Wednesday, July 24, 2013

Are Employee Shareholders an Attractive Proposition?

The Growth and Infrastructure Act becomes Law

The new employment status of Employee Shareholder received Royal Assent on 25th April 2013 and it is expected that the section related to Employee Shareholders will become law from 1st September 2013.

In simple terms an Employee Shareholder agreement is reached where the employer gives the individual shares to the value of £2,000 or more and the Employee Shareholder in return gives up certain employment rights:
the right to claim "ordinary" unfair dismissal
the right to a redundancy payment
the right to request flexible working (in most circumstances)
the right to request time off for studying and training

Also, the Employee Shareholder will need to give longer notice in relation to certain entitlements (e.g to return early from maternity leave).

There were a few late changes after the House of Lords raised some concerns, so that there are additional rules relating to the Employee Shareholder status:
the individual must receive independent legal advice, paid for by the employer, prior to entering into an Employee Shareholder agreement
there will be a 7 day "cooling off" period after the advice is received and before the agreement has legal effect
the employer must provide a written statement specifying what rights the individual is relinquishing by entering the agreement and setting out details about the shares that they will receive
existing employees will be considered to have been unfairly dismissed if the reason for dismissal is their refusal to convert to Employee Shareholder status and they will also be protected from suffering any other type of detriment
the first £2,000 of shares will be free from income tax or national insurance contributions liability

This is a very significant change to employment laws and employers should give serious consideration to whether or not this is an attractive proposition.  It seems likely that in most cases it will not be attractive, as most employers tend not to unfairly dismiss staff and try to avoid redundancies.

However, it is possible that some employers - particularly new ventures with initial high growth and risk - may be attracted.  They could see this as meaning staff will be more likely to be committed to growth through their share ownership, and some risks will be ameliorated if they will be able to take swift action to fire staff if necessary without worrying about unfair dismissal or redundancy payments.

Wednesday, July 10, 2013

A summer of change for employment law?

Government reforms start to take effect

We have already seen an increase in parental leave from 13 to 18 weeks, and the compulsory auto-enrolment of employees into employers' pension schemes continues to roll out to smaller employers.  On top of that there is a long list of further changes anticipated:

From 25th June

Dismissal for political opinions or affiliation - an employee no longer needs to have any qualifying period of service to be able to claim unfair dismissal where the reason for dismissal is their political opinions or affiliation.

Whistleblowing - employees can no longer rely on the protection of whistleblowing legislation unless their disclosure is made in the public interest.  This should put a stop to the use of whistleblowing to support unfair dismissal claims where the "disclosure" is related to the employee's own contract or something which only affects them individually.

From 29th July

Tribunal fees - claimants will only be able to submit a tribunal claim if they pay a fee at the same time.  Fees will be £160 for more basic claims (e.g. for unpaid wages) and £250 for other claims (e.g. unfair dismissal or discrimination).  They will also need to pay a further fee (£230 or £950) if the claim proceeds to a full hearing.  There is a process for remission of fees in some circumstances, where the claimant is a very low earner.

Tribunal process - the claim form and the employer's response form will both be subject to scrutiny by the tribunal on receipt, and either may be struck out where the tribunal believe the claim or response to be without merit.  It will be even more important now that employers take advice before submitting a response to a claim.

Later in the Summer (dates to be confirmed)

There are a number of other measures to follow, including the legal protection of conversations with employees during employment to promote a severance agreement; renaming of compromise agreements to settlement agreements; a cap on unfair dismissal compensation payments of 12 months' pay; the new employee shareholder status which is expected from 1st September (reported in last month's newsletter); and changes to TUPE (the legislation protecting employees when an undertaking is transferred between employers).