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Employment Update 4 March 2011

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United Kingdom

Read the 'Employment Law Update'' newsletter, 4 March 2011, on ffw.com

Welcome to our fortnightly round-up of what's happening in employment law.

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Default retirement age - clearing up the confusion

As outlined in our last alerter, there was some confusion caused by the recently published Draft Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011. They appeared to state that the transitional provisions for phasing out the default retirement age (DRA) only applied if the person retiring reached the age of 65 (or the employer's normal retirement age if higher) between 6 April 2011 and 30 September 2011. An employee who turns 65 by 6 April 2011 therefore did not appear to fall within the transitional provisions.

The Department for Business, Innovation and Skills (BIS) has this week issued a revised set of draft regulations, providing some welcome clarification. The revised regulations state that the current DRA procedure will continue to have effect if an employer notifies an employee of retirement in accordance with the DRA procedure before 6 April 2011 and the employee has attained the age of 65 (or the normal retirement age if higher), or will attain it, before 1 October 2011.

The key points to note are as follows:

  1. the last day on which an employer will be able to notify an employee of the intended date of retirement under the DRA procedure is 5 April 2011.
  2. the employee must have reached, or will reach, 65 (or the normal retirement age if higher) by 30 September 2011.
  3. as the maximum notice of intended retirement that can be given under the DRA procedure is 12 months, the last date on which an employee can be retired is likely to be 5 April 2012. This is subject to any agreed extension - see below.
  4. the last day on which an employee can request to work beyond the intended date of retirement is 4 January 2012.
  5. if an employer agrees to allow an employee to work beyond the intended date of retirement, the maximum extension possible is 6 months (if an employer agreed an extension of more than 6 months, it would need to issue a fresh notification of retirement which it cannot do after 5 April 2011). The last possible date on which an employee can therefore be retired under the DRA procedure is likely to be 5 October 2012.

Whilst the revised regulations provide some clarity, there is still some controversy surrounding the last dates in points 3 and 5 above, based on how the relevant periods are calculated. However, in a note accompanying the revised draft regulations, BIS states that the latest possible retirement date, given the 6 month extension that can be agreed as outlined above, is 5 October 2012.

From 6 April 2011, employers who therefore wish to retire an employee cannot use the DRA procedure. If the above transitional provisions do not apply, any retirement dismissal from this date will constitute unfair dismissal (unless, for example, it is a fair dismissal for "some other substantial reason") and unlawful age discrimination (unless it is objectively justified). Given that there is now a month to the phased abolition of the DRA, employers should take steps now to ensure that they are sufficiently prepared to tackle retirement issues in the workplace. If you need advice on this area, please contact us. 

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No sex please, we're insurers

The European Court of Justice (ECJ) has banned insurance companies from using gender as a factor in pricing products such as annuities. Although it is based on an analysis of the current law, the ECJ has ruled that, for practical reasons, the ban will not come into force until December 2012. Click here to read the full article

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Cabin crew claims - ET has jurisdiction

The Court of Appeal has confirmed that an Employment Tribunal did have jurisdiction to hear the claims of race and age discrimination from British Airways (BA) cabin crew based in Hong Kong. The issue of territorial jurisdiction is notoriously complex but this recent decision sheds some light on the approach taken by the courts. It is worth noting, however, that the legislative provisions examined in this case do not appear in the new Equality Act 2010 and it remains to be seen how territorial jurisdiction will be addressed in the future.

In British Airways plc v Mak, Ms Mak (the lead claimant) and 15 other claimants were all Hong Kong based cabin crew who served on flights between Hong Kong and Great Britain. The claimants had stronger links with Hong Kong to the extent that they were born there and were of Chinese national origin. They were based and ordinarily resident in Hong Kong at all material times and were recruited in Hong Kong out of BA's base there to serve as members of BA's international cabin crew. They were compulsory retired at 45, whereas other international cabin crew working out of London were not forced to retire. They brought age and race discrimination claims in Great Britain.

The Employment Tribunal found that it had jurisdiction to hear the claims. It held that Ms Mak worked 'partly in Great Britain' so her employment came within s.8(1) of the Race Relations Act 1976 (RRA) and she should therefore be regarded as being 'at an establishment in Great Britain'. It rejected BA's argument that the claimants' work should be treated as being done in Hong Kong on the basis that 'where work is not done at an establishment it shall be treated...as done at the establishment... with which it has the closest connection' (s.8(4) of the RRA).

The Employment Tribunal found that, even discounting time in British airspace and rest time and even though the claimant's work in Great Britain was only around 5% of her overall working time, Ms Mak did her work partly in the UK. Such work was a regular and crucial part of her role and her role could not be done without it. It was not in any sense trivial or trifling. The Employment Tribunal reached the same conclusion about the age discrimination claims. Following an unsuccessful appeal to the Employment Appeal Tribunal, BA made a further appeal to the Court of Appeal.

The Court of Appeal upheld the Employment Tribunal’s decision. It confirmed that it is more logical and makes better sense to begin at the beginning with s.8(1) of the RRA rather than to begin at the end with s.8(4) of the RRA. It noted that there was no need or justification for enlisting s.8(4) when s.8(1) fits the case. It therefore deemed Ms Mak's employment to be at an establishment in Great Britain by reason of the work done by her partly in Great Britain. The process of regarding her employment as being at an establishment in Great Britain was triggered simply by Ms Mak doing her work partly in Great Britain. It was not stipulated that her work must actually be done "at an establishment" as long as it was done at least partly in Great Britain. In those circumstances s.8(4) is not reached and did not apply.

As noted above, it is worth remembering that these territorial jurisdiction provisions do not appear in the Equality Act 2010, which is silent as to its territorial scope. As this is a complex area of law, it remains to be seen how Employment Tribunals will approach this issue in the absence of such provisions. For the many organisations, such as BA, that have a global presence, it would be wise to watch the developments in this area very closely. 

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TUPE does apply to administrations

Contrary to its decision in the earlier case of Oakland v Wellswood (Yorkshire) Ltd, the Employment Appeal Tribunal (EAT) has confirmed that the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") do apply to transfer employees to the buyer in a sale by an administrator (including in a "pre-pack" administration). This decision provides welcome clarification about the application of TUPE to insolvency proceedings.

When TUPE came into force in 2006, new provisions were introduced to deal with the following two categories:

  1. "bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor" (regulation 8(7) TUPE). Where these proceedings apply, employees will not automatically transfer to the transferee and transfer-related dismissals will not be automatically unfair.
  2. insolvency proceedings which have been opened "not with a view to the liquidation of the assets of the transferor" (regulation 8(6) TUPE). In these circumstances, employees will transfer to the transferee and have unfair dismissal protection. The transferee will also have greater scope to vary terms and conditions.

This case, OTG Ltd v Barke and others, involved five appeals which were listed together because they raise the same question – do administration proceedings fall within the first category, with the result that employees do not automatically transfer to the transferee? The competing arguments were that they never do so ("the absolute approach") and, on the other hand, that they may do so if it is found as a matter of fact that the administration was instituted with a view to the liquidation of the transferor's assets ("the fact based approach").

Previously, in Oakland v Wellswood (Yorkshire) Ltd, the EAT held, based on the fact based approach, that administrations fell into the first category, so employees' rights were not preserved under TUPE. However, the EAT in OTG Ltd v Barke and others decided to approach the case with "a clean slate" and departed from the earlier decision in Oakland. It held that the absolute approach (i.e. that administrations can never amount to a liquidation) should be adopted rather than the fact-based approach. Therefore, if a sale of the business or assets of a company in administration amounts to a relevant transfer under TUPE, the employees will transfer to the buyer and be protected against transfer-related dismissals.

The EAT examined the principles of the Acquired Rights Directive, on which TUPE is based, and confirmed that the distinction between the different types of insolvency proceedings was likely to depend on the legal character of those proceedings. Focusing on the object of the proceedings, rather than the object of the individuals operating it, was conducive to legal certainty. It also noted that the fact-based approach inevitably increases the likelihood of disputes as to who is liable for the transferor's obligations, which generates cost, delay and uncertainty. Further, the purpose of the Directive is to protect employees in the event of a transfer and to ensure that their rights are safeguarded. The absolute approach is the preferable construction to achieve that purpose, whereas the fact-based approach means that in many cases, employees will be left only with lesser protection. 

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More women at board level by 2015

UK listed companies in the FTSE 100 should be aiming for a minimum of 25% female board member representation by 2015, according to a recent report published by Lord Davies.

The report states that FTSE 350 companies should set targets for 2013 and 2015 to ensure that more talented and gifted women can get into the top jobs in companies across the UK. Lord Davies also calls on chairmen to announce these goals in the next six months and Chief Executives to review the percentage of women they aim to have on their Executive Committees in 2013 and 2015.

As part of the report Lord Davies and his panel also state that companies should fully disclose the number of women sitting on their boards and working in their organisations as a whole, to drive up the numbers of women with top jobs in business.

Lord Davies said:

"Over the past 25 years the number of women in full-time employment has increased by more than a third and there have been many steps towards gender equality in the workplace, with flexible working and the Equal Pay Act, however, there is still a long way to go. Currently 18 FTSE 100 companies have no female directors at all and nearly half of all FTSE 250 companies do not have a woman in the boardroom. Radical change is needed in the mindset of the business community if we are to implement the scale of change that is needed.

"This is not about aiming for a specific figure and is not just about promoting equal opportunities but it is about improving business performance. There is growing evidence to show that diverse boards are better boards, delivering financial out-performance and stock market growth."

The report also calls upon The Financial Reporting Council to amend the UK Corporate Governance Code to require listed companies to establish a policy concerning boardroom diversity. This should include how they would implement such a policy, and disclose annually a summary of the progress made.

Lord Davies also recommends:

  • investors should pay close attention to the recommendations from the report when considering re-appointments to a company board;
  • companies should periodically advertise non-executive board positions to encourage greater diversity in applications; and
  • headhunting firms should draw up a voluntary code of practice addressing gender diversity in relation to board level appointments to FTSE 350 companies.

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Consultation on age discrimination in services, public functions and associations

The Equality Act 2010 includes provisions banning age discrimination in the provision of services and the exercise of public functions, and by clubs and other associations. The Government intends to bring this ban into effect in April 2012 and has published a consultation setting out the circumstances in which it would remain lawful to use age as a reason for treating people differently. The consultation closes on 25 May 2011.

The Government Equalities Office has listed the exceptions which have been prepared for the following areas:

  • Age-based concessions. This exception will allow any organisation to use age to determine eligibility for concessions or benefits, provided that the purpose of the concession is to benefit the age group to which it applies.
  • Group holidays. This exception will allow specialist holiday providers to continue to provide holidays for people in particular age groups e.g. Saga and Club 18-30 holidays.
  • Immigration. When determining a person's eligibility to enter and remain in the UK, age needs to be one factor that is given consideration in some applications along with other factors such as earnings.
  • Sport. This exception will allow for the continuation of age-restricted sports competitions, for example, under-21s' football competitions and tennis veterans' competitions.
  • Residential park homes. This exception will allow residential park homes to continue to include age limits in their park admission rules.
  • Financial services. This exception will allow the use of age in the assessment of risk, in the financial services sector to continue, provided that this is based on relevant information from a source on which it is reasonable to rely. Age-banding and age limits will also be allowed. In addition, the Government also intends to use voluntary measures to improve access to insurance products through sign posting and to increase transparency regarding how age is used when pricing these products. 

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