Settlement agreements

Employers look for certainty and predictability in their employment relations just as much as their investment decisions. A recent judgment of the Employment Appeal Tribunal (EAT) regrettably makes this harder to achieve in the context of settlement agreements. Market practice for many years has been to try to agree a clean break – in which the employee receives a severance payment, or other benefits, in exchange for a waiver of all claims.

After a group of decisions in the late 90s and early 2000s, lawyers generally agreed that it was possible (provided the drafting was clear enough) for that waiver to include:

• all claims and allegations the employee had raised;
• all claims they could conceivably raise in the future arising from acts they already knew about; and
• all future claims even those arising from acts or omissions they knew nothing about.

The EAT has now ruled that the third of these categories – unknown future claims – cannot be lawfully waived. If the higher appellate courts do not reconsider the point, this potentially exposes employers to "tail" risk, as they can no longer be guaranteed that a settlement will produce certainty. 

Redundancy

Employment lawyers often like to say that more unfair dismissal judgments are down to defective procedures than to substantive unfairness. That is particularly so in redundancy situations, where the Courts and Tribunals have, over a very long period, stressed the central importance of bringing affected staff into the loop at an early stage. Where collective redundancies are being proposed, meaningful consultation with the relevant union or elected employee representatives is mandated by statute, but the same basic principles apply to individual redundancies too. 

A recent EAT decision demonstrates the dangers of procedural shortcuts. Two nurses were employed at the same grade, both for fixed-terms. A need to reduce costs arose (one that the Tribunal found to be genuine), and the NHS Trust decided to select for redundancy the nurse whose contract was due to expire first.  That was the sole selection criterion, and the nurse was not consulted until after the decision was taken. At first instance, the Tribunal concluded the decision was fair, but the EAT overturned that ruling. In doing so, it underlined some basic principles:

• employers should give as much warning as possible about impending redundancies;
• the pool of employees from which redundancies are to be selected must be reasonable;
• employers must not act arbitrarily as between employees, or groups of employees;
• consultation is usually necessary as to the selection criteria to be adopted, which should be as objective as possible;
• the selection criteria should be applied fairly; and
• alternatives to redundancy, such as deployment elsewhere in an organisation, should be considered.

These are not strict rules, so employers can depart from them where a particular situation warrants it – but a cogent explanation for such a departure will be required.

It is worth quoting the words of a senior Court of Appeal judge from 1994, in a case in which a young Keir Starmer appeared as part of the employee’s legal team: “fair consultation involves giving the body consulted a fair and proper opportunity to understand fully the matters about which it is being consulted, and to express its views on those subjects, with the consulter thereafter considering those views properly and genuinely.”

Diversity and inclusion

The Financial Reporting Council (FRC) has published a new report focussing on the barriers to senior leadership at FTSE 100 and 250 companies faced by members of minority ethnic groups. The FRC’s view is that, whilst significant challenges remain, companies and their executives across the spectrum have taken the need for change seriously. The report will be of interest to listed companies, as well as other publicly traded companies, looking to assess and improve access to leadership for minority ethnic groups.

Home Office ends temporary right to work concession

All employers have the duty to check that their employees have the right to work in the UK by checking their identity documents and visas.

Employing someone without the right to work may lead to a fine up to £20,000 per employee working illegally. Such a fine can be avoided if the employer undertakes a valid right to work check.

During the Covid-19 pandemic, the Home Office introduced a concession which allowed employers to undertake these right to work checks remotely over a video call without the need to handle original documents.

This concession ended on 30 September 2022.

From 1 October 2022 onwards, in order to establish a valid statutory defence against a civil penalty for employing illegal workers, employers must perform a right to work check on or before the first day of employment as follows:

• if the employee is British or Irish – the employee must present their original documents in person which should be dated and kept on file (for example, their British/Irish passport);
• if the employee has a Biometric Residence Permit or eVisa or status under the EU Settlement Scheme – the employee must provide a share code from their online visa account which the employer should enter here and note any expiry dates or conditions; and
• if the employee is not covered by the above - the employee must present their original documents in person which should be dated and kept on file (for example, a visa sticker from their passport) and note any expiry dates or conditions.

Legislative reform and our new podcast

The recent weeks of political turmoil have seen a number of important policy announcements being floated. In advance of the next mini-Budget on 17 November 2022, the new administration has not yet signalled whether it intends to take any or all of these forward, or whether it has new plans of its own.

For future editions, we are going to accompany this email update with a short podcast, in which we’ll discuss interesting topics in a little more depth.  It seems highly likely that the Government’s stance on data privacy, no-fault dismissals, "red-tape", and the scrapping of EU-derived employment legislation – as well as the long-promised reform of sexual harassment law and redundancy protections - will be top of the list for discussion. Stay tuned!