"A day" to remember... more From 6 April 2006 the new limits on Revenue approved pension/life cover benefits apply. Should employers take any steps?

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1 February 2006 Law at work Contents Features print (pages 2-8) for this section A brave new (older) world (Part II) more Second of a two part feature on the legal and practical implications for employers of the forthcoming age discrimination legislation and focuses on benefits, pensions and termination of employment Members to be given new voice in respect of pension scheme changes more New Regulations require members, or their representatives, to be consulted whenever "listed" changes are proposed to their occupational or personal pension scheme "A day" to remember more From 6 April 2006 the new limits on Revenue approved pension/life cover benefits apply. Should employers take any steps? Case law update print (pages 9-11) for this section Employees who work outside Great Britain may bring unfair dismissal claim more Serco Limited v Lawson, Botham (FC) v Ministry of Defence and Crofts and others v Veta Limited and others [2006] UKHL 3 No protection for whistleblowers after the employment relationship has ended more Diana Woodward v Abbey National plc (EAT) Appeal No: UKEAT/0240/05/RN Need for "reasonable belief" when making whistleblowing disclosures more Mr P Milne v The Link Asset and Security Company Limited (EAT) Appeal No: UKEAT/0867/04 Hot topics print (page 12) for this section New TUPE Regulations laid before Parliament on 7 February more Draft maternity, paternity and adoption leave regulations published more Employee references guide from Information Commissioner more "Partly unmeasured time" exemption to be removed from the Working Time Regulations 1998 ("WTR") more Contacts 1

2 Features A brave new (older) world (Part II) In October this year, age discrimination legislation will come into force in the UK. Draft regulations setting out the new law have now been issued and, in last month's Law at Work, we looked at the structure of the new law and its impact on recruitment and advertising. This month, we look at the impact of the new law on benefits, pensions and termination of employment. Benefits Many UK employers have benefits policies which base benefits entitlement on length of service. Most commonly, employees are allowed to accrue an extra day of holiday entitlement for each year of service, up to a set maximum. At first glance, these benefits would appear to conflict with age discrimination legislation: older employees will be far more likely to have the required service than younger employees. However, the government has introduced a specific exemption to the legislation to allow service-based benefits. To take advantage of the exemption, the length of service requirement will need to apply to all employees in the group and the length of service used must be five years or fewer. However, provided that is the case, benefits such as holiday, insurances or entitlement to enhanced redundancy payments which increase with length of service will not be age discrimination. The five-year exemption probably covers most benefits UK employers commonly offer. However, enhanced redundancy payments are often based on much longer periods of service. Will these be unlawful? The answer should usually be 'no'. Provided the service requirements are applied even-handedly, these policies will be lawful provided that it reasonably appears to the employer that there will be an advantage to it from rewarding the loyalty, encouraging the motivation or recognising the experience of workers by awarding benefits on the basis of length of service. Where age discrimination may have greater impact is in the provision of health, life and permanent health insurance to older employees. Currently, it is considered best practice by many employers to limit receipt of these benefits to those employees who are accepted 'at normal rates of premium'. From October, if employees are subject to increased premiums as a result of their age, and the employer discontinues the insurance, this will be indirect discrimination and will need to be objectively justified. Justification is only available as a defence where the measure is a proportionate means of achieving a legitimate aim. In most circumstances, it seems unlikely that keeping the employer's insurance costs down will be a sufficient legitimate aim, or that excluding older employees will be a proportionate response. Employers who currently exclude older workers (or, in some cases, younger workers - for example on the provision of car insurance) from insurance participation will need to look carefully at this issue before October, and at the cost of adding those employees to the policy. Pensions Occupational pensions are an area that could have been dramatically impacted by age discrimination legislation. After all, retirement ages, ages for entry into the scheme and actuarial calculations are all directly based on age. In some schemes accrual rates (in the case of some defined benefit schemes) or contribution rates (in the case of some defined contribution schemes) also vary depending on the age of the participant. In fact, occupational pensions seem to be the area of employment that will experience least change as a result of the new laws. There will be a general rule that it is unlawful for trustees or managers of an occupational pension scheme, when carrying out their functions, to harass or discriminate against a member or prospective member of the scheme on grounds of age and every scheme will be treated as including a non-discrimination rule. However, most age related rules in pension schemes are effectively excluded from the legislation. The exempted areas include: providing different pension schemes to people of different ages or with different lengths of service; the use of minimum and maximum admission ages (including where there are different ages for admission for different groups of employees), minimum salaries for participation and minimum periods of employment for participation; having a normal pension age in the scheme; age-related pension contributions; use of age in most actuarial calculations; setting the level of pension benefits by reference to length of service; 2

3 closing pension schemes or parts of schemes to new members; and adjustments to pension benefits where there is an age gap between the member and his/her spouse (e.g. many pension schemes provide a widows/widowers pension, but some reduce this pension where the surviving spouse is more than 10 years' younger than the member, to account for the likely greater length of the payment period) and age limits on pensions to dependant children. It therefore appears that occupational pension schemes will change very little as a result of the new law. However, employers should note that these blanket exemptions are only stated to apply to occupational pensions, and do not apply to personal pension schemes (including group personal pension arrangements and most stakeholder pension schemes). Employers who offer contributions to personal pension schemes could be directly caught by the new laws and will need to ensure that they review any age related rules (e.g. minimum and maximum joining ages and differential contributions by age). Checklist - Benefits Does your company offer any benefits that use length of service as a qualifying criterion? If so, is that length of service five years or fewer? If yes, you will be able to rely on the benefits exemption. If no, can you demonstrate that you consider that the policy is in your best interests by rewarding the loyalty, encouraging the motivation or recognising the experience of workers? Would it be easy to change the length of service criterion to five years or fewer? Do you offer any insurance-based benefits? If so, check with the insurer whether older employees (or younger employees, for example in the case of car insurance) attract higher premiums. Are these people currently insured? If not, what would it cost to insure them? Do you offer contributions to personal pension schemes? Do these vary according to the age of the employee? If so, consider whether this can be justified. Unfair Dismissal and Redundancy At present, employees become barred from claiming unfair dismissal when they reach 65, or their employer's usual retirement age. As a result, older employees have often, along with those with less than a year's service, been the first targets of restructuring programmes. Employers have often, rightly or wrongly, felt the need to 'make way' for younger talent moving up the ranks, in order to keep junior employees motivated. From October, the age cap on unfair dismissal claims will be removed. This means that targeting older employees for redundancy will be a potentially expensive exercise. Not only will these employees have the right to claim unfair dismissal, but we anticipate that they will find it easier to convince a tribunal that they will find it difficult to find new employment, which could lead to significant (uncapped) awards if the reason for the dismissal is found to be age discrimination. This change will not impact only upon those who would previously have been barred from unfair dismissal claims. A fifty-nine year old man who is dismissed from a CFO role may find it relatively easy to convince a tribunal that he will not find another role of similar seniority and that his career is effectively finished. If that director told the tribunal that he would not have retired until 65, an employer losing an age discrimination and unfair dismissal claim against him could be looking at a compensation claim for six years' full package. Redundancy criteria and packages will also need reviewing. Many companies with company redundancy schemes currently mirror the statutory scheme and weight payments according to the age of the employee in question (with lower multipliers for younger employees, and a greater multiplier for those over 42), with reduced payments for those in the final year before retirement. These structures are likely to be discriminatory from October, and company redundancy schemes should treat all employees equally regardless of age. Although service multipliers could be indirect discrimination, it seems likely that these will remain acceptable, and the Government has confirmed that length of service will continue to be used in the statutory redundancy pay regime. The Government does, however, intend to restructure the statutory redundancy payments to remove age-based multipliers. It has not yet been confirmed what the new multiplier will be. 3

4 Retirement At present, many UK employers have mandatory retirement ages of 60 or 65. During the development of age discrimination legislation, there was much debate on how retirement should be handled. The CIPD and age lobby groups said that there should be no default retirement age. The CBI's view was that a default age was necessary to enable people to "retire with dignity". At one stage, a default retirement age of 70 was proposed and sent out for consultation, though it did not find favour with many lobby groups on either side of the debate. Eventually, it was decided that there would be a new default retirement age of 65. Retirement ages below that will need to be objectively justified by employers. For example, for physically demanding jobs, it might be possible to argue that retirement should take place at 60 or even 55. However, for the majority of desk-based jobs, such justification will not be possible. Whilst (subject to disability legislation) it will still be possible to dismiss people for incapability or arrange early retirements if health renders them unable to work before reaching retirement, it will not generally be possible to impose a mandatory retirement age of below 65. The default retirement age will only apply to employees, not partners or office holders (in relation to their office: the legislation will still apply to them for their employment). This may have particularly far-reaching implications for law and accountancy firms, which still operate as partnerships, and many of which have retirement ages of around 60 at present. Another major change for employers will be that, if they wish to enforce retirement at their company's retirement age, there will be a legally mandatory retirement procedure which must be followed. This process must commence at least six months before the intended retirement, so employers will need to start planning for retirements far earlier than they tend to at present. If the procedure is followed, it is hoped that it will still be relatively easy for companies to require retirement at age 65. There will also be a legal obligation to consider requests to work past retirement age (much like the obligation to consider requests to work flexibly from parents of young children). However, the DTI have already indicated that the default retirement age will be reviewed in 2011, when it may be removed entirely. Checklist - Retirement, Dismissal and Redundancy Do you have an existing retirement age? If it is under 65, can you justify it? Do you have standard redundancy selection criteria? Do these weigh against older employees either directly or indirectly (for example, by including a score for 'cost of package'), and if so, can you justify the criteria? Do you have a company redundancy scheme? Does this weight payment according to the age of the employee in question? If you wish to continue using a set retirement age of 65, have you set up a warning system to notify you at least six months before retirement is planned? A Brave New (Older) World? Employers need to begin preparing now for the introduction of age discrimination law in October. The legislation is still in draft, so it is possible that changes could still occur before the law is actually implemented and employers may need to re-evaluate their compliance once the law is finalised. However, the changes will affect every stage of the recruitment process for new employees, and many terminations, so it is likely to take some time to prepare fully. Whilst employers should not lose sight of the fact that the law protects everyone, it is expected that the majority of early claims will come from older employees who feel that their age has disadvantaged them in the workplace. Since older workers are often the highest paid in an organisation, the stakes are high. by Rowena Davis and Mark Smith Forthcoming Seminar We propose to review the age discrimination legislation and its implications for employers in a seminar to be held in the early autumn, prior to its implementation. If you would like to reserve a place, please contact Karen French (k.french@taylorwessing.com). 4

5 Members to be given new voice in respect of pension scheme changes The draft regulations of The Occupational and Personal Pension Schemes (Consultation by Employers) Regulations 2006 were recently highlighted in the July 2005 edition of Law at Work. The Government consultation has now been concluded and The Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006 (the "Regulations") have been published and laid before Parliament. The Regulations do not stray far from the draft regulations published in June 2005 and, in a nutshell, require that members, or their representatives, are consulted whenever 'listed' changes are proposed to their occupational pension scheme or personal pension scheme (where direct payment arrangements exist). The Regulations generally apply to all employers (except those excluded in Regulation 4 including public service pension schemes, some small occupational pension schemes and unregistered schemes that are administered outside of the EU member states). The Regulations also apply to trustees and managers of all occupational schemes that are not multi-employer schemes and, in respect of multi-employer schemes, apply to each relevant employer, the trustees and managers of the scheme and any other person that has the power to make a major or significant change. Sections 259 and 261 of the Pensions Act 2004 did limit the Regulations in relation to multi-employer schemes to employers, trustees and managers but The Occupational Pension Scheme (Consultation by Employers) (Modification for Multi-employer Schemes) Regulations 2006 have specifically extended these sections to ensure that any person who has the power to make a change does come within the Regulations. What qualifies as a 'Listed Change'? Examples of the 'listed' changes that will require consultation were detailed in the July edition of Law at Work and these have not seen much change in the Government consultation. 'Listed changes' to occupational pension schemes will still include provisions: to increase the normal pension age; to prevent new members from joining the scheme; to prevent future accrual of benefits under the scheme; to remove an employer's liability to make contributions; and to introduce member contributions where none were previously payable. However, an amendment that has been made to the draft regulations is that any reduction in the amount of employer contributions towards the scheme now requires consultation. Previously this only applied where the contributions were being reduced by a margin of more than 2% or to below a level of 3%. Similarly any increase in the member's contributions now qualifies as a 'listed change' and requires consultation. The draft regulations only included provision for consultation where contributions were being increased by 2% or more. In respect of personal pension schemes these levels have also been removed so that any reduction in employer contributions or any increase in member contributions now qualifies as a 'listed' change. Consultation As detailed in the draft regulations, the consultation procedure involves relevant employers providing all affected members with written information describing the listed change and what effects it might have on the scheme. This information must be provided in advance of the consultation and must include any relevant background information, along with an indication of the timescale for introducing the change. Where affected members are represented by a trade union, an elected or appointed consultation representative or an employee representative from a pre-existing agreement, then they must also be consulted about the change. The Regulations set out the procedure for electing employee representatives. These largely replicate the provisions of the draft regulations except that a new obligation has been included that requires employers to: review the number of representatives from time to time; and, ensure that the number of representatives is adjusted accordingly. The schedule to the Regulations makes provision for employment rights and protections in relation to those members and representatives that are consulted: representatives are entitled to time off work and remuneration in their capacity as an employee representative; and individuals who are consulted are protected from unfair dismissal and other detriment. 5

6 The Regulations introduce a new regulation setting out the 'Conduct of Consultation'. Regulation 15 states that each employer must ensure that, so far as is reasonably practicable, the consultation covers all affected members. It imposes a 'duty to work in a spirit of co-operation' on all parties to the consultation. The Regulation states that an appropriate period for carrying out the consultation must be allowed and that this must not be less than 60 days. In terms of implementing a 'listed change' the Regulations are not intended to provide members or their representatives with a veto and therefore the only requirement on the person who proposed the change is to consider all comments and responses before making his final decision. There is no requirement that the members' views should prevail. As in the draft regulations, failure to comply with the Regulations can result in a complaint being made to the Pensions Regulator. The maximum penalty for breach of duty is a fine of 50,000. However, failure to consult does not appear to invalidate any change made. The Regulations will come into force on 6 April 2006 and implementation will be phased so that employers with less than 150 employees (reducing to 100 employees in April 2007 and 50 employees in April 2008) will not be affected. This is aimed at helping small businesses that will face a proportionately higher cost (on a per member basis) to comply with the Regulations. The Information and Consultation of Employee (Amendment) Regulations 2006 (the "Amendment Regulations") Many employers may find that the new consultation requirements in respect of pensions are not dissimilar to the current information and consultation procedures that they will have implemented under the Information and Consultation of Employee Regulations 2004 (S.I.2004 No.3246) (the "Employment Regulations"). The Employment Regulations, which came into force on 6 April 2005 for employers with at least 150 employees, do not require automatic consultation but do require employers to consult with employees or their representatives where the employees have requested that the procedure be adopted. Where the requirement to consult has been triggered, an employer is expected to inform and consult with their employees and representatives on matters, such as, recent development of the employer's activities; the situation, structure and probable development of employment; or specific decisions likely to lead to substantial changes in work organisation or in contractual relations. The Employment Regulations do not specifically set out what the consultation procedure should involve but most employers will have implemented an arrangement based on advance written notification of relevant information, followed by a period of consultation. The Amendment Regulations are to come into effect simultaneously with the Regulations, on 6 April 2006, and have also been published and laid before Parliament. The purpose of these regulations is to ensure that employers are not under an obligation to consult with employees about the same issue twice. The Amendment Regulations disapply any requirement under an Information and Consultation agreement, or any obligation under regulation 20 of the Employment Regulations (where any Information and Consultation agreement does not exist) where an employer is: under a duty to consult under the Employment Regulations; and the employer has notified the employees (or their representatives) that they will be complying with that duty. Comment Currently there is no statutory obligation on employers of less than 150 employees to consult employees, or their representatives, before making major changes to their occupational or personal pension arrangements. However, as a matter of good practice many employers do already consult members and allow them an opportunity to voice their views. A number of trade unions have been vocal in their opposition to change where no such consultation has taken place. Employers that already follow a consultation procedure should not be overly burdened by the Regulations but should ensure that their current practice is in line with them. Employers that do not currently consult employees about changes to their pension arrangements and are not required to consult employees or their representatives under the aforementioned Employment Regulations should be aware that the new consultation procedure may be costly and time consuming. On this basis they should consider whether they have any 'listed changes' that they wish to make to their occupational pension scheme prior to the Regulations coming into force on 6 April All employers should also consider notifying members, prior to 6 April 2006, of any future changes that they propose to make to their occupational pension scheme after the April deadline. Regulation 6 (4) provides an exclusion to the 6

7 consultation procedure where active or prospective members of the scheme have been informed of the future 'listed' change prior to 6 April There is no provision in the Regulations which states that a change notified to members prior to 6 April 2006 must be implemented by a specific future date but further guidance on this point may follow in due course. By Ewan Horn "A day" to remember Background Everyone is worried about how long they have to work to have a pension good enough to live on. As other articles in this edition of Law at Work show, significant changes to the retirement regime are taking place. Another matter which employers and pension scheme trustees will need to consider is the impact of the Finance Act 2004, which leads to changes to the tax treatment of life cover, occupational pension schemes and personal pensions from 6 April 2006 ("A Day"). This article is a short aide memoire aimed at employers rather than scheme trustees, and focuses on measures which they may need to consider, to the extent not already done, in relation to benefit provisions and employment contracts. Key Revenue changes The core relevant fact is that as part of the Government's pensions simplification regime, the statutory "earnings cap" of Inland Revenue approved limits on pension schemes will be replaced with a lifetime allowance for permitted taxefficient pensions saving. There will be a 1.5m lifetime allowance limiting the amount employees can accumulate in all the pension funds (including life cover) for them. The lifetime allowance will rise in stages to 1.8m by 2010/11. Any salary-related pension scheme benefits will be given a value which will count towards this lifetime allowance. Amounts which accumulate above the lifetime allowance can be paid but will be subject to a tax charge. There will be a maximum annual allowance of contributions to pension funds which is 215,000 in tax year 2006/07. Contributions above that will be subject to tax. Again, the annual allowance will increase until 2010 when the position will be reviewed. Contributions up to the annually allowed amount can attract tax relief up to 100% of UK earnings for UK tax payers. Note: There will be no "earnings cap" by reference to which pension contributions or life insurance benefits can be paid. Previously section 590C of the Income and Corporation Taxes Act 1988 applied to make contributions tax free provided they were limited by reference to this "earnings cap". Actions for employers Many employers will already have considered matters of policy with pension scheme trustees or benefit providers as to how they will deal with these changes. Anecdotal evidence suggests that many employers will continue making pension contributions or life cover arrangements at the current rates as if the "earnings cap" still applied. If this is the decision of principle which employers have made, they will need to ensure that that is appropriately understood and implemented with benefit providers and trustees, and communicate it to staff. In communicating any policy (or changes where appropriate) employers should consider the terms of any offer of employment, employment contract or staff handbook in relation to pension and life cover benefits. Employment contracts may provide something along the lines of: "The Employee may participate in the Employer's Pension Scheme subject to its trust deed and rules from time to time". If this is the case, changes to the rules are the primary matters which will be considered with trustees, and those may be communicated in a special announcement to participants. 7

8 Another example may include a contractual statement that: "Subject to any applicable maximum under the Income and Corporation Taxes Act 1988 the Employer shall contribute to such personal pension scheme as the Employer nominates at the rate of [ ]% of his basic salary per annum". If this wording applies, it might be that unless steps are taken to clarify the position of the employer, the employee will consider that pension contributions will now be made subject to the new statutory limits, on the basis that the old legislation no longer exists, or they might even try to argue that there is now no limit because the "earnings cap" concept has gone. For high earners, this might result in unwanted arguments that contributions should be made above the allowed annual maximum (this year 215,000 as referred to above), and other employees may still argue that they should be accruing higher benefits. A different example may relate to life cover provisions. Sometimes these are provided through pension schemes, in which case it is possible that the general wording referred to above may give employers reasonable flexibility. In other cases, for example those which include wording along the following lines, it may be necessary to clarify the employer's position. "The Executive may participate in a life insurance scheme by which a lump sum benefit shall be payable on his death in employment equal to four times his basic annual salary subject always to the maximum permitted by section 590C of the Income and Corporation Taxes Act 1988". In this case, since the cap will cease to apply after 6 April 2006, if an employee dies his family might claim that the death benefit should be paid by reference to four times the actual salary, if this is more than the salary currently permitted by the earnings cap ( 105,600). Claims of this sort are distressing and time consuming, as well as potentially expensive, to deal with. Next Steps If employers have not identified how they want to deal with the earnings cap changes as a matter of policy, they should do so very shortly in discussion with lawyers, pension scheme trustees and benefit providers. Employers should be aware that there is some transitional legislation which will permit the continued application of the earnings cap and Revenue limits in some circumstances for a limited period after 6 April on 17 February 2006 the Pension Schemes (Modification of Rules of Existing schemes) Regulations (SI 2006/364) were passed. But employers should not assume that these Regulations will cover all the circumstances. A particular area to focus on will be high earners who might be able to argue for benefit contributions or accrual above the current earnings cap. Individual arrangements may need to be come to as part of the normal pay or bonus or promotion discussions. For employees generally, employers may want to consider adopting a policy whereby they "freeze" benefits by reference to the current cap - for example replacing the life cover clause above with something like: "The Executive may participate in a life insurance scheme under which a lump sum shall be payable on his death in employment. The benefit shall be equal to four times his annual basic salary at the date of death, subject always to a maximum annual salary of 105,600." There are risks attached to an approach which fixes a benefit for all time and others may find it appropriate to adopt terms which provide for a cap, subject to an increase for inflation. Next Steps Employers should check with advisers the impact of the legislation on their current pension and life cover arrangements. Policy decisions may need to be reached or reviewed in relation to remunerating high earners in particular. Consider announcements to employees to clarify the approach post "A Day", amending standard form contracts for new hires and, where appropriate, amending contracts generally to sweep up these changes and any others associated with retirement age (see articles elsewhere in this Law at Work). Where appropriate, consolidations or changes may need to be tied into annual pay reviews or promotions. By Sean Nesbitt 8

9 Case law update Employees who work outside Great Britain may bring unfair dismissal claim Serco Limited v Lawson, Botham (FC) v Ministry of Defence and Crofts and others v Veta Limited and others [2006] UKHL 3 Why care? Before October 1999 employees who ordinarily worked outside Great Britain did not have the right to bring an unfair dismissal claim in the UK. Following the repeal of this law, tribunals have been struggling to define the geographical extent of employees' rights under the Employment Rights Act 1996 ("ERA") for unfair dismissal insofar as their employment was partly or wholly carried on outside Great Britain. The case The House of Lords dealt with three appeals in order to determine the territorial scope of the right not to be unfairly dismissed and the connection, if any, which an employee or his employment must have with Great Britain. The facts of the case were as follows: Lawson v Serco: employer was a company registered in England & Wales, where its head office was based. Mr Lawson was British and ordinarily domiciled in England & Wales. However he carried out all his work for the company on Ascension Island in the South Atlantic. After six months he resigned claiming that he had been constructively dismissed. Botham v Ministry of Defence: Mr Botham worked under a succession of MOD contracts in Germany. He was treated as resident in the UK rather than in Germany for various purposes including taxation. He was dismissed for gross misconduct but is claiming unfair dismissal. Crofts v Veta Limited: Mr Crofts was a pilot working for a wholly-owned subsidiary of Cathay Pacific Airways Limited. Both companies were registered in Hong Kong. Mr Crofts was based at Heathrow which enabled him to live in the UK but was dismissed in circumstances which he claims were unfair. In the Lawson and Botham cases the employer and employee had close connections with Great Britain but all the services were performed abroad. The Court of Appeal had previously found that in these circumstances the employees had no unfair dismissal rights. The House of Lords disagreed, and reconsidered the issue of expatriate employees. The fact that the employer is based in the UK or that the employee is British, is not enough. The House of Lords identified two additional circumstances: (1) where a UK employer posts an employee abroad they work as a representative of a business conducted at home or; (2) an expatriate works in what amounts to an extra-territorial British enclave in a foreign country. On this basis, the House of Lords held that both Mr Lawson and Mr Botham also had the right to bring a claim for an unfair dismissal in Great Britain. In the Crofts case the employer was foreign but the employee was resident in Great Britain and although his services were peripatetic, they were based in Great Britain. The Court of Appeal had decided that Mr Croft's basing in Great Britain was sufficient to enable him to bring an unfair dismissal claim. The House of Lords agreed with this decision and that the "homebase" of peripatetic employees was their place of employment. What to take away This to some extent clarifies the position for bringing UK unfair dismissal claims for both expatriate and peripatetic employees. But this does not mean, in any particular case, that an employee could not also bring a claim in another country. It is where the individual is working at the time of dismissal, rather than the terms of the contract of employment, which is the key. UK unfair dismissal rights may also apply to foreign nationals working in the UK. 9

10 Although the case has to some extent clarified the position for airline crew with a base in the UK, or for individuals working for a business out of the UK, or are in an enclave, the position of those working abroad for a branch of a UK business is less clear, and each case will be considered on its own facts. No protection for whistleblowers after the employment relationship has ended Diana Woodward v Abbey National plc (EAT) Appeal No: UKEAT/0240/05/RN Why care? The case highlights the lack of protection afforded to employees making protected disclosures and whistle blowing from detriment after the employment relationship has ended, in contrast to the post-termination protection from victimisation under discrimination legislation (where the discrimination arises out of and is closely connected to the relevant employment relationship). The case Ms Woodward was employed by the employer company until The employee had made disclosures during her employment that fell within the ambit of the subsequently enacted s. 43A ("protected disclosures") of the Employment Rights Act 1996 (the "ERA"). In July 2003 she claimed in the Employment Tribunal (the "ET") pursuant to s. 48 of the ERA that she had been subjected to a detriment (on three separate occasions) following the termination of her employment for reasons linked to her having made the protected disclosure by the former employer (ie, in contravention of s. 47B ERA). The ET held that there was no jurisdiction to hear the claim as it was bound by a previous Court of Appeal decision. The EAT did note that the apparent contrast between, on the one hand the protection afforded from victimisation under discrimination legislation and, on the other, the lack of post-employment protection afforded to whistle blowers, was something that Parliament, rather than the courts, should address if it deemed fit. What to take away Employees cannot, as the law stands, claim against former employers for detriment caused to them by that former employer for the employee having made a protected disclosure during their employment. Need for "reasonable belief" when making whistleblowing disclosures Mr P Milne v The Link Asset and Security Company Limited (EAT) Appeal No: UKEAT/0867/04 Why care? The case highlights the risks of potential adverse costs awards against employees who make a claim based on dismissal for having made protected disclosures where there is no "reasonable belief" on the part of the employee. A constructive unfair dismissal claim faces the hurdle of showing a fundamental breach of the employee's contract, which goes beyond mere poor behaviour on the part of the employer. The case Mr Milne was employed as a broker for the employer company from 1999 to Following advice from an accountancy firm and consultation with his wife, who had experience of HR, he signed up to an offshore trust benefit 10

11 scheme (the "EBT") which was available to some employees. Subsequently he alleged that the EBT was "potentially illegal". The employee was suspended by the employer on 12 December 2003 pending a disciplinary meeting held on 17 December, which concerned issues over his performance and conduct. He resigned before a second meeting was held, citing his wish to avoid damage to his professional reputation by being dismissed, but not referring to his concerns over the EBT. The employee made an application to the Employment Tribunal complaining that he had been constructively dismissed and that his dismissal was unfair, whilst also claiming that his dismissal was automatically unfair under the whistle blowing provisions of section 43B(1)(b) and 103A of the Employment Rights Act 1996 (the "ERA"). The Employment Tribunal (the "ET") was critical of the employer's procedures but nevertheless found that: (i) (ii) (iii) the employee had not been constructively dismissed by the employer (principally because there had been no fundamental breach of the employee's contract by the employer), and consequently the unfair dismissal claim also failed; the employee had no whistle blowing claim under the ERA; and the employee should pay 5,000 towards the employer's costs. On appeal to the Employment Appeal Tribunal (the "EAT"), the employee appealed against the above conclusions. In relation to the whistle blowing claim based on s. 43B(1)(b) of the ERA (failure or likely failure to comply with a legal obligation), the ET had found that the employee had no reasonable belief in any illegality of the EBT and that his concerns in fact related to his own financial position. It found his claim for automatically unfair dismissal under s. 103A ERA was opportunistic and he had used the whistle blowing claim to put pressure on the employer during the litigation process. The absence of "reasonable belief" on the part of the employee meant that the disclosure couldn't be a "qualifying disclosure" for the purpose of s.43b ERA. The EAT agreed with the ET's decision, highlighting the lack of reference to the whistle blowing claim or the EBT in the employee's resignation letter. What to take away Claimants need to be aware of the hurdle to be overcome to show that there has been a constructive dismissal, before the tribunal will even consider whether the dismissal is automatically unfair by virtue of dismissal for having made a protected disclosure. Claimants should also be aware of the potential costs implications of including a whistle blowing claim where the motive for doing so is to improve the employee's position in litigation and where the employee lacks the requisite "reasonable belief" in the information disclosed. Contents page 11

12 Hot topics New TUPE Regulations laid before Parliament on 7 February 2006 The Transfer of Undertakings (Protection of Employment) Regulations 2006 are now available and are due to come into force on 6 April The DTI has also published guidance on the Transfer of Undertakings (Protection of Employment) Regulations We shall report on the changes and scope of the new regulations in next month's Law at Work. Draft maternity, paternity and adoption leave regulations published The DTI has published for consultation three sets of draft regulations due to take effect in April They aim to bring some of the reforms to the rules on family related leave and flexible working announced in the Government's response to the Work and Families Consultation. The proposed changes will be the subject of an article to be reported in next month's Law at Work. Employee references guide from Information Commissioner The Information Commissioner's office has produced a "Data Protection Good Practice Note Subject access and employment references". It clarifies how the Data Protection Act 1998 ("Act") applies to employment references including whether organisations can release a reference to the person who is the subject of the reference; how the Act applies to references; and the fact that references may have been given "in confidence". "Partly unmeasured time" exemption to be removed from the Working Time Regulations 1998 ("WTR") Regulation 20(2) reduces the level of protection given by the WTR to workers who have an element of their working time measured or pre-determined but voluntarily work longer hours. This additional work does not count for the purposes of the restrictions on weekly working time and night working. However the Working Time (Amendment) Regulations 2006 will remove this exemption as of 6 April The exemption in Regulation 20(1) which provides that the WTR's regulations on night work, average weekly working time, rest breaks and record keeping do not apply for workers where none of their working time is measured or predetermined remains unchanged. 12

13 Contacts If you would like to receive a hard copy of Law at work, be taken off the recipient list, or add a colleague's name, please send an to s.nesbitt@taylorwessing.com. If you are asking to be taken off the recipient list please insert 'Unsubscribe' in the subject line. Taylor Wessing employment specialists For further details on any of the topics raised in this update please contact your usual employment contact at Taylor Wessing or one of the practice leaders below, who will be pleased to answer your queries. Practice leaders: Employment Sean Nesbitt +44 (0) s.nesbitt@taylorwessing.com Pensions Carolyn Saunders +44 (0) c.saunders@taylorwessing.com Immigration Gavin Jones +44 (0) g.jones@taylorwessing.com Taylor Wessing has offices in Berlin, Brussels, Cambridge, Düsseldorf, Frankfurt, Hamburg, London, Munich, Paris. Representative offices: Alicante and Shanghai. Associated office: Dubai For events and seminars, please contact: Lorraine Burrell +44 (0) l.burrell@taylorwessing.com If you would like to receive a copy of our other newsletters please contact us on london@taylorwessing.com This bulletin is correct to the best of our knowledge and belief at the time of going to press. It is however written as a general guide, so it is recommended that specific professional advice be sought before any action is taken. We are required by law to protect personal data. Please write to Carmelite, 50 Victoria Embankment, Blackfriars, London EC4Y 0DX if you no longer wish to receive any of our future publications and we will amend our records accordingly. February 2006 Taylor Wessing All rights reserved 13