Good news for employers seeking to enforce restrictive covenants

contract terms, contracts of employment, employment law, restrictive covenants

Five years ago I wrote an article for this blog which was entitled “Don’t rely on a court to fix a ‘defective’ restrictive covenant“. In doing so I was merely using a recent case to demonstrate the approach taken by courts to restrictive covenants in employment contracts, viz. that they have to be precise and correct in all respects, failing which they are likely to be struck out in their entirety. That’s why you often see a sub-clause at the end of series of restrictive covenants which states something along the lines that if any covenant or part thereof should be found to be unenforceable, that shall not invalidate the remainder: an attempt to pre-empt the likely outcome if the clauses are subjected to court scrutiny.

Restrictive covenants in employment contracts, and particularly those which seek to restrict a former employee from joining a competitor, can be difficult to enforce in practice. That’s because they are a form of restraint of trade which, on the face of it, is contrary to public policy. However, courts have acknowledged over the years that employers have legitimate business interests which they ought to be able to protect, but only to the extent that it is reasonable to do so. Consequently, such restrictions should be reasonable in area and duration, with the restrictions providing no more protection than is reasonably necessary. the received wisdom has been that if they go too far, they are likely to be struck out altogether. Since court proceedings in this field can be cumbersome, time-consuming and very expensive, often with no guarantee of a successful outcome and with an opponent who might not be in a position to pay costs if ordered to do so, employers have tended to be understandably wary about litigating and have instead relied on the deterrent factor of including such clauses in contracts.

There has been a good deal of litigation concerning restrictive covenants, very often considering what restrictions are reasonable in terms of their scope and application. However, it has been over 100 years since restrictive covenants have been considered by our most senior court. That is until the judgment of the Supreme Court in the case of Tillman v Egon Zehnder Limited, which was handed down on 3 July.

Regular voluntary overtime should be included in holiday pay

contract terms, contracts of employment, Directive, Employment Appeal Tribunal, employment law, employment tribunal decisions, holiday pay, overtime, pay and benefits

The Court of Appeal has this week ruled that employers must consider any ‘regular’ voluntary overtime when calculating holiday pay, in addition to ‘non-guaranteed’ overtime, upholding the earlier decision of the Employment Appeal Tribunal (EAT).

In Flowers and others v East of England Ambulance Service NHS Trust (2017) the Claimants, all employed by the East of England Ambulance Service NHS Trust (in a variety of roles) initially brought their claim to the Bury St Edmunds Employment Tribunal alleging that unlawful deductions had been made from their holiday pay.

They stated that the calculation of their holiday pay should account for overtime in two categories – non-guaranteed overtime, and voluntary overtime. The difference between the two in this case is that non-guaranteed overtime occurs when the employee is carrying out a task which must be completed after the end of the shift (for example dealing with an emergency services call for an ambulance), whereas voluntary overtime would be classed as additional shifts which the Claimant can choose to volunteer for (there was no requirement or expectation for them to do so however).

Red Dead Redemption 2: Is ‘crunching’ actually voluntary overtime?

contract terms, contracts of employment, employment law

Cowboy Later today, the review embargo lifts on the biggest video game since Grand Theft Auto 5.  Even those of you not of a video gaming persuasion have no doubt noticed the constant advertisements online, on the TV and on the side of buses for “Red Dead Redemption”.

What is Red Dead Redemption 2?  Well, it’s an adventure game set in the Wild West with the almost mandatory mix of horse chases, gun-slinging and exploring a vast desert-esque landscape.

So, why is it such a big deal?  One word: Rockstar.  Rockstar are the equivalent of Apple 10 years ago.  By that, I mean that nearly every product they make receives rave reviews (at least 95% on average) and is known for its brutal, gritty storytelling.  As an example of their attention to detail, in some shape or form, work on this game has been ongoing for eight years with a budget larger than many Hollywood movies!

So, surely, eight years is more than enough to make a good game.  Well, yes.  But Rockstar want to make ‘extraordinary’ games not just good or very good ones.  And this, unfortunately for them, has led to a lot of media controversy over supposedly ‘voluntary’ overtime and the issue of ‘crunching’.

Let’s tackle the media controversy first.

Pimlico Plumbers and other employment status news

contract terms, contracts of employment, employment status, Supreme Court

Late last month the Supreme Court delivered its long-awaited if not altogether surprising decision in Pimlico Plumbers v Smith. It upheld the decisions of the lower courts that Mr Smith should properly be classified as a worker, with attendant rights (including discrimination rights and holiday pay), rather than being self-employed.

Gary Smith worked for Pimlico Plumbers for six years (from 2005-2011). Although he was VAT registered and paid self-employed tax, from an employment law perspective, he was nonetheless entitled to workers’ rights.

The judgment was unanimous and the lead judgment was provided by Lord Wilson. Having considered the history of the law concerning the status of workers (dating back to 1875), he considered the written agreements between Pimlico and Mr Smith (the original dated 2005 and a replacement issued in 2009), both of which he thought were confusing. However, he noted the extent of control exercised over Mr Smith including the right to dismiss him for gross misconduct, how he should provide his services, an obligation to provide advance notification of absences and the supply of tools. The second agreement included an obligation to wear Pimlico’s uniform, a minimum 40 hours’ working week, advance notice of annual leave and provision for warnings and dismissal.

He also noted that there was no provision for Mr Smith to appoint a substitute to do his work (other than by another Pimlico operative). Having considered relevant authorities, he concluded that “the dominant feature of Mr Smith’s contracts with Pimlico was an obligation of personal performance”.

There was an “umbrella contract” between Mr Smith and Pimlico whereby, if work was available to be done by him, he would be expected to do it. Nonetheless, Mr Smith correctly presented himself as self-employed for tax purposes.

Equal pay at the BBC

contract terms, contracts of employment, equal pay

Eddie MairFollowing last year’s widely publicised equal pay audit at the BBC, there has been a good deal of concern expressed about the disparities between the earnings of some of the Corporation’s best known presenters.

The BBC’s former China editor, Carrie Gracie, complained that the male Middle East and North America editors, Jeremy Bowen and Jon Sopel, were earning at least 50% more than her. Her complaint attracted national newspaper coverage and widespread support from her colleagues. Last month the BBC backed down, apologised to her for underpaying her and said it had “now put this right” by giving her back pay. Ms Gracie donated the back pay to the Fawcett Society, which campaigns for women’s rights.

She had refused a £45,000 pay rise because this still left “a big gap” between her and her male counterparts and her objective was to secure equality. She will now, at her request, take six months’ unpaid leave. What struck me as odd about the matter is that the jobs were regarded as equal in the first place. It is undeniably the case that, over many years, the Middle East and North America editors have had a much higher profile than the China editor, whether male or female. Perhaps the most stark disparity between the jobs is the amount of significant news coverage emanating from the different locations. However, the crucial difference in this case was that, when accepting the appointment, Ms Gracie was told that her pay would be “on a par” with that of the North America editor. It turned out that he was in a bracket of £200,000 to £250,000, whereas she was paid £135,000 (Jeremy Bowen was in a bracket of £150,000 to £199,000).

Following Ms Gracie’s resignation last January, a number of well-known male presenters, including John Humphrys, Jeremy Vine, Nick Robinson, Huw Edwards and Jon Sopel, agreed to take pay cuts as part of a move to harmonise salaries.

However, one who notably refused to do so was the presenter of BBC Radio 4’s PM programme, Eddie Mair.

DPD relaxes onerous terms imposed on its delivery drivers

contract terms, contracts of employment, employment status

A year ago I wrote about the onerous terms imposed on DPD couriers, which had come to the attention of the Work and Pensions Select Committee:

“Meanwhile, it has emerged that DPD, which deliver parcels for Marks & Spencer, John Lewis and River Island, fines their couriers £150 per day if they cannot find cover when they are ill. This has resulted in drivers being forced to work when they are sick. The fine, which is described as “liquidated damages”, means that couriers who earn on average £200 a day, lose £350 if they cannot work through illness and are unable to find a substitute.”

Chair of the Committee (and my MP) Frank Field, commented at the time:

“The gig economy is producing wave after wave of evidence on the grim reality of life at the bottom of Britain’s labour market…A group of companies now controls the working lives of an unknown number of people, and yet evades its own responsibilities as employers and taxpayers by labelling those people as self-employed… This move [by DPD] makes the rest of the gig economy look as though it operates in the Garden of Eden.”

In February 2018 The Guardian reported the sad story of Don Lane, a DPD courier, who was fined £150 for attending a medical appointment to treat his diabetes and who, at age 53, subsequently collapsed and died for reasons connected with the disease. His widow, Ruth, disclosed that he had missed medical appointments because he felt under pressure to cover his round. He had collapsed twice, including once into a diabetic coma, while at the wheel of his DPD van. His fine was imposed when he went to see a specialist about eye damage caused by his diabetes. He collapsed in late December, having worked through illness during the Christmas rush and died in the Royal Bournemouth Hospital on 4 January.

More unrest at the BBC – now it’s about personal service contracts and a word of warning about the ostensibly self-employed

contract terms, employment status

Perhaps the most surprising aspect of “employment” provided through personal service companies is that such arrangements have lasted as long as they have.

When the BBC first published the salaries of its top presenters last year there were some notable omissions. For example David Dimbleby didn’t appear on the list. Why? Because he is paid by the BBC through a separate production company. Similar arrangements are in place for Lord Alan Sugar, John Torode and Gregg Wallace.

For years the BBC has encouraged and, some have argued, mandated some of their key talent to be paid through a personal service company. The idea is that the company provides the services of, say, the presenter to the BBC and the BBC therefore pays the company for the services provided. The upshot is that the presenter benefits from the lower tax regime for limited companies (currently 20%) rather than the higher personal tax rates of 40% over £45,000 and 45% over £150,000.

Unsurprisingly, HMRC have been chipping away at such arrangements for a number of years and, as far as the BBC is concerned, matters recently came to a head with a victory in the High Court against BBC Look North presenter Christa Ackroyd. Ms Ackroyd was sacked by the BBC in 2013 after HMRC demanded unpaid taxes from her on the basis that she was, in reality, an employee of the BBC and therefore required to be taxed under Schedule E. Her HMRC appeal was unsuccessful and she is now facing a bill for £419,151 in back taxes, plus undisclosed legal costs. An HMRC spokesman reiterated their long held view that “employment status is never a matter of choice…It is always dictated by the facts and when the wrong tax is being paid we put things right”.

You may take the view that Ms Ackroyd had tried it on and been caught out but, as is so often the case, it is by no means that straightforward and the BBC is very much under scrutiny as a result of its actions.

Voluntary overtime included within holiday pay: freely given time isn’t free!

contract terms, holiday pay, holidays, overtime1 Comment

The Employment Appeal Tribunal (EAT), the Tribunal which hears appeals from the regular Employment Tribunal, has recently confirmed that regular payments for overtime incurred voluntarily by employees should be taken into account when calculating an employee’s allowance of 20 days of holiday pay (this is the statutory minimum amount of holiday leave outside of the…