March 7 2005 Employment Law Enews

In this edition of employment enews we look at a breach of contract case, new minimum wage rates, plans for mandatory pay audits and the proposed statutory maternity leave increase.

SHORT SERVICE AND BREACH OF CONTRACT

Regular readers of this newsletter will be aware of the running saga of Harper-v-Virgin Net Limited.

The question posed by the case is whether an employee dismissed in breach of contract because they have not been given sufficient notice can claim damages on the basis that had they been given their contractual notice, they would have been employed for more than a year and thereby entitled to claim unfair dismissal. The argument advanced by Mrs Harper is that her damages for wrongful dismissal should reflect her lost chance of recovering unfair dismissal compensation, which she would more than likely have received had she remained in employment until the end of her notice.

The case of Raspin-v-United News Shops Limited [1999] allowed employees with less than 12 months notice but dismissed without being allowed to work their contractual notice (and where there is no contractual right to pay in lieu of notice), to claim on the basis of the lost right to claim unfair dismissal. This was effectively a back door in into unfair dismissal compensation for employees dismissed just short of 12 months service.

The Court of Appeal in Harper-v-Virgin Net had effectively quashed the Raspin type argument, thereby allowing employers to reliably dismiss employees approaching 12 months service without the fear of damages even in circumstances where the employee's notice, if worked, would take them over 12 months service.

Harper is to go to the House of Lords and the Court of Appeal's Judgment may be overturned, thus restoring the position back to the law as approved in the case of Raspin. Prudent employers would be advised to ensure they review the performance of new employees early in the first 12 months of service rather than scramble to dismiss employees shortly before the anniversary of their employment.

Another answer to the Raspin type claim for damages is to have a contractual payment in lieu of notice clause (a PILON clause). This allows employers even where an employee is fast approaching 12 months service to be dismissed with immediate effect and paid in lieu of notice. This defeats the Raspin type argument even if the House of Lords overturn the Court of Appeal's Judgment in Harper. However, it does have tax implications.

Even if the House of Lords approve the Court of Appeal's decision in Harper thereby defeating the Raspin type claim, employers should recognise that the Employment Rights Act 1995 allows for the extension of an employee's service by one week in circumstances where they are dismissed summarily, other than where they have committed an act of Gross misconduct. This means that even where there is a contractual PILON clause and an employee is dismissed one week short of attaining 12 months continuous service they will be able to rely upon the Employment Rights Act to extend their service by a further week, thereby allowing them the opportunity to claim unfair dismissal because as far as the Act is concerned, they will have 12 months service.

DTI ANNOUNCES NEW MINIMUM WAGE RATES

The DTI has recently announced the new National Minimum Wage rates that will apply from 1st October 2005 and 1st October 2006. The table below shows the current hourly rates and the rates that will apply from October 2005 and October 2006.

* The Government has agreed that the Low Pay Commission should review the operation of the 16-17 year old rate and report in 2006.

PLANS FOR MANDATORY PAY AUDITS

The Women and Work Commission ("the Commission") is expected to make interim recommendations to Government on 8th March 2005 on ways of narrowing the gap between the salaries of men and women. The Commission was set up by prime minister Tony Blair last year to look at ways of closing the pay gap between men and women, particularly women who work part time after returning from maternity leave.

The Commission's interim report has been leaked and is said to make several recommendations including:

- The introduction of mandatory pay reviews to force companies to narrow the pay gap;

- Enforcing a 'gender duty' across the public and private sectors to enhance the opportunities of women.

The Commission is also considering the case for "equality representatives" in the workplace to police discrimination and the promotion opportunities for women.

PROPOSED STATUTORY MATERNITY LEAVE INCREASE

The Department for Trade and Industry ("the DTI") has recently published a consultation paper on proposals to increase paid statutory maternity leave and to extent the right to request flexible working. The consultation comes to an end on 25 May 2005.

The proposals are as follows:

To extend statutory maternity and adoption pay to nine months, by April 2007, with the intention of increasing this by a further 3 months, to one year's paid leave by the end of the next Parliament. The right to pay is currently only for the first six months of leave;

To introduce a new right for mothers to transfer part of their maternity leave to the father of the child;

To consider extending the right to request flexible working arrangements to parents of older children and carers of adults;

To give employers greater certainty as to when employees are returning to work;

and

To simplify administration of statutory maternity pay.

This article copyright © 2005 Steeles Law llp. All rights reserved.