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Settlement agreements

Settlement agreements

You are a senior or C Suite Executive. Your employer has offered you a settlement for you to leave the business.
It is very important to get the right legal advice about your settlement and if necessary your claim, before agreeing to the terms of a settlement agreement. We can help. Our HR Solicitors have specialist expertise negotiating hundreds of settlement agreements with global organisations. We have been helping senior executives get the best exit deal for over 11 years.
Read this article which explains what you need to know, to consider and to do next.
For immediate advice and help contact us by email or on 0203 755 5288 directly.

What is a settlement agreement?

A settlement agreement is a legally binding agreement between you and your employer. In the agreement you agree to settle your potential employment claims and in return your employer will agree to pay you financial compensation. Sometimes the agreement will include other things for your benefit like an agreed reference letter. 

What do I need to know about settlement agreements?

The settlement agreement is part of the settlement negotiation and when the financial compensation is agreed it will be written down in that agreement.

Why have I been offered a settlement agreement?

You may have received a settlement agreement due to one of these four different, but typical, scenarios:

  • Your board of directors or shareholders want to end the employment contract you have with the company eg because there are differing views with you as CEO on strategy or the business is not performing satisfactorily and they are trying to hold you as CFO responsible.
  • You are being made redundant
  • You and your employer can no longer work together and your employer is prepared to give you compensation for you leaving
  • Your employer has started a disciplinary (eg for poor performance) and is prepared for you to leave early provided a settlement agreement is signed

Why do I need legal advice for my settlement agreement?

You must get independent legal advice from a qualified employment law solicitor. Your employer will not sign the agreement or make any payments to you until your employment law solicitor has signed the certificate (which is in a schedule to the agreement) confirming that he/she has given you legal advice.
Your solicitor has to explain to you what employment law rights you are waiving (giving up) in return for the settlement payments.

Why is my the settlement agreement headed “without prejudice” ? What does “without prejudice” mean?

All conversations, emails and the settlement agreement offer are stated to be “without prejudice”.

A without prejudice statement made in a genuine attempt to settle an existing dispute cannot be used at an Employment Tribunal as evidence which prejudices (adversely affects) the interest of the person who made it. This protects both you and the employer.
This means that if you discuss a settlement package (but never sign the settlement agreement) your employer cannot say at an Employment Tribunal that you accepted you were at fault and/or you did not want to pursue your employment claims.

What are the legal requirements for a valid settlement agreement?

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

  1. The agreement must be in writing
  2. The agreement must relate to a particular complaint or particular proceedings
  3. The employee must have received legal advice from a relevant independent adviser (for example, a qualified employment lawyer or union official) on:
    – the terms and effect of the proposed agreement; and
    – its effect on their ability to pursue any rights before an Employment Tribunal
  4. The independent adviser must have current professional indemnity insurance covering the risk of a claim against them by the employee for the advice
  5. The employee’s adviser must be identified
  6. The agreement must state that the conditions regulating settlement agreements have been satisfied.

What is included in a settlement agreement?

Other than the legal requirements listed above, the contents of a settlement agreement are up for negotiation. As your employment solicitor we would advise you and depending upon your situation, aim  to negotiate the following outcomes for you:

  1. An agreed leaving date
  2. Payment of any outstanding salary and benefits
  3. Payment of all salary and benefits for your notice period – whether you have to work your notice period or not
  4. Compensation for your loss of employment – particularly if it will take you a long time to get another role
  5. Payment of outstanding bonuses and the right to exercise share options, share plans etc
  6. Contribution to your legal fees
    Employers usually offer between £350 to £750 + VAT for your employment solicitor to explain what employment law rights you are waiving in your settlement agreement. As there will be extra legal fees for negotiating a settlement we ask the employer to pay for those extra fees but this cannot be guaranteed so you may have to pay our additional legal fees
  7. An agreed reference so you can use the reference when looking for another role
  8. If your employer is going to make an announcement to staff, an agreed announcement so you know the content in advance and when it will be announced .You will need to waive any employment law claims you have against your employer. The settlement agreement will list out all the possible types of claims which you could have (in a schedule to the settlement agreement) and you will be required to waive those claims and accept the compensation payment in full and final settlement of any actual claims that you may have.

Your employer will want you to:

  • Confirm that your existing restrictive covenants (eg not to approach customers) will continue
  • Confirm that you will continue to keep any information of the employer confidential
  • Give an indemnity to the employer in relation to income tax and National Insurance Contributions if the taxation of the payments have not been correctly taxed
  • Agree not to make any statements to other staff or on social media about the company and/or the terms of your settlement.

The employer may want you to:

  • Stay at home on gardening leave while negotiations close and your settlement agreement is agreed and signed and/or while you work any agreed notice period
  • Return any company property eg phone, laptop etc

Which types of employment claims can be settled by a settlement agreement?

A large number of statutory claims can be settled by a settlement agreement, e.g claims for:

  1. Unfair dismissal because eg your employer does not have a fair reason (e.g poor performance or gross misconduct) for dismissing you
  2. Pregnancy or maternity-related discrimination
  3. Discrimination, victimisation or harassment related to sexual orientation.

The settlement agreement will also state an agreed leaving date and give you compensation for your notice period if your employer does not want you to work your notice.

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

There are a number of statutory claims that cannot be settled by entering into a settlement agreement, including some types of:

  1. Personal injury claims. If you have a claim then you can still bring this claim separately
  2. Pension claims. Your accrued pension rights up to your leaving date will be unaffected and your pension should be paid as normal when you retire in accordance with your pension scheme with your employer
  3. Claims following the transfer of a business using the TUPE procedure.

Can any compensation be paid free of tax?

Up to £30,000 of any compensation payment may be paid tax free.
Where a payment is made to an employee on the termination of employment, it is either taxable:

  • in the normal way as earnings under the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) because it is the payment for the notice period; or
  • taxed as a termination payment under sections 401 to 416. The first £30,000 of payments that fall within section 401 are exempt from tax and any excess will be subject to income tax in the normal way.

The settlement agreement will explain which payments are taxed and which payments fall within the £30,000 limit.

What is the “ACAS Code on Settlement Agreements”?

Acas code of practice settlement agreementsSometimes employers also say the settlement offer is made in accordance with the ACAS Code on Settlement Agreements. This link explains more about the Acas Code of practice on Settlement Agreements. Employers sometimes state that negotiations using this Code are “Pre-Termination discussions”.  Employers can start these discussions under section 111A of the Employment Rights Act. This means the discussions are protected from disclosure at an Employment Tribunal and are similar to “without prejudice” discussions and correspondence.
However usually when senior C Suite Executives are involved, employers prefer to negotiate directly on a “without prejudice” basis with the Exec’s chosen employment law solicitor, rather than follow all the ACAS Code process. Why? The Acas Code process  has a minimum 10 day period for an employee to consider a settlement offer and then respond. Employers prefer to speak directly with your employment law solicitor because it’s quicker. In our experience Settlement Agreements take on average a week to negotiate and agree if both sides are keen to get it done.
Hiring an experienced employment law solicitor to negotiate your settlement agreement works doubly to your advantage, 1) Employers often prefer negotiating with a senior executive who is well advised by an experienced employment law solicitor and 2)  your employment law solicitor should negotiate the settlement efficiently for you, meaning you get a better deal.  

How can The Legal Partners help?

As we have said, it is very important to get the right legal advice about your settlement and if necessary your claim, before agreeing to the terms of a settlement agreement. Our Employment Solicitors have specialist expertise negotiating hundreds of settlement agreements with global organisations and have been helping senior executives get the best exit deal for over 11 years. We represent employees and employers, so you can rest assured that you will be getting expert advice about your settlement agreement from specialist Employment Solicitors who are on your side but who know how employers think. This means you get the best deal and a reference so you can move onto your next successful role with your career intact, and you will know some expert business and employment lawyers as a bonus.
What do I do next?
Contact us directly:
by email Richard Mullett – by phone 0203 755 5288
                 Abigail Oprey  –                     0203 755 5288 
More information
This Checklist is designed to help you focus on the main issues to deal with
Please contact us if you need further help:
This document is not specific legal advice. If you can share your employment situation and any settlement package or agreement offered to you we can advise you on correct approach to take to obtain the right settlement for you.

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

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Importing from China, legal advice for UK companies

Importing from China, legal advice for UK companies

If your business is already importing from China, or considering Chinese imports, you will want to ensure the process, and the relationship with your Chinese suppliers, goes smoothly right from the beginning.
Stories of lost sales and key promotions unfulfilled due to a slip up at the Chinese factory are common and can make companies cautious of taking the first step.
Here are some key tips and useful practices to adopt with your Chinese suppliers, to ensure that your goods arrive as expected, on time, and in the right quantity, consistently. We’ve included some front line advice on what to do if problems do arise. First things first, do your research.

Check the validity of your potential supplier’s chinese factory & company.

  • Speak to other customers to confirm the quality your potential supplier’s goods.
  • Visit the factory of your potential supplier at an agreed date.
  • Double check by arriving “on spec” unannounced at the factory a second time. Doing this won’t  jeopardise your relationship with the potential supplier.

    Ask to see the plant, the process, and the goods that you are planning to order whilst you are there. Arrange to stay for a few days so that if there is no one to meet with you straight away, you can always return in the following days.

  • Ask the same questions of different people at the factory to check for consistent answers. Ensure you are buying directly from the chinese factory and not via an agent of the factory.
  • Set up a Letter of Credit to show payment will be made and goods will be shipped. Your bank should know how to do this, or contact us.

How to ensure goods purchased from your chinese factory are of the quality required

  • Send your agent, or better still, visit the factory yourself to check the quality of goods before the first order is shipped.
  • Request that one batch of the first shipment is sent by air rather than sea, then check the quality of this batch when it arrives.

How to ensure goods purchased from your chinese supplier do arrive

  • Agree small orders first, over a period of time, so trust builds up.
  • Pay in stages with an amount withheld until delivery
  • Ask for goods to be delivered to a warehouse in your country. Once delivery arrives, pay for the goods as they are released.

Protecting your intellectual property

If your chinese factory is involved in assembling an innovative product, or has exposure to your intellectual property, patent details or knowledge in the factory process, this will be a key concern and you will need to be even more vigilant. The Government has published useful guidance on the intellectual property risks to UK companies of operating in China.

How to approach issues with your chinese factory supplier.

  • The best ways to approach disagreements and difficult issues with chinese business people is to talk, meet face to face and go to dinner together.
  • If you are in a position to talk the issue out over a meal, be ready to address it only at the end of the meal. This is the chinese way and you should get better results for your patience.
  • If you can’t get out to the factory, use Skype as the next best alternative, or speak by phone rather than email. Email will be less effective unless you’ve had face to face conversations already.

Managing Negotiations with chinese suppliers

  • Allow time for any decision to go up through the Chinese decision making tree.
  • Ask how long it will take for an answer to come back from above, so you know time scales you are working with.
  • Get to “yes” at each stage of the negotiation process, follow up what’s been agreed at a meeting in writing and ask for confirmation from your supplier that this is what both you and they agreed to during the meeting.

    Recognise that “yes” in Chinese is ambiguous, it can mean “yes, I’ve heard what you are saying” not necessarily ”yes I agree”.

  • Avoid the silence vacuum. Silence from a chinese supplier means “no”.
  • You must have a trusted interpreter/translator, to  establish credibility and show you are serious in negotiations.
  • It helps to have a trusted interpreter/translator, to establish credibility and to show you are serious in negotiations.

There are many ways of limiting the damage if things go wrong in the first months, or even after years, of dealing with a chinese factory or supplier. The Legal Partners are expert commercial negotiators, with experienced practicioners who know how to do business in, and negotiate with chinese companies. Please get in touch.

Posted in: Import Export Law for UK & Asia business

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Settlement Agreements – What are they, why use them and how to negotiate them?

This Checklist sets out the key issues a business should consider before entering into a settlement agreement with an employee. A Settlement Agreement is the new name for Compromise Agreements. The UK Government (Department for Business, Innovation and Skills) renamed them in July 2013 to promote a culture of trying to resolve issues within the company rather than at an Employment Tribunal. For example employers can now use the new Pre-Termination Negotiations which allow an employer to offer a settlement agreement for an employee to leave by following the ACAS Code of Practice on Settlement Agreements under section 111A of the Employment Rights Act 1996.
What is a settlement agreement?
A settlement agreement is a legally binding agreement between a business and an employee under which the employee agrees to settle their potential claims and in return the employer will agree to pay financial compensation. Sometimes the agreement will include other things of benefit to the employee, such as an agreed reference letter.
In what circumstances will a settlement agreement be appropriate?

  • An employee can make a claim against a business under both their contract of employment and under statute. These claims may arise:
    • on recruitment;
    • during employment; or
    • when their employment has been terminated.
  • In many cases, a business may want to make a payment to an employee in return for an effective waiver of their potential claims. Businesses can enter into an agreement with an employee to settle potential claims when they are still working for the business, but in most situations, their employment will have ended (or be about to end). Although it is usual for compromise agreements to be entered into where employment has terminated (or is about to terminate), it is possible to enter into one where employment is continuing. Although it is usual for compromise agreements to be entered into where employment has terminated (or is about to terminate), it is possible to enter into one where employment is continuing. Unlike contractual claims, which can be waived by entering into a contractual waiver of such claims, statutory claims can only be waived in prescribed ways, one of which is by means of a compromise agreement Although it is usual for compromise agreements to be entered into where employment has terminated (or is about to terminate), it is possible to enter into one where employment is continuing. Unlike contractual claims, which can be waived by entering into a contractual waiver of such claims, statutory claims can only be waived in prescribed ways, one of which is by means of a compromise agreem

What are the legal requirements for a valid settlement agreement?
For a settlement agreement to be legally binding, there are a number of conditions that must be met:

  • The agreement must be in writing.
  • The agreement must relate to a particular complaint or particular proceedings.
  • The employee must have received legal advice from a relevant independent adviser (for example, a qualified lawyer or union official) on:
    • the terms and effect of the proposed agreement; and
    • its effect on their ability to pursue any rights before an employment tribunal.
  • The independent adviser must have a current contract of insurance (or professional indemnity insurance) covering the risk of a claim against them by the employee for the advice.
  • The employee’s adviser must be identified.
  • The agreement must state that the conditions regulating settlement agreements have been satisfied.

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

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

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

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

Which types of claim can be settled by a settlement agreement?
A large number of statutory claims can be settled by a settlement agreement, for example claims for:

  • Unfair dismissal.
  • Pregnancy or maternity-related discrimination.
  • Discrimination, victimisation or harassment related to sexual orientation.

Which types of claim cannot be settled by a settlement agreement?
There are a number of statutory claims that cannot be settled by entering into a settlement agreement, including some types of:

  • Personal injury claims.
  • Pension claims.
  • Claims following the transfer of a business.

Posted in: Employment law for HR Directors

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Redundancy – why must a business offer alternative employment?

Businesses that make redundancies have a duty to look for alternative employment for any potentially redundant employees. A dismissal is likely to be unfair if, at the time of the dismissal, the business did not consider whether any suitable alternative employment existed within its business. This business briefing sets out the key issues a business needs to consider.

Extent and duration of the search

  • A business is not obliged to create alternative employment for redundant employees where none already exists. However, the business should make a thorough search for alternative employment and document that search. This will enable the business to show the steps it has taken if it has to produce evidence in defence of an unfair dismissal claim.
  • Make sure the business continues to search for possible alternative employment until the date an employee’s dismissal takes effect.

Providing employees with sufficient information

Provide sufficient information about any vacancies to all potentially redundant employees, so they can make an informed decision on whether the position is suitable for them. A business should also highlight the financial prospects of any vacant alternative positions. Do not automatically assume an employee would not want to take a more junior role for less money.

Matching vacant roles with potentially redundant employees

  • If the business is dealing with more than one potentially redundant employee, ensure that all of them are made aware of any vacancies.
  • When it comes to deciding which candidate to award a vacancy to, the business does not need to take the same rigorous approach that is required in a redundancy exercise, where the selection of employees must be based on objective criteria.
  • Any potentially redundant employees on maternity or adoption leave should be offered any suitable alternative vacancies first. If there are other vacancies, the business is then entitled to undertake a competitive interview process and appoint the candidate it considers to be the best for the job, even if this is based on a subjective view. The business simply needs to act fairly and reasonably.
  • Be aware of the risk of discrimination when considering whether there are any suitable vacancies and (if relevant) the process for deciding which potentially redundant employee should be offered each vacancy.
  • When the business has identified one or more possible alternative jobs, it will need to agree on the method for deciding which potentially redundant employees would be best suited for those roles.
  • The amount of administration and time required is likely to increase as the number of potentially redundant employees increases. This, and the fact that an offer must be made before the termination of an employee’s existing employment, should be taken into account when the business is preparing any timetable for a redundancy exercise.

Bringing vacancies to the attention of potentially redundant employees

  • A business will need to decide how to alert potentially redundant employees to the existence of possible alternative jobs. For example:
    • for a small group of employees, the business may want to speak to them as a group or individually to advise them of the existence of any opportunities and what each involves; or
    • for a larger number of potentially redundant employees, it may be more practical to draw their attention to established methods of communicating vacancies (for example, the business’s intranet or notice boards).
  • If the business uses internal methods of communication, ensure the information is provided separately to any affected employees without access to those methods of communication (for example, because they are on sick leave or maternity leave).
  • It may also be useful to write to each potentially redundant employee confirming the information the business has provided in any meetings and providing details of the vacant roles.
  • The business should offer (and provide sufficient information about) jobs of lower status compared to the job an employee has been dismissed from.
  • Discuss the possibility of all alternatives to redundancy with affected employees, including:
    • possible alternative vacancies; and
    • contractual changes (such as a move to part-time working).

In some cases, it will be appropriate to consider and discuss whether an affected employee should be given another employee’s job with that employee being made redundant (this process is known as “bumping”).

Allocating vacancies between potentially redundant employees

  • Any potentially redundant employees on maternity (or adoption) leave have an automatic right to be offered any suitable vacancies first.
  • A business will need to make arrangements for other potentially redundant employees to be considered for vacancies in which they are interested. For example, once the business has provided details of the available vacancies, it can set out a timetable for the applications to be made and for interviews to be held.
  • Applications for vacant roles should be limited to potentially redundant employees and, where possible, appointments should be made from that pool of candidates.

Posted in: Employment law for HR Directors

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Redundancy Checklist

This redundancy checklist summarises the key issues that a business should be aware of when dealing with a redundancy situation.
When can a redundancy situation arise?
Redundancy encompasses three different types of situation:

  • Business closure.
  • Workplace closure.
  • Reduction of workforce.

Collective consultation

  • If a business is making 20 or more employees redundant over a period of 90 days or less, the business must:
    • inform and consult appropriate employee representatives.
    • notify the Department for Business, Innovation and Skills (BIS).
  • An employment tribunal can award up to 90 days’ pay for each employee if the business has not consulted adequately. The business can also be fined for failing to notify BIS.
  • The business should also ensure that it follows a fair procedure during the redundancy process (including consulting with employees properly) to minimise the possibility of claims for unfair dismissal.

 
Redundancy and unfair dismissal

  • Redundancy is a potentially fair reason for dismissal. However, a redundancy dismissal is likely to be unfair unless the business:
    • identifies an appropriate pool of employees for selection for redundancy.
    • consults with the individuals in the redundancy selection pool.
    • applies objective selection criteria to the employees in the redundancy selection pool.
    • considers suitable alternative employment where appropriate (subject to a trial period).
  • In certain circumstances, selecting an employee for redundancy will be automatically unfair. For example, selecting an employee:
    • for a reason connected to pregnancy;
    • because they refused to sign a working tie opt-out agreement; or
    • for reasons related to trade union membership or activities.

Alternatives to redundancy

  • At the start of a redundancy procedure, the business should consider whether it can avoid making compulsory redundancies or reduce the number of compulsory redundancies. For example, by:
    • suspending or restricting recruitment;
    • reducing or removing overtime opportunities;
    • not renewing contractors’ contracts; or
    • ceasing or reducing the use of agency workers.
  • If these steps are unavailable or insufficient, the business could also consider:
    • inviting potentially redundant employees to apply for suitable alternative vacancies;
    • inviting employees to volunteer for redundancy;
    • inviting employees to consider early retirement; or
    • temporarily laying off employees or reducing their hours.

Redundancy payments

  • Employees with at least two years continuous employment with the business at the point they are made redundant will be entitled to a statutory redundancy payment.
  • Some employees may also be entitled to an enhanced contractual redundancy payment, if their contract of employment or other documents provide for it.

 

Posted in: Employment law for HR Directors

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TUPE Checklist

Use this TUPE checklist to help make the Transfer as efficient and liability free as possible.

When does TUPE apply?

TUPE applies to a “relevant transfer”. A relevant transfer can be where:

  • A business or part of a business is sold.
  • Work is outsourced from a client to a contractor.
  • Outsourced services are transferred from the original contractor to another contractor or back to the client (ie in-sourced).
  • A client brings the outsourced services back in-house.

Further analysis and advice is always needed to confirm whether TUPE applies or not.
Whether TUPE does or does not apply will have significant financial implications on any proposed transaction.

Which rights are automatically transferred under TUPE?

  • Employees transfer to the new employer on their existing terms of employment and with all
    related employment rights, powers, duties and liabilities. Old age, invalidity and survivors’
    benefits under occupational pension schemes are excluded.
  • The new employer steps into the shoes of the transferring employer in relation to the
    transferred employees. Any acts or omissions committed by the transferring employer are
    treated as having been done by the new employer.
  • Employees who object to the transfer do not automatically transfer to the new employer. Their
    contracts will instead terminate on the transfer date.

All businesses will need to review all the employment contracts and benefits of affected employees.
If your staff will transfer from your business you will need to prepare all the “Employee Liability Information” (see section below). For a complete list of what you need to do – contact us.
If staff will transfer to your business your will need to review all the Employee Liability Information (called conduct your Due Diligence) in sufficient time to negotiate the commercial and legal aspects of the contract for your particular transaction so you are protected from taking over expensive liabilities. Contact us for advice how to do this and what to look for to avoid costly liabilities.

Changing terms of employment

Any changes to an employee’s terms of employment are void if the main reason for the change is
either:

  •  The transfer itself.
  • A reason connected with the transfer that is not an economic, technical or organisational
  • reason requiring changes in the workforce (an ETO reason).

However, it is possible to make changes to transferring employees’ employment terms if the reason for the change is unconnected with the transfer or is connected with the transfer but is for an ETO reason.
There are legitimate ways to reorganise a workforce after a TUPE transfer has occurred. Contact us to find out how to do this so that your business is not constrained from reorganising the new workforce joining the business.

Protection against dismissal

  • Employees are entitled to enhanced protection against unfair dismissal. Any dismissal of an employee with the qualifying period of service is automatically unfair where the main reason for the dismissal is either:

the transfer itself; or

a reason connected with the transfer that is not an ETO reason.

  • This enhanced protection also applies if:

an employee resigns in response to a serious breach of their contract; or

the new employer makes a substantial change in the employee’s working conditions which is detrimental to them.

  • Employers can be ordered to reinstate, re-engage or compensate the dismissed employee if their complaint is upheld by an employment tribunal.

If your business is receiving new staff you need to proceed within the law and avoid unfair dismissal claims with a maximum liability of up to £85,200 but still achieve your company’s operational requirements.

Obligations to inform and consult

  • Both parties involved in the transfer are obliged to inform and (if appropriate) consult recognised trade unions or elected employee representatives in relation to their own employees who may be affected by the transfer. If there are no existing representatives they must be elected by the affected employees for the purposes of consulting over the transfer.

This can be a time consuming and administrative issue which is often overlooked.
Scheduling enough time in the transaction timetable to communicate clearly with affected staff is important and will lead to a smoother transfer of staff.

  • An individual employee has the right to bring a claim for breach of these requirements if an employer:

fails to take any steps to invite employees to elect representatives; or
in the absence of election, fails to give information to the affected employee.

  • Certain information (for example, the reason for the transfer and where it is expected to take place) must be provided to the representatives long enough before the transfer to enable the transferring employer to consult with them about it.

It is important to involve the business which is receiving the new staff in this process to get them comfortable and ensure that any issues are resolved where possible before transfer. Remember that disgruntled staff in a TUPE process often sue both their “old” and “new” employer. This means
that the “old” employer should not think that “once the TUPE transfer has taken place the issue is off their hands”.

  • Although the duty to inform always arises, the duty to consult only arises where an employer envisages taking measures in relation to affected employees.
  • Failing to comply with these obligations can expose both parties involved in the transfer to up to 13 weeks’ GROSS uncapped pay for each affected employee. In certain circumstances,both parties can be held to be jointly and severally liable. This can be a significant liability, for example:

If 10 staff would have been entitled to transfer under TUPE but there is no informing and consultation exercise and their average salary (excluding benefits) is £30,000 pa then the maximum liability would be:

13 weeks/52 weeks = 25% x £30,000 x 10 = £75,000 + legal costs + wasted management time.

Take legal advice to avoid these costs arising.

Employee liability information

  • The transferring employer must provide information (for example, the disciplinary and grievance records of the transferring employees) to the new employer not less than 14 days before the transfer takes place.
  • If the transferring employer fails to comply with this duty, the new employer can apply for compensation based on the losses suffered, with a minimum award of £500 for each employee that the information was not provided for.

If you are preparing the Employee Liability Information contact us for a checklist of the information to prepare and how to present it in as efficient a way as possible.
If you are receiving the Employee Liability Information contact us for a detailed checklist of what you will need and to ask for so you do not receive inadequate information concealing expensive employee liabilities. We can also help you to interpret the information disclosed to you so you know what
employee issues you are undertaking.
Insolvent businesses To help the rescue of failing businesses, some key TUPE employment protections are relaxed if the transferring employer is insolvent. The extent of these modifications depends on the type of insolvency proceedings the transferring employer is involved in.

More information

This Checklist is designed to help you focus on the Main Issues to deal with.
Please contact us to help your TUPE Transfer be as efficient and liability free as possible:

Richard Mullett – 0208 334 8049 / Richard.Mullett@TheLegalPartners.com
Abigail Oprey – Abigail.Oprey@TheLegalPartners.com

This document is not specific legal advice. If you can share your business situation we can advise you what to do next to have a smooth TUPE transfer process and minimise liability.

Posted in: Employment law for HR Directors

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Top 10 Tips for Avoiding Workplace Claims

Here are our top ten tips for avoiding employment tribunal claims.

1. Ensure that contracts of employments are properly drafted and kept up to date.

It is a legal requirement that employers provide employees with a written
statement of terms no later than 2 months after their employment begins. There
is certain information that must be contained in the written statement of terms
which employers need to ensure is contained within their contracts.

2. Tailor your staff handbook to your business.

It should contain all the policies which set out best practice on how your
managers should deal with day to day personnel matters. Use it to communicate
employers’ and employees’ duties and obligations within the workplace to avoid
misunderstandings.

3. Communicate staff handbook to all employees plus updates

They need to understand the consequences if they breach any of these policies.
Employers should treat staff fairly in accordance with these policies to avoid
conflict.
Train your managers to help them understand the key principles in employment
law and how to sensibly apply these in the workplace. Often managers who are
very good in their specialist field, may not know how to effectively deal with an
employment dispute, training courses are therefore a useful tool to help fill this
void.

4. Follow formal procedures (eg disciplinary/ grievance/ redundancy) and follow what the staff handbook and contract state.

Also employers should ensure that disciplinary and grievance procedures comply
with the ACAS Code of Practice. If employers fail to follow these ACAS
guidelines then this could result in an employee’s compensation award being
increased by up to 25 per cent by the employment tribunal.

5. Consider mediation to resolve disciplinary and grievance issues.

Mediation is a voluntary and informal service where an independent party helps
two parties resolve a dispute. It can be used at any stage in a workplace dispute
but may not be the best way forward in allegations of gross misconduct.

6. There may be certain situations which are not easily resolved with
difficult employees so employers should seek specialist employment
advice at an early stage because this may avoid an expensive
employment claim.

TAKE legal advice from The Legal Partners!

7. Have a transparent pay, promotion and bonus structure in place to help
avoid any equal pay claims.

8. Make one person (eg HR Manager) responsible to review all the policies
and procedures to ensure that they comply with current employment law
and also remain relevant to the business.

9. Finally it may sound straightforward but this point is often overlooked by employers……..

……when you see a problem developing, COMMUNICATE with your employees
on an informal basis at the earliest opportunity in an attempt to seek a resolution
before the dispute escalates into a situation which could result in an employment
tribunal claim.

10. Have regular appraisals – to find out why it is important for an
employment law reason….. speak to Richard or Abigail.

Disputes in the workplace should ideally be addressed at an early stage and
employers need to take time to listen to their employees
 

Posted in: Employment law for HR Directors

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