Ashfords Solicitors - Employment Update

Preparing to Compete and Breach of Contractual or Fiduciary Duties

The Court of Appeal has found, in Helmet Integrated Systems Ltd v Tunnard, that a salesman was not in breach of his contractual or fiduciary duties when he started to make preparations to compete.

Mr Tunnard was taking preparatory steps to develop a product that he would market, following his resignation, in competition with his employers. Mr Tunnard had obtained funding from the DTI to develop the product, commissioned concept drawings and had sent those drawings to a rival of his employer (who eventually invested in the product). The Court of Appeal found that, although Mr Tunnard's contract of employment required him to report any competing activity to his employers, he was not in breach of his fiduciary duty to report his own activities to the employer. As a result of this the employers were not entitled to a share of the profits.

Smoke-Free Premises Regulations Passed

From the 1 July 2007 it will be criminal offence in England to smoke in a smoke-free place. The ban will cover premises which are "enclosed" or "substantially enclosed".

The Health Act 2006, which brings in the Smoke-Free (Premises and Enforcement) Regulations 2006, describes, in Section 2, a smoke-free premises as:

Premises open to the public, whether by invitation or not, and whether upon payment or not (but only while open to the public, unless they are also a workplace).
Premises used as a place of work (including voluntary work) by more than one person (even if those who work there do so at different times, or only intermittently).
Premises used as a place of work where members of the public might attend for the purpose of seeking or receiving goods or services from those working there (even if members of the public are not always present).

Premises will be "enclosed" where both of the following apply:

There is a ceiling or roof – a "roof" is defined as including any fixed or moveable structure or device that is capable of covering all or part of the premises as a roof, including a canvas awning.
The premises are wholly enclosed either permanently or temporarily, except for doors, windows and passageways.

Premises will be "substantially enclosed" if they have a ceiling or roof, but there is either an opening, or aggregate area of openings in the walls, which is less than half the area of the walls. When calculating the area of the walls, any other structures that serve as walls and which form the perimeter of the premises must be taken into account. However, openings containing doors, windows or other fittings that can be opened or shut will not be taken into account in calculating the area of the opening(s).

Anyone who occupies or is concerned in the management of smoke-free premises will have a duty to put up "no-smoking" signs, or risk a fine in the Magistrates' court or a fixed penalty. This will include employers.

Enforcement authorities will be Local Authorities or Port Health Authorities, however, further Regulations will be released to deal with signage, penalties for non-compliance and offences in Vehicles.

Rates of Statutory Payments for 2007-08

Her Majesty's Revenue and Customs have announced the new 2007/2008 rates for Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Statutory Adoption Pay (SAP).

The flat rates for SMP, SPP and SAP will increase from £108.85 to £112.75 per week, effective from 1 April 2007.
The flat rate for SSP will increase from £70.55 to £72.55 per week, effective from 6 April 2007.

Failure to include all statutes in a Compromise Agreement

In Palihakkara v British Telecommunications PLC a salutary reminder was made of the importance of including references, in a compromise agreement, to all statutes on which an employee could rely on when bringing a claim.

The claimant had entered into a compromise agreement that did not conform with either the Sex Discrimination Act 1975 or the Race Relations Act 1976 for the purposes of entering into a valid compromise agreement. This made the agreement invalid in respect of these acts and allowed the employee to bring a claim to the Employment Tribunal under them.

The employee also had a grievance on-going at the time she signed the compromise agreement, the employer's refusal to acknowledge the grievance post-termination was pursuant to an invalid agreement.

Accordingly, the employee's ability to bring a claim for breach of contract, sex discrimination and racial discrimination were not precluded by the compromise agreement.

Parallel contracts of an agency worker

In Cairns v Visteon the Employment Appeals Tribunal rejected an agency worker's claim against an end-user (user of the employment business). The employee of the employment business chose not to bring a claim against the employment business itself, but against the end-user, the reason for this was that she thought she would have a greater chance of success. In effect, if the EAT allowed the claim, it would be necessary to acknowledge the existence of parallel contracts.

The EAT held that the agency worker had an express contract with the employment business and there was no good policy reason nor business necessity for implying a contract with the end-user.

Essentially, the EAT suggested that it would be hard for an employee to overturn the established principle that an employee can not have two masters. However, the EAT's decision did not categorically rule out the possibility of the existence of parallel contracts.

Continuing from the introduction of the Employment Equality (Age) Regulations 2006 in October, the first substantial challenge to the Regulations has been made to the ECJ.

The High Court has permitted Heyday (an organisation campaigning on age-related issues) to refer a question to the ECJ regarding the Mandatory Retirement Age. The question that will be put to the ECJ will not be decided until January 2007. Once this is made, readers will be updated.

BNP race discrimination case can proceed to trial

In HM Prison Service v Potter the EAT held that a race discrimination claim brought by an applicant to the Prison Service, who was a member of the BNP, should not be struck out and should proceed to trial.

Mr Potter argued that his job application had been rejected because he was a member of the BNP. He argued that the prison service treated white racist organisations less favourably than non-white racist organisations.

The EAT decided that a claim based on indirect discrimination had no chance of success, this claim was a fact sensitive direct discrimination claim and Mr Potter should be given a chance to present evidence at trial. The EAT did comment that Mr Potter's chances of success were very thin.

In N v Chief Constable of Merseyside Police the High Court ruled that the Chief Constable was not vicariously liable for an assault by one of his officers. This was because it was clear that the policeman had used his position as an officer as an opportunity to commit the offence. The court decided the policeman was "on a frolic of his own", and that the offence was not closely enough related to his employment with Merseyside Police. While this case only concerns the police it does it will apply to common law on vicarious liability, and is relevant to all employment relationships.

What's Coming in 2007?

EU membership

Bulgaria and Romania became members of the European Union on 1 January 2007. Despite being members of the EU, Bulgarians and Romanians will still require a work permit to work in the UK.

Companies Act 2006

Our November 2006 update introduced the Companies Act 2006. While a few sections came into force on 20 January 2007, the majority will not be introduced until October 2008.

Statutory limits

The statutory compensation limits will increase on 1 February 2007. The limit on a week's pay will increase to £310 and the maximum compensatory award will increase to £60,600.

Working families

A number of rights arising as a result of the Work and Families Act 2006 came into force on 1 October 2006 (See our October 2006 update) and apply where the expected week of childbirth falls on or after 1 April 2007.

Discrimination in the provision of goods and services

Part 2 of the Equality Act 2006 will come into force on 6 April 2007. This will make it unlawful to discriminate on the grounds of religion or belief or sexual orientation in the provision of goods and services.

Information and consultation obligations

The Information and Consultation of Employees Regulations 2004 will be extended on 6 April 2007 to apply to employers with 100 or more employees.

Pensions consultation obligations

The obligations to consult before making changes to occupational and personal pension schemes will be extended on 6 April 2007 to cover undertakings with more than 100 employees.

Statutory dispute resolution procedures

The Employment Act 2002 (EA 2002) introduced compulsory procedures aimed at improving workplace dispute resolution, the statutory dismissal and disciplinary procedures and the statutory grievance procedures. It will be amended on 6 April 2007 to include three new jurisdictions, namely:

Detriment relating to employees of European Public Limited-Liability Companies.
Detriment in relation to Information and Consultation representatives and employees.
Detriment relating to Occupational and Personal Pension Schemes Representatives.

Flexible working

On 6 April 2007 the existing right to request flexible working will be extended under the Work and Families Act 2006 to include carers. For the purposes of this right, a "carer" is an employee who is, or expects to be caring for an adult who:

Is married to, or the partner of the employee;
Is a near relative of the employee (which includes parents, parents-in-law, adult children, adopted adult children, siblings (including those who are in-laws), uncles, aunts, grandparents or step-relatives); or
Falls into neither category, but lives at the same address as the employee.

Age discrimination

The Employment Equality (Age) Regulations 2006 will be amended on 6 April 2007 to address a number of technical "glitches", including the fact that the default fixed conciliation period of 13 weeks applies to claims of age discrimination, but not other discrimination claims (see our November 2006 update).

Gender equality in the public sector

Part 3 of the Equality Act 2006 amends the Sex Discrimination Act 1975 (SDA) to place a statutory duty on all public authorities to eliminate unlawful discrimination and harassment and promote equality of opportunity between men and women. This duty is commonly referred to as "the gender equality duty" or "gender duty" and will come into effect on 6 April 2007.

As part of the new public-sector gender equality duty, certain listed bodies are required to put in place a gender equality scheme by 30 April 2007. These public bodies include: government departments; county, borough and district councils; local education authorities; state school governing bodies; higher education establishments; police authorities; probation boards; NHS trusts and the armed forces.

Working time for trainee doctors

The weekly working time limit under the Working Time Regulations 1998 for doctors in training will be reduced to 56 hours on 1 August 2007.

Statutory holidays

The Government plans to include public and bank holidays in the annual leave entitlement under the Working Time Regulations 1998 (which would mean that the statutory right would increase from four to 5.6 weeks). In its consultation paper it proposed introducing an additional 0.8 of a week holiday (4 days for a five day week) on 1 October 2007 but sought views on when the remaining 0.8 of a week should be introduced.

Commission for Equality and Human Rights

The Commission for Equality and Human Rights (CEHR) will be established under the Equality Act 2006 in October 2007 to provide a single equality body responsible for all strands of discrimination. It will take over the work of the existing equality commissions and be responsible for sexual orientation, religion or belief, age and human rights.

Data protection

All remaining provisions of the Data Protection Act 1998 will come into force in October 2007. This means that any manual filing systems in existence before 24 October 1998 will be required to comply with the Act.

Corporate manslaughter

A new offence of corporate manslaughter will be introduced during 2007 under the Corporate Manslaughter and Corporate Homicide Bill 2006.

Safeguarding vulnerable groups

The Safeguarding Vulnerable Groups Act 2006 is due to come into force in 2007 and will introduce a centralised vetting system for people working with children and vulnerable adults.

Ashfords is regulated by the Solicitors Regulation Authority. The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.

19th January 2007

Key Contacts

Employment Update - January 2007