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Coronavirus (COVID-19) Planning for Employers

Coronavirus (COVID-19) Planning for Employers

Article updated on Wednesday 15th October. Please refresh your browser.

Planning for return to work:
Planning for future disruption

Latest Government guidance for Employers & HR planningg

This article covers the latest Government guidance for Covid-19 as it affects employers, staff and workplaces. We cover what you need to know for managing your workforce and workplace safely in these times. We include guidance on planning for future disruption, when an employer should close a workplace (aside from government mandated closures in regions on high alert), and what to expect if this happens.

The nature and extent of local Covid-19 restrictions varies around the UK, and things are changing fast. The Government has introduced a ‘simplified’ system of ‘Local COVID Alert levels‘ in England. The ‘three-tier alert system’ sees every area of England classed as being on medium, high or very high alert – also known as Tiers 1 to 3, respectively. A postcode search on .gov.uk gives the local coronavirus alert levels by area and the restrictions, what people can and cannot do if they live, work or travel in each local COVID alert level.

The tier 1, ‘medium’ alert level, consists of the current national measures which came into force on 24th September- listed in the bullet points below, including the rule of 6 and the closure of hospitality at 10pm.

The tier 2 ‘high’ alert level, includes a ban on households mixing indoors, including in pubs and restaurants. Much of the North East and North West, already under stricter local restrictions for several weeks are automatically categorised on ‘high’ alert level. London, Essex, and more areas of the north including York go onto high alert from Saturday 17th October.

In tier 3 areas, under a ‘very high’ alert level, pubs and bars will close ‘as a baseline measure’ unless they are serving main lunch or evening meals and travelling in and out of the area is restricted to essential trips. The Government is hoping that central and local government can work together to agree additional measures and these may vary, so check the specific rules in your area.

Understandably given the devastating impact of these decisions on people and businesses, there is intense push back from some regional leaders. Liverpool City region is the first to be placed on the ‘very high’ alert level. Manchester may follow, but to agree, its regional leaders are demanding an extension of the furlough scheme for affected workers, support for the self employed and proper compensation for business.

When asked, the Department of Health said the reasons for categorising areas as ‘very high alert’ included: The number and increase of coronavirus cases, the positivity rate (or the percentage of tests that come back positive), Pressures on the NHS, and which age groups are being infected. The three tier alert system came into force on Wednesday 14th October.

Non-essential retail, schools and universities will remain open in all levels.

The Chancellor announced on 9th October that the Job Support Scheme (JSS) will be expanded; the Government is to cover two-thirds of the wages of workers at businesses that are forced to shut due to Covid-19 restrictions. Details of this latest extension and what we know so far about the JSS are outlined in our employers guide to the Job Support Scheme.

Between 22nd and 24th September 2020, the Prime Minister announced extra national measures tests across England. Boris Johnson announced stronger fines for not complying, up to £10,000 for repeated breaches by employers and individuals, and warned these measures could in place until March 2021 (a year on from the start of lockdown). The measures announced are:

The latest national measures introduced on 22nd and 24th September, now constituting the ‘ Medium’ alert level.

  • Work at home, once again, ‘if you can do so effectively’.
  • By law, pubs, bars & restaurants and other premises selling food and drink must close by 10pm and offer table service only.
  • Businesses will need to display the official NHS QR code posters so that customers can ‘check-in’ using this option – now that the NHS Covid-19 app is up and running – as an alternative to providing their contact details.
  • Staff and customers in hospitality & retail must now wear face coverings. Previously only customers in these settings were required to do so.
  • Covid-Secure guidance for all retail, leisure and tourism and other sectors is now a legal obligation with fines of up to £10,000 for non compliance.
  • By law, businesses must follow their industry guidance around social distancing, PPE, contact tracing, cleanliness and hygiene. See Government guidance for working safely during Coronavirus (Covid-19). There are links to the Government guidance for each of the 14 workplace situations below.
  • Employers must not knowingly require or encourage someone who is being required to self-isolate to come to work. (Ensure your Line Managers and other key points of contact for staff are fully aware of this. Employers risk fines of between £1,000 and £10,000 where they “knowingly allow self-isolating staff to come to work without reasonable excuse”).
  • Businesses must remind people to wear face coverings where mandated.
  • From 28th September people must isolate for 14 days if they have symptoms, test positive for Covid-19, or are told to do so by an NHS test & trace worker. Anyone who fails to self-isolate when required is liable to be fined between £1,000 and £10,000 for repeat offences / serious breaches. But people contacted by the NHS Covid-19 smartphone app are not legally obliged to self-isolate. (link to Test & Trace support payments).
  • The planned Oct 1st reopening of business conferences, exhibition halls and large sports events is halted for now.

As stated, the restriction of no more than 6 people meeting in private homes continues following its introduction on 14th September. Breach of this rule also now incurs a fine of £200.

The Prime Minister reiterated the need for people in England to follow these national restriction and the local alert based restrictions, on top of the basic rules, summarised as:

HANDS – FACE – SPACE. Wash hands regularly, cover face in enclosed spaces, stay 2 metres apart (1metre + extra precautions) where possible.
If you have symptoms, isolate and get a test within 5 days (if you can).
Download the NHS Covid-19 app.

NHS test & trace

The UK’s Covid-19 testing system, currently unfit for purpose, is under increased pressure as schools & universities have returned, and demand for tests has soared.

As well as the problematic NHS test & trace service, which is increasingly being handled by local authorities, the Government has also launched the NHS test & trace app (called the NHS Covid-19 app). By 30th September 2020, 14 million people had downloaded this app.

Employers need to be mindful of the potential disruption of staff being asked to self-isolate and get a test as a result of either of these two systems, the significant bottleneck and delays in getting tests and results back. Read more on testing below.

Working from home or the office

Back on 1st August 2020, employers were given more discretion over how employees can work safely. Providing their workplace is Covid-19 secure, employers were told they could ask employees to return to the workplace.

On 22nd September this advice was updated because of the increasing Covid-19 cases and the Government advised people to ‘work from home over the winter if they can do so effectively, (our italics). Exceptions again include those “in key public services – and in all professions where homeworking is not possible, such as construction or retail – people should continue to attend their workplaces”.

The Prime Minister later added that staff should keep going to the office “if it is important for their job, mental health or wellbeing”.

The public transport travel guidance continues to apply. People on public transport must wear face coverings, and observe social distancing where possible, e.g avoid peak times, and sit spaced out on trains and busses.

It is important to take the time to have conversations and a good listening ear to understand where staff can effectively work from home and still find out any reasons for an employee’s reluctance to working in the office if they have to do so.

Everyone has been permitted to use public transport at any time in England since 1st August. Employers will need to keep a careful eye on how their people can travel to work safely.

Face coverings

The latest restrictions require retail staff and those working in leisure and hospitality settings who are likely to come into contact with members of the public to wear face coverings. This includes not just shops, restaurants and cafes, but other public-facing businesses, banks, hotel lobbys, and estate agents. In addition, customers in indoor hospitality, pubs, takeaways, restaurants etc – must also wear face coverings, except while they are seated at a table to eat or drink. Fines for individuals failing to wear a face covering will rise to £200 for a first offence and up to £6,400 for repeat offences.

There would be a greater police presence to enforce these new rules, with “military support where required”, the Prime Minister said. Previously shop workers were told they “should encourage compliance”.

The Government added taxis and private hire vehicles to the list of places where face coverings must be worn.

The requirements do not apply to certain categories of people, such as employees, children under 11 yrs, and certain groups who are exempt.

Face coverings have been compulsory on public transport since mid June and in retail stores since 10th July.

Face coverings will be mandatory in schools that are in local lockdown areas and left to the discretion of head teachers in the rest of England.

Social distancing still the norm

The 2 metre social distancing rule remains the preferred guidance. However 2 metres safe social distance becomes “one metre plus” an additional form of infection mitigation, which can be:
+ wearing face coverings (mandatory in enclosed public spaces from 8th August.)
+ increased use of hand sanitiser
+ sitting people alongside rather than face to face to reduce transmission.

For example, on public transport it will be one metre plus a face covering.

The Government has published Covid-19 Secure guidance for 14 different workplace situations, see the list and links below.

Government’s 5 steps to working safely during COVID-19

The Government guidance for making workplaces ‘COVID- secure sets out 5 practical measures that employers must adopt to maintain the critical two metres social distancing, what to do where this is not possible and adopting very good hygiene and cleaning practices at the workplace.

1 Return to work, if you can do so safely

During lock down, people were asked to work from home and employers were asked to take ‘all reasonable steps’ to help them do so. Then the shift came and on 10th July, the PM urged people to go back to work if they can, and if their workplace is covid-19 secure.

As we go forward, we may see regional reversals back to home working. Find our employers’ guide to homeworking, which includes a template homeworking policy, risk assessment, guidance and resources here if you need it here).

2 Carry out a Covid-19 risk assessment, in consultation with workers or trade unions and implement it

This forms the core of your return to work plan. Take the opportunity to consult with staff, so that when they do return to work on site, they have already been consulted and given their views on making their workplace Covid-19 secure.

If possible, employers should aim to publish the results of their risk assessments on their website; the Government expects all businesses with over 50 employees to do so. Further details on risk and completing risk assessments are contained in the guidance for making workplaces ‘covid-19’ secure.

Following the PM’s announcement, on 12th May 2020 the Health & Safety Executive (HSE) published a toolkit designed to assist employers to manage and assess risks at work arising from the COVID-19 pandemic and more generally.
HSE risk assessment toolkit overview and,
HSE risk assessment detail .

3 Maintain two metres social distancing wherever possible

Employers should re-design workspaces to maintain two metre distances between people by:

  • staggering start times
  • creating one way walk-throughs
  • opening more entrances and exits, and/or
  • changing seating layouts in break rooms.

4 Where people cannot be two metres apart, manage the transmission risk 

Employers should consider:

  • putting barriers in shared spaces
  • creating workplace shift patterns or fixed teams minimising the number of people in contact with one another, and/or
  • ensuring colleagues are facing away from each other.

5 Reinforce cleaning processes 

Workplaces should be cleaned more frequently, paying close attention to high-contact objects like door handles, stair rails, and keyboards. Employers should provide hand washing facilities or hand sanitisers at entry and exit points.

Government guidance for 14 workplace situations

The Government guidance consists of 14 workplace guides for different workplace situations, listed below:

Close contact services: hair & beauty, therapists, tailors
Construction and other outdoor work
Factories, plants and warehouses
Heritage Locations
Hotels & other guest accommodation
Labs and research facilities
Offices and contact centres
Other people’s homes
Performing Arts
Providers of grassroots sport and gym/leisure facilities
Restaurants, pubs, bars & takeaway services
Shops and branches
Vehicles
The visitor economy: hotels, guest accommodation, indoor & outdoor attractions, business events & consumer shows.

Each guide sets out practical considerations for employers on how to set up a COVID-19 secure workplace. You will need to put in place as many as are appropriate for your workplaces. Expect these guides to be updated regularly so check them frequently.  You may of course need to follow more than one guide.

As COVID-19 is a new illness, employers must follow this official guidance as it is updated and adopt any additional steps as required.

The guides also confirm that the wearing of face coverings is optional and not required by law at the workplace, unless there is a specific requirement for PPE because of the industry or workplace setting.

Health & Safety compliance

HSE have the power to undertake spot checks and impose fines and workers can complain to the HSE if they think the workplace is not ‘COVID-19 secure’. HSE says workers should follow up with their employer first before contacting them. HSE have stated that in their experience of complaints so far, employers usually have not understood what is the right thing to do, rather than deliberately breaching health and safety laws, and when HSE has contacted the employer, the employer has worked with HSE to remedy the situation.

Health & Safety case law shows that where the employer has been liable, it has usually been a result of failing to implement the employer’s own system for making the workplace safe in line with its own risk assessment.

Following the guidance above will help employers to comply efficiently, to reassure your staff that theirs is a COVID-secure workplace and is a major part of an employer’s compliance with Health & Safety Law.

Each guide includes a downloadable notice which employers are encouraged to display in their workplaces, to show that they have followed the guidance. 

It goes without saying that employers will still need to follow their legal obligations for Health & Safety, Employment and Discrimination Law.

Continue to communicate very closely with your employees as they return to work and in the coming months if there are changes to the current guidance and / or local lockdowns take place. Be ready to review regularly your risk assessment and update it, and communicate it again with your staff.

Employers have a 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 and mental safety. What is ‘reasonable’ will depend upon the:

  • type of workplace
  • likelihood and gravity of harm
  • costs and practicality or preventing it; and
  • justifications / defence for running any risks

COVID-19 has been designated by the UK Government as a ‘serious and imminent threat to public health‘. This means that the above Health and Safety duties are critical. If employers do not take adequate measures to protect their workers when returning to work, under the Employment Rights Act 1996 (s44), workers have the right to:

  • walk out;
  • refuse to return to work; or
  • take appropriate action to protect themselves or fellow workers

Workers are protected from any detriment they suffer from an employer as a result of workers taking the above protective action and any dismissal would be automatically unfair. Therefore employers should:

  1. carry out a risk assessment, as stated above, and
  2. maintain very good two-way communication with staff so concerns can be addressed.

Further planning for return to work post lockdown

Testing

Under the NHS Test and Trace system, everyone who has symptoms of Covid-19 must isolate immediately, for 14 days, and get a test, within 5 days of those symptoms appearing. Those who have been in contact with anyone testing positive are being identified through tracing and asked to isolate for 14 days.

Since this announcement the national system for tracking down people who may be infected has changed. The central pool of contact tracers are making way for local teams with neighbourhood knowledge. Local authorities will now step in if people can’t be reached by the national service.
As well as the NHS test & trace service, the Government has also launched the NHS test & trace app (called the Covid-19 app). It allows users to check into pubs, restaurants and other venues by scanning a QR code on their phone. They will then get an alert telling them to self isolate if other visitors at the same time are found to have been infected.

At the time of writing there are 2 types of test. The first main, test is to diagnose someone with a current case of coronavirus and involves a nose and throat swab which has to be sent off to be processed at a lab. About 3/4 of people are receiving results back in 24 hours.

The second test is to test if the person has had the virus, called the antibody test. Antibody tests are currently available only to health and care staff.

Employers will need to be mindful of the potential effect of the test and trace system on staffing. Arranging teams in small cohorts and rotating teams are sound measures.

In addition, hospitality businesses must now to help Test and Trace respond to local outbreaks by collecting contact details from customers.

The UK testing system is coming under pressure from surges in demand. Employers of essential workers and workers over 65 who are self isolating with symptoms of coronavirus can book a Covid-19 test for them online. The Government will update details of who can be tested here. Employers of essential workers should email portalservicedesk@dhsc.gov.uk with two email addresses that will be used to log in and upload essential worker contact details. Once employer details have been verified, login credentials will be issued for the employer portal for Covid-19 testing.

All care home staff and residents are now eligible for testing with priority for those in homes that look after the over-65s. An online portal is now live for care home staff and residents that makes it easy for care homes to arrange deliveries of COVID-19 test kits.

Swab tests are already available to all adults and children who are experiencing symptoms of Covid-19, They involve taking a swab up the nose or from the back of the throat and indicate if a person currently has Covid-19.

Where employers are considering securing immunity/antibody testing kits when available so that staff can be tested for Covid-19 before they return to the workplace, employers they will need to consider:

  • how they can require employees to submit to testing,
  • how to manage the privacy and data protection issues involved in processing employee’s health data which is special category data for the purposes of the GDPR,
  • how will the testing be done, and
  • who will conduct the testing.

The Information Commissioner’s Office has also published a new set of FAQs for employers on data protection issues employee temperature testing

Mental Health on return from lockdown

Mental health will have been a real issue for many during the lockdown who will want to return to work for the social effects as well to get “restarted in a more familiar environment”.

Some employees may find prospect of returning to work may be even more worrying than being at home dealing with feelings of loneliness and anxiety. Having being consistently urged to stay at home to protect the NHS and save lives, there will be widespread concern about stepping out beyond home boundaries, sending children back to school, getting back onto public transport, being back in close proximity with colleagues or just having to resume a “normal” working day.

An employer who wants reintegration to be as smooth as possible will be very much aware of these issues and should:

  • Develop a clear communication plan in place to allay concerns by setting out what the employer plans to do to help employees
  • Provide support as necessary to help those who are struggling to deal with the return to the workplace.

Changes to salary and benefits on return from lockdown

The Coronavirus Job Retention Scheme (Furlough Scheme) continues until 31 October and employers are now contributing to the worker’s salary costs on an increasing scale since 1 August.

Now may still not be the time for any hasty redundancies which, in the short term use up even more cashflow paying the salary and benefits for employees’ notice periods and the statutory redundancy payment for employees with at least 2 years service. These statutory redundancy payments will need to be made at 100% salary. There is also now the £1,000 the Job Retention Bonus for employers to claim for staff who have come back from furlough and remain employed at 31 January 2021.

Employers who have furloughed workers under the Coronavirus Job Retention Scheme, will need to review the situation each month.

Employees who may have reluctantly agreed to these arrangements while under lockdown and may be more likely to challenge these once they are asked to return to a more normal working pattern.

Therefore, employers will need to justify any decisions to prolong these arrangements or to put in place new measures, ensuring employees are properly informed (and, where necessary, consulted with) to ensure there is a clear understanding of the rationale.

As other industries announce redundancies workers will be concerned and may see the fact that they have been furloughed as indicating they are more at risk of redundancy. Ensure there is a one-to-one return to work and appropriate team meetings to re-enforce returning workers as part of the team.

Flexible working on return from lockdown

Employers would be wise to consult with workers individually about their situations to enable an effect and safe return to work. As we have already stated above the Government is recommending that employers ensure that staff work from home where they can but there is now a drive to get workers back to the workplace.

The lockdown has seen a more wide spread adoption of home working adn may be deployed as the situation requires. For example if a worker has to shield for their own or family reasons or is contacted by test & Trace or home schooling is re-introduced, home working may be required for some weeks and months. Workers may be at time unfit to work and be back into the Statutory Sick Pay (SSP) scheme.

Now is the time to update what is needed for home working on a longer term basis e.g changes to employment contract, risk assessment and identifying the correct way to use secure IT systems and the new video conferencing, messaging, collaboration platforms etc.

Our home working article covers all the elements Employers and HRs need to know in order to get home working right.

Home working going forward

Employers have been implementing remote working since the lockdown of course, and some employees will continue to work from home in the mid term.

In normal circumstances, anyone working from home should undertake a risk assessment of their home workplace. Clearly, this was not possible in the early phase of adjusting to the pandemic.

However:

– working hours can still be clearly defined, and
– staff should receive their normal pay, taking into account any furlough payments from August 2020 if they work part time.

Employers are still responsible for employees’ Health and Safety and welfare when they are working at home.

Communicate with workers your policy on:
– home working,
– work travel, and
– precautionary isolation.

Read our guidance on managing home working effectively and compliantly, which includes a template risk assessment and home working policy.

What are employees’ rights if working from home.

Consider what pay your employees will receive if they work part-time, to fit around caring for children/elderly relatives.
Be as agile and flexible as you are able to ensure as many employees as possible to continue working.

Conduct internal and client meetings where appropriate using virtual meetings/video conferencing/live streaming.

Workers who are shielding

From 1 August 2020, employees who had been shielding and who cannot work from home will be able to return to their workplaces. For the clinically extremely vulnerable in England, who have been shielding but do not have to any more employers will still need to take a workers personal situation into account. This is because of he health and safety risk of forcing them back into the workplace with the risk of them contracting COVID-19 at the workplace. Individual discussions should always take place with these categories of workers. As employees may feel uncertain about returning to work employers can help with the transition for their clinically extremely vulnerable employees, ensuring that robust measures are put in place for them to return to Covid-secure workplaces. This includes agreeing a plan for their returning with 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. Employer should therefore plan for these employees having to work from home again.

Things to consider, depending on business requirements and staff profiles 

Some of the issues that you should consider from an employment law perspective include:

Sick leave / caring for family members & Sick Pay

  1. Any staff who have to self-isolate or be quarantined under the Health Protection (Coronavirus) Regulations 2020 passed recently are deemed to be sick and would receive contractual sick pay or, if there is no contractual sick pay, then Statutory Sick Pay (SSP).

    Staff do not need to go to their GP to get a sick note.

    The Government is advising people not to visit their GP but instead to self isolate at home for 7 days, use the NHS website for help and
    call NHS 111 only:
    – if they cannot cope with their symptoms at home,
    – cannot get help online.
    – if their symptoms deteriorate
    – if symptoms do not get better after 7 days.

    SSP is paid at £94.25 per week. SSP will be payable for 14 days by employers directly to staff and employers with less than 250 staff will be able to claim it back from the Government.

    Your workers on zero hours contracts are entitled to sick pay if they have done some work for you and have earned on average £118 or above per week.

    The Government has indicated that it is making plans for anyone not eligible for sick pay, who needs to self isolate due to the virus.

    The self employed now qualify for SSP, as we stated above.

    Those earning less than £118 per week appear not yet to qualify for SSP

    Those working in the gig economy will be able to claim universal credit and/or contributory Employment and Support allowance. Watch out for announcements outlining how this will work.

    Look out for these upcoming details and communicate as soon as they become available, to reassure staff.

  2. Plan for a greater percentage of your staff having to self-isolate, as the Government is requiring whole households to self-isolate for 14 days at home if one family member is sick (i.e has a new persistent cough, or a fever, which are the main early symptoms of the virus).
  3. Employers can decide to require staff to stay at / work from home and so would continue to pay staff full salary and benefits where staff are not sick but working from home.
  4. Staff may use their statutory rights to time off to care for dependants (short – term unpaid leave) or can use annual leave or parental leave as applicable, as the schools are closed from Monday 24th March to all but the vulnerable children and children of key workers.

    Remind employees of their rights to do so.

  5. The Government has implemented form 1 September 2020 a new payment for people on low incomes in areas with high rates of COVID-19, who need to self-isolate and can’t work from home. Payments of up to £182 to be made to people who have tested positive for COVID-19 and their contacts. The Scheme started first in Blackburn, Darwen, Pendle, and Oldham.

Planning for future disruption

There will be continued disruption in the months ahead, so businesses need to continue to:

  1. Identify business critical roles and how they can be maintained.
  2. Identify any vulnerable employees, such as pregnant women, those over 70 and those who originally received a letter from the NHS at the start of the pandemic, explaining that they must shield. Assess and agree the adjustments needed for them for example long term working from home.

    Where travel is absolutely necessary:
    – consider what protective measures should be put in place,
    – ensure that protective equipment is sourced and ordered
    – check the FCO advice for the country in question.

  3. Identify the minimum safe level of workers required to continue operating, and how that can be maintained in the worst-case scenario. Identify the point at which the business may need to cease operating temporarily and speak to us about the employment law consequences.
  4. Plan for staff working from home on a longer term or more regular basis in accordance with the Government guidelines or flexible working requests, because parents are still home-schooling.
  5. Plan for a local lockdown which means workers have to work from home again and non-essential travel is curtailed.
  6. Plan for vulnerable and/or shielding staff to have to go back to home working or taking sick leave.
  7. Some staff will be keen to return to the workplace and others may be very nervous of the health risks of travelling to and attending work.

At what point should an employer close the workplace?

Businesses need to comply with any local lockdown imposed as a result of moving into a higher alert level, and imposed by heir local authority. Aside from this, some thoughts on when an employer might close the workplace.

  1. The Acas guidance advises that if someone with COVID-19 comes into a workplace, the workplace does not necessarily have to close.
  2. In England, the local Public Health England health protection team (HPT) will get in contact with the employer to:
    – discuss the case
    – identify people who have been in contact with the affected person.
    – carry out a risk assessment
    – advise on any actions or precautions to take.
  3. A risk assessment of each setting will be undertaken by the HPT with the employer. Advice on the management of staff and members of the public will be based on this assessment.
  4. The HPT will also be in contact with the case directly to advise on isolation and identifying other contacts and will be in touch with any contacts of the case to provide them with appropriate advice.
  5. Advice on cleaning of communal areas such as offices or toilets will also be given by the HPT.

Review the plan each week and communicate regularly to staff.

From July 18th, the Government gave local councils the power to impose lockdowns to combat potential outbreaks. Councils can now close premises, pubs and cancel events without asking the Government.

Keep up to date

Refer employees who are concerned about infection to the official medical sources and advice below, and encourage them to keep themselves informed and updated as time goes on.

NHS Coronavirus COVID-19 : how to protect yourself or check if you need medical help on the NHS website.

GOV.UK: information for the public
GOV.UK: self-isolation guidance
GOV.UK: household isolation guidance
GOV.UK: guide on social distancing/protecting elderly and ‘at risk’ adults

also:
BBC: Advice for people with health conditions
Telegraph Coronavirus: ‘constant reminder’ video – hand washing is critical to staying safe during the outbreak

If you need further advice to enable your workers to start returning to your COVID-secure workplace or to continue working from home safely or to start returning to your COVID-19 secure workplace, please do get in touch. We are here to help.

If you want to talk through your plans or need specific advice please call on 0208 255 1914 or 0203 755 5288 or email me. We are here to help.


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Redundancy procedures & alternatives to redundancy

Redundancy procedures & alternatives to redundancy

The Coronavirus Job Retention Scheme, or the flexible furlough scheme as it has become known, is due to end on 31st October 2020. With virus infections growing apace and the three-tier alert system dealing further blows to businesses and the economy, Employers’ minds are sharply focussed on managing staffing needs in the coming uncertain months. The Covid-19 Job Support Scheme, (JSS) which starts immediately after the CJRS closure on 1st November, is by no means a successor, or replacement. Read our article explaining the JSS and the important differences between the JSS and flexible furlough.

There is a the range of options open to employers to consider before starting a redundancy process, which can save cashflow on redundancy payments and maintain skills and experience in the business for when the upturn comes and 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 eg some holiday to be taken in Q2 rather than stored up to until August 
  • 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- 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
  • Remember, flexible furlough is still available until 31st Oct 2020 to staff who have been furloughed before 10 June 2020
  • Consider whether the Coronavirus Job Retention Bonus (JRB) scheme may help.

Under this scheme, employers will be paid a £1,000 Job Retention Bonus for each employee they bring back from furlough and continuously employ through to January 2021. For businesses to be eligible for the bonus, the employee must be paid at least £520 on average in each month from November 2020 to the end of January 2021 (equivalent to the national insurance lower earnings limit).

How best to go about making these changes

  • Impose changes on reasonable notice and follow consultation with employees as necessary
  • Issue flexible furlough letters and get employees to sign them.

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

NB Check bonus schemes and employment contracts.

  • Cutting/changing contractual bonus schemes and commission arrangements – eg whole/part of commission only paid on company receiving £ 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 on reasonable notice and following consultation with employees
  • It may be appropriate to seek prior written consent if changes 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

  • With employee’s prior written consent

Other methods of making these changes

  • Imposing changes unilaterally but risk of unfair dismissal
  • Dismissing and re-engaging on new terms but risk of unfair dismissal
  • Commence 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 
  2. to consult 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)

If employers don’t follow these mandatory steps, the redundant employees can bring claims for unfair dismissal.

It’s vital to follow a full and fair procedure when making employees redundant.

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 not regularly attending the office or are on furlough / flexible furlough. 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, 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.

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 the employee works their notice period before redundancy they can remain on the furlough scheme for the notice period. However, the furlough scheme grant cannot be used for PILON (payment in lieu of notice) or the statutory redundancy pay.

The furlough scheme grant cannot be used for PILON (payment in lieu of notice) or statutory redundancy pay.

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

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Handling an employee grievance, 5 key actions

Handling an employee grievance, 5 key actions

handling an employee grievance 8 cropped to 300 w x 250 h

This is a 5 step guide to handling an employee grievance effectively and efficiently in order to save management time, preserve employee relations and keep the business out of Employment Tribunals. It includes 2 Golden Rules of handling an employee grievance.

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

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.  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. 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 & KEEP 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.

 

THE 2 GOLDEN RULES OF HANDLING EMPLOYEE GRIEVANCES

  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 opposite for the slide share on this topic.

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Employer’s guide to tackling sexual harassment at work

Employer’s guide to tackling sexual harassment at work

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

Tackling Sexual Harassment at work a guide for employers The Legal Partners #2

With homeworking due to Covid-19 still the norm for many of us,  its very easy for employers to take the view that sexual harrasment ‘at work’ is not a current worry. But of course remote working does not provide immunity for employers, and sexual harassment can still take place, in WhatApp groups, on meeting platforms, MS teams and Skype etc and employers can be liable.  Consider as the ‘workplace’ online platforms used by your company, both the formal and the informal.
Spell out to employees in your homeworking policy that if ‘they don’t want to read it on social media platforms, don’t write it down’.

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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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

Updated Friday 29th May 2020. Please refresh your page.

Flexible furloughing

On Friday 29th May 2020 the Chancellor announced major changes to the CJRS scheme. From 1st July, employers can bring back staff part time whilst still claiming part of the grant. The Chancellor gave the example of an employee who could be brought back to work for 2 days a week, and remain furloughed for the other 3 days. In this case, the employer would pay the full wage costs for those 2 days, and claim the 80% of the wage costs for the other 3.

This new flexibility will be welcomed by employers and employees as we navigate an uncertain path to new normal; though we think a June start would have been more helpful still. We are revising this article over the coming days to reflect the new changes, with guidance on bringing employees back from furlough.

Employers to share more of the costs of furloughing

As predicted, from 1st August 2020, employers will start paying some of the wage costs of furloughed staff – employer’s NI and pensions for August. In September, employers will contribute 10% of the wage costs of furloughed staff, with the Government contributing 70%. And in October employers will be contributing 20% of the wage costs, with the Government contributing 60%.

Furlough scheme to end 31st October

Please note furloughed employees will need to be put on the scheme by June 10th The last date for furloughing employees is 30th June 2020,

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.

Employee eligibility:

  • The cut-off point for employees to qualify for CJRS is that they must be on the payroll at 19 March 2020, not 28 February, as originally stated.
  • Employees that were employed as of 28th February 2020, and on payroll (i.e notified to HMRC on an RTI (real time information) submission on or before 28th February) and were made redundant or stopped working for an employer after that and prior to 19th March 2020, can also qualify for the scheme if their employers re-employ them and put them on furlough. More information on this can be found on GOV.UK.

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 scheme will be back dated to 1 March 2020, will be open for at least three months and will be extended as explained above until 31 October 2020. Claims should be started from the date that the employee finishes work and starts the furlough period, not when the decision to furlough is made, nor when the employer writes to the employee confirming their furloughed status.

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 businesses are covered?

The scheme will be open to all UK employers, including charities, recruitment agencies, and public authorities (who are not receiving direct support from the government) so long as they have:

  1. – created and started a PAYE payroll scheme on or before 28 February 2020, and
  2. – have a UK bank account

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)

BYOD practical tips for an effective policy The Legal partners

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 (Research by Syntonic) 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.

 

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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 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?

New Consumer Rights Laws for business The Legal Partners

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.

Posted in: Corporate and Business law for CEOs & CFOs

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Avoid Bribery charges & fines with our Anti-Bribery and Corruption Toolkit.

Avoid Bribery charges & fines with our Anti-Bribery and Corruption Toolkit.

The UK Bribery Act 2010 made Company Directors legally responsible for bribery in their organisations, and personally liable for not preventing it.
In recent years global organisations such as Avon, Glaxo China, BAE Systems and more recently Rolls Royce have fallen foul of the Serious Fraud Office investigations and paid millions in fines on Bribery and Corruption charges.  In 2016, for the first time a UK company Smith and Ouzman and it’s Directors were handed a £2.2m fine and 4 1/2 yrs (suspended) after being found guilty of bribing foreign agents, following a 4-year investigation by the SFO. The length of this investigation and the sentencing of a “typical UK SME” rather than a global corporation sends a strong message to UK companies of every size.
Being smaller and less resourced counts as neither excuse nor protection.
For UK Directors, being unprepared means being vulnerable.
Is your business protected and prepared for the Government’s zero tolerance on Bribery?

Anti-Bribery & Corruption Toolkit

We have created and Anti-Bribery and Corruption Toolkit to help you minimize Bribery and Corruption Risks and show that your business has taken “adequate procedures” which could be a defence to any Bribery Act liability.

The Anti-Bribery & Corruption Toolkit includes:
Anti-Bribery & Corruption toolkit The Legal Partners thumbnail

  1. Board Memorandum for your Board to adopt as the evidence that the Board has considered the Anti Bribery and Corruption issue & taken action
  2. Staff Anti–Bribery and Corruption policy to be inserted in the Staff Handbook. This will assist your business with adequate training in meeting the “adequate procedures defence” to a bribery offence committed by one of its employees/workers
  3. Bribery Act 2010: Anti-Bribery and Corruption and Statement of Ethics Code to be added to tender documentation for public and private sector contracts, passed to agents, distributors to show the overall policy, to put on your web site
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Contact me directly at Richard.mullett@thelegalpartners.com or on 0203 755 5288 to purchase your Toolkit today.

What is bribery and corruption? 

The Bribery Act makes it a criminal offence anywhere in the world for UK residents, nationals and UK companies or overseas companies operating in the UK to give or receive a bribe.

What constitutes a bribe?

Broadly, the Bribery Act 2010 defines bribery as giving or receiving a financial or other advantage in connection with the “improper performance” of a position of trust, or a function that is expected to be performed impartially or in good faith.
Bribery does not have to involve cash or an actual payment exchanging hands and can take many forms such as a gift, lavish treatment during a business trip or tickets to an event.  Some examples are:

  • bribery in order to secure or keep a contract
  • bribery to secure an order
  • bribery to gain any advantage over a competitor
  • bribery of a local, national or foreign official to secure a contract
  • bribery to turn a blind eye to a health safety issue, or poor performance, or substitution of materials or false labour charges
  • bribery to falsify an inspection report or obtain a certificate

What does the UK Government advise businesses to do about Bribery & Corruption?

The UK Government website  states that UK companies should
1 have an Anti Bribery and Corruption policy for staff and separate Ethics policy for agents and distributors.
2 provide their staff with regular training on Bribery & Corruption, so the whole business understands what behavior and activities constitute Bribery & Corruption, and what action must be taken if it occurs.
3 monitor and review regularly what is happening within the business and amongst its agents and distributors.

Our business only operates in “safe” countries, so what is the problem?

No country is completely free of corruption, as demonstrated by this infographic published as part of Transparency International’s Corruption Perception Index
 
How corrupt is your country The Legal Partners Anit-Bribery toolkit Transparency International infographic
 
This is one of the key authoritative external sources on Bribery and Corruption world wide. Businesses and organisations use the Index to find out which are the high risk countries. You may be surprised to see what are perceived as safe countries appearing lower down on the list than expected. The UK is listed in 14th place.

 What are the likely fines for Bribery and Corruption? 

Fines for companies are likely to be substantial, as proved by the GSK case in China. No guidance has yet been given, but a judgment in the UK Crown Court in 2010 against a company that had bribed foreign public officials stated that fines for corruption should be in the tens of millions or more. 

Who enforces the Bribery Act? Who will raid our offices?

The Serious Fraud Office (SFO) enforces the Bribery Act.
The SFO priorities are not to punish those who are trying to be ethical but to work with organisations to help overcome difficult issues and problems. Their priority is those who have no procedures to prevent bribery, or those whose procedures are purely a paper exercise who have no real intention of stopping bribery.

As a Director, what is my personal position with regards to Bribery and Corruption in my organisation? 

As CEO or CFO, you will be expected to have:

  1. appointed a compliance officer
  2. followed the 6 “core principles” – see below – and implemented them. This will prove to the SFO and any court that your business had adopted “adequate procedures” to prevent Bribery and Corruption and so protect you against a Bribery & Corruption charge.

A director will have committed a crime under the Bribery Act where he/she is deemed to have given his/her consent or connivance to: 

  • giving or receiving a bribe or
  • bribing a foreign public official.

Critically, it is possible that a court could regard failing to act to prevent Bribery as consent or connivance and this could lead to directors being prosecuted, fined and/or imprisoned. 
A director convicted of a bribery offence is also likely to be disqualified from holding a director position for up to 15 years. 
A “Senior officer” (which is broadly defined under the Bribery Act and includes directors) can also be convicted of a Bribery offence. 
Bribery is bad for business, morally wrong and not worth taking the risk.
SFO guidance has stated that if a Director is aware of unethical conduct, he/she should try and change the organisation’s approach to doing business fairly. Failing that he/she should seriously consider resigning.

What can a business do to minimize liability under the Bribery Act?

More than ever, SMEs can expect that their large customers will conduct due diligence on their business and supply chains to ensure they are complying with anti-bribery and corruption compliance.
The Ministry of Justice  (the UK government Department which is responsible for the implementation and monitoring of the Bribery Act) has published guidance on what adequate procedures might involve. The 6 steps recommended by the UK Ministry of Justice are set out in its guidance document. 

Bribery Act; summary of the 6 core principals:

  1. Proportionate procedures.
  2. Top level commitment.
  3. Risk assessment.
  4. Due diligence.
  5. Communication.
  6. Monitoring and review.

The Legal Partners have produced this Toolkit to help you minimize Bribery and Corruption Risks and show that your business has taken “adequate procedures” which could be a defence to any Bribery Act liability. 
 
Contact me at Richard.Mullett@TheLegalPartners.com or call 0203 755 5288 for more information and also if you need due diligence or training on a particular Anti Bribery & Corruption area.
 

 

Posted in: Corporate and Business law for CEOs & CFOs

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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 information please contact Richard Mullett on 0208 334 8049.
For more general help information about exporting please see The Department for International Trade Export services for UK Business.
The Legal Partners are a Member of the Trade Advisory Network.

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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Covid-19: Job Support Scheme

Covid-19: Job Support Scheme

The original Job Support Scheme (JSS) announced by the Chancellor in September has been replaced by something considerably more useful to employers. This is in response to objections from businesses in tier 2 areas in particular, who were facing drastically reduced demand but less support from the government than tier 3 businesses legally required to close. This revised version is called the short-term working, or Job Support Scheme ‘Open’.

The main source of information is the Job Support Scheme Factsheet, which will be updated with more information and sample calculations in the days ahead.

The Chancellor had also announced an expansion to the Job Support Scheme on 9th October, to provide temporary support to businesses in tier 3 areas whose premises have been legally required to close due to the tighter tier 3 restrictions. This is now called the Job Support Scheme ‘Closed’. Details of the JSS ‘Closed’ remain unchanged. Both Open and Closed parts of the JSS are explained here. Where we refer simply to the Job Support Scheme, this means both Open and Closed parts.

The JSS starts from 1 November 2020, immediately after the Coronavirus Job Retention Scheme (CJRS) finishes. It is by no mans a successor to the CJRS, and there are important differences you need to be aware of, also explained below.

Job Support Scheme ‘Open’

  • An employee will now only need to work and be paid for a minimum of 20% of their normal hours, not 33% as originally announced. A lower threshold and much easier percentage to work with all round.
  • The employee will receive up to 61.67% of their normal pay, for the hours not worked, which will be paid by the Government, up to a cap of £1,541.75 per month (up from £697.92 a month as originally announced).
  • The employer will contribute the other 5% of the unworked hours (capped at £125 per month), not 33% as originally announced.

    Businesses will have to pay all employer national insurance contributions and statutory pension contributions.

Job Support Scheme ‘Closed’

  • Under the Closed Job Support Scheme, businesses who have been required to close due to Covid-19 restrictions will receive grants towards the wages of employees who cease work.
  • This will cover business that are legally required to close their premises, or to provide only delivery and collection services from their premises.
  • The Government will pay two thirds of employees’ usual wages, up to a cap of £2,100 per month. You will not be required to contribute towards wages, but do need to cover employer National Insurance and pension contributions.

    Search ‘Job Support Scheme expanded to firms required to close due to Covid Restrictions‘ for more on the Job Support Scheme ‘Closed”.

Eligibility for the JSS

The Job Support Scheme is open to most employers and an employee does not need to have been previously furloughed in order to benefit. Larger employers (with 250 or more employees) are only eligible if their turnover has fallen during the pandemic.

Employers must agree the new short time working arrangements with their staff, make any changes to the employment contract by agreement and notify the employee in writing. This agreement must be available to HMRC upon request.

To be eligible for the JSS, employees must:

  • be registered on the PAYE payroll on or before 23rd September 2020. This means a Real Time Information (RTI) submission notifying payment in respect of that employee must have been made to HMRC on or before 23 September 2020.
  • work at least 20% of their usual hours, and they can undertake training in their working hours whilst being claimed for.
  • staff on any type of contract are eligible, including those on variable or zero hours and agency workers.

Employees can be in the Job Support Scheme for as short a period as 7 days or longer. They do not have to be working the same pattern each month.

Importantly, employees cannot be made redundant or put on notice of redundancy while in the JSS.

The JSS runs for 6 months from 1 November 2020. The first JSS claims may be made by Employers online through gov.uk from 8th December 2020. Claims will be paid on a monthly basis.

HMRC will tell employees the amount of the Government grant paid for them.

The Government expects that employers do not top up their employees’ wages above the two-thirds contribution to hours not worked at their own expense. This is different to the CJRS where employers have sometimes paid more than their contribution to give employees more than 80% of their wages overall.

The JSS will operate in addition to the Job Retention Bonus (JRB). The JRB pays businesses £1,000 per employee who has been furloughed and remains employed at 31 January 2021. Both schemes can be used and claimed for the same worker(s). 

Comparing the JSS and the CJRS

Recent data from HMRC indicates that around 3m workers are still on furlough under CJRS (about 12% of the workforce).

Only about 20% of furloughed workers are on the flexible furlough scheme option introduced in July.

This may be because it is more complex to calculate claims for the flexible furlough scheme and therefore the JSS may have a similar low take up. 

The JSS is less generous than the CJRS. In October under the CJRS employers were paying just 20% of the workers normal wages and the worker need not work at all. Under the JSS from 1 November where an employee works a minimum of 20% of the normal hours the employer will have to pay more, 25%, of the normal wage costs.

It may be better for employers to agree with the worker just to work less hours so that it is overall cheaper for the employer and the worker would not be put into the JSS. If redundancy is the only alternative then the worker may in effect have to agree. It is still possible that just because an employer did not use the JSS the decision to select a worker for redundancy would still be a fair decision.

A reminder that the JSS will be suitable only for certain types of business, as the Government says where the jobs are viable and will be needed for the longer term.

What should employers be doing now?

  • Decide by 31 October which employees will return from furlough leave and could move to the JSS.
  • Decide whether any employees currently working will move into the JSS.
  • Regularly review staffing requirements because staff can cycle on and off the JSS, for as little as 7 day period.
  • If there is insufficient work for workers to do (less than 20% of normal hours) and therefore the JSS does not support them then employers will need to consider putting them at risk of redundancy.
  • Consider how to implement the move of workers to the JSS including collective and individual consultation with staff. This consultation may be required if staff do not agree to move to the JSS and therefore redundancy has to be implemented. Employers have followed the correct procedures to protect themselves from an unfair dismissal situation. Look out for further details about the JSS when published in the coming weeks most likely by HMRC further guidance.

The information set out in this article is correct at date of publication (30th October 2020). 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: Corporate and Business law for CEOs & CFOs, General

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

Covid-19 Home working pack: policy and guidance for employers
Homeworking pack for Employers subtitled Homeworking policy Risk Assessment and Practice guidance illustrated with hand washing inside line drawing of house

Article updated Tuesday 29th September 2020

On Tuesday 22th September, in a retightening of earlier restrictions designed to address rising cases of coronavirus in England, the Prime Minister asked office workers in England once again, to work from home ‘if they can’.

He noted exceptions: ‘those in ‘key public services and in all professions where this is not possible, such as construction and retail, should continue to go to into work.’

He added later that people should keep going into work if it is important for their job, mental health or wellbeing.

In July, the PM had urged the country to return to work and on 1st August had given employers the go ahead to ask employees to return to Covid-secure workplaces.

Large numbers of office workers had in reality continued working from home, despite the government’s calls to return. Many employers too are considering or making plans for a move to flexible, longer or permanent home working for their staff.

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. Croner | how to make the move to homeworking. Croner have made freely available it’s covid-19 specific summary page on moving to homeworking. Guidance is more geared possibly towards organisations unused to homeworking until recently.  It highlights that trust is essential and that employers will face challenges over supervision, reliability, punctuality, quality, output, consistency, plus health and safety. Raises the questions will the employer contribute to the cost of the employees’ heating, lighting and phone bills.
  4. Mental Health Foundation | Looking after your mental health focusses on returning to work as lockdown eases, but includes useful homeworking tips on scaling the learning curve of  IT & Technology, getting into a routine, keeping up the formal and social flow of work, and guidance for managers of remote teams.
  5. Mind | Guide to wellness action plans  for employees and managers. Simple and accessible, useful for sharing with teams. 
  6. When change feels like you’re in a washing machine. This is how leaders should see their team in times of change. Not our words, but those of coach Sara Traynor in a very useful linked in post on managing people through change, for leaders and managers.  
  7. 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.
  8. Moore Legal | best tools for working remotely. From Slack to MS teams to Zoom, Moore Legal have shared their top picks for remote working platforms and tools. They helpfully explain which is best for what and why.  

The information set out in this article is correct at date of publication (22nd September 2020). 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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CJRS & flexible furloughing: an essential guide for employers

CJRS & flexible furloughing: an essential guide for employers

Flexible furlough leave article: Essential guide. Image shows Employer contributions return to work letter workforce planning and full time part time section in article

From the Government Statistics published on 21 August 2020 for Q2 upto 30 June 2020 9.8 million UK workers, over a quarter of the UK workforce, across 1 million employers, have been been supported by the £14 billion-a-month furlough scheme. Further details are available here. Upto 16 August 2020 the overall cost of the United Kingdom’s job retention scheme has been £35.4 billion. The OBR puts the total estimated cost of CJRS to the UK taxpayer at £60 billion.

Updated Friday 4th September 2020.

Flexible furloughing

In latest developments, the Chancellor announced on 8th July that employers would be given a £1000 ‘Job Retention Bonus’ for every furloughed employee they bring back into work, who is continuously employed until 31st January 2021.

To be eligible, employees will need to:

– earn at least £520 per month (above the Lower Earnings Limit) on average for November, December and January

– have been furloughed by you at any point and legitimately claimed for under the Coronavirus Job Retention Scheme

– have been continuously employed by you up until at least 31‌‌‌ ‌January 2021.

Employers will be able to claim the bonus from February 2021 once accurate RTI data to 31‌‌‌ ‌January has been received. More information about this scheme was published on 31‌‌‌ ‌July and is available here.

In previous changes to the CJRS scheme, from 1st July 2020, employers can bring back staff part time whilst still claiming part of the grant. The Chancellor gave the example of an employee who could be brought back to work for 2 days a week, and remain furloughed for the other 3 days. In this case, the employer would pay the full wage costs for those 2 days, and claim the 80% of the wage costs for the other 3.

This new flexibility will be welcomed by employers and employees as we navigate a very uncertain path to the ‘new normal’.

Please note, the deadline for putting employees on the furlough scheme has passed. Only employees who were registered on the scheme by the 10th June (for the required 3 week period) and for whom the employer has submitted a claim for this by 31 July will qualify for flexible furlough.

Further details on the Coronavirus Job Retention Scheme can be found here.

Employers to share more of the costs of furloughing

From 1st August 2020, employers have been paying the employer’s NI and pensions for August to contribute to the wage costs of furloughed staff and will now continue to do so each month. In addition in September, employers will contribute 10% of the wage costs of furloughed staff, with the Government contributing 70%. And in October employers will be contributing 20% of the wage costs, with the Government contributing 60%. The Scheme ends on 31 October 2020.

The infographic and table below summarise these changes:

If the employer agrees with the employee that they should work part time with the remainder of the time on furlough leave then the above amounts will apply to the days of the week/usual working hours in a week which the employee spends on furlough leave. 

The Government Guidance for the Scheme states that Employers should discuss with their staff and make any changes to the employment contract by agreement when an employee returns or goes onto flexible furlough. When employers are making decisions in relation to the process, including deciding who to offer furlough to or to return from furlough, equality and discrimination laws will apply in the usual way. We recommend regular communication with staff and giving sufficient notice for the return from furlough. With children returning to school in September now is a good time to communicate again with furloughed staff.

According to Government figures, the average grant claimed under CJRS is £1,380 per month so far. Taking this figure, the cost to an employer per month for its contributions for its employee’s wages will rise to £207 by September and £345 in October. This represents 14% and 23% of gross wage costs per employee per month respectively.

The employer will still pay as usual the employee usual 100% salary, holiday pay, pension contribution and other benefits for the days / hours that the employee works.

If the employer wants to change the 100% salary and benefits for the days/hours the employee is working then this will need to be by agreement with the employee. 

Furlough scheme to end 31st October

Please note any final employees needed to be in the scheme by June 10th which is 3 weeks (the current minimum furlough leave period) before the 30th June and employer needed to have submitted a claim for this period by 31 July for staff to qualify for flexible furlough

So furloughed employees would have needed need to have been in the scheme by 30th June 2020 and the scheme is now closed to new entrants.

From 1 July, the minimum claim period is also being reduced from 3 weeks to just 1 week and a claim cannot overlap from one month to the next. This has been introduced because employers will start contributing from 1st August, and the furlough payment calculations would get too complicated if the claims periods overlap from one month to the next.

HMRC Portal for claiming the grant here,
and at GOV.UK www.gov.uk/guidance/claim-for-wages-through-the-coronavirus-job-retention-scheme

Which workers are eligible?

  • Broadly, all employees and workers whether full time, part-time or on zero hours contracts are eligible – see below for more details.
  • The cut-off point for employees to qualify for CJRS is that they must be on the payroll at 19 March 2020, not 28 February, as originally stated.
  • Employees that were employed as of 28th February 2020, and on payroll (i.e notified to HMRC on an RTI (real time information) submission on or before 28th February) and were made redundant or stopped working for an employer after that and prior to 19th March 2020, can also qualify for the scheme if their employers re-employ them and put them on furlough. More information on this can be found on GOV.UK.
  • As we’ve said, 30th June was the key cut-off point. Employers must have used the scheme by that date for at least one worker and after 30th June flexible furlough leave will only apply to workers who have previously been furloughed for at least a full three weeks before that date.
  • Employers cannot suddenly then furlough staff who have been working since 1 March 2020.
  • From 1 July claim periods will no longer be able to overlap month ends. Employers who previously submitted claims with periods that overlapped calendar months will no longer be able to do this going forward. This is necessary to reflect the forthcoming changes to the scheme from 1 August when employers start making contributions . 
  • The number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim under the current CJRS. This means that employers cannot suddenly furlough more staff than they have furloughed in previous months.

Paying employee taxes and pension contributions

Employees will still pay the taxes they normally pay out of their wages.

Employers must deduct and pay to HMRC income tax and employee National Insurance contributions on the full amount that they pay the employee, including any scheme grant.

Employers must also pay to HMRC the employer National Insurance contributions on the full amount that they pay the employee, including any scheme grant.

Employers must report these payments via a Full Payment Submission to HMRC on or before the pay date.

Employees will also still pay pension contributions (both employer and automatic contributions from the employee), unless the employee has opted out or stopped saving into their pension. From 1 August employers can no longer claim for employer NICs and pension contributions and pay those costs as usual.

What should employers do next?

Strategic considerations

Now that the Government has set out the guidance for the return to a COVID-secure work place and the dates when certain sectors can reopen, employers need to plan their staffing requirements and build in as much flexibility as possible.

It’s vital you keep clear and accurate records of employees’ working hours and days. The HMRC portal from 1st July requires clear statements from employers about days/hours worked back in the business and those on flexible furlough leave. This will ensure that the correct grant payment is claimed and reduce fraud.

The start of flexible furlough leave from 1st July has helped employers bring back staff part-time as demand stabilises in the business.

If demand then reduces, employers can put staff back on furlough leave for minimum periods which from 1 July can now just be one week.

Now is the time to check employee and worker contracts again to see what changes are needed to be agreed with staff either in the short term on return to part-time work (flexible furlough leave) or in the long term.

Employers need to remember that consultation may be needed with the employee representatives (who need to be elected in advance) or trade union representatives if the employer’s proposals will lead to the risk of 20 or more people being dismissed (for redundancy). Please remember that changes proposed by the employer to more than 20 staff which, if unaccepted would lead to dismissals (for redundancy), will still require this consultation exercise.  

Employers who will not be opening until the Autumn will need to make some difficult decisions. Do they continue with the flexible furlough scheme arrangements but continue to pay from 1st August for staff who are furloughed? Or do they decide to start discussions with staff to change long term salaries and benefits and working hours through a consultation / redundancy process as necessary? This needs clear strategic planning with built-in flexibility if demand returns quicker than expected.

Employers also need to plan now for the 31st October closure of the scheme altogether. This now appears to look like a “cliff edge”. Working back from that date employers will need to consider if they need to start redundancy consultation with employee representatives and or trade unions at least 30 days (if there are between 20 and 99 redundancies proposed) or 45 days (if 100 or more redundancies are proposed). By the middle of September these proposals will need to be communicated in sufficient time to complete the collective consultation and then individual consultation as part of the redundancy round before 31 October. 

The ongoing situation through this year at British Airways for example, shows the need for very careful planning and there may be more Government intervention in certain industries to prevent widespread redundancies or what are perceived to be unfair reductions in employee salaries, benefits and working conditions.

If employers are planning to make furloughed employees redundant whether they are on full-time furlough or flexible furlough they need to correctly calculate the redundancy costs.

These costs usually fall into 2 categories:

  1. pay for the employee’s notice (if they are not to work their notice) and the employment contract just provides the statutory notice of 1 week for each year of service upto 12 years service; and
  2. statutory redundancy pay if the employee had worked for or more years with that employer.

    These costs should be calculated and paid based on the employee’s 100% (before being placed in the furlough scheme) salary.

The 28 August 2020 revised HMRC document: “Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme – GOV.UK” states as follows:

“If you’ve made your employees redundant

Where you must make redundancies, you should do so in accordance with the normal rules. This includes giving a notice period and consulting staff before a final decision is reached. You can continue to claim for a furloughed employee who is serving a statutory notice period, however grants cannot be used to substitute redundancy payments.

If you’re made redundant, there is new legislation that ensures you are entitled to received redundancy pay based on your normal wage and not the reduced furlough rate.

There are 2 basic exceptions.

  1. The employment contract as varied by the agreed flexible furlough agreement may state a different notice period eg 1 or 3 months and 80% pay level for the furloughed time each month and therefore those figures would be used if the statutory notice period is not longer and does not apply; and
  2. Statutory Redundancy payments are calculated on a week’s gross wages for the employee and are capped currently at £538 per week which is an annually reviewed figure reviewed by the Government in April each year.

Please also note that the HMRC guidance above does identify serving statutory notice and therefore a payment in lieu of notice so the employee does not work their notice period would not qualify for a grant payment. For this and cashflow purposes it is better to keep a worker who has been given notice of redundancy on furlough and claim for their notice period pay each month under the Scheme. The above guidance also indicates that the furlough scheme grant payment cannot be used to fund what we think HMRC mean to be just the statutory redundancy payment not the notice period payment. This would need to be checked with HMRC.

Template return from furlough leave letter

Download the template
letter.

We have put together this template return from furlough leave letter that, following discussions with furloughed employees, you should customise and send to them, confirming their return to work.

If the employee is returning on their pre furlough terms, there is no need to gain agreement. If you plan to ask a furloughed employee to return to work part-time however, then the part time arrangements, and any changes in their working hours and / or salary & benefits should be set out in the letter. The Government advises employers to gain the employee’s agreement to the new changes to their furlough leave arrangements and, keep a record of the communications for 5 years. We agree – otherwise there is the risk of employment grievances and claims and the wasted management time and costs defending an Employment Tribunal claims. Agreement must be sought where salary, benefits, working hours or place of work are changing. 

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

By now all employers will have registered for the scheme and have arrangements set up with accountants and payroll agents who are authorised to make claims.

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.

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.

Which businesses are covered?

The scheme will be open to all UK employers, including charities, recruitment agencies, and public authorities (who are not receiving direct support from the government) so long as they have:

  1. created and started a PAYE payroll scheme on or before 28 February 2020, and
  2. have a UK bank account

Which employees are covered?

The HMRC guidance states that CJRS will cover employees who have been on the payroll since 19th March 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, or agreement reached with the employee.

    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.

    HM Treasury has now directed that there is no longer any need for a worker to agree to be furloughed. However HM Treasury has stated that there must now be a written furlough agreement setting out the employee’s terms and conditions which is incorporated into their contract and retained until 30 June 2025. We know, it’s somewhat complicated, so please do get in touch if you have queries

  • 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 for the employer (except training). The employee can still volunteer as e.g an NHS or care volunteer.

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

  • Employers can check exactly the wages that they can recover through the scheme on the HMRC guidance, and can check out worked examples in the links.
  • 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. 
  • 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’s health has been affected by Covid-19?

Employees who are on sick leave should receive 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. However we think employees receiving any other statutory payment, such as statutory maternity pay, paternity pay, adoption pay cannot be also placed on furlough.

An employee who is currently on furlough leave, may move to be on another statutory leave, e.g Maternity leave.

Employees who are shielding, self isolating 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?

Put briefly, on 20 May 2020 HM Treasury (not HMRC) directed that there is no longer any need for a worker to agree to be furloughed. However HM Treasury clarified there must now be a written furlough agreement setting out the employee’s terms and conditions which is incorporated into their contract and retained until 30 June 2025. 

It is still best to adopt the best HR and employment law practice of explaining to a worker the changes and writing to them to confirm they are on furlough leave / any new flexible furlough arrangements and asking them to countersign the new agreement. Please contact us if you need help with any of your furlough agreements.

If the you are 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.

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%?

No, but employers can choose to do so.

What happens to pension, holiday and other benefits?

Each employer will have different arrangements, so explain the changes clearly to your staff. Until 31st July, employers can still claim under the grant for the employers workplace pension contribution. When paying their staff, employers will deduct the worker’s workplace pension contribution and pay the contributions into the relevant pension scheme as normal. From 1st August, employers will be paying those contributions as usual and will not be able to claim them as part of the grant.

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, calculated over the last 52 weeks average pay) even if employers are only planning to pay 80% salary.

Can a furloughed employee request to remain on furlough leave or switch to flexible furlough leave?

Yes, an employee can request, but it’s the employer’s decision. Discussion with the employee themselves to find what suits them and the business will of course smooth the path.

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 continue to use the scheme instead of making redundancies and / or closing the business.

How do I choose which employees remain on flexible furlough leave and which return to work?

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, to return on flexible furlough leave, or to return to work full time, 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.  As the minimum period of furlough leave can now be as short as one week (from 1 July), there is more flexibility for employers to bring back staff from / place staff on furlough leave as necessary, depending on the demand in the business.

You can also keep staff on flexible furlough leave where they work part-time some days in the business.

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. 

Where possible, employers 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, have asked for volunteers to be placed into the Coronavirus Job Retention Scheme and when return to work is possible. They have received very positive response and large numbers of workers accepting the re-designation in order to preserve their employment. It is vital to find out an employee’s and family situation, e.g home schooling, so you know if the employee can return or not and if so whether working from home or onsite is more appropriate.

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 functions can continue as the business re-opens in a Covid-19 secure way.

What happens if the employer has furloughed 20 or more staff and is changing terms and conditions?

This template letter has been written for situations where less than 20 staff are being called back from furlough leave. (If you recalling more than 20 staff from furlough, and you are planning to change their terms of employment on return, then collective consultation may be required. Please get in touch in this case.

If there are more than 20 staff and the employer would have to consider redundancies if the employees do not accept the new contract changes on return from furlough leave e.g a reduction to 80% or less salary, then a collective consultation process will need to be undertaken.

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?

The CJRS was altered early on so that employees hired by the later date of 19th March 2020 (rather than by 28th February) qualify for the scheme, provided they were on a the RTI filing submitted to HMRC on or before 19th March.

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

Furlough leave runs for a minimum of 3 weeks and from 1 July this reduces to just one week. This allows employers more flexibility, so they can bring workers back from furlough leave and if necessary put them back onto flexible furlough leave; in out, in out whilst the scheme lasts.

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 employers whilst on furlough leave?

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 £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 or parental bereavement pay.

How frequently can an employer submit a claim?

An employer can only submit one claim every three weeks or every week from 1st July .

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. Since 31 July 2020, the Government has confirmed that payments should be at the 100% salary level for statutory redundancy and the statutory notice period if that notice period applies instead of the notice period and salary in the employment agreement (as varied by any agreed flexible furlough arrangement).

Can I change an employee to be back to work after they have completed the minimum 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. The scheme is open until 31 October and as we’ve said from 1 July employees can be on flexible furlough leave, where they work part-time in the business.

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.

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: Corporate and Business law for CEOs & CFOs, 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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