Jedi Faith – May the Force be with you!

Recent reports have suggested that a group of four inmates at Her Majesty’s Prison Isis in South London are threatening to sue the prison service.  The inmates allege that the prison service has discriminated against them by failing to allow them to practice their Jedi religion freely.  The prison service acknowledged that Jedi was a religion recognised on the UK census but indicated that it was recognised by the National Offender Management Service (“NOMS”).  NOMS does recognise Rastafarianism as a religion.  According to the 2012 census, Jedi is cited as the seventh most popular religion in the UK.

The Equality Act 2010 makes discrimination base on religion or belief unlawful.  There is no definitive list of religions or belief systems which are recognised by the law.  Given that beliefs are often extremely personal to the individual holding them, it makes this a very difficult to area in which to legislate.  Previous case law has formulated a set of criteria for determining whether a belief is recognised to the extent of being legally protected:-

  1. The belief must be genuinely held;
  2. It must be a belief and not an opinion or viewpoint based on the present state of information available;
  3. It must be a belief as to a weighty and substantial aspect of human life and behaviour;
  4. It must attain a certain level of cogency, seriousness, cohesion and importance; and
  5. It must be worthy of respect in a democratic society, be not incompatible with human dignity and not conflict with the fundamental rights of others.

The Employment Appeal Tribunal has previously stated that “belief in the supreme nature of the Jedi Knights” would fail at least four of these five limitations on what amounts to a belief.  On that basis, the force may not appear to be strong for the Jedis.

Jack Boyle
Senior Solicitor – Employment Law

Animal Rights in Employment Law

Search Dog

In the recent employment tribunal case of The Commissioner of Police for the Metropolis v Keohane, the facts were that a dog called Nunki Pippin was permanently removed from a police dog handler when she was no longer operational because of her pregnancy. She claimed that this decision was both directly and indirectly discriminatory. The Employment Appeal Tribunal (EAT) upheld the claims of direct and indirect discrimination. The judgment was handed down on 4 March 2014.

The EAT held that this decision produced an impact on career progression and loss of overtime on the claimant’s return and was therefore a detriment. Even although the motive behind the decision was to ensure that a search dog was kept operational, the EAT held that the claimant’s pregnancy had been a factor in the decision. The detriment did not need to be caused solely or mainly by a discriminatory motive and it was held that it was enough that the pregnancy was a major influence on the decision.

The EAT also noted that the policy of removing dogs without guaranteeing their return to handlers would have a differential impact on one gender as a whole and therefore would be indirectly discriminatory.

Employers should be careful when making decisions which are determined by an employee’s protected characteristic.  If a significant factor in making a decision is because an employee holds a protected characteristic, employers may face a direct discrimination claim by that employee. Similarly employers may face an indirect discrimination claim (or claims) if a policy has a differential impact on employees who hold a specific protected characteristic compared to employees who do not hold such a characteristic.  Such a policy would require to justified in order to avoid a finding of indirect discrimination.

If in doubt, the sensible approach would be to take legal advice at an early stage so as to avoid a potential claim under the Equality Act.

Simon Allison
Partner – Employment Law

50 Shades of Purple… but only one for Cadbury

The Supreme Court has refused Cadbury’s application to appeal against the Court of Appeal decision in Nestle SA v Cadbury UK Ltd. In the case, it was held that Cadbury’s trade mark application, regarding its distinctive colour purple, could not be a validly registered mark.

The Court of Appeal considered that a trade mark must be (1) “a sign”, and (2) “graphically represented”. However, on the basis of Cadbury’s verbal description, it did not meet the required criteria of constituting a sign:-

 “the colour purple (Pantone 2685C)… applied to the whole visible surface, or being the predominant colour applied to the whole visible surface, of the packaging goods.”

The wording “or… predominant” was thought to be vague and is capable of constituting a large number of alternative signs and designs without any certainty as to what the mark actually is. It was considered to be an application for a shade of colour together with secondary characteristics, rather than just a solid colour. Overall, the court stated that the mark lacked “the required clarity, precision, self-containment, durability and objectivity” required for registration.

Cadbury

Given that the Intellectual Property Office originally accepted the application, Cadbury may wish to make a further trademark application for Pantone 2685C. The judgment of the Court of Appeal highlighted some points which Cadbury (and other potential colour trade mark owners) should consider the following:

The application to register a trade mark must be:

  •    a sign;
  •    capable of graphical representation; and
  •    capable of distinguishing between different goods or services.
  •   In order to be identifiable, a mark must be clear, intelligible, specific, precise, accessible, uniform, self-contained and objective.
  •  A single mark cannot take on multiple forms so as to cause confusion as to what exactly is being registered.
  •  A colour alone is not capable of being a sign; the colour must convey a message as to the source or origin of the goods or services. In such a case, colours without a defined figure or shape would be capable of registration when applied to a product or service.
  • A mark with multiple combined colours must be strictly uniform in its graphical representation, for example Burberry tartan (mark UK2300419).

The purpose of these rules is to prevent any unfair competitive advantages through the abuse of trade mark law.

The difficulties in securing the more unusual trade marks, as demonstrated by this case, may deter potential applications. If the potential owner can establish a reputation in the colour (as Cadbury had been able to do by showing the goodwill built up in their use of the purple since 1914) they can still rely on passing-off rights. Given the additional complexities in enforcing rights in unregistered marks, it is to be hoped that this area of the law develops further in the near future to ensure much needed clarity for applicants.

Ellis Walls
Trainee Solicitor – Business Services

Games Tax Relief – Will this be console-ation to the industry?

Gaming

TIGA, the gaming industry’s representative body, has announced the introduction of a Games Tax Relief to assist those companies operating in the video game development industry.

It is asserted by TIGA that the relief will contribute up to £188m in extra investment to the UK games industry in the next five years. While the extent of these indirect benefits are not yet clear, what are the direct benefits for those companies qualifying for the relief?

Qualifying Games

UK registered companies which develop video games for distribution to the public may qualify for the relief, applicable to accounting periods beginning on or after 1 April 2014. The relief does not apply to partnerships or LLPs. Start-ups in the video games sector should note this when considering what structure (incorporated or otherwise) will be appropriate for them. Although the tax advantage ‘tail’ should not be allowed to wag the dog.

The company must be directly responsible for designing, producing and testing the game or contracting and paying for goods and services required in relation to that game. This is presumably to avoid duplicate claims for relief from other organisations because they have carried out development work for the original developer through a sub-contract.

The game in relation to which the relief is applied must have been developed as a game intended for distribution to the public from its inception. It must not have been developed in relation to another technology project and “switched” to a game in order to apply for the relief. Games which were produced for advertising or gambling purposes for not eligible for GTR. It is suspected these were intentionally excluded to prevent the multitude of gambling and bingo websites from claiming the relief on the grounds of limited original artistic or development work.

Spend

Not only are there parameters on what qualifies as an eligible game, but also what is eligible spending. The expenditure should not be on developing the initial concept or for general maintenance or carrying out ‘fixes’. All costs incurred in the design, production or development stages of a game are eligible. Having said that, the game must be completed and brought to market in order to qualify; a cancelled project may not qualify for relief.

Relief

Presuming that a company’s developed game and its spending is eligible for relief, how can the company benefit?

If a claim is successful HMRC will pay back the amount of relief in the form of a tax credit to reduce the liability to corporation tax (or claim a cash rebate if the game makes a loss). 80% of the total costs of game production can be claimed against. Up to 25% of those costs can be claimed back. The percentage relief applied is calculated on the basis of a points system. Points are awarded as to what extent the game in question is culturally British. HMRC will consider the following:

  • the location of the game;
  • how many of the game’s characters are from the UK;
  • does the game portray a British story;
  • if the dialogue is in English or another UK recognised language;
  • the extent of the game’s promotion of British culture;
  • the number and role of the production staff who are citizens or residents of the UK.

This UK test also extends to consideration of whether the costs will be eligible. The intention is to avoid companies exporting all of the production and development work to other countries and losing those jobs from the UK market.

There are certainly a number of tests to overcome before a company can qualify for the GTR, which may limit how beneficial it will be to the industry in general.

The real concern however may be for the gamers, rather than the developers, should the content and style of games become increasingly homogenised in order to pass the “Britishness” culture test in order to qualify for greater percentages of relief.

Kelly Craig
Solicitor – Business Services

Zero Hours, Zero Rights?

blackered/E+/Getty Images
blackered/E+/Getty Images

The Scottish Affairs Committee has recently published an interim report on the use of zero hours contracts in Scotland.

Zero hours contracts are often used by employers who want to engage staff on a flexible basis without binding themselves to certain obligations.  Zero hours contracts are not defined in law.  Typically, a worker will sign up to be available for work as and when required although a zero hours contract places no obligation on the employer to actually provide work.  The worker will be paid only for the hours worked which are generally not guaranteed.

The report described the use of casual labour as alarming and branded the Government’s consultation over zero hours contracts as “too narrow”.  Ian Davidson MP, who chaired the Committee stated: “The overwhelming majority of zero hours contracts are abusive and exploitative and should be abolished”.

The report continued: “It is clear that zero hours contracts and other forms of casual labour can benefit both employers and workers but our inquiry has shown that, too often, the relationship is unbalanced, leaving the employer with all of the flexibility and few costs and the worker in fear of dismissal and denied access to due rights of employment”.

The report found that 20 per cent of those engaged under zero hours contracts are paid less than their permanent counterparts with around 5 per cent being paid below the National Minimum Wage! It described the Government’s assertion that low paid workers could challenge abusive employers through the courts as “fanciful”.

The overriding conclusion was that in the vast majority of cases, zero hours contracts should not be used.  The committee recommended that zero hours contracts must only be used if the employer could objectively justify the use.

It will be interesting to see how the Government reacts to the report and whether any legislation is introduced to regulate the use of zero hours contracts.  In the meantime, no doubt zero hours contracts will remain prevalent.

Jack Boyle
Senior Solicitor – Employment Law

Practise What You Preach!

James Cotier/Photodisc/Getty Images
James Cotier/Photodisc/Getty Images

The recent case of IBM UK Holdings Ltd & Anor v Dalgleish & Others provided an interesting consideration of the implied term of mutual trust and confidence in an employment contract.

In light of the decision, employers should be aware that if they claim to maintain high ethical standards then the courts will consider this when determining any subsequent dispute between the parties.  This case essentially means that a court can determine any dispute with reference to the implied (unwritten) duty of mutual trust and confidence.

In the case, IBM wished to alter its pension arrangements and much of the case is about pension law. However, the Judge also considered whether IBM was in breach of the implied term of mutual trust and confidence by failing to consult properly with its employees. The Judge held that the employees were entitled to expect a consultation process which was in accordance with the company’s statements of principle which were based on honesty and clear communication. Mr Justice Warren held that IBM had not behaved openly and transparently and, in the context of IBM’s statements of principle, this was a breach of the implied term of trust and confidence.

This demonstrates that an employer must take into account employees’ reasonable expectations when making decisions. The employees’ reasonable expectations are relevant in determining whether or not the implied duty of trust and confidence has been breached.  Employers who choose to make assertions like the ones made by IBM, should ensure that they practise what they preach!

Cheryl Hogg
Trainee Solicitor – Employment Law

Constructive Dismissal in 4 Pictures

Constructive dismissal occurs when an employee terminates the contract under which he is employed in circumstances in which he is entitled to terminate it by reason of the employer’s conduct. Morecommonly, claims of constructive dismissal arise when an employee decides that “enough is enough”, and resigns from his or her employment on the basis of the employer’s unreasonable behaviour.

Determining whether constructive dismissal has taken place is complicated and, if the case proceeds to an employment tribunal, the legal burden is on the employee to demonstrate that he or she was entitled to resign from employment on the basis of the employer’s behaviour. Assistance in this area is given by the decision of the Court of Appeal in Western Excavating (ECC) Ltd v Sharp 1978 ICR 221. In this case, the Court of Appeal held that constructive dismissal was deemed to exist where the employer was guilty of conduct which was a significant breach going to the root of the contract of employment or which showed that the employer no longer intended to be bound by one or more of the essential terms of the contract. The Court of Appeal’s definition of constructive dismissal in this case is thorough and detailed but the test can be distilled into a four-part test which is illustrated below in picture form:

John Foxx/Stockbyte/GettyImages
John Foxx/Stockbyte/GettyImages
  1. There must be a breach of the contract of employment on the part of the employer. This can be a breach of an express term within the contract or an implied (or unwritten) term.  Frequently employees will rely upon a breach of the implied, unwritten duty of mutual trust and confidence between employee and employer.
Andy Andrews/Photographers Choice
Andy Andrews/Photographers Choice
  1. The breach must be fundamental. The breach must go to the root of the contract.  Basically the breach must be so serious that it allows the employee to treat the contract as having been terminated.  This part of the test is the one that employees frequently find difficult to satisfy.  A minor or insignificant breach on its own will not satisfy this part of the test.

causation-v-correlation-cartoon

  1. The employer’s breach must be the reason for the employee’s resignation. The employment tribunal would require to ask itself, “Would the employee have resigned if there had been no breach?”  If the answer to this is no, this part of the test will not be satisfied.
Tom Merton / OJO Images/Getty Images
Tom Merton / OJO Images/Getty Images
  1. The employee did not delay too long before resigning. If the employee waits too long after the breach before resigning, he or she may be deemed to have accepted the breach.

From an employee’s perspective, if the employee cannot satisfy all four parts of the above test, a claim of constructive dismissal will fail.

From an employer’s perspective, if you want to avoid a claim of constructive dismissal, you should treat your work force in a fair and transparent manner.  An employer should strike a balance between, on the one hand, keeping the workforce informed and happy and, on the other, supporting the managers.  Whilst employees may be unhappy about certain policy decisions in the workplace, it would not be appropriate for managers to feel undermined by the employer in their decision-making.  Similarly employers should ensure that they have a robust grievance policy in place and should not be afraid of using it as a tool for managing the workforce when necessary. Ultimately communication is key. Where appropriate, employers should ensure that employees have a forum to discuss matters if unhappy and also make sure that they deal with any grievances promptly and properly.

Cheryl Hogg
Trainee Solicitor – Employment Law

Changes to Statutory Sick Pay

 

Aslan Alphan/Getty Images/E+
Aslan Alphan/Getty Images/E+


Rate of statutory sick pay
:  From 6 April 2014, the rate of statutory sick pay (SSP) has increased from £86.70 per week to £87.55 per week.  This means that the maximum SSP payable over 28 weeks is now £2,451.40 (as opposed to £2,427.60).

Recovery of statutory sick pay:  Prior to 6 April 2014, employers could reclaim any amount of SSP which exceeded 13% of its national insurance contributions in the month.  However the government considered that this dis-incentivised employers from encouraging long-term sick employees from returning to work and, as a result of this, has revoked this provision.  With effect from 6 April 2014 onwards, it is no longer possible for employers to reclaim SSP from the government.  Commentators have suggested that this should save an estimated £50million each year.

Simon Allison
Partner – Employment Law

Excuses, Excuses, Excuses!

Joshua Blake/Getty Images
Joshua Blake/Getty Images

Not quite “the dog ate my homework”…but almost! 

My colleague Cheryl recently highlighted the increased National Minimum Wage (NMW) thresholds which will be applicable from 1 October 2014.

Employers who fail to pay their staff the appropriate rate of NMW run the risk of facing penalties of up to £20,000 (in addition to claims for unpaid wages).

Her Majesty’s Revenue and Customs (HMRC), who are responsible for enforcing NMW, recently announced a list of the ten worst excuses given by employers who default on NMW obligations.

Among the weird and wonderful excuses included one employer who alleged that the staff did not get minimum wage because they did not speak English (arguably this would be discriminatory as well as to breaching the NMW regulations).  Another employer claimed that its employees were happy being underpaid because they were gaining experience (for an interesting discussion on this point see Cheryl’s blog about fashion interns from last week).  One employer indicated that it was not a conscious decision to underpay its staff but explained that they had never been asked by any employee to pay minimum wage (for the avoidance of doubt, an employee does not have to ask to enjoy the benefit of NMW – it is automatic!).

In 2013/14, HMRC’s investigations resulted in over 26,000 employees getting a share of £4 million in back pay.

Employers should always observe the NMW regulations and this publication by HMRC serves as a timely reminder that they are proactive in taking action against those employers who breach the rules.

Jack Boyle
Senior Solicitor – Employment Law

The Intern Debate

 

Elisabeth Villa/Getty Images Entertainment
Elisabeth Villa/Getty Images Entertainment

“We don’t wake up for less than $10,000 a day”
Linda Evangelista

Unfortunately, not everyone in the fashion industry can demand the same wage as supermodels. In fact, many people work as unpaid interns in the hope of gaining valuable experience and perhaps a job at some point in the future. An important question employers should consider is whether they should be paying interns in exchange for their blood, sweat and tears.

My colleague Sarah Winter wrote an article last year about voluntary workers and whether they shared the same rights as employees under discrimination law. Sarah commented on a decision by the Supreme Court where it was decided that a volunteer with Mid-Sussex Citizens Advice Bureau was not an employee and was not protected by discrimination legislation.  Sarah concluded that it is now clear for charities that volunteers are excluded from discrimination protection, but noted that it is often unclear whether a volunteer has employment status or volunteer status. This can only be determined by the facts in each individual case.

This position is the same when it comes to the question of whether or not an intern is entitled to be paid. This can only be determined by looking at the role, duties and obligations of each individual rather than the job title.

It is interesting to note that a woman is currently suing a top fashion house for payment of wages for four months’ of unpaid work. The woman worked for Alexander McQueen fashion house as an intern between 2009 and 2010 and claims that she should have been paid the national minimum wage. Her lawyer claims that when interns do “real work under a contract” they are entitled to be paid at least the national minimum wage. The internship included drawing artwork for embroidery and dyeing large quantities of fabric for no pay.

The National Minimum Wage Act 1998 section.1 outlines that a worker shall be paid by his/her employer in respect of any work at a rate which is not less than the national minimum wage. Section.54 defines a worker as an individual who has entered into, or works under, a contract of employment or any other contract whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual. Whether an intern would fall into this category would depend on the type of duties and obligations which the intern undertakes.

Employment law expert Timothy Brennan QC has said that “If someone is engaged on a regular basis for an extended period of time to sew sequins on to ball gowns or similar work, which is a core part of a clothing manufacturer’s operation, then that person may well be considered an employee or worker and would be entitled to the minimum wage.

In 2009, an employment tribunal decided that an art department assistant who had been taken on by London Dream Motion Pictures on an ‘expenses-only’ basis was to receive backdated minimum wage payments. The tribunal’s decision confirms that in certain circumstances workers cannot be denied their statutory rights to payment even where they agree to work on an expenses-only basis. The employment tribunal held that the intern was a worker as it was clear that “she carried out all of the tasks that one would have expected of an assistant in that position”.

In determining whether an individual has ‘worker’ status, a tribunal would consider:

  • Whether there is an obligation on the individual to perform the work personally
  • Whether there is an obligation for the company to provide the individual with work, and
  • Whether the individual is to be rewarded for work undertaken.

In a more recent case Keri Hudson v TPG Web Publishing Limited, Ms Hudson was hired as an unpaid intern for TPG Publishing Limited. During her internship, Ms Hudson worked between 10 am and 6 pm and was responsible for a team of writers and hiring new interns. She had discussions with the company that she would be paid. The employment tribunal held that these discussions, taken together with the extent of the work Ms Hudson was undertaking, was sufficient to show that Ms Hudson was a “worker”.

Employers should carefully consider the role and obligations that an intern will have within the business. If an intern is obligated to do work which is of value to the employer then they may have a valid claim for National Minimum Wage. Remember that an employer who breaches the National Minimum Wage Regulations can be subjected to a penalty of up to £20,000!

Cheryl Hogg 
Trainee Solicitor – Employment Law