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The Seven Deadly Sins for Employers

June 18, 2024

The employment relationship carries inherent risks, many of which lie on the employer’s side. Employment Law is one of the fastest changing areas of law, so it is crucial that businesses conduct regular appraisals of their risk in this context and ensure that all their employment documentation reflects the current legal position.

1. Keeping employment contracts up to date

A failure to include all the terms required by section 1 of the Employment Rights Act 1996 in the employment contract risks reputational damage, a loss of control of the employment relationship and an award of compensation by the Employment Tribunal.  

Contracts should be prepared in time for the start of the employment, take account of promotion or a change of role and protect an employer’s commercial interests with clauses covering confidential information and intellectual property.

With Labour proposing a New Deal for Working People if they are elected, including an abolition of the current two-year qualifying period for unfair dismissal claims, any failure to include an initial probationary period for employees so that they can be dismissed on short notice without formal process is risky.

2. Calculating Pay

A failure to pay the annual increase in the National Minimum Wage, and miscalculating holiday pay or statutory redundancy, risk Employment Tribunal claims and action by HMRC including criminal prosecution and a range of civil penalties.

3. Vicarious Liability for discrimination by staff

Employers are not always aware of their liability for their employees’ discriminatory acts performed in the course of employment. The fact that they did not know about them or approve of them is irrelevant.

There is a defence if an employer can prove that it took such steps as were reasonable to prevent the discrimination taking place. By not implementing regular internal training on policies and procedures (including equal opportunities and bullying and harassment) or taking appropriate action if complaints are made, an employer risks being found vicariously liable for the actions of its staff and unable to rely on this defence.

4. Maternity Rights

Unfortunately, all too often, employers fail to communicate effectively with their staff during maternity leave, whether with updates on important developments at work and promotion opportunities or more formally with keeping-in-touch days (KIT days). This can lead to more serious failures when women at risk of redundancy are not made aware of suitable available vacancies which as a matter of law they have a priority right to fill.This can expose employers to costly sex discrimination claims against them where compensation is potentially unlimited.

5. Time off during Redundancy and Collective Consultation

Not every employer knows that staff who have two years' continuous employment and are given notice of redundancy are entitled to reasonable time off to look for new employment or make arrangements for training for future employment. Employees should be paid for the absence at the appropriate hourly rate.

If an employer unreasonably refuses any time off, or fails to pay the employee, it may be ordered to pay the employee the amount due to them (subject to the limit of 40% of a week's pay for the employee). A policy setting out the scope of such time off is therefore helpful and will avoid litigation, particularly where large numbers of employees are affected.

Equally, an employer should be aware of its duty to consult employee representatives where more than 20 employees are at risk of redundancy, as the protective award that can be made by an Employment Tribunal can be as much as 90 days’ pay per employee regardless of service.

6. Losing control over a business’ most valuable assets

Confidential information and intellectual property can be amongst the most valuable assets a business owns. Confidential information includes trade secrets, business strategies, secret formulas, algorithms and industrial processes. Intellectual property includes patents, trademarks, copyrights and trade secrets. All too often their use and disclosure are inadequately safeguarded with poorly drafted clauses in the employment contract.

Restrictive covenants can play a crucial role in protecting confidential information from being exploited by departing employees for personal gain or to benefit competitors. By implementing such robust measures to protect these assets can ensure that a business can take advantage of a range of remedies in case of a breach, such as injunctions, compensation and damages.

7. Dismissal

The question of whether a dismissal has taken place is sometimes key to tribunal claims and an employer's liability can depend on the words and conduct used. The tribunal not only considers the surrounding circumstances but also how the words would be understood by a reasonable listener.

In Futtyv D and D Brekkes Ltd a foreman told an employee, a fish filleter: "If you don't like the job, f**k off." As the words were interpreted against the background of the fish dock, the Tribunal found that this was not a dismissal but a ‘general exhortation to get on with the job’.

Employers should therefore approach such matters carefully, and avoid ambiguity in the way that they speak to their staff.

It is important for employers to invest the necessary time and resources at the outset to protect their commercial business interests and comply with their legal obligations under employment law, by ensuring contracts and policies are fit for purpose and tailored for the specific requirements of the business.

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