Q and A

The employment law team at Addleshaw Booth & Co answer questions on
workplace issues

Pay-off timing

Q When it comes to making a payment under a compromise agreement
following a termination does it make any difference whether the payment is made
before or after the P45 is issued?

A It is usual for the payment to be made after the employee has
received their P45. This is because, assuming that the first £30,000 is tax
free as is usually the case, then income tax only has to be deducted at the
basic rate on the excess over £30,000. The ex-employee only then has to account
to the Inland Revenue for any marginal rate tax at the end of the tax year.

If, however, payment is made before the P45 is issued, income tax must be
deducted at the individual’s marginal rate (although he will be able to reclaim
any overpayment at the end of the tax year). There is, therefore, a clear
cash-flow advantage to the ex-employee to be paid after the P45 has been

Exceptionally, in the case of a lower paid employee, the rate of deduction
may be less than the basic rate in which case there may be an advantage in
making the payment before the issue of the P45.

Malcolm Pike

Parental leave

Q Am I entitled to benefit from the rules governing parental leave in
relation to my one year-old and six year-old children?

A Until recently the Regulations governing parents’ rights to time
off work to look after their children meant that leave could only be taken in
respect of children who were born on or after 15 December 1999. However, those
rules have now been relaxed with the right being extended to all parents with
children (including adopted children) born on or after December 15, 1994. This
means you are entitled to benefit in respect of both your children (assuming
you have 12 months or more service with your present or past employer). However,
the period of time that parents will have to take that leave will depend on the
child’s birthday.

Under the Regulations, qualifying parents are each entitled to 13 weeks
unpaid leave per child. In the case of any child born on or after December 15,
1999, the leave must be taken before the child’s fifth birthday. Alternatively,
if the child was born prior to the 15 December 1999 and their fifth birthday
was or is on or after 15 December 1999, the parental leave must be taken before
31st March 2005.

It follows you are entitled to 13 weeks unpaid leave in respect of your
six-year-old which must be taken before 31st March 2005. You are entitled to a
further 13 weeks’ leave in respect of your one-year -old and you have until the
child’s fifth birthday to take that leave.

Philip Williams

Pitfalls of demotion

Q One of our employees has not been performing to the standard required,
and we have now exhausted our performance management procedure. Rather than
dismiss the employee, we would like to retain his services in a less
responsible job, on a lower salary, effectively demoting him. Can we do this?

A By demoting an employee, particularly with a pay-cut, there is
serious risk of committing a breach of contract sufficiently material so as to
make a resignation based on it a constructive dismissal, entitling the employee
to claim unfair (in the absence of a fair procedure and a fair reason) and
wrongful dismissal.

The wrongful dismissal claim would be limited to the net value of salary and
benefits over the contractual notice period. The solution would be for the
employment contract itself (not the performance or disciplinary procedures, for
these should always be non-contractual) to include a term allowing such a
demotion to be used as a sanction for poor performance or misconduct.

That may not be not the end of the story. The demotion could be claimed to
constitute a breach of the implied duty of trust and confidence.

However, recent case law shows that it is not sufficient, in order to
establish breach of the trust and confidence term, to show that there have been
acts by the employer which were likely to seriously damage the trust and
confidence relationship.

Breach of the implied term requires, in addition, that the employer’s conduct
is without reasonable and proper cause. Were this not the case, an employer who
disciplined an employee on conduct or capability grounds would be in danger of
being in breach of the term, even if there was reasonable and proper cause for
taking the disciplinary action.

Therefore, provided that the employer has a performance management procedure
(or disciplinary procedure, if used for performance management), which is
followed, then if the employee’s conduct has still not improved, you should be
able to establish reasonable and proper cause.

Justin Beevor

Need for consultation

Q We are planning to introduce a pay-cut for all of our 40 employees
instead of making redundancies. For those staff who do not agree, we intend
serving notice and offering re-employment on new terms and conditions. Is it
necessary to consult with the employee representatives in these circumstances?

A The duty to consult arises in cases where the proposed dismissal is
by reason of redundancy. However, the relevant legislation widely defines
redundancy dismissals for consultation purposes as a "dismissal for a
reason not related to the individual concerned or for a number of reasons all
of which are not so related". This means that even though there may
ultimately be no actual job losses you will need to carry out consultation with
the appropriate representatives of the affected employees.

Failure to comply with this obligation may lead to a protective award (of up
to 90 days’ pay for each affected employee). Failure to consult the individuals
concerned (even if followed by re-employment) will also clearly increase the
risk of any dismissals being unfair.

Katrina Wilson

Data protection

Q We have become aware that some of our line managers, after carrying out
staff appointments, are in the habit of collecting the relevant paperwork in
their desk. The paperwork consists of application forms and interview notes
relating to the appointment. Is this collection of papers caught by the Data
Protection Act?

A  The Act applies to a relevant
filing system which means any set of information relating to individuals which
is structured, either by reference to individuals or by reference to criteria
relating to individuals, in such a way that specific information relating to a
particular individual is readily accessible.

Applying this test, the papers will no doubt identify the applicant by name
and they would appear to be readily accessible. Accordingly, the papers will
amount to a relevant filing system and so will need to be be processed in
accordance with the Data Protection Act.

Daniel Rubin

On-call for minimum wage

Q Are workers entitled to be paid the national minimum wage
for all the hours they are "on call" at home, or just for the time
spent answering calls?

A There is no doubt that time
spent by a worker who is "on call" at home, actually answering calls
constitutes "time work" under the National Minimum Wage Regulations
1999. However, the question arises as to whether or not time spent in between
calls undertaking other activities, such as watching television or reading,
also constitutes "time work" under the Regulations.

Regulation 15(1) of the Regulations states that for the
purposes of determining the time which qualifies as "time work", time
counts where the worker is available at or near the place of work to carry out
work, except where the worker makes himself available for work from his home
and his home is at or near the place of work. On a strict interpretation, it
would seem that in those circumstances envisaged above, the worker is only
entitled to be paid the minimum rate for time spent answering calls as opposed
to all the hours that he/she is on duty.

However, every case will turn on its own facts as the recent
case of British Nursing Association v. Inland Revenue illustrates.

This case involved nursing agency employees working from home
at night. They could watch television in between calls. The EAT held that the
totality of their shift had to be taken to be working time. The EAT found that
to extract only from the night time hours those few minutes or hours when each
phone call takes place as work, would be to select one type of work in
preference to another.

Criteria for determining when a worker is working for the
purposes of the Regulations will include: the nature of the work, the extent to
which the employee’s activities are restricted when not performing the
particular task; whether pay is calculated by reference to a shift; and the
extent to which the period during which work is being performed is readily ascertainable.

Emma Hodgson

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