People with Significant Control

I reported earlier this year about the Government’s plans to introduce what were then being referred to as “registers of beneficial interests”. Each company will be obliged to maintain a register noting the beneficial ownership of shareholdings which are registered in the name of a nominee.

The registers have now been re-branded as registers of “people with significant control” (PSC) but the substance is the same. It appears to be the Government’s intention to push these reforms through as soon as possible and certainly to ensure that the legislative changes are made before the next general election.

The registers will be introduced as part of the Small Business, Enterprise and Employment Bill which is currently being debated in Parliament. However, the mechanics of how a PSC’s interest will be recorded in the relevant register and the matter of protecting certain pieces of data which are contained in the register are still to be determined. The latter point is something which requires consideration more generally; such as the suppression of the full date of birth of directors of companies to assist with the prevention of fraud.

In order to consider these points the government has issued a discussion paper.

Significantly the discussion paper also asks for views on the guidance which would be provided to ensure that companies (and PSC’s) understand their obligations under the act when it is passed. In my view the guidance needs to make it absolutely clear that (contrary to the headline grabbing title of “register of beneficial interests”) the registers should contain not just information pertaining to shareholdings, but also the ability to exercise voting rights or the ability to appoint or remove directors or similar powers held by an individual through another corporate entity.

We also note that it is proposed that the guidance will supplement that produced by Companies House. I wonder how the content of one set of guidance would vary materially from the other as I would expect the main aims of both to be to assist parties: (i) to understand what a PSC is; (ii) to correctly record all relevant information in the register once the format has been agreed pursuant to this discussion paper; and (iii) the consequences of failure to have and maintain the register.

We would hope that no more information is recorded in the register than is absolutely necessary. The members of a company may have chosen to enter into a shareholders’ agreement to reflect control arrangements precisely because they do not want them in the articles of association to maintain a certain amount of privacy.

Responses are sought before 9 December 2014.

Other Small Business, Enterprise and Employment Bill changes

Anyone who has a burning interest in company legislation may have noticed that there will not be an obligation to file an annual return once the bill takes effect. I would suggest that you do not celebrate the removal of a piece of company administration just yet, as it is to be replaced with a “click and confirm” process. How this will differ in practice from submitting an annual return is unclear at present. Perhaps the process will be streamlined when Companies House website is incorporated into the wider www.gov.uk site, but this remains to be seen.

The Bill will also bring into effect the changes to the director disqualification rules which Ellis Walls reported on earlier this year and will abolish corporate directorship. There will be a period of 12 months to remove a corporate director currently appointed from the time the legislation comes into force.

Kelly Craig
Solicitor – Corporate & Commercial
www.blackadders.co.uk

Resigned to the loss of an employee? General advice about when a resignation is not a resignation

Constructive Dismissal

It is very important for employers to be careful when accepting a resignation from an employee. In certain circumstances an employee’s resignation can amount to a constructive dismissal. When an employee resigns because of a breach of contract by the employer, and this breach makes it near impossible for the employee to continue working, then that can be deemed to be a constructive dismissal. If this happens the employee will be able to make a claim against the employer.

In order for this claim to succeed, the employee requires to demonstrate that:

  1. There has been an actual or anticipatory breach of contract by the employer;
  1. The breach was serious enough to justify the employee’s resignation without notice;
  1. The employee resigned in response to this breach; and
  1. The employee must have resigned shortly after the event. If the employee waits too long to resign, he will be deemed to have accepted the breach by the employer.

Unambiguous resignation

There are many situations where an employee shows clearly, usually by their choice of words, that they intend to end their employment with the employer. Generally when an employee says, “I am resigning”, or words to this effect, these words will be taken at face value by a tribunal. However there are special circumstances when even these words will not amount to a resignation. For example employers should be cautious of words which are said in the heat of the moment or words which an employee has been pressured into saying by an employer or other external forces. In such situations it is recommended that the employer allows a reasonable period of time for cooling off. What is deemed to be a reasonable period of time will always depend on the circumstances. Once a suitable time has passed, a further inquiry into whether the words were meant or not should be carried out by the employer.

Ambiguous resignation

Conversely there are many examples where it is not so clear cut whether the employee has resigned or not. These can be situations such as when an employee states “I’ve had enough of this” (or similar, less friendly expressions) or simply walks out of the door without saying a word and not returning for a number of days. If it is not expressly clear what the intentions of the employee are, by either his words or his conduct, then it would be prudent for the employer to contact the employee and ask if it was their intention to resign. Again it would be sensible to allow a reasonable cooling off period before such an approach is made. Such a step will make it very hard for an employee to later claim that they were unfairly dismissed.

Tips for dealing with resignations

  1. Whether an employer is unhappy or relieved about an employee’s heat of the moment or ambiguous resignation, it should make a follow up effort to ensure that it is the employee’s final decision.
  1. An employer should be aware that if their conduct had a significant effect on the resignation, then the employee can be said to have been constructively dismissed.

Even the most clear cut resignations can be found to have been dismissals. When an employee is told they have resigned, and in fact they have not, then they will have likely been dismissed, often unfairly. Be wary!

Andrew Wallace
Trainee Solicitor – Employment Law
@EmpLawyerAndy
www.blackadders.co.uk

Call me…or don’t call me but it’s still ‘Working Time’

The Working Time Regulations 1998 (WTR) provide certain restrictions on how much time a worker can spend working.  For example, workers are entitled to a minimum rest period of 11 consecutive hours in each 24 hour period (or in some circumstances an equivalent period of compensatory rest).  Over the years, the courts and tribunals have grappled with the issue of ‘working time’ which is defined by the WTR as “any periods during which the worker is working, at his employer’s disposal and carrying out his activities or duties”.  One of the particular issues which has been debated before the courts is whether working time includes time when workers are ‘on-call’ but not actually carrying out any activities or duties.

The Employment Appeal Tribunal (EAT) recently addressed this specific issue in the case of Truslove and another v Scottish Ambulance Service.   This case concerned two paramedics who were required to provide nightly cover from time to time at two locations away from their usual base.  For any periods when they were required to be providing nightly cover, the paramedics were required to be on-call and had to stay in accommodation within a three mile radius of the location which they were covering.  They did have freedom of choice on the accommodation but that was subject to the three mile radius restriction.  This arrangement resulted in them working a daily shift from 8am until 6pm, followed by a night shift where they remained on-call from 6pm until 8am.  This arrangement continued on one occasion for four straight days, totalling 97 consecutive hours.  The workers argued that the time spent on-call was working time and claimed that the employer had breached the requirement to allow the minimum rest periods of 11 hours in each 24 hour period.

The EAT agreed with the paramedics and overturned the decision of the employment tribunal (which had originally decided that the on-call time was not working time).  The EAT took into consideration the purpose of the WTR and UE Working Time Directive which were aimed at ensuring a healthy working environment.  The EAT went on to observe that the question of whether an individual on-call is working or resting will turn on whether the individual is required to be present and available at a place determined by the employer.  The paramedics required to be within a three mile radius as determined by the employer and thus could not be home enjoying the quality of rest to which they were entitled.  Their on-call time was accordingly working time and the employer had breached their obligations in respect of rest periods.

This case makes it clear that working time will include time spent on-call in circumstances where the employer imposes certain freedom restricting constraints on the worker (such as a requirement to be within a particular geographical location).  Employers who operate on-call working arrangements should reflect on their practices as a result of this decision and assess their obligations under the WTR to allow sufficient periods of rest.  Employers should also be aware that in many cases, such on-call working time will also require payment of the National Minimum Wage for the duration of the on-call period.

Jack Boyle
Senior Solicitor – Employment Law
@EmpLawyerJack
www.blackadders.co.uk

Important Changes to Tenancy Law in Scotland

Background:

The Scottish Government is currently holding a consultation which aims to develop and modernise Scottish Tenancy Law. There are now over 368,000 privately rented homes in Scotland and it has long been apparent that the existing legislation, introduced over 26 years ago, is in drastic need of updating.

Introduction of a Private Rented Tribunal:

One of the most common criticisms from both Landlords and Tenants is the length of time it takes for a decision to be obtained from the court. This issue has become more pronounced due to the increased pressure on courts following the recent court closures and it is now common for cases not to be resolved until many months after the tenancy relationship has broken down.

This is in neither the Landlord nor the Tenant’s best interest and as such, the Scottish Government plans to remove Tenancy issues from ordinary court business and dedicate a special Private Sector Rented Tribunal (PRS). It is hoped that this measure will make it easier, cheaper and faster to resolve disputes.

Abolition of “No fault” eviction:

The law itself will also undergo modernisation to reflect the current market. Perhaps the most fundamental change will be the removal of the “no fault ground” for eviction. At present tenants can be removed from properties simply on the basis that certain statutory notices were provided before the commencement of the tenancy and that the tenant was informed 2 months before the tenancy end date that they would be required to vacate the property. The Court had no discretion to delay or prohibit eviction of the tenant on this ground and if this ground is abolished Landlords will need to demonstrate a specific reason for terminating the tenancy.

Abolition of discretionary grounds of eviction:

Currently, apart from the above mentioned ground there are 17 grounds for which the landlord may evict a tenant. Half of these grounds allow for the Sheriff to exercise some discretion as to whether the tenant should be evicted; whilst the other half bind the Sheriff to grant an order of eviction if they apply. It is intended to replace the 17 grounds with 8 grounds which do not allow the Sheriff to exercise discretion. These would be as follows:

  1. That the landlord wants to sell the home
  2. That the mortgage lender wants to sell the home
  3. That the landlord wants to move into the home
  4. That the property is to be refurbished
  5. That the use of the home is to be changed
  6. That the tenant failed to pay three full months’ rent
  7. That the tenant is anti-social
  8. That the tenant has otherwise breached the tenancy agreement.

It is hoped that with the removal of the discretionary grounds, cases will be more straightforward and faster as at present when discretionary grounds are used the individual circumstances of each case require to be carefully examined which can be  a time consuming process.

Modification of Notice to Quit periods:

The final major proposal is a modification of how the notice periods prior to eviction operate. Currently, a tenant may be asked to vacate a property after either 28 or 40 days. It is instead proposed that the notice period would vary depending on how long a tenant had stayed in the property. However, an exception is provided for when either ground 6, 7 or 8 applies.

Summary:

If implemented the Scottish Government’s proposals will have a dramatic impact on the rental market. Both the major and minor modifications aim to reduce the reliance on solicitors and courts throughout the tenancy relationship, from creation to termination. However, the effectiveness and viability of these measures are yet to be determined.

Alastair Johnston
Solicitor – Dispute Resolution
www.blackadders.co.uk

Holiday Pay NightBEAR for Employers … BUT Silver Lining

The Employment Appeal Tribunal (EAT) has today issued its detailed decision in the hotly anticipated holiday pay/overtime cases (Bear Scotland Ltd v Fulton & anor).

The bad news

The crux of the decision is that holiday pay should reflect “normal remuneration” (i.e. pay which is normally received by a worker) and that this should include payments of non-guaranteed overtime.  The EAT also found that radius allowances and travelling time payments also fell within normal remuneration and thus should be reflected in holiday pay.

As a brief aside, there are two sources of holidays for a UK worker.  There is basic leave – that being the 4 weeks’ annual leave entitlement derived from the European Directive.  In addition to basic EU leave, UK law offers an additional 1.6 weeks’ annual leave.  Strictly speaking, the EAT decision requiring overtime to factored into holiday pay applies only to the 4 weeks’ basic leave (because the decision is concerned with annual leave stemming from the EU Directive).  In other words, employers can still potentially pay the 1.6 weeks’ additional leave at just basic pay excluding overtime.  Whether employers will go to the expense of creating separate holiday pay systems for the separate types of leave is another matter (the costs could outweigh the benefits).

The silver lining?

Employers would be well advised to amend their practices for holiday pay moving forward in order to comply with the decision.  Some employers might elect to reduce the availability of overtime to limit the impact of the decision.  However, the issue of backdated claims remains.  That is the million dollar question – can employees claim for backdated holiday pay and, if so, how far back can they go?

The EAT held that the scope for recovery of underpaid holidays as unlawful deductions from wages was limited.  The workers in these cases sought to go back a number of years, arguing that each underpaid holiday was one in a series of deductions.  It was decided that workers could not claim for any holidays in cases where a period of three months or more had elapsed between the underpaid holiday. In other words, any underpaid holidays which have been superseded by a gap of three months or more, without any further underpaid holidays, are extinguished for the purposes of any unlawful deduction claims.  That might prove to be a saving grace for many employers at least in terms of limiting liability.

Still unanswered questions

Leave has been granted for the unsuccessful employers to appeal this decision to the Court of Appeal.  Given the wide ranging ramifications of this decision, an appeal should be expected.

The judgment does not offer any insight into how employers should factor overtime into holiday pay in practical terms.  Presumably, employers can utilise average overtime payments over a particular reference period.  However this will likely result in further considerations as to what specific reference period should be utilised – particularly in industries where overtime is seasonal and thus subject to greater fluctuation.  For example, do employers look at a 12 week reference period or do they take an annual average?

One thing is a certainty – this will be far from the last word on the matter and the floodgates will likely open as employees and unions rush to get claims in before employers correct their practices.

Jack Boyle
Senior Solicitor – Employment Law
@EmpLawyerJack
www.blackadders.co.uk

Post-Halloween Terror for Employers

Halloween may be over however many businesses still face a potentially terrifying event tomorrow.

On 4 November 2014 the Employment Appeal Tribunal (EAT) will issue its decision in the much-publicised Bear Scotland Limited v Fulton and others case.  This case will prove to be one of the most important UK employment cases for many years.

What is the history of this case?

A group of employees successfully persuaded an employment tribunal that their employer, Bear Scotland Limited, should have included regular, but non-contractual, overtime in their calculations for the workers’ holiday pay.  The employment tribunal held that overtime which a worker could refuse on reasonable grounds should be included in holiday pay calculations.  Bear Scotland and some associated employers appealed the decision to the EAT on the basis that this decision is contrary to the “traditional” concept that holiday pay does not have to include payment for any overtime which the employer is not contractually obliged to provide to the employee.  The EAT is due to issue its decision on this case tomorrow.

Why has this happened?

As we know, each worker is entitled to 5.6 weeks’ holiday each year, paid at the rate of a week’s pay, in terms of the UK’s Working Time Regulations 1998.  The European Working Time Directive 2003 states that all workers must be entitled to paid annual leave.  However the manner in which a worker’s pay is calculated whilst on annual leave is left to national legislation or practice.  The EU Directive has been interpreted to preclude national laws which pay workers holiday pay based on basic salary alone.  The European Court of Justice has already made it clear that “normal remuneration” includes not only basic salary but also any other remuneration which is “intrinsically linked to the performance of tasks”. 

What can the EAT choose to do?

The EAT has a number of options open to it.  One option may be for it to find that the employment tribunal, which determined the Bear Scotland case, has taken too wide an approach in applying UK law in accordance with EU law.  This option may result in a finding that UK law does not actually comply with EU obligations and a presumption that this issue will require to be addressed by Parliament (and not the courts).  Unfortunately the more likely option is that the EAT will affirm the employment tribunal’s decision that holiday pay should include payments received by an employee over a 12-week reference period including any voluntary overtime.

In any case, there will be much publicity affecting tomorrow’s judgment and employers should be taking urgent steps to assess whether or not this judgment affects their own practices with a view to avoiding unrest amongst the workforce or, worse still, time-consuming litigation with each of its employees.

Simon Allison
Partner – Employment Law
@EmpLawyerSimon
www.blackadders.co.uk