Terms which allow the trader to determine the price after the consumer is bound.

If asked the Courts will review contract terms to determine if they are fair.
The CRA broadly restates stops a trader relying on any term or notice which excludes or restricts liability for death or personal injury resulting from negligence.
All written terms of a consumer contract must be “transparent”. Transparent means legible, and in plain and understandable language.
The Ts & Cs should use ordinary language in its ordinary sense, and short sentences will help. The terms should be well organised under easily understood headings covering recognisably similar issues. Font size, colour, clarity and (where used) paper quality are all relevant.
Legibility and clarity of language are not enough to ensure compliance. Wording that is literally used and legally accurate may still fail the transparency test if it is vague or misleading or if it refers to legal concepts that would not be familiar to a non-lawyer. Words like “indemnity” and “statutory rights” fall within this description. The Ts & Cs should set out all rights and duties in a clear and comprehensible way, so the consumer can see how they relate to each other, and foresee and evaluate at the time of entering the contract the possible consequences of the terms. The aim is to ensure that consumers can make an informed choice. Other pre-contract information may be needed to achieve this, and time to read and understand the transaction.
Lack of transparency does not make a contract term unenforceable. Any ambiguity will be interpreted against the trader (except in regulatory action against the trader).
Under English law, there are two main types of contract term which the courts have considered to be unfair:

  1. Limitations. Attempts to limit liability for breach of contract, or to exclude liability completely eg no liability for death or personal injury or no liability if the consumers rights under the Consumer Rights Act 2015 are breached.
  2. Other unfairness. Contract terms which are unfair in a more general way, for example, a contract that is one-sided in terms of termination rights or tries to limit compensation below the price paid for the goods, service or digital content.

What rights do a consumer have for Alternative Dispute Resolution?

Consumers sometimes encounter problems in getting redress for unsatisfactory goods or services. Such problems are even more difficult for consumers to solve when they buy something in another EU country or online. Disputes of this kind can be settled quickly, effectively, and cheaply without going to court, through ADR entities. However, not all EU countries have ADR entities to cover all kinds of consumer disputes with traders, and some existing ADR entities do not meet minimum quality standards. As a result, consumers are not always able to resolve their disputes and may lose money unjustly. The UK is setting up and authorizing ADR agencies for each type of industry.
The Consumer Rights Act is complicated. For help and advice get in touch.
You can also purchase our Consumer Rights Act Toolkit which will allow you to create or amend your Ts and Cs so that they comply with the new laws under the Act.

Our Consumer Rights Act 2015 Toolkit includes:

Consumer-Rights-Act-2015-fn-image-Toolkit-150x150Initial consultation with one of our experienced lawyers
Review of your current ts & cs to check where they do not comply
Provision of new Ts & Cs which are fully compliant with the Consumer Rights Act 2015
The new ts & cs are written in plain English and satisfy the fairness and transparency tests now required under the Consumer Rights Act 2015
One hour’s legal advice so you know what to do to comply with the Consumer Rights Act 2015
Point-of-sale wording to display in a shop or on-line

Price
£1,250 plus VAT
Contact me on 0203 755 5288 for more information, to discuss any issues concerns or to purchase your toolkit.

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Export Contracts, top 10 legal terms to include

Here are the most common legal terms we include in export contracts to protect UK exporters and questions The Legal Partners team are asked.
1 Find out who is the customer in the export contract?
It may seem obvious but from the outset of negotiations it is important to know whether the UK exporter is dealing with the direct end customer or via an agent or distributor in the country where the goods are to be sold.
2 Is the UK exporter or the Asian importer insuring the goods? 
The export contract will need to state clearly who is insuring the goods and from what point in the export process. Any specified Incoterm incorporated into the export contract may need to be amended for the UK exporter’s insurance coverage and what can be offered to the Asian importer.
3 Can an export contract legally and validly exclude liability?
Yes it can.
The export contract will need to clearly state if and to what extent the UK exporter accepts liability for loss subject to upper limits, or loss caused to third parties. Any liability which is excluded by the UK exporter should be limited only to those circumstances covered by the insurance policy and up to the level of that policy.
4 Should the UK exporter also get legal advice from the local lawyer in the country where the goods are to be imported?
Yes. There are usually local laws which will affect the Asian importer so it is worth checking during the negotiation process with one of our partner law firms in China (PRC), Singapore or Malaysia. If the UK exporter and Asian importer agree that the local law will govern the export contract then it will critical to get local law advice.
5 Are the Incoterms suitable to be incorporated into the export contract?
Yes they can be.
Each of these standard 3-letter descriptions eg EXW (ex Works London) prescribe set terms into the sales contract about who pays for transport & export/import licences/duties and who bears the risk of damage to the goods at what point in the export process.
If the UK exporter is uncertain which of the Incoterms to choose or if the Incoterm does not correctly describe what has been agreed with the Asian importer, then the detail for delivery including who pays for transport, insurance and any export and/or import licences should be written into the export contract.
See How to use Incoterms to de-risk your exports 
6 Will the UK exporter be responsible for obtaining an export licence? 
Each type of good which can be exported is assigned by the UK Government a commodity code. With the correct code, the Trade Tariff lists the other things that a UK exporter may need to import or export its, for example:

  • import/export licences or any special regulations for goods (called ‘measures’).
  • duty to pay.
  • VAT to pay.duty and tax reliefs.
  • exemptions from licences etc in certain countries.
  • customs procedures that apply to the goods

For more information see Gov.uk which has helpful advice to find commodity codes 

The export contract should state who will obtain the export licence and import licence – the UK exporter or Asian importer.
7 What payment method is to be used (such as documentary credits or collection arrangements)? 
Should the Asian importer give security for payments under the export contract?
Do due diligence on the importer and decide whether:

  • the Asian importer should provide a bank guarantee or performance bond; or
  • the UK exporter supplier should obtain credit insurance in respect of the Asian importer buyer.

Will payment be made in sterling or some other hard currency?
Because of exchange rate risks, the payment currency must be clearly stated in the export contract.
Consider also answers to these questions:
What deposit is required from the Asian importer?
What will be the time for payment (for example, 30 days after invoice date)?
To encourage prompt payment will the export contract state:

  • interest on late payments?
  • and/or a discount for early settlement?
  • and/or in an instalment contract, the entire price to become due if a single instalment is paid late?

The export contract should exclude the Asian importer’s right to make deductions or withholdings from any payments to be made.
8 Will insurance or financial backing be arranged through the Export Credits Guarantee Department?
The Export Credits Guarantee Department (ECGD) is part of UK Export Finance. It is the UK’s export credit agency, helping UK exporters and investors by providing credit insurance policies, political risk insurance on overseas investments and guarantees on bank loans.
For more information see: UK Export Finance 

9 When should legal title for the goods pass from the UK exporter to the Asian importer?
It is important to explain in the contract what the Asian Importer has to do to pay for the goods at the time they legally pass to the importer (called the point when “title to the goods passes”). If the goods are not perishable (eg food), a retention of title clause can be included in the export contract so the UK exporters keeps title (ownership) of the goods until full payment is received .
The UK exporter can reserve (keep) title to goods until it has received payment in full if the Export contract is written under English law.
10 What governing law and court jurisdiction or arbitration is best for the export contract?
It is important to propose a governing law which is internationally recognised like English law.
The next question to ask is: who is likely to need to sue, litigate or start legal proceedings under the export contract?
If it is the UK exporter, then a decision will need to be made about the best way to enforce any English law judgment against the Asian Importer and any assets depending where they are located.
Is arbitration better than a court hearing in an export contract dispute?
It can be easier to state that the dispute will be decided by an arbitrator (rather than a court) under London Court of International Arbitration (LCIA).
In international disputes, the enforcement of an arbitral award under the New York convention of the United Nations Commission on International Trade Law (UNCITRAL) is often easier than the enforcement of a national court’s judgment. This means that countries who are signatories to the convention will enforce an arbitration award from another country who is also a signatory to the convention.
For more information on UNCITRAL see A Guide to UNCITRAL: Basic facts about the United Nations Commission on International Trade Law. The UK, China, Singapore, Malaysia and many ASEAN countries are members of UNCITRAL.
For more general help information about exporting please see The Department for International Trade Export services for UK Business.
The Legal Partners are members of the Department for International Trade’s UK Investment Support Directory.  Membership of this searchable Directory is by nomination only. Hosted on the invest.great.gov.uk website, it connects international investors to businesses providing services key to helping a business set up or expand operations in the UK.

Posted in: Import Export Law for UK & Asia business

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Using NDAs to protect confidential information

Confidentiality agreements (sometimes called Non-Disclosure Agreements (NDAs) or Information-Exchange Agreements) should be signed at an early stage in negotiations, ideally before any information is exchanged.
In this article the descriptions Confidentiality agreement and NDA both mean the same agreement.
The agreement confirms that both exporter and Asian importer will keep confidential the terms of the negotiations, any sensitive product or service information and the terms of the eventual export contract.
It is often the first document entered into, before the document setting out the principles is signed – often called Heads of Agreement or Heads of Terms or Memorandum of Understanding. See  our article Heads of terms: how to negotiate

What legal protection do NDAs give an exporter?
An NDA ensures that information disclosed during negotiations remains confidential and is not used other than for the purpose disclosed. A confidentiality agreement creates a contractual right as well as helping to establish a relationship of confidence on which an action under general law can be based.
However if the exporter has any doubt that the information will not be kept confidential, then the information should only be disclosed by reference or in stages in return for information required from the Asian importer as the two-way trust during the negotiations is built up.
Can I include commercial terms in NDAs?
Yes.
It is possible to include commercial terms in NDAs if they are distinct and clear and do not prejudice the negotiations in the future. For example the NDA might say that the UK Exporter and Asian importer will share costs for attending a trade exhibition.
When does a duty of confidence arise when exchanging confidential information?
A duty of confidence may arise even in the absence of an agreement if the person receiving the information knows it is confidential, but an agreement helps to establish and define this relationship.
Database protection rights may protect confidential information contained in databases and supplement the protection gained by an agreement.
What are the limitations of confidentiality agreements?
Confidentiality agreements are difficult to enforce. Practical measures to keep information confidential are much more important than the ability to sue for damages for wrongful use or disclosure or seeking an injunction.
But in a negotiation, psychologically it is important to have NDAs signed at the start of the negotiations. This means that the UK exporter knows that the person it is dealing with has authority to sign the Non-Disclosure Agreement and the UK exporter can ask for two signatures with the second signature being a Board or equivalent director or President. This will show that the Asian importer has raised the project with the top decision-making body at the importer.
Confidentiality agreements are restrictive and will be construed against the party seeking to rely on them. Most jurisdictions will not enforce agreements if if the information covered is already public information confidential. Jurisdictions may (but rarely) require the duration of the agreement to be reasonable.
What are the legal restrictions on disclosure of confidential information?
Legal restrictions may prevent the disclosure of certain information by the parties. For example:
A company director or employee may be in breach of his duty of good faith (where this is implied in the employment relationship) or (where applicable) his fiduciary duties, if he discloses confidential information without authority.
Parties who are government contractors may be subject to restrictions under relevant official secrecy laws.
Data protection legislation in respect of personal data.
The supply of information to competitors under competition or antitrust laws.
What are the duties applicable during NDA negotiations? 
Various duties usually apply to negotiations under general law and take different forms from country to country. They include:
General duties to negotiate in good faith in the US and many continental European jurisdictions. If in doubt then a paragraph can be written into the Confidentiality agreement requiring both parties to negotiate in good faith.
General rules relating to pre-contractual misrepresentations.
Specific rules relating to the marketing of financial securities.
It is not usually possible to contract out of these rules completely (and in some cases, at all).
The country where negotiations take place will determine which duties apply. Where negotiations take place in the country of the Asian importer it is important to take direct “in-country” advice.
For details of our partner lawyers and law firms in Asia see: The Legal Partners in Asia.
For additional trade advice see the Department for International Trade Export Services for UK Business.
The Legal Partners are a Member of the UKTI’s Trade Advisory Network. 
What law should govern NDAs?
The UK exporter will need to plan for the worst case if it has to enforce the Confidentiality agreement in the country of the importer. This will mean as a minimum checking to ensure that the courts of the country where the Asian importer is based will enforce a judgment under the chosen law in the NDA.
Contact us if you need advice from our partner law firms in China (PRC), Singapore or Malaysia.
For more information or for an example NDA please speak to Richard Mullett on 0208 334 8049
 

 

Posted in: Import Export Law for UK & Asia business

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Employment law implications of hybrid working

Employment law implications of hybrid working

What is hybrid working?

Updated 21 June 2022

Born in response to the Covid-19 pandemic, hybrid working is a type of flexible working where an employee splits their time between the workplace and working remotely, in most cases from home. This article discusses the employment law implications of hybrid working, addressing the specifics of what employers need to do when they have made the decision to introduce long term home working or hybrid working arrangements.

Hybrid working is just one part of the larger category of flexible working that includes part time, flexitime, annualised hours and job sharing as well as hybrid working. Hybrid working covers where work is done.

The proportion of workers in the UK who worked entirely from home was relatively low until the Covid 19 pandemic. Hybrid working proved popular with employees and the exponential growth seen during the pandemic is holding firm as employers compete for candidates in the current employee driven market conditions. In research commissioned by Acas during March – April 2022, 60% of employers surveyed have seen hybrid working increase following the pandemic, just over half (52%) have seen an increase in staff working from home full-time. Following these figures, Acas has published updated advice for employers regarding hybrid working, this is outlined below.

In December 2021, the Government published a consultation document, Making flexible working the default, proposing various reforms to the right for employees to request flexible working, taking into account changes in working practices brought about during pandemic. Its own flexible working task force has recommended that flexible working should be the default position for all workers post-pandemic, and the Welsh Government perhaps unsurprisingly has confirmed plans to encourage long-term remote working.

The extent to which hybrid working becomes firmly embedded as the new normal way of working no one knows; it may cool off a little as businesses, wages and jobs come under increasing pressure in inflationary times. But at some level it is here to stay and organisations will take different approaches to it depending on their requirements. As we are seeing, they will change and tweak arrangements in an iterative process to strike the right balance.

Better, but not perfect

There are some clear advantages including reduced overheads, enhanced staff retention and motivation, technological competency and brand reputation. But downsides have also become apparent, for example reduced collaboration, with teams becoming more siloed, increased isolation, reduced oversight, problems with inclusivity, communication with training those at the early stages of their careers, and big issues around data security.

  • Employers will need to address a range of legal and practical issues, including:
  • Considering the need to tailor standard employment contract clauses to encompass homeworking or hybrid working.
  • Introducing new policies and reviewing existing policies to set out the arrangements and conditions for homeworking or hybrid working.
  • Taking appropriate measures to protect confidential information and personal data.
  • Reviewing the health and safety implications of the arrangements, including carrying out a risk assessment.i.e in all likelihood this will be an update of the risk assessment for home working during the pandemic
  • Deciding whether any special equipment should be provided.
  • Considering whether any special equipment should be provided.
  • Considering whether any special planning or insurance arrangements are required.
  • Deciding what arrangements should should be made for the management and supervision of certain types of homeworkers and hybrid workers.
  • Identifying the tax consequences of homeworking and hybrid working.
  • And firmly on the practicalities, in the light of the imminent energy crisis, some thought at least given to covering the cost of heating and to a smaller extent electricity when employees are working from home.

Acas publishes latest advice on hybrid working

Acas has provided updated advice to employers on hybrid working, after its latest survey found that 60% of employers have seen it increase compared to before the pandemic.

Following the research, Acas published the following advice to employers:

Employers will need to ensure that staff who work remotely have access to the same opportunities as those that are physically in a workplace. Acas has advice on how to keep connected with staff that are hybrid or home working, consider whether it is suitable for their workplace or if other types of flexible working are better suited for some roles.

  • Hybrid working policies should explain how hybrid working can be requested, detail how job roles are assessed and how decisions will be made.
  • Remote staff should have equitable access to opportunities such as team building, training and social activities as those in the workplace.
  • Transparency and fairness are important when deciding whether to approve staff requests for hybrid working. Other forms of flexible working may be considered as alternatives.
  • Suitable equipment and information to facilitate safe at-home working is necessary.
  • Employers must comply with the law on working hours. Staff working at home should take adequate rest breaks and look after their mental health.
  • A trial period to test hybrid working and establish any necessary adjustments may be useful.

This advice follows Acas guidance published in June last year which can be found at acas.org.uk/hybrid-working.

Implementing hybrid working will require changes to contractual terms. General flexibility clauses or mobility clauses that already exist in employment contracts are probably not enough and it would be best not to try to rely on them. It is a contractual requirement to detail the place of work so changes to contracts are likely to be required, for that reason if no other. 

Employers are required to provide employees and workers with a “written statement of particulars of employment” which must include key terms such as those relating to hours of work and place of work (section 1(1), ERA 1996). This is often referred to as a “section 1 statement”. Where changes are made to any of the particulars covered by a section 1 statement, the employer must give the employee or worker a written statement containing particulars of the change, known as a “section 4 statement” (section 4(1), ERA 1996). A change from workplace-based working to homeworking or hybrid working is likely to trigger this statutory requirement.

There are a number of areas in the employment contract that may need to be changed, these are:

  • Hours of work
  • Salary
  • Expenses
  • Holidays and sick leave
  • Confidentiality
  • Restrictive Covenants
  • Intellectual Property
  • Equipment, data security and monitoring
  • Discipline and Grievance
  • Right to enter
  • Trial Period
  • The right to revert

There is significantly more detail on each of these than this article allows. Please get in contact with us for more information and assistance.

Finishing up with the final point in this list, it’s worth planning now – on the way in – for what happens if the business needs to revert back to a full office working environment. There are a number of circumstances in which an employer may wish to bring an employee’s homeworking or hybrid working arrangements to an end. For example:

  • where the employer has reserved the right to ask the employee to revert to workplace-based working practices at the end of any unsatisfactory trial period.
  • where homeworking or hybrid working has been a stopgap or temporary solution to a problem.
  • where changes to the business or workforce make it impossible for the employer to organise work effectively with the employee working at home.
  • where the employee’s role or responsibilities change so that working from home is no longer suitable.

A contractual term dealing with termination of a homeworking or hybrid working arrangement should set out the circumstances in which the right to terminate can be exercised and the notice that the employer will provide.

Posted in: Employment law for HR Directors, General

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How and when to use Settlement Agreements, a checklist for employers

How and when to use Settlement Agreements, a checklist for employers
 

In the current Covid-19 situation, businesses and organisations may be in the unfortunate position of having to negotiate more staff exits. Settlement agreements may be one way in which a sensible mutually agreed termination of employment can be reached and evidenced.

This Checklist sets out the key issues employers should consider before entering into a settlement agreement with an employee, and how and when to use settlement agreements. 

Settlement Agreements used to be called Compromise Agreements. The Government renamed them in July 2013 to promote a culture of trying to resolve issues within the organisation rather than at an Employment Tribunal. For example, also in 2013, Pre-Termination Negotiations were introduced, which were designed to give employers a safe route to open discussions to offer a Settlement Agreement for an employee to leave without this leading to an unfair dismissal claim, by following the ACAS Code of Practice on Settlement Agreements under section 111A of the Employment Rights Act 1996.

What is a settlement agreement?

A settlement agreement is a legally binding agreement between a business and an employee under which the employee agrees to settle their potential claims and in return the employer will agree to pay financial compensation. Sometimes the agreement will include other things of benefit to the employee, such as an agreed reference letter.

In what circumstances will a settlement agreement be appropriate?

An employee can make a claim against a business under both their contract of employment and under statute. These claims may arise:

  • on recruitment;
  • during employment; or
  • when their employment has been terminated.

In many cases, a business may want to make a payment to an employee in return for an effective waiver of their potential claims. Businesses can enter into an agreement with an employee to settle potential claims when they are still working for the business, but in most situations, their employment will have ended (or will be about to end). Although it is usual for settlement agreements to be entered into where employment has terminated (or is about to terminate), it is possible to enter into one where employment is continuing. Unlike contractual claims, which can be waived by entering into a contractual waiver of such claims, statutory claims can only be waived in prescribed ways, one of which is by means of a settlement agreement.

There are a number of circumstances when an employer may wish to think about using a settlement agreement, for example: at the start of investigation; in disciplinary or capability processes; or in the event that an enhanced redundancy package (beyond that to which an employee is contractually or statutorily entitled) is being offered.

What are the legal requirements for a valid settlement agreement?

For a settlement agreement to be legally binding, there are a number of conditions that must be met:

  • The agreement must be in writing.
  • The agreement must relate to a particular complaint/s or particular proceedings. For example, it would not be possible to cover ‘all possible employment law claims’ in a settlement agreement. There should be reference to the actual issues that have arisen and then any other possible claims should be particularised to the extend of referring to specific sections of the specific Acts or Regulations.
  • The employee must have received legal advice from a relevant independent adviser (for example, a qualified lawyer or union official) on:
    • the terms and effect of the proposed agreement; and
    • its effect on their ability to pursue any rights before an employment tribunal.
  • The independent adviser must have a current contract of insurance (or professional indemnity insurance) covering the risk of a claim against them by the employee for the advice.
  • The employee’s adviser must be identified.
  •  The agreement must state that the conditions regulating settlement agreements have been satisfied.

Why does the employee need to see a Solicitor when negotiating a settlement agreement?

The employee is giving up legal rights in the Settlement Agreement, and so must be properly advised by an independent solicitor for any agreement to be legally binding. Independent legal advice for an employee when dealing with a settlement agreement is vital for employers to ensure that such agreements are binding. It would prove a waste of time and effort for an employer to negotiate an agreement with an employee only to find it was not legally watertight as a consequence of a lack of independent legal advice to the employee. The requirement therefore provides protection for both employees and employers in this process. It is usual for the employer to pay a contribution to the cost of the legal advice that the employee obtains. Currently this is standardly around £500 but there is no figure fixed by law and it may vary depending on the circumstances.

Possible content of a settlement agreement

Other than the legal requirements listed above, the contents of a settlement agreement are largely at the discretion of the business and the employee involved. Examples of common clauses include:

  • Compensation for loss of employment.
  • Contribution to legal fees.
  • Waiver of claims by the employee, including warranty that the claims listed are the only claims which the employee has against the employer.
  • Re-assertion or modification of existing restrictive covenants.
  • Indemnity from employee in relation to tax and National Insurance Contributions.

Confidential information

Protecting confidential information is usually crucial to a business and therefore settlement agreements often contain confidentiality provisions, for example, the employee agrees:

  • Not to use any confidential information.
  • Not to disclose any confidential information to any person, company or other organisation.
  • To keep the terms and existence of the agreement confidential.
  • To not make any derogatory comments about the employer (or any individuals employed by it) to a third party.

It is important however to appreciate that a settlement agreement should not prevent an employee from making a protected disclosure. In the light of the #metoo movement changes were also made to clauses around non-disclosure that solicitors were allowed to draft or permit to be in agreements that they advised on.

Which types of claim cannot be settled by a settlement agreement?

A large number of statutory claims can be settled by a settlement agreement, but there are some which should not be, namely:

  • Personal injury claims (unless the individual was aware, or could reasonably be aware, of the claim at the time the agreement was signed
  • Pension claims.
  • Claims following the transfer of a business.

If you need further advice on managing Settlement Agreements and Pre-Termination Negotiations or managing the effects on Covid-19 on your business, please get in touch, our details are below.

Posted in: Corporate and Business law for CEOs & CFOs

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Covid-19 Home working pack: policy and guidance for employers

Covid-19 Home working pack: policy and guidance for employers

Last updated 29th September 2020
First published March 2020

Wherever you are in your workforce planning, this homeworking pack will help you review, update your policies and practices easily, allowing your staff to work from home as efficiently as possible. 

The pack contains: 

  • A Homeworking policy covering temporary homeworking in COVID-19 to add to your staff handbook and issue to your teams.
  • A Risk Assessment which can be completed by the employee and includes questions assessing technology, data security & confidentiality and additional information for higher risk cases, for example expectant mothers. The Government will be asking businesses to carry out risk assessments as a crucial part of making workplaces ‘covid-secure’ as it eases lockdown restrictions. Carrying out risk assessments for continued homeworking fits into this this comprehensive plan).
  • A list of useful sites and resources, in one place. There is a wealth of information online covering every aspect of homeworking. At the bottom of this article are listed the sites we know Employers and HR practitioners are finding useful, and some to provide a little uplifting inspiration.

This article “Ten key things for effective remote working, from Jane Sparrow at the Culture builders”, has some helpful quick-check reminders on how to manage remote teams, including your line managers who are managing others in turn. 

It goes without saying, but if you haven’t already done so, write to your employees.

Write to your employees

With a change to a work situation, it is preferable to set this out in writing and get this agreed with the employee/s concerned.

It’s certainly time, if you haven’t already, to communicate formally with your teams who are working from home, and who may be doing so for a longer period.

Below are elements you need to consider, and we suggest cover, in a letter to your home workers. Include the home working policy and risk assessment that you can download here and amend when you send the letter.

The letter represents a change to the worker’s contract so needs to be customised for the relevant home worker. Get in touch if you need more advice and guidance on getting this right for your particular situation, or if you need a template letter to start from.

Why is it so important to send a formal letter to home workers?

On a very practical level of course, responsible employers want to do everything they possibly can to ensure the health & safety of their people during the pandemic, whether working from home or at the office.

Employers have a legal duty to protect the health, safety and welfare of their employees, including those who work from home, under the Health & Safety at Work etc. Act 1974: As part of these duties:

  • Employers are required to carry out a risk assessment to identify hazards and take steps to remove these. This risk assessment can be done by the employee and submitted to the employer for review.
  • Employers must keep a record of the findings of the risk assessment and keep the risks under review.
  • Employers are responsible for any equipment they provide to be safe and suitable, and must provide appropriate eye tests, on request.
  • New and expectant mothers are owed a special duty of care under the Management of Health and Safety at Work Regulations.
  • Employers should check they have appropriate insurance cover for homeworkers, including statutory employer’s liability insurance, and insurance covering any equipment or materials, and
  • Treat employees fairly and consistently whether at work or home working.

Health & Safety Executive (HSE) guidance for employers on protecting home workers. This page is part of the overall guidance from HSE on protecting workers in the Covid-19 pandemic. HSE will be enforcing the new rules for Employers and workplaces as return to work gets underway so keep an eye on this website for the latest information and advice for employers.

Homeworking policy

Update your company ‘Working from home policy’ in the Staff Handbook and reissue it. A Homeworking policy sets out the basis for working from home, the assessment criteria, the necessary arrangements and how home working will be managed going forward.

Contact us for help customising this template Homeworking policy for your particular situation.

Homeworker’s risk assessment

This risk assessment should be sent with the letter and homeworking policy to the homeworker. It can be completed by the homeworker and includes questions assessing technology, data security & confidentiality and additional information for higher risk cases for example expectant mothers. It also includes a critically important final question so easily missed by employers.

Setting up effective homeworking

The Health & Safety Executive have produced a working from home toolbox and video here and a display screen equipment (DSE) checklist here

This 3 minute you tube video created by a physiotherapist demonstrates correct home workstation set up for good posture also helpful as a reminder.

Systems and data security for home workers

Protecting data security and data confidentiality in a homeworking setting.

Businesses still have a legal responsibility to ensure that they have sufficient data security and data protection practices in place for homeworking as well as health and safety considerations for employees. There are increased risks from:

– malware attacks
– data breaches
– use of down devices, and
– adoption of new technology which has been poorly implemented, secured or assessed may arise

Employers are responsible for data security and protection of personal information. This remains the case when any member of your workforce is homeworking.

Employees must try to maintain the same standards of data confidentiality and security at home as they would normally do in the office. 

Phishing attacks sky rocketed during the pandemic, with significant numbers targeted at home workers. (At the height of the lockdown Google was blocking 18 million coronavirus scam emails every day, EU data breaches quadrupled in March 2020 as remote workers were targeted by hackers. Hackers targeted the UK’s furlough scheme just hours after it went live.

Do warn and train your staff to avoid a disruptive security breach and IT misuse from these attacks.

Employers may want to think about:

  • Putting an ‘IT and Systems in Homeworking’ Policy in place to manage your remote team and keep your data secure.
  • Asking your employees to complete a working from home assessment Offering employees (including those furloughed) online training or webinars on data security and confidentiality while working from home
  • Reviewing access to internal systems, security of employees own devices and updated anti-malware and virus protection across all devices. 

For more information and advice on data security and confidentiality, and what to do once your risk assessments are in, contact Karen Heaton at www.dpo4buiness.co.uk who works closely with The Legal Partners when we advise clients on these issues.

Practical tips for homeworking to share with your staff

Some tips to consider, and review from time to time with your existing staff and new joiners, who are working from home

Define your space –  have a dedicated area for work, however small, to separate work life from home life. Ideally in a separate area, but otherwise any quiet area.

Sitting correctly –  in an ideal situation, every employee should have a fit-for-purpose work chair and desk as well as desk equipment set up professionally. Make sure you have checked in with your team on these elements.

Working in natural light, sitting with correct posture in the best chair possible, ensuring laptop screens are positioned at eye height and using external keyboard & mouse wherever possible, are all important elements to get right. Check in with your teams on these aspects, and use/share the links in the section above.

Take regular short breaks – every 20 minutes, look up, stretch, walk about, reach out to a colleague, open a window and get some fresh air. Make time to eat lunch properly. 

Establish a routine – establishing some familiarity in unfamiliar circumstances can help people stay productive and to feel in control, happier at work. Set regular hours and stick to the schedule. 

Plan the day – set a plan for each day and where possible stick to it.
 
Work-life balance – many people have family, caring responsibilities and household set ups that make keeping to their usual work hours difficult, and make working from home a challenge. Discuss with people individually what working from home means for them, adapt working structures and agree a way forward. 

Staying in touch – ironically, homeworking has proved a golden opportunity to break the habit of communicating by email alone. Companies have been encouraging teams to pick up the mobile to make calls, and of course online video meet up platforms. Take  5 or 10 minutes to have a general chat and make it a daily habit. Virtual “tea-breaks” work well. 

Whatever technology is used, the point is don’t allow vacuums in communications to arise. Schedule regular ‘check in, check out’ team conference calls, at the beginning and end of the day. Dedicate part of the call to something not work-related. Ensure everyone is involved and heard, especially those who are not physically visible.

Employers increasingly expect line managers to take responsibility for their team’s health and wellbeing. Be mindful that more junior line managers may well need some coaching in how to do this for their teams.

Some firms have created ‘wellbeing platforms’; breaking areas down into mental wellbeing, physical wellbeing, thought leadership and combining childcare with homeworking, inviting staff to contribute.

Training & upskilling. Many employers took the opportunity in lockdown to train and upskill their teams using the online resources, (Microsoft Excel topped the list of training courses taken during the pandemic). Continuing training programs, and promotions, when staff are homeworking is good for morale, and for moving forward.

Below are some helpful additional resources, tips and reminders on managing remote teams and all aspects of effective homeworking.

Additional homeworking resources

  1. CIPD | ‘Getting the most from home working‘  page has a series of top 10 tips for homeworking in Covid-19, divided into sections on: 
    working remotely
    managing remote teams 
    healthy remote working 
    effective online meetings
    legal & contractual considerations (already covered in this article) and related content.

    CIPD have made available a more general, non covid-19 specific, guide outlining some of the key aspects Managers need to consider when ‘preparing the organisation for home working‘.

  2. Acas | Working from home a short bullet list on much of the above plus setting clear expectations.

  3. Mind | Guide to wellness action plans  for employees and managers. Simple and accessible, useful for sharing with teams. 
  4. The globally crowdsourced Remote Work | Survival ToolKit, was produced remotely, by a team of over 100 contributors to help people and their managers thrive whilst working from home during coronavirus. Useful for sharing with teams. Talks about burn out and resilience, what happens when tech fails, and how succeed as a remote worker and manager.

The information set out in this article is correct at date of publication. Although we regularly review this article as we moved through the pandemic and (hopefully soon) out beyond it, the effect of coronavirus on businesses means things change fast, and so it is important to obtain legal advice to ensure you are properly protected.

Posted in: Employment law for HR Directors, General

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Buying a business: avoid the legal pitfalls

Buying a business: avoid the legal pitfalls

Businesses are facing disruption from all angles. Brexit and of course the Covid-19 pandemic are the latest additions to a complex landscape facing companies. This brings opportunities of course as well as risks and we are seeing renewed interest and activity in business acquisitions as the country moves beyond Covid-19. We highlight some of the pitfalls of buying a business, and how to avoid these.

What is the right structure for the acquisition? 

A buyer can buy either the shares of the company that owns the target business or simply buy the assets which make up that business:

What is a share purchase?

The buyer buys the whole company (including liabilities that it may not know about).

What is an asset (or business) purchase?

The buyer chooses the assets that it wants to buy. This will provide more flexibility, but it can be complicated to identify and transfer specific assets.

What are the tax and accounting issues when Buying a business? 

Check how any goodwill on the acquisition is likely to be treated for tax and accounting purposes. Asset deals are typically less tax-efficient for sellers than share deals, which can affect the price the buyer pays. Check how any goodwill on the acquisition is likely to be treated for tax and accounting purposes. Asset deals are typically less tax efficient for sellers than share deals, which can affect the price the buyer pays. Obtain tax and accounting advice at the start and during the process as these issues will affect the price the buyer will want to pay.

What could be deal-breakers in Buying a business?

Employees

If a buyer buys a business as a going concern (even via an asset purchase), it must take on its employees on their existing contract terms because the Transfer of Undertakings (Protection of Employment) Regulations 2006 apply. See our TUPE checklist https://www.thelegalpartners.com/tupe-checklist/

Pensions

The buyer may have to take over the target company’s existing pension arrangements or offer prescribed pension arrangements to transferring employees.

Intellectual Property rights

A brand, trade mark or patent may be the most valuable asset of the target business. Take legal advice to check that the target business:

  • Owns the rights
  • Has adequately protected the rights
  • In the case of asset sale, can transfer the rights to the buyer.

Environmental issues

The buyer could face huge liabilities (possibly including criminal liability) if it buys contaminated land or a company that caused or allowed contamination. Check your position here https://www.gov.uk/contaminated-land

Shared assets

If the target business is part of a larger corporate group, it may share assets (such as computer systems, property and insurance policies) with other group members. Consider whether these arrangements can be unravelled without incurring prohibitive costs or disruption to the target business. An agreement can be drafted to deal with how the assets are divided and shared after the completion of the sale.

Key staff

The buyer should consider whether it is desirable to incentivise or tie-in key staff or management on special terms and new employment contracts.

Consents and third party approvals

The acquisition may need the approval of third parties (for example, industry regulators) or require approval from competition authorities. Consider when to approach them and whether the transaction is likely to get their consent.
If the buyer is acquiring all the shares in the target company, check that no important contracts can be terminated on a change of control.
The transaction may require approval from either the buyer’s or the seller’s shareholders.

Early stage negotiations: key points to remember 

Make sure that the person the buyer is negotiating with has the authority to talk to the buyer and has the power to provide the information the buyer requires.
If the seller or the target company is a competitor, the buyer must take legal advice before starting any discussions or exchanging information. Sharing sensitive business information is risky as it could lead to a breach of competition law, and potentially a large fine for the buyer.
Avoid making a legal commitment by mistake. A binding deal can be made without anything in writing (even through a conversation). When talking or writing, make sure the seller is aware that nothing is legally binding until the formal acquisition agreement has been signed (for example, mark correspondence “subject to contract”).
Negotiate Confidentiality Agreements (called Non-Disclosure Agreements – NDAs) and Head of Terms – see below.
Engage your business lawyers early on in the process.

What is the process and what are the legal documents?

Planning

Acquisitions can be complex, involve a lot of people and take a long time to complete. Make sure the buyer compiles a detailed plan with key deadlines and responsibilities.

What is a Confidentiality agreement?

Acquisitions are highly business-sensitive. Sign a confidentiality agreement (also called a non-disclosure agreement) at an early stage. This will generally require both parties to keep the deal secret until it is formally announced, and protect any information exchanged by the parties. A buyer should take legal advice before signing a confidentiality agreement to ensure that its position is adequately protected and its obligations under the agreement are reasonable.

What are Heads of Terms? 

Heads of Terms are usually signed at an early stage of a deal before detailed due diligence. They may also be known as:

  • Heads of agreement
  • Memorandum of understanding
  • Letter of intent
  • Term sheet.

They set out the key terms of the deal and are generally not legally binding. However, legal obligations can be created inadvertently and a strong “moral commitment” can be created that could weaken the buyer’s negotiating position later on. The buyer will normally prepare this document. A buyer should always take legal advice before signing this document.
See Heads of Terms: How to Negotiate https://www.thelegalpartners.com/heads-terms-agreement-legal-advice-cfos

What is an exclusivity agreement?

An exclusivity agreement (also known as a lock-out or no-shop agreemnt) gives the buyer a period of exclusivity in which to negotiate the transaction by preventing the seller from actively seeking or negotiating with other prospective buyers during the specified period. An exclusivity commitment can be dealt with in a separate agreement or as part of the Heads of Terms for the transaction.

What is due diligence?

The purpose of due diligence is to investigate the assets and liabilities of the target business. A buyer must take legal advice to ensure it gets the legal protections that it requires. If the buyer becomes aware of any significant problems in the due diligence process, it can:

  • Abort the deal
  • Negotiate a price reduction
  • Seek specific protections in the acquisition agreement.
  • Get your business solicitors to check all materials assets and liabilities.

What is an acquisition agreement?  

The acquisition agreement sets out the agreed terms governing the transaction and the mechanics of the deal (for example, the parties involved, the amount to be paid, the timing of the completion  and any consents or approvals required before completion). It will typically contain a number of provisions designed to protect the buyer, including:

  • Warranties These are contractual promises given by the seller about different aspects of the target business (for example, that it owns all the assets and there are no disputes with third parties). If they are untrue, the buyer can sue for damages.
  • Indemnities These require the seller to compensate the buyer (on a pound for pound basis) for specific liabilities if they arise (for example, potential tax or environmental liabilities).
  • Restrictive covenants These can prevent the seller from competing with the target business or poaching key customers or employees for a period following completion. They will only be enforceable if they are reasonable in scope, duration and geography.

If your business is the buyer, get your business lawyers to draft the acquisition agreement and control the negotiation process.

What is a disclosure letter?  

The disclosure letter is an important document that must be read in conjunction with the warranties in the acquisition agreement. A buyer cannot make a warranty claim for anything disclosed in this letter, although it may want to negotiate alternative protection for disclosed issues (such as a price reduction or an indemnity or insurance to cover the issue). If the buyer knew about a problem before signing the acquisition agreement, it may be unable to make a warranty claim for that issue even if it is not disclosed in the disclosure letter.

Seller limitations on claims

The seller will try and limit the claims that can be made under warranties and indemnities (for example, by limiting the time within which the claim can be brought and the amount that can be claimed).

Signing and completion

Signing of the acquisition agreement and completion of the transaction are often simultaneous, but a gap between them may be necessary if there are completion conditions to be fulfilled. For example:

  • Informing and consulting with any transferring employees
  • Getting approval from the competition authorities
  • Obtaining shareholder consent to the transaction.

If there is an interval between signing and completion, additional issues will need to be addressed in the acquisition agreement, including:
How the target business will be operated between signing and completion.
The period for satisfying the completion conditions, each party’s responsibility for ensuring the conditions are met and what will happen if any of the conditions are not fulfilled.
Who bears the risk of any breach of the seller’s warranties or other adverse event that occurs in relation to the target business in the interval between signing and completion.

After the acquisition

Prepare a detailed integration plan for the acquired business after completion.

Poor integration planning is often cited as the most common reason for acquisitions to fail.
Carry out the post-completion filings with Companies House, update the company books (if necessary) and pay any stamp duty due.
A buyer should take legal advice immediately if it thinks it has a possible claim for compensation from the seller. The acquisition agreement will invariably include strict time limits for bringing warranty claims which are often drafted to expire once the buyer has completed its first audit of the target business (although the time limit will usually be longer for tax claims).

Posted in: Corporate and Business law for CEOs & CFOs, General

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Bribery Act: how to avoid criminal liability

Bribery Act: how to avoid criminal liability

This guide explains the offences introduced by the Bribery Act 2010, the penalties, and highlights practical steps that business can take to keep within the law.

What is bribery?
Transparency International (a non-governmental anti-corruption organisation) defines bribery as “the offering, promising, giving, accepting or soliciting of an advantage as an inducement for an action which is illegal or a breach of trust.”

Why was the Bribery Act 2010 introduced?

The Bribery Act 2010 was introduced to strengthen the existing bribery and corruption laws in the UK. The Organisation of Economic Co-operation and Development (OECD) had repeatedly criticised the UK system for being weak and ineffective compared with the more robust regimes in other countries, such as the US Foreign and Corrupt Practices Act.

What are the offences under the Bribery Act 2010?

Bribing another person

  • A person is guilty of this offence if they offer, promise or give a financial advantage or other advantage, to another person:
    • to bring about improper performance of a relevant function or an activity; or
    • to reward a person for the improper performance of a relevant function or an activity.
  • The types of function or activity that can be improperly performed include:
    • all functions of a public nature;
    • all activities connected with a business;
    • any activity performed in the course of a person’s employment; and
    • any activity performed by or on behalf of a body of persons.

There must be an expectation that the functions are carried out in good faith or impartially, or the person performing them must be in a position of trust.

  • It may not matter whether the person offered the bribe is the same person that actually performs or performed the function or activity concerned.
  • The advantage can be offered, promised or given by the person themselves or by a third party.

Being bribed

  • The recipient or potential recipient of the bribe is guilty of this offence if they request, agree to receive, or accept a financial or other advantage to perform a relevant function or activity improperly.
  • It does not matter whether it is the recipient, or someone else through whom the recipient acts, who requests, agrees to receive or accepts the advantage. In addition, the advantage can be for the benefit of the recipient or another person.

Bribing a foreign public official

  • A person is guilty of this offence if they intend to influence an official in their capacity as a foreign public official. The offence does not cover accepting bribes, only offering, promising or giving bribes. It does not matter whether the offer, promise or gift is made directly to the official or by a third party.

Failing to prevent bribery

  • A commercial organisation is guilty of this offence if a person associated with it bribes another person, with the intention of obtaining or retaining business or a business advantage for the commercial organisation. The offence can be committed in the UK or overseas.
  • A business can avoid conviction if it can demonstrate that it had adequate procedures in place designed to prevent bribery.

What are the penalties for committing an offence?

  • The offences of bribing another person, being bribed and bribing a foreign public official are punishable on indictment either by an unlimited fine, imprisonment of up to ten years or both. Both a company and its directors could be subject to criminal penalties.
  • The offence of failure to prevent bribery is punishable on indictment by an unlimited fine.
  • Businesses convicted of corruption could find themselves permanently debarred from tendering for public sector contracts.
  • A business may also be damaged by adverse publicity if it is prosecuted for an offence.

Practical steps to avoid liability under the Bribery Act 2010

Top level commitment

All senior managers and directors must understand that they could be personally liable under the Bribery Act 2010 for offences committed by the business. It is important that senior management lead the anti-bribery culture of a business, especially if the business wants to take advantage of the “adequate procedures” defence to the offence of failing to prevent bribery.

Risk assessment

  • Consider all the potential risks the business may be exposed to. For example, certain industry sectors (such as construction, energy, oil and gas, defence and aerospace, mining and financial services) and countries are associated with a greater risk of bribery.
  • Think about the types of transactions the business engages in, who the transactions are with and how the transaction is conducted. High-risk transactions include:
    • procurement and supply chain management;
    • involvement with regulatory relationships (for example, licences or permits); and
    • charitable and political contributions.
  • Review how the business entertains potential customers, especially those from government agencies, state-owned enterprises or charitable organisations. Routine or inexpensive corporate hospitality is unlikely to be a problem, but clear guidelines should be put in place.
  • If the business operates in foreign jurisdictions, always check local laws.

Implementing and communicating an anti-corruption code of conduct

Implement a code of conduct setting out clear, practical and accessible policies and procedures that apply to the entire business. Make sure the code is communicated effectively to all parts of the organisation.

Carry out background checks when dealing with third parties

A business will be liable if a person associated with it commits an offence on its behalf. Businesses should therefore review all their relationships with any partners, suppliers and customers. For example, if an agent or distributor uses a bribe to win a contract for a business, that business could be liable. Ensure that background checks are carried out on any agents or distributors before they are engaged by the business.

Policies and procedures

Review any existing policies and procedures and decide whether they need to be updated. If the business does not have any policies or procedures in place, consider preparing them as a matter of urgency.

Effective implementation and monitoring

  • Consider introducing a compulsory training programme for all staff. If only a few employees operate in a high-risk area, consider targeting the training at those employees.
  • Ensure anti-corruption policies and procedures are continually monitored for compliance and effectiveness, both internally and externally.

Posted in: Corporate and Business law for CEOs & CFOs, Import Export Law for UK & Asia business

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