the Queen’s Speech and LLPs

Delivered with all the traditional pomp and ceremony that one would expect the Queen’s Speech was made to the combined Houses of Parliament on 8 May, setting out the Government’s legislative programme for the coming year.
Probably of greatest interest to lawyers and other professionals is the removal of the presumption of self-employed status for members of LLPs. Limited Liability Partnerships were introduced a number of years ago as, effectively, a half way house between “old-fashioned” partnerships governed by the provisions of the Partnership Act 1890 and limited companies. As the name suggests, a particularly appealing aspect of the structure has been to limit the liability of a member or partner to the assets of the business, thereby avoiding the risk of personal financial ruin in the event of business failure. In fact, that benefit has been largely diluted in practice as a result of the tendency of banks, other lenders and even regular contractors to require personal guarantees from the members. However, another benefit has been that members, including fixed share members, have been treated as self-employed for tax purposes on the basis that they are, even if only in a very small part, all owners of the business. That, in turn, is significant because the LLP does not have to pay employer’s national insurance contributions (13.8%) and the tax treatment of the individuals is more advantageous to them.
However, the National Insurance Contributions Bill sets out to put paid to such arrangements.


fee remissions in courts and tribunals

It’s all very well introducing fees across more courts and tribunals in an effort to keep unmeritorious claims away, but there is always the risk of “throwing the baby out with the bath water”. What about the deserving cases of those who simply cannot afford the fees? Legal Aid is less and less likely to be of any assistance – assuming, of course, it is even available for a particular jurisdiction in the first place.
So, having got the bit between its teeth on Employment Tribunal fees, with their complex fee remission arrangements, the Government has decided to look more widely at the whole question of the remission of fees. Various systems have been implemented over time across the whole range of courts and tribunals, and standardisation is now the name of the game.
Accordingly, the Ministry of Justice has launched a consultation on proposals for a single system of fee remissions (waivers) for all fee paying courts and tribunals.
The main changes being proposed include:

Introducing a capital test – at the moment there is no capital test so people with low income but large capital don’t have to pay towards court and tribunal fees, meaning the taxpayer picks up the cost;
Ensuring those who can afford to make a contribution to fees do so – the proposals will mean more contributions from those who can afford it and an income cap to stop high earners receiving remissions;
Making the remission system simpler – bringing in one unified system to cover the whole of the courts and tribunal system, replacing the complicated current arrangements, and calculating fee remissions using monthly salary figures rather than annual salaries so users have more accessible evidence;
Full fees remission for people on specific benefits – ensuring access to justice is maintained for those who cannot afford to pay a contribution to a civil court or tribunal fee.


fees payable for employment tribunal claims and appeals

On 29 May HM Courts & Tribunals Service announced that fees for Employment Tribunals and the Employment Appeal Tribunals will be introduced on 29 July.
Having been in the pipeline for some time now, a draft order allowing for the introduction of fees in these Tribunals, and giving full details of their levels and when they will be payable, has been laid before Parliament. Having said “full details”, many of the provisions allow for fees to be payable on “dates specified”, either in notices accompanying notices of hearing or in notices issued by the Lord Chancellor. Clearly we will need to wait and see the system in action before we know exactly when parties will need to get their cheque books out.
The Draft Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013 has prompted a surge in claim numbers as people seek to pre-empt the introduction of the fees regime.
They specify in Part 2 that fees in employment tribunal proceedings are payable:

when a Claim Form is presented (“issue fee”); and
on a date specified in a notice accompanying the notification of the listing of a final hearing of the claim (“hearing fee”).


is obesity a disability in the context of discrimination?

It was a mistake, the Employment Appeal Tribunal held in Walker v Sita Information Networking Computing Ltd, for an Employment Tribunal to say that a claimant was not disabled because there was no identifiable or recognisable pathological or mental cause for his “constellation of symptoms”. The Tribunal had been wrong to concentrate on the fact that there was no physical or mental cause for the impairments suffered – the point to look at was what effect the impairments had on everyday life, except where there was any doubt as to the genuineness of the symptoms.
In this case, the claimant suffered from “functional overlay” accentuated by his obesity – he weighed around 21.5 stones (136.5kg). EAT President Langstaff considered that obesity was not a disability of itself, but it could make it more likely that a claimant would be disabled. On the other hand, because obesity can be reversed by a determined effort to lose weight, it could be that any impairments caused by obesity could be reversed within 12 months – thus meaning that the claimant would not be disabled within the statutory definition, which is:
Section 6 Disability
(1)A person (P) has a disability if-
– (a)P has a physical or mental impairment, and
– (b)the impairment has a substantial and long-term adverse effect on P’s ability to carry out normal day-to-day activities.
As confirmed in the government’s guidance to the definition of disability and corresponding Equality Act Guidance
"substantial" is more than minor or trivial – e.g. it takes much longer than it usually would to complete a daily task like getting dressed [and] "long-term" means [likely to last] 12 months or more – e.g. a breathing condition that develops as a result of a lung infection.
So what is "functional overlay". In this case what was described as an abbreviated list included asthma, dyslexia, knee problems, diabetes, high blood pressure, chronic fatigue syndrome, bowel and stomach problems, chemical sensitivity, hearing loss, anxiety and depression, persistent cough, recurrent fungal infections, carpal tunnel syndrome, eye problems and sacro-iliac joint pains. Any reasonable person would regard such a combination as causing a great deal of pain and inconvenience and, in the normal sense of the word (which is what matters in this context) substantial impairment. It does not matter whether the impairment is physical or mental or a combination of the two. Equally it does not matter what has caused the impairment.
Mr Justice Langstaff made it clear that obesity does not of itself and without more render a person disabled. However


temporary real time information reprieve for small businesses

HM Revenue & Customs has announced a concession for employers of fewer than 50 employees allowing them to delay the full implementation of the new “Real Time Information” PAYE reporting scheme until 5 October 2013. Until then, smaller employers may provide the information when they do their usual payroll run, so long as it is not after the 5th of the month.
The grace period was announced in typically last minute fashion on 25 March as follows:
HM Revenue & Customs (HMRC) recognise that some small employers who pay employees weekly, or more frequently, but only process their payroll monthly may need longer to adapt to reporting PAYE information in real time. HMRC have therefore agreed a relaxation of reporting arrangements for small businesses.

Until 5 October 2013, employers with fewer than 50 employees, who find it difficult to report every payment to employees at the time of payment, may send information to HMRC by the date of their regular payroll run but no later than the end of the tax month (5th).

This is a temporary relaxation to give some extra time to small businesses that pay weekly (or more frequently) but who only run their payroll (or use an agent to run their payroll) at the end of the month. This extra time will enable these businesses to adapt their processes or change their arrangements with their payroll service supplier so that they can comply with the new legislation.

From April 2013, employers who choose to take advantage of this relaxation will still need to report their PAYE in real time by the last payday in the month or the end of the tax month (5th) at the latest.

This is not a withdrawal of the requirement to report PAYE in real time. All employers are still required to operate PAYE in real time and we expect most employers to be reporting PAYE in real time from their first payday on or after 6th April.

From 6th October all employers will be required to report PAYE in real time each time they pay their employees


can secret recordings be admitted as evidence in employment tribunal claims?

I suspect that, if asked, most people would assume that covert recordings cannot be admitted in evidence, based on general principles of fairness and natural justice. In Vaughan v London Borough Of Lewisham & Ors the Employment Appeal Tribunal considered this question. Ms Vaughan, who had raised a number of claims against Lewisham, made a blanket application that 39 hours of recordings she had covertly made at work should be admitted in evidence. The Employment Judge refused to admit the recordings. She had not been given access to any of the original tapes, or been provided with transcripts, and without knowing the contents of the recordings, she could not form a view on whether they were relevant to the allegations made.
On any reading of the matter Ms Vaughan is a serious litigant who was acting in person before the EAT. She had brought nine claims of which seven were before the EAT. Three were consolidated and dismissed after an employment tribnunal hearing which lasted for 20 days. An appeal to the EAT was rejected and that was in turn the subject of an appeal to the Court of Appeal (unresolved at the time of this EAT appeal).
She was also ordered to pay one third of the respondents’ costs in the concluded proceedings, estimated to total £260,000. Three of the remaining claims remain listed for an estimated twenty eight day hearing later this year. It is in the context of these remaining claims that the question of admissibility of covert recordings has arisen.
Ms Vaughan disclosed that she had secretly recorded numerous meetings with colleagues and managers. At a pre hearing review an Employment Judge determined that the recordings should not be allowed as evidence. This decision was appealed, along with the decision to award costs.


revisiting old warnings

Last month I commented on the case of Simmonds v Milford Club in which it was thought appropriate to revisit previous warnings if they were “manifestly inappropriate” when considering the fairness of a misconduct dismissal, Davies v Sandwell Metropolitan Borough Council emphasises that this approach is very much the exception to the rule.
In Davies the claimant, a teacher, had been given a final written warning for misconduct during a lesson on static electricity, against which she appealed. That appeal was never concluded after being adjourned at the request of the union official representing the teacher. It thus remained “live”. There was then a second allegation of misconduct and the claimant was dismissed, taking into account the subsisting warning. The dismissal was found to be fair by two different Employment Tribunals, the second of which specifically examined whether the warning had been valid.
The Court of Appeal turned down an appeal by the claimant; she had not shown that the warning was manifestly inappropriate, and although not strictly necessary for the decision, the Court also expressed the view that in appropriate cases it is legitimate to take into account the fact that an appeal against a warning has been abandoned or withdrawn.
The Court also took the opportunity to remark that tribunals should not get bogged down in listening to a mass of irrelevant evidence and should, if the parties do not do so themselves, take control of proceedings to avoid the waste of time and money. As Lord Justice Lewison commented:


you’re out of time, but all’s not lost

Employment Tribunals have a limited power to extend the three-months’ time limit for bringing unfair dismissal claims where it is “not reasonably practicable” for a claimant to make a claim in time. In the case of El -Kholy v Rentokil Initial Facilities Services (UK) Ltd the Employment Appeal Tribunal reminds us that, where the reason the claimant has not presented a claim within the time limit is an error by a professional adviser, he or she cannot rely on that error as making it not reasonably practicable to observe the time limit. In this particular case, the claimant was dismissed on 4 October, and consulted a solicitor on 15 October to help him appeal against dismissal. That appeal was refused on 6 January – by which time the three months had already run out. Proceedings were started a couple of weeks later, after the case had belatedly been passed to an employment specialist.
The practical lesson to be drawn from this case for professional advisors, is not be tempted to await the outcome of internal processes before lodging an ET1. Cynical employers could (and frequently do) draw another conclusion.
Even if the deadline is missed, that is not necessarily the end of the road from the claimant’s perspective. Missing deadlines is one of the most frequent causes of professional negligence claims against solicitors and other legal advisers. According to research carried out by Lockton Professions missed deadlines account for 46% of claims made against lawyers in litigation matters (including employment claims).


decisions, decisions

Redundancy selection can be a tricky business; faced with having to choose between a number of employees how do you make sure you do so fairly? Well, the standard advice is to establish a set of objective criteria and apply those. And very good advice it is too, but Mental Health Care (UK) Ltd v Biluan & Anor shows that it is possible to go too far in the quest for objectivity.
In this case, 19 redundancies were needed when a ward in a residential home was closed. There were 58 staff in the pool for redundancy selection – the entire staff, in fact. Three criteria were used – disciplinary record, absence record and a competency assessment. The latter was based on a recruitment process involving a written test, an interview and an assessed group discussion. Selection was carried out by a team of HR specialists and healthcare professionals who did not work in the home and had no personal knowledge of the staff at all.
When the result of the selection came out it surprised some, because a number of workers who were known to be good performers were amongst those had not done well. But those who scored lowest were selected, all the same, because the process was felt to be fair and transparent.
The Employment Appeal Tribunal held that the Employment Tribunal had been reasonable in its approach to the matter when concluding that the dismissals were unfair, and had not substituted its own view for that of the employer.


if employment regulation is a problem why are we getting more?

The government has published “Employment Law 2013: progress on reform” which notes both that in the UK, “burdens from employment law are low by international standards”, and that there is a perception that employment regulation is a problem (perhaps fuelled by exercises such as the “Red Tape challenge“?), leading to a situation where “fear of getting it wrong still undermines business confidence”. To help to counter this fear (perhaps greater than it needs to be since many employers appear to be under the impression that the ill-fated compulsory dismissal procedures are still in force) ACAS is to develop an online interactive tool for use to help with disciplinary issues.
The first change came into force from 6 April, when the period for collective redundancy consultation was cut from 90 days to 45 days. This is only relevant when 100 or more employees are subject to te same redundancy exercise. For 20 to 99 employees the consultation period remains unchanged (30 days). For fewer than 20 employees the consultation period must be reasonable but no minimum period is specified.
Looking further ahead this year:

– New settlement agreement arrangements including a new statutory code of practice will come into force at some as yet unspecified point during summer 2013
– Tribunal reforms have put been back to "summer" from spring 2013. These include new powers to strike out weak cases sooner rather than later, simplifying the procedure needed to withdraw claims and combining prehearing reviews and case management discussions. Fees will be introduced in employment tribunals at the same time, along with the reduced cap on unfair dismissal awards;
– In the autumn (note the trend for nothing more specific than a season!) there are plans to reform TUPE, as I outlined last month. The introduction of the new “employee owner” status has been put back to autumn 2013 from spring (about which read more in my introduction to this month’s newsletter). The proposal has also been tweaked in the recent budget, in which it was announced that the first £2000 worth of shares will be exempt from income tax and national insurance. There is also a requirement for independent advice.