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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

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

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Are the new disclosure rules on pay ratios sufficient to combat excessive pay disparity?

Executive pay gap rules now in force

Under regulations which came into force on 1 January 2019, UK-listed companies with more than 250 UK employees must now publish certain executive pay data in their annual reports.
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Labour’s plan to force businesses to hand equity to their staff has divided opinion. What would the policy mean for UK businesses?

The shadow chancellor John McDonnell has revealed details of Labour's employee ownership policy which would see every company with more than 250 staff set up an "inclusive ownership fund" (IOF). Under the proposal, an IOF would own up to 10 per cent of the company's equity on its workers' behalf.
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Labour’s plan to force businesses to hand equity to their staff has divided opinion. What would the policy mean for UK businesses?

Vento bands increase announced

The Presidents of the Employment Tribunals in England & Wales and Scotland have issued new guidance updating the bands of awards for “injury to feelings”, in the event that employees suffer from discrimination in the workplace.

The compensation available for injury to feelings is divided into four categories, depending on the seriousness of the discrimination that occurred, known as the Vento bands. The increased Vento bands, which will be effective for any claims issued on or after 6 April 2018, will be as follows: £900 to £8,600 for less serious cases (the lower band), £8,600 to £25,700 for serious cases (the middle band) and £25,700 to £42,900 for the most serious cases (the upper band). Compensation over £42,900 can be awarded by the Employment Tribunal in exceptional cases.

This increase should act as a reminder for employers to make sure that they are taking all reasonable steps to prevent discrimination in the workplace, including implementing up-to-date equal opportunities and anti-bullying and harassment policies, and carrying out regular diversity training.

Vento bands increase announced

The Real Living Wage has increased, but is it actually benefitting employees?

Earlier this week it was announced that the Real Living Wage has been increased from £8.45 to £8.75 per hour across the UK and from £9.75 to £10.20 per hour in London. The changes have been driven largely by inflation, higher private rents and transport costs, and the new figures have been calculated to reflect the actual cost of living required in order to sustain a decent quality of life in the UK and London.

However, the Real Living Wage remains voluntary, unlike the mandatory National Living Wage put in place by the Government. Further, despite more than one thousand employers signing up to pay the Real Living Wage since Living Wage Week last year (including Google and Ikea), 5.5 million people across the UK (comprising 21% of the workforce) are still being paid less than the Real Living Wage. One of the criticisms of the Living Wage campaign was that it targeted sectors that do not tend to have significant numbers of low paid staff – as such, it may not, as yet, have had the desired impact for those who need it the most.

Further, there have been questions around how employers are offsetting the additional cost of meeting the Real Living Wage – some employers have cut overall pay packages to mitigate the costs of increased pay, for example stopping overtime rates and cutting back hours. As such, the overall benefit being passed to employees is, in some cases, questionable.

On a more positive note, the increase in the Real Living Wage will see more than 150,000 employees get a pay rise, as more than 3,600 employers have now signed up to pay the Real Living Wage since it was introduced. Among these is Heathrow, which is set to become the first Real Living Wage airport by the end of 2020.

The Real Living Wage has increased, but is it actually benefitting employees?

President of the Employment Tribunals announces increase in the Vento Bands

Following a recent consultation, the President of the Employment Tribunals has announced a rise in the compensation that employees can recover for 'injury to feelings', in the event that they suffer from discrimination in the workplace.
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President of the Employment Tribunals announces increase in the Vento Bands

Its all change in employment law in April…

April is a key month for employment law changes and this April is no different. 6 April is “D-Day” for a number of significant changes. By way of reminder:

1 April

  • National minimum wage – the National Living Wage (for workers aged 25 and over) increased from £7.20 to £7.50 and there were also changes in the other bands.

Weeks commencing after 2 April

  • Cap on a week’s pay  – the cap on a week’s pay (which is used in statutory redundancy pay calculations for example) increased from £479 to £489.

5 April and onwards

  • Gender pay gap reporting – employers with 250 employees should have collated their relevant data on the first annual “snapshot date” yesterday. Today the work on calculations can begin! Private employers have a 12 month window (4 April 2018) before calculations must be published on the employer’s website and the relevant government website. Remember that public sector employers have a earlier snapshot date (31 March), their calculations need to be published by 30 March 2018 and every four years thereafter.

From 6 April

  • Unfair dismissal compensatory award – the statutory cap increases from £78,962 to £80,541.  Don’t forget that the cap will be one year of the employee’s gross salary if lower.
  • Apprenticeship levy – UK employers in the public and private sectors with annual wage bills of £3 million or more have to pay their monthly levy payments;
  • Immigration skills charge – employers who sponsor workers under tier 2 will have to pay £1,000 per year, or £364 if they are a small employer or a charity;
  • IR35 – new rules apply to public authorities paying personal service companies or other intermediaries. The public authority will need to make tax and National Insurance deductions as appropriate;
  • Salary sacrifice – relief on benefits in kind provided via salary sacrifice arrangements is being scaled back for benefits entered into from today.
Its all change in employment law in April…

Increase in limits

This week new limits applying to certain awards of employment tribunals, and other amounts payable under employment legislation, have been increased.

The increases apply where the event giving rise to the entitlement to compensation or other payments occurred on or after 6 April 2017. Limits previously in force are preserved in relation to cases where the relevant event was before 6 April 2017.

Key new relevant limits are as follows:

  • Minimum basic award in cases where a dismissal is unfair by virtue of health and safety, employee representative, trade union, or occupational pension trustee reasons: Old limit – £5,853; New limit – £5,970
  • Limit on amount of guarantee payment payable to an employee in respect of any day: Old limit – £26.00; New limit – £27.00
  • Limit on amount of compensatory award for unfair dismissal: Old limit – £78,962; New limit – £80,541
  • Maximum amount of “a week’s pay” for the purpose of calculating a redundancy payment or for various awards including the basic or additional award of compensation for unfair dismissal: Old limit – £479; New limit – £489
Increase in limits