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• Employment Law Update - February 2006

A quick reminder about the Employment Rights (Increase of Limits) Order 2005 which took effect from 1 February 2006. The main increases are:-

STATUTORY GRIEVANCE PROCEDURES: THE DECISIONS KEEP COMING

In the recently decided case of Holc-Gale v Makers UK Ltd, the EAT confirmed that a questionnaire under the Equal Pay Act 1970 would not constitute a statement of grievance for the purposes of the statutory grievance procedure.

The Claimant served a written questionnaire on Makers in connection with a potential claim for equal pay using the standard DTI form.

Her employment terminated and she brought an equal pay claim relying on the questionnaire as her "written grievance". The Respondent argued that she could not rely on it as a step one letter under the statutory grievance procedure.

At the pre-hearing review, the employment tribunal decided that the Claimant had not raised a grievance under the Employment Act (Dispute Resolution) Regulations 2004.

She subsequently appealed the decision and the EAT accepted that the statements in the questionnaire potentially fall within the definition of a grievance for the purpose of the SGP. However, the important question here was whether her statements were excluded from that definition by regulation 14 of the 2004 Regulations.

Regulation 14(2) specifies, among others, that any questions raised under the questionnaire procedure under the Equal Pay Act 1970 will not constitute a statement of grievance. Therefore, her appeal was rejected on this ground.

This case highlights that Parliament's aim was to exclude discrimination questionnaires, in their entirety, from the definition of a statement of grievance. However, employers should note that in this case the employee used the standard DTI questionnaire form. There is no obligation to use such forms and there is the danger that employees will submit written documents containing a mixture of grievances and questions. Whether such documents would fall within the exception of regulation 14 remains to be seen.

DISABILITY DISCRIMINATON: SICKNESS ABSENCE PROCEDURE

The recent case of Royal Liverpool Children's NHS Trust v Dunsby is an interesting decision from the EAT about how employers should deal with persistent short term absence in light of a possible disability.

The Claimant was employed by the Trust as a staff nurse. She had a bad sickness record, with repeated absences.

The Respondent had a four stage procedure, which was followed over a one year period. The Claimant provided various reasons for her absences and had been referred to the occupational health service, who reported that her absence was due essentially to problems in her personal life.

In June 2004, the Respondent terminated the Claimant's employment on grounds of her unreasonable absence levels. She then presented a claim to an employment tribunal for unfair dismissal, sex discrimination and disability discrimination.

At the case management conference the Tribunal directed that the claim would proceed on the assumption that she was a disabled person. However, there was lack of clarity as to whether this meant that all her absences were assumed to be disability-related or whether the tribunal should assess whether all the absences were in fact disability related.

The Tribunal found that the Claimant had been unfairly dismissed and that it had been for an unjustifiable disability related reason. The Respondent appealed.

The EAT upheld the appeal, finding the Tribunal had erred in law in its approach to justification to the disability discrimination act and to the unfair dismissal claim. The EAT warned against hearing a claim for disability discrimination on the basis of an assumed disability, where it had made no findings on the nature of the assumed disability but was required to determine whether sickness absences were disability-related. Consequently, the case was remitted to a freshly constituted tribunal for rehearing.

Of more interest to employers is the finding by the EAT that an employer may take disability-related absences into account when operating a sickness absence procedure. Whether this would be unlawful discrimination depends entirely on whether the particular circumstances of each individual case warrants such an approach to justify it.

EQUALITY BILL RETURNS TO THE HOUSE OF LORDS

The Equality Bill, which sets out to establish a Commission for Equality and Human Rights (CEHR) to replace the existing equality commissions recently had its third reading in the House of Commons and has now been sent back to the House of Lords. However, the controversial proposal to create a statutory race committee was rejected.

The CEHR hopes to take over and build upon the work of the Equal Opportunities Commission, the Disability Rights Commission and the Commission for Racial Equality. It also aims to expand into the newer areas of discrimination law (sexual orientation, religion and belief and age) and human rights.

Some of the provisions of the Bill include, among others:

WORK AND FAMILIES

The Work and Families Bill also recently received its third reading in the House of Commons and will now proceed to the House of Lords.

The provisions of the Bill include:

The DTI has also published the following draft regulations which deal with some of these issues:

The draft Regulations are currently the subject of consultation which closes on 18th April 2006.

CORPORATION TAX ON SHARES FROM EMI SCHEMES

Schedule 23 Finance Act 2003 provides for Corporation Tax (CT) deduction for shares acquired by employees from Enterprise Management Incentive (EMI) share options.

HMRC are to publish draft legislation to clarify the amount of relief due when certain shares are acquired from the exercise of EMI options. These will take effect for all accounting periods beginning on or after 1 January 2003 to confirm previous understanding of how the CT rules work.

The employer currently gets a CT deduction if qualifying shares are acquired by employees from the exercise of an EMI option. This deduction applies if the option is to acquire shares at their market value when the option was granted. Section 530 Income Tax (Earnings and Pensions) Act 2003 (ITEPA) provides that no charge arises on the employee in these circumstances, but there is still a chargeable event and CT relief matches the difference between the market value when the shares are acquired and the amount paid for them under the option.

However, where an EMI option is granted at a discount to the market value at grant, and the shares to be acquired carry restrictions or conversion rights, the interaction of sections 531 and 476 of ITEPA with Schedule 23 does not provide the correct CT deduction. Section 531 defines the taxable amount for the purposes of section 476 ITEPA as the market value of the shares at the date that the option was granted less any consideration for the option itself and the actual amount paid for the shares: in broad terms the amount of the discount. Part 4 of Schedule 23, which deals with the quantum of the CT deduction for restricted shares, provides that this will be the amount that counts as employment income so the CT deduction is restricted to the amount of the discount only. It does not also include the amount that is regarded as not taxable, i.e. the difference between the market value of the shares at exercise and the price paid.

HMRC has recently looked again at the existing legislation. As it was not the intention of the original Schedule 23 CT rules to disadvantage EMI options granted at a discount, HMRC propose to amend Schedule 23 to make it clear that the CT deduction for restricted shares acquired from the exercise of an EMI option will take into account both the amount of section 476 ITEPA gain given by section 531 ITEPA and the amount that would be exempt by virtue of section 530 ITEPA if the option had not been granted at a discount.

Draft legislation is expected to be published by the end of February 2006.

THE OPPORTUNITY TO BUILD UP FURTHER PENSION RIGHTS

The Occupational Pension Schemes (Early Leavers: Cash Transfer Sums and Contribution Refunds) Regulations 2006 have recently been laid before parliament and should come into force on 6th April 2006.

Where a member of an occupational pension scheme leaves the scheme without the right to a pension from the scheme, but has at least 3 months' qualifying service, that person will be entitled to receive either
a) a cash sum to be transferred to another pension scheme; or
b) a refund of their contributions.

The choice will down to the individual in question and the DTI sees this as more of an incentive to build up pension rights than already exists. By taking the cash transfer, the person will benefit from both their own contribution to the scheme and that of the employer.

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.