Ashfords Solicitors - Employment Update

Increase to National Minimum Wage announced

The Government has announced that, as of 1 October 2008, the National Minimum Wage ("NMW") will rise from £5.52 to £5.73 per hour. The rate for 18-21 year olds will also increase from £4.60 to £4.77, while the 16-17 year old rate will rise from £3.40 to £3.53.

Nearly one million employees will benefit from the increase, two thirds of them female. The Government has also boosted funding for the enforcement of the NMW and is planning tough new penalties for employers who underpay their staff.

The NMW was initially set at £3.60 when it was introduced in April 1999 and by October 2008 it will have risen by 59%, against a 47% increase in average earnings.

Employers with more than 50 employees obliged to inform and consult with their workforce.

The Information and Consultation of Employees (Amendment) Regulations 2006 ('ICE') give employees in larger businesses the right to be informed on an ongoing basis about the business that they work for.

ICE implements an EU directive under a framework agreed with the CBI and TUC. From 6 April 2005 ICE applied to all businesses with 150 or more employees, this was extended to businesses with in excess of 100 employees on 6 April 2007. From 6 April 2008 the net will widen considerably as ICE will apply to all businesses with in excess of 50 employees.

The requirement to inform and consult does not operate automatically but will be triggered by a formal request by employees for an information and consultation agreement or by employers choosing to start the process themselves. This usually entails the setting up of a "national works council" or similar information and consultation body to facilitate the exchange of views and establishment of dialogue between employers and employees.

Age Discrimination: Dismissal for being too young

In the case of Wilkinson v. Springwell Engineering Limited, an employment tribunal has held that the dismissal of an employee was not on the grounds of capability, as argued by the employer, but rather on the basis of age. The employer had therefore discriminated against the employee in breach of the Employment Equality (Age) Regulations 2006 ("the Age Regulations"). It was found that the employer had made a stereotypical assumption that capability equals experience and that experience equates to older age. Therefore age was the predominant reason for the decision to dismiss.

Facts

Miss Wilkinson commenced employment with Springwell Engineering Company Limited ('Springwell') as an office administrator in January 2007. She was placed on a three-month probationary period.

In February 2007 Miss Wilkinson was advised that she was only doing 90% of her role and asked to improve her work rate over the next few months. Around the same time Springwell asked another, older, administrator to cover some of the work they would otherwise have expected Miss Wilkinson to perform.

On 16 March 2007 a conversation took place between Miss Wilkinson and her line manager, in which, Miss Wilkinson alleged, she was informed that her employment was being terminated on the grounds that she was too young for the job. She was required to leave the premises immediately and was not informed of her right to appeal the decision. She was 18 years old at the time of her dismissal.

Springwell refused to reply to a letter before action and an age discrimination questionnaire, allegedly on advice.

Miss Wilkinson brought a claim for discrimination on the grounds of her age.

Decision

The tribunal found that Miss Wilkinson was not dismissed on the grounds of her capability but rather by reason of her age in breach of regulation 3 of the Age Regulations.

The tribunal found that there had been a "lack of application to any form of orthodox procedure in both engaging the claimant or dealing with her termination". Whilst this was not uncommon in a small business, the tribunal also went on to note that Springwell's failure to respond to a complaint of discrimination and a statutory questionnaire submitted before proceedings were commenced demonstrated an "equivocality of approach and attitude".

The tribunal therefore concluded that Springwell had been satisfied with the work carried out by Miss Wilkinson's predecessor and appeared to expect Miss Wilkinson to achieve the same level of performance. This, together with use of another, older, administrator to cover some of her work, lead the tribunal to find that Springwell had made stereotypical assumption based upon age to the detriment of Miss Wilkinson. Springwell had assumed a relationship between age and capability. They formed a view of her capability which was not consistent with the evidence of her work they claimed to have relied upon in dismissing her.

Miss Wilkinson established primary facts from which the tribunal could conclude that her dismissal must have been by reason of age, and Springwell had failed to establish that age was not the reason for dismissal.

The tribunal awarded Miss Wilkinson loss of earnings to the date of the tribunal hearing and future losses of 26 weeks, together with an award of £5,000 for injury to feelings and two weeks' salary for failure to supply a statement of particulars. The tribunal ordered a 50% uplift on the total compensation due to Miss Wilkinson as a result of Springwell's failure to follow the statutory procedures when dismissing her.

Amendments to Sex Discrimination Act 1975

The Sex Discrimination Act 1975 (Amendment) Regulations 2008 ("the New Regulations") come into force on 6 April. The Regulations will recast the provisions relating to prohibition of harassment; discrimination on the grounds of pregnancy or maternity leave; and exceptions from the right to claim discrimination in respect of terms and conditions during maternity leave.

The main changes introduced by the Regulations are outlined below:

Prohibition of Harassment
Currently, s.4A of the Sex Discrimination Act 1975 ('SDA') states 'that a person subjects a woman to harassment if, on the grounds of her sex, he engages in unwanted conduct that has the purpose or effect of violating her dignity, or of creating an intimidating, hostile, degrading humiliating or offensive environment for her'. The New Regulations will substitute the phrase 'on the grounds of her sex' with the phrase 'related to her sex or that of another person'. As a consequence of the change, the burden will be on the complainant to show that the alleged treatment was related to the person's sex and not that the behaviour was as a result of the complainant being male or female.

Discrimination on the Grounds of Maternity Leave
The New Regulations remove the current requirement is s.3A for a woman to compare her treatment to that of a woman who is not pregnant or not exercising a right to maternity leave.

Exceptions to the right to claim discrimination in respect of terms and conditions during maternity leave
As a result of the changes, a female employee will be able to claim discrimination for the non-payment of any discretionary bonuses that relate to the two-week period after childbirth when the woman would be on compulsory maternity leave.

There is also a significant extension in maternity rights by allowing the same types of discrimination claim permitted in the ordinary maternity leave period (first 26-weeks) to be brought during the additional leave period (27 to 52 week period). These further provisions only applies to women whose expected week of childbirth falls on or after 5 October 2008.

Public statements and direct discrimination

The Advocate General has delivered her opinion that a public statement made by an employer in the Belgian media suggesting that they would not employ Moroccans, was direct discrimination contrary to the EU Race Discrimination Directive (2000/43). The UK Government intervened in the case to argue that, as the employer had not actually acted on their discriminatory statement, the discrimination was only hypothetical with no identifiable victim and so the Directive should not apply. In the Advocate General's view, a statement of an employer's race recruitment policy has an actual discriminatory effect as it deters individuals of certain racial origin from applying for a position when they know in advance that they will not be hired because of their race. Furthermore, she considered that to limit the Directive to cases in which there was an identifiable victim would undermine the effectiveness of the principle of equal treatment.

It is well established that advertisements which display an employer's discriminatory recruitment practices are unlawful. If the Advocate's General's opinion is followed by the ECJ, public statements about an employer's potentially discriminatory recruitment practices will also be unlawful.

The Budget 2008

This year's Budget has been quiet from an employment perspective. The only developments of note relate to the VAT arrangements in respect of the supply of temporary workers by employment businesses, which will be withdrawn from 1 April 2009. The Government has also indicated that it may take action to prohibit tax relief for ordinary commuting expenses being claimed by workers who participate in structures such as umbrella companies with employment businesses.

VAT: withdrawal of staff hire concession
From 1 April 2009, the current concessionary VAT arrangements in respect of supplies of temporary workers by employment businesses will be withdrawn. Currently such businesses are allowed to exclude the wages element from the supplies of temporary workers they make, and to account for VAT solely on their margin.

The withdrawal of this concession will impact on employment bureaux who use the existing concessionary arrangements and any of their customers who are not able to fully recover the VAT charged to them, for example the finance sector, health and care sector, education sector, charities and some parts of the public sector.

Following the 2004 implementation of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 and now that the regulatory framework for this sector has been amended to ensure equal treatment for those operating on the same commercial basis, HMRC (www.practicallaw.com/6-200-6399) considers that this tax concession is no longer necessary. Furthermore, the concession has no basis in UK or EU VAT law and must therefore be withdrawn. Accordingly, from 1 April 2009 VAT will be applied to all of the consideration which employment businesses receive, including the wages element, in respect of the supplies they make.

Expenses of temporary workers
The Government is concerned by the growing use of structures, such as "umbrella companies" and over-arching contracts of employment with employment businesses, which allow workers participating in such structures to obtain tax relief for ordinary commuting expenses that would not be available to other workers. The Government may take action in relation to this issue in future.

Extension of HMRC powers to deal with PAYE recovery

The introduction of the Income Tax (Pay As You Earn) (Amendment) Regulations 2008 ("the Regulations") will take effect from 6 April 2008 and will extend the powers of HMRC to transfer PAYE liability from an employer to an employee in certain specified circumstances.

The Regulations are intended to cater for situations where an employer is liable for the full amount of under-declared PAYE on employment income notwithstanding payment of tax by the employee on that same income. Broadly, the effect of the Regulations is to allow employers to set the two amounts against each other.

This is good news for employers who were previously obliged to pay the full amount of tax due and then seek repayment from the employee of the amount of tax already paid and take the risk that the employee will have insufficient funds to meet this claim.

Employment Update - March 2008