Monthly Archives: September 2016

Penalty Clauses in Employment Contracts

One area when an employment contract may be unenforceable is when there is a penalty clause which is found to be void.

Penalty clauses are rare. It is a clause where it imposes a detriment on the employee in the event of he / she breaches the contract which is out of proportion to any legitimate interest of the employer,

What type of employment clauses might be a penalty clause?

1. Repayment clauses – these may include for example the repayment of training costs, relocation allowances or enhanced maternity
pay if an employee does not stay in employment for a particular period of time. Courts normally find these clauses reasonable if they are not too excessive and the employee was clear about them.

2. ‘Liquidated damages’ – these are clauses in a service agreement, when payment is made to a director on breach of contract, change of ownership of the company or where a fixed term is not renewed. If the liquidated damages are excessive they might amount to a penalty clause.

3. Bonus clauses, if they withhold a bonus in certain circumstances

4. Clauses don’t always need to involve the payment of a sum of money to be a penalty, any benefit will do.

5. Indemnities in settlement agreements where the employee needs to repay compensation if they bring a Tribunal or breach perhaps a restrictive covenant. Such clauses sometimes are held to be unenforceable.

However, over the years the courts have been reluctant to strike down penalty clauses.

The employer and employee can assess, in advance, any likely loss that may occur if a contract is broken. If the amount is reasonable and a genuine pre-estimate of the loss, then it will be enforceable – this is known as ‘liquidated damages clause’. Much will depend on the facts and circumstances of the termination of employment, and the amounts repayable.

Contact us if you need any help with Employment Contracts

Modern Slavery – what does a business need to do to comply?

Modern Slavery Act – What does a Company need to do to comply?

The Modern Slavery Act 2015 came into force in October last year and applies to financial years ending on or after 31 March 2016.

It requires large organisations doing business in the UK with a minimum total turnover of £36 million per year to publicly state each year the action(s) they have taken to ensure that their supply chains are slavery free.

However, many smaller companies below this threshold are being asked when they tender for work to show they can comply with the regulations.

Contracts are often not being renewed or tender documents are not successful because the supplier cannot show they can comply with the Modern Slavery Act obligations.

What do we need to do to comply?

At a bare minimum a Company must publish a Modern Slavery Act statement on their website. This can actually state that they do not comply with the Modern Slavery Act or it can be a Modern Slavery Act Policy.

We can put together a Modern Slavery Act statement for small business for a fixed price of £400 bespoke to your industry ready to publish on your website.

What should a Modern Slavery Act statement contain?

We would recommend that the slavery and human trafficking statement must include one of the statements below:

• the steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains, and in any part of its own business; or
• that the organisation has taken no such steps.

The statement may contain other information, such as the organisation’s structure, its due diligence processes in relation to slavery and human trafficking and any training on the subject that is provided to its employees.

Time limit

The Home Office guidance provides that a business is encouraged to make it within six months of the end of the previous financial year.

Next Steps

As part of your Modern Slavery Act Policy it is advisable to map your supply chain in terms of industry type, countries and size of the contract to decide whether you add on an additional section to your supplier tendering documents to ask Modern Slavery Act questions.

Employment Law Support can assist you with your Supplier Questionnaire and Supplier Risk Assessment bespoke to your industry or a fixed price of between £350 to £600 depending upon the depth of the questionnaire needed.

We would advise you to also update your terms and conditions to include a Modern Slavery Act clause.

Employers: even smaller companies are being asked to publish a Modern Slavery Act Statement if they are tendering for work with certain customers.

We can provide further information on this topic and can also assist organisations in preparing a compliant statement for a very competitive fixed price.

Contact us if you need help with a Modern Slavery Act Statement and associated documents

Whistleblowing – meaning of worker

The Public Interest Disclosure Act 1998, or more commonly called the Whistle blowing Act, creates two levels of protection for whistle blowers.

The dismissal of an employee will be automatically unfair if the main reason, for dismissal is that they made a “protected disclosure”. The Act also protects and employee for being subjected to any detriment on the ground that they have made a protected disclosure.

The definition of “worker” under the Whistle Blowing Act is wider than the definition under the Employment Rights Act 1996. However, the recent case of McTigue v. University Hospital Bristol NHS Foundation Trust has highlighted just how widely the courts are willing to apply the definition.

The Definition of “worker”
A “worker” is defined by section 230(3) ERA 1996 as: “an individual who has entered into or works under (or, where the employment has ceased, worked under) –
a contract of employment; or
any other contract, whether express or implied and (if it is express) whether oral or in writing, 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.”

However, under section 43K ERA 1996, the usual definition of worker is extended in relation to the whistle blowing provisions to include a number of individuals who would not otherwise be covered. This additional definition includes agency workers and individuals supplied via an intermediary.

The case was helpful in some guidance on how to determine whether an individual is a worker within section 43K(1)(a)

A number of questions that should be addressed when determining whether an individual is a worker within section 43K(1)(a) are helpful such as:
– For whom does or did the individual work?
– Is the individual a worker as defined by s.230(3) in relation to a person or persons for whom the individual worked? If so, there is no need to rely on s.43K in relation to that person.
– If the individual is not an s.230(3) worker in relation to the respondent for whom the individual works or worked, was the individual introduced/supplied to do the work by a third person, and, if so, by whom? If so, were the terms on which the individual was supplied to do the work determined by the individual? If the answer is yes, the individual is not a worker within s.43K(1)(a).
If the answer is no, were the terms substantially determined (i) by the person for whom the individual works or (ii) by a third person or (iii) by both of them?

If any of these is satisfied, the individual does fall within the subsection.
In answering question (e) the starting point is to look at the the contract. Also look at the agency contract.

If the company alone mainly determines the terms on which the individual worked in practice (whether alone or with another person who is not the individual), then the company is the employer within s.43K(2)(a) for the purposes of the protected disclosure provisions. There may be two employers for these purposes under s.43K(2)(a).

Key points from this case: an agency worker may be able to bring a whistle blowing claim against an end user, provided that the terms of engagement are not substantially determined by the worker himself/herself; and that the fact that an individual may be a section 230(3) worker in relation to the agency does not automatically prevent that individual from being a worker under the extended definition.

We can assist with whistle blowing questions