UK: Plus ca change, plus c´est la même change

Last Updated: 16 June 2005
Article by James Libson and Joanna Blackburn

This month we deal with a variety of topical issues, ranging from the current state of the Working Time Regulations op-out to proposed consultation obligations in relation to company pension schemes.

UK fights to keep Working Time op-out

In October 2004, we reported on European proposals that were expected to water down the ability to require employees to opt out of the 48-hour maximum working week. In May of this year, the European Parliament voted in favour of more far-reaching proposals, which could have put an end to the opt out altogether. This would have had significant consequences for many UK businesses, which use opt-outs as a matter of course for all their staff.

However, when EU employment ministers met at the beginning of June to make a decision, the UK Government (with backing from a number of other countries) opposed the proposal, thus forcing the issue to be dropped for the time being. This does not mean that the opt-out is safe, but the issue is not likely to return to the agenda for at least another year. So until then, the opt-out will remain.

Proposals for employee consultation on pension scheme changes

Draft Regulations requiring employers to consult with employees before making changes to their pension schemes have recently been issued. Under the proposed Regulations, employers will not be able to make certain types of changes without first informing and consulting with scheme members. Such consultation must take place at least two months before the proposed changes take effect. The types of changes that employers must consult on include increasing the age at which benefits become payable, introducing member contributions where none were payable previously, removing the employer's liability to make contributions to the scheme and (in the case of money purchase schemes) reducing employer contributions.

Consultation can be undertaken either with a trade union, with specially elected representatives or with representatives already elected for information and consultation purposes in accordance with the Information and Consultation Regulations. The new Regulations are expected to come into force gradually, applying to business with over 150 employees from 6 April 2006, those with over 100 employees from 6 April 2007 and those with over 50 employees from 2008. For employers who already consult with their employees under the Information and Consultation Regulations, this additional consultation obligation is unlikely to cause much of a burden. However, employers who do not have staff consultation committees will need to plan ahead when contemplating changes to their pension schemes, as not only will they need to consult for two months before any changes can be made, if there is no trade union they will also need to provide sufficient time for elections of representatives to take place. The process may also put employees on notice of their entitlement to request consultation on other business issues.

Court of Appeal limits scope of compromise agreement

In a recent case, the Court of Appeal has provided guidance on the drafting of compromise agreements. The Court of Appeal made it clear that in order to be valid, compromise agreements must be tailored to the individual employee whose claims will be compromised and thought must be given to the particular claims that may be relevant. It is not sufficient to simply include a list of all employment claims that exist in law and/or a general release clause. The potential claims which apply to the employee in question should be identified and specifically set out in order to be waived. Employers should be aware that in light of this decision, the use of "off the peg" compromise agreements which are not properly tailored will be risky and could leave the employer exposed to claims that it thought had been settled.

Who employs the agency worker?

This question has vexed both the courts and businesses that either use agency workers, or provide them, for some time. Though the position remains that there is no conclusive test and that each case will be determined on its own facts, two cases have been reported recently which held that the agency worker was not employed by the agency.

In one case, the worker limited his appeal to the question of whether or not he was an employee of the agency. He did not appeal against the Tribunal's decision that he was also not an employee of the client and so this question did not arise at the Court of Appeal stage. The worker's services were supplied to various clients by an employment agency. Although there was a contract between the agency and the worker, which contained detailed provisions relating to the worker's conduct when working on an assignment for a client, it was held that the agency lacked necessary control over the worker and so was not his employer. The day-to-day control of the work rested with the client when the worker was working on an assignment. The Court also held that the necessary mutuality of obligation to provide work and to perform it was lacking.

In the other case, the Employment Tribunal had decided that the worker was employed by the agency (which was not party to the proceedings). However, the employee appealed and argued that he was employed by the client end-user. There was an express contract between the agency and the worker but no contract between the worker and the client. The Employment Appeal Tribunal held that the Tribunal had failed in not correctly determining whether there was an implied contract between the worker and the client which would render the worker an employee of the client. The Employment Appeal Tribunal also went on to urge claimants to claim against both the agency and the client where there was any doubt as to who (if anyone) was the true employer. It also reminded tribunals that if the claimant did not do so, a tribunal has power to order any person who might be liable to be made a respondent to the litigation. It may therefore be that businesses involved in the supply or use of agency workers may find themselves party to proceedings where the worker's complaint is actually directed against the other party.

This article is only intended as a general statement and no action should be taken in reliance on it without specific legal advice.

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