Employment - The Basics

Selecting Employees

As well as getting the right person for the job, you need to comply with a range of anti-discrimination legislation principally covering sex, race and disability. When advertising, interviewing and selecting prospective employees, you must be careful to comply with the provisions of this legislation.

Legislation aimed at tackling discrimination in employment and training on the grounds of sexual orientation and religion was introduced in December 2003. Similar legislation to tackle age discrimination was introduced in October 2006.

There are also certain other restrictions on the employment of children, young persons and foreign nationals which you should take account of.

Employees Past Criminal Convictions

After a period of time, people who have been convicted of criminal offences and who have served their sentences are, with some exceptions, not obliged to disclose those convictions. In effect, they become "spent". A "spent" conviction or failure to disclose such a conviction are not proper grounds for dismissing or excluding a person from any office, profession, occupation or employment or from prejudicing him or her in any way in most jobs.

Basis of Appointment

Employee or Self-Employed

The difference between an employee and a self-employed person is extremely important. The legal rights enjoyed by each differ in many ways. For example, an employee will enjoy many statutory employment protection rights if he or she meets the necessary qualifying requirements: in most cases, someone who is genuinely self-employed will not.

Essentially the distinction is between a contract of service and a contract for services. Many larger companies employ workers on temporary assignment through the mechanism of a third party. This can, where the terms are drafted appropriately, allow employers to avoid the direct employer-employee relationship. However it is important to note that traditional employment protections are increasingly being extended to "workers" - people who are neither strictly employees nor really running their own business. Many people who are self-employed are now covered by these extended rights.

Probationary Employees

Many employers when taking on new employees state that they will initially be employed for a "probationary" period. It is a commonly held but mistaken belief that giving a new employee the status of a probationer lets the employer terminate the employment, if he or she is found to be unsatisfactory, without the normal hazard of facing a claim for unfair dismissal. In fact calling an employee a "probationer" has virtually no effect on the employer/employee relationship. Although at present the qualifying period for unfair dismissal claims is one year (and so very few probationers will be covered), this qualifying period may at some point be reduced or even dispensed with completely. Even where the probationer does not qualify for unfair dismissal protection the employer should comply with their contract.

Part-Time Workers

Employers also need to ensure that they do not treat part time workers any less favourably than full time workers who carry out the same sort of work at their establishment. The Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 have been in force since 1st July 2000 and they aim to prevent part time workers being less favourably treated in relation to contractual terms or by being subject to any other detriment. Treatment should be on a pro-rata basis (unless application of that principle would be "inappropriate") although the employer can seek to justify any differential treatment by giving a sound business reason. You will note that the Regulations apply to "Workers" rather than "Employees", which brings within the scope of the Regulations some casual workers and home workers.

Fixed Term contracts

Fixed-term employees are afforded protection by the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 which came into force on 1 October 2002. As with the Part-Time Workers Regulations (above) they aim to prevent fixed-term employees being less favourably treated than permanent employees in relation to contractual terms or by being subject to any other detriment. The Regulations apply to employees on contracts that last for a specified period of time or which will end when a specified task has been completed or when a specified event does or does not happen. Unless agreed otherwise through the conclusion of a collective or workforce agreement, the use of successive fixed-term contracts is limited to four years. This period of time may also be extended if justified on objective grounds. Unfair dismissal waivers have been invalid for some time and now so too is any redundancy waiver included in a fixed-term contract which has been agreed, extended or renewed after the coming into force of these Regulations.

Duration and Transfer of Employment

Continuous Employment

Working out the length of an employee's service isn't always straightforward but is often important. There are detailed Regulations which provide for breaks in employment to be bridged in certain circumstances. It should also be noted that periods of part-time employment, irrespective of the number of hours worked per week, will count in working out the length of employment. Many of the statutory employment protection rights, such as the right to claim a redundancy payment and compensation for unfair dismissal, apply only to employees who have built up sufficient continuous employment. Also the calculation of a redundancy payment and of the basic award in unfair dismissal proceedings is based on the employee's length of continuous service.

Transfer of Undertakings

Far-reaching rules for the protection of employees' rights and the transfer of an undertaking are contained in the Transfer of Undertakings (TUPE) Regulations of 2006. The Regulations apply where an "undertaking" is "transferred" from company A to company B. An undertaking could be anything from a whole business to, in some cases, a single employee.

Individuals who are employed by company A "immediately before the transfer" automatically become the employees of company B from the time of the transfer on the terms and conditions they previously held with company A. In addition company B inherits company A's rights and (perhaps more importantly) liabilities in relation to those individuals. The regulations also impose important obligations on the employer of employees affected by the transfer to provide information to, and consult with, representatives of the employees. This is a particularly complex area and warning bells should ring whenever any part, or indeed the whole of a business, changes hands.

Terms and Conditions

Every employer is required to give each employee a written statement of particulars of certain terms of his or her employment contract not later than two months after the beginning of the employee's employment. Whilst salary and benefits are mostly for agreement between employer or employee, it should be noted that employers must now comply with the National Minimum Wage.

Sickness and Sick Pay

Employers may wish to include a contractual right to sick pay, failing which the statutory right to a specified minimum level of sick pay will apply. The statutory payments are offset against contractual payments, and vice versa.

The written particulars given to an employee setting out the terms and conditions of his or her other employment must state whether or not the employer makes payments for periods of absence due to sickness and if so on what terms.

Under the statutory scheme the entitlement limit is to 28 weeks pay at the statutory level.

In order to qualify the employee must have 4 or more consecutive days of sickness, and notify his or her absence to the employer, and supply evidence of incapacity. In addition there is an average weekly earnings threshold.

Holidays

The contract of employment usually makes express provision for paid holidays to be given. However, under the Working Time Regulations workers are entitled to at least 4 weeks annual paid leave which accrues from day one of employment. Effectively, this means that during their first year of employment workers are entitled to one-twelfth of the annual holiday entitlement per month worked. There is also an entitlement to receive compensation for any untaken leave at the end of the employment.

Working Time Regulations

In addition, it should be noted that under the regulations the average working time (including overtime) in each 7 day period should not exceed 48 hours. Workers are entitled to a minimum daily rest period of 11 consecutive hours in each 24 hour period and minimum uninterrupted rest periods of 24 hours in every 7 day period (ie one day off per week minimum).

Where the working day is longer than 6 hours, workers are to be entitled to a rest break. In relation to night workers, the normal hours of work should not exceed an average of 8 hours in any 24 hour period. This also applies to those whose work involves special hazards, i.e. particularly heavy physical or mental strain, who should not be required to work more than 8 hours in any 24 hour period.

It is important to note that all of these limits apply from the first day of employment, and no qualifying period of service is required.

Maternity Leave

Those expecting a child on or after 1 April 2007 will be entitled to 26 weeks paid maternity leave and additional unpaid leave of up to 26 weeks. The statutory maternity pay period will be extended from 26 weeks to 39 weeks. The Government's ultimate aim is to extend this to a full year before the end of this Parliament.

All employees entitled to maternity leave are entitled to make use of 10 "Keeping in Touch" (KIT) days. KIT days will allow employees to do work under their contract of service without losing a week's statutory maternity pay and without bringing their maternity leave to an end. KIT days can be taken at any time during maternity leave other than the two weeks after the birth. Use of KIT days must be by agreement between the employee and the employer.

It is unlawful to dismiss (or single out for redundancy) a pregnant employee for reasons connected with her pregnancy. Such treatment will constitute grounds for automatic Unfair Dismissal and/or Sex Discrimination. At the end of the maternity leave period she is entitled to resume her normal job on the same terms and conditions as if she had not been absent. If however, a redundancy situation has arisen during her maternity leave, or if there is some other genuine reason why her original job is no longer available at the end of her maternity leave, she must be offered any suitable alternative work that is available at the point when she wants to return.

Paternity Leave

Statutory paternity leave and pay is available to employees whether they are the biological father, or are mother's partner or husband but are not the biological father.

Leave can be taken in a single block of either one week or two weeks. It can be taken after the birth of a child of the placement of a child for adoption. The leave must be taken within 56 days of the expected week of childbirth or the actual birth (if this is earlier).

The Government plans to increase the length of paternity leave, a change which will be introduced at the same time as the provisions entitling women to a full year's statutory maternity pay. The first six months of maternity leave will be preserved for women and will not be allowed to be shared. However, if the mother returns to work, fathers will be given the right to an additional paternity leave period of up to 26 weeks.

Adoption Leave

For those expecting to have a child placed with them on or after 1 April 2007, all adopters with 6 months' service ending with the week in which they are notified of being matched with a child for adoption are entitled to 26 weeks' Ordinary Adoption Leave (OAL). Those who are entitled to OAL are also entitled to Additional Adoption Leave (AAL) up to 12 months inclusive of OAL.

All employees who are entitled to adoption leave will be entitled to the use of 10 "Keeping in Touch" (KIT) days allowing employees to do work under their contract of service without losing a week's statutory adoption pay and without bringing their adoption leave to an end.

For those expecting a child to be placed with them on or after 1 April 2007 the statutory adoption pay period will be extended from 26 to 39 weeks.

Parental Leave

An employee who satisfies certain conditions is entitled to take parental leave "for the purpose of caring for the child".

Whether male or female, if an employee has worked for an employer continuously for a year and has responsibility for a child, he or she is entitled to 13 weeks' unpaid parental leave for each child.

This leave must be taken by the time the child reaches the age of 5 or the age of 18 if the child is disabled. If the child is adopted, then parental leave must be taken by the 5th anniversary of the adoption or by the time the child reaches the age of 18, whichever is the earlier.

Time off for Dependants

An employee is entitled to take a reasonable amount of unpaid time off during working hours in order to take action which is necessary:

to provide assistance on an occasion when a dependant falls ill, gives birth or is injured or assaulted;
to make arrangements for the provision of care for a dependant who is ill or injured;
in consequence of the death of a dependant;
because of the unexpected disruption or termination of arrangements for the care of a dependant; or
to deal with an incident, which involves a child of the employee and which occurs unexpectedly in a period during which an educational establishment, which the child attends, is responsible for him or her.

"Dependant" is defined as a partner, parent, child, someone who lives as part of the family, or someone who relies on the employee for assistance and care.

The employee must notify the employer as soon as possible with reasons for the absence and an estimate of how long they will be away from work (which should be no longer than a day or so at most).

Flexible Working

Parents of children under the age of six and parents of disabled children under the age of eighteen are entitled to request flexible working arrangements. From 6 April 2007 this right is extended to the carers of adults.

Employers have a duty to seriously consider any such request. Any rejection of a request can only be justified on one or more of eight grounds which include: the burden of additional costs; detrimental impact on performance; and planned structural changes.

Restraint of Trade, Confidentiality and Ex-Employees

Employers may wish to control competing activities by current, or more usually, former employees. Current employees have certain implied duties in this respect but to impose more extensive duties upon them or to exert any control over the activities of former employees, express agreement from the employee is required.

Restrictions are always worth considering for key personnel and will usually involve restrictions after termination of the employment on:

what the employee is entitled to do.
where they are entitled to work.
soliciting customers/employees.

The restrictions will generally be limited in time.

As a matter of public policy, the law says that restrictions will only be upheld by the courts to the extent that they are reasonably required for the protection of the employer's legitimate interests. This can be a fine line to draw. As a general rule, the shorter and more limited the restriction is, the better chance it has of standing up in court but there are no hard and fast rules - a year may be acceptable in one scenario but 6 months too long in another. This is an area where it is vital to take advice.

Neither current nor future employees may misuse confidential information belonging to their employers, whether or not their contracts expressly prohibit them from doing so. However employees are entitled to use the general skills and experience they acquire. Cases often turn on drawing the line between the two, which can be extremely difficult.

Health & Safety

An employer is under a common law duty to have regard for the safety of its employees. It is also liable at common law for accidents caused by acts of its employees where the employees were acting in the course of their employment. In addition, statutory obligations have been imposed upon employers in certain circumstances by legislation such as the Occupiers Liability Acts, the Factories Act and the Health & Safety at Work Act. It should also be borne in mind that the Employment Rights Act provides protection from detriment and dismissal in certain situations for health and safety representatives and other employees who have health and safety concerns.

Termination

Termination of Employment

A contract of employment may be terminated in several ways. The distinction between the different methods of termination may be important in working out whether the employee can bring a claim for unfair dismissal, wrongful dismissal, or redundancy.

Unfair Dismissal

If an employee with more than one year's continuous service is dismissed without good reason or without following a fair procedure (see below), the employer may find themselves on the wrong end of a claim for unfair dismissal. When such a claim is brought, the employer has to establish the reason for the dismissal. If the dismissal is held to be unfair, the employer can be ordered to re-engage, reinstate or to pay compensation to the ex-employee.

In addition, an employee who is dismissed for an "automatically unfair" reason does not need a qualifying period of continuous service in order to claim unfair dismissal. The "automatically unfair" reasons include dismissal on the grounds of pregnancy, maternity, trade union recognition, for taking action on health and safety grounds and reasons relating to the national minimum wage.

In any unfair dismissal case the dismissed employee requires to bring a claim before the Employment Tribunal within 3 months of dismissal unless they are able to persuade the tribunal to extend this limit or the dispute resolution provisions below apply.

Statutory Dispute Resolution Provisions

The new Disciplinary and Dismissal Procedure and the new Grievance Procedure involve a 3-step procedure: the issues of concern should be set out in writing, a meeting should be held to discuss the issue, and the employee should be given an opportunity to appeal any decision taken. In certain limited circumstances a modified 2-step procedure can be used.

Failing to follow these procedures could have potentially serious consequences for both employers and employees. In particular, where an employer has failed to go through certain steps and meet certain requirements before dismissing an employee, the dismissal will be deemed automatically unfair. On the flip side, an employee who has not first tried to resolve the dispute directly with his or her employer by raising a grievance will not be entitled to lodge an employment tribunal claim.

In certain circumstances the normal time limit for bringing a tribunal claim can be extended by 3 months.

Awards of Compensation

Successful claimants are entitled to a basic award, calculated on the employee's age, length of service and gross wage up to a maximum of £9,300 (from 1 February 2007), a compensatory award up to a maximum of £60,600 (from 1 February 2007), and an additional award where an employer has failed to comply with a reinstatement or re-engagement order. This additional award can amount to a maximum of £16,120 (from 1 February 2007).

Wrongful Dismissal

If an employer dismisses an employee in breach of their contractual or statutory obligations to give notice, it will be liable to pay damages for wrongful dismissal. This right comes from the common law relating to contract and is quite distinct from the employee's statutory employment protection rights (e.g. to claim compensation for unfair dismissal). In order to bring such a claim the ex-employee must establish that he or she was dismissed in breach of contract or with less than the statutory minimum period of notice, and that he or she has suffered loss as a result.

Despite the provisions of a fixed term contract or of a contract terminable on giving notice, an employer may dismiss an employee summarily, without having to pay him damages for wrongful dismissal, if the employee has been guilty of gross misconduct. In addition an employee may be summarily dismissed if he or she is grossly incompetent in the performance of his or her contractual duties. What constitutes misconduct or incompetence is a matter of interpretation and proper procedures must be followed, so taking advice before doing anything drastic is always sensible.

Redundancy

The Right to a Redundancy Payment

The conditions which must be fulfilled for a person to be entitled to a redundancy payment are:

that he or she was an employee.
that he or she had been continuously employed for two years.
that he or she was dismissed.
that the dismissal was as a result of redundancy.

The amount of the redundancy payment is based upon the employee's age, length of continuous employment and gross average wage (subject to an upper limit of £310 per week (from 1 February 2007).

Consultation and Notification Requirements

Where an employer is proposing to dismiss as redundant at least 20 employees within a period of 90 days or less, it must consult about the dismissals with "appropriate representatives" of the employees concerned. There is a sliding scale relating to the number of employees and the length of consultation, where the number of employees exceeds 20. The appropriate representatives are the recognised unions or, if there is no recognised union in relation to some or all of the affected employees, representatives elected by those employees for the purpose on consulting with the employer.

Notice must also be given to the Department of Trade & Industry on a similar timescale.

Information and Consultation

Described as 'potentially the most significant piece of employment legislation ever to be introduced in the UK' the Regulations have applied to those employers with 150+ employees since March 2005, those with at least 100 employees will be covered from April 2007 and at least 50 employees from April 2008.

Where the Regulations are invoked and there is a failure to negotiate an information and consultation agreement, employers will be obliged to provide workforce representatives with information on:

The recent and probable development of the undertaking's activities and economic situation;
The situation, structure and probable development of employment within the undertaking and any anticipatory measures envisaged, in particular, where there is a threat to employment within the undertaking; and
Decisions likely to lead to substantial changes in work organisation or in contractual relations, including decisions covered by the legislation on collective redundancies and transfers of undertakings.

Consultation will also be expected to take place on the latter two.

Employers can avoid the operation of the Regulations by putting in place a 'pre-existing agreement' before any employee request under the legislation is received.