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Carillion Liquidation and IT suppliers

Carillion, a very large construction company, which existed largely on the outsourcing of large government contracts, has announced that a group of its companies have gone into liquidation. It had many suppliers and is certain to have a number of IT suppliers. In the end it ran out of money leaving no option but to go into liquidation.

 

The early talk is the government may step in and take over the running of some of the projects Carillion was previously running for the government. This will mean a requirement for continuation of some of the existing supplies.

 

The Liquidator has confirmed in this case that suppliers generally will be paid and should continue to supply services to the Company as before liquidation. But what if the liquidator did not do that and as in this situation may want to continue using the Supply or service?

 

Broadly speaking there are 2 types of supplier: A supplier of Essential Supplies and suppliers generally.

 

What is done is done. Following the coming into force of the Insolvency (Protection of Essential Supplies) Order 2015 a supplier of essential IT supplies, can no longer strong-arm a Liquidator to pay debt accrued prior to the liquidation, as a condition of continuing supply. However, like general creditors, it can force a Liquidator to personally guarantee payment going forward, or subject to the terms of its contract, it can terminate the supply. Other creditors are free to arm twist if they can. Creditors should take care though, because withdrawing the supply incorrectly may trigger a claim for wrongly terminating the contract.

 

It is important to find out early what supplies a supplier may have into a company like Carillion, to see if they are considered Essential (Utilities, IT and communications) , to consider their contract of supply and act quickly to give notice to the Liquidator that he/she is personally required to guarantee future payment as soon as possible. Subject to the terms of their contract the supply may be withdrawn if the guarantee is not provided. Even though the managers appointed to assist in the Carillion liquidation have indicated that all suppliers should continue to supply and will be paid, suppliers should insist on clarity in their own particular circumstances, in particular when they will be paid. Our advice is never rely on vague assurances.

 

It is important to note, a liquidator may not pay until forced, leaving the supplier, out of pocket. A supplier should not sit back in the hope that being “nice” may result in payment or a new contract. The notice requiring a guarantee is considered procedural and a liquidator in this situation should be expecting these calls to come rolling in.

 

The situation is different in an Administration. For contracts entered after 1 October 2015, a term in a contract terminating an essential supply on Administration will be invalid and particular steps will need to be taken to withdraw the supply.

 

Unfortunately suppliers may find that the loss of a substantial contract with a company like Carillion puts severe pressure on their own viability, in which case Company Directors may need to seek advice on their own and their Company’s position and record the steps they have taken in case they too become insolvent.

 

For any creditor or supplier facing an insolvent customer, particularly in an Administration, the outcome can often be improved if they act quickly. We have years of experience acting for creditors, especially IT suppliers, in these situations so if you would like to find out more please don’t wait to email or call.

 

This article is provided for general information only. stevensdrake will only be responsible for the advice we give which is specific to you.

 

For more information, please email gavin.pickering@stevensdrake.com or call us directly on 01293 596900

How are your GDPR preparations going? Can we help?

In advance of our recent seminar, we received an enquiry from one of the attendees about the implementation of the new EU General Data Protection Regulation (GDPR) in May 2018.  More specifically, they were wondering whether they needed to update their employment contracts to include a new form of consent from staff for the processing of their personal data.  This raises a very interesting point.

As it happens, for some time now there has been considerable doubt over the validity of consents given by employees in relation to the processing of their personal data.  For consent to be meaningful, it must be ‘freely given’.  Yet the consents given by employees almost always form a compulsory part of the contract of employment.  As a result, the employee has little opportunity to negotiate or indeed refuse to give the consent requested.  Given that the requirements for valid consent from data subjects are being ‘beefed up’ still further under the GDPR, the prospect of achieving a valid consent after May 2018 seems to be very small indeed.

In the circumstances, employers will need to consider what alternative justification they may have for processing their employees’ personal data.  They will also need to issue their employees with a valid ‘privacy notice’.  Amongst other things, this notice must clearly document (i) the types of personal data they will process, (ii) the reasons for which they will process this data and (iii) the legal basis on which they are doing so.  This ‘privacy notice’ needs to be quite detailed and will require careful thought.

We are in the process of drawing up a template ‘privacy notice’ for those businesses who need one. If you would be interested in finding out more, please contact us at employment@stevensdrake.com

Finally, some ‘Brexit’ news on EU Worker status

You have probably heard on the news that we have apparently reached agreement in principal in relation to the likely position of EU workers after we leave the European Union.  The Government has summarised the deal as follows:

  • People who, by 29 March 2019, have been continuously and lawfully living here for 5 years will be able to apply to stay indefinitely by getting ‘settled status’.
  • People who arrive by 29 March 2019, but won’t have been living here lawfully for 5 years, will be able to apply to stay until they have reached the 5-year threshold.  They can then apply for ‘settled status’.
  • Family members who are living with, or join, EU citizens in the UK by 29 March 2019 will also be able to apply for ‘settled status’, usually after 5 years in the UK.
  • Close family members (spouses, civil and unmarried partners, dependent children and grandchildren, and dependent parents and grandparents) will be able to join EU citizens after exit, where the relationship existed on 29 March 2019.

Similar rights will, in all likelihood, be extended to the citizens of Norway, Iceland, Lichtenstein and Switzerland (albeit these countries are not technically part of the EU).

Importantly, reciprocal protections will be extended to UK citizens living and working in the rest of the EU.

No doubt, there will be further developments in this area before a final deal is struck.  For all the latest information, keep your eye on the relevant Home Office webpage at https://www.gov.uk/guidance/status-of-eu-nationals-in-the-uk-what-you-need-to-know

‘Historic’ holiday pay claims back on the agenda

Until the recent case of King v Sash Window Workshop Ltd, we had hoped that at least some of the uncertainties concerning the calculation of holiday pay had gone away.  Clearly, we spoke to soon. As a result of this European Court of Justice decision, we are once again having to contemplate the prospect of workers being able to claim years’ worth of holiday pay, if their entitlements have been calculated incorrectly.

King v Sash Window - the facts

Throughout his time with Sash Window Workshop Ltd, Mr King was treated as if he was self-employed.  As a result, he did not receive any holiday pay when he took time off work.  After his engagement with the company came to an end, Mr King claimed that he should have been categorised as a ‘worker’ for legal purposes.  As a consequence, he argued that he was entitled to holiday pay for each of 13 years he had previously worked for the company.

The decision

Mr King was successful in arguing that he was a ‘worker’ of Sash Window.  So the question then arose as to how much holiday pay he was due.  Was he entitled to receive holiday pay only in respect of the holiday year in which his engagement terminated or for each of 13 years he worked for the company?

The European Court of Justice concluded that workers who have been prevented from enjoying their right to paid leave should not be prevented from bringing a claim in respect of their full entitlement simply because the relevant holiday year has come to an end.  Given the ECJ’s decision, it would appear that Mr King is entitled to claim at least 4 weeks’ holiday pay for each of his 13 years of service.

So what?

Recent case law had suggested that workers could only claim unpaid holiday pay where each occasion of underpayment is not more than 3 months from the last.  Any break of more than 3 months was understood to be fatal to the ongoing claim.  What’s more, the government introduced legislation back in 2015, aimed at limiting workers to a claim for a maximum of 2 years’ holiday pay in cases such as these.  Whilst the King v Sash Window case concerns non-payment of holiday pay, commentators have suggested that its principles should be applied to both non-payment and underpayment cases.  If this is right, recent UK case law and indeed the 2015 regulations may be incompatible with European law.  As a result, despite what we previously thought, workers may be able to claim for non-payment or underpayment of holiday pay going right back to the beginning of their engagement or 1996, whichever is the later.  It will be interesting to see what our domestic courts and tribunals make of this judgment.

If you are still struggling with issues relating to holiday pay and need some input from us, please get in touch.

Missed our recent seminar? Don’t worry, all is not lost!

No doubt you will be kicking yourself if you weren’t able to come along to our recent employment law update seminar.  More than 50 people from a variety of different businesses and organisations registered to come and hear us talk about recent developments in employment law.  The feedback from delegates was very positive.

If you are now left wondering what you can do to ensure you don’t miss out entirely, then please get in touch.  We can provide you with a copy of the slides from our presentation and talk you through any aspects of the seminar that particularly interest you.  Then, if you’d like us to, we can come out to your offices to run the session for you and any of your colleagues who might be interested.  No charge, of course.  It’s all part of the stevensdrake service.

If you are interested in this offer, please drop us an email at employment@stevensdrake.com

We look forward to hearing from you.

What did the Autumn Budget say about employment law?

Commentary on the recent Autumn Budget has been dominated by talk of changes to stamp duty and the like. However, unsurprisingly, we want to draw your attention to a couple of developments in the area of employment law.

Minimum wage changes

In line with the recommendations of the Low Pay Commission, with effect from April 2018, national minimum wage rates will change as follows:

- The National Living Wage will go from £7.50 to £7.83;
- The rate for 21-24 years old will go from £7.05 to £7.38;
- The rate for 18-20 year olds will go from £5.60 to £5.90;
- The rate for 16-17 year olds will go from £4.05 to £4.20; and
- The rate for apprentices will go from £3.50 to £3.70.

Employment status ‘discussion paper’

In response to the recent review of employment laws conducted by Matthew Taylor, the Government intends to publish a ‘discussion paper’, with a view to considering the potential for ‘reform’ of the test of employment status for tax and employment law purposes. This paper is something to look out for, as and when it materialises. However, it’s fair to say that any legislative change to the laws in this area sounds like it is still a long way off.

When should employees take their weekly rest?

It would be easy to imagine that the Working Time Regulations 1998 (WTR) are solely concerned with the issue of holiday pay. After all, that’s what the disputed cases are almost always about. But the recent case of Maio Marques da Rosa v Varzim Sol reminds us that the WTR (and the EU Working Time Directive (WTD) on which they are based) give workers a variety of other rights as well.

‘Working Time’ rights

Amongst other things, the WTR and WTD entitle workers to:

- Minimum rest breaks during the working day;
- Minimum periods of rest between consecutive days of work; and
- One day’s ‘weekly rest’ during each 7-day period.

But when should this ‘weekly rest’ be taken?

The Facts

Mr Marques da Rosa worked in a casino. During the course of his employment, Mr M was routinely required to work for 7 days in a row. After his employment terminated, he brought claims against Varzim Sol, arguing that this arrangement was unlawful under the WTD.

The ECJ’s decision

After the case was sent to the European Court of Justice, the ECJ judges came down in Varzim Sol’s favour, indicating that employers enjoy a considerable degree of flexibility in terms of when ‘weekly rest’ should be taken. It is not the case that after 6 days of work, the employee is automatically entitled to the 7th day off. Instead, the ECJ concluded that an employee could conceivably be required to work up to 12 days in a row, if a worker’s weekly rest fell on the first day of one 7-day period and the last day of the subsequent 7-day period.

Is your house in order?

This case is reassuring; it reminds of us that there is a good degree of flexibility in this area of law. By the same token, it would be dangerous to assume that you can do whatever you like, as long as your workers don’t object.

If you want to put in place an unusual or atypical working time arrangement and have yet to check whether it complies with the law, please get in touch.

Office Christmas parties – a ‘festive’ warning

For employment lawyers, it is as much a Christmas tradition as turkey and mince pies. Each December, we all trot out our articles on the perils of holding a Christmas party. Well far be it from us to fly in the face of tradition, so here is this year’s festive offering!

Who should you invite?

When drawing up the invites list, you should aim to be as inclusive as possible. No one should feel left out. Remember to make an effort to invite those who are presently away from work, whether because of maternity leave, sickness or for any other reason. If staff are encouraged to invite their partners along, allow for the prospect of unmarried couples and same-sex relationships.

Where should you hold it?

It is worth thinking carefully about the venue for your Christmas party. Is it accessible to all, including those with a disability? Can people get home easily? Choosing a venue that might encourage people to ‘drink and drive’ is clearly inadvisable. So consider whether you have good public transport links or ready access to taxis.

What should you do?

Consider how you make the party appealing to all. Organising an event solely based around the consumption of large quantities of alcohol will no doubt please some of your staff, but it could well be a turn-off for others. In particular, be sensitive to the religious and other beliefs of your staff; make sure there are plenty of non-alcoholic drinks and the menu provides a vegetarian option.

What about the entertainment?
Be careful about the speakers or entertainers you choose to use. There is a very well-known Employment Tribunal case that arose out of the booking of the ‘stand-up comedian’ Bernard Manning. You can probably guess what went wrong there!

What should you talk about?
When a lot of alcohol has been consumed, people become less inhibited and more likely to say (or do) precisely what is on their mind. As a result, the risk of discrimination and harassment claims rears its ugly head. So make sure people understand that this is a work event and a level of professionalism is still required. Oh, and if you’re the boss, remember that alcohol and conversions about pay rises don’t mix!

The morning after the night before?
Make sure people understand whether they are required to be in work the day after the Christmas party. If they phone in sick, carefully consider whether it is genuine sickness or the result of over-indulgence. Then consider whether disciplinary action is required.

Do your policies need to be given the ‘once-over’?
We wouldn’t suggest that you need a policy specifically to cover your Christmas party. But it’s worth considering whether your existing policies on conduct, harassment and the like are clear about what is expected of people in this context. If not, now is the time to get your house in order.

Make sure you have fun!
Finally, and before we begin to sound too much like the legal equivalent of the ‘Grinch’, the Christmas party is a chance to come together, celebrate a successful year and thank your colleagues for their efforts. It is also an opportunity to have fun. So having taken some sensible precautions, relax, unwind and enjoy yourself. You deserve it!

Uber loses in Employment Appeal Tribunal, but vows to fight

As you will surely be aware by now, Uber is a smartphone ‘app’ that uses GPS to match passengers with taxi drivers and, hey presto, you’ve got a lift home!

Uber’s business model works on the basis that its so-called ‘partner-drivers’ are all self-employed. As a result, they don’t currently receive either the national minimum wage or paid holiday. Uber have also argued that far from being a taxi firm themselves, they are simply and IT business providing an online platform for the benefit of taxi drivers and their potential passengers.

In October 2016, an Employment Tribunal found that despite protestations to the contrary, Uber drivers are ‘workers’ and, as a result, enjoy workers’ rights. In the last few weeks, we have discovered that Uber’s appeal to the Employment Appeal Tribunal has failed. The EAT concluded that the Employment Tribunal was entitled to look behind the relationship that Uber’s contracts purported to create and consider what was happening in reality.

As things stand, the ET and EAT have concluded that Uber drivers are not in business on their own account, contracting directly with their passengers. Instead, Uber exercises a degree of control over its drivers that is inconsistent with self-employment and much more consistent with ‘worker’ status.

What next?

So far as we can tell, Uber are unwilling to take the EAT’s decision lying down. Its implications for their ‘gig economy’ business model are simply too great. As a result, we understand that Uber are attempting to take their case straight to the Supreme Court, leapfrogging the Court of Appeal.
We will have to wait and see whether it’s ‘third time lucky’ for Uber. In the meantime, we can only presume that they will be devising contingency plans for how they can accommodate their drivers’ worker status, if these repeated appeals do not succeed.

Autumn Budget 2017 – how are you affected?

Yesterday the Autumn UK Budget was delivered, for the second time, by The Conservative’s Party’s, Philip Hammond. Now the question on everyone’s lips, is how am I going to affected?

We’re here to take you through a key summary of the key points you need to be aware of.

Income tax and National Insurance
Personal allowance: This will rise from £11,500 to £11,850 in April 2018

The higher rate threshold will rise from £45,000 to £46,350 from April 2018.

Marriage allowance: Married couples and those in a civil partnership can currently transfer up to 10% of their unused personal allowance to their spouse or civil partner. You can backdate a claim by up to four years. From today this will also apply to widows, widowers and civil partners. They will be able to backdate this by up to four years. This will come into force on November 29th.

Pensions, investments and savings

State pension: The state pension will rise by the triple lock, which is inflation, earnings or 2.5%, whichever is the higher. This will apply to the basic state pension and new state pension from April 2018. It will be an extra 3% or £3.65 a week for the full basic state pension, taking it from £122.30 a week to £125.95 a week. The new state pension will rise by £4.80 a week to £164.35.

Savings tax rate: As well as the £1,000 tax free savings allowance (also known as the personal savings allowance) you can earn an extra £5,000 tax free. This assumes you only earn as much as the personal allowance, which is £11,500 in the current tax year. If you earn more than £11,500, the savings tax rate is reduced. The Budget announced that this allowance would remain the same at £5,000 for tax year 2018 – 19.

ISA allowance: The ISA allowance will stay the same at £20,000 in the tax year 2018 – 19. However, the junior ISA allowance will rise to £4,260.

Lifetime limit for pensions: This will increase in line with CPI from £1 million to £1,030,000 in April 2018.

Save as you earn (SAYE): Employees who are on maternity or parental leave will be able to take a 12 month break from contributing to their SAYE scheme. Currently the limit is six months. This will come in on April 6th 2018.

Employment, wages and working

National Living Wage: The NLW will rise by 4.4% from £7.50 to £7.83 an hour from April 2018.

National Minimum Wage: For apprentices it will rise from £3.50 to £3.70 an hour. For those aged 16-17, it will rise from £4.05 to £4.20 an hour, for those aged 18 – 20 it will rise from £5.60 to £5.90 an hour. For those aged 21 – 24, it will rise by 4.7% from £7.05 to £7.38 an hour.

Stamp duty, housing and capital gains tax

Abolition of stamp duty for first time buyers up to £300,000. If you’re a first time buyer and you’re completing on your property today or after today, you won’t pay any stamp duty on the first £300,000 if you’re buying a property costing up to £500,000. If you buy a property costing more than £500,000, you can’t take advantage of this measure. Previously, stamp duty (for all buyers) applied to properties costing £125,000 or more.

NOTE: In order to qualify, you cannot have owned a property in the past – in the UK or elsewhere in the world. If you’re buying jointly, all of you must be first time buyers. If you’ve already completed on your property, you can’t claim this retrospectively.

Stamp duty for second properties: A higher rate of stamp duty – 3% above the normal rates – was introduced for second properties in April 2016. Today’s Budget includes a change which means that if you’re buying a property from your husband, wife or civil partner you won’t pay the higher rate, and it will also clamp down on abuse where someone changes which of their properties is their main residence, but keeps an interest in what was their main residence. This comes into effect from today.

Capital gains tax allowances increased: The capital gains tax allowance will rise from £11,300 to £11,700 in April 2018, and from £5,650 to £5,850 for trustees.

Cars and transport

Railcard for 26 – 30s: A railcard for 26 – 30 year olds will be introduced in the spring of 2018. It will give a third off most rail fares, although there is likely to be a minimum spend or fare on peak times. Greater Anglia is going to start trialling this railcard early in December and it will be rolled out fully in 2018.

Fuel duty frozen: Rates of fuel duty will be frozen for another year. The government says the average driver will be £850 better off overall by April 2019, compared to if the fuel duty rises had been implemented since 2010.

Car tax rates: The rates for car tax will rise by the retail prices index (RPI) from 1st April 2018. All rates for cars, vans and motorbikes will rise by this amount, as will first year rates for cars registered after April 2017.

New diesel cars: New diesel cars that aren’t the ‘next generation’ clean models (i.e. those that meet emissions standards in real driving conditions) will have to pay a car tax (VED) supplement from 1st April 2018. It effectively means that in the first-year drivers, will pay car tax at the rate of the next band up.

Diesel supplement for company car tax: From 6th April 2018, the company car tax diesel supplement, will rise from 3% to 4% (unless the car is a next generation clean diesel car).

Alcohol and tobacco

Cider, beer, wine and spirit duty: These rates have been frozen.

Tobacco duty: Duty rates on tobacco and cigarettes will rise by RPI plus 2% until the end of the current parliamentary term.

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