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Legal Briefing: Employment Legislation – April 2005

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Alison Wallace

Alison Wallace, head of employment practice at Steptoe & Johnson updates HRZone members on the latest raft of employment legislation. If you’re not on top of it then read on!


1. Implementation of the Employment Relations Act 2004

The measures in the Act that came into force on 6 April 2005 include:

  • Amendments to the statutory procedure by which trade unions can obtain recognition for collective bargaining purposes and the corresponding procedure by which they can be derecognised.
  • Provision to increase the protections against dismissal of employees taking official, lawfully organised industrial action. The main change involves extending from eight to 12 weeks the protected period during which it is automatically unfair to dismiss an employee for taking such industrial action.

    After the protected period has ended, an employer may dismiss the employees still participating in the industrial action, provided it has taken all reasonable procedural steps to resolve the industrial dispute.

    Section 238B of TULRCA contains a list of matters that a tribunal should take into account when deciding whether reasonable steps were taken.

    This includes whether or not the employer or union has unreasonably refused a request for the parties to use mediation or conciliation services. Changes from 6 April 2005 will introduce additional matters to be taken into account where the parties have agreed to make use of conciliation or mediation services, namely:

  • Whether the employer or union was represented at conciliation or mediation meetings by an appropriate person;
  • Whether the employer or union co-operated in making arrangements for conciliation or mediation meetings if requested to do so;
  • Whether the employer or union fulfilled any commitment given during the conciliation or mediation to take a particular action, having regard to any agreed timetable or the time taken;
  • Whether the employer or union answered questions put to their representatives at conciliation or mediation meetings;
  • Clarification of the law to ensure that dismissal on grounds of trade union membership or activities is unlawful regardless of length of service or age.
  • A new right for employees not to be dismissed or suffer other detriment because they are summoned or have been away from work on jury service.
  • Measures to improve the enforcement of the national minimum wage.

2. Gender Recognition Act 2004

This provides transsexuals with the opportunity to obtain legal recognition of their acquired gender. The legislation also amends the Sex Discrimination Act 1975 increasing the protection afforded to all employees against less favourable treatment meted out on the grounds that they intended to undergo or are undergoing or have undergone gender reassignment.

The genuine occupational qualification defences will not be available for the purpose of discriminating against someone who has made a successful application to the Gender Recognition Panel and thus obtained legal recognition of his or her acquired gender.

3. 3 April 2005 – Revision of the standard rates of Statutory Maternity Pay (SMP), Statutory Paternity Pay (SSP) and Statutory Adoption Pay (SAP)

The standard rates of SMP, SPP and SAP are to be increased to £106 per week (or 90% of the person’s average weekly earnings if that is less than £106). For 2005, the increased rates will apply from Sunday 3 April. This is because SMP payment weeks typically begin on a Sunday and follows the precedent for previous years.

4. 6 April 2005 – Information and Consultation of Employees Regulations 2004

This is the initial phase of the Information and Consultation Regulations (the “Regulations”). The Regulations require employers in undertakings of more than 150 employees to inform and consult on a wide range of business issues, provided that either 10% of the employees make a request for such consultation and there is no pre existing consultation forum.

The issues that employers will be expected to inform their employees about include the state of the business, business reorganisation, employment trends and job security and substantial changes including redundancies where fewer than 20 employees are involved.

Employers will be able restrict the amount of information disclosed to representatives in the interests of confidentiality, or even withhold information altogether, if disclosure risks seriously harming and prejudicing the undertaking.

A failure on the employer’s part to inform and/or consult with its employees can result in a complaint to the Central Arbitration Committee (CAC), seeking a declaration that the information should be provided. Furthermore, the Employment Appeal Tribunal (EAT) will have the power to impose a penalty on the employer up to a maximum of £75,000.

5. 6 April 2005 – The transfer of Employment (Pension Protection) Regulations 2005

These Regulations concern the obligations of an employer under Section 258 of the Pensions Act 2004 towards a transferred employee and who had actual or contingent rights in relation to an occupational pension scheme immediately before the transfer.

Under Section 258 the transferee employer is required to secure that the employee is or is eligible to become an active member of their occupational pension scheme and if it is a money purchase scheme, to make “relevant contributions” to it.

Alternatively, the transferee employer must make such contributions to a stakeholder pension scheme of which the employee is a member or offer to contribute to a stakeholder scheme of which the transferred employee is eligible to be a member.

Regulation two requires that either the value of the benefits provided for by the transferee scheme must be at least 6% of pensionable pay for each year of employment in addition to any contributions made by the transferred employee or that the scheme must provide for the employer to make relevant contributions on behalf of his employee.

Regulation three provides that such contributions must be made in respect of each period for which the employee contributes to a pension scheme and that amount contributed must equal the employee’s contribution subject to an upper limit of 6% of basic pay.

7. Pensions Act 2004

From April 2005 the current pensions regulator will be superseded by a new Pensions Regulator. The Regulator will be given new powers and target its resources at schemes where members’ benefits are at greatest risk. These new powers include power to:

  • require the provision of documents and information;

  • enter and inspect premises;

  • issue “contribution notices” and “financial support directions” (see below);

  • issue “improvement notices” requiring individuals to take (or not take) certain actions;

  • issue “third party notices” to persons whose behaviour is causing a breach of pensions legislation;

  • recover unpaid contributions;

  • issue “freezing orders” in relation to the winding-up of pension schemes

These provisions will be supplemented by Codes of Practice issued by the Regulator.

Pension Protection Fund (PPF)

The plight of members of pension schemes whose employers have become insolvent has prompted the Government to establish the PPF from April 2005. The PPF will provide a core level of benefits (“protected liabilities”) to members of such schemes:

  • members above the scheme’s “normal pension age” and those who have retired early due to ill-health will receive 100% of their current benefits (with the exception of limited increases on their pensions in payment); and
  • other members will receive 90% of a capped level of benefits (currently expected to be £25,000 pa).

Members will only benefit if the scheme’s sponsoring employer becomes insolvent or cannot continue as a going concern after April 2005 and the scheme cannot afford the protected liabilities.

The PPF does not apply to schemes which start to wind-up prior to April 2005. Members of such schemes may be eligible for relief under the “financial assistance scheme” to which the Government has committed £400 million over 20 years.

8. 4 April 2005 – The Road Transport (Working Time) Regulations 2005

These apply to commercial workers and crews of heavy goods vehicles and public service vehicles. Self employed drivers are not covered. The main provisions of the new Regulations are as follows:

  • Weekly working time is limited to an average of 48 hours unless extended by a collective agreement or workforce agreement;
  • A maximum of 60 hours can be worked in a single week provided that the average 48 hour limit is maintained;
  • Night workers are restricted to 10 hours working time in any 24 hour period unless otherwise agreed by a collective agreement or workforce agreement provided that the 60 hour actual weekly limit is not exceeded.
  • Mobile workers should not work for more than six hours without a break of not less than 30 minutes.

9. The Statutory Maternity Pay (General)) (Amendment) Regulations 2005
These came into force on 6 April 2005. From this date, where an employer awards a pay rise this will effect a woman’s statutory maternity pay entitlement.

Any pay rise that is effective from the date between the start of the period used to calculate the employee’s statutory maternity pay and the end of her maternity leave, the employer must re-calculate the employee’s average weekly earnings taking account of the pay rise and pay any arrears of SMP.

Also, if a pay rise has an effective date which falls before the beginning of the relevant period used to calculate SMP and the earnings used in that calculation have not been adjusted to reflect that pay rise then SMP must also be recalculated to reflect that pay rise. It is the date the pay rise is effective from, which is the key date from when the pay rise is awarded.

10. The Companies (Audit, Investigations and Community Enterprise) Act 2004
New rules in relation to directors’ indemnities come into force on 6 April 2005. The law will permit companies to:

(1) provide indemnities to their directors in relation to defence costs of claims brought by third parties but not where a defence to a criminal claim is unsuccessful and not any fines imposed by criminal proceedings or regulatory bodies; and
(2) pay directors’ defence costs incurred in civil and criminal proceedings even where the company itself takes the action. However, the director will have to reimburse the company if the defence falls.

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