http://www.healdlaw.com/en-gb© 2012 Heald SolicitorsHeald Solicitorshttp://www.healdlaw.com/news-172-EAT-Rules-that-Lap-Dancer-was-an-Employee.aspxMany employment rights - including the right to sue for unfair dismissal - are confined to employees. Defining just who is and who is not an employee has long proved something of a challenge for the courts and tribunals. Take, for example, the recent decision of the Employment Appeal Tribunal (EAT) in Quashie v. Stringfellows Restaurants Ltd. Q worked as a lap dancer at Stringfellows. She was paid in what was described as "Heavenly Money " - vouchers paid to her by customers which Stringfellows later redeemed for real money minus deductions. Those deductions included commission payable to Stringfellows, a "house fee" and fines. Dancers were fined for such things as being off rota or late for a shift or stage dance. Dancers were also required to pay a set fee to the "House Mother", who was responsible for ensuring that the dancers were well turned out and for looking after the dancers' general wellbeing. Q's earnings came entirely from the customers. On any particular night, it was possible that her earnings might be less than the amount she had to pay out, with the result that she would earn nothing for that night. When Stringfellows terminated Q's contract over drug dealing allegations, she sued for unfair dismissal. Stringfellows had two lines of defence. It argued, first, that Q was not an employee and, second, that Q's contract had been illegally performed by reason of her tax returns and claims for tax credit. Dealing with the employee point as a preliminary "knock-out" point, the Employment Tribunal ruled that Q was not an employee. The EAT allowed Q's appeal. Although Q's earnings came entirely from customers, rather than Stringfellows, she was being paid for work done. Employment status is not a matter of the source, or the route, of the payment. The Employment Tribunal had been wrong to focus too narrowly on the "wage/work" bargain. Q had been obliged to turn up for work in accordance with the rota. She was not entitled to send a substitute. The imposition of fines or deductions by agreement implied an ongoing relationship. The EAT sent the case back to the Employment Tribunal so that it could hear Q's unfair dismissal claim and deal with the illegality point. Whether or not an individual is an employee will always depend on the facts of the particular case. Employers need to appreciate that an Employment Tribunal will always look at the substance, or reality, of the situation. It will not be bound to accept the particular label which the parties have chosen to put on their relationship. Even an individual whose contract clearly states that he or she is not an employee may, in fact, be an employee in law and have all the rights of an employee. To find out more, please contact Nick Crook or Gareth Pobjoy. 14 May 2012 08:07:07http://www.healdlaw.com/news-171-Torrential-rain--gale-force-winds-and-achy-bodies---that-s-all-in-a-day-s-work-for-the-Heald---Toes-team.aspxOn 29 April 2012 the Heald and Toes team, which comprised of four lawyers, David Dees, Esther Marchant, Tom Silverwood-Cope and Tina Middleton, braved freezing conditions, gale force winds and flooded redways to take part in the MK Marathon Corporate Relay Challenge. The 26 miles route was divided between all four team members and visited scenic sites such as the lakes at Caldecotte and Willen and the woods at Linford. Tom started the race strongly and, at mile 6.5, passed the team baton to David who had kindly volunteered to complete the longest leg of 8.5 miles. After battling a "mountain" at mile 15, David victoriously hung up his running shoes and passed the baton to Tina who battled with the numerous and never-ending bridges during her 6.5 mile stint. At mile 21 the heavens opened but, undeterred, the team baton was passed to Esther. She summoned the energy to run the final 4.7 miles with a little sprint as she did the glory run around the pitch at the MK Dons stadium. The Heald and Toes team completed the marathon in 4 hours and came a respectable 41 out of 98. Half the money that the team raised will go to the charities nominated by the MK Dons Sport and Education Trust. The other half will be donated to a charity close to the hearts of many team members, the Hertfordshire Multiple Sclerosis Therapy Centre. This charity provides much needed physiotherapy and oxygen therapy, to name just a few, to those sufferers of MS and other neurological conditions. There is still time to donate to this worthwhile cause by following this [link|http://uk.virginmoneygiving.com/team/healdandtoes4|link] 04 May 2012 09:57:38http://www.healdlaw.com/news-170-Borrowing-Old-Equipment-Lands-Director-in-Hot-Water.aspxLaw is often largely a matter of commonsense. Take the issue of Directors' Duties. What the law requires generally accords with what most businesspeople would regard as normal standards of commercial morality. With many of the cases that come before the courts, it is difficult to believe that the Director concerned did not see that there was a glaring conflict between his own interests and those of the company. However, from time to time a case crops up that shows just how strict the rules can be and how careful a Director has to be to avoid falling foul of the law. A good example is the decision in[b] Premier Waste Management Ltd. v. Towers[/b]. Towers was a director of Premier, a waste disposal and treatment company. Ford ran a small business supplying plant and machinery for sale and hire. He did business with Premier. In 2003, Towers was renovating a property. He asked Rafter, Premier's operations manager, to ask Ford if he would lend Towers an excavator and dumper. Ford agreed to do so. Towers used the equipment for six months. It then remained at Towers' property until 2008. The equipment was old and in a poor condition. Towers spent some of his own money on repairs. However, when the excavator required new tracks, this was arranged through Premier. Rafter put the cost through Premier's books. When Towers discovered this he reprimanded Rafter. Eventually, Rafter invoiced Ford for the cost of the tracks. Ford paid the invoice. In 2008, Premier and Towers parted company on bad terms. Meanwhile, Ford had invoiced Premier for the cost of hiring the equipment. Premier sued Towers claiming that he had made an unlawful profit from his Directorship. The claim, which covered the whole five-year period during which the equipment was in Towers' possession, came to more than £48,000. Premier had a partial victory in the High Court, the Judge ruling that Towers was liable in respect of the six-month period during which he had actually been using the equipment. He awarded Premier £5,200 plus interest. Towers' appeal to the Court of Appeal was dismissed. The Court took a fairly hard line and rejected Towers' arguments based on commercial reality. The rules requiring a Director to be loyal to the company and to avoid conflicts of interest are to be applied strictly. It was irrelevant that neither Towers nor Ford had any corrupt motive. Nor did it matter that the value of the benefit to Towers was small and that Ford received no benefit from the deal. Even if a Director is guilty of a breach of duty, the court has power to excuse him if it is satisfied that he acted honestly and reasonably. However, in this case the Court of Appeal endorsed the Judge's decision not to exercise that power. There had been no mitigating factor and no evidence of injustice or hardship which might justify granting relief in Towers' favour. Many people may view this as a harsh decision lacking in commercial reality. Was there really a conflict between Premier's and Towers' interests? Be that as it may, the message is clear. A Director must be extremely cautious about entering into any transaction where there is a danger that a conflict between the company's and his own interests may arise. [b]Note:[/b] The relevant events in this case occurred before the coming into force of the Companies Act 2006. That Act set out in statute, for the first time, Directors' general duties. However, the Court of Appeal stated that the final result would have been the same had the 2006 Act been in the force at the relevant time. If you would like to know more, please contact David Dees or Nick Crook. 03 May 2012 07:42:22http://www.healdlaw.com/news-169-Stamp-Duty-Land-Tax---Revenue-Gets-Extra-Slice-of-the-Cake.aspxStamp Duty Land Tax (SDLT) is payable by purchasers of real estate. As well as land and buildings, a sale will often include other goods (for example curtains and carpets). These are what lawyers call chattels. A sale can also include fixtures and fittings such as air conditioning units. The sale price will normally be split between the land and chattels. However, HMRC may argue that what are described as chattels are, in fact, fixtures and form part of the land and buildings. This matters because once the sale price payable for the land and buildings falls within a higher SDLT band, the whole of that price will be taxed at the higher rate. In a recent case, Miss O purchased a house for an all-in price of £258,000. £8,000 was apportioned to chattels. Miss O paid SDLT of £2,500 (1% of £250,000) .This figure was the top limit of the 1% band. If even £1 more of the price had been allocated to the land, SDLT at 3% would have been due. HMRC argued that fitted units in the garage, worth some £800, had been wrongly described as chattels. A Tribunal has upheld HMRC's view. . The upshot was that Miss O should have paid SDLT on £250,800, well within the 3% band. As a result she found herself liable to pay an additional £5,024. The introduction, in this year's Budget, of higher SDLT rates applicable to more expensive residential properties shows that this Government favours SDLT as a source of additional revenue. Purchasers and their advisers need to be aware that land / chattel splits may be challenged by HMRC. Such a challenge is more likely where the sale price for the land is at or near a rate band limit. If you would like to know more, please contact Caroline Wilton or Martin Banham-Hall. 01 May 2012 14:49:26http://www.healdlaw.com/news-168-Borrowing-Old-Equipment-Lands-Director-in-Hot-Water.aspxLaw is often largely a matter of commonsense. Take the issue of Directors' Duties. What the law requires generally accords with what most businesspeople would regard as normal standards of commercial morality. With many of the cases that come before the courts, it is difficult to believe that the Director concerned did not see that there was a glaring conflict between his own interests and those of the company. However, from time to time a case crops up that shows just how strict the rules can be and how careful a Director has to be to avoid falling foul of the law. A good example is the decision in[b] Premier Waste Management Ltd. v. Towers[/b]. Towers was a director of Premier, a waste disposal and treatment company. Ford ran a small business supplying plant and machinery for sale and hire. He did business with Premier. In 2003, Towers was renovating a property. He asked Rafter, Premier's operations manager, to ask Ford if he would lend Towers an excavator and dumper. Ford agreed to do so. Towers used the equipment for six months. It then remained at Towers' property until 2008. The equipment was old and in a poor condition. Towers spent some of his own money on repairs. However, when the excavator required new tracks, this was arranged through Premier. Rafter put the cost through Premier's books. When Towers discovered this he reprimanded Rafter. Eventually, Rafter invoiced Ford for the cost of the tracks. Ford paid the invoice. In 2008, Premier and Towers parted company on bad terms. Meanwhile, Ford had invoiced Premier for the cost of hiring the equipment. Premier sued Towers claiming that he had made an unlawful profit from his Directorship. The claim, which covered the whole five-year period during which the equipment was in Towers' possession, came to more than £48,000. Premier had a partial victory in the High Court, the Judge ruling that Towers was liable in respect of the six-month period during which he had actually been using the equipment. He awarded Premier £5,200 plus interest. Towers' appeal to the Court of Appeal was dismissed. The Court took a fairly hard line and rejected Towers' arguments based on commercial reality. The rules requiring a Director to be loyal to the company and to avoid conflicts of interest are to be applied strictly. It was irrelevant that neither Towers nor Ford had any corrupt motive. Nor did it matter that the value of the benefit to Towers was small and that Ford received no benefit from the deal. Even if a Director is guilty of a breach of duty, the court has power to excuse him if it is satisfied that he acted honestly and reasonably. However, in this case the Court of Appeal endorsed the Judge's decision not to exercise that power. There had been no mitigating factor and no evidence of injustice or hardship which might justify granting relief in Towers' favour. Many people may view this as a harsh decision lacking in commercial reality. Was there really a conflict between Premier's and Towers' interests? Be that as it may, the message is clear. A Director must be extremely cautious about entering into any transaction where there is a danger that a conflict between the company's and his own interests may arise. [b]Note:[/b] The relevant events in this case occurred before the coming into force of the Companies Act 2006. That Act set out in statute, for the first time, Directors' general duties. However, the Court of Appeal stated that the final result would have been the same had the 2006 Act been in the force at the relevant time. If you would like to know more, please contact David Dees or Nick Crook. 01 May 2012 14:48:25http://www.healdlaw.com/news-167-Nuisance---Statutory-Licence-or-Permission-Does-Not-Necessarily-Give-You-Carte-blanche.aspxOver recent months the courts have had to grapple more than once with the question of how far the grant of a statutory licence - for example, a licence to operate a waste tip - or a planning permission prevents local residents from suing for nuisance. This is an area where some rather fine lines are drawn. In [b]Barr (and Others) v. Biffa Waste Services Ltd.[/b], Biffa operated a waste tip. In 2004, Biffa obtained a statutory permit allowing it to accept household and non-hazardous industrial and commercial waste at the site. Soon after operations were begun, Biffa started receiving complaints from the local residents about the smell coming from the tip. Eventually, the residents sued Biffa for nuisance. The issue was how far the residents' common law rights in nuisance had been affected by the relevant environmental and landfill legislation. Biffa argued that it would be unfair and unrealistic if it could still be liable to the residents in nuisance despite having complied with all its statutory obligations. The High Court accepted this argument and dismissed the claims. However, the Court of Appeal allowed the residents' appeal, ruling that the normal principles of the law of nuisance applied. Whether or not something amounts to a nuisance depends on all the circumstances of the case, including the character of the neighbourhood. Here, the grant of the permit had not been enough to alter the character of the neighbourhood. The Court said that statutory authority might be a defence to an action in nuisance in some cases - for example, where the act authorised will "inevitably" involve a nuisance, even if every reasonable precaution is taken. However, that was not the case here. The mere fact that the operation of the waste tip benefitted the community at large was not enough. Contrast another recent case. In[b] Lawrence and another v Fen Tigers Ltd[/b], since 1975 FTL had operated a racetrack under a series of planning permissions and Certificates of Lawful Use. In 2006, the claimants bought a house in the vicinity of the track. After repeated complaints about the noise, they eventually sued FTL in nuisance. Ruling in the claimants' favour, the High Court granted an injunction against further nuisances and awarded the claimants damages. However, the Court of Appeal allowed FTL's appeal. Although the grant of planning permission was not a licence to commit nuisance, the local planning authority's decisions had in fact, over time, changed the character of the neighbourhood. The noise periodically generated by the racing had become one of the established characteristics of the locality. The Court of Appeal also took account of the fact that the planning consents were matters of public record which would have been discoverable by the claimants, or their solicitors, before they purchased their property. To find out more, please contact Gareth Pobjoy or Tom Silverwood-Cope. 20 April 2012 08:00:26http://www.healdlaw.com/news-166-Children---Court-of-Appeal-Upholds-Sperm-Donor-s-Contact-Rights.aspxIncreasingly, the courts are being asked to deal with issues which simply would not have arisen before owing to including advances in reproductive sciences and changes in society's attitudes to same sex relationships. Children can end up in extraordinary situations, when someone agrees to act as a sperm donor. What seemed a sensible arrangement before birth may turn into a nightmare after the baby is born. It is all too easy for the adults involved to lose sight of what really matters - namely, what is in the best interests of the child. Take the recent case of [b]A v. B and C[/b]. B and C were in a long term lesbian relationship and wanted to have a child. A, a gay man, who was an old friend of both women offered to act as a sperm donor for the couple. They all agreed that B would be the child's biological mother. B came from a religious family, who had not accepted her sexual orientation. To avoid further difficulties that might arise from the planned conception and birth, A and B married, with no intention that they would ever live together. It was agreed any child born would live with B and C, who would be the primary carers. A, as the biological father, would be welcomed and acknowledged as such, but otherwise his relationship with the child was to be purely secondary. B and C were concerned that any greater role for A would encroach upon C's relationship with B and, particularly, with the child. They also worried about who would look after the child if B were to die prematurely, and wanted that responsibility to rest with C. So far, so straightforward. When B became pregnant, increasingly fraught discussions ensued. A expressed his wish for weekly overnight contact at his home from birth in addition to an annual holiday. In September 2009, M was born. Eventually, in November 2010, A applied for a contact order and B and C responded with an application for a joint residence order. In the High Court, the Judge largely sided with B and C, granting them the joint residence order. Although he slightly increased A's contact, the Judge agreed with B and C that, for the foreseeable future, A should play a secondary role in M's life - enough for M to know who his father was, but not so much as to unduly interfere with what was described as the "nuclear family". The Court of Appeal allowed A's appeal ruling the Judge had been too inflexible in his approach. He had wrongly thought that a general rule applied in all disputes between two female parents and one male parent. However, the Court stressed that all such cases will depend on their specific facts. What matters most is the child's welfare. The adults' pre-conception intentions will be relevant, but are not necessarily conclusive. It was generally accepted that a child gained by having two parents. It did not follow that the addition of a third parent was necessarily disadvantageous. In this case, A's involvement with and commitment to M from birth suggested that he might have offered a relationship of considerable value to M. The Judge had been wrong to decide the future as definitively as he had. A's role in M's life may change and develop over time The Court of Appeal sent the case back to the High Court for reconsideration. If you would like to know more, please contact Mary Banham-Hall or Dawn Millar. 19 April 2012 08:07:11http://www.healdlaw.com/news-165-Heath-and-Safety---Gamekeeper-Shoots-Himself-in-the-Leg.aspxLike data protection and the Human Rights Act, health and safety law tends to be the subject of a certain amount of urban folklore. Sometimes it is simply used as a convenient excuse to justify what someone wants, or does not want, to do or the excessively cautious approach taken by some public authorities and insurers. In fact, when cases are litigated, the courts tend to take a realistic and commonsense approach to what the law requires and to uphold an employer's right to assume than an employee will take reasonable precautions for his or her own safety. A good example is the recent decision in [b]Whitehead v. Trustees of the Chatsworth Settlement[/b]. W had many years of experience using guns - first in the army and later as a gamekeeper. Whilst at work, he was carrying a loaded shotgun broken over his arm. He climbed over a low stone wall, which crumbled under his weight. He fell and shot himself in the leg. He sued the Trustees claiming that, as his employer, they had been in breach of the Provision and Use of Work Equipment Regulations 1998. He argued that they had been under a duty to discover that he might have been running a risk with his own safety, and to ensure, by instruction, training and disciplinary measures, to prevent or adequately control the risk. The County Court dismissed his claim. The Court of Appeal has now rejected an appeal by W. The Trustees had done all that could have reasonably been expected of them. W had been well instructed in gun safety. He had been aware that best practice was to remove cartridges from the gun before negotiating an obstacle. W had been given relevant mandatory instructions in writing. The Trustees had had no reason to think that W was not complying with those instructions. It followed that they had not been under a duty to make further investigations or to check up on how W was carrying out his duties. On the face of it, at least, this decision provides a degree of reassurance to employers. However, it is important to bear in mind that in this case the Trustees were in a position to show that they had done things by the book: - that they had undertaken a proper risk assessment, correctly identified the risk and ensured that employees had been issued with appropriate written instructions. To find out more, please contact Nick Crook or Gareth Pobjoy. 17 April 2012 07:31:48http://www.healdlaw.com/news-164-Residential-Tenancy-Deposits---Sledgehammer-Legislation-Repealed.aspxResidential landlords will be relieved to learn that, with effect from 6th April 2012, the sanctions for non-compliance with the rules relating to tenants' deposits taken in connection with assured shorthold tenancies are finally relaxed. Under the original rules, which were enacted in the Housing Act 2004 and came into force in April 2007, any deposit taken from a tenant in connection with assured shorthold tenancy must be dealt with in accordance with an authorised Tenant Deposit Scheme (a TDS). The sanctions for non-compliance with the rules were fairly Draconian: . If a landlord failed to comply with the rules he was barred from serving a two-month notice terminating the tenancy. . In addition to ordering the landlord to either repay the deposit to the tenant or pay it into a TDS, the court was required to order the landlord to pay to the tenant a sum equal to three times the deposit. The court was allowed no discretion in the matter. This provision generated considerable litigation with the courts indulging in a certain amount of mental gymnastics in an attempt to mitigate the harshness of the rule. Under the new rules: . The time-limits within which landlords must comply with the requirements of the rules are increased from 14 to 30 days. . It is made clear that a landlord will no longer be barred from serving a two-month termination notice if: . The deposit has been repaid to the tenant in full or with such deductions as the parties have agreed; or . Court proceedings have been determined by the court, withdrawn or settled by agreement between the parties. . Most importantly, the courts are given a degree of flexibility as to the financial penalty imposed on a landlord in breach. This will be a sum not less than the deposit but not more than three times the deposit. To find out more, please contact Martin Banham-Hall or Caroline Wilton. 04 April 2012 10:11:08http://www.healdlaw.com/news-163-Tweeter-Who-Posted-Libellous-Tweet-Ordered-To-Pay--90-000.aspxThe media often talks as if the Net is some kind of lawless Wild West. Indeed, it is all too easy for people to forget that things said and done in cyberspace can have consequences in the real world. In reality, the Net is far from being a legal no-go area. Increasingly, individuals are finding themselves held to account for things said or done online. A recent example of this is the libel action brought by Chris Cairns, the well-known New Zealand cricketer. In January 2010, the defendant, Modi, published the following words on his personal Twitter page: "Chris Cairns removed from the IPL auction list due to his past record in match fixing.". When, later the same day, he was asked to do so by an online cricket magazine, Modi provided confirmation of the allegation in the following form: "We have removed him [Cairns] from the list for alleged allegations [sic] as we have zero tolerance of this kind of stuff. '. The magazine then published an article repeating the allegation. Cairns sued Modi for defamation in respect of both the tweet and the comment to the magazine. Cairns won the case. The Judge ruled that Modi had failed to provide any reliable evidence that Cairns had been involved in match fixing, or even that there had been strong grounds for suspecting that he had been. Cairns was entitled to damages, assessed on the basis that he had been a professional cricketer of good character and reputation. The starting point for such damages was £75,000. The Judge increased the damages recoverable by a factor of about 20% to reflect the sustained and aggressive way in which Modi had asserted a defence of justification - truth - and awarded Cairns total damages of £90,000. The Judge also granted Cairns an injunction against repetition of the libel. To find out more, please contact Gareth Pobjoy or Tom Silverwood-Cope. 03 April 2012 11:26:39http://www.healdlaw.com/news-162-Heald-swim-again-for-the-Milton-Keynes-Charity-Swimathon.aspxOur intrepid team of staff, family and friends have again taken up the challenge to raise money for local charities by seeing how many lengths of the Stantonbury Swimming Pool they could swim in just under an hour. On Saturday 10th March, the Heald Haddocks team clocked up 140 lengths of the 25m pool. The team of 6 were still smiling after the 55 minutes of swimming and will raise over £350 for the good causes. For more information go to the [link|http://www.rotary-milton-keynes.org/swimathon-2012.html|Swimathon web site]02 April 2012 13:11:48http://www.healdlaw.com/news-161-TUPE---EAT-Provides-Useful-Guidance-on-Contracting-Out.aspxThe issue of contracting out has always been a thorny one relation in TUPE. How do you distinguish between, on the one hand, a client simply changing from using the services of Supplier A to those of Supplier B and, on the other, the situation where there is a transfer of an identifiable entity - including employees - from Supplier A to Supplier B for TUPE purposes? When TUPE was re-enacted as the Transfer of Undertakings (Protection of Employment) Regulations 2006, the Government tried to spell out exactly when TUPE applied to contracting out situations (or, as TUPE somewhat inelegantly puts it, a "service change provision". Cases now starting to come before the Tribunals suggest that the Government has failed to achieve absolute clarity. The new rules apply if, immediately before the transfer, there is an "organised grouping of employees" carrying out the relevant activities. In a recent case, [b]Eddie Stobart v Moreman[/b], ES delivered meat from a particular site - initially to five clients. Three of the clients were then lost. The two that remained had different delivery systems which meant that, in practice, ES's night shift dealt mainly with the deliveries for Client A and the day shift mainly with those for Client B. However there was no formal separation and all orders were simply executed on a bar code basis. When ES decided to close the site Client B gave its work to FJG, another transport firm. FJG did not take on any of ES's staff apart from one person. The issue was - who was liable in respect of the various employment law claims brought by the day shift employees in connection with their loss of employment - ES or FJG? ES contended that when the work was given by Client B to FJG TUPE applied and the liabilities had transferred to FJG. It argued that the division of the work [i]in fact[/i], meaning that the day shift employees had essentially done the work for Client B, was sufficient to constitute those employees - in the words of TUPE - an "organised grouping of employees" carrying out the relevant activities. The Employment Tribunal rejected this argument, a decision which has now been confirmed by Employment Appeal Tribunal. In the Tribunal's view, it was not sufficient that the de facto effects of the working pattern meant that in practice the day shift employees worked on Client B's orders. Rather, there had to be something in the nature of an organised "Client B team". The new rules make it clear that there is no TUPE transfer where the relevant activity is the supply of goods rather than services. In another recent case, [b]Pannu v. Geo W. King Ltd[/b], the claimants were all employed by GWK on an assembly line producing axles for IBC Vehicles Ltd. When GWK went into liquidation, IBCV contracted with another company, Premier, for Premier to assemble the axles at IBCV's own premises. Premier took on only one of GWK's workers, a supervisor. The remaining employees were dismissed. The dismissed employees brought claims on the basis that there had been a TUPE transfer - to either IBCV or Premier. They argued that the activity in which they had been engaged had amounted to more than just the supply of goods and that they had been providing a service to IBCV in assembling the axles. This argument was rejected by the Employment Tribunal, a decision which has now been confirmed by Employment Appeal Tribunal. The Tribunal ruled that you have to look at the position between the service-provider and the client, as opposed to that between the service-provider and its employees. For clear practical advice on TUPE issues, please contact Nick Crook or Gareth Pobjoy 29 March 2012 09:27:28http://www.healdlaw.com/news-160-Redundancy---Fishing-in-a-Pool-of-One.aspxA Lawyer's Nightmare (Mr Ebenezer Scrooge consults his Solicitor, Mr Uriah Heap) [b]Heap[/b]: Ebenezer? Hi there. I got your message to call. How are things? [b]Scrooge[/b]: Oh, mustn't grumble. Well I could but it won't get me very far. [b]Heap[/b]: And how's business? [b]Scrooge[/b]: So, so. In fact, that's what I needed to speak to you about. [b]Heap[/b]: Yes? [b]Scrooge[/b]: Things are a bit patchy at the moment. It's all this recession and deficit reduction mularky. And the Government doesn't exactly help with its endless pettifogging rules and regulations. And now, to cap it all we have lost the contract with The Road to Ruin Finance House. [b]Heap[/b]: Oh dear. That is bad news. [b]Scrooge[/b]: Yes, it's a real downer. Still, every cloud has a silver lining. It's an opportunity to clear out some dead wood. I've decided to make Mr Brown redundant. Between you, me and the gatepost, we've been carrying him for years. He's got to go. [b]Heap[/b]: Ah-ha. Now just hang on a moment. You don't want to run the risk of a claim for unfair dismissal, do you? [b]Scrooge[/b]: I don't want to be bamboozled by a load of legal complexity. Look, it's simple. We've lost the contract. Brown did eighty per cent of the work on the contract. It occupied him practically full-time. He's obviously redundant. [b]Heap[/b]: I agree that there is a redundancy situation, in that you are faced with a reduction in the amount of work and you require fewer employees to carry out the work that remains. However, it does not necessarily follow that Brown should be the one to go. [b]Scrooge[/b]: I do not believe it! More red-tape! So, advise me. What exactly am I supposed to do? [b]Heap[/b]: The first thing you need to do is to give some thought as to who should be in the redundancy pool - in other words, who should be at risk of being made redundant? It may be, for example, that all employees working on similar contracts should be included in the pool. At the very least, you need to be able to demonstrate to a Tribunal that you gave serious consideration as to whom the pool should include. [b]Scrooge[/b]: I see. It's not so simple, is it? [b]Heap[/b]: No, it isn't. Look, why don't I send you our Standard Redundancy Procedure and we'll take it from there. [b]Scrooge[/b]: (sighs) Very well. I suppose we'd better do things by the book. No doubt you'll want to charge me. [b]Heap[/b]: I'm afraid so. At my usual reasonable rates! [b]Scrooge[/b]: That's what concerns me. OK, I'll wait to hear from you. ___________________ The above dialogue was inspired by the decision in the recent case of [b]Capita Hartshead Ltd. v Byard[/b]. B was employed by Capita as an actuary. She no longer had enough work for a full-time role as many of the pension schemes she had worked on had either been wound up or the clients has been lost. There was no criticism of B's performance as an employee. However, although there were three other actuaries, B was put into a redundancy selection pool of one and then dismissed for redundancy. The Employment Appeal Tribunal (EAT) upheld the Employment Tribunal's decision that B had been unfairly dismissed. The EAT confirmed that a Tribunal is entitled, if not obliged, to consider with care and scrutinise carefully the employer's reasoning to determine if he has 'genuinely applied' his mind to the issue of who should be in the redundancy pool. However, provided that the employer has genuinely applied his mind to the issue of who should be in the pool, then it will be difficult, but not impossible, for an employee to challenge the selection criteria. The EAT's decision in this case can be seen as a shot across the bows of employers. It is probably fair to say that it is in line with previous cases. Contrary to what some employers might think, when it comes to redundancy procedures Tribunals are usually willing to cut employers a fair amount of slack. However, this case is a reminder that the employer must genuinely address the issue of selection with an open mind. Finally, it is important to appreciate that if an employer gets the process wrong, it can be very difficult to retrieve the situation. Consider: - Initially only A is told that he is at risk of being made redundant. The employer then realises that he needs to carry out a proper procedure. Having done so, he comes to the conclusion that, yes, A is the person who should be made redundant. On such facts an Employment Tribunal may take some convincing that the employer has approached the matter with a genuinely open mind. To find out more, please contact Nick Crook or Gareth Pobjoy. 14 March 2012 10:20:19http://www.healdlaw.com/news-159-Uruguay-joins-the-Hague-Convention.aspxOn Thursday 9 February 2012, Uruguay became the 103rd country to Contract to the Hague Convention of 5 October 1961. The consequence of this act is that from the 14th October 2012 documents will no longer need to be stamped by the Uruguayan Embassy after having an apostille from the Foreign and Commonwealth office. This will speed up the process of legalising your documents as well as reducing the costs associated with the process. For more information please contact Gareth Pobjoy09 March 2012 14:55:23http://www.healdlaw.com/news-158-Employer-Restrictive-Covenants---Less-is-Often-More.aspxWhen drafting clauses for an employment contract intended to restrict the employee's activities after the employment has ended, there is a natural tendency to draft in as wide terms as possible and to throw in everything bar the kitchen sink! Such tactics can prove counterproductive. There is always a risk that the courts will strike down a clause that is too widely-drawn as an unreasonable restraint of trade. By contrast, a clause that is more precisely focused on what really concerns the employer stands more chance of being upheld. The recent case of [b]Customer Systems plc v Ranson[/b] provides a good example of a clause being too wide in its scope. In that case, the employee's contract contained the following restrictive covenant: "During your employment with CS and for a period of one year afterwards you undertake not to be employed directly or indirectly by any present or past customer of CS with which you have been personally involved in the course of your employment by CS." The High Court ruled that this covenant was unenforceable. The 12-month duration was considered too long because there was no time limit on the interval between the employee's involvement with a customer and the employee leaving the business. The inclusion of past customers without any limit of time was unreasonable, as was the absence of any time limit on the employee's previous involvement with the customer. If you require realistic hard-headed advice as to the appropriate drafting of restrictive covenants in employment contracts, please contact Nick Crook or Gareth Pobjoy. 24 February 2012 08:40:15http://www.healdlaw.com/news-157-Employer-Could-Impose--No-Opt-Out---No-Overtime--Rule.aspxThe Employment Appeal Tribunal (EAT) has ruled that an employer is entitled to refuse to allocate overtime to an employee who refuses to sign an opt-out agreement under the Working Time Regulations 1998 (the WTR). In [b]Arriva London South Ltd v Nicolaou[/b], N had been employed as a bus driver by Arriva since 1998 and regularly used to work overtime on his rest days. When asked to sign an opt-out agreement under the WTR, relating to the 48-hour limit on average weekly working time, N declined to do so. His refusal resulted in Arriva no longer offering him overtime. N brought a tribunal claim alleging that in denying him the opportunity to work overtime, Arriva had subjected him to an unlawful detriment. The Employment Tribunal upheld his claim. Although the Tribunal found that Arriva's policy was reasonable in the circumstances, it held that this was irrelevant to the issue of whether or not N had suffered an unlawful detriment, but was only relevant to the amount of compensation N should receive. Arriva successfully appealed. The EAT ruled that a requirement for an employee to sign an opt-out before working overtime was reasonable and necessary to ensure the employer complied with its duty under the WTR to take reasonable steps to ensure compliance with the 48-hour week. This decision will be welcomed by employers as it brings a degree of certainty to the employer's position. Failing to take reasonable steps to ensure compliance with the average 48-hour week limit is a criminal offence punishable by an unlimited fine. Having said that, the decision in the Arriva case does seem somewhat surprising. The condition requiring N to sign an opt-out was upheld even though N had previously never got anywhere near infringing the average 48-hour week limit. The EAT's decision in this case may not be the last word on the matter. More cautious employers may decide that it is safer to insist on an employee signing an opt-out agreement only where there is a real risk of the average 48-hour week limit being infringed. If you would like to know more, please contact Nick Crook or Gareth Pobjoy. 17 February 2012 11:59:57http://www.healdlaw.com/news-156-Oman-has-joined-the-Hague-Apostille-Convention-.aspxThe accession of Oman is significant as the first State of the Persian Gulf to join the Apostille Convention. The treaty specifies that a document issued in one of the signatory countries can be certified for legal purposes in all the other signatory States. Under the convention, the government of a receiving country is legally bound to accept documents issued by the sending country's apostille office. In the UK this is the Legalisation Office of the Foreign & Commonwealth Office which is next door to our offices in Milton Keynes. Thus, the receiving country will accept the documents even if they are not attested by its embassy in the sending country. As a result people travelling to Oman particularly those who work there will see a big change in the document legalisation procedure. Contact Gareth Pobjoy to learn how this could affect you. 13 February 2012 10:41:16http://www.healdlaw.com/news-155-Notaries-going-digital.aspxOn 18th January 2012 the EU Commission held a lecture on the progress of the European Digital World initiative. The initiative is to implement a system whereby digital signatures can be used to replace physical signatures and apostilles on documents. The ability to verify documents digitally will have significant implications in commerce and Notarial practice as will the Identity Assurance Programme being developed by the Government Digital Service. Heald has been part of a trial of the digital signatory system but currently there is no date set for the system to be used. For more information contact Gareth Pobjoy.13 February 2012 09:00:34http://www.healdlaw.com/news-154-Failure-to-Pay--130-Cost-Tenant----s.aspxA recent case shows - yet again - how careful a tenant has to be when exercising its right to terminate a lease under a break clause. The fact that the tenant had failed to pay a negligible amount of interest, even though the landlord had not issued any demand for it, meant that the tenant lost its right to terminate. The Judge himself described this result as "a harsh one". In [b]Avocet Industrial Estates LLP v Merol Ltd.[/b], it was a condition of the break clause that the tenant must have paid all the sums due under the lease up to the break date. The main issue was whether the tenant had complied with its obligation to pay six months' rent before that date. On the day before the break date the tenant had had a letter, together with a cheque for the correct sum, hand delivered to the landlord's offices where it was accepted. Two weeks later the cheque was cashed. However, the landlord argued that the rent had not been paid before the break date because the lease entitled it to insist on payment in cleared funds. The Judge rejected this argument. Although there is a general right to insist on payment in cash rather than by cheque, in this case the landlord had previously accepted payments under the lease made by cheque. That had amounted to an implied agreement to accept such payments. So far, so good for the tenant. However, the landlord had a second line of attack. The lease provided for the payment of Default Interest on rent and other sums paid late. Having gone back through its records, the landlord claimed Default Interest in respect of every sum that the tenant had paid late, even though the landlord had not made any such claim at the time. It is probably true to say that the Judge's sympathies lay with the tenant. He considered whether the landlord should be treated as having waived its right to the Default Interest. His reluctant conclusion was that some, but not all, of the claims had been waived. According to the Judge's calculation about £130 remained due. It followed that the tenant had not complied with the conditions of the break clause. The consequences of this decision for the tenant will be serious. It is stuck with premises it does not want for another five years at a rent of £67,500 pa, subject to rent review. We understand that the tenant is seeking to take the case to the Court of Appeal. The careful negotiation of a break clause will often be key. It is important to appreciate that once litigation has arisen, the court will have limited room for manoeuvre. It will be dealing with a hard-edged, black or white, issue: - Has the tenant complied with the terms of the break clause or not? The court does not have a general power to reach what it regards as the "fair" result. We have extensive experience in advising both landlords and tenants on the issues that arise on the operation of break clauses. To find out more, please contact Caroline Wilton or Martin Banham-Hall. 10 February 2012 10:19:45http://www.healdlaw.com/news-153-New-credit-easing-measures-for-SMEs.aspxThe government has recently published further details of a package of credit-easing measures aimed at SMEs. The package of measures relates to the National Loan Guarantee Scheme and the Business Finance Partnership. [b]The National Loan Guarantee Scheme[/b] The National Loan Guarantee Scheme allows banks to apply for government guarantees that they can use to lower their cost of funding. The Scheme allows banks to raise up to £20 billion to lend to SMEs at a lower cost than they might normally achieve and, in many cases, will lead to a reduction in the cost of business loans of up to 1 percentage point. Any SME with a turnover not exceeding £50 million is eligible for the Scheme. [b]The Business Finance Partnership [/b] The Business Finance Partnership is intended to provide joint public and private sector funding through managed funds lending directly to SMEs on fully commercial terms, with the aim of diversifying the sources of non-bank finance available to SMEs. Details of the BFP are somewhat sketchy. However, funds will apparently be required to invest in to lend to businesses with a turnover of up to £500 million. Although no minimum size of business has been set it appears that the BFP will be more aimed at medium-sized businesses rather than smaller ones. If you would like to know more, please contact David Dees or Nick Crook.30 January 2012 12:24:41http://www.healdlaw.com/news-152-Sale-of-Business-by-Company-in-Administration---Court-Ruling-Increases-Buyer-s-Exposure.aspxIn the recent case of [b]Amble Assets LLP v. Longbenton Foods Ltd.[/b], the High Court ruled on the validity of a clause in a sale contract that provided for any liabilities of the seller or the administrator to rank as an unsecured claim against the seller (rather than, for example, as an expense of the administration). Such clauses are a common feature of administration sale contracts. This decision means that should the administrator or seller breach their obligations under a sale contract, the buyer's remedies will be limited. It underlines the need to conduct thorough due diligence and for the buyer to take whatever steps it can to protect its own position. For sound legal and commercial advice on such matters, please contact David Dees or Martin Banham-Hall. 24 January 2012 12:17:45http://www.healdlaw.com/news-151-Entrepreneurs--Relief-Applied-to-Sale-of-Part-of-Business.aspxBusiness people will welcome a recent ruling that the sale of part of a business qualified for entrepreneurs' relief for Capital Gains Tax purposes. In [b]Gilbert v. HMRC[/b], G had carried on a business of selling food on commission. He represented nine different suppliers. In 2008, he agreed to sell part of his business to F, one of the suppliers. The sale included the records, goodwill, trade marks and customer database of the relevant part of the business. Under the sale agreement, G agreed to have no further contact with F's customers. G made a gain of £285,000 on the sale. He claimed entrepreneurs' relief, which would reduce the chargeable gain by four-ninths. HMRC rejected the claim on the basis that G had not disposed of 'an identifiable part of the business'. G appealed. Allowing the appeal, the Tribunal upheld G's contention that his business had comprised nine different parts (i.e. one part for each of the suppliers he represented), and that he had sold one of those parts. In the Tribunal's view the inclusion of goodwill and the customer database were the key factors for its finding that there was a sale of a going concern as opposed to the sale of the individual assets. Although this decision is not binding and every case will depend on its facts, anyone who has disposed of part of a business in similar circumstances should consider making a claim for entrepreneurs' relief. Individuals intending to dispose of their business in stages, or who are forced to do so because they cannot find a buyer for the whole business, should take whatever steps they can (such as same day completion for the sale of different business units) to ensure that entrepreneurs' relief is available. If you would like to know more, please contact David Dees or Nick Crook. 18 January 2012 10:05:01http://www.healdlaw.com/news-150-ECJ-Talks-Sense-on-Holiday-Pay-and-Sick-Leave.aspxIn a recent case the European Court of Justice (ECJ) ruled that EU law does not require the unlimited accumulation of annual leave by an employee who is on sick leave for several years. This is the latest in a series of cases dealing with the right to carry unused holiday forward. [link|http://www.healdlaw.com/news-135-Sick-Employee-Could-Carry-Untaken-Holiday-Over-to-Next-Leave-Year.aspx|The story so far] [b]KHS AG v Schulte[/b] concerned the legality of a tern in a German collective agreement. This stated that leave not taken during the leave year because of sickness could be carried forward but stipulated that it had to be taken within 15 months of the end of the holiday year in question. S had been off sick for six years. When he was eventually dismissed he claimed holiday pay in respect of several years when he had not been able to take annual leave. Following the opinion previously given by the Advocate General, the ECJ ruled that the limitation on S's right to carry forward untaken annual leave was compatible with EU law. The latter does not mandate a right to carry leave forward indefinitely. The Court indicated that any limitation must be substantially longer that the reference period for the leave (i.e. the holiday year) and allow employees to plan their carried over leave, but it must also protect employers from the possibility of employees accumulating long periods of holiday entitlement, thereby potentially making difficulties in organising work later. In so ruling, the ECJ indicated the purpose of the right to annual leave is to promote the health and safety and general well-being of employees. If large amounts of leave are carried forward, it becomes merely a matter of relaxation and leisure. This is not the basis for the entitlement. Where does this leave employers? Under the Working Time Regulations 1998 as presently worded, there is no express right to carry untaken annual leave forward. However, the Regulations must be read subject to the developing ECJ case law. The Coalition Government has previously indicated that it is considering introducing a right for sick employees to carry untaken annual leave forward, subject to a time-limit. The ECJ's judgment in the KHS case suggests that any reasonable limitation on the right to carry forward that is introduced is likely to be compatible with EU law. If you would like to know more, please contact Nick Crook or Gareth Pobjoy. 10 January 2012 10:47:51http://www.healdlaw.com/news-149-Court-of-Appeal-Clarifies-Law-on-AGAs.aspxA recent decision of the Court of Appeal provides some welcome clarification on the law relating to Authorised Guarantee Agreements and guarantors. In [b]K/S Victoria Street v House of Fraser (Stores Management) Ltd.[/b], a case concerning a complex deal, the Court of Appeal confirmed that an agreement by the tenant's guarantor to guarantee the tenant immediate assignee's liability under the lease in the future, at the time of an assignment, will be unenforceable. The Court also confirmed that an actual guarantee covering an assignee's liability under a lease by a tenant's guarantor will also be unenforceable. However, the Court indicated that it may be possible to get round the problem by clever drafting. A sub-guarantee, by which a tenant's guarantor guarantees the assignor's obligations under an AGA, will probably be enforceable; Landlords will probably welcome the indication that a sub-guarantee is likely to be upheld by the courts. Tenants may also regard this as good news as it increases the options available as to the form of security which may be offered to a landlord on an assignment. Where, for whatever reason, a sub-guarantee is not an option the landlord will have to rely on due diligence or alternative forms of security, such as a rent deposit deed or director guarantees. This is undoubtedly a complex and difficult area of law. if you would like clear and realistic advice about the legal and commercial issues that can arise in connection with AGAs, please contact Martin Banham-Hall or Caroline Wilton. 19 December 2011 09:24:00http://www.healdlaw.com/news-148-Residential-Tenancy-Deposits---Sledgehammer-Legislation-Repealed.aspxResidential landlords will be relieved to learn that the sanctions that for non-compliance with the rules relating to tenants' deposits taken in connection with assured shorthold tenancies are soon to be relaxed. Under the rules, which were enacted in the Housing Act 2004 and came into force in April 2007, any deposit taken from a tenant in connection with assured shorthold tenancy must be dealt with in accordance with an authorised Tenant Deposit Scheme (a TDS). The sanctions for non-compliance with the rules are fairly Draconian: . If a landlord fails to comply with the rules he is barred from serving a two-month notice terminating the tenancy. . In addition to ordering the landlord to either repay the deposit to the tenant or pay it into a TDS, the court [b]must [/b] also order the landlord to pay to the tenant a sum equal to three times the deposit - whether or not the landlord's non-compliance has caused the tenant any loss. The court is allowed no discretion in the matter. This provision has generated considerable litigation with the courts indulging in a certain amount of mental gymnastics in an attempt to mitigate the harshness of the rule. The Localism Act 2011 makes a number of changes to the rules which are expected to come into force in April 2012: . The time-limits within which landlords must comply with the requirements of the rules are increased from 14 to 30 days. . It is made clear that a landlord will no longer be barred from serving a two-month termination notice if: . The deposit has been repaid to the tenant in full or with such deductions as the parties have agreed; or . Court proceedings have been determined by the court, withdrawn or settled by agreement between the parties. . Most importantly, the courts are given a degree of flexibility as to the financial penalty imposed on a landlord in breach. This will be a sum not less than the deposit but not more than three times the deposit. To find out more, please contact Martin Banham-Hall or Caroline Wilton. 28 November 2011 15:21:14