Employment Update - 16 July 2010

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

Capping redundancy payment - justified

The Employment Appeal Tribunal (EAT) has confirmed that applying a "cap" to payments under a contractual redundancy scheme, to prevent employees receiving more than they could have earned had they remained employed until retirement, was not discriminatory under the Employment Equality (Age) Regulations 2006.

In Kraft Foods UK Ltd v Hastie, the employer conducted a redundancy exercise. Voluntary redundancy was available to employees on the terms of an established scheme agreed with the trade unions. The terms of the scheme were generous and provided that employees receive three and a half weeks' actual pay for each year of service. However, the scheme also contained a "cap" which provided that the maximum amount payable should not exceed the amount that the employee would have earned if he had remained in employment to normal retirement age. Mr Hastie, who had nearly forty years' service, was two years from retirement and had his voluntary redundancy pay reduced on application of the cap. He complained that this was unlawful age discrimination.

Whilst the Employment Tribunal upheld Mr Hastie's claim, the EAT allowed the employer's appeal. The EAT held that the object of the scheme was to compensate employees who took voluntary redundancy for the loss of the earnings that they had a legitimate expectation of receiving if their employment had continued. Unless the scheme incorporated a cap, it would result in "windfall" payments which exceeded what was necessary to achieve that object in cases where the employee was close to retirement age. The EAT confirmed that it is legitimate for a redundancy scheme to incorporate a provision designed to prevent excess compensation and that the cap was a proportionate means of achieving that aim. The EAT also suggested that the cap applied in this case was arguably more accurate than the application of a taper, the other means commonly used in schemes.

Equality Act 2010 - commencement order

The Equality Act 2010 (Commencement No. 1) Order 2010 was made on 5 July 2010, bringing into force, on 6 July 2010, a number of provisions of the Equality Act 2010 (the Act) that allow the Government to make subordinate legislation or guidance. It also brings into force provisions which amend the Equality Act 2006, allowing the Equality and Human Rights Commission to issue Codes of Practice under the Act.

Employment Tribunal statistics 2009/10

The Tribunals Service has published its annual statistics for 1 April 2009 to 31 March 2010. The key findings from the statistics are as follows:

• there was a 56% increase from 2008/09 in the number of claims accepted by Employment Tribunals. This was mainly due to the rise in multiple claims, which were up 90% from the previous year, which is thought to have been partly as a result of the changing economic climate. 
• there was a 14% increase in the number of single claims accepted by Employment Tribunals.
• there was a 17% increase in the number of Employment Tribunal claims associated with unfair dismissal, breach of contract and redundancy. This is likely to be a result of the economic recession. 
• There were 57,400 unfair dismissal claims accepted by the Employment Tribunal (compared with 52,700 in 2008/09), 75,500 unauthorised deduction from wages claims (compared with 33,800 in 2008/09) and 42,400 breach of contract claims (compared with 32,800 in 2008/09).

Civil service redundancy pay to be capped

As part of the Government’s deficit reduction plan, the Minister for the Cabinet Office, Francis Maude, announced last week that he would begin the process of introducing legislation as soon as possible to cap the amount of redundancy payments made to civil servants to bring them in line with best practice in the private sector.

The Civil Service Compensation Scheme (CSCS) provides for compensation to be paid to civil servants if their employment is terminated prematurely. The terms of the CSCS were amended earlier this year, but those amendments were subsequently quashed in judicial review proceedings brought by the Public and Commercial Service Union. Click here for our report of the proceedings earlier this year.

Francis Maude said the Government had made the decision to legislate “with reluctance”, but that it had become necessary because of the current economic climate and the unilateral action taken by the union. The Superannuation Bill, published this week, is broadly intended to limit the cost of future redundancy payments by capping compensation payable under the CSCS at a maximum of 12 months' pensionable earnings for dismissals, and 15 months' pensionable earnings for voluntary terminations.

Agency Workers Regulation - under review

The Secretary of State for the Department for Business, Innovation and Skills confirmed in the House of Commons last week that the Agency Workers Regulations 2010 (due to come into force on 1 October 2011) are under review.

The Secretary of State said that the Government is aware of "the different points of view expressed by the business community about certain aspects of the agency workers regulations and is currently considering the way forward".

Acas guide to Equality Act 2010 

Acas has published its guide to the Equality Act 2010 to help businesses understand and prepare for the forthcoming changes.

The guide, entitled The Equality Act - what's new for employers?, is produced in conjunction with the Government Equalities Office and the Equality and Human Rights Commission, and sets out the key issues, identifying the relevant definitions, protected characteristics and refers to the range of new provisions.

The Government Equalities Office has also published a series of guides on the Equality Act.

120 million "sickies" across Europe

According to a survey by AON, more than 120 million sick days a year are actually taken for personal reasons rather than for an illness across Europe.

According to a survey of over 7,500 European workers from across Belgium, Denmark, France, Germany, Ireland, the Netherlands, Norway, Spain, Switzerland and the UK, more than one in ten people (15%) say the last time they took a day off from work as sick leave they were only feigning illness. Additionally, 10% of people took their last sick day in order to look after a family member.

AON reports that Europe’s ‘sickies’, are costing employers close to a billion hours in lost man hours. The Spanish are the most likely to admit having taken a sickie (22%), followed by UK workers, the Irish (both 21%) and the Dutch (20%). The Danish (4%), the Norwegians (10%) are the least likely to have taken a sick day off from work under false pretences.

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