A Framework for Modern Employment – House of commons report.

The Work and Pensions and Business, Energy and Industrial Strategy Committees have published a joint report on “A framework for modern employment” (the Report) which considers how the employment framework should be amended to reflect the modern workplace.

The Report acknowledges that “the expansion of self-employment and business models built around flexible work on digital platforms promise positive opportunities for entrepreneurs, workers and consumers alike”, but also stresses that the changes can also create confusion as to the rights and entitlements for workers and can add to the potential for exploitation. The Committees have therefore looked at the recommendations made by Matthew Taylor in his Review of Modern Employment Practices (the Taylor Report).  In addition, the Committees have produced a draft Bill that includes many of the recommendations of the Taylor Report.  The main recommendations of the Committees are:

  • Employment status. Entitlement to employment rights and protections is determined by employment status. The existing statutory definitions of employment status are set out in s230 Employment Rights Act 1996 (ERA). This is supplemented by case law. The Report follows the recommendations of the Taylor Report that greater legislative clarity is required and a first draft of the legislation defining the employment status is set out in the draft Bill, which reflects many of the points from case law. It also provides that the courts may also have regard to whether the worker was engaged in marketing their business before the contract came into existence, and whether any substitution clause is, in practice, capable of being freely exercised by the individual.
  • Worker status by default.   Another proposal in the draft Bill is implementing a worker by default model, which would then place the burden on an employer to prove that an individual is not a worker rather than placing the burden on the individual themselves. The Report states that this presumption of worker status would apply to companies who have a self-employed workforce above a certain size defined in secondary legislation.
  • Non-guaranteed hours. The Taylor Report had recommended that a higher rate of the National Minimum Wage (NMW) or National Living Wage (NLW) should be introduced for hours that are not guaranteed as part of the contract (i.e for those employees on zero hours contracts). This Report suggests that the Government should work with the Low Pay Commission (LPC) to pilot such a pay premium arrangement. The LPC would also be consulted on the rate at which the premium should be set, the potential impact on marginal hours of employment and compliance.
  • Continuous service. A range of employment rights are only available to employees who have completed a minimum level of continuous service. However, under the ERA, continuous service is broken by any one week in which a workers is not covered by a contract. For flexible workers this can be an issue. The Report therefore recommends that the Government extend the time allowed for a break in service from one week to one month.
  • Employment tribunals. The current employment tribunal rules enable class actions where the cases are based on the same set of fact, meaning that their use is very limited. The Report considers that employees should be able to bring ‘class actions’ in the Employment Tribunal for certain types of claims, including claims for unlawful deduction of wages, worker status, and under the Working Time Regulations..
  • Flexibility and the National Minimum Wage. Interestingly however, the committee has rejected Matthew Taylor’s suggestions on adapting the existing piece rate legislation to calculate pay for those workers on the gig economy.   The Taylor Report noted that working time should be sensibly calculated and that “no individual should be expecting to be paid for all that the time that he or she has the app open (regardless of whether or not they are seeking work).”   The Taylor Report suggested that the Government could adapt the piece rate legislation to enable platforms to compensate workers based on output. This would also include a requirement for certain conditions to be satisfied so that a platform worker could earn less than the NMW or NLW, including a requirement for the company to provide information to the worker about the level of work they could expect to earn at a given time. The Report however suggests that this proposal is overly complex and risks undermining the NMW/NLW by inviting workers to choose to work for a lower rate of pay.
  • Written statement of terms and conditions. The requirement for employers to provide a written statement of terms and conditions should be extended to workers, as well as employees and should specify the individual’s status. The right to receive this statement should apply from day one and the statement should be provided within seven days of starting work.

The Report anticipates that there should be strong support across all parties for taking these reforms forward. It will be interesting to see whether any of these recommendations or the wording in the draft bill is taken forward.

When emotions run a-Mok: Trial judge’s decision upheld in Sweeting v Mok, 2017 ONCA 203

As an employer, you need to be careful what you say in the heat of the moment. That is the takeaway from the Ontario Court of Appeal’s recent decision in Sweeting v. Mok, 2017 ONCA 203.

In this case, there was a dispute between Ms. Sweeting and her employer, Dr. Lawrence Man-Suen Mok. After a heated conversation, Dr. Mok angrily told Ms. Sweeting to “Go! Get out! I am so sick of coming into this office every day and seeing your ugly face.”

On these words, Ms. Sweeting left the office and brought a legal action against Dr. Mok for wrongful dismissal. Based on the facts of the case, both the trial judge and the Ontario Court of Appeal found that Dr. Mok’s words were enough to terminate Ms. Sweeting’s employment.

Facts

Ms. Sweeting was a registered practical nurse who had worked in Dr. Mok’s medical office for 22 years as his practice assistant and office manager.

Dr. Mok admitted that Ms. Sweeting was indispensable to his office – she was a top notch nurse and administrator. At a certain point, however, Dr. Mok’s secretary left and Ms. Sweeting became overworked.

This led to an altercation over the implementation of a new electronic medical recording (“EMR”) system in Dr. Mok’s office. Dr. Mok asked Ms. Sweeting to look into it, but Ms. Mok felt that she was too busy.

After several discussions about the EMR, things finally came to a head in a meeting on June 20, 2012.

Although the parties had very different stories about what actually happened during this meeting, the trial judge accepted Ms. Sweeting’s version of events. She said that Dr. Mok just blew up. He yelled at her, swore and waved his arms in the air. And then he finally told her to get out.

Dr. Mok did not intend to fire Ms. Sweeting. However, the trial judge also found that he had no expectation that Ms. Sweeting would return after this incident, nor did he try to rectify any misunderstanding or contact her afterwards.

The Ontario Court of Appeal upheld the trial judge’s decision in favour of Ms. Sweeting. She was awarded 24 months’ notice of termination, equivalent to $120,000.

Takeaway

This case is a reminder that one unfortunate incident will sometimes be enough to irreparably destroy the employment relationship – even if that was not the employer’s intent.

Remember that where there is a dispute in the workplace, you may want to postpone any further discussion until after everyone has had a chance to calm down.

If tempers do flare despite your best efforts, consider contacting legal counsel to see if you can salvage the situation. It may not be possible in all cases, but if employers act quickly to remedy the situation they may be able to avoid legal action and an inadvertent termination of employment.

Written in collaboration with Justine Smith, articling student.

Working as a freelancer and as an employee for the same company

In Germany, the distinction between employees and independent contractors (also referred to as freelancers) is particularly important. For example, the question of whether a person is an employee or an independent contractor determines whether they are protected against unfair dismissal and also affects how they are treated for statutory social security and income tax purposes. The key factor which indicates that an individual is an independent contractor is that he performs the agreed services working independently. By contrast, an employee is characterised by his dependency on the employer. An employee performs his work in accordance with the employer’s instructions and within its work organisation.

The German Federal Labour Court recently decided that an employee can be employed as an employee and as a freelancer by the same company (BAG, 27.03.2017 – Az: 9 AZR 852/16). The precondition for this is that the employer’s right to give instructions further to the employment contract must not include activities which are part of the services agreement as a freelancer. An employee may enter into multiple employment contracts with the same employer and also is not precluded from entering into both an employment contract and a contract for services as a freelancer from the outset.

In the case, the Court decided that a music teacher was working as an employee and as a freelancer at a music school. According to the German Federal Labour Court, teachers who do not teach at universities are generally employees due to their training curriculum. In contrast, music teachers at music schools can work as freelancers, because there is no compulsory school attendance, there are no formal school leaving qualifications and the music school has less control over how they carry out their duties.

Fair Work Commission considers award provision allowing employers to deduct pay where an employee fails to give sufficient notice

As part of its four yearly review of modern awards, the Full Bench of the Fair Work Commission (FWC) has recently considered whether a clause found in many modern awards allowing employers to make deductions from an employee’s termination pay (where the employee fails to give sufficient notice of resignation) should be removed, changed or included in all modern awards.

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23 redundancies with no consultation? Federal Court says ‘that’s OK’

An employer decides to abolish 23 full-time positions due to a lack of funding.  Surely this is a major change likely to have a significant effect on employees which obliges the employer to consult with those employees as per the consultation term in their enterprise agreement?

While many would say ‘yes, of course’, the Federal Court in Australian Nursing and Midwifery Federation v Bupa Aged Care Australia Pty Ltd [2017] FCA 1246 recently found the answer to be a clear ‘no’ and, accordingly, there was no requirement for the employer to consult.

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What rights does an employer have to suspend an employee?

In Hong Kong, employers have a right to suspend employees from employment. 

Under section 11 of the Employment Ordinance, an employer may without notice or payment in lieu suspend any employee from employment for up to 14 days: (a) as a disciplinary measure for any reason for which the employer could have summarily dismissed the employee; (b) pending a decision by the employer as to whether or not it will exercise its right to summarily dismiss the employee; or (c) pending the outcome of any criminal proceedings against the employee arising out of or connected with his or her employment.  If the criminal proceedings are not concluded within the period of 14 days, the suspension may be extended until the conclusion of the criminal proceedings. 

An employee who is suspended from employment has a right to claim constructive dismissal by the employer at any time during the period of suspension.  In such event, the employee will be able to claim all accrued statutory entitlements.

Occasionally, some employers may find that a suspension period of 14 days is insufficient for them to conclude the investigation into the employees’ conduct.  The employer may consider it necessary for the employee to continue staying away from the workplace whilst the investigation continues.  However, the Employment Ordinance is silent as to whether the employment can be suspended beyond the initial period of 14 days or whether any suspension beyond the 14-day period should be paid or unpaid.  Accordingly, it is suggested that the employer should ask the employee to take a paid leave of absence commencing immediately following the initial suspension period of 14 days.  The paid leave of absence should be for a reasonable period of time, say 2 to 3 weeks.  If the employer requests the employee to take a paid leave of absence for an unreasonably lengthy period (for example, a few months), the employee may decide to bring a claim in constructive dismissal against the employer on the ground that the employer is preventing him or her to work.

In the event it is found that the employee has committed misconduct upon the conclusion of the investigation, the company should take disciplinary measures against the employee.

Uber appeal – Drivers have worker status

The EAT has dismissed Uber’s appeal against the employment tribunal’s decision that its drivers are ‘workers’ within the meaning of S.230(3)(b) of the Employment Rights Act 1996 (ERA 1996) and the equivalent definitions in the National Minimum Wage Act 1998 (NMWA 1998) and the Working Time Regulations 1998 (WTR 1998).   The EAT held that the employment tribunal was entitled to reject the characterisation by Uber of its business in the written contractual documentation and to look at the situation as a whole.

There are three levels of employment status in the UK: self-employed, worker and employee. Self-employed individuals are not entitled to the same employment protections as workers and employees, and so, for example, are not entitled to protection from unlawful deductions from wages, entitlement to receive the national minimum wage, and entitlement to paid annual leave. A number of Uber drivers had brought claims before the employment tribunal claiming that they were in fact workers and were therefore entitled to those rights.  The employment tribunal held that the individuals were workers.  The tribunal had held that the contractual documentation characterising Uber’s business model did not reflect the true nature of the working arrangements.  Uber appealed to the EAT.

The EAT dismissed the appeal, holding that the tribunal was entitled to disregard the contractual documentation which purported to suggest that Uber was acting as agent for the individuals who were acting on their own account and were self-employed. The tribunal had rejected this argument because, looking at the circumstances as a whole it was entitled to disregard the terms and labels in the written agreements.  The tribunal was entitled to take into account, among other things, the scale of the business, and rejected the notion of Uber as ‘a mosaic of 30,000 small businesses linked by a common platform’.  In considering the factual reality of the situation the tribunal could also consider that the drivers were integrated in the Uber business; they were excluded from establishing a business relationship with passengers; the drivers worked on the understanding that Uber would indemnify them for bad debts; and the drivers were subjected to various controls by Uber.

The EAT also considered when time would start to run for the purposes of calculating the working time under the WTR 1998 and the NMWA 1998. The tribunal had found that the drivers should be treated as working  when they had the app switched on, they were within the territory in which they were authorised to drive, and were able and willing to accept assignments.   However, Uber argued that the tribunal should have taken into account that, even while signed into the app, drivers were at liberty to take on or refuse work and could even work for others, including other private hire vehicle operators.  The EAT appreciated that this was a particularly difficult point.  However, based on the facts of the particular case, which required drivers to accept at least 80% of trip requests when signed in, this meant that once in the territory with the app switched on, drivers were available to Uber and at its disposal.  The EAT did go on to say that the assessment of the drivers status and time in between the acceptance of individual trips will however be a matter of fact and degree.  As such, if it is genuinely the case that drivers are able to hold themselves out as at the disposal of other operators when waiting for a trip then the same analysis may not apply.

The Taylor Review of Modern Working Practices which was published on 11 July considered when workers under the gig economy should be entitled to the National Minimum Wage. It noted that working time should be sensibly calculated and that “no individual should be expecting to be paid for all that the time that he or she has the app open (regardless of whether or not they are seeking work).”   The report suggested that the Government could adapt the piece rate legislation to enable platforms to compensate workers based on output.  However, this would also include a requirement for the company to provide information to the worker about the level of work they could expect to receive at that time.  It will be interesting to see how this develops as, if individuals continue to obtain worker status, this difficult aspect of the case will need further clarification.

Uber has indicated that it intends to appeal and we will keep you updated.

Drug and alcohol testing: have you got your employee’s consent?

The idiom “I’m chained to my desk” is one familiar to many, but for the Queensland District Court the relationship between the workplace and incarceration may not always stop there.

In Pere v Central Queensland Hospital and Health Service[1], a hospital fire safety and security officer brought an action against his former employer, Queensland Hospital and Health Service (QHHS) for battery (although it was misconstrued as assault) and negligence after hospital staff required him to take a blood and urine test on suspicion of him being intoxicated at work.

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Bilanzsteuerrechtliche Risiken bei älteren Betriebsrentensystemen

Ältere Versorgungsordnungen nehmen hinsichtlich des Anspruchsbeginns häufig nicht ausdrücklich auf die aktuelle gesetzliche Regelaltersgrenze Bezug, sondern verweisen nach wie vor auf die starre Altersgrenze von 65 Jahren. Gleichwohl erbringen die meisten Unternehmen in der Praxis erst ab dem gesetzlichen Regelrentenalter Versorgungsleistungen und bilden auch ihre Rückstellungen entsprechend. Fallen folglich Schriftform und Rückstellungen auseinander, so kann dies zukünftig unangenehme steuerliche Auswirkungen haben. Die so gebildeten Pensionsrückstellungen werden künftig nicht mehr anerkannt, sondern sind gewinnerhöhend aufzulösen. Die erforderlichen Anpassungen der Versorgungsregelungen sind ggf. nur noch bis zum Ablauf des aktuellen Geschäftsjahres möglich.

Bislang unproblematisch: Starre Altersgrenze von 65 Jahren in Versorgungsordnungen

Verweisen Regelungen zur betrieblichen Altersversorgung in Unternehmen auf die seinerzeit geltende feste Altersgrenze von 65 Jahren für den Bezug einer Altersrente, so war dies bislang unproblematisch. Arbeitsrechtlich ist seit den Entscheidungen des Bundesarbeitsgerichts (BAG) vom 15.05.2012 (Az. 3 AZR 11/10) sowie vom 13.01.2015 (Az. 3 AZR 897/12) jedenfalls für Gesamtversorgungssysteme geklärt, dass die jeweilige Versorgungsregelung dahingehend auszulegen ist, dass auch die Betriebsrente erst dann beansprucht werden kann, wenn die Regelaltersgrenze aus der gesetzlichen Rentenversicherung erreicht wird. Auch wenn das BAG dies bislang nur für Gesamtversorgungssysteme ausdrücklich entschieden hat, so kann dies nach überwiegender Auffassung auch auf andere Versorgungssysteme übertragen werden. Die Versorgungsleistung kann daher bis zu zwei Jahre später, nämlich mit 67 Jahren fällig werden.

Abweichende Auffassung des Bundesministeriums der Finanzen

Bilanzsteuerrechtlich vertreten die Finanzbehörden hierzu jedoch eine abweichende Auffassung. Dies kann dazu führen, dass gebildete Rückstellungen steuerlich nicht anerkannt werden. Eine solche „falsch“ gebildete Rückstellung müsste demnach gewinnerhöhend aufgelöst werden, was ganz erhebliche zusätzliche Steuerlasten zur Folge hätte.

Auch wenn dem Bundesministerium der Finanzen (BMF) die einschlägige Rechtsprechung des BAG bekannt ist, so vertritt das Ministerium gleichwohl den Standpunkt, dass bilanzsteuerrechtlich das schriftlich fixierte Renteneintrittsalter von 65 Jahren maßgeblich sei. Weicht das Unternehmen in der Praxis folglich durch eine spätere Auszahlung erst mit dem Erreichen der gesetzlichen Regelaltersgrenze von ihrer eigenen schriftlichen Regelung ab, so ist nach Auffassung des BMF die jeweilige Versorgungsregelung zwingend schriftlich anzupassen. Erfolgt eine Anpassung nicht innerhalb einer Übergangsfrist (bis zumindest Dezember 2017), so wären die entsprechenden in der Steuerbilanz passivierten Pensionsrückstellungen gewinnerhöhend aufzulösen.

Konkreter Handlungsbedarf bis spätestens 31. Dezember 2017

Dieses Thema dürfte nahezu alle Unternehmen mit betrieblicher Altersversorgung betreffen, sofern die Altersversorgung schon vor längerer Zeit eingeführt wurde, und ist für diese von ganz erheblicher Bedeutung. Die Finanzbehörden werden bei denjenigen Unternehmen, die – wie weithin üblich – den Wortlaut ihrer „alten“ Versorgungsordnungen nicht ausdrücklich an die neue gesetzliche Regelaltersgrenze angepasst haben, die gebildeten Pensionsrückstellungen nicht mehr anerkennen.

Die erforderlichen Anpassungen der Versorgungsregelungen – meist in Form von Betriebsvereinbarungen – sind nur noch im laufenden Geschäftsjahr und damit regelmäßig nur bis zum Jahreswechsel 31.12.2017 möglich.

What rights does an employer have to suspend an employee in the UK?

What rights does an employer have to suspend an employee in the UK?

During an investigation into an allegation of misconduct against an employee, an employer may wish to suspend the employee from work if there is, for example, a potential threat to the business or other employees or individuals, or where it is not possible to conduct a proper investigation if the employee remains at work. However, does the employer always have the right to suspend?

Is the employer contractually entitled to suspend?

Where there is no express contractual right to suspend, the employer may still be able to do so if there is no implied right to work. Where there is an implied right to work, suspension could be a breach of contract.

The right to work might arise, for example, where the employee would otherwise be deprived of the opportunity to earn remuneration such as commission, or where there is a need for the employee to exercise their professional skills frequently.

In view of the uncertainty about whether there may be an implied right to work, it is safest from the employer’s point of view if there is an express contractual right to suspend in particular circumstances which clearly sets out the method of calculating pay during the suspension.

When will suspension amount to a breach of the implied term of trust and confidence?

Even where there is an express contractual right to do so, suspending an employee may amount to a breach of the implied term of trust and confidence. The employer needs to be sure that it has reasonable grounds to do so in order to avoid breach of contract in this way, and what is considered to be reasonable will depend on the particular circumstances, such as the seriousness of the allegations and the impact which suspension would have on the employee.

A recent case illustrated the risk of suspending an employee as a “knee-jerk” reaction to an allegation without considering whether it could be avoided. In the case, allegations were made against an experienced teacher that she had used unreasonable force towards a pupil who exhibited particularly challenging behaviour. In the letter to the employee, the suspension was stated to be necessary “to allow the investigation to be conducted fairly”. The employee challenged the legality of her suspension as being a repudiatory breach of the implied term of trust and confidence.

The court found that before suspending the employee, the employer had made no attempt to hear her version of events or to consider any alternatives to suspension. In addition, the suspension letter did not explain why it was necessary in order to carry out a fair investigation. These facts led the court to conclude that suspension had been a “knee-jerk reaction” and therefore was in breach of the implied term of trust and confidence.

The case demonstrates that an employer must take great care when considering whether suspension is the only option when investigating allegations of misconduct, and should document its reasons for deciding that suspension was necessary in the circumstances. In particular, in the case in question, the employer’s overriding duty to protect children could not be relied upon as the reason for suspension when the stated purpose of the suspension was to ensure a fair investigation.

Does an employer have to pay the employee during suspension?

Unless there is a clear contractual right to do so, the employer has no right to suspend the employee without pay and must therefore pay full salary and benefits whilst the employee is suspended.

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