Administrations: TUPE or not to pay?

The TUPE Regulations 2006 provide certain protections to employees whose employer transfers its business or undertaking to another party.

In an attempt to encourage the rescue of failing businesses, the regulations offer certain protections to the acquiring party where the transferor employer is subject to relevant insolvency proceedings.  This means insolvency proceedings which are commenced not with a view to liquidation of the transferor’s assets.  This includes administration.

Certain debts which the transferor employer owes to employees do not transfer to the new employer (transferee).  These are the redundancy payments, arrears of pay, notice pay and holiday pay which employees can recover from the National Insurance Fund i.e. up to the maximum of £400 per week.  Liability for amounts due to employees in excess of £400 per week (or greater than 13 weeks’ arrears of pay) will potentially pass to the acquiring party.  The regulations provide greater scope in relevant insolvency situations for the acquiring party to vary an employee’s terms and conditions of employment.

The regulations also provide that some of the protections offered to employees in ordinary circumstances do not apply where the transferor is subject to insolvency proceedings which have been instituted with a view to liquidation of the transferor’s assets.  Thus, if the transferor employer is in liquidation, its employees will not automatically transfer to the transferee and will not benefit from protection against dismissal in connection with the transfer (i.e. a dismissal in connection with the transfer will not be automatically unfair).

The Employment Appeal Tribunal recently issued its decision in OTG Limited v Barke, where it confirmed that a pre-pack administration can never qualify as “insolvency proceedings with a view to the liquidation of the transferor’s assets”.  A pre-pack administration is one where the deal to sell on the business is agreed before the transferor company enters administration, and takes effect immediately following the administrator’s appointment.  Accordingly, on the sale by the administrator, regulations 4 and 7 of TUPE will apply.

Essentially this means that employees who are employed by the company in administration immediately before the transfer will automatically become the employees of the acquiring party on the same terms and conditions of employment as before. They will also have the benefit of protection from dismissal in connection with the transfer.

Jack Boyle
Trainee Solicitor

Protected by a Collateral Warranty?

The outcomes in the cases of Scottish Widows Services v Harmon/CRM Facades and Scottish Widows Services v Kershaw Mechanical Services are a wake up call that liability can be incurred in providing collateral warranties.

Scottish Widows Services were assigned the lease to Port of Hamilton, as well as the collateral warranties provided to the original Tenant by the contractor and architect for the development. The roof of the building was leaking so Scottish Widows Services sought damages from the contractor and architect, for issues/defects in a development they had leased.

Scottish Widows Services knew of the defects before they acquired its interest and as such were in a position where they didn’t have any obligation under the lease to repair these defects. They did however chose to carry out the repairs of the own volition. They then sought to recover, but where they entitled to?

The contractor and architect argued that the losses where self-inflicted as Scottish Widows Services knew the position when they were entering into the lease. Scottish Widows Services then accepted the premises in the condition it was in at the start of the lease (including the defects). It was also argued that the repairs were done for Scottish Widows Services’ convenience and not as a legal obligation. These arguments did not carry any weight with the court as the breach of collateral warranty remained the dominant cause of loss.

Scottish Widows Services only had to prove that they incurred reasonable costs in fixing the defects, which were a result of the breach of the collateral warranty. A beneficiary of a collateral warranty is not normally party to the terms of the original contract or appointment, they are unlikely to have an existing or future relationship with the granters of the warranty, so they are likely to pursue any legal remedy robustly.

Kyle Moir
Solicitor

Blues Sky thinking

Well there may be good news for publicans who are struggling to make Sky and ESPN contracts work financially.  Many of you have just found it too expensive to subscribe and in reality when you work out the cost of the service against the increase in profits the answer is often just not worth it – BUT of course people like to come to a pub where sport is shown and if you don’t have it at all will you get anyone in at all?

Many of you will have been tempted to subscribe to cheaper European alternatives and some of you may have been sued for so doing.  We at Blackadders have certainly been called upon to assist clients in fending off legal action from the English Premier League with regard to the possession of decoder cards which enable customers to view overseas broadcasts of football matches.

The English Premier League owns the copyright in Premier league match footage and exclusively licenses its rights to broadcasters in different territories (in the UK, the live rights are currently licensed to Sky and ESPN).  Under the terms of their licences, foreign broadcasters are prohibited from supplying “non-UK” satellite decoder cards – which facilitate the transmission of match footage – for use in the UK.

Well one landlady Mrs Murphy has taken the matter to the European Court of Justice arguing that the laws governing the European Union single market should permit her to use alternative and cheaper European sports TV providers.

The European judges are due to come to a decision this Autumn.  In the meantime their legal advisor, the Advocate General Juliane Kokott, has stated that in her opinion Mrs Murphy’s case has merit and that the Premier League’s marketing of broadcasting rights on a territorially exclusive basis amounts to profiting from the elimination of the internal market.  The court does not have to agree with Ms Kokott’s opinion.  However, it would be very unusual for them to take a decision which goes against it.

What does this mean for you?  At present, nothing.  The law in the UK remains the same.  You are not currently permitted to use any provider other than Sky or ESPN who have successfully bid for the right to show Premier League football in the UK.  They have poured millions of pounds into the Premier League enabling clubs to grow, develop their offering and the Premier League will fight all the way to the end to preserve its position.  It is likely the Premier League will have the support of Sky for its interest.  That said, many believe that it will take a comeback in the mould of the recent Newcastle v Arsenal match in order for the Premier League to turn this around.

So watch this space.  We will keep you informed as to the outcome of the case and advise you of your options.

Good trading!

Janet Hood
Consultant
Accredited Liquor Licensing Specialist

Kirk Dailly
Senior Solicitor
Business – Corporate & Commercial

Equality Considerations in Public Procurement

The Equality Act 2010 (EA) brings together various public sector equality duties under a new single equality duty.  This requires public bodies to consider various factors such as race, gender, age, disability, sexual orientation, and religion or belief when making decisions about the exercise of their functions.  The aim is to “promote the development of more personalised public services… and place the achievement of equality outcomes at the heart of our public services”.  The new general duty is underpinned by the specific duties which applied under previous legislation.

On 18 January 2011, sections 151 to 155, section 157 and Schedule 19 of the EA all came into force.  These provisions relate to the application of the EA to certain public bodies.  Essentially, they allow Ministers to add to the list of public bodies who are currently subjected to the equality duty.  The current list includes the Police and the NHS.  The specific duties which are to underpin the new single duty are not detailed in the EA.   However, the EA grants Ministers power to impose these specific duties by way of secondary legislation.

Specific duties may be imposed on a public authority, for example, in connection with its public procurement functions.  The public sector spends approximately £175 million each year on goods and services.  Some public authorities already use equality duties when putting work out for tender, for example, by asking contractors for a breakdown of their workforce by ethnicity or gender.  The aim of these provisions is to enable Ministers to set out how public bodies can go about using procurement more consistently to help achieve equality objectives.

Jack Boyle
Trainee Solicitor

Planning for new property solutions?

I read a very interesting report about research by the Royal Institution of Chartered Surveyors (RICS) which has suggested one solution to easing the current housing crisis could lie in low-cost housing solutions.

In the New Law Journal, potential solutions include modular homes – self-contained houses with a bathroom and kitchen, constructed off-site and then transported to a given location. Such homes can be priced from around £20,000. In addition, RICS suggests that homes made from recycled plastic are also available. This accommodation is made from “thermo poly rock” which uses 18 tonnes of recycled plastic and minerals which would otherwise be consigned to landfill sites. the report author Dr Chris Goodier from Loughborough University, said “UK house-building has long been associated with expensive, time-consuming methods and can mean that environmental standards are difficult to maintain. [These] designs are not only cost-effective but can be constructed in a very short period of time. Furthermore, many major mortgage providers are already willing to lend against these structures, which has been a problem in the past, meaning that first-time buyers could find them a way of getting onto the property ladder.”

For the Tayside and Scottish market, it will be very interesting to see just what the reaction of planning officials will be to a planning application for these properties, what developers will make of them, if lenders are prepared to finance them, and what local surveyors will make of them in valuation reports!

Shaun Mackintosh
Associate

Tenants’ Break Options

In the present economic climate it is not uncommon to find that tenants enter into lease transactions in circumstances where they are given the right to terminate the lease before the end of its contracted duration or indeed to extend the duration of the lease beyond the period of occupation originally contemplated in the lease. Normally the lease will provide that options such as these are to be exercised by the tenant serving notice upon the landlord of the tenant’s intention to exercise such option.

In situations such as this it is essential that care is taken when serving such a notice to ensure that the notice is fully compliant with the terms of the lease. Quite frequently a lease will specify a strict time limit for service of the option notice which must be met if the option is to be successfully exercised. The tenant would be well advised to diarise in advance the date upon which service of the notice is to be made to ensure that it is not overlooked.

When serving the notice the tenant needs to consider carefully the terms of the lease before issuing the notice. The lease should specify the period of notice required,  the address to which the notice is to be served and the method by which the notice is to be served. In particular it is essential that the party serving the notice ensures that service is effected upon the correct recipient and this is frequently an issue where the landlord has disposed of the leased property to a third party since granting the lease.

The consequences of failing to validly serve a notice exercising a break option can be catastrophic to a tenant and may well result in the tenant losing the right to exercise the option and being contractually committed to continuing to occupy the leased property and meet the costs of the rent and other outgoings until the expiry date of the lease. It is therefore in the tenant’s best interest to ensure that they are correctly advised on the matter and that the notice is served appropriately.

If you require any further information in connection with the above, please contact Ken Scott whose e mail address is ken.scott@blackadders.co.uk

Delay to Bribery Act Implementation

Those with a compliance brief will be interested to hear that the Ministry of Justice has confirmed a delay in implementation of the Bribery Act.  The Act – which was one of those labeled “anti-growth” by outgoing CBI director general Sir Richard Lambert last week – was due to come into effect in April.  However, the Ministry of Justice has not yet issued the guidance for businesses that was slated for January, and the Act will not now come into force until 3 months after this has been issued.

As yet, there is no date fixed for the issue of guidance.  A draft of the guidance was issued for consultation in September last year, and my own feeling was that while it was a start, it was very general, and the examples it gave only related to overseas business.  If the result of the delay is to provide more focused guidance that is targeted at all types of organisation – large and small, regional, national and international, the delay will have been a good thing.  It will also give those organisations who have not given serious consideration to corruption issues more time to get their house in order.

The Bribery Act extends the scope of current anti-corruption laws, and will expose all organizations to the risk of prosecution if they do not have appropriate anti-corruption procedures in place.  We ran a seminar on this topic in October last year and will continue to keep clients and contacts up to date with progress.

Please contact me for further information or for help in assessing your organisation’s risk profile and formulating appropriate procedures.

Campbell Clark
Head of Corporate & Commercial

Your Views on the Default Retirement Age

Now that the Government has confirmed that the default retirement age is being phased out, employers will need to decide whether to retain a specific retirement age (referred to as an employer justified retirement age) or not.

The article Managing without the Default Retirement Age has further information on the transitional arrangements, and includes a useful flowchart.

We would also be grateful if you could take a few moments to answer the following questions.   This will help us understand where employers are in relation to the abolition of default retirement age, and assist us in providing further advice on this issue.

[contact-form subject=”Default Retirement Age Questionnaire” to=”chris.terry@blackadders.co.uk”]
[contact-field label=”Name” type=”name” /]
[contact-field label=”Email” type=”email” /]
[contact-field label=”Does your business have an existing fixed retirement age?” type=”select” options=”Please select,Yes,No” /]
[contact-field label=”If yes, do you intend to retain this?” type=”select” options=”Please select,Yes,No” /]
[contact-field label=”Will it be compulsory (i.e. you will dismiss employees at that age)?” type=”select” options=”Please select,Yes,No” /]
[contact-field label=”Will it be voluntarily (i.e. employees may choose to leave at that age)?” type=”select” options=”Please select,Yes,No” /]
[contact-field label=”Do you intend to have no fixed retirement age?” type=”select” options=”Please select,Yes,No” /]
[contact-field label=”Please add any comments you would like to make about the abolition of the default retirement age” type=”textarea” /]
[/contact-form]

Thank you

Managing without the Default Retirement Age

The Government has confirmed that the Default Retirement Age (DRA) will be phased out this year.  Currently employers are able to retire staff who reach the age of 65 by giving between 6 and 12 months’ notice before they reach their 65th birthday.  Employees have a right to request to stay on.  If exercised, this is dealt with at a face to face meeting followed by the employer’s decision in writing.  There is also a right to appeal which is dealt with in the same way.  So, although employers have to tick all of the boxes, the current process provides certainty for staff planning.

Transitional Arrangements

The DRA is being phased out over a transitional period running until 1 October this year.    The last day that an employee can be compulsory retired is 30 September 2011.  This means that employers can only use the current process with employees who turn 65 on or before 30 September 2011.  The last day that an employer can give 6 months’ notice is 30 March 2011.  The Government recognises that some employers may already have given staff notice of retirement and has confirmed that any notice which specifies a retirement date after 30 September 2011 will be invalid.  This flowchart sets out the transitional arrangements.

Post 1 October 2011

Employees will still be able to retire after 1 October 2011 but employers will only be able to force employees to retire at a set age if it can be objectively justified.  If choosing to set a compulsory retirement age, employers will need to be able to show that in doing so they are responding proportionately to a legitimate aim.  Some industries will find this easier than others, such as those whose employees require high levels of physical fitness.  Whilst ACAS has published guidance on the subject (Working without the DRA, January 2011), it does not give clear guidance to employers looking to set a compulsory retirement age.

With employees having the right to continue working after they reach state pension age, employers have raised concerns that insurers will raise the costs of group risk insured benefits (such as income protection, sickness and accident insurance as well as private medical insurance).  The Government has confirmed, however, that employers may withdraw these benefits for staff who continue working past state pension age.

Implications for Employees

The removal of the DRA does not mean that employees can no longer retire, it just means that their employer cannot force them to retire once they reach a certain age.  Older employees can still voluntarily retire when they choose and draw any retirement benefits they are entitled to in line with pension scheme rules.

Implications for Employers

The removal of the DRA is an opportunity for employers to review their practices for managing employees and their performance.  Without the DRA, employers have one less fair reason to dismiss.  The potentially fair reasons they are left with include capability/ability, conduct and ‘some other substantial reason’.  Performance or conduct concerns, whether or not they may be grounds for dismissal, should be addressed by discussion within the workplace.

Older employees may be more prone to impairments.  If an impairment amounts to a disability, the employer is required to make reasonable adjustments to remove any barriers to their performance, regardless of the age of the employee concerned.  Employers must also be careful not to neglect to address performance or conduct issues with older staff because, or in the expectation that, they will be retiring soon.  Any such issues must be addressed consistently regardless of the age of the employee concerned.  Failing to address performance or conduct issues with older staff will make matters difficult and may well be discriminatory.

Sarah Winter
Senior Solicitor

Post 1 October 2011

Employees will still be able to retire after 1 October 2011 but employers will only be able to force employees to retire at a set age if it can be objectively justified.  If choosing to set a compulsory retirement age, employers will need to be able to show that in doing so they are responding proportionately to a legitimate aim.  Some industries will find this easier than others, such as those whose employees require high levels of physical fitness.  Whilst ACAS has published guidance on the subject (Working without the DRA, January 2011), it does not give clear guidance to employers looking to set a compulsory retirement age.

With employees having the right to continue working after they reach state pension age, employers have raised concerns that insurers will raise the costs of group risk insured benefits (such as income protection, sickness and accident insurance as well as private medical insurance).  The Government has confirmed, however, that employers may withdraw these benefits for staff who continue working past state pension age.

Implications for Employees

The removal of the DRA does not mean that employees can no longer retire, it just means that their employer cannot force them to retire once they reach a certain age.  Older employees can still voluntarily retire when they choose and draw any retirement benefits they are entitled to in line with pension scheme rules.

Implications for Employers

The removal of the DRA is an opportunity for employers to review their practices for managing employees and their performance.  Without the DRA, employers have one less fair reason to dismiss.  The potentially fair reasons they are left with include capability/ability, conduct and ‘some other substantial reason’.  Performance or conduct concerns, whether or not they may be grounds for dismissal, should be addressed by discussion within the workplace.

Older employees may be more prone to impairments.  If an impairment amounts to a disability, the employer is required to make reasonable adjustments to remove any barriers to their performance, regardless of the age of the employee concerned.  Employers must also be careful not to neglect to address performance or conduct issues with older staff because, or in the expectation that, they will be retiring soon.  Any such issues must be addressed consistently regardless of the age of the employee concerned.  Failing to address performance or conduct issues with older staff will make matters difficult and may well be discriminatory.

Sarah Winter

Pints by Text

The Scottish Legal Perspective:

I read with interest Peter Coulson’s well considered article re the above and would like to advise on the law in Scotland.

As Peter rightly suggests there is no actual way for persons offering alcohol for sale over the internet, by phone or other remote means  to ensure the age of the would be purchaser. This is true whether the transaction is for alcohol to be delivered to someone’s home or for vouchers to be utilised in a venue at a later date.

If the alcohol is to be delivered from a Scottish base to a Scottish domestic dwelling there are specific rules which have to be followed.

The alcohol which is the subject of the transaction has to be entered into a day book and a delivery book or invoice  by the seller. The seller has to  describe the goods e.g 12 bottles of Bonkers Shiraz and note the quantity, the price and the name and address of the person to whom it is to be delivered. There is no reason why an alternative name and address cannot be given in the day book, e.g. the local post office, shop or even a neighbour if the person ordering the wine can’t be present to accept the delivery.

Further in Scotland when alcohol has been dispatched from warehouse premises or other licensed premises within Scotland to domestic premises in Scotland it is an offence to deliver that alcohol to a person under the age of 18. The driver needs to check. I suggest that in the interests of safety the transport companies adopt Challenge 25.

If the driver believes the person offering to take delivery of the alcohol is under 25 the driver  MUST check the age of the person by asking to see ID, being one of the 3 following documents: –

  1. a current passport
  2. a current European photo driver’s licence
  3. a current Young Scot, Citizens Card or other age ID card with a PASS hologram – not matriculation cards
  4. if the  If the driver does not believe the ID is accurate he must refuse to deliver the alcohol and should keep a note of the reason for his decision e.g. thought person under 18
  5. NO OTHER ID IS ACCEPTABLE – IF IN DOUBT DO NOT DELIVER TO DOMESTIC PREMISES

Although not against the law best practice would suggest that the alcohol would have to be delivered to a person rather than left at random on the site. How else would the seller know the goods had been delivered if no signature was obtained.

As for vouchers being purchased to enable the build up of credit for a night out. I do not see anything wrong with this. Obviously alcohol could not be sold to under 18s whether or not they had paid in advance. If persons purporting to be 18 came to the bar of a pub or club or other premises and asked to redeem the vouchers for alcohol staff would require to undertake all the normal precautions to ascertain their age. Challenge 25 will be compulsory in Scotland as from 1 October 2011 unless we have a legislative change. Anyone offering vouchers would be advised to put a note on their web site that vouchers will not be redeemed for alcohol and monies may be lost unless voucher holders can prove they are over 18 at point of delivery. The point of sale is irrelevant in Scotland for these purposes.

Following this fairly simple advice should prevent problems for the licensee in Scotland and if adopted south of the border for our English and Welsh cousins.

Janet Hood
Consultant
Accredited Liquor Licensing Specialist