Welcome to the March edition of our monthly Newswire, where you will find the usual selection of articles on various topics related to HR and employment law. If you want to discuss any of the issues raised in more detail, just pick up the telephone and give me a call. I look forward to hearing from you. James Willis Head of Employment 01293 596931 james.willis@stevensdrake.com
Why not follow our new Twitter account! Lock v British Gas – The latest news! Gender pay reporting on its way Are discretionary bonuses truly discretionary?”
As a firm, we have been regularly ‘tweeting’ for years. If you don’t do so already, make sure you follow us at @stevensdrake Now, with a view to ensuring that we provide regular and targeted information and ideas on HR and employment law in particular, we have launched a brand new Twitter feed called @employmentSD Again, please follow us and we will most certainly return the favour!
As you may have heard, the Employment Appeal Tribunal (EAT) recently rejected an appeal by British Gas in the long-running saga over how employers should calculate holiday pay. We already knew that, in principle, European laws require employers to include overtime and commission payments when calculating holiday pay. However, British Gas were effectively arguing that our domestic legislation cannot currently be read to implement this requirement into English law. The EAT disagreed and concluded that the Working Time Regulations 1998 can be read so as to be consistent with European law, albeit that it requires some tinkering here and there.
We keep on hoping that one of these decisions is going to come along and give us the certainly that we are all looking for. However, the EAT’s judgment in this case seems like a bit of damp squib, in that we are all simply wondering whether this decision is going to be appealed to the Court of Appeal. Bearing this in mind, for now, we still seem to be in the ‘wait and see’ position that we have been in for at least the last 18 months. Oh well. C’est la vie! We’ll keep you posted of any further developments.
As you may have heard, the Government Equalities Office recently confirmed that it intends to bring new laws into force this October that will require businesses with 250 or more employees to publish statistics on their gender pay gap.
For decades now, we have had laws requiring employers to pay men and women the same pay for undertaking the same or similar work. Yet despite these laws, the gap between pay rates for men and women remains stubbornly high. Many would argue that there are various and complicated reasons why women tend to get paid less than men. It is by no means the case that an employer is acting unlawfully simply because its female workers happen to earn less than its male ones. After all, they may be performing different functions. However, by calculating an individual employer’s gender pay gap, as well as the distribution of female workers across the various echelons of the business, we can begin to identify particular patterns or indeed problems - a ‘glass ceiling’ perhaps? Once these problems have been identified, presumably we are one step closer to devising a strategy to solve them.
On an annual basis, starting in April 2017, affected employers will need to calculate their mean and median hourly rates of pay for both men and women. They will then have to work out the ‘gap’ between these rates of pay and publish this information on their website. In addition, they will be required to publish statistics on the distribution of men and women across the various pay grades within the company, as well as information about the bonuses paid to the respective genders. Employers will have a year in which to ‘number crunch’ the figures and get the data onto their website. This means that employers will not be required to begin publishing their ‘vital statistics’ until April 2018.
Interestingly, businesses that fail to comply with the new laws will be at risk of being publically ‘named and shamed’. However it would appear that, for now, they will face no other sanction (whether financial or otherwise). So what now? Despite the lack of any real ‘stick’ with which to beat employers who don’t do what they should, if you have 250 or more employees, you really ought to be taking steps to work out how you will comply with the new laws. Indeed, some employers will want to get in early and ‘measure’ their gender pay gap now. The advantage of doing this is that you can identify any problems and tackle them before you have to publish your data to the wider world. If you need further advice on your likely responsibilities under the new laws and what you should be doing to prepare, then please get in touch.
When drafting bonus arrangements, employers often want to give themselves a fair bit of flexibility to decide how much to pay to their staff. At the same time, they want to give their employees a real sense that if they work hard, they will be rewarded. The recent case of Patural v DB Group Services (UK) Ltd provides a reminder that sometimes these competing objectives can lead to conflict.
Mr Patural was a derivatives trader (no, I’m not quite sure either). His employment contract set out his ‘right’ to a discretionary bonus. The contract and handbook specified various factors that could be taken into account when calculating the bonus. In particular, they stated that his pay would be ‘broadly consistent’ with that of his colleagues. Mr Patural objected when he received a bonus of a little under €1.3m! Having regard to the profits that he had generated, he believed that his bonus was significantly less generous than that received by his colleagues. He subsequently issued a breach of contract claim in the High Court, arguing that DB had breached: his express right to be treated consistently with his colleagues; and DB’s implied obligation to act rationally and in good faith. The decision The High Court dismissed Mr Patural’s claim. In a judgment that will come as a relief to many employers, the court found that there were good reasons why Mr Patural’s colleagues had been treated differently; their contracts contained specific formulae for the calculation of their bonuses. Furthermore, the court imposed a heavy burden on Mr Patural to prove that DB’s decision was perverse, irrational or took obviously irrelevant factors into account. Mr Patural was unable to satisfy the court in this regard and, as a result, his claim failed. This is good news, but… This is a good decision and one that makes sense. However, this dispute will still have cost DB dear in terms of time, hassle and a fair bit of money. Things might have been different if the employment contract hadn’t mentioned the factors that DB would take into account in relation to the bonus calculation, or his right to be treated similarly to his colleagues. In general, my advice is that if you want to establish a discretionary bonus scheme, leave as much to your discretion as possible. Don’t specify the factors that you will take into account. Otherwise you are in danger of limiting (or fettering, as lawyers call it) the very discretion that you have sought to create. Need a helping hand? If you need some help in putting a new bonus scheme together, please get in touch.
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