We write to update you on a number of recent significant developments in the employment arena.

The Employment Bill and the Draft ACAS Code of Practice

As we reported in our March bulletin, the Employment Bill has now been published.  The most significant change set out in the Bill is the repeal of the statutory dismissal and grievance procedures, together with a new discretion for Employment Tribunals to increase compensation awards by up to 25% should an employer fail to comply with a designated Code of Practice.

The changes are not due to come into force until April 2009.  However, at the beginning of May, ACAS launched its draft Code of Practice on "discipline and grievance".  There will now be a period of consultation in relation to the Code, which is due to close on 25 July 2008.

In response to demand, the Code is deliberately short and is said to concentrate on the "key principles" that underpin the handling of disciplinary and grievance issues.  ACAS are then to separately publish a guidance booklet on disciplinary and

grievance procedures, which will not attract any uplift if not followed.

The Code is an important document given that a failure to follow it can attract an uplift on compensation of up to 25%.

The key principles set out in the Code are as follows:

·                     procedures for handling disciplinary and grievances should be set out in writing;

·                     matters should be dealt with promptly and meetings and decisions should not be unduly delayed;

·                     employers should act consistently and similar cases should be treated in the same way;

·                     appropriate investigations should be carried out;

·                     meetings should, so far as is possible, be carried out by a manager not involved in the matter giving rise to the dispute (save where the matter is a performance issue, in which case the manager may have to be involved);

·                     employees should know the basis of the problem and have the chance to put forward their case;

·                     employees should be given the right to be accompanied at any disciplinary or grievance meeting by a colleague or trade union representative;

·                     employees should have the right to appeal against any decision made.

The Code then goes on to set out the basic procedure to be followed when handling disciplinary issues or employee grievances.  The full Code can be found here.

It is important to emphasise that, whilst it can result in an uplift on compensation, a failure to follow the Code will not attract liability in itself.  This is a material difference between the current dispute resolution procedures and the new regime.  However, given that the Code is not overly complicated, the threat of a 25% uplift on compensation does provide a reasonable incentive to comply.

Sex Discrimination Act

The Sex Discrimination Act was amended with effect from 6 April 2008 to bring the Act in line with both European legislation and existing UK case law. 

The changes to the Act are as follows:

·                     the definition of discrimination on grounds of pregnancy and/or maternity leave has been amended so as to eliminate the need for the claimant to point to a comparator who is not pregnant or on maternity leave.  This reflects the fact that it has been long established by case law that pregnant women are in a unique position which is not comparable with either that of a man or that of a woman who is not pregnant or is at work;

·                     the definition of harassment has been changed so that it is no longer necessary for a claimant to show that the harassment was on grounds of their own sex.  As a result, a third party who, for example, witnesses the sexual harassment of a colleague can now bring a claim provided that they can show that the effect of the harassment of their colleague has violated their own dignity or created an intimidating environment in which they work;

·                     it is now unlawful for an employer to fail to take reasonably practical steps to protect employees from harassment by third parties, provided that such harassment is known to have occurred on at least two other occasions.  It is not, however, necessary for the same third party to be responsible for the relevant harassment on all three occasions.  This amendment is particularly odd given that it is entirely inconsistent with the provisions of the Protection from Harassment Act 1997 which kicks in immediately from the point unwanted conduct is repeated for a second time;

·                     for mothers expecting to give birth on or after 5 October 2008, their terms and conditions of employment (save in relation to the terms relating to remuneration) will now continue during both ordinary and additional maternity leave. 

Agency Workers

The government has announced plans for new legislation that will give agency workers the right to receive the same pay and holiday entitlement as permanent staff after twelve weeks in a job.  The legislation will not cover sick pay or pensions, and agency workers will have to work for the same length of time as permanent workers to be entitled to paid maternity leave.  There are 1.4 million agency workers in the UK who may be affected by the new rules, although at present only half of the assignments undertaken by agency workers last for the twelve week period that is required for the legislation to have an effect.

The planned changes represent an agreement reached by the government with unions and employers’ groups after of months of negotiations and a joint press statement was released announcing the changes on 20 May 2008.  Further discussions will take place regarding anti-avoidance measures and mechanisms for resolving disputes under the new rules. 

The proposed changes to the law affecting agency workers are a result of the planned European Agency Workers Directive that is currently being debated in Brussels.  The UK government plans to implement the new legislation this autumn (presumably in October in line with other legislative changes in the employment law area) providing that the EU Directive has been passed by then.  

Illegal Workers

On 29 February 2008 provisions of the Immigration, Asylum and Nationality Act 2006 came into force that affect employers who employ illegal workers.  These provisions replaced the previous regime that derived from the Asylum and Immigration Act 1996, which came into force in 1997.  Under the new regime, employers of illegal workers could now face:

·                     a fine of up to £10,000 for each illegal worker employed; and

·                     criminal prosecution for the offence of knowingly employing an illegal worker and, on conviction, a prison sentence of up to two years and/or an unlimited fine.

An illegal worker is defined as a person who does not have valid permission to be in the UK or who does not have valid permission to do the type of work in question.

If an employer does not know that a worker is an illegal worker, he will not be liable for employing him providing that certain original documents were checked before the worker started work and that appropriate follow up checks were carried out where necessary.  Although there is no legal requirement under the new regime for employers to check the documents of new employees, the defence of being unaware that a worker is illegal is only available to employers who carry out the recommended checks.

Details of the documents that should be checked with respect to new employees can be found in the Immigration (Restrictions on Employment) Order 2006 and the Border and Immigration Agency (BIA)’s Summary Guidance for Employers.  Records of checks carried out on new workers and copies of any documents should be retained by the employer for the duration of the worker in question’s employment and then for two years following the termination of the employment.

The new requirements apply with respect to employees who started work on or after 29 February 2008.  Employers are not obliged to carry out checks on existing employees providing that, in the case of employees whose employment commenced between 27 January 1997 and 28 February 2008, the appropriate checks under the old regime were carried out.  Employers may still be liable for breaches of the old rules regarding illegal workers and should ensure that records and copies of documents relating to this period are retained.

Where employers acquire employees after 29 February 2008 as a result of the transfer of a business under the Transfer of Undertaking (Protection of Employment) Regulations 2006, they will need to carry out the same checks as they would if they were recruiting new employees.  However, they have a period of 28 days after the acquisition in which to do so.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

For further information about any of these topics, please speak to David Smellie (Tel: 020 7917 7394/email: dcs@farrer.co.uk) or your usual contact at the firm on 020 7242 2022

© Farrer & Co, June 2008