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High Court finds that directors can be liable for breach of employment contract

Most directors of companies don’t expect to be held personally liable for inducing the employer to breach an employee’s contract of employment. However, this only goes so far and the recent case of Antuzis & Ors v. DJ Houghton Catching Services Ltd & Ors [2019] EWHC 843 (QB) clearly shows the limits of that protection. In this case, the High Court concluded that Mr Houghton (director) and Ms Judge (company secretary) were personally liable for the company’s breaches of contract. The “breaches of contract” included statutory claims, in particular in relation to unpaid wages, unlawful deductions and fees and lack of holiday pay.

The Lithuanian claimants were employed in the UK by DJ Houghton Chicken Catching Services (the company) to work at various farms across the UK as chicken catchers. Their working conditions were dreadful. They worked long hours, being deprived of sleep and toilet breaks. They were paid less than minimum wage and often had pay withheld or docked for unknown reasons. No attempt was made to pay their holiday pay or overtime and they were prevented from taking holidays and bereavement leave.

The High Court applied the long established principle in Said v. Butt [1920], which states that a director is not ordinarily personally liable for inducing breach of contract where the director acts “bona fide within the scope of his authority”.

The court concluded that Mr Houghton and Ms Judge were not acting bona fide. They knew that their actions amounted to a clear breach of their duties under section 172 (duty to promote the success of the company) and section 174 (duty to exercise reasonable care, skill and diligence) of the Companies Act 2006. It was held that “what they did was not in the best interests of the company or its employees. On the contrary (…) they wrecked its reputation in the eyes of the community.” It was found beyond doubt that they did not believe that the employees’ remuneration arrangements were lawful and were therefore personally liable for the breaches of contract.

The case is a useful reminder that, whilst the company can indemnify directors against third party claims and purchase insurance to limit the risks associated with carrying out director duties, there are still situations where personal liability cannot be excluded. It is also another example of individuals being personally liable for their actions towards employees (see also our previous article regarding personal liability for subjecting employees to the detriment of dismissal arising from making a protected disclosure, available here. This case demonstrates that it can be impossible to avoid being caught for bad behaviour!

High Court finds that directors can be liable for breach of employment contract

EAT judgment provides guidance on making reasonable adjustments for disabled employees

In the recent case of Linsley v. Commissioners for Her Majesty's Revenue and Custom UKEAT/0150/18 the Employment Appeal Tribunal (EAT) gave guidance on factors to be taken into account in deciding whether an adjustment is reasonable.

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EAT judgment provides guidance on making reasonable adjustments for disabled employees

Slow progress on gender pay gap in second year of reporting

5 April 2019 saw the first anniversary of the requirement to report gender pay gaps by businesses with 250 or more employees.

The gender pay gap is the difference between the average earnings of men and women, expressed as a percentage of men’s earnings. It should not be confused with unequal pay which occurs when women are paid less than men for doing equal work.

Gender pay gap reporting was introduced by the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (the Regulations). The government wanted to encourage employers to consider and, if required, to take appropriate actions to reduce or eliminate their gender pay gaps. Employers are required to publish their data on their public-facing website and to report it to Government Online by 5 April every year.

The Regulations themselves do not include an enforcement mechanism or any sanctions for non-compliance. However, the Equality and Human Rights Commission (EHRC) is responsible for monitoring compliance with the Regulations and has the power to seek a court order against the organisations that refuse to comply with their reporting duty.

So how does the last year’s data compare with the figures recently published on the government’s website?

  •  Unsurprisingly, no significant changes have been noted. Compared with the last year the median pay gap has narrowed by just 0.1%, reduced from 9.7% to 9.6%.
  • The figures show that around 8 out of 10 companies pay men more than women. The BBC has reported that overall, 78% of companies had a pay gap in favour of men, 14% favoured women and the rest reported no difference.
  • There was little progress in the proportion of women in top paid jobs. In 2017 women accounted for 37% of the top quartile of earners. This figure increased to only 38% in 2018.
  • Disappointingly, in certain sectors such as finance and insurance, health and social work and the public sector the pay gap has widened.

These figures show that the pay gap will not be eliminated overnight and more needs to be done to tackle the problem. It was also noted that a number of employers have failed to report their gender pay gaps timeously and many have filed mathematically impossible results.

The Fawcett Society suggested that “employers need to set out a five-year strategy for how they will close their gender pay gaps, monitoring progress and results.” The Acas guidance on managing gender pay reporting (available here) also provides a number of suggestions of measures employers can take to tackle their gender pay gap. Regardless of their chosen strategy, it is clear that short-term solutions will not solve the problem and the sooner employers implement relevant plans the faster they will see the results of their actions.

In the meantime, the ECHR has confirmed that it will take enforcement action against the businesses that missed the 5 April 2019 deadline. No company has yet faced a fine for not reporting. However it seems likely that in future sanctions may become one of the main means of policing the lack of reporting/misreporting the figures. The other option, which is becoming increasingly popular, is to name and shame the worst offenders for failure to comply with their reporting duties. It is essential therefore that businesses act now to ensure that their reports for next year are accurate and demonstrate a positive trend towards closing the gender pay gap.

Slow progress on gender pay gap in second year of reporting

Vento bands increase

In addition to financial compensation, an “injury to feelings” award is available in discrimination and certain whistleblowing claims.

The level of any injury to feelings award is assessed by reference to guidelines that are commonly referred to as the “Vento bands” (taking their name from a Court of Appeal case which initially considered this approach).

The Presidents of the Employment Tribunals in England and Wales and Scotland have issued an update to the Vento guidelines, setting out the following new bands as adjusted for inflation:

  • Lower band: £900 to £8,800 (less serious cases).
  • Middle band: £8,800 to £26,300 (cases that do no merit an award in the upper band).
  • Upper band: £26,300 to £44,000 (the most serious cases, with exceptional cases capable of exceeding £44,000).

These updated figures apply to cases presented on or after 6 April 2019, and follow hot on the heels of the annual increase to statutory minimum wage rates and other statutory changes – you can find our previous blog post covering these changes here.

Vento bands increase

New regulations set out work and residence permit procedure for UK nationals living in Spain post-Brexit

New regulations have been enacted in Spain setting out what UK citizens working or living in Spain after Brexit will be required to do to maintain their right to live and work there.

The regulations apply to UK and Northern Irish citizens living in Spain before the exit date. Affected individuals must apply for a special work and residence permit within 21 months of Brexit. During this 21 month “transition period”, UK nationals will broadly maintain the same rights they currently have under EU law (except, for example, the right to vote and stand in elections to the European Parliament).

Dentons’ lawyers in Spain have put together a summary of the key points of the regulations, which can be found here.

As the largest law firm in the world Dentons is uniquely placed to provide high-quality counsel to clients both within and outside Europe. Our experts have put together a number of resources, including a series of webinars and a Brexit jargon buster, which can be found here. Dentons’ lawyers in Spain have put together a summary of the key points of the regulations, which can be found here.

As the countdown to exit day continues, please contact Jessica Pattinson (Head of Immigration, UK) at jessica.pattinson@dentons.com if you require any additional support on immigration matters

New regulations set out work and residence permit procedure for UK nationals living in Spain post-Brexit

Failure to offer appeal hearing amounts to unfair dismissal according to EAT

The appellant in the recent case of Radia v Jeffries International Limited, Mr Radia, was a Managing Director of a regulated financial services company. He had previously brought two claims against his employer. The Employment Tribunal's decision in the first claim criticised the credibility of his evidence and found him evasive. On receiving the judgement, Mr Radia was suspended by his employer pending a disciplinary. No investigation took place before the disciplinary hearing, which instead relied on the findings of the first Employment Tribunal. As he was a regulated person the employer decided that as a result of the Employment Tribunal's decision on Mr Radia's credibility, they could no longer employ him and consequently dismissed him for gross misconduct.
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Failure to offer appeal hearing amounts to unfair dismissal according to EAT

Is it still viable to run an internal disciplinary process alongside criminal proceedings?

The Court of Appeal's decision in the case of North West Anglia NHS Foundation Trust v. Gregg [2019] EWCA Civ 387 brings some welcome reassurance to employers that it remains viable to run internal disciplinary processes alongside criminal proceedings. Only in very limited circumstances is there any requirement on an employer to delay pending the outcome of those criminal proceedings.
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Is it still viable to run an internal disciplinary process alongside criminal proceedings?

Adverse treatment of a gay head teacher found to be constructive dismissal and sexual orientation discrimination

In The Governing Body of Tywyn Primary v. Mr M Aplin UKEAT/0298/17/LA the EAT held that the adverse treatment of a gay head teacher amounted to constructive dismissal and sexual orientation discrimination.
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Adverse treatment of a gay head teacher found to be constructive dismissal and sexual orientation discrimination

Acas publishes guidance on workplace neurodiversity

Acas has published guidance to help employers learn about neurodiversity and to suggest changes that can be made in the workplace to better support neurodivergent staff.
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Acas publishes guidance on workplace neurodiversity

Expanding the female talent pipeline – new government guidance

The Government Equalities Office has published some simplified guidance on actions that can help support women's progress in the workplace.
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Expanding the female talent pipeline – new government guidance