September 2017

How to best prevent an employee becoming a competitor?

One of our commercial clients had recently found that a former employee was competing, with restrictive covenants being breached blatantly.

This key employee had the passwords for our client’s website. He altered the website to divert business away from the company to himself, meaning the company was losing significant profits. This is of course a nightmare scenario that businesses of all types dread and hope will never happen to them.

However, there are measures employers can take to reduce the chances of an employee becoming a competitor.

While the employment is ongoing

Firstly, employers can insert a clause within an employee’s contract, instructing them to devote ‘all their time, attention and abilities’  to the business when they are employed. This means that an employee would not be allowed to set up a competing business during working hours.

A further preventative measure includes that of including such competing activity within a list of matters that would constitute gross misconduct in the employer’s staff handbook.

The above two preventative measures can not only act as a deterrent for an employee but would put the employer in a stronger position to immediately dismiss if they find out about the activities whilst the employee is still employed.

After the employment has ended

The most effective preventative measure is restrictive covenants. These contractual clauses are used to prevent a former, often more senior employee (after their employment has ended) from:

1. enticing away existing clients/customers;
2. poaching employees; and
3. representing themselves as associated with the former employer.

Post-termination restrictive covenants need to be well-drafted to enforce because if they go further than reasonably necessary they will be unenforceable. It is particularly difficult to show this ‘reasonableness’ element and judges have to look at a number of factors when assessing ‘reasonableness’. The upshot of this is that employers must take legal advice on whether they are successfully preventing employees competing with restrictive covenants each time they recruit and promote.

This is because in order for restrictive covenants to be enforceable, they need to be tailored specifically bearing in mind the employment relationship. Our article on how to stop employees competing with restrictive covenants gives more details.

By Zahid Reza

Image used under CC courtesy of Fe llya 

Key differences: UK employment law and US labour law

Why do we need to consider the differences between UK employment law and US labour law?

Background

With Britain and the European Union (EU) in talks for some months now after the historic Brexit vote, Britain must consider how to mitigate the problem of leaving the luxury of the single-market (which provided for the free movement of goods, capital, services and labour between EU member states). Apart from the obvious idea of trying to secure new trade deals with individual EU states, Britain might negotiate trade agreements with the US.

Therefore in light of a possible strong trade relationship post-Brexit, it is a good time to look at how UK employment law differs from that of the US. There is a common presumption that because of our shared language and relationship, American laws and practices work in symphony with UK laws. Although historically US law emanates from English common law, this assumption is far from correct and there have been many examples of businesses making critical mistakes because of this presumption.

Therefore we thought it best to summarise some of the main areas of difference in employment and labour laws that businesses from the UK thinking of entering the US market should be aware of:

1. Paid holiday leave

US workers are not legally entitled to any holiday pay, however most US employers (probably through commercial competition) will offer workers paid time off. Although the number of days off will differ from employer to employer, on average a US employer will offer 10 working days for their workers. The UK in comparison, legally entitles employees to 5.6 weeks paid holiday per year (28 days including public holidays for a full-time worker).

2. Sick Pay

There is no federal law that requires workers to be offered sick leave. However many state laws require sick leave to be given. The precise terms will differ from employer to employer, and in accordance with individual state rules and regulations.  By way of contrast, the UK requires all employees (provided they qualify) to be entitled to Statutory Sick Pay (SSP) and employees are entitled to this for up to 28 weeks. The current SSP rate employers must pay to employees who qualify for SSP is £89.35.

3. Healthcare

In the US, employers who have 50 or more full-time workers (full-time workers being defined as those who work 30 hours or more per week) are required to provide ‘health care coverage’ to employees (including dependants). Employers with 50 or more full-time workers who fail to provide adequate ‘health care coverage’, will owe an employer shared responsibility payment to the government. The UK has the National Health Service (NHS) which is publicly-funded; therefore employers in the UK do not need to contribute to the healthcare of employees, although sometimes private-healthcare can be added as a benefit.

4. Laws governing the employment relationship

In the US, there are few laws governing the employment relationship. However UK employment law provides for pregnancy leave, sickness leave and pay, protection of employees on a sale of business (TUPE), dismissal, notice periods and redundancies to name a few.

5. Employer terminating employment

In the US, there is the concept of ‘at will’ employment, which allows employers to terminate the employment relationship at any time, without notice, good cause or prior warning provided it is not a violation of a ‘protected class’  (these classes include race, sex, religion or national origin). The majority of employees in the US are ‘at will’. Under UK employment law, employees have pretty much the same lack of employment rights until they have two years’ service. Employers therefore can generally dismiss employees with less than two years’ service without notice, any prior warning or reason (provided there is no discrimination and the reason for termination is not for whistleblowing or a similar, ‘automatic’ reason).

6. Written contract

In the US, there is no legal requirement for a written document or contract as proof of the employment relationship. Sometimes an offer letter is issued which address the main terms such as salary, title, bonus (if any) and holidays. UK employees must be provided with a written statement setting out the fundamental terms of the contract. Typically employees are given very detailed employment contracts.

7. Age Discrimination

In the US, federal protection is given to applicants and employees who are aged 40 or over. Whereas in the UK, protection is given to employees and applicants of all ages. There is also a clear difference in the amount of money awarded for discrimination, although in both countries awards for discrimination are uncapped. In the US, discrimination claims can reach millions of dollars following long (often years) legal disputes and great expense. In the UK, discrimination awards are not that high; they rarely reach the six-figure mark.

8. Overtime

Employers in the US can generally order an employee to do as much overtime as it wants. UK employment law limits the hours of work an employee can be obliged to work to 48-hours. So employers cannot require employees to work over this amount. However those employees who want to work more than 48-hours can sign an ‘opt-out’ agreement to work more than this, and senior staff are not covered at all. So in reality, the 48-hour week is a law without teeth.

Conclusion

We shall wait and see the specific terms of Brexit. However if there is a trend of UK businesses deciding to operate within the US post-Brexit, then they will need to comply with US labour laws and recognise the distinctions between US and UK employment laws.

By Zahid Reza

Image used under CC courtesy of Nicolas

New report reveals current modern slavery checks are not ‘fit for purpose’

Following the National Crime Agency’s (NCA) shock revelation that Modern Slavery and Trafficking is affecting ‘every large town and city in the country’ and that the NCA’s previous estimates of 10,000 – 13,000 victims in the UK are the ‘tip of the iceberg’, a report by the University of Sheffield and the University of Bath has illuminated one of the main reasons why it is difficult to know the true scale of Modern Slavery and Trafficking in the UK.

The study focused on the food and construction sectors. The report found that whilst an increasing number of companies can accurately trace where their product comes from, many companies do not know the backgrounds of their workforce.

An owner of a UK hotel chain explained: “We have pretty much solved traceability of the food served in our restaurants. I can tell you the farm where the steak on your plate came from, probably even the name of the cow. But we have no idea where the workers came from that work in our kitchens.”

The report indicates that existing background checks are not ‘fit for purpose’ to uncover Modern Slavery and Trafficking. The researchers in this study concluded that the key is to understand and monitor the labour supply chain.

Professor Andrew Crane from the University of Bath says that if companies can find a way to trace their products, they can do the same with their workforce. He said “Twenty years ago most high street retailers did not have a clue where the products they sold actually came from. Since then, there has been a revolution in responsible business practices and companies have invested millions of pounds to trace the source of their products and tackle the myriad sustainability issues they found there. To prevent the misery of modern slavery from blighting our workforces companies must apply that same focus to their staff.”

It remains to be seen whether in light of this study, the government will take steps to ensure employers carry out a more thorough background check on workers before they commence employment.

By Zahid Reza

Image used under CC courtesy of Marissa Orton

Nannies and the National Minimum Wage

When it comes to nannies and the National Minimum Wage, the position is usually clear. But this is not the case with live-in workers. A minimum wage claim brought by an immigrant domestic worker was recently heard by the High Court.

The case required the court to address the “family worker” exemption set out in the National Minimum Wage 2015. The provision in question is the one relating to wage “deductions” for accommodation and meals.

Mrs Ajayi, came to the UK from Nigeria in 2005. She has worked for  Mr and Mrs Abu for a total of nine years and claims she was a victim of human trafficking.

There was no dispute over the fact that Mrs Ajayi was an employee over the alleged period, but there was a disagreement on her hours and pay. In this kind of situation, the employee’s word is generally believed unless the employer has kept records.

The defence initially relied on the “family worker” exemptions for live-in workers who are treated as members of the family. This obviously includes nannies and the national minimum wage would not need to be paid. For this defence to be successful, however, the employer cannot make the employee pay for food and accommodation. This was the issue that the court had to decide.

The court ordered Mr & Mrs Abu to provide a detailed spreadsheet with a breakdown of monthly salary, “expenses” and the net payments made to Mrs Ajayi. The spreadsheet they submitted showed how expenses had been deducted from Mrs Ajayi’s salary for “lodging” and “feeding”.

At this point they realised that this scuppered their defence and claimed that the document was unreliable. Unsurprisingly, they were held to the spreadsheet they had provided and their defence was rejected. The court said that the Claimant’s “very little pay was the produce of effectively making her pay for the ‘free’ accommodation and meals”.

It is now for the courts to decide how much Mrs Ajayi is to be awarded, with an additional claim of harassment to now be considered.

By Matthew Wheatley

Image used under CC courtesy of Chrisissy

The employment crisis in the social care sector

The employment crisis in the social care sector

Lily Wilde, Warwick University, Faculty of Law, September 2017

The social care sector covers a wide range of services ranging from work in nursing homes to overnight care at the home of the elderly or physically challenged. 1.48 million people currently work in social care and, with a predicted increase of the UK’s aging population, demand for carers keeps growing.

The sector has recently come under public scrutiny with a series of dramatic statistics over several years: 900 social care workers leave their jobs every day, a third of nursing homes fail the Care Quality Commission inspection and in 2017 more than 15% of advertised vacancies were in social care. In a country with an unemployment rate of 4.5% and a growing demand for social care workers, why is this sector facing such a crisis? This article examines the causes.

Undoubtedly staff shortages results in a permanent situation of undermanning and pressure for workers staying in the sector. However this extra workload is  also not rewarded appropriately. A full-time social care worker earns £14,800 on average per year, compared to an average salary of £27,600 across all sectors in the UK.

Additionally, the staff shortage has forced many social care workers to limit their time with their clients and increased travel between clients as fewer workers are spread more thinly geographically but some companies refuse to pay their employees for their travel time.

This can be explained by the fact that a large number of employers are private or not-for-profit companies, which cannot afford to pay their staff for travel time. For state-funded organisations, since 2010 councils have cut £4.6 billion from the adult social care budget: due to this lack of funds, many services have had to close. However the law specifies that a worker is entitled to the National Minimum Wage, and should be paid for travelling time during working hours. This does not include the travel time between the worker’s home and the workplace, but it includes all travels undertaken during the work time between the clients’ homes or nursing homes.

The social care sector encompasses many diverse activities. One of the difficulties of a social care worker’s situation lies in the fact that they might be required to sleep at the client’s house. The 2013 case of Whittlestone v BJP Home Support created a precedent for future cases. The claimant, a social care worker, was required to stay at three of her clients’ homes overnight in order to be able to potentially provide care. She was allowed to sleep if her work was not required, however she was not being paid for that time. The Employment Appeal Tribunal had to consider whether the claimant was entitled to claim the NMW for the hours she spent sleeping at the client’s home. The tribunal differentiated between the non-core hours and the core hours of her overnight shift. On appeal the EAT concluded that she was entitled to the NMW during her non-core hours. If the worker is at the client’s disposal, for a specific purpose, and would be punished for leaving the premises during the shift, they are entitled to the NMW. Therefore even when asleep, a social care worker is ‘working’.

The constant lack of staff has created a vicious circle. The failure in the system is due to underfunding, unpaid wages which caused unfilled vacancies and sickness absences. All these factors have an impact on the quality of the services provided, which explains the failure to comply with the CQC’s requirements. Additionally, the constant staff shortage raises the stress levels of the remaining social care workers, who may in consequence call in sick, or on the long run, leave their jobs. This constant pressure has now become a considerable cause of workplace sickness.

As mentioned above, low pay is one of the major factors which deters people from joining the social care workforce. Also, a large number of social care workers are migrants. Brexit will therefore have a significant impact on the sector: free movement is due to end in March 2019 and will add another challenge to the crisis faced by the social care sector as a large number of workers are EU nationals. The number of applications for social care jobs from EU nationals has already dropped by 26%.

Another interesting element is that the social care sector is largely female dominated with 80% of the jobs being held by women. Could there be a link between the low salary and the fact that most social care workers are women and/or migrants?

The profession consists of maintaining vulnerable people’s dignity and independence by helping them in their daily lives. It is an honourable and necessary task, however the profession seems to be permanently undervalued: social care workers have left their jobs to work in supermarkets which offers better financial prospects.

Despite the recent public scrutiny on the sector, the voice of the front-line staff does not seem to be heard. Social care workers do not feel adequately appreciated: the notion that the profession is not an esteemed one is a cause of the constant staff shortage. This lack of respect towards the social care workforce could be blamed on the fact that most of the workforce are women or migrants: therefore discrimination can be considered a factor to the crisis faced by the social care sector. Recruitment and retention represent a major issue as employers do not always recruit the right people for caring roles due to the lack of applications and constant staff shortage.

The staff turnover rate in this sector is of 27%. With fewer candidates from the EU, retiring staff and recruitment issues, the social care sector seems to have reached a dead end. To face the recruitment crisis, the profession has to be recognised, appreciated and properly funded. Additionally the pay and training conditions have to be improved. The fact is that the cuts concerning the social care sector had a dramatic effect on the employers, the employees and the people cared after. The councils need to give an appropriate budget to the employers, so that they can decently pay their employees who can then take proper care of their clients.  It appears that no one has taken the social care issue seriously for the past years until it has reached a critical threshold.

However the government has now acknowledged the crisis as the Queen mentioned it in her speech: “My ministers will work to improve social care and will bring forward proposals for consultation” and HMRC is actively scrutinising the sector in order to protect social care workers. This could be the sign that the Government will stop burying its head in the sand and start dealing firmly with this crisis.

By Lily Wilde

Image used under CC courtesy of Y-Lee

Terminal illness at work – TUC seeks protection

The ‘Dying to Work Charter’ (Charter) is a voluntary charter which lays down guidance for employers in how to support workers with a terminal illness at work.

The TUC wants terminal illness to be recognised as a ‘protected characteristic’. Their idea is for terminally ill workers to enjoy a ‘protected period’ where they cannot be dismissed as a result of their condition. Royal Mail is the most recent employer to sign up to the Charter, meaning that now over 500,000 workers are now covered by this Charter.

Frances O’Grady, TUC General Secretary, said:

“Your job should be the least of your worries when you get a terminal diagnosis. Royal Mail has shown real leadership in this area, working with unions like the CWU to guarantee fair treatment for terminally-ill workers. Over half a million workers are now covered the Dying to Work charter, and we expect more employers to commit in the coming months.”

Dr Shaun Davis, Royal Mail Group Global Director of Safety, Health, Wellbeing & Sustainability, said:

“Everyone experiences terminal illness in a unique way, and at Royal Mail we want to ensure that any of our people diagnosed with such an illness is supported at work through a tailored and flexible approach. Signing up to the Dying to Work Charter builds on the policies and guides we already have in place to help employees, and their direct families, if they receive such a diagnosis.”

The current legal position for terminally ill workers is that some employers will expect them to continue working after a diagnosis. Some will dismiss after what they consider to be a reasonable period of absence; others will offer early ill-health retirement. We are aware of a case where Sainsbury’s gave £8,000 to an employee with a diagnosis of bone cancer and a 2 year prognosis, although it had no legal entitlement to do so This helped her to take time to deal with the diagnosis and put her affairs in order.

The TUC have not added any detail as to how long the protected period would be. Determining how long a terminally ill worker would be protected before an employer can dismiss may be seen as more of a moral question. This would require balancing the worker’s interest of support and protection with the employer’s interest in recruiting a suitable replacement so to maintain the smooth running of their business.

Additionally, if terminal illness was to be a protected characteristic it is likely that many workers bringing a claim will die whilst doing so. In that case, the law would provide that the family of the employee bringing a ‘terminal illness at work claim can collect any settlement or compensation.

Conclusion

The TUC’s idea would not be good for  employers because introducing another protected characteristic would increase the number of claims. This, coupled with the recent scrapping of employment tribunal fees could result in employers dealing with many more tribunal claims from their workforce.

It will be fascinating to see whether more employers join the Charter, because if they do then this will only increase the chances of the TUC’s idea coming to fruition.

By Zahid Reza, Employment Paralegal

Image used under CC courtesy of Howard Lake