A reminder that next month sees the following:

• increases in the rates of SSP, SMP, SAP and SPP - see /docs/legal/keystatistics.html
  Action to take: ensure that your payroll department is aware of these increases and also check any policies such as absence or maternity and any template letters in case these mention actual statutory payment rates

• an increase in the amount of statutory holiday to 5.6 weeks (which may include bank/public holidays) - for guidance on this see /docs/legal/stathol.html
  Action to take: review your holiday arrangements and check whether you have any staff who will be affected by this (particularly check part-time workers, those on fixed-term contracts and also the way you calculate holiday pay for those who leave or join during the holiday year). Notify any affected staff of the increase - a note in the pay slip or an email or memo will suffice. Also review your arrangements for notifying staff of nominated days and for recording these if you nominate the public and bank holidays as part of their overall entitlement.

• the repeal of the statutory grievance and disciplinary procedures - see our hot topic later this month which will cover this in detail
  Action to take: review your procedures following our hot topic. As from 6 April 2009 the new ACAS code of practice requires you to consult with employees and their representatives on any changes to your disciplinary/grievance procedures and rules so if you lack formal representative structures you may feel you wish to introduce any changes prior to this date! Also consider reviewing your procedure for redundancy and the dismissal of fixed-term contracts as the new code does not apply to these.

• the extension of flexible working to carers of children aged up to 16 - see /docs/legal/flexible.html
  Action to take: it is much more likely that you will get requests for flexible working if you have not already done so - the number of workers potentially covered will increase from 800K to 4.5M. So ensure that you are up to speed with the statutory timescales and procedures for handling such requests.

• changes to the methods used to enforce the national minimum wage and to calculate arrears, plus an unlimited fine for underpayment of the national minimum wage or employment agency offences - see /docs/legal/minimumwage.html
  Action to take: check that you are paying the minimum wage to all workers - see below for more guidance.

Also as from 1 April, employers seeking candidates from outside the EU will be required to advertise skilled vacancies through JobCentre Plus for at least two weeks. At the moment, employers must publish job vacancies in the UK for up to two weeks before advertising overseas. In an attempt to get round this restriction, some employers have used obscure trade journals or newsagent shop windows, knowing that few appropriate UK jobseekers would see their adverts.

Employers will now have to advertise vacancies for skilled jobs in tier 2 (such as construction, nursing, teaching and hotel management) in Jobcentre Plus branches before advertising abroad. The employer will receive a letter confirming their advert and allowing them to apply for certificates of sponsorship with the UK Borders Agency, enabling them to hire non-EU staff.

Employers caught breaking the new rules could have their licence to employ non-EU migrants revoked and be fined up to £10,000 for each illegal employee on their staff.

In addition to this, the government is also tightening up on tier 1 (highly skilled workers). As from April 1 applicants will now have to hold a master's degree (as opposed to a bachelor) and should previously be on a salary of at least £20,000 a year (previously £17,000).

Tier 3 (temporary shortage areas) has already been suspended to ensure no foreign national from outside the EEA can come to the UK and work in a low-skilled job.

The Home Office predicts that this could halve the number of migrant workers coming into the UK to 14,000 next year.

For more information on recruiting foreign workers, see /docs/legal/foreign.html

The Low Pay Commission (LPC) has been given a later deadline to submit its recommendations for this year's NMW increase (due in October). The recommendation will be made by 1 May 2009 (instead of the end of February), giving the LPC time to take account of the Bank of England's next Inflation Report, employee jobs figures for December 2008, GDP figures for the fourth quarter of 2008 and updates on average earnings.

The new NMW rates will still take effect from 1 October 2009.

A new interactive tool designed to help employers to check if workers are entitled to the NMW has been launched by the Recruitment and Employment Confederation in conjunction with BERR. This allows employers to check a workers' entitlement to NMW as well as any arrears that might be owed to them. Given that the enforcement regime for the NMW will be tightened as from next month, it may be worth reviewing any particularly tricky cases, eg those where you provide accommodation, tips, bonuses etc.

View the new calculator online at the businesslink website. (Note: this is not suitable for agricultural workers who may be entitled to a higher rate: for more information call the Agricultural Wages Helpline on 0845 0000 134.)

From April 6 this year, employers could face a new financial penalty if they fail to pay their workers the NMW - see /docs/legal/minimumwage.html

Discrimination on grounds of age

Last week(Thursday 5 March) the European Court of Justice (ECJ) considered whether employers should be able to lawfully enforce retirement at the age of 65, and decided that this was indeed possible.

The ECJ agreed with the Advocate General's opinion and confirmed that the Default Retirement Age does not contravene the European Framework Directive. They then went on to spell out that direct discrimination can only be justified by reference to social policy objectives, such as those related to employment policy, the labour market or vocational training and reminded us that it is for member states, not employers, to justify direct discrimination.

It is expected that the case will be referred up to the UK's High Court within months to decide if our national default retirement age can be justified. The High Court will be guided by the ECJ's interpretation of EU law and our government will have to successfully argue both that our regulations reflect a legitimate aim and also that our NRA of 65 is appropriate and necessary to achieve this. The government will then anyway review the default retirement age again in 2011.

The national default retirement age of 65 was introduced in 2006 as part of the Age Regulations, legislation that was supposed to stamp out ageism in the workplace.

There are around 800 claims of age discrimination by workers who have been retired against their will which are currently on hold.

Discrimination: equal pay

The Office of National Statistics reports that the pay gap between male and female full-time workers has increased (from 17% in 2007 to 17.1% in 2008). For a full-time female worker this equates to an average loss of £369,000 over her working life.

The gap between part-time workers has also increased (from 35.8% to 36.8%).

Another survey, of public and private sector employers, by the CEHR showed that 5% more employers have conducted equal pay reviews since 2005 and 8% more said they planned to. The Commission is recommending that all employers carry out equal pay audits.

Discrimination on grounds of disability

Other research by the CEHR has found that disabled people and those with long-term health conditions face higher levels of negative treatment in the workplace. The British Workplace Behaviour Survey 2008, which covered nearly 4000 workers, compared the responses of those with a disability or long-term illness against those who had not:

• 22.5% had been the subject to persistent, unfair criticism of their work (compared to 13.4%)
• 13.4% had been humiliated or ridiculed in connection with their work (compared to 8.7%)
• 11.6% had experienced actual physical violence at work (compared to 5.5%).

The full report can be downloaded from Equality Human Rights website.

Discrimination on grounds of religion And it would seem that either discrimination on grounds of religion or the number of people prepared to bring a claim is also increasing. Claims of discrimination on grounds of religion increased in the year to April 2008 to 600 cases, up from 486 in the 12 months to April 2006.

The Chartered Management Institute has published a new guide, 'Religion and belief in the workplace', aimed at helping employers tackle prejudice and misunderstanding. This includes information about different religious beliefs, a brief overview of the law and explains the business case for taking account of religion as well as the range of issues policies should cover, such as prayer time and Holy Days or festivals.

The guide can be downloaded from {HTTP:www.managers.org.uk/beliefguide}

Plans to extend statutory maternity rights, originally due to take effect by 2010, have been delayed.

The proposed changes were to increase pay to 52 weeks (to cover the whole period of both ordinary and additional maternity leave) and to introduce an entitlement to up to 26 weeks' paternity leave (at least part of which would be paid), which would allow both parents to share the ordinary maternity leave period.

There are now suspicions that the change could be delayed indefinitely.

The government has launched a £1m 'Know Your Rights' campaign to raise agency workers' awareness of their employment rights. This will incorporate poster and press campaigns as well as letters from business minister Pat McFadden to some 13,000 employment agencies.

If you use agency workers, do read our guide: /docs/legal/agency.html

Dismissal: do warn if dismissal is a possible outcome

No change to our normal advice, but confirmation from the Employment Appeal Tribunal (EAT), in Zimmer v Brezan, that the letter inviting an employee to a disciplinary hearing must also state that the employer is contemplating dismissal, if this is the case.

Zimmer Limited had investigated Mr Brezan's mileage and expenses claims and considered his expenses claim unusually high. They therefore invited him to a meeting to discuss this. The step 1 letter did not specifically say that the meeting might result in dismissal, nor did it say that his behaviour might be considered gross misconduct.

In terms of the statutory procedures, the EAT said that a dismissal made following a 'Step 1' letter which does not state that dismissal is a possible outcome will be automatically unfair. Whilst the statutory procedures will no longer apply from April 2009, this would still be regarded as best practice.

Constructive dismissal: damages

Employees who bring a claim of constructive dismissal are still required to take steps to mitigate their losses and are expected to prove that they have been looking for other jobs. However when assessing damages for unfair dismissal, tribunals traditionally have always awarded full compensation for the full contractual notice period - even if the ex-employee has been fortunate enough to find another job or failed to actively seek other employment. This principle has applied for over 30 years, since Norton Tool v Tewson.

In Stuart Peters Ltd v Bell, the EAT decided that the same principle applies to constructive dismissals (as well as 'normal' dismissals).

So an employee who is unfairly or constructively dismissed does not need to deduct any earnings during his/her notice period from his/her claim and therefore may financially benefit from this. Ms Bell therefore was able to claim compensation for her full six month notice period.

Discrimination - religion or belief

A similar case and outcome to last month's London Borough of Islington v Ladele. You may remember that in that case Ms Ladele, a Christian registrar, claimed discrimination because she faced dismissal for refusing to carry out civil partnership services. The EAT found that the Council's commitment to promoting equal opportunities and combating discrimination would be undermined if its staff could choose not to carry out their duties on the basis of their own prejudicial views. The indirect discrimination Ms Ladele experienced was therefore justified and her claim failed.

In McFarlane v Relate Avon Limited, the employee, a Christian counsellor, stated that he could not provide psycho-sexual therapy to same-sex couples due to his religious beliefs. He was subsequently dismissed on the basis that he was required to carry out the services of Relate to all clients, with no discrimination to same-sex couples. This dismissal was fair.

And in Chondol v Liverpool City Council, the EAT decided that Mr Chondol, a carer who had given a Bible to a client, and asked a vulnerable service user if he believed in God and went to church, was lawfully dismissed. The EAT accepted that there was a difference between dismissal for possession of religious belief (which would be impermissible) and dismissal for the inappropriate foisting of those beliefs on others. Liverpool City Council had a clear prohibition on the overt promotion of religious beliefs. Tribunals will still need to ensure that such a reason for dismissal is the true reason.

Harassment on grounds of race

In Richmond Pharmacology v Dhaliwal, a director was alleged to have said to a senior employee who was leaving the company, "We will probably bump into each other in future, unless you are married off in India". She claimed that amounted to an act of harassment on grounds of her race.

The questions to ask when considering harassment are:

• Did the respondent engage in unwanted conduct?
• If so, did that conduct have the purpose or effect of either violating the claimant's dignity or creating an adverse environment for her?
• Was that conduct on the grounds of the claimant's race (or ethnic or national origins)?

The EAT awarded £1000 for injury to feelings and also commented that much previous case law relating to harassment is unlikely to be helpful, as things have moved on so much.

Redundancy: what is an establishment?

This has always been a grey area and it's one which JJB fell foul of when it tried to classify each of its stores as a separate workplace - and thereby avoid the statutory consultation periods.

Under UK law, employees are entitled to 90 days' consultation where 100 or more redundancies are being made, and 30 days' consultation for 20-99 redundancies. In 2008 JJB closed 72 of its UK stores. JJB argued that, because each of the stores employed fewer than 100 staff, employees were not entitled to the full 90 days' consultation.

The GMB union subsequently challenged this and the tribunal ruled that JJB had acted unlawfully and ordered the firm to pay its former workers 65 days' wages.

TUPE - collective agreements may transfer across

Are transferees bound by pay increases negotiated by the transferor with a union under a collective agreement AFTER the TUPE transfer has taken place?

Most of us would think (and hope) not, but a recent case has contradicted this line of thinking.

In Alemo-Herron v Parkwood Leisure, the claimants were originally employed by the London Borough of Lewisham. Their contracts entitled them to pay 'in accordance with collective agreements negotiated from time to time by the National Joint Council for Local Government Services'. In 2002 they were transferred to CCL Ltd and then to Parkwood Leisure Ltd.

After the transfer to Parkwood, the Council agreed pay increases with the unions under the collective agreement. Parkwood was not involved in the pay negotiations and did not recognise any of the relevant unions.

Despite this, the claimants argued that they were legally entitled to the benefit of pay increases negotiated between the council and the union.

The EAT decided that the UK was entitled to interpret the Acquired Rights Directive in a way more favourable to employees than European Law required. They confirmed that where a collective agreement, incorporated into employees' contracts, provides for terms such as pay to be determined by negotiation with the relevant union from time to time, the employees are entitled to the benefit of any post-TUPE transfer improvement in terms negotiated in accordance with that agreement.

Unsurprisingly, Parkwood have appealed the decision.

So - at least until the appeal is heard, an employer who transfers in employees covered by a collective agreement should look at how long the agreement has to last, as it would appear that the employer may be tied in until the agreement ends. If the Court of Appeal agrees with EAT, this could have a very interesting implications, not just on public sector employees, but on all clients who inherit ex-public sector staff by means of contracting out situations.

Dismissal - apprentices

In this case, trainee solicitors.

In November 2007 Mr Iain Montgomery, a trainee with Express Solicitors, was dismissed on grounds of 'gross misconduct'. It was alleged that he had failed to meet the firm's customer service requirements.

The tribunal thought that Mr Montgomery's conduct did not amount to gross misconduct and criticised the supervision he received. The employment judge commented: 'I was surprised that a trainee less than six months into his training contract was expected to run a caseload of 54 files of his own.' She said that training on taking witness statements consisted solely of reading a memo on the subject.

The tribunal determined that a trainee's employment and training contract were 'indivisible' and so a trainee could not be dismissed without his/her training contract also being terminated. This could only be done with the agreement of the Solicitors Regulation Authority .

The Sheffield Employment Tribunal ruled that the employer had breached the terms of a training contract which could lead to a claim for damages of up to £25,000.

Express Solicitors have confirmed that they will not appeal the decision; Mr Montgomery said that he intends to seek another training contract.

Just when it looked as though the opt-out was certain to go, the European Commission rejected the European Parliament's proposal to end the opt-out from the maximum average 48-hour week. However, the Commission's opinion allows for a greater restriction on the use of the opt-out than is currently the case. It would have to be used with appropriate safeguards and after other forms of flexibility have been examined. Workers would be unable to agree to opt-out during their probationary period and a cap of 60 hours may be agreed.

The European Council of Ministers will now either approve amendments, reject the amendments (in which case it will try and reach a compromise), or (if it fails to reach agreement) the amendments will not be made and the status quo will be preserved.

So again - we don't know the outcome but would anyway encourage all employers to review their reliance on the opt-out and consider whether this is the best way of meeting their business needs. The WTR were of course initially a piece of health and safety, not employment, legislation and permitting employees to work long hours still carries significant risks for your business, even when an opt-out is signed.

Researchers from University College London and the Finnish Institute of Occupational Health reported in the American Journal of Epidemiology that their research clearly indicates that working overtime can seriously reduce wellbeing and cognitive function. They monitored 2,214 middle-aged UK civil servants, who took various cognitive tests in 1997-99 and again in 2002-04.

In the first set of tests, employees working more than 55 hours a week performed worse in vocabulary tests than employees working 35-40 hours a week. Five years later, those working longer hours again performed worse at vocabulary tests but also had declined scores in cognitive reasoning.

The effects were cumulative. The longer the working week, the worse the test results. Employees with long working hours also had shorter sleeping hours, reported more symptoms of depression and used more alcohol than those with normal working hours.

The researchers said: "The link between cognitive impairment and dementia later in life is clearly established. The difference between staff working long hours and those working normal hours is similar in magnitude to that of smoking, a risk factor for dementia."

According to the Office for National Statistics, more than one-fifth of workers in the UK work 45 hours a week or more.

In last month's newsletter we covered the recent ruling that annual leave continues to accrue during sick leave, but a recent email alerted us to something that wasn't initially obvious to most commentators - ie that this ruling only applies to the 4 week minimum holiday entitlement currently provided by the European Working Time Directive and not the 4.8 weeks (soon to be 5.6 weeks) provided by the Working Time Regulations in the UK. Nor does it apply to any additional contractual holiday to which an employee may be entitled under his/her contract of employment. Now this may be splitting hairs but if you have generous contractual holidays you may wish to differentiate given the cost of the above.

The ruling has an immediate impact on the public sector but the private sector will now have to await the decision in the House of Lords where the case will return for a final hearing. If the Lords decide that the UK's Working Time Regulations are incompatible with the ruling, the Government will be obliged to amend our existing legislation.

We've had a number of queries about this from clients who have PHI schemes which only pay benefits to employees - so they have employees on their books who are never going to be able to return to work but are unable to dismiss without them losing out on a benefit provided specifically for this eventuality. They are therefore concerned about the long term implications of someone on PHI benefits until retirement accruing full holiday entitlement every year for the foreseeable future!

Whilst it may be premature to take action before the House of Lords gives its opinion, there are a few preliminary steps which it may be sensible to consider:

• review any long-term sick cases and ensure that you are taking all possible steps to encourage return to work - ie reasonable adjustments etc

• consider having a clause in your contracts which gives you the right to insist that an employee takes any outstanding leave during his/her notice period - thus an employee dismissed on ill-health grounds who only gets statutory notice, and who is thereby eligible to full pay during the notice period, may be required to take the leave during this period - thus minimising the chance of you having to pay for both! Also if you have generous leave entitlements you may want to restrict the accrual of leave during long term sickness absence to any statutory entitlement for those on long term sickness absence rather than full contractual leave

• if you offer PHI, then review your contracts for the future and consider including a clause that clarifies that you have the right to dismiss someone, even if this will mean that they lose a right to PHI benefit.

• discuss this ruling with your PHI provider and see whether it is possible to dismiss without your employees losing the benefit; if not it may be possible to restrict the holiday payment to that which brings the employee up to full pay - ie if the scheme pays 75% of salary, then you only have to top up by 25% - and you may be able, with the agreement of the PHI provider, to agree to nominate when the holiday is taken and when this should be paid so that the benefits are not affected

Are we more inefficient?

Research by Badenoch & Clark suggests that job insecurity inspires inefficient working: 46% of those questioned identified job insecurity as the key cause for this, with employees reacting in the following ways:

• 54% put their heads down and try to keep busy
• 32% spend more time on individual tasks
• 26% write 'to do' lists
• 25% surf the internet
• 22% take shorter lunches/breaks

It would seem that many people try to appear busy in order to prove their worth to their employer. Does that sound familiar? Or is your organisation already so lean that you are actually doing what used to be 2 or 3 people's jobs anyway?

Even more redundancies to come?

A few more facts:

• The Ernst & Young Item Club predicts that the next 12 months will see the largest contraction in the UK economy.
• The TUC reports that the UK is experiencing the third-sharpest increase in unemployment in Europe. Our unemployment rate currently stands at 6.3%.
• The latest CIPD/KPMG quarterly survey of employers' recruitment and redundancy plans points to even bigger job losses and a tighter squeeze on pay. It reveals that around two-thirds of UK employers have either experienced an organisational budget cut in 2008 or are about to experience one, and the cuts look set to affect travel, fringe benefits and the opportunity to work overtime. Significant differences are beginning to appear between the private, public and voluntary sectors: 74% of private sector employers have reduced their travel expenses compared with 50% in both the public and voluntary sectors.
• The winter Labour Market Outlook (LMO) survey of 892 UK employers, conducted by Ipsos Mori at the turn of the year, found that 36% plan to cut jobs in the first quarter of 2009 - double the figure from last autumn. The LMO records a negative balance of 9 percentage points between the proportion of employers planning to cut jobs (36%) and the proportion planning to hire additional staff (27%).
• Those who plan pay reviews expect staff pay to increase on average by 2.6% but as many as one in eight employers don't intend to conduct a pay review at all in 2009.
• The Office for National Statistics (ONS) reports that redundancies among workers in highly paid professional jobs - including architects, lawyers and tax advisors - are outstripping those in the rest of the UK economy. They reported that quantity surveyors suffered the steepest increase in unemployment rates during 2008: the number of quantity surveyors claiming jobseekers' benefits rose from 100 to 590 over the course of the year. The number of unemployed architects, meanwhile, increased by 432%, to 1,490. Underwriters and commercial pilots have also experienced high rates of redundancy.
• The EEF has reported that the slump in UK manufacturing could result in a further 140,000 job losses this year as output continues to fall. Its survey indicated that output was likely to fall by a further 8% this year, with only a 0.2% recovery in 2010.
• The latest Report on Jobs research by the Recruitment and Employment Confederation (REC) and KPMG also found demand for staff at companies is declining at its fastest rate for more than a decade. February recorded an index reading of 27.6 - the weakest reading since the survey began in October 1997. Any figure below 50 indicates a decline.
• A separate survey by Ceridian found one in ten UK workers would take a pay cut to keep their current job.

Increasingly, employers are attempting to retain staff without making redundancies and there has been much press coverage of agreements to make pay cuts, put staff onto reduced hours or take unpaid sabbaticals etc. Do take advice before contemplating such action - whilst employees may well be more prepared to agree to detrimental changes to their contracts (thinking that it's better to have a job than no job), changes to contractual terms should be reached through agreement and after consultation. If you try to simply impose pay cuts or other changes and don't follow the correct procedures, you could end up with a breach of contract claim, a constructive dismissal claim, a claim for a redundancy payment and a protective award of 90 days' pay for failure to consult! So retaining your staff is a laudable aim, but like anything else, the right procedures have to be followed. Also the longer term implications need to be considered - a temporary reduction in hours and pay would not reduce a redundancy payment further down the line, but a permanent agreement to reduced hours or reduced pay would do so.