New President of the Employment Tribunals (England and Wales) announced

Brian Doyle has been appointed President of the Employment Tribunals (England and Wales).

Judge Doyle (as he will be known) is currently the Regional Employment Judge in Manchester. His appointment takes effect on 1 April 2014.

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Work/Life/Law has moved …

… and is now at http://worklifelaw.co.uk

The new RSS feed is http://feeds.feedburner.com/worklifelaw

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“0800 sickie” by MC Elemental

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For all the cynical employers out there, the song “0800 Sickie” can be downloaded here (MP3 link) courtesy of MC Elemental.  More from MC Elemental here.

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Compromise agreements and the Equality Act 2010

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It has become common practice to settle employment disputes by means of a “compromise agreement”.  These agreements are provided for in most employment legislation, and enable the employer and employee to settle their dispute.  In order to be  binding on the employee, the agreement must comply with certain formalities, and the employee must have been advised on the agreement by a “relevant independent adviser”.  Typically the mechanism adopted is for the employee to consult a solicitor, with the employer paying towards the cost of the advice.

In an update (subscribers only) published the day before implementation of the Equality Act, Practical Law drew the legal profession’s attention to a problem with the way in which the Equality Act dealt with compromise agreements.

The Equality Act adopts a rather different formulation to other employment legislation. There is still a requirement for the agreement to identify the “particular complaint” intended to be compromised, and for the lawyer to have insurance, but the requirement for the lawyer to be an “independent adviser” is different.

Under the Employment Rights Act 1996 (s203(3B)(a)) the lawyer will not be independent (in relation to the employee) if:

“… he is … employed by or is acting in the matter for the employer or an associated employer”

In the Equality Act (s147(5)) the lawyer is now no longer independent if they are:

“(a) a person who is a party to the [compromise agreement] or complaint, [or]

(d) a person who is acting for a person within paragraph (a) or (b) in relation to the contract or the complaint”

The employee themselves is always going to be a person who is a party to the compromise agreement, and a literal interpretation of these provisions leads only to one conclusion – that a lawyer acting for an employee cannot be a “independent adviser” for the purposes of advising on a compromise agreement under the Equality Act.

Since any lawyer consulted by the employee might be said to be acting for them, this leads to the absurd conclusion that there is no lawyer who can validly count as an independent adviser. Immediately they start to advise the employee, they will be “acting for” the employee and no longer independent.

This has caused some consternation amongst employment lawyers. Some are arguing that the courts and tribunals will have to interpret section 147(5)(a) as referring to “a person who is another party to the compromise agreement” in order to avoid an absurd result that could not have been intended by Parliament.  They will point out that the explanatory notes (pdf) of the Bill as presented to Parliament state (at paragraph 464) that: “The clause replaces provisions in current legislation which have the same purpose.

Others will no doubt be looking to the ACAS pre-claim conciliation procedure, but universal adoption of this in preference to compromise agreements would be unmanageable by ACAS.

However this is resolved, it does seem to be a major drafting error in the Equality Act.

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The latest employment law news – from 1998

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A recent office clear-out uncovered a batch of old client newsletters.  Amidst the news of new partner appointments and dire warnings about the millenium bug was this employment law update, from October 1998, warning of a reduction in the qualifying period for unfair dismissal claims from two years to one year, and a proposed removal of the cap on the compensatory award for unfair dismissal (then £12,000).  It all seems a long time ago … click here for the .pdf.

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What one-in, one-out means for employment law

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Vince Cable today announced details of the government’s one-in, one-out plan for business regulation.

As from 1 September, any new regulation will have to be balanced by another regulation being abolished.

The government has chosen to implement this on the basis of the net cost to business of the regulation.  It will not simply be a mathematical exercise of counting the number of regulations implemented and abolished.  Instead, the government will look at balancing the cost of the regulations.  A number of new low-cost regulations might be set off against the abolition of a single high-cost regulation.

The anticipated costs of any new regulation is detailed in the “regulatory impact assessment” which accompanies new regulations.  These can be controversial.  For example, the regulatory impact assessment for the proposal to abolish the default retirement age (Annex E here (pdf link)) identifies the only costs for business as being one-off costs of  approximately £20m for familiarising themselves with the changes and another £20m for employers who do not already have one to introduce an appraisal system.  There is no mention of the costs of tribunal claims being brought by employees who are over 65, which will undoubtably increase once the default retirement age is increased (although these may be included after consultation).  In contrast, the benefits to employers are assessed at around £45m a year, including £5m a year savings from the abolition of the retirement procedures and £40m in “increased profit”.  Overall, the abolition of the default retirement age is assessed as being a net benefit to employers, rather than increasing costs.

Similarly, the Equality Act 2006 has been assessed (page 6 here (pdf link)) as having a net benefit of anywhere between £65m and £675m over ten years.

The Agency Workers Regulations, which derive from European law, will not be caught by these new rules, which apply only to domestic law.   The cost of the Agency Workers Regulations to business are assessed at £1.5 billion a year (page 28 here (pdf link)).

So of the most significant new employment regulations set to come into force in the next year or so, two are supposed to have a net benefit to business, and the third, which is assessed as costing £1.5 billion a year, is exempt from the new requirements.  That might not be quite what business thought was being promised by the headline “one-in, one-out”.

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How the Seldon case undermines the government’s plans to abolish the default retirement age

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Last Wednesday, the Court of Appeal delivered its judgment in the case of Seldon -v- Clarkson Wright & Jakes, supporting the right of a partnership to forcibly retire a partner at 65.

On Thursday, the government announced its plans to abolish the right of an employer to compel an employee to retire at 65 or over.

The contrast between these two approaches was summed up in the front page headlines in the Daily Express and the Daily Mail for Thursday: “Workers can be forced out at 65” and “Now the right to work past 65“.

We have not as yet seen any draft legislation for the abolition of the employer’s ability to retire an employee.  The government’s consultation (pdf) is not specific about how these plans will be carried out.  The most obvious way of doing this would simply be to abolish the specific exemption in reg 30 of the Employment Equality (Age) Regulations 2006, which exempts retirement of an employee at age 65 or over from the prohibitions on age discrimination, and the procedures in Sch 6 which are required for the retirement dismissal to be fair.  Para 7.2.7 of the consultation says that “objective justification” of retirement by employers will still be permitted, which suggests that compulsory retirement will still be permitted where it can be justified by employers, but without a specific exemption.

That put us in precisely the kind of situation dealt with in the Seldon case.  The exemption for the retirement of employees at 65 has never applied to partners.  The compulsory retirement of partners must be “objectively justified”, just as in the future the compulsory retirement of employees would have to be objectively justified.

The Seldon judgment is the authoritative statement (so far) of what is required for such justification.

In that case, the partnership had sought to justify the compulsory retirement by reference to two broad principles, categorised by the Court of Appeal as “dead men’s shoes” (ensuring associates at the firm had the opportunity of partnership after a reasonable period, and facilitating workforce planning by having some predictability about when vacancies might arise) and “collegiality” (limiting the need to expel partners by way of performance management).  Either of those purported justifications (and particularly the latter) might be expected to apply equally to employees as to partners.

Sir Mark Waller gave the judgment of the Court of Appeal, and referred heavily to the previous judgments of the ECJ and the High Court in the Heyday case, which unsuccessfully challenged the UK government’s decision to exempt the retirement of an employee from age discrimination law.

He said (paras 21 – 23 of the judgment):

“… where a partnership is acting consistently with the social aim which has justified the legislative provision, it would be … to contradict that aim to render such a provision unlawful if the clause was a proportionate means of achieving the aim.

Accordingly [the challenge by Mr Seldon] directed at the legitimacy of the “dead men’s shoes” aim clearly fails.  It is also in my view equally clearly fails in relation to the “collegiality” aim.  It seems to me that an aim intended to produce a happy work force has to be within or consistent with the Government’s social policy justification for the regulations.  It is not just within partnerships that it may be thought better to have a cut-off age rather than force an assessment of a person’s falling off in performance as they get older.

… my experience would tell me that it is a justification for having a cut-off age that people will be allowed to retire with dignity …

There is a very great difference between employees or partners who are under-performing but not by reason of age, and employees or partners who are doing their best but it is no longer good enough because old age has caught up with them.”

This begs a number of questions – how is it that Sir Mark Waller gets from his conclusion that the dead men’s shoes and collegiality arguments are legitimate aims (which arguably they are) to then apparently finding that the partnership’s requirements were a proportionate means of meeting that aim?  Why is it that there should be a legal difference between under-performance that relates to age and other under-performance?

The first point is addressed to a certain extent later in the judgment, when Sir Mark Waller refers to reg 30 as supporting the idea that 65 is a proportionate cut-off date.  Of course, under the new provisions reg 30 would not longer exist, but it is difficult to see that retirement of a partner at 65 could be proportionate at the end of September 2011 but not at the start of October 2011, when reg 30 is expected to be abolished.

On the second point, to the extent that the age-related under-performance relates to a medical condition, the medical condition may count as a disability for which reasonable adjustments should be made.  Nevertheless, in a judgment that he specifically contemplated being wider than the partnership context, he has decided that “it may be thought better to have a cut-off age rather than force an assessment of a person’s falling off in performance“, and “it is a justification for having a cut-off age that people will be allowed to retire with dignity“.

The problem with the Seldon judgment, in the context of the government’s plans, is that there is no real room for distinguishing between the justification given by the partnership for retiring Mr Seldon at 65 and the justification any employer would give for retiring any employee at 65.

Mr Seldon’s case had the support of the EHRC, and it seems to me that it is inevitable that they will seek permission to appeal to the Supreme Court so as to avoid the Court of Appeal judgment as being a precedent which suggests that compulsory retirement at 65 is justified irrespective of the abolition of the specific exemption for employees.  BIS intervened in the Seldon case.  It is not clear from the judgment what the nature of their submission was, but presumably they will not now have any interest in supporting the partnership’s approach to this case.

Unless the Court of Appeal’s judgment is overturned, the abolition of the default retirement age may well just be an academic exercise – retirement at 65 can continue as normal, on the basis that it is justified.

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