Archive for the ‘Employment Practices’ category

UK Government Modern Workplaces Consultation

19 May, 2011

In the United Kingdom, when government departments change or make policy, they listen to public views via a consultation. For those of us in the United States, this is similar to the our government’s request for public comment on a matter. You can read the consultation paper about what government wants to do or change and then send your thoughts back. For those with clients in the UK, this can have an effect on the administration of people in those offices.

The UK Government has just published consultation (Found Here) on its plans for flexible, family-friendly employment practices. There are four key elements:

  1. System of flexible parental leave,
  2. A right for all employees to request flexible working,
  3. Changes to the interaction of annual leave and sick leave, and
  4. Measures to encourage equal pay for equal work between men and women.

The changes to maternity, paternity and parental leave are likely to be of most immediate interest to employers, who have only just got used to the new rules on paternity leave and pay. The key proposal is that maternity leave and pay, reserved exclusively for mothers, will effectively be reduced to 18 weeks. There will then be an entitlement of 30 weeks flexible parental leave which can be shared between the parents in whichever way they wish, subject to their employers’ agreement. 17 weeks of this leave will be paid and 13 weeks will be unpaid. Payment will be on the same basis as now with reference to the same eligibility criteria and set financial limits. Parental leave can be taken by both the mother and father concurrently so that parents can be together. An additional period of 4 weeks paid leave will be reserved for each of the father and the mother. The father will also retain a right to the current 2 week paid paternity leave period available around the time of the baby’s birth. Employers will be concerned that the changes will have financial and administrative consequences and that it will be more difficult to plan for absences. The consultation seeks to minimize administration and states that the default position where the parties cannot agree when leave is taken is for parents to take leave in a continuous block.

The consultation also proposes extending the statutory right to request flexible working to all employees. However to reduce the administrative burden the current statutory process for considering requests will be replaced with a new duty on employers simply to consider requests reasonably. A statutory code of practice would be created to demonstrate a reasonable process. An interesting proposal is that employers will be allowed to take account of any factors they consider relevant in the event that they have to choose between multiple requests. The consultation makes it clear that employers would still have to show that all the requests could not be accommodated for purely business reasons and wider principles of discrimination would still need to be respected.

The Government also takes this opportunity to consult on changes concerning the carryover and rescheduling of annual leave in the light of recent European cases. The consultation proposes amending the Working Time Regulations so that where a worker has not been able to take his annual leave (due to sickness absence) in the current leave year he can carry it over to the next holiday year, provided he does not exceed a four week limit. The consultation recognizes that employers would still need to be aware of other contractual or statutory obligations such as the disability discrimination provisions of the Equality Act 2010.

The equal pay proposals would require tribunals (which have found an employer to have discriminated because of gender in relation to contractual terms or non contractual pay matters) to order that employer to conduct a pay audit. The pay audit would involve comparing the pay of women and men doing equal work and investigating the causes of any potential discrepancies.

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Employment Liability Insurance – Taking precautions in UK

20 September, 2009

In the U.S., where employment practices liability insurance (“EPL”) originated, claims of this type can typically turn into multi-million dollar lawsuits. While the UK legal system differs vastly from the U.S. – not enabling costly class actions, punitive damages, or juries typically more sympathetic to the claimant to adjudicate – meaning compensation is oftentimes far lower, litigation is undoubtedly on the rise.

According to figures from the Tribunals Service (Click here to learn more about this Ministries of Justice agency) published earlier this year, the number of employment tribunal claims rose sharply to 189,303 for the period of April 2007 to March 2008, an increase of 43% on the 2006/2007 figures.

Despite this, firms that are purchasing EPL, which covers discrimination, harassment and other similar employer-employee disputes, has been relatively low in the UK. For instance, it has been reported by a leading insurance broker that just 17% of the top 100 UK law firms have EPL, compared to 75% of U.S. practices.

Companies which sell EPL in the UK as both a standalone product and as part of its directors’ and officers’ (“D&O”) offering, say that – while the U.S. is more litigious than the UK – England, Northern Ireland, Scotland and Wales are a “long way ahead of many parts of Europe”, and that there is an increase in compensation awareness, predicting that interest in EPL will build over the next decade. It has also been reported that the European Union influence will also have an effect because of its focus on protecting consumer rights. The EU is currently consulting on the possibility of bringing class actions, which while they won’t be the same as in the U.S., will still provide a vehicle to claim for those that may not singularly do so.

Ignoring obligations

It has long been the case that some firms have a reputation for ignoring their obligations under employment law, and believing that their staff will not take them on in employment tribunals and court, thus choosing to fail to put this type of insurance in place to cover them. There are many reasons for this. Cost is a factor, particularly in the case of larger firms, but also, historically there has not been a range of products in this area on the market – although this is now starting to change. With potential compensation for successful discrimination claims now unlimited, the cost of the premium may be a small price to pay for peace of mind.

The U.S. has seen much higher levels of compensation paid out in discrimination cases, and this may be why a higher percentage of firms in the U.S. have insurance. However, UK employees in all sectors are now more aware of their employment rights than they were 10 years ago and there is no longer the stigma attached to pursuing claims before employment tribunals. The number of discrimination laws in UK is increasing and, therefore, employers are becoming increasingly vulnerable. In a recession, more people become unemployed and, therefore, the prosecution rate for unfair dismissal is bound to increase. Even if the claim is without foundation.

Currently, it is the larger commercial companies (more than 25 employees), rather than the smaller businesses (less than 25 employees), that take out EPL. The theory behind this is mainly because they will have systems in place, an HR department and the right kind of guidance. The company would be UK domiciled, not U.S.

Right fit for all?

Some question whether EPL is the right fit for all firms because the U.S. legal system differs vastly from the UK in a couple of crucial areas – the ability in the U.S. to launch class actions and punitive damages – both of which can lead to multi-million dollar claims. In the UK, compensation is much lower, therefore, while a number of companies buy standalone EPL policies, most of the mid-market companies interested in the product tend to buy an extension to their D&O policy. In a recession, exposure for EPL increases, however, perversely, this is the time where companies are struggling to find the money for extra cover. Most that buy EPL will not cancel it but there are not many buying it for the first time.

Some believe that EPL is not striking the right cord in the UK market. There are reportedly a number of reasons for this. Namely, it was a U.S. product designed for that market, and, in the employment sphere, while U.S. workers have few rights compared to the UK and Europe, they are more prepared to exercise the rights they do have. Also, in the U.S., the cases are determined by jury, not a judge, this is a bigger risk for the U.S. firms.

Given the current economic circumstances and certainty that claims will rise, it is believed this is a market crying out for a good quality EPL policy that is cost effective.