August 22, 2007

Ten laws every employer needs to know

There are many employment laws that employers need to comply with, not to mention a mass of tax and health and safety regulations. Many of these employment laws are long-standing, while others are newer and some even change annually, such as the minimum wage. But employers still make mistakes about even the most basic and established of these. Every mistake is potentially costly but some can be threatening not only to the sanity of business owners or managers but to the survival of the business itself.

Here, starting with the beginning of employment and finishing with termination, are the key employment laws that businesses need to comply with. Following these basic principles should keep most employers out of serious trouble, most of the time.

1. Anti-discrimination

Under our anti-discrimination laws, employers cannot pick and choose between job applicants on the basis of sex, race, disability, sexual orientation, religion or equivalent belief, or age. Huge amounts of compensation can be awarded against employers where they discriminate in this way and they can find themselves failing to win central or local government contracts because they are marked down in the assessment regimes. Of course, employers can refuse to employ applicants under the minimum school-leaving age (broadly age 16), as it is generally illegal to employ them except for in part-time or holiday work. Employers must also refuse to hire applicants who cannot demonstrate that they have the right to work in the UK under our immigration laws; knowingly employing illegal immigrants could cost you a heavy fine. Once employment is underway, there must be pay equality between men and women, part-time and full-time workers and fixed-term and permanent staff.

2. Employment contracts

Many employers still fail to meet their legal obligation to issue written statements of employment particulars to new employees, even though this law has been around since 1963. There are a number of areas the statement must cover - too numerous to list, but you can read more here - all laid down by law, and it must be provided within eight weeks of employment starting. The Government-sponsored Business Link website has an easy to use software tool that will write a legally compliant statement for you in no more than half an hour. Many problems will be avoided if employers take the time to get this right, as the written statement will avoid later arguments about what the employee’s package and the disciplinary process is. The old adage of a stitch in time saves nine later comes to mind. Any subsequent changes to the statement must be confirmed in writing within four weeks.

3. Family-friendly rights

Using New Labour-speak, this is the collective term for rights such as paid maternity leave. Maternity pay rights have of course just been significantly increased and a form of swapping of unused maternity leave between mothers and fathers is on the cards. In addition, there is also the right to take unpaid time off to care for a child or other dependent in case of emergencies, which many employers do not understand at all. Then there is the right for parents of young or disabled children (and soon for carers of dependent adults) to request so called “flexible working” - which is to say, shorter or different hours. An employer has to give such a request reasonable consideration, but the employee has to submit a reasoned request in writing and the arrangement must be proposed on a permanent (as opposed to temporary) basis. If there is a reduction in working time, the employer is entitled to proportionately adjust salary.

4. Working time

Under the working time laws, employees are subject to a maximum average working week of 48 hours (40 if under age 18), a maximum of 13 hours work in any one day, and are entitled to one whole day off a week on average. Employers should also have a system for monitoring working time to ensure compliance. Employees can of course opt out of the 48-hour limit but this has to be in writing and they can cancel it at any time on three months notice. They are legally protected against victimisation.

5. Holidays

While the working time laws entitle employees to four weeks paid leave a year, there is no general right to have paid leave on public holidays, contrary to popular belief. However, changes are being made to the working time laws to increase the amount of annual leave to 28 working days a year, which is intended to allow employees paid time off on public holidays or paid time off in lieu from 2009.

6. Anti-harassment

Every employer must take effective measures to ensure his employees are not subject to verbal or physical bullying or harassment (particularly but not exclusively sexual harassment) from their bosses, fellow workers or customers or suppliers. This can even extend to out of work activities. Legal cases in the Employment Tribunal for constructive dismissal, sexual discrimination and workplace “stress” resulting from this are increasing. Criminal prosecutions against the harasser (for example, for assault) are also possible: at least one sexual harasser has been jailed. So employers need to take this very seriously.

7. Business sales and outsourcing

When an employer sells all or part of his business, or outsources a function it has previously conducted in-house, this will probably amount to a transfer of an undertaking. Under the transfer of undertakings law (“TUPE”), the employees working in the business or relevant part or function will transfer to the new owner or outsource provider on their existing contracts, and they have the right to be informed in advance. Any breach of the law will give rise to legal claims, including potentially for unfair dismissal.

8. Changing terms and conditions of employment

Many employers think they can change terms and conditions of employment by giving (say four weeks) prior written notice. But it is a centuries old legal principle that a contract can only be changed by a negotiated agreement. So giving notice of change can only work legally in two cases. First, where the matter in question is outside the contract (such as a discretionary benefit-in-kind) or, second, where the contract expressly allows it to be changed by the employer by this method. If none of these routes is open to the employer, it can always serve the correct notice to terminate the contract, but that then counts as a “dismissal”.

9. Dismissal

There are three key laws to comply with here. First, there is a legal minimum notice period, which is one week after one month’s employment, rising from the end of the second year at the rate of one week for each completed year up to 12 weeks notice after 12 years employment. Second, employees’ dismissed after 51 weeks employment can claim for “unfair dismissal”, which currently could cost an employer up to around £70,000 compensation. To successfully defend an unfair dismissal claim, the employer must satisfy an Employment Tribunal that it had a legally good reason for dismissing the employee and that it acted reasonably. Third, the employer must follow a mandatory three-step dismissal process or automatically be guilty of unfair dismissal. The 3 steps are: (1) written notice stating why the employer is considering the employee for dismissal; (2) a formal meeting to discuss the matter with the employee (and his/her companion); (3) a right of appeal against dismissal.

10. Redundancy

Genuine redundancy is a fair reason for dismissal, but employers still need to act legally reasonably and follow the three-step process to avoid being guilty of unfair dismissal. Redundant employees are of course entitled to notice or pay in lieu, and redundant employees with two or more years service will also be entitled to (tax-free) statutory redundancy pay, which rises to a maximum of £9,300 for 20 years service. If the employer is proposing 20 or more redundancies in a 90-day period, there has to be a 30-day period (90 days in which 100 or more redundancies are proposed) of information and consultation before any of this happens. An extra penalty of up to 90 days pay will be payable to the affected employees if the employer defaults.


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