1. SOURCES OF EMPLOYMENT LAW
Employment law in England and Wales is mainly based upon the following sources, set out in order of priority:
In terms of the order of priority, where applicable European law is the most important. Some sources of EU employment law are directly enforceable in the domestic courts without the need for domestic legislation, eg the Treaty of Rome (which covers for instance the right to equal pay) and Regulations. Others require domestic implementing legislation, eg Directives in relation to the private sector. Directives can be directly enforceable in domestic courts in relation to the public sector. All domestic law must be read in conformity with the European legislation which it is designed to implement.
The terms of a contract of employment cannot contravene statutory requirements (eg the national minimum wage). Some of the most important statutes are as follows:
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2. PRINCIPAL INSTITUTIONS
The Department for Trade and Industry (DTI) is the government department which deals with the majority of the policy behind, and the detailed statutory drafting of, employment law in England and Wales. The Advisory Conciliation and Arbitration Service (ACAS) is an organisation independent of government which is charged with the general duty of ‘promoting the improvement of industrial relations’. In particular ACAS provides conciliation facilities with a view to promoting settlement if an individual has brought a tribunal claim. It also provides arbitration services to the parties to a trade dispute and for disputes relating to unfair dismissal and flexible working practices. It provides specific and general advice upon a wide range of matters to interested parties.
The Central Arbitration Committee (CAC) has the power to determine disputes in relation to statutory recognition of trade unions using a staged procedure that includes the opportunity for conciliation. The CAC will also have new powers to determine disputes in relation to the implementation of national information and consultation procedures.
There are currently three Commissions which aim to eliminate discrimination:
A new body, the Commission for Equality and Human Rights (CEHR), is to be set up to replace the EOC, CRE and DRC and to take on responsibility for age, religion and belief, and sexual orientation. The aim is for the CEHR to be up and running by October 2007.
3. ROLE OF THE NATIONAL COURTS
Employment tribunals generally deal with all employment claims arising from statutory provisions. Employment tribunals have jurisdiction over contractual issues to a limited extent. Appeals on questions of law are heard by the Employment Appeal Tribunal (EAT). Appeals from the EAT go to the Court of Appeal, and thereafter, to the House of Lords. Where issues affecting European law are concerned, these may be referred directly to the European Court of Justice (ECJ).
These courts retain a number of areas of jurisdiction in relation to employment such as:
Appeals from the lower courts go to the Court of Appeal, and thereafter to the House of Lords. Where issues affecting European law are concerned, these may be referred directly to the ECJ.
4. EMPLOYMENT STATUS AND CATEGORIES OF WORKER
The question of whether an individual is an employee or self-employed is an important one as the legal rights enjoyed by and applicable to each differ widely. Generally, if a worker has a contract of employment this means that he is an employee, whereas if he has a contract for services he will be self-employed. The two key requirements of a contract of employment are that there be ‘mutuality of obligation’ and ‘sufficient control’. If either or both of these factors are absent, there cannot be a contract of employment. If both these factors are present, there may be a contract of employment. The employment tribunal must go on to consider the facts of the situation. Case law has suggested that a worker is likely to be an employee if:
These are not by any means exhaustive lists. However, in general, the greater the degree of personal responsibility an individual undertakes, the more likely he is to be considered self-employed rather than an employee.
Employee Self-employed
All contractual rights All contractual rights
| Unfair dismissal protection | Not applicable |
| Race, sex, disability, sexual orientation, and religion | Race, sex, disability, sexual orientation, and |
| and belief discrimination protection | religion and belief discrimination protection |
| Written particulars of terms of employment | Not applicable |
| Payment of wages free of any deductions not | Payment of wages free of any deductions |
| properly authorised | not properly authorised |
| Redundancy payment entitlement | Not applicable |
| Equal pay | Not applicable |
| Maternity rights (and parental leave) | Not applicable |
| Statutory sick pay | Not applicable |
| A safe place of work | A safe place and system of work |
| Statutory minimum notice period | Not applicable |
The three main categories of employee employed on different types of contract are:
given (by employer or employee) or until they end in some other way, eg on retirement. Fixed-term contracts are those which in the normal course will terminate on:
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A worker is a part-time worker if he is paid wholly or in part by reference to the time he works and, having regard to the custom and practice of the employer in relation to workers employed under the same type of contract, is not identifiable as a full-time worker.
Workers who work part-time have the same rights and obligations as those who work full-time. In addition:
Part-time employees have the right not to be dismissed, selected for redundancy or subjected to a detriment basically on grounds connected to their part-time status.
The term ‘director’ refers to a statutory office held in a company. A director holds his position as a director by virtue of appointment to that position. This appointment refers only to the individual’s appointment to the office of director of a company. The circumstances in which a director can be removed from their office as director are not dictated by employment law but, rather, by company law.
In practice, most directors are also employees of the company and will enter into a separate contract of employment with the company. In their position as an employee of the company, a person who is also a director of the company will enjoy all employment rights applicable to normal employees.
Whilst one individual may be both a director of a company and an employee of the company, the two positions are distinct and separate. However, the relevant documentation should reflect the fact that the two separate positions are held by one individual. For example, it is common for a director’s employment agreement to provide that if the employee’s employment is terminated, the employee will, if requested, resign from any directorships held in the company, failing which the company can do anything necessary to effect the resignation of the directorships.
5. CONTRACT
In order for there to be a contract of employment there must be:
Employers must provide employees with certain specific written information in relation to their terms and conditions of employment (known as a section 1 statement (see section 6.1 below)). Other than this, there are no formal requirements which must be complied with when entering into a contract of employment – in general it is not even necessary for the contract to be in writing. The usual contractual principles will, however, apply, so that there must be: offer, acceptance, consideration, an intention to enter into legal relations and certainty.
A contract of employment may comprise more than one document. The central contract may incorporate, by reference, terms in other documents such as the section 1 statement and the employee handbook.
In addition to the express terms that the parties include in a contract, some terms may be implied by law. Sources of these implied terms include:
It is not possible to derogate from many of the implied terms, such as the statutory rights to equal pay and treatment, by use of an express term. Similarly, where statute sets out a right (such as a minimum notice period or a minimum redundancy payment) an express contractual term which purports to reduce that right will be void.
Where there is an express term dealing with a particular circumstance, common law will not imply a term which contradicts that express term.
6. TERMS AND CONDITIONS
Section 1 of ERA 1996 requires employers to provide employees with a written statement of the main terms and conditions of their employment within two months from the commencement of employment. The statement may be given to the employee in instalments, but there are certain key pieces of information which must be set out in one ‘Principal Statement’.
In some circumstances the employee may be referred to another document. Where there are no relevant terms in relation to some of the key pieces of information, this must be stated.
Principal Statement information
Other required information
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The precise terms of an individual’s contract of employment will be the subject of
negotiation. Some of the typical clauses included are as follows.
Employee’s obligations:
Certain individuals are exempt from these working time requirements, including workers the duration of whose working time is not measured or pre-determined or can be determined by the worker. In addition, special provisions apply to night workers, shift workers and young workers.
7. EMPLOYEE REPRESENTATION
There is a statutory recognition procedure under which trade unions can be awarded recognition. Very broadly, recognition will be awarded where:
• recognition is supported by the majority of those voting and 40 per cent of those
eligible to vote; or • over half of the workforce are already members of the trade union.
A large multinational enterprise (MNE) operating in two or more EU states and which employs 1,000 or more employees may be required to establish a European works council or some other suitable transnational procedure for informing and consulting its employees.
The Information and Consultation of Employees Regulations 2004, SI 2004/3426, which implement the European National Information and Consultation Directive (Directive 2002/14/EC), came into force in the UK on 6 April 2005. The provisions apply to:
If the employer does not have a pre-existing agreement with employees in place, the employer must seek to reach a negotiated agreement with employee representatives over the practical arrangements for information and consultation (I&C) within six months.
A similar procedure would apply if the employer has a pre-existing agreement but could not demonstrate that the pre-existing agreement has employee approval.
If the employer has a pre-existing agreement and can demonstrate that the agreement has employee approval, the employer can choose to ballot the employees to see if they endorse the ten per cent request. If the employees endorse the request, the employer must seek to reach a negotiated agreement with employee representatives over the practical arrangements for I&C. If the employees do not endorse the request, the employer can continue with the preexisting agreement.
In certain circumstances, including where the parties failed to reach their own agreement, standard I&C provisions will apply. These require the undertaking’s management to provide an I&C committee with information on:
The employer must consult the I&C representatives on the matters referred to in (2) and (3). In the case of matters falling within (3), this consultation must be with a view to reaching agreement. If an employer will be consulting on collective redundancies and business transfers in accordance with sections 8.1-8.2 below, it does not have to consult with I&C representatives, provided it notifies the latter of this fact.
A European Works Council (EWC) agreement is not a valid agreement for national I&C purposes.
8. INFORMATION AND CONSULTATION
An employer must consult with appropriate representatives when the employer proposes to dismiss as ‘redundant’ 20 or more employees at one establishment within a period of 90 days or less. For these purposes, ‘redundancy’ is defined as dismissal for ‘any reason not related to the individual employee concerned or for a number of reasons, all of which are not so related’.
The appropriate representatives are:
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The appropriate representatives must represent all of the employees who may be affected by the proposed dismissals or may be affected by measures taken in connection with those dismissals.
Consultation must begin ‘in good time’, and, in any event:
A failure to comply with these obligations can result in the employer being ordered to pay up to 90 days’ pay to each affected employee.
The employer of an employee who may be affected by a transfer of an undertaking or by measures taken in connection with the transfer must inform appropriate representatives of any class of employee likely to be so affected of:
The transferee must give the transferor the information as to whether or not it intends to take measures at such time as will enable the transferor to perform its duty to inform appropriate representatives. For the definition of ‘appropriate representatives’ see section 8.1 above. The information must be given ‘long enough before’ the transfer to enable meaningful consultation to take place.
The duty to consult only arises where it is envisaged that measures will be taken in relation to any affected employees. In such circumstances the employer must consult with appropriate representatives with a view to seeking their agreement to the measures to be taken. Failure to comply with these obligations can result in the employer being required to pay compensation of up to 13 weeks’ pay to each affected employee.
On health and safety matters, employers must consult:
9. EQUAL OPPORTUNITIES
Discrimination on the grounds of sex, marital status, race, colour, nationality or national or ethnic origins, disability, sexual orientation, religion or belief and age is unlawful.
With the exception of disability, the structure of the anti-discrimination legislation is almost identical across all of the strands of discrimination. Discrimination is prohibited during recruitment, employment, on termination of employment and post-employment.
There are four types of discrimination:
Discrimination will not be unlawful if being of a particular race, sex etc is a ‘genuine occupational qualification’.
Employers are liable for their employees’ acts carried out in the course of their employment whether or not done with the employer’s knowledge or approval. The employer may, however, have a defence if it can show that it has taken such steps as were reasonably practicable to prevent the employee from doing such acts.
Compensation for claims of discrimination is unlimited.
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Discrimination against disabled people is prohibited during recruitment, employment, on termination of employment and post-employment.
A person directly discriminates against a disabled person if, on the ground of the disabled person’s disability, he treats the disabled person less favourably than he treats or would treat a person not having that particular disability whose relevant circumstances, including his abilities, are the same as, or not materially different from, those of the disabled person. Direct discrimination cannot be justified.
A person discriminates against a disabled person if:
A person also discriminates against a disabled person if he fails to comply with a duty to make reasonable adjustments imposed on him in relation to the disabled person. The duty to make adjustments arises where a provision, criterion or practice applied by or on behalf of an employer or any physical feature of premises occupied by the employer, places the disabled person concerned at a substantial disadvantage in comparison with persons who are not disabled. In such circumstances, the employer has a duty to take such steps as it is reasonable, in all the circumstances of the case, for it to have to take in order to prevent the provision, criterion or practice, or feature, having that effect.
An employer is not, however, under any duty in relation to a disabled employee if the employer does not know, and could not reasonably be expected to know, that the employee has a disability and is likely to be placed at a substantial disadvantage in comparison with persons who are not disabled.
Broadly, the Equal Pay Act 1970 covers discriminatory contractual terms (the Sex Discrimination Act 1975 covering non-contractual benefits), but in some cases there may be an overlap between the two. The scheme of the Act is that a woman must compare herself with a ‘real’ man who is being treated more favourably. The woman must then show that she is:
The employer can defend the claim on the basis that a ‘genuine material factor’ has resulted in unequal pay. The genuine material factor must not be based on, or tainted by, sex discrimination.
A successful claim will result in the imposition of an implied ‘equality clause’, so the woman must be presumed to be entitled to be treated equally, particularly in terms of pay.
It is unlawful to refuse to employ a prospective employee on the grounds that the prospective employee either is or is not a member of a trade union. It is also automatically unfair to dismiss an employee on ‘union grounds’. Employees are also protected against victimisation on union grounds during the course of employment.
All employees, regardless of their length of service, are entitled to 26 weeks’ ordinary maternity leave. Employees who have, at the beginning of the 14th week before the expected week of child birth (EWC), been continuously employed for a period of not less than 26 weeks may be entitled to a further 26 weeks’ additional maternity leave.
Employees with 26 weeks’ service ending on the 15th week before the EWC may (subject to their normal weekly earnings) be entitled to statutory maternity pay (SMP) for a maximum period of 26 weeks. The first six weeks is paid at 90 per cent of the woman’s normal weekly earnings (calculated on her earnings for the period of eight weeks immediately preceding the 14th week before the expected week of childbirth). The remainder is paid at the lower of that rate and the prescribed rate (currently £108.85). It is a criminal offence to allow an employee to work during the period of two weeks commencing from the day on which childbirth occurs. An employee’s terms and conditions are preserved during a period of ordinary maternity leave. Certain terms and obligations are also preserved during a period of additional maternity leave.
Changes are to be made in relation to employees whose EWC begins on or after 1 April 2007. In relation to these employees:
Employees are entitled not to be dismissed or subjected to a detriment for reasons relating to pregnancy, maternity or maternity leave.
Employees with one year’s service who have responsibility for a child born or placed with them for adoption can take 13 weeks’ parental leave up to the child’s fifth birthday. Special rules apply for parents of disabled children. Employers can agree individual parental leave schemes with employees. Such schemes cannot, however, contradict certain key elements, including the right to 13 weeks’ leave. If no individual scheme is agreed, fallback provisions apply which include requirements that employees cannot take leave other than in multiples of a week and cannot take more than four weeks’ leave in respect of any individual child during a particular year.
The employee remains employed while on parental leave, but need not be paid, and is only bound by and entitled to certain terms and conditions.
Employees with 26 weeks’ service may be entitled to take one week’s or two weeks’ paternity leave on the birth or adoption of a child. Broadly, this must be taken within 56 days of the birth or adoption.
During paternity leave the employee may be entitled to statutory paternity pay which is the lesser of £108.85 per week or 90 per cent of the employee’s normal weekly earnings.
Employees with 26 weeks’ service who adopt a child may be entitled to 26 weeks’ ordinary adoption leave and 26 weeks’ additional adoption leave. Where couples adopt jointly, one of the couple will be entitled to adoption leave and the other may be entitled to paternity leave. During adoption leave employees may be entitled to statutory adoption pay (SAP) for up to 26 weeks. The amount of SAP is the lesser of:
An employee’s terms and conditions are preserved during a period of ordinary adoption leave. Certain terms and obligations are also preserved during a period of additional adoption leave. Employees are entitled not to be dismissed or subjected to a detriment on grounds relating to adoption leave.
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9.9 Right to request flexible working
Employees with 26 weeks’ service who have responsibility for the upbringing of a child can apply to their employer for a contract variation if the purpose in applying for the change is to enable them to care for a child.
The application must be made before the 14th day before the child’s sixth birthday (or 18th birthday if the child is entitled to a disability living allowance).
An employee may apply to his employer for a change in:
An employer can only refuse an application on grounds defined by statute. If an employer does not consider or refuses an application, the employee can complain to a tribunal which can order the employer to reconsider the application and award the employee compensation of up to a maximum of eight weeks’ pay.
This right is to be extended to carers of adults and it is expected that this will take effect from 6 April 2007.
10. DISCIPLINE, GRIEVANCES AND TERMINATION
10.1 Disciplinary procedures
Employers and employees must follow statutory disciplinary and dismissal procedures (SDDP) in certain circumstances. There is both a ‘standard’ and a ‘modified’ version.
The standard SDDP applies where an employer wishes to dismiss an employee (for any reason) or take action (other than suspension on full pay or the issue of warnings) on grounds of conduct or capability.
A modified SDDP applies to immediate ‘gross misconduct’ dismissals unless the employee presents a complaint to a tribunal before the employer has sent the statement of grounds of action.
There are certain specified circumstances in which neither SDDP applies, including in collective redundancy situations. If either SDDP applies, time limits will be extended for three months if a complaint is presented outside the normal time limit but the employee believed that a procedure was being followed. It will be automatically unfair for an employer to dismiss an employee without completing the relevant statutory procedure. Employees will receive a minimum of four weeks’ pay as compensation. Following the relevant SDDP does not automatically mean that the dismissal will be fair.
Employees have a right to be accompanied at a meeting held for the purposes of the SDDP.
10.2 Grievance procedures
The standard statutory grievance procedure (SGP) applies where an employee wishes to complain about any action by an employer.
A modified SGP applies to grievances by ex-employees if the parties agree in writing and the employer was either unaware of the grievance before the employment ended or was aware of the grievance but the standard SGP had not been started or completed before the employment ended.
Neither SGP applies where:
General exemptions apply if a party fears a significant threat, harassment or it is not practicable to commence/comply with a procedure within a reasonable period.
If either of the SGPs applies, an employee cannot bring a tribunal claim if:
10.3 SDDP and SGP – general rules
The principles underlying both the SDDP and SGP are:
If either party fails to use the statutory procedures, tribunals will be able to vary compensatory awards by between ten and 50 per cent (up or down depending upon who has failed to comply). In exceptional circumstances where a variation on this scale would be unjust or inequitable, the tribunal may vary the award by less than ten per cent or decide to make no variation to the award at all. Adjustments will not take an award above the statutory cap.
10.4 Termination by employee
An employee does not have to have any grounds for terminating an employment contract. The only requirements are that the employee complies with the statutory requirement to serve one week’s notice and any contractual notice period over and above this notice period and any other formalities in the contract of employment relating to notice (such as that the notice be in writing).
If an employee fails to comply with contractual requirements in relation to the serving of notice, the employee will be in breach of contract and, theoretically, an employer could apply for an injunction against the employee and/or damages. Such action is, however, extremely rare as the courts will not order specific performance of an employment contract but may prevent an employee eg joining a competitor during the period of the contractual notice.
10.5 Termination by employer
Employees with less than one year’s service
Employees generally only acquire the right not to be unfairly dismissed after they have completed one year’s service. This means that before they have completed one year’s service, an employer does not have to have a specific reason for dismissing an employee as a tribunal
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will not have jurisdiction to assess the fairness of the dismissal. However the SDDP (see section 10.1 above) applies to all employees irrespective of length of service.
Employers must ensure that any reason for dismissal does not fall within any of the grounds on which discrimination is prohibited. There is no qualifying period for an employee to be able to bring a complaint of discrimination. Assuming that the reason for dismissal is not discriminatory, the only requirement is that the employer serve the employee with any relevant contractual or statutory period of notice. If the notice period is not stated in the contract, the individual will be entitled to receive ‘reasonable’ notice.
The notice period, whether contractual or ‘reasonable’, is subject to a statutory minimum period of notice on termination by the employer (save, with exceptions, for a fixed-term contract). This statutory minimum is calculated at the rate of one week for every year of continuous service, up to a maximum of 12 weeks.
If an employer fails to serve the correct contractual notice an employee will be able to bring a claim for damages for breach of contract, ie a sum equivalent to the contractual pay and benefit which the employee would have received during the relevant notice period had he been allowed to serve it. In exceptional circumstances, if an employee is guilty of a repudiatory breach of contract (usually gross misconduct), the employer can lawfully dismiss without giving notice.
If a disciplinary procedure is incorporated into the employee’s contract, a failure to follow it before a misconduct termination would constitute a breach of contract in itself.
Employees with one year’s service
An employee who has been employed continuously for one year has the statutory right not to be unfairly dismissed. The employer must be able to show that the reason for dismissal was one of the six ‘potentially fair’ reasons and that it was fair and reasonable in all the circumstances of the case to dismiss for the reason given.
Reasons for dismissal
It is for the employer to show what the reason was for the dismissal (or if there was more than one, the principal reason) and that it was one of the potentially fair statutory reasons, namely:
Fair procedure
If there is no potentially fair reason for dismissal or if there is an automatically unfair reason for dismissal, then the dismissal will be unfair and remedies awarded. If however there is a potentially fair reason for the dismissal, then the tribunal will determine whether the dismissal was fair or unfair in all the circumstances. If the dismissal is found to be unfair, then remedies will be awarded.
The precise procedure which must be followed will depend upon the reason for the dismissal. However:
Remedies for unfair dismissal
If a dismissal is held to be unfair a tribunal can order reinstatement or re-engagement or award compensation. Compensation comprises:
A further award can be made if an employer fails to comply with a reinstatement or re-engagement order.
10.6 Redundancy payment
Employees with two years’ service who are made redundant are entitled to a statutory redundancy payment calculated in a similar way as the unfair dismissal basic award and subject to a maximum of £8,700 (£9,300 from 1 February 2007). This amount will be offset against the basic award if the employee wins an unfair dismissal claim.
Employers will often pay enhanced redundancy payments either on a contractual basis or at their discretion.
10.7 Automatically unfair dismissals
Certain reasons for dismissal render a dismissal automatically unfair without any consideration of reasonableness. These include reasons connected with health and safety, pregnancy or maternity, parental leave, assertion of a statutory right, union membership, making a protected disclosure, working time and working part-time/flexible working. Special rules apply to automatically unfair dismissals, including the fact that the employee does not always have to have one year’s service in order to bring a claim.
11. COLLECTIVE DISMISSALS
11.1 Definition
The definition of redundancy for unfair dismissal purposes is set out at section 10.5 above.
For the purposes of statutory collective consultation, ‘redundancy’ is defined as dismissal for ‘any reason not related to the individual employee concerned or for a number of reasons, all of which are not so related’.
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11.2 Information and consultation
If an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less the employer must provide information to and consult with appropriate representatives about the dismissals (see section 8.1 above).
A failure to comply can result in each affected employee being awarded a maximum of 90 days’ pay.
11.3 Notification to Department of Trade and Industry
An employer who proposes to dismiss 20 or more employees at one establishment is required to give certain written particulars to the DTI within a specified time-scale and before giving notice to terminate an employee’s contract of employment in respect of any of those dismissals. The specified time-scale is:
less, the notification must be given at least 30 days before the first dismissals take effect. Failure to observe these requirements is a criminal offence and may result in a fine.
In addition to complying with the collective consultation requirements set out above employers must ensure that the dismissal procedure takes into account:
it was reasonable in the circumstances for the employer to dismiss the employee for that reason. In deciding this question, a tribunal will consider whether there was objective selection criteria and consultation both with any relevant union or employee representatives and also individually with the employees concerned. See further section 10.5 above in relation to the fair procedure to be followed. If a dismissal is held to be unfair, the tribunal can make any of the awards set out at section 10.5 above.
12. FORTHCOMING LEGISLATION
The right to request flexible working is to be extended to carers of adults. It is expected that this will take effect from 6 April 2007.
The government has also committed to extending paid maternity and adoption leave to 12 months by the end of this Parliament and introducing a new entitlement to additional paternity leave alongside this extension.
13. USEFUL REFERENCES
Statutes and statutory instruments
Her Majesty’s Stationery Office: www.hmso.gov.uk
General bodies
Advisory Conciliation and Arbitration Service: www.acas.org.uk
Department of Trade and Industry: www.dti.gov.uk
Discrimination bodies
Commission for Racial Equality: www.cre.gov.uk
Disability Rights Commission: www.drc-gb.org
Equal Opportunities Commission: www.eoc.org.uk
