Category Archives: Employment and HR

The Brexit Effect; how employment legislation will be affected by the UK’s new independence

More than six months have passed since the historic Brexit vote and the subject has remained ever present on the news agenda. Recent events have now revealed a date to look towards as PM Theresa May has announced she will trigger article 50 by the end of March 2017, which means the UK will be non EU members by the middle of 2019.

Here, Richard Thomas, Employment Law specialist and Partner at Cardiff and London based law firm, Capital Law, looks at the potential legal implications the UK could face during the withdrawal process of Brexit, focusing on the potential repercussions on employment law.

Ever since the result of the much anticipated vote was announced, lawyers and civilians were cautious of the legalities that would be involved in the process of leaving the EU. This is predominantly because the Brexit camp never put forward any clear blueprint or model as to how the UK would govern its legal and trading relations once out of Europe.

This was in stark contrast to 2014’s Scottish Independence Referendum when the then Scottish Government published a prospective detailing how an independent Scotland would exist and function.

Theresa May’s decision to invoke Article 5O will serve irrecoverable notice of Britain’s decision to leave the EU. This will then trigger the two year negotiation period in which to conclude a withdrawal agreement.  We’re repeatedly told that ‘Brexit means Brexit’, but ambiguity abounds about what the term actually means in real terms.

The legal implications of such a withdrawal for the UK’s current laws are considerable. For example, the treaties, directives and regulations (and rulings of the European Court of Justice) will cease to apply in the UK unless their affect is specifically preserved by UK national law. Furthermore, the EU Court will no longer have jurisdiction over the UK and UK citizens will no longer have the rights of EU citizens.

What is clear is that there will be significant practical difficulties associated with the need to disentangle EU derived requirements from non-EU derived requirements, especially where case law has, for over 20 years, drawn on the UK Courts interpretation of EU directives and ECJ rulings.

In the employment law field, a significant amount of UK legislation and case law developments have stemmed from the EU and this has strengthened workers individual rights in areas such as working time and annual holidays. Other benefits that have arisen from our EU membership include family friendly policies, anti-discrimination legislation, and employment protection in the event of a change of employer.

Worker collective rights have also been strengthened by EU directives in the areas of collective redundancies, TUPE, European works councils and information and consultation obligations.

Redundancy consultation is a valuable piece of employment protection which could very well be watered down when we leave the EU. The current laws stem from an EU directive and state that collective consultation is required when over 20 people are affected. I suspect that this number will change after our withdrawal and will more likely increase to a minimum of 100 employees that need to be under consultation, although I doubt this will be a legislative priority in the immediate aftermath.

Most of the Working Time Regulations will remain. Paid holiday will certainly stay, and of course the UK gold-plated the European four weeks paid annual leave in the UK.

We also suspect that a ‘week’s pay’, which currently includes commission and overtime following ECJ rulings, will be pared back to what it was a few years ago, with just basic salary being paid as holiday pay.

Possibly the most talked about issue relating to employment is the future of British nationals living and working in other EU countries and vice versa. Previously, Liam Fox, the Secretary of State for International Trade, said that the future of British nationals in Europe is ‘one of our main cards’ in the ongoing Brexit negotiations. He said that no guarantee would be given to the two million EU nationals living in the UK until more information about the fate of British citizens living in Europe has been revealed.

Following Brexit, EU nationals would no longer have the automatic right to continue to work in the UK. It seems likely that the UK Government will agree with the EU a position whereby existing EU migrants can stay (at least for an agreed period) in return for permission for UK citizens working in the EU to remain where they are. It is also likely that the UK will introduce an immigration system similar to the current system for non-EU citizens, whereby skilled workers and students can gain permission to stay for a limited period. Undoubtedly, this could have an impact on some UK businesses if significant restrictions are imposed on their ability to recruit labour from the EU.

While the Brexit effect has already been felt across a number of industries, this is a fraction of what the implications will be when we formally leave the EU. Employment law will certainly be affected not only in the areas touched upon here but also within discrimination cases and data protection, which will both be reviewed upon our withdrawal.

Companies and employers should keep an eye on the news agenda to assess any further impact Brexit could have on recruitment, employment and immigration in order to stay ahead and safeguard their current employees before the legislation changes.

Counseling Early Stage Companies: Advance Preparation for the Exit

Representing early stage, high-growth companies often involves supporting a team of entrepreneurs to take a business from an idea, through commercial launch and market penetration, to a successful exit, often through an acquisition by a strategic or financial purchaser.  The speed and intensity of the client’s activity can be tremendous.  Under the pressure of achieving critical product development or revenue milestones – often driven by the client company’s investors – management will sometimes forego certain basic contracting, human resources and capitalisation  management measures.   Unfortunately, these short cuts will surface during the exit transaction, where the acquirer’s due diligence on the target company will spot these shortcomings in order to identify potential risks as well as opportunities to revalue the target company’s assets and business and reduce the purchase price.  The attorney representing the early stage company can streamline the exit transaction and minimise adverse due diligence discoveries by helping the client institute the following four relatively simple disciplines at the company’s outset (or at least at the outset of the counsel’s engagement), well in advance of any merger and acquisition considerations.

  1. Protect and Preserve Company Intellectual Property. For many early stage companies, intellectual property assets can represent the core of the company’s value at exit.  Those assets, of course, are generated by employees and contractors working on behalf of the company.  In the course of the company’s history, employees and independent contractors come and go.  However, sophisticated acquirers will often probe the target company’s files for potential intellectual property “leaks” or gaps – situations where employee or contractor inventions or developments may not clearly belong to the target company.The simple but often neglected solution to this due diligence red flag is drafting and religiously using a standard employment agreement or independent contractor/consultancy agreement with all new employees and service providers. These standard agreements should contain the following basic covenants:I. Confidentiality: Provisions prohibiting an employee or independent contractor from disclosing or otherwise using the company’s confidential information both during the relationship and for multiple years beyond the term of the agreement.ii. Invention Assignment: Provisions indicating that all “inventions, original works of authorship, trade secrets, concepts, ideas, discoveries, developments, improvements, combinations, methods, designs, trademarks, trade names, software, data, mask works, and know-how, whether or not patentable or registrable under copyright, trademark or similar laws” developed during the term of employment or contractor service belong to the company.  This covenant should similarly include an acknowledgement that all copyrightable material is a “work made for hire.”  Note that company counsel should confirm the impact of the applicable state laws on these covenants. For example, the “work made for hire” clause should be excluded from independent contractor/consultancy agreements governed by California law, as California law dictates that individuals subject to this type of covenant in a services agreement may be deemed employees under the California Labour Code .  Avoid the temptation to limit company ownership of employee or contractor developments to only those generated “on company time” or “using company resources.”  This limitation will only act to invite ownership ambiguity – an unnecessary impediment in the acquisition due diligence process.iii. Pre-existing Intellectual Property Disclosure and Licenses: Provisions obligating employees or contractors utilising pre-existing intellectual property in their work for the company to (i) clearly identify the pre-existing IP and (ii) grant the company a perpetual, transferrable license to use, in the course of its business, any relevant pre-existing IP included in works created by the employee or contractor for the company.
  2. Facilitate Shareholder Decisions. The decision to exit the business will naturally require the approval of both the Board of Directors and the shareholders of the company.  Minority shareholders who are no longer associated with the business, or who have a different perspective on the company’s direction and objectives, can seek appraisal rights, demand certain concessions, or take other steps to block or disrupt the transaction.  While reverse merger structures can be used to minimise the disruption caused by dissenting minority shareholders, these structures increase both transaction costs and the potential liability to the target company.The pre-emptive solution here is a basic shareholder agreement, prepared and negotiated when the early stage company’s shareholder base is relative small and cohesive. The shareholder agreement should include the following elements:i. Dragalong Rights. Terms requiring minority shareholders to support and vote with the majority on fundamental company decisions, including a vote to sell the company and/or waive of appraisal rights.ii. Buy/Sell Arrangements. Structures that ensure that the equity interests of disaffiliating shareholders are (or can be) repurchased by the company or the remaining shareholders;iii. Joinder Provisions. Requirements that all new shareholders (including those acquiring their equity interests through the conversion of debt) become signatories to the shareholder agreement.
  3. Simplify Contract Assignment. A major factor in the acquired business’ valuation is the status of its contractual relationships with customers, vendors, strategic partners and other third parties, and how easily an acquirer can continue to take advantage of those contracts following the acquisition. Contracts that include non-assignability clauses – provisions requiring counterparty’s consent prior to assignment – can greatly obstruct this transition, particularly if the transaction is structured as an asset sale (vs. a stock sale or merger). At best, these clauses can delay a closing while the target company pursues the counterparty’s consent, who may see an opportunity to extract a contractual concession from a vulnerable target.  At worst, the target company’s inability to obtain a counterparty’s consent may result in the termination or rejection of the contract by the acquirer, which can reduce the target company’s valuation.Since non-assignability clauses are often a standard part of the “boilerplate” sections of many agreements, and since solving the anti-assignment clause problem once the contract has been signed is difficult, if not impossible, company counsel should help the client implement the following prophylactic measures at the outset of the negotiations:i. Removal: Generally, the absence of a non-assignability clause in a contract allows both parties to assign the contract freely.ii. Change of Control Carve-Out: An exception that eliminates the need for the counterparty’s consent when the contract is assigned to a successor organization in the event of a merger, spin-off, or other reorganization, or any sale to any entity which buys all or substantially all of the assigning party’s assets, equity interests or business can eliminate the issue in an exit transaction.iii. Reasonableness Standard. As a fallback, incorporate a requirement that the counterparty’s consent to a contract assignment may not be “unreasonably withheld.” While this does not eliminate the need to secure the counterparty’s consent, it will impose a baseline legal standard which may facilitate the assignment negotiation.
  4. Maintain Good Corporate Capitalisation Hygiene. While cases of mystery shareholders appearing at the closing of an acquisition transaction are rare, confusion over the accuracy of the capital structure of the target company, as well as the identification of non-compliance with securities laws, can materially disrupt an exit transaction.  Common causes of capitalisation problems most often relate to (i) failing to either register or file a registration exemption with the Securities and Exchange Commission and/or state authorities in connection with the sale of private securities issued by the target company to early investors, which are usually friends and family, (ii) issues involving the company’s equity incentive plan, including unsigned documents, unclear vesting schedules, and uncertain stock repurchase provisions and exercise; and (iii) overlapping and conflicting convertible securities, including securities with conflicting conversion terms or circular conversion formulas. Many buyers will avoid assuming any risks associated with an ambiguous capital structure or improperly issued shares, preferring instead to let the target company identify and resolve discrepancies before closing.As with the other sets of issues described in this article, the preventive solutions are straightforward and, in most cases, inexpensive:i. Comply With Applicable Federal and State Securities Laws in Securities Offerings: Most states and the SEC have numerous exemptions allowing early stage companies to issue securities without the need for a formal registration.  The exemption process, however, often requires the issuing company to file a registration exemption with the appropriate securities regulator. Failing to file a registration exemption may not require the company to register its shares, but it may prevent the company from utilising a “safehabour ” in future transactions, including an exit transaction with another private company.  Filing the necessary registration exemption forms will not only help ensure securities law compliance; it will also provide assurance to a potential acquirer that these registration exemptions will remain in effect in future transactions.ii. Invest in a Commercial Cap Table Management Software. There are a number of quality, low cost software solutions on the market that can help track and automate company cap tables and “date-stamp” capital structure changes, in order to allow for a simple analysis of capitalisation changes and confirmation of issuances.iii. Automate the Effect of Certain Equity Incentive Plan Triggers. For example, if a company’s restricted stock plan provides for the buyback of unvested shares if the employee terminates, the company’s repurchase of those unvested shares should occur automatically.  Relying on the affirmative action of the company (and potentially the memory, or filing system, of the company’s executives) can result in inconsistent equity incentive plan operation and unintended equity ownership.

    iv. Create Pro Forma Models to Reflect the Terms of Convertible Securities. Going through the exercise of translating the terms of convertible securities – particularly where different securities are issued at different times to multiple parties – will help pressure test the conversion terms and validate that they function as intended.

The foregoing measures, designed to minimise exit disruption, are neither difficult nor time-consuming.  In fact, the most difficult task is often convincing the client company to expend the time, effort and resources to implement these disciplines, even years in advance of a potential exit.  As noted above, it is ultimately time and energy well spent.

It’s No Secret. Laws Combating Wage Secrecy Are Here to Stay

“Bob, don’t talk about your wages at work, please.”

“Fred, don’t ask about the wages of other employees, please.”

“John and Susan, don’t compare your salaries, please.”

Any of these statements by an employer could get the employer into deep legal trouble.  Telling employees not to discuss their wages can subject employers to lawsuits in several states.  The growing trend in wage secrecy laws, which typically include provisions forbidding employers from taking adverse employment actions against employees for discussing their wages, does not look like it will slow down anytime soon.

The Rising Tide

The rise in these laws began in the 1980s, when California and Michigan became the first states to enact wage secrecy laws.  Ten states—Colorado, Connecticut, Illinois, Louisiana, Maine, Minnesota, Oregon, New Jersey, Vermont, and New Hampshire—passed wage secrecy laws prohibiting employers from making adverse personnel decisions against employees, between 2000 and 2015.

Wage secrecy laws promote national and state legislation that require employers to equally compensate all employees for equal work, regardless of the employee’s gender.  According to the United States Department of Labor, in 2014, women who worked full time earned 79 cents to every dollar that a male earned.  One of the policy rationales behind wage secrecy laws is that if employees can freely discuss their wages and know what other employees are paid, employees can identify disparities in wages. 

In April 2016, Louisiana passed the Equal Pay for Women Act, a measure to eliminate pay inequality between men and women.  The Louisiana law does not allow employers to make an adverse employment decision against an employee for “inquiring about, disclosing, comparing, or otherwise discussing the employee’s wages or the wages of any other employee.”  Following suit, in August 2016, Massachusetts passed one of the country’s most robust equal pay laws, as the Massachusetts law bans employers from inquiring about job applicants’ salary history, as well as prohibits employers from taking adverse actions against employees for discussing their wages.

Like the Louisiana equal pay law, the Maryland Equal Pay for Equal Work Act, which went into effect on October 1, 2016, includes wage secrecy provisions that forbid an employer from taking adverse actions against employees for “inquiring about, discussing, or disclosing the wages of the employee or another employee; or requesting that the employer provide a reason for why the employee’s wages are a condition of employment.”  The law also bans Maryland employers from making adverse personnel decisions against employees for inquiring about another employee’s wages, among other provisions.  Several other states including, Ohio, Washington State, Virginia, South Carolina, Indiana, and Pennsylvania are currently considering similar wage secrecy legislation.

Violations Can Be Costly

Violating a wage secrecy law can be costly for an employer.  States impose various civil penalties for violations of its wage secrecy laws.  California employers may be required to reinstate an employee who has been terminated or suspended for discussing their wages as well as pay the employee for lost wages, including interest.  Colorado allows an employee who has prevailed in a lawsuit under its wage secrecy law to recover punitive and compensatory damages, if the employee can prove that the employer’s unlawful conduct was intentional. Violating Vermont’s wage secrecy law can require an employer to pay a prevailing employee compensatory damages, punitive damages, court costs, and attorney’s fees.

Although most states’ wage secrecy laws subject an employer to only civil liability, a Michigan employer can face criminal liability for violating the state’s law.  It remains to be seen whether more states will expand their wage secrecy laws to include criminal liability provisions.

Wage Secrecy Laws May Have Limited Exceptions

Several states do allow employers to limit discussion about wages in limited circumstances.  For example, some states such as New York and the District of Columbia do not allow persons with access to employees’ wage information as part of their job function, such as Human Resources personnel, to disclose those wages.  The exceptions to wage secrecy laws are limited, however.  As such, employer should tread with caution when limiting discussion about wages.

 Federal Trends in Wage Secrecy Laws

On the federal level, the National Labor Relations Act prohibits employers from taking adverse employment actions against employees for discussing the employee’s wages.  Several states’ wage secrecy laws track the language of the NLRA.  Further setting a national trend promoting wage transparency, in 2015, the Office of Federal Contractor Compliance Programs issued a Final Rule implementing President Obama’s Executive Order that forbade federal contractors from prohibiting their employees from discussing wages.  The Obama Administration introduced the Paycheck Fairness Act, which would ban an employer from taking an adverse action against an employee for discussing the employee’s wages.  However, Congress did not pass the legislation.

Congress’ failure to approve the Paycheck Fairness Act does not mean that the federal government will not be holding employers accountable for equally paying all employees.  In 2018, the EEOC will require covered employers to submit an updated EEO-1 form, disclosing the pay data of all employees.  The EEO-1 form currently requires covered employers to submit demographic information about employees, such as employees’ sex, race, and ethnicity.  The EEOC now requires disclosure of pay data in order to assist the EEOC in detecting discriminatory pay practices.

Wage Transparency is Here to Stay

There is no indication that the tide of wage secrecy laws is slowing down or even shrinking.  The District of Columbia currently has a wage secrecy law banning employers from penalizing employees for discussing wages.  Similar to the new Massachusetts law, the District of Columbia is considering legislation that would prohibit employers from asking applicants about their wage histories.

The increase in wage secrecy laws means that employers who do not want to be hit with a lawsuit should carefully review their employment policies to ensure that they do not unlawfully limit their employees from sharing wage information. Confidentiality and social media policies that have not been reviewed in a while should be dusted off and examined as soon as possible, as these are typical places that could get employers into hot water if they include provisions unlawfully limiting employee speech.  Finally, employers should stay abreast of applicable local, state, and federal laws regarding wage transparency.  These laws are likely here to stay.

How to Check Foreign Workers Rights

At the start of October 2016, it was announced by the UK Home Secretary, Amber Rudd, that businesses would be required to list how many foreign nationals they employ, in the hope that it forces more businesses to employ British workers. Ms Rudd said that foreign workers should not be able to “take the jobs that British people should do”.

In a world where we are taught to be accepting of all no matter their nationality, race, gender, or sexual preference, the move to effectively name and shame businesses who support foreign workers seems incredibly backward. And a new way of bringing to light the national origins of who businesses employ.

It’s important to note that the Home Secretary has said that the idea is currently being reviewed, and not policy, much less being a legal requirement which is enforceable.  Personally, I feel that these proposals will not be progressed any further, but they do evidence a renewed push on the part of the Government to discourage employers from failing to recruit UK nationals to fill gaps in the workforce.

Much is often made of the fact that overseas nationals are coming to the UK and working for less than British citizens, which then supposedly leaves UK nationals out of work. But many refute this claim and insist that without foreign workers many crucial roles would be left unfilled.

Whatever your personal or professional opinion on the subject, we’ve put together a guide to help you understand which rights you should be granting to citizens from abroad who are working in the UK.

What is a right-to-work check?

A right-to-work check involve you checking a document which grants an individual the permission to work in the UK. As an employer, it is your duty to check this before you employ anyone to ensure they are legally allowed to work for you. If you employ someone who has a time frame on the period they can work in the UK, then it is your responsibility to ensure follow-up checks are conducted.

You can take the following three-step approach to carrying out right-to-work checks:

  1. Obtain potential workers original documents
  2. Check these in the presence of the holder
  3. Retain a clear copy of the documents and record the date the check was conducted

As an employer, you have a duty to conduct checks to prevent illegal workers from working in the UK, if they are not permitted to do so. If you carry out the checks correctly, then you will have a statutory excuse against any liability which may be bought about in regards to civil penalties. Providing you have checked and documented the required checks then you will not receive a civil penalty if you were found to have employed an illegal worker.

Who should I conduct checks on?

You should carry out right-to-work checks on all potential employees no matter their nationality. As an employer, you should show no bias or discrimination against anyone who applies for the job role you are recruiting for.

No assumptions should be made about a person’s right to work in the UK based on their colour, nationality, ethnicity or national origins, accent or length of time they have been a resident in the UK.

Any breach you do make against the code of practice for employers may be used in evidence in legal proceedings – so act with precaution.

If no restriction to work in the UK is found, then you are not required to conduct any follow-up checks. However, if some restrictions on working are found such as a time-limited visa, then you are required to carry out follow-up checks.

What documents do I need?

Acceptable documents include:

  • Biometric Residence Permits
  • Residence Cards
  • Passports
  • Certificate of Registration or Naturalisation as British Citizen
  • Rights of Abode Certificates
  • European Economic Area documentation – passport or national identity cards
  • Permanent Residence Certificate
  • Certificate of Application that permits work
  • Asylum claimants need to supply a Positive Verification Notice
  • Entry Clearance Vignette

You should check documents are genuine and that the holder matches the documents they are presenting to you. You also need to ensure that the potential employee is able to legally carry out the work you are offering.

Things to look out for on documents include:

  • Check photographs and date of birth is consistent across all documents
  • Ensure expiry dates have not passed
  • Look at whether any work restrictions apply
  • Check documents have not been tampered with
  • Question the owner if difference across the documents occur. If these are easily explained ensure follow-up documents are obtained

You’ll need to make unalterable hardcopies of the documents you require and keep these for the duration of an employee’s time with you, and for an additional two years after employment has been terminated.

What happens if I employ an illegal worker?

If you don’t want to run into trouble with the law, then ensure that you conduct the necessary checks and always record the dates and documents which you were presented with. Employers who are found to have employed illegal workers may face up to five years in jail and be required to pay an unlimited fine, regardless of whether workers were knowingly employed illegally or if you had reasonable cause to believe they did not have the right to work in the UK.

If you had reasons to believe the following, then you may be found guilty of employing an illegal worker:

  • The worker had no permission to enter or remain in the UK
  • Their leave had expired
  • They weren’t allowed to undertake certain types of work
  • Their documents were incorrect or false

It’s your responsibility as an employer to ensure that you’ve carried out the checks correctly. Failure to do so can result in catastrophic penalties for your business both financially and in the eyes of the public.

While these new measures by Amber Rudd remain to be officially confirmed or come into effect, ensuring you are adhering to the rights of foreign workers now can allow you to stay ahead of the game should changes to the law be made.

The Time Has Come to Finally Address Gender Pay

It’s estimated that reducing the gender pay gap could add £150 billion to our economy by 2025, through increasing the number of women in work. It’s a figure – that as a nation – we wouldn’t ignore if it were to be added to our National Health Service or education system. So, why in the world of work are businesses still refusing to close the pay gap which alienates women and has the potential to destroy businesses?

New legislation which comes into effect from April 2017, will require businesses with more than 250 employees to report data relating to pay of both female and male employees. Yet, while the date is just over six months away, unless the gap is addressed in advance of the date, it could leave businesses on an unsure footing further down the line.

Considerable movements were made towards closing the gap back in 1970, with the Equal Pay Act and the Equality Act in 2010; it’s estimated by Deloitte that the gender pay gap still won’t be closed until 2069. With the gap currently standing at 19.4%.

Throughout our work we meet several organisations, and I don’t believe employers have a problem with meeting the new regulations; the time and resources required are easy targets to meet. The real issue lies with addressing any pay gap which is found – which the government are hoping the mandatory reporting encourages.

Our most recent research found that only 44% of organisations currently measure the state of pay within their business. 77% of those that do measure pay, do not report on their findings at all and only 1% publish the data externally – proving there’s clearly a long way to go until figures are published for all to see. While these figures will rise when the new legislation comes into play, ignoring the figures now will impact your business in the long term.

It’s a confusing time for businesses who are perhaps unsure on how to begin dissecting their pay data or address any pay gaps. However, one thing is for sure; gender pay isn’t an issue you can sweep under the carpet. Pay is one of the most emotive subjects in the workplace, so getting it right is key to your businesses success. 

What employers should do

If your business employs more than 250 members of staff, then you are required to report on baseline pay gap figures in April 2017 and then again in April 2018. The figures are then published at the latter date on your businesses website so that they are accessible to employees and the public for three years, as well as being submitted to the government through a dedicated portal.

Pay gap figures should include bonuses and car allowances. Bonuses can be a breeding ground for pay inequalities as they are often individually determined, thus increasing the number of gaps which occur. Pay and bonus figures are to be analysed and submitted separately.

Most importantly, any gaps that are found, are required to be investigated to see the main driver behind the figures. Businesses are then required to act to close the gap.

Put pay on the agenda

Don’t be put off by the fact that data won’t be published until April 2018 – the time to act is now. Depending on when you review employees pay, your 2016 figures may influence your baseline gap when measured in 2017. Those who review pay between May and December may find this to be the case, proving the 2018 deadline could be affected.

The government has stated, “If gender pay gap reporting is to have any impact, it must help employers understand why pay gaps exist and lead to action to address these problems. It must be the beginning of a process rather than the culmination of a tick box exercise.”

Businesses need to be fully invested in closing the gap rather than simply paying lip service to the legislation. A detailed audit will fully identify genuine pay discrimination and help to explain pay gaps which currently exist within the business.

Develop a clear process, like the below, to help you address gaps:

  1. Decide the scope of the review and identify the data required
  2. Identify where men and women are doing equal work, like work, work rated as equivalent or equal value
  3. Collect pay data to identify gaps
  4. Establish the cause of pay gaps and decide whether they are free from discrimination
  5. If pay gaps aren’t free from discrimination an equal pay action plan should be developed, if there are no gaps, this should be reviewed and monitored

Avoid business suicide

Whatever you do, don’t put the pay gap to the back of your businesses mind. It should be at the forefront right now or you could risk committing business suicide. Pay is so emotive that it has the potential to lead to bad feeling both internally and externally if you don’t handle gender pay reporting in the right way. Leading to a PR disaster and employees in uproar if you aren’t careful.

There have been several high-profile cases where big pay-outs were made by businesses and public image destroyed. Birmingham City Council were found to be liable for a £757 million settlement from equal pay claims from women who missed out on bonuses. A big hit to both finances and image.

Putting external views aside, if you refuse to address the gap you could face a wave of unrest among your employees. Identify any gaps and work hard to reduce them and the impact on employee engagement and retention is unmeasurable. Measuring the gender pay gap enables you to empower employees and prove to them they are valued and respected in their working environment. Thus, increasing their loyalty with you and improving productivity.

Clearly, the legislation is a step in the right direction in helping to close the gender pay gap once and for all. However, with no mandatory ruling in place that gaps are addressed, it seems the government are hoping the name and shame route will force businesses into reducing gaps and bring pay equality to their firms.

Tips for Effective Drafting and Enforcement of Restrictive Covenants

The speed of business in the 21st Century has undoubtedly placed tremendous burdens upon employers seeking to enforce restrictive covenants in the modern business world.   In today’s fast-paced and high-tech society, trade secrets can be lost with the click of an iPhone camera and customer information can be mined from protected databases and stolen through the use of an inexpensive flash drive.  Often, the only protection available to prevent further harm is the legal construct known as the restrictive covenant.  Yet, the restrictive covenant’s status as the great elixir is directly linked to its ability to be enforced.  The past decade has ushered in an era of tremendous conflict in connection with the relationship between employers who seek to hold employees accountable for agreements that control the end of the parties’ economic relationship, and the ability of employees to escape the enforcement of such agreements.   This article will explore the methods used in drafting and enforcing restrictive covenants.    

The Basics:

Restrictive covenants in the employment context seek to protect business interests of a corporation by limiting post-employment engagements of an individual or individuals who has moved on from the company.  As a general rule in all jurisdictions, our country’s courts will not allow a company to enforce restrictions if such enforcement will not benefit the legitimate business interests of the ex-employer. See, Guardian Fiberglass Inc. v. Whit Davis Lumber Co. 509 F.3d 512 (8th Cir. 2007).  This notion stems from the fact that our judicial system considers restrictive covenants to be a restraint upon trade by their nature.  This is of course balanced against the parties’ inherent freedom to enter into a contract, which has led courts to a common ground in most jurisdictions.   In large part, most jurisdictions will not issue a blanket prohibition against restrictive covenants and will uphold restrictive covenants to the extent that: 1) the restriction is fair and reasonable and; 2) protects a legitimate business interest.   In determining what constitutes a legitimate business interest, courts usually identify trade secrets, confidential proprietary information, goodwill and special training as protectable property of the business.  With these protectable interests in mind, it becomes essential for the employer to identify how to protect each interest and specifically tailor the agreement to meet its specific needs.   Stated another way, there is no “one size fits all” restrictive covenant.   Business owners and employees must narrow their proposed agreements to match their specific needs.  Doing so requires an understanding of the various types of agreements that are classified as follows:

Non-Competition Agreements:  A Non-Competition Agreement prohibits a former employee from engaging in an employment or ownership affiliation with a competing separate entity or group.

Non-Solicitation Agreements:  These agreements protect against employees who solicit current and or former customers. 

Non-Disclosure Agreements:  These agreements prohibit the employee from utilising and or disclosing trade secrets and confidential information belonging to the employer.

Non-Poaching Agreements:   Non-Poaching Agreements are also commonly referred to as “anti-raiding” covenants and bar employees from hiring away employees to join a new entity.

Given the various types of restrictions available to business owners, it is critical at the outset for the drafter to identify, with particularity, what specific business interests the company seeks to protect.  After identifying the company’s needs, the framework of the agreement may be constructed in a manner that avoids the common pitfalls that have a detrimental effect upon the enforcement of restrictive covenants.  Aside from these agreements, one should be mindful of the separate common-law duty of loyalty in many jurisdictions which prohibits employees from acting in a manner that is contrary to the best interests of the employer during the employment relationship.

Effective Enforcement of Restrictive Covenants Begins with The Drafting of An Effective Agreement – What Every Business Owner Should Know:

When drafting a restrictive covenant, the practitioner must always be mindful of the notion that courts in all jurisdictions historically characterise restrictive covenants as a restraint upon trade.  Because of the judiciary’s conceptual concerns over the restraints presented in this setting, the drafter must be especially mindful of the fact that the agreement must be precise in its scope and more importantly, should only go as far as necessary to protect specific business interests.  Drafters of restrictive covenants should take great care in avoiding the common mistake of creating a covenant that will not stand judicial scrutiny on account of the overbroad nature of the restrictions placed upon the departing owner or employee.  A hallmark of an effective agreement achieves a delicate balance between the protection of the business’ legitimate interests and fairness to the departing individual(s).  

Avoid Broad Geographic Restrictions At All Costs

One of the most critical errors in the process of drafting a restrictive covenant occurs when a party attempts to inject an overly protective limitation on the area in which the departing party may operate a business.  A restrictive covenant must be reasonable in its geographic area.  Generally, this limitation is defined as the area where the existing company does business.  Depending upon the nature of the specific business at issue, the geographic areas often vary and are best described as economies of scale.  While there is no bright-line rule per se, it is generally accepted that geographic restrictions contained in restrictive covenants can restrict an area as small as a few miles as in the case of a “mom and pop” business, or can span the continent as in the case of a large corporation.  Because of the uncertainty attached to geographic limitations, recent strategies in drafting restrictive covenants often de-emphasise a detailed geographic restriction in favour of protecting confidential information and or trade secrets.  By focusing on the information, not the location of the business, the covenant is more likely to be found to be a reasonable protection of a legitimate business interest as opposed to an unreasonable restraint on trade.   Through careful craftsmanship of a targeted and precise geographic restriction, or alternatively focusing on confidential information, (not location), the restrictive covenant is more likely to withstand any challenge, and will likely be enforceable.

Avoid Lengthy Periods of Restriction

Because excessive restrictive periods will not be enforceable, the drafting of an enforceable restrictive covenant requires the infusion of a reasonable time period controlling the former employee or co- adventurer’ conduct toward existing or former customers and the handling of confidential information.  Typically, these the types of restrictions: 1) aim to control the length of time that an individual must refrain from soliciting the employer’s clients or customers and; 2) prohibit the use of  business’ confidential information.   With regard to the former, the duration and the nature of the customer relationship are critical factors in determining whether the prohibition from soliciting customers is reasonable.  In these instances, the duration of the restriction is generally reasonable only if it is no longer that necessary for the former employer to put a new employee to work as a means to demonstrate his or her skill-set in satisfying the former employer’s clients and customers.

In the case of confidential information, the focus shifts to the type of information being protected, not geography. A key consideration in this regard is the length of time the information remains confidential before it becomes part of the public domain or stale and unusable.  The longer the time the information retains its confidentiality, the longer the restrictive period will be found to be reasonable.   By examining the nature of the relationship between the customer or client and the identification of the of information being protected, the period of the restriction set forth in the agreement can be gauged appropriately which will protect the terms of the agreement from collateral attack.

 Identify Whether the Agreement Contains Proper Consideration

Because it is a contract, a restrictive covenant must have adequate consideration (a bargained for exchange) for the covenants to be enforceable.   The most common form of consideration is contained in a services agreement, such as an employment agreement where the owner receives services from the employee in exchange for salary.   In a variety of states, the act of requiring a new employee to sign a restrictive covenant at the commencement of employment as well as conditioning an employee’s continued employment upon execution of the agreement are considered valid consideration.   However, the concept of employment as consideration is not universally accepted in each state and it is imperative for the practitioner to be aware of the jurisdiction’s treatment of employment as adequate consideration.  For example, New Jersey courts hold that employment is valid consideration in a restrictive covenant, whereas Pennsylvania courts hold that mere continued employment is not sufficient consideration and will not enforce a restrictive covenant absent some additional consideration.  See, A.T. Hudson, 216 N.J. Super. at 431-32 (non-compete signed at hire supported by adequate consideration) But See, Socko v. MidAtlantic Systems  of CPA,  105 A.3d 659 (2014) (holding that continued employment is not sufficient consideration to support a restrictive covenant under Pennsylvania law.)   Because of these conflicts of law, drafters must be keenly aware of their state’s handling of employment as consideration to avoid challenge to the sufficiency of the entire agreement.

Be Cautious With Choice of Law and Forum Selection Provisions

Choice of law and forum selection clauses can present significant risks in the context of restrictive covenants because not every jurisdiction treats restrictive covenants in the same manner.  There exists a strong possibility that selection of a choice of law clause could have unintended consequences which prove fatal to the enforceability of the agreement.  For these reasons, parties drafting these types of agreements must exercise due diligence and familiarize themselves with the procedural and substantive law of the foreign jurisdiction.  For example, restrictive covenants are void as a matter of law in California except for a small number of limited circumstances expressly authorized by statute, e.g., where owner is selling goodwill of business. California Business and Professions Code § 16600.  Similarly, not all states honor forum selection clauses, effectively rendering the parties’ intent moot.  To avoid the latent dangers associated with these provisions, it is extremely important for the parties to familiarize themselves with relevant state law in both choice of law and forum selection settings.  Otherwise, these seemingly innocuous provisions could have potentially devastating ramifications upon the enforceability of the agreement.

 The Importance of Confidentiality Agreements

 As mentioned above, a confidentiality agreement protecting the company’s confidential information is independent of  the tighter restrictions of non-competes.  For this reason, it is worthwhile to explore the utility in drafting a confidentiality agreement in tandem with a restrictive covenant insofar as the confidentiality provisions may withstand scrutiny when a restrictive covenant fails.

Strategies For Enforcing Your Agreement

Armed with an agreement that adheres to the foregoing characteristics and honed to the particular laws of the relevant jurisdiction; a party seeking to enforce the agreement by obtaining a remedy for a breach of the agreement can confidently pursue an action at law and equity in several ways:

The Injunction

In a majority of jurisdictions, injunctive relief fashioned to prevent further violations of a restrictive covenant is available under specific circumstances where the relief is necessary to prevent irreparable harm, meaning that the damage cannot be remedied by monetary damages.  For example, acts such as disclosing confidential trade secrets and interfering with customer relationships have been recognised as conduct that sufficiently rises to the level of irreparable harm in various state and federal courts.

Money Damages

Monetary damages may be recovered against a former employee who violates a valid and enforceable restrictive covenant as a means to place the injured party in the position it would have been in but for the action of the party who breached the agreement.  In determining the amount of damages that may be recovered, courts will typically review what the expectations of the parties were at the time of the agreement and will analyse the foreseeability of the harm caused by the breaching party in setting the amount of monetary damages.

Having an agreement that comports with the above principals will

The Blue Pencil Doctrine:

In many jurisdictions, even where = certain portions of the parties’ agreement may be found to be unreasonable, all may not be lost.  Restrictive covenants containing certain unenforceable provisions may still be enforced to the extent reasonable under the circumstances.  In various jurisdictions known as “Blue Pencil States”, the courts have broad equitable power to grant partial enforcement of a restrictive covenant both by removing offensive terms and by adding limiting language in order to grant an employer only that protection which the court deems necessary; to protect what the court’s deem to be legitimate business interestsThis principle allows courts to redraft an unreasonable restrictive covenant to make it reasonable and, therefore, make it enforceable based on the equities in the case.  The doctrine, known as the “Blue Pencil Doctrine” is not universal and must be analysed on a state by state basis.

While the restrictive covenant is not the perfect elixir on all occasions and in all locations, if properly utilised, it can be the best line of defence against threats to the very existence of a business.  However, because of the various state by state idiosyncrasies associated with laws governing the enforceability of restrictive covenants, it is fundamentally important to familiarise one’s self with the particular state law in the jurisdiction at issue and not simply assume that the “cookie cutter” restrictive covenant will suffice.

Uber and Deliveroo just the tip of the on-demand iceberg

Regardless of genre, the battle between the two biggest heavyweights in the on-demand world is constantly being played out before us in the nationals, trade and broadcast media. But anyone thinking that the so-called ‘gig economy’ is the preserve of fast-food and taxi cab businesses are wrong. Very, very wrong.

The gig economy, that which sees an increasing reliance on contract workers rather than permanently employed staff, is set to transform the legal sector sooner than many of us think. But are you ready for it?

Uber is the perfect manifestation of what we mean by the gig economy. With over 30,000 drivers in the UK and valued at over $62 billion, Uber’s hook is that it provides opportunities for independent drivers to work flexibly when they want, with the tagline Work for yourself, drive when you want, make the money you need.

Of course, the business model it operates under has opened up the debate over whether Uber drivers are classified as an employee, worker or self-employed. This has seen a number of protests from Uber and Deliveroo workers over the last few months seeking greater clarification over their correct legal status – the distinction being critical in determining tax liability, statutory sick pay and paid annual leave to name just a few of the rights being questioned.

Both Uber and Deliveroo have become the poster boys of an increased trend – nationally and globally – towards greater flexibility in the workplace. Although the gig economy has its roots in the hospitality and services sectors, its influence is spreading across all industries at a rate of knots, including law.

PwC’s The Future of Work report forecasts that by 2020 around 1 in 5 workers in the UK will be so-called ‘gig workers’. These figures are rather tame when compared to those from the leading trade body the for the UK recruitment sector.

Indeed, the Recruitment & Employment Confederation (REC) suggests that as many as 1 in 3 of us will be opting to work in this way by 2021. It cites figures from research group The McKinsey Global Institute that predicts the gig economy will be worth an expected £45 billion to the UK economy by 2025.

Whichever set of predictions you choose to follow, the consensus is that the gig economy is not a passing fad. Rather, its influence in the way law firms recruit and retain staff will be clear for all to see, if it isn’t already. Let’s look at the numbers.

Recent figures from The Law Society state that there are around 370,000 people employed in the UK – a rise of 8% from 2014-2015. 63% of these positions are solicitors. Growth in the legal sector has averaged at 3.3% each year since 2005 compared to just 1.2% for the UK economy as a whole.

At this rate, the sector will see an additional 29,000 or more new entrants each year for the foreseeable future. So if we fast forward to 2020-2021, of the 29,000 new people joining the legal sector each year around 6,000 of these workers will be gig workers – or portfolio careerists – according to PwC, or 9,600 if we take the REC’s predictions into account.

Against this backdrop, it is surprising to learn that less than one-third of legal employers have a strategy in place to enable their law firms to adapt and accommodate the rise of the gig and portfolio career worker. Why?

Like with many advances, organisations adopt a wait-and-see approach to see if all the predictions presented will actually come to fruition or remain as hyperbole. But regardless of whether law firms are sceptical about the changes that lie ahead (and they will happen), they should be embraced and not feared.

The ‘gig economy’ may still be in its infancy, but there are two distinct demographics that are leading the charge.

First are the ‘millennials’(sometimes referred to as ‘Generation Y’) – those who are currently aged between 20-35, and born between 1982 and approximately 20 years thereafter. They typically want to have greater control over their careers and are expected to make up around three-quarters of all workers by 2030.

Then there are those with a few more years under their belts, the Generation X’ers who were born sometime between 1965 and 1984. They also want more flexibility but they are increasingly seeking greater variety in the work they are doing, opting instead to combine their main career with a number of often-diverse roles.

With demand for gig working growing apace so will the value law firms attribute to it and the greater their understanding of the challenges (and opportunities) presented by this way of working.

One such challenge will be the way law firms manage quality control. Employers will need to ensure that contracts are allocated to the best person for the job and not the one who offered the cheapest rate.

Indeed, with many skilled positions being outsourced to gig workers there is a job to be done to make external workers feel part of the internal team, and vice versa. Failure to do so could see an increase in silos which in turn could see the talent pool become much smaller; thereby, creating an ‘us and them’ corporate culture.

There will likely be changes in work patterns too. Law firms will be required to become more agile and turn many of their preconceptions of how employees work on their heads. Contingency workers are typically recruited to plug short-term gaps in the workforce, but this is likely to change. Workers at both ends of the skills spectrum will increasingly expect to be able to work flexibly and as it stands right now, law firms overall are less geared for such flexibility.

The issue over pay is another key consideration. Law firms will need to clarify the legal and tax status of gig workers to ensure they receive the same protections (and benefits) as other self-employed workers so as to avoid protests like we have seen this summer from Deliveroo and Uber workers. Not forgetting the way that the firm itself will be perceived by clients who will be engaged with a firm whose teams are made up of both permanent and gig workers.

Managing a team of permanent and flexible workers will be a challenge, but so too is the ability too ensure continuity of service throughout the customer journey.

Contract lawyering will certainly be a marked shift away from what we have been familiar with and all of us have a simply choice to make – Are we onboard with the change or not?

With the downward pressure on pricing showing no signs of abating, the ‘gig economy’ is a good fit for the legal sector. Those practitioners with the skills, experience and proven know-how will be in demand and available to be called upon on demand for whatever length of time they are required.

Gig working will not be the death knell of legal practice as we know it. Rather, it will enable law firms to become more flexible, less rigid and utilize a workforce that can be quickly scaled up or down according to the needs of the business. It will take some getting used to, but we’re in an increasingly competitive sector and embracing the gig economy could prove invaluable for practitioners under increasing pressure to reduce their costs while maintaining a high standard of service to their clients.

Leaving the EU – what this means for you and your business

Now that the dust is settling on the UK’s decision to leave the EU, our clients are asking what this means for them.  We are the first member state ever to  leave the European Union and as such, the result has ignited much uncertainty and debate about what lies ahead.

Change always brings opportunities, as well as challenges, and we are focused on helping our clients understand how these changes can benefit their business during the period of transition ahead.

A recent survey we commissioned suggests that only 20% of businesses had set in place a continuity plan for the leave vote. In the public sector, there is concern about what will happen to staffing arrangements as well as EU-funded collaboration projects.  We understand that there is much uncertainty at present, but we will continue to support and provide innovative solutions to help our clients invest and grow.

Of course, it’s not only businesses that are affected.  Exit from the EU will likely have a knock-on effect on a range of private and family law matters which are currently governed by a system which in many areas combines both EU and domestic legislation into an integrated European framework.

Whilst it is not clear what the exit will look like or how we will take forward the laws that the UK has adopted over the last 40 years, we do know that there will be opportunities coming out of these changes and we will be supporting our clients in understanding how these can be used to their advantage.

In this article, I explore some of our key sectors and what the implications may be for them of leaving the EU.

Real Estate

Real Estate markets, whether commercial or residential, always prefer certainty. The last few months have led to a slowdown in transactions while people awaited the outcome of the Referendum. In some recent cases, transactions have been entered into with options to determine depending on the result of the vote, and those agreements may now be determined. Now that we know that the Leave vote has won, we expect to see the Real Estate markets to pick up rapidly. Banks are still in the market to lend to the right product, and there is a significant amount of private equity cash available for property transactions. However, there may be some weakness in areas involving prime offices if companies start relocating their HQs.

Private Law

Since 17 August 2015, we have been coming to terms with new EU legislation for succession (known as Brussels IV). Paradoxically, this system is intended to unify the succession laws which apply to an estate, and now, we have voted to leave just at the point when the member states choose to change things for good!

That said, the UK opted out of the full implementation of the legislation, along with Ireland and Denmark, so the impact strangely has been simplified as there was some uncertainty as to how the legislation applied to the UK. The intention is that EU citizens are able to make an election of the law of the jurisdiction of their nationality to govern the whole of their estate (including foreign property located in another EU state). Post-Brexit the UK is clearly a ‘third state’ under the Regulation, like the USA

This means less flexibility in the choice of succession rules and potentially more tax, although double taxation treaties should continue to apply. Our EU neighbours mainly favour a succession system which includes forced heirship, and we could find ourselves in a position where there is less choice on the ultimate distribution of foreign immovable assets.

Employment

Employment law is unlikely to see too many dramatic changes as the UK leaves the EU. Despite the claims that businesses are stifled by EU labour laws, the fact is that many Employment law rights either originated in the UK or have become deeply embedded in UK law as the UK’s attitudes to social issues have evolved. A move to scale back all but the most minor Employment law rights would, in all likelihood, be politically unpopular.

In addition, potential changes could be severely limited by the subsequent trade deal negotiated – other non-EU countries such as Norway and Switzerland have not in practice been able to free themselves of many EU labour laws. In several areas, such as data protection, we are likely to produce laws that mirror EU legislation to ensure we can conduct business effectively.

Such changes as there are could be seen in the areas of collective consultation rights, clarification on Working Time rights such as paid holiday and a repeal of the 48-hour limit, tweaks to the Transfer of Undertakings (Protection of Employment) Regulations 2006, and potentially more significant changes to/removal of the Agency Workers Regulations 2010.

As well as the immediate impact on markets and the business outlook for employers, the referendum result will also throw up longer-term issues, such as the migration of staff in and out of the UK and a potential re-run of the Scottish referendum. Unfortunately, the lack of a clear indication as to what any exit deal would look like makes it very difficult for businesses to plan for it in any practical way at the present time.

Banking and Finance

The financial markets and the banking sector hate uncertainty. The government needs to move quickly to reassure the business community by setting out a clear plan to replace existing trade and other arrangements with the EU and the world as a whole.

Particularly in the short term, the role of the Bank of England will be key. At a time when the monetary tools available to them are already limited, they need to find a way to protect the pound and keep interest rates at a level that enables companies to continue to borrow and invest in what will hopefully be a prosperous economic future for the UK.

Healthcare

The Referendum campaign highlighted a fundamental lack of objective data regarding the impact of EU membership on our healthcare system, and therefore the effects of an exit. However, staffing is likely to be impacted as the NHS, and social care are reliant on overseas migrants to help alleviate intense staffing pressure.

The London location of the EU Medicines Agency has been cited as a positive factor in the NHS’s successful positioning of its R&D capabilities, attracting overseas investment and funding. If the EMA must now relocate, the long-term impact on trials revenue and participation will depend on the strength and depth of relationships already established.

European systems have influenced several of the new models of care programmes in the NHS.  Many independent healthcare operators have pan- European activities. Uncertainty in the short term about implications of an exit could impact collaboration and appetite for financial risk in organisations supporting the NHS.

Education

It is impossible to ignore the fact that the higher education sector, which is presently reliant on the EU as a reliable source of funding, in the form of students, research grants, and capital finance, faces a challenging future, given the uncertain nature of the relationship between the UK and the EU. In the next five years, we may well see a more innovative approach to funding and collaboration required, with institutions looking further afield for support, or collaborations with the private sector.

Intellectual Property

For the moment it is business as usual and trade mark and design owners should not panic – European Union Trade Marks and Registered Community Designs remain valid in the UK, and there is no immediate loss of IP protection.

Once the UK formally gives notice to exit, the EU negotiations will begin on the status of EU marks in the UK and whether any transitional provisions will be required to grandfather across EU trade mark and registered design rights into the UK.

Planning

There maybe harmful consequences for major infrastructure projects as much of the funding comes from Europe including Crossrail and HS2.  How such projects will be funded in the future will apparently be included in the Brexit negotiations.

It is impossible, though, to predict what the wider impact will be on our economy or the property market at this stage but if migration is reduced, then the pressure on housing should be reduced and the housing needs assessed more accurately.

Information Governance

Most of the laws in information governance are derived from European legislation. The Data Protection Act, the Privacy and Electronic Communications Regulations, the Re-use of Public Sector Information Regulations, the Environmental Information Regulations – all of these are examples of UK laws derived from EU directives.  For primary legislation, such as the DPA, leaving the EU will have no immediate effect.  For secondary legislation, such as the EIRs, the situation is more complicated.  These were made under powers derived from the European Communities Act 1972, which is the statute that governs our membership of the EU.

Family Law

Leaving the EU will have a knock-on effect on a range of family matters governed by the current system, which pulls together strands of EU and domestic legislation into a single Family law regime. Changes are likely to be felt most keenly by international families.

In terms of jurisdiction in divorce matters, the current rule of “first in time” as to where proceedings will be dealt with will disappear. Parties will therefore potentially be afforded greater flexibility as to where they choose to divorce. However, matters could become increasingly costly if the proposed jurisdiction is contested and, in these circumstances, parties may well find themselves litigating over jurisdiction issues before the main proceedings are dealt with at all.

Enforcement of existing domestic Orders concerning maintenance, child contact, and domestic violence will also be affected. EU legislation currently works with domestic legislation to provide a relatively simple framework for enforcement of such Orders in other EU member states. Brexit means that the system will not operate as such any longer, thereby potentially undermining the current system of mutual co-operation between Courts.

The law governing international child abduction would also see some changes, albeit that these would be less significant. This is because the main international legislation governing this area is found in the 1996 Hague Child Protection Convention and the 1980 Luxembourg Convention, which will remain in force. However, changes incorporated into these Conventions by later EU Regulations will fall away, leaving gaps to be filled at a later stage. The child abduction regime may be weakened in the interim until a comparable system is put back into place through re-negotiation of bilateral agreements with different states to replicate the lost provisions.

For more information on what leaving the EU will mean for your business visit www.blakemorgan.co.uk/brexit or email brexit@blakemorgan.co.uk

Life after Brexit – Brave new world for employers – or business as usual?

What if Britain has chosen Brexit and begins the process of withdrawing from the EU.  What are the implications for employment law?

“Workers rights” featured time and time again in the referendum debate.  For example, Jeremy Corbyn campaigned on the basis that voting Remain would protect “paid holiday, the anti-discrimination legislation, the maternity leave, the paternity leave and particularly environmental protection”. For Leave, Boris Johnson said we needed to take back control of our rights from the European court.

Should Britain chose Brexit, we will set sail on unchartered and untested territory.  There will be intense debate over the coming months, or even years, as to what the UK’s future relationship with the EU will be.

It is too early to say what the employment law landscape would look like after Brexit.  While there has been talk of the UK being able to rip up the statute book and start again in relation to EU derived or EU compliant employment law; this is a theoretical, rather than realistic, possibility.

Don’t panic

Our immediate message to our clients is “don’t panic”.  The last thing we would advise is for any “knee-jerk” reaction by employers to address life post Brexit.

The UK has been part of the EU for the last odd 44 years, and many employers and employees – including CEOs, MDs, Directors of HR – and employment lawyers have never known anything else. They have come of age with an understanding, and acceptance of, EU standards and law.  Much of this has became firmly entrenched in the national consciousness, and championed by Government – for example, the equal treatment legislation, and the prohibitions on unlawful discrimination, harassment or victimization.    Indeed, the UK already had much of the law vaunted as “European”, before the EU required it, such as the right to paid holidays, and the right to paid maternity leave.  Again, in several important areas, (again including holiday and maternity leave entitlements), the UK provides more generous workers’ rights than the EU requires.

Even where many of these rights are not the accepted norm, it would be wrong to characterise the government as being able to throw off the shackles of Europe and free to scrap employment legislation as it sees fit.  Far reaching changes to the employment law landscape would face the usual political and practical obstacles, and could face resistance from businesses, unions, and politicians on both sides of the house.  It is hard to imagine, for example, an argument that employers should be free to discriminate on grounds of pregnancy or sexual orientation being accepted.

Add to this, the fact that employees are now more than ever aware of their individual rights. There is a growing emphasis on the individual and human rights in the workplace and the scope of discrimination law is continually increasing. The UK does not have a Human Bill of Rights and this gap is, in part, filled by the current employment law regime.

It also seems likely that a future relationship with Europe will be, to some degree, conditional upon compliance with EU standards and principles, which may well include employment laws, and also related areas such as data protection, trade secrets and confidential information.

National laws – Candidates for review/scrapping?

That said, it looks unlikely that it will be “business as usual” in all respects.  The legislation of the EU and the jurisprudence of the European Court of Justice (ECJ) have had a profound and far-reaching effect on our national employment law. It is perhaps not surprising that some of these developments have been more welcomed and embedded into our national law than others.

There are some pieces of EU-derived employment law, which are likely to now be considered candidates for scrapping, or rewriting.

Working Time

The Working Time Regulations 1998 must be high on the list.  The UK government has never had much sympathy with this legislation. As long ago as 1996 it argued – unsuccessfully – in the ECJ for the directive’s annulment.

From the very first discussions, the UK government was not in favour of the imposition of maximum weekly working hours (48 hours a week); seeing it as an unwelcome interference in business and sovereignty. It successfully secured an ‘opt-out’ to this, but has been forced to defend that position ever since.

The opt-out has been heavily relied upon in the UK. The neutralised policy is now likely to come under review.  In our view, it is very unlikely that the Regulations will be wholly abolished. More likely, they will be watered down.

The 48-hour week aside, the Regulations provide rights to statutory paid holiday and these are surely too secure to be considered under threat.

However, not all aspects of statutory holiday delight employers. How it works in practice has become one of the most technically complex and debated issues in employment law, with new developments and cases every year. It’s hard for employers to know where they stand with this measure. Further, the Regulations have been found not to comply with the European directive in various respects, which only increases the uncertainty.

Over the years, the ECJ has looked at various situations and asked how the right to annual leave works, keeping its focus very firmly on the health and safety purpose which sits at the heart of the legislation. This has led to some surprising and, to many employers, frustrating results, such as the provision for workers on sick leave and maternity, or other statutory leave, to continue to accrue holiday. There are also complex decisions concerning on-call time, compensatory rest and holiday pay. Such decisions – which some employers have conformed with begrudgingly – may well now be addressed in a domestic legislative ‘rewrite’ and court cases following Brexit.

Discrimination and Equal Treatment

While the basic tenets and principles of equal treatment may now be pretty firmly enshrined in the UK and it is generally accepted that “thou shall not discriminate”, it is also right to say that the decisions from the ECJ have protected individuals’ rights, and extended these, often fundamentally so. This reflects Europe’s founding commitment to equal treatment as enshrined in its Treaties. Examples here include rights in respect of equal pay, maternity, pregnancy, part-time workers and long term sickness.

During the campaign, Boris Johnson said we “need to weigh in on all that stuff, all that social chapter stuff” and the employment minister, Priti Patel, said: “If we could just halve the burdens of the EU social and employment legislation we could deliver a £4.3bn boost to our economy and 60,000 new jobs….”  It will now be a case of “over to them” to see if and how these aims will be achieved.

Other areas

Other laws likely to be appealed or reviewed include the Agency Workers Regulations, certain aspects of the Transfer of Undertakings Regulations and of collective consultation requirements, and the obligations in respect of information and consultation bodies.  These are all examples of EU-derived legislation, which has never gone down well with businesses, and which has not been absorbed seamlessly into our national approach. Other possible candidates include part-time workers’ legislation and fixed-term employees’ legislation.

However, as the referendum and the debate leading up to it have showed, predictions are dangerous, and we will have to wait and see.

Jonathan Maude

Jonathan Maude is a Partner at Vedder Price and leads the group’s employment team in the firm’s London office. Mr. Maude regularly advises across the full spectrum of employment law-related issues in the contentious and non-contentious spheres, and advises corporate clients on complex strategic human resource-related matters. He also provides training for clients’ employees on the full range of employment law matters, advises clients on global mobility issues as well as on data protection and privacy matters.  Mr. Maude is a regular commentator in the press on employment law, gives seminars, and has appeared on national television because of his knowledge of the subject area.

Esther Langdon

Esther Langdon is a Senior Associate in the Labor and Employment group of Vedder Price’s London office.  Ms. Langdon advises clients on all aspects of employment law, with a particular emphasis on contentious matters before the Employment Tribunal and the High Court. She also advises on the full range of personnel matters, carries out comprehensive reviews of employment documentation, is experienced in advising on employment issues arising from corporate transactions, and advises and provides training for clients and their employees on equal opportunities and diversity in the workplace.  Ms. Langdon also provides full-spectrum advice to clients on privacy, technology and data security matters.

Vedder Price is a leading law firm, with offices in the UK and USA. Jonathan Maude is Partner and employment law lead; Esther Langdon is a Senior Associate in the Labour and Employment group

Changes to Sentencing – A View on the New Corporate Manslaughter and Health and Safety Offences

As of February this year, a new guideline has been unveiled by the Sentencing Council to act as a definitive guide for both the Magistrates and Crown Courts when dealing with a number of cases concerning health and safety offences – including corporate manslaughter for both companies and individuals. Kate Lingley, solicitor in the crime department at law firm, HardingEvans gives her thoughts on what the changes mean for businesses.

“Before this guideline was published, there was little specific guidance as to how the Courts should deal with these matters. This lack of clarity no doubt resulted in Courts dealing with offenders in different ways from others, such as imposing significantly varying fines.

“The Guidelines Council has brought a clear structure to future sentencing and has given effect to the changes in the law made by the Health and Safety (offences) Act 2008 which increased the maximum penalties for a number of relevant health and safety offences, for example, the maximum sentence that can be imposed by a Magistrates Court increased from £20,000 to a unlimited fine for offences such as contravening any requirement of an improvement or prohibition notice (Section 33 Health and Safety At Work Act). This power relates to offences committed after March 2015.

“The new guideline moves sentencing towards higher fines and will no doubt have an effect on businesses and individuals who find themselves before the Court for health and safety matters. This is because the guideline creates new categories for either increasing or decreasing the seriousness of the offence by considering the culpability of the offender and the harm caused to the victim.  For example, in a case of poor hygiene in a business, if death or very serious injury is caused to a customer then it will fall within the most serious category. If there is some form of permanent or long term effect upon the victim then this would fall into the middle category and anything less would be in the lowest category.

“In terms of determining culpability, this will largely depend upon the way the company or individual has acted. For example, are there clear industry recognised measures in place to try and prevent the situation occurring that have been ignored? Have concerns raised by employees or others been disregarded? Should obvious changes have been made or has the dangerous situation existed for some time?

“The Court will use the premise of culpability and harm to assist them in deciding how serious the offending is. Next the Court will look at the business’ turnover to decide on how big the financial penalty should be for the offence. For example, a company with a turnover of 50 million or more would be looking at a fine of between £2.6 million and £10 million for a high culpability, higher harm case. The guideline gives scope for this to be even higher depending upon the turnover of the company. In contrast, smaller businesses with a turnover of less that two million can expect fines in the region of £150,000-£450,000 for the same level of offence.

“There are a number of important lessons that can be learned from the guidelines to help businesses avoid committing offences, or in the event that they have been committed, to try and ensure they are dealt with at the lowest possible level. Businesses are advised to ensure that their practices and procedures for avoiding and mitigating risks are up to date and in accordance with industry standards. If concerns are raised, by internal staff or external sources, make sure these are acted upon and not ignored.

“Serious situations such as the death or illness of an employee or member of the public do unfortunately occur. These situations are not always the fault of those in charge. If you find yourself in a situation like this, legal advice is crucial to avoid an already serious situation developing into what may be a disastrous outcome for you and your business.

“Prompt and effective legal advice results in informed decisions being made at the earliest stage possible. This means your solicitor assisting you to put forward a clear and concise defence at both the investigation and prosecution stages. Alternatively, it is important to have quality representation to advise you if the evidence is overwhelming.  If you accept responsibility for any shortcomings then an early guilty plea avoids long and costly litigation and ensures you receive the best possible sentence discount, in other words, a lower fine.”