National minimum wage - first criminal prosecution

1. Dancing in the Moonlight?
2. Smouldering claims
3. Restrictive Covenants
4. Face up to the cost of Facebook

Workers have been protected by the National Minimum Wage Act 1998 (NMWA) for over eight years. The main rate for workers aged 22 years and over will increase to £5.52 on 1 October this year. The development rate for 18-21 year olds will increase to £4.60 from the same date, and the rate for 16-17 year olds will change to £3.40.

The Department for Business, Enterprise and Regulatory Reform is responsible for policy; however, HM Revenue and Customs (HMRC) is responsible for enforcing the minimum wage.

The approach previously taken by HMRC was not to pursue criminal prosecutions as enforcement powers and penalty notices available under the legislation have in the past been seen to provide sufficient sanction. However, upon investigating employers found to be paying less than the minimum wage, approximately 45,000 since the act came into force, it has been discovered that a small number of employers failed to comply with the penalties enforced. As a result of this research HMRC reviewed its default position of non-prosecution.

The first proceedings of this kind were successfully brought against the proprietor of a children’s nursery school. The owner entered a guilty plea to the charge, under the NMWA, of obstruction. The behaviour of the owner in not allowing compliance staff access to records resulted in £3,000 worth of fine and costs. In particular, the judge commented that the owner had, 'demonstrated a clear and deliberate intent to obstruct officers and this was a scandalous breach of the national minimum wage legislation'.

Along with the offence of delaying or obstructing a compliance officer there are five potential criminal offences under section 31 of the NMWA, all of which carry a maximum £5,000 fines and a criminal record:

• An employer refuses or wilfully neglects to pay NMW
• A person fails to keep or preserve records
• A person knowingly causes or allows false entry in records
• A person produces or furnishes false records or information
• A person refuses or neglects to answer any questions or produce documents for compliance officer

The future of the national minimum wage may be under review as Gordon Brown is planning to vary the minimum wage region by region. This means that it would be increased in London and the southeast where living costs are higher. However, it is anticipated that any proposal to cut the minimum wage rate in areas with lower living costs would be strongly opposed by trade unions.

Dancing in the Moonlight?

A recent survey undertaken by finance specialists has indicated that 7% of the 1,400 survey participants were found to have two jobs in addition to their day job.

It is estimated that nearly half of moonlighters work for extra money and 25% considered that their potential is not recognised by their day job employers. One in five people said that they believe that by moonlighting they were opening themselves up to more opportunity and broadening their horizons.

70% of moonlighters were found to be keeping their employers in the dark about the other jobs they had and 43% admitted that holding down more than one job was not permitted by their employers.

To ensure that your staff are happy just working for you ensure that their talent is maximised and that they are valued! In tandem with this, if your employee's work is suffering as a result of "moonlighting" please contact our employment team to obtain advice on how best to combat these problems.

Smouldering claims

Our May 2007 Employment update provided advice as to how to prepare for the smoking ban, but now it has been in force for over 2 months what are the employment issues as a result of the ban that are beginning to smoulder?

The recent case of Smith v Michelin Tyre Plc (2007) posed a number of questions to a Tribunal including: What happens when an employee refuses to give up smoking and breaches the no-smoking policy in the workplace? And, can a one off cigarette justify dismissal or would there have to be more to it?

• In 2006 Mr Smith had worked for Michelin Tyres Plc as a Tyre Finisher in their Dundee for 12 years
• Michelin enforced a non-smoking policy for many years as a result of highly flammable processes that took place in the factory
• Michelin’s disciplinary policy stated that smoking in unauthorised areas was an example of gross misconduct
• In March 2006, the smoking ban was introduced in Scotland and Michelin reviewed its smoking policy
• The review and legislation resulted in smoking inside the factory being completely banned and smoking only permitted in designated outside areas.
• The new policy was made known to employees by way of presentations and notices. Mr Smith attended a training session.
• Mr Smith was caught smoking by a supervisor in November 2006, he had opened the fire door and sat by the door smoking, but still inside the building.
• Mr Smith attended disciplinary hearings where he put forward mitigating arguments including that he was suffering from depression and that smoking had just been an automated reaction
• It was decided that this mitigation was insufficient and he was summarily dismissed for gross misconduct. Mr Smith unsuccessfully appealed this decision claiming that he was depressed and "addicted". He then applied to an Employment Tribunal claiming unfair dismissal.

Employment Tribunal decision

As in all unfair dismissal cases, the issue before the tribunal was whether Michelin had a potentially fair reason for dismissing Mr Smith and whether they had acted reasonably in treating that reason as grounds for dismissal.

The Tribunal decided that it was clear from the employer’s disciplinary policy that smoking in unauthorised places amounted to gross misconduct and concluded that it was a fair reason for dismissing him. Although the Tribunal did balance the employee’s and employer’s arguments it was decided that the disciplinary policy was there with the aim of 'preserving its business, their property and more importantly, the lives of their other staff'.

The decision is reassuring, as the Tribunal have highlighted the importance of ensuring that no-smoking policies are adhered to. It is however essential that all disciplinary policies are clearly communicated and that preventative action / alternatives to dismissal are considered wherever possible. It is worth bearing in mind that although Smith is a Scottish case, the decision would be persuasive authority for Tribunals in England and Wales and we suggest that it is likely to be followed. For any advice on disciplinary measures please contact our employment team.

Restrictive Covenants

The High Court has, over the past year, had to consider the enforceability of non-competition clauses in a number of cases.

It is commonplace, particularly with managerial and sales staff for employers to seek to restrict certain activities following termination of employee’s employment, for example, non-solicitation and non-dealing covenants. These are included in contracts and compromise agreements with the aim of preventing employees from soliciting work from customers or prospective clients that they may have dealt with under previous employment.

The time scales that these covenants are applicable are normally between 6-12 months, but are case specific depending on how much protection the employer believes is necessary from the employee

The Court of Appeal appear to be upholding the growing trend of taking a robust approach to the enforceability of these clauses, in particular, restrictions relating to the prevention of someone working in a specific industry.

The recent case of Huw Thomas v Farr Plc and Hanover Park Commercial Limited mirrors this trend. The case concerned a company director who had been restricted for a period of 12 months from the termination of his employment, from engaging in any competing business in any place where his employer had conducted business in the 12 months prior to termination.

Upon Mr Thomas’ termination of employment he secured employment with a competing organisation and as a result his former employers sought to enforce the restriction and prevent him working for a period of 12 months following the termination date.

The Court of Appeal upheld the restriction on the basis that there would be difficulty in enforcing the confidentiality clause in the employment contract and it that it would be difficult to detect any breach of covenants by Mr Thomas. In addition, the court held that as Mr Thomas was the Managing Director of a competing business, therefore it would not be easy to police the non-solicitation and non-dealing clauses as he would be unlikely to deal directly with customers. This was one of the reasons why enforcement of the restrictions was seen to be important – to ensure protection of the former employer.

Restrictive covenants serve a useful purpose in preventing employees who may be able to cause damage to their former employer’s business by joining a competing organisation. However, there are strict rules surrounding the enforceability of restrictive covenants; therefore, they should be regularly reviewed to ensure that they remain relevant and proportionate to maximise the chances of enforceability. Our employment team has extensive experience in advising on restrictive covenants and would be pleased to discuss any concerns that you may have.

Stress at Work

2 claims have recently been considered by the Court of Appeal in respect of stress at work and employer’s responsibilities.

Deadman v Bristol City Council (2007)

• Mr Deadman had been employed by Bristol City Council for around 30 years
• In February 1998 a female employee made an complaint of harrassment against him
• The complaint was dealt with in acordance with the City Council’s harassment procedure. The complaint was proved by an adjudicating panel consisting of two managers
• According to the Council’s harassment policy the panel should have consisted of the three managers and as a result of this breach of policy Mr Deadman successfully appealed their decision
• A decision was later made to rehear the original complaint, Mr Deadman was told of this decision by a letter left on his desk
• Following a trial lasting ten days the judge found in favour of Mr Deadman, but on an unusual basis
• It was conluded that there was a contractual duty to act “sensitively” contained in the City Council’s Equal Opportunities Policy and that leaving a letter on the Claimant’s desk was “most insensitive” and a breach of that contractual duty
• It was also held that the failure to appoint 3 members to sit on the panel was a breach of contract
• The Council appealed this decision to the Court of Appeal who rejected the conclusion held at trial, that is, there was a contractual duty to act sensitively
• The Court of Appeal instead found that the references to acting sensitively were simply an acceptance by the Council of the way in which they should conduct themselves and that in the absence of any indication of illness they were not in breach of that duty
• The Court concluded that the failure to appoint 3 members to the adjudication panel was a breach of contract but that the damage claimed was too remote.

It was made clear by the Court of Appeal that a Claimant will not often have a better chance of success in a stress at work claim by putting the claim forward as a breach of contract rather than as a breach of the duty of care.

McAdie v Royal Bank of Scotland (2007)

The Court of Appeal endorsed the EAT's approach in holding that an employer could fairly dismiss an employee for ill-health capability despite the fact that the employee's stress-related illness was attributed to the conduct of the employer.

Despite the fact that the cause of an employee's incapability is a relevant factor for the tribunal to consider when determining whether or not a dismissal is fair, the key issue is whether the employer acted reasonably in all the circumstances, which include the fact that the employer was responsible for the ill-health.

On these facts the employee made it abundantly clear that she did not want to return to work, an assertion that was supported by medical evidence, and as a result there was no alternative to dismissal.

As an aside the Court of Appeal did however support the comments of the EAT, that where an employer is responsible for an employee's ill-health, effort should be made to put up with a longer period of sickness absence than would otherwise be reasonable or to find alternative employment for the employee.

Face up to the cost of Facebook

A New research suggests that the misuse of e-mail and Internet systems in the workplace are costing UK businesses up to £132 million per day. The research surveyed 3,469 UK organisations and highlighted that approximately 233 million hours a month are lost as a result of employees using the internet outside official breaks.

The current estimated cost to employers is £30.8 billion per year; however, this is anticipated to continue to rise. With online gambling and use of social networks such as facebook becoming increasingly common employers are left with the decision whether to ban employees from accessing sites; or whether to discipline them if they continue to use them in work time.

With networks on social communities titled ‘I have been on facebook all day and done no work today’ it is understandable why employers are concerned that Internet based communities are having a serious effect on the productivity of many businesses.

Censoring what employees have access to is further evidence of the presence of Big Brother, but what is the best way to combat facebook? Maitland Walker would be pleased to provide up-to-date advice on these issues and specific guidance on how to manage staff and any misconduct that arises as a result of this new trend. This should serve as a reminder to every employer that it is important to maintain an up-to-date handbook with appropriate and clearly defined examples of misconduct so as to prove as a useful tool in managing and disciplining staff.

     

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 our employment team.

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 Solicitors Regulation Authority.