1. Smoking Ban – Are you ready to quit?
2. Should employers offer help to employees that smoke
3. Bonus Schemes
4. Our advice on bonus schemes
5. Statutory Dispute Procedures
6. Got that ‘Monday feeling’?

The case of Huw John Philip Thomas V (1) Farr Plc (2) Hanover Park Commercial Ltd [2007] EWCA Civ 118 has laid down an important principle in the area of enforceability of restrictive covenants. This Court of Appeal decision held that a 12-month restrictive covenant, which prevented a senior insurance broker from working for a competitor’s business, was enforceable. The decision was based on Mr Thomas’s access to confidential information and the fact that provisions relating to non-solicitation and confidentiality were not seen to be sufficiently protective.

The starting point for restrictive covenants is that they are unenforceable for being contrary to public policy and in restraint of trade. As such, the courts have historically been unwilling to uphold non-competition clauses which last as long as 12 months.

Although this decision was an important one, it must be remembered that incidents of restrictive covenants and their enforceability are particularly fact-sensitive and this must be borne in mind when including them in an employment contract and when challenging their enforceability.

Smoking Ban – Are you ready to quit?

From 2 April 2007, the Smoking Ban came into effect in Wales. There are only 2 months left to ensure that employers are prepared for the impending restrictions here in England. Maitland Walker takes this opportunity to remind you of the practical steps that should be taken to ensure your workplace is ready to quit!

Our advice:

• Assess the premises and allocate areas that can be classed as smoke-free premises. We outlined the implications of the Health Act 2006 in our February 2007 update, but remind employers that all indoor areas will be covered by the ban. Any review of a working environment must look at outdoor space too to ensure that any such areas that are substantially enclosed are designated smoke-free.
• Make sure that suitable signage is installed well in advance of the ban coming into force.
• Ensure that a smoke-free policy is drawn up, highlighting to employees that it is important to abide by the policy and that they may be guilty of a criminal offence if no smoking rules are broken.
• In drafting any policy consider consulting your employees as keeping them informed is an important part of maintaining a harmonious workforce.
• Any policy in place must be monitored to ensure that progress is being made, that no variations are required, that the policy is practicable and it is being enforced fairly. It is also essential to ensure that statutory obligations are adhered to at all times.
• Provide employees that smoke with a safe area in which they can smoke. The priorities should be to make sure that the area is appropriately lit, provides protection from the weather and ensure that the area is excluded from the ban by not being substantially enclosed.

Should employers offer help to employees that smoke

As workplaces in England prepare to go smoke-free from 1 July, the debate continues as to what, if any, support and assistance should be given by employers to employees that smoke. On 25 April this year the National Institute for Health and Clinical Excellence (NICE) issued advice on the support that smokers should be offered in their workplace to help them quit smoking.

Despite the fact that employers are not legally obliged to help employees to stop smoking, it is suggested by a number of organizations, including NICE, that employers that do provide cessation support could reduce the risk of non-compliance with the law, as well as taking advantage of the opportunity it offers to improve peoples’ health. It is proposed that by providing help in giving up smoking employers will be promoting healthy living and no smoking within society, as well as benefiting from reduced sickness absence and increased productivity.

NICE guidance recommends that employers publicise a number of interventions and make information on local stop smoking support services widely available at work. It is advised that documentation should include details on the type of help available, when and where, and how employees can access the services.

It is recommended that employers be responsive to individual needs and preferences, and where feasible and where there is sufficient demand, provide on-site stop smoking support. Some ideas like allowing staff to attend smoking cessation services during working hours without loss of pay are proving to be controversial with non-smoking employees, and perhaps rightly so. Is it fair to offer paid time off to employees that wish to give up smoking, yet not allow paid time off for employees to go to the gym or attend slimming classes if they wish to lose weight?

The option to light up during working hours is an important issue for smokers and implementation of the ban could leave them feeling victimized. Although, case law following smoking bans is only just beginning to “smoulder” in Scotland and Ireland, there will inevitably be employment law issues in England relating to the smoking ban. It is therefore vital that any smoking cessation policy should be developed in collaboration with a cross-section of staff, both smokers and non-smokers, as well as their representatives, as one element of an overall smoke-free workplace policy.

Bonus Schemes

Having reached the end of 2006-2007 tax year we thought it a suitable time to assess the general principles and latest developments in relation to bonus schemes:

• Where an employee has a specific contractual right to a performance based or ‘on target’ bonus, it will amount to a breach of employment contract for employers to set bonus targets which are impracticable to reach – Clark –v- BET plc;

• Where an employee’s bonus involves a discretionary element, that discretion must be exercised in a rational manner – Clark -v- Nomura International plc;

• A bonus scheme which is expressed to be "discretionary" may nevertheless be deemed to amount to a contractual entitlement – as laid down in Horkulak -v- Cantor Fitzgerald, where a bonus scheme was deemed to be a contractual benefit and more than, “a mere declaration of the employer's right to pay a bonus if he wishes" as it was paid in anticipation of future loyalty and plainly to motivate and reward employees in a high-earning and competitive activity in which the payment of bonuses was part of the remuneration structure.

• It should also be remembered that a "discretionary" bonus, which has been paid out every year over a considerable period of time, may be viewed as an implied contractual entitlement through custom and practice.

Two recent decisions in relation to bonuses have generated significant interest and may be catalysts for future changes to the way that bonus schemes are operated.

1. In Commerzbank AG -v- Keen, the Court of Appeal held that where an employee argues that the employer's exercise of discretion was "irrational", it is for the employee to establish irrationality, i.e., that the employer acted in a way in which no other reasonable employer would have done.

Therefore the burden of proof in claims based on irrationality is now more onerous for the employee. In addition, the court in Commerzbank also suggested that, if the employer does not provide an explanation of that factors which influenced and the reasons for the exercise of discretion in relation to additional pay, this could amount to a breach of the implied term of mutual trust and confidence.  If this is the case, it may allow an employee to resign and claim compensation for constructive unfair dismissal, although, as compensation for unfair dismissal is currently capped at £60,600, this may not be much of a consolation prize for a disillusioned high-earning employee who cannot overcome the irrationality hurdle.  However, post-termination restrictive covenants may also be rendered unenforceable as a result and this may be a significant issue in highly competitive sectors.

Although the decision in Commerzbank has made it more difficult for an employee to demonstrate an "irrational" exercise of discretion, the underlying theme of case law is that employers should nevertheless have clear and justifiable reasons in mind when exercising their discretion. It is also worth remembering that the irrationality test will only apply in the context of a contractual claim.

2. In Takacs -v- Barclays Services Jersey Limited, the employer sought to rely on an express contractual provision that the employee in question was not entitled to a bonus, as he was no longer employed on the date that payment was due. The High Court accepted that, despite the fact the employee had an express contractual provision for a minimum guaranteed bonus, it was arguable that, if the employer fails to pay the bonus in these circumstances, such failure could amount to a breach of implied term of mutual trust and confidence.

The High Court also concluded, upon hearing an application for striking the claim out, that an employer must (i) co-operate with an employee in achieving a bonus target and not frustrate the employee in their efforts to hit the target, and (ii) not terminate an employee’s employment simply in order to avoid its obligation to make a bonus payment.

Although this case has only been decided at an interlocutory level and will need to be considered in more detail at full trial, it suggests that the courts may be increasingly willing to place limitations on the employer's express powers of termination. The outcome of this trial could have significant implications on the way in which employers operate their bonus schemes, and indeed, how they run their businesses in light of such schemes – we await the result with interest.

Our advice on bonus schemes

Employers that fail to implement clear bonus schemes or who apply the qualifying criteria relevant to bonus schemes in an ambiguous fashion leave themselves open to claims from employees who believe that they should have been awarded a higher bonus. Employers need to carefully consider any bonus schemes offered to employees ensuring that the nature and duration of any entitlement is laid out, the extent and exercise of scheme discretion, the inclusion of leavers and joiners as well as tax implications are clearly addressed in any bonus policy.

To conclude, employers that clearly define the remit of bonus schemes and apply them transparently and in accordance with clearly defined rules are in a stronger position to deal with employee disputes in relation to bonus related complaints.

Statutory Dispute Procedures

The interim review on Employment Dispute Resolution, published last month calls for a radical overhaul of the statutory dispute procedures. The consultation follows an independent review of the procedures that were introduced by the Employment Act 2002 (Dispute Resolution Regulations) 2004.

Key recommendations, out of the 17 in the review, include:

1. Repeal of the statutory dismissal and grievance procedures
2. Simplification of employment tribunal application forms
3. Offer of free early dispute resolution services including mediation
4. Abolition of the fixed periods in which ACAS must conciliate
5. Allow tribunals to take account of early attempts at dispute resolution when considering costs awards

The Government asked Michael Gibbons (a member of the Better Regulation Commission) to conduct a root and branch review of all aspects of employment dispute resolution, in the report Mr Gibbons commented “my vision is of [a] greatly increased role for mediation…. based on my knowledge of the use of mediation in resolving difficult family disputes and also with some involvement in alternative dispute resolution through civil courts.” Reform of the law in this area is now almost inevitable.

Maitland Walker has extensive experience in many areas of mediation. If you would like further information on the process and benefits of mediation then our Employment team would be pleased to help.

Got that ‘Monday feeling’?

We all know that warm glowing feeling one gets as a Friday afternoon creeps on – but that Friday feeling on a Monday morning, surely not!? Research by HR Consultancy Chiumento suggests this may be just so and that almost 66% of UK workers actually like Monday mornings. The survey canvassing over 1,000 workers indicated that only 5% of people reported feeling anxious on Sunday evenings about starting work again the following day and a large proportion confessed to feeling positive about the beginning of the working week.

To ensure that your employees have the right kind of Monday Morning feeling Maitland Walker’s employment department are here to help. For more information on policy and documentation reviews to ensure that you complying with employment law regulations or for general employment law enquiries please contact Nick Rowe.

As this information has been prepared by Maitland Walker Solicitors as a general guide, we recommend that you seek specific professional advice before acting upon the information contained within it. No liability can be accepted by Maitland Walker for any action taken or not taken as result of this information. Maitland Walker is regulated by the Law Society.