Increase proposed to minimum holiday entitlement

When the Working Time Regulations came into force in 1998, the Government introduced a minimum statutory entitlement to paid holiday for the first time. The right was for workers to have 20 days holiday a year, pro rated for part-timers. However, this included the eight public holidays, and in practice this meant that lowly paid workers were often only granted the minimum entitlement of 20 days, including public holidays.

The Government now intends to vary this law to ensure that employers cannot count public holidays as part of the 20 days annual leave. However, rather than introduce a statutory right to paid leave on public holidays, the proposal is to increase the current statutory entitlement from 20 days to 28 days, including public holidays. This is to ensure that businesses can still operate on public holidays without employees demanding a right to take time off. The Government has also raised the possibility of holiday being able to be carried over into the following holiday year and the additional 8 days being capable of being 'bought out' by employers instead of the leave being taken. Neither of these options are available under the Working Time Regulations as they currently stand.

The consultation is due to begin in the next few months, with the new proposals intended to come into effect in late 2007. We will keep you updated on the progress of the consultation.

Repayment Clauses

A recent decision by the Court of Appeal in the case of CMC Group v Zhang has cast doubts on the enforceability of 'repayment clauses' commonly included in compromise agreements.

Mr Zhang entered into a contract settling his claims against CMC for $40,000. The contract contained a clause, common in compromise agreements, that the full $40,000 would be immediately repayable if Mr Zhang broke any of the terms contained in the agreement. The contract imposed obligations on Mr Zhang not to harass any employees of CMC or to make derogatory comments about the company. CMC later alleged that Mr Zhang breached the non-derogatory provisions in the contract and issued proceedings for the return of the $40,000. CMC won in the first instance but Mr Zhang appealed.

The issue for the Court of Appeal was whether the repayment clause was unenforceable due to it being a penalty clause. A penalty clause is one which provides for a stipulated sum to be repaid which is extravagant in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach. The Court of Appeal agreed with Mr Zhang on the basis that his breach was minor and the fixed level of $40,000 for any breach of the contract was excessive when viewed against the nominal damages actually suffered by CMC as a result of Mr Zhang's breach.

CMC was granted appeal to the House of Lords. Pending any appeal, the ability of employers to recover payments from employees in breach of compromise agreements is likely to prove troublesome without the repayment being closely linked to the losses that could be suffered as a result of any breach.

If we have drafted a compromise agreement for you in the past, we have not linked the repayment of compensation to any breach of the compromise agreement precisely because of the concerns that were raised by the Court of Appeal in Zhang. Instead, we have linked repayment to any breach of the settlement clauses, i.e. the employee has sued the employer, notwithstanding that they have agreed to settle all claims. Zhang did not have to deal with this issue and given this, we consider that repayment in these circumstances remains possible. However, if you use a precedent compromise agreement drafted by us, please do let us know so we can discuss whether you want to tighten up the provisions of the repayment clauses whilst the Zhang case is ongoing.

Database Policy

Businesses whose revenue depends on repeat business from successful client relationships are most at risk from database theft. Employees in these types of businesses often consider their relationships with clients as belonging to them as individuals and not to their employers. Consequently, employees incorrectly believe that there is nothing wrong in taking client databases with them on termination of their employment.

A statement of database rights makes employees aware of the legal ownership of database information and conveys the message to staff that the company's database is extremely valuable and that the company is prepared to fight to protect it. A company with a database policy will also be able to rely on the policy when disciplining or dismissing employees for breaches of the policy.

It is important that a database policy is specifically tailored for individual company requirements and objectives, but the following basic principles should be included in any database policy:

  1. The contents of any database may not be used for any purpose other than proper company business
  2. An employee is prohibited from copying any part of the database or transferring any part of the database onto any other electronic media
  3. Approval should be sought if an employee needs to remove any details from the database for use outside the company premises
  4. Any breach of the prohibitions or any other form of misuse will result in disciplinary action up to and including dismissal
  5. At the end of employment, the employee should return all confidential information taken from the company's premises, for whatever reason.

Employers who wish to implement this type of policy for its business should contact us for further advice.

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