England/Wales

Section 235 of the Employment Rights Act 1996 (the “ERA 1996) defines an employee as “an individual who … works under … a contract of employment…under the direction and control of another (the employer) in return for a wage or salary”. Independent contractors are therefore excluded.

There are a number of approaches courts and tribunal use to decide whether or not an individual is employed or self-employed. For an employment relationship there are a number of factors to be considered but there must be some degree of mutual obligation, e.g. to provide work or pay. Further there must be some degree of control by the employer on the employee.

2. How do you define an employment contract?

The parties to an employment relationship will often, not always, put the terms and conditions that govern that relationship into writing. The contract can be written, oral or a combination of both.

3/4. What does an employment contract need to contain? Is there a legal requirement to provide an employee with a written contract and if so, when does this have to be provided?

An employment contract will normally contain express written terms of employment; however, there can also be implied terms which are read into a contract of employment by operation of law or convention. An example of an implied term is one where the relationship between an employer and an employee should be based on mutual trust and confidence, so that the employee must act toward the employer with fidelity and in good faith and vice versa.

There is no legal requirement for a contract of employment to be in writing. However even where there is no written contract of employment, the law requires employers to provide what is known as a written statement of terms to their employees what is sometimes called a section 1 statement (section 1 of the ERA 1996). In the absence of any written contract, the section 1 statement must set out certain minimum details about the terms governing the employment relationship.

In the section 1 statement (S1. Employment Rights Act 1996), the employer must, within two months of employment commencing, give the employee a written statement of the terms relating to the following particulars:

(i) Identity of the parties (Names and addresses of both Employer and Employee)

(ii) Date employment began

(iii) Date continuous employment began (taking into account any relevant employment with a previous employer)

(iv) Scale or rate of remuneration and intervals to be paid

(v) Hours of work

(vi) Any term relating to:

holidays, holiday pay

sickness, sick pay

pensions, pension scheme

(vii) Length of notice required to terminate the contract

(viii) In the case of non-permanent employment, the period for which it is expected to continue, if it is a fixed-term, the date it is to end;

(ix) Job title or a brief description of work

(x) Place or places of work

(xi) Particulars of any collective agreements (trade union or workers agreements) which directly affect the terms and conditions of employment

(xii) Where employees are required to work outside the UK for a period of more than one month, the period of such work, currency in which payment is made, benefits provided and terms relating to return to the UK

(xiii) Disciplinary rules (unless the number of employees employed by the employer, plus any associated employer, is less than twenty

(xiv) Grievance procedure; and

(xv) Whether a contracting out certificate is in force (for pension purposes).

5. How would you define redundancy/economic dismissal?

The definition of redundancy can be found in section 139 (1) of the ERA 1996:

“for the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to:

the fact that the employer has ceased or intends to cease:

to carry on the business for the purposes of which the employee was employed by him; or

to carry on that business in the place where the employee was so employed; or

the fact that the requirements of that business:

for employees to carry out work of a particular kind; or

for employees to carry out work of a particular kind in the place where the employee was employed by the employer;

have ceased or diminished or expect it to cease or diminish.”

Redundancy can broadly therefore be categorised into three main situations:

1. Job Redundancy

Section 139(1) (a) (i) of the ERA 1996 states that an employee who is dismissed because the employer has closed the business, or the closure of the workplace, will be dismissed by reason of redundancy. This will be the case, whether the cessation of business is permanent or temporary.

2. Place of Work Redundancy

Section 139 (1) 9a) (ii) of the ERA 1996 refers to a situation where the place where the employee is employed is either closing or being relocated. If an employee has worked from several locations then the place of work will be established by further investigation which will consider all factors including the contractual terms.

3. Employee Redundancy

Section 139(1) (b) of the ERA 1996 states that an employee is dismissed by reason of redundancy if the reason for his dismissal is that the requirement for the employees to do work of a particular kind has ceased or diminished.
(This could include situations where you may still require the job to be performed but skills may be required.)

6. What is the procedure that an employer must follow when making an employee redundant and/or dismissing on economic grounds?

This will depend on how many employees are being made redundant. An employer has certain duties to inform and consult employees prior to the redundancy taking effect and to follow a particular procedure, otherwise the dismissals may be deemed to be procedurally unfair. In a nutshell the employer must do the following:

1 Give as much warning as it reasonably possible of redundancies;

2 Consult the employees affected and where relevant, trade union or employee representatives;

3 Where applicable, decide on the selection criteria and apply them objectively;

4 Before the redundancy takes effect, consider any suitable alternative employment that could be offered.

Where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer must consult with the recognised trade union or elected representatives (where appropriate). The employer also has a duty in these circumstances to notify the Department of Trade and Industry in writing. The minimum period of consultation in the period referred to above where 20 or more employees are being made redundant is a minimum of 30 days and where 100 or more employees the consultation period is a minimum of 90 days.

Where less than 20 employees are being made redundant consultation must be for a reasonable period e.g. 2 to 4 weeks.

Consultation

The purpose of the consultation period is to explore ways of avoiding redundancies. There is a defence for employers to argue that consultation would have been futile, e.g. immediate close of factory for financial reasons. Consultation must also be meaningful.

Selection Criteria

Where a person is being made redundant out of a pool of employees, a selection process has to take place to select which employee should be made redundant. In these circumstances the employer must apply fair selection criteria. Employers are allowed to decide the selection criteria which are most suitable for their business but unless these criteria are applied fairly and objectively there could be a risk of unfair dismissal/unfair selection claims. It used to be the case that the criteria which many businesses applied was the last in/first out criteria. However times have moved on and companies can use factors such as performance and ability, attendance record, health, age, personal circumstances, flexibility, disciplinary record etc. Employees are selected having been marked against the criteria.

Payments

In a redundancy situation employees are entitled to be paid their notice pay (which they may be required to work) plus their statutory redundancy pay which is worked out on a formula dependent on age and length of service.

7. Do you have laws against discrimination, if so, what types of discrimination do you have and how are they defined?

There are discrimination laws to which prevent discrimination against an individual on the grounds of:

Sex or marital status (Equal Pay Act 1970 and Sex Discrimination Act 1975)

Racial grounds (colour, race, nationality or ethnic or national origins) Race Relations Act 1976

Disability or being a disabled person as defined ( Disability Discrimination Act 1995)

Trade union activities (refusal to employee on grounds of this- Trade Union and Labour Relations (Consolidation) Act 1992)

Sexual Orientation

Religion or religious belief

There are no eligibility requirements for a person to bring a claim for discrimination, e.g. there is no minimum length of service requirement of employment. There is a three month time limit from the act complained of in which to bring such a claim, unless the employee can demonstrate a policy of treatment over a period of time.

Discrimination can be broadly divided into three areas:

direct discrimination (this includes harassment), where discrimination occurs
if the person was treated less favourably on directly on the grounds for example of their sex/racial origin;

indirect discrimination, where an employer imposes a condition or requirement which applies to all employees but the proportion for example of those from a sexual or racial group that can comply is considerably smaller and is not justifiable irrespective of sex or race and

victimisation- where a person is treated less favourably on the grounds that he/she has brought proceedings, given evidence about or complained about discrimination for example.

An employer can also be held vicariously liable for the discriminatory actions of their employees but there are various defences available.

8. Do you recognise harassment and again, how is this defined?

There is no specific definition of sexual or racial harassment in the SDA 1975 or the RRA 1976 but the employee may still be able to bring a claim under the SDA 1975 or RRA 1976.

The Protection from Harassment Act 1997 (PHA 1997) has created a means by which victims of harassment in the work place can obtain compensation from harassment suffered by them in the workplace. Most discussion regarding the PHA 1997 has tended to concentrate on its criminal offences and use of injunctions. However, section 3(2) of the Act allows civil courts to award damages to victims of harassment for (amongst other things) ‘any anxiety caused by the harassment and any financial loss resulting from the harassment. What If someone is harassed at their place of work they could decide to sue their employer for damages using the Protection from Harassment Act 1997 rather than by going to an Employment Tribunal.

9. What can an employee do about discrimination?

There are three remedies for discrimination to an employee who takes proceedings in an employment tribunal and these are:

the tribunal may make an order declaring the rights of the complainant; and/or

order the employer to pay compensation, where the tribunal will take account of the employer’s manner in dealing with the complaint which could lead to aggravated damages being awarded, on top of an award for pecuniary loss arising from the act of discrimination; and/or

make a recommendations that the employer take action to alleviate or reduce the effect of the act of discrimination on the complainant. Failure to comply with such an order can lead to an increase in the compensation ordered.

10. What is an unfair dismissal?

Every employee has the right not to be unfairly dismissed by his employer (section 94 ERA 1996). An employer must be able to show, not only that he had a good reason to dismiss, but also that he acted fairly in, for example, the way in which he handled the dismissal.

Eligibility

An employee requires one year’s continuous employment to qualify to make a claim and needs to be below the statutory age limit of 65 years old. There are exceptions to this and dismissals will be automatically unfair where the dismissal is for a reason relating to trade union membership, asserting certain statutory rights, on health and safety grounds or pregnancy related which are just a few examples. The employee must also have been dismissed.

If the issue is disputed, the burden of proof is on the employee to show that he was dismissed. This is particularly relevant where the employee claims to have been constructively dismissed. The employee must be able to convince a tribunal that there has been a repudiatory (serious) breach of contract by the employer and that the employee resigned in response to that breach. There must also not be too long a delay so that they may be regarded as having waived the right to take action on the breach.

The onus is on the employer to show that the dismissal is for one of the five permitted reasons under the ERA. They are:

Relating to the capability or qualifications of the employee to do the work of the kind which he was employed to do; or

Relating to the conduct of the employee; or

The employee was redundant; or

The employee could not continue to work in the position held without contravening some statutory provision; or

That there was some other substantial reason justifying dismissal of an employee holding the position which that employee held.

11. What can an employee do about an unfair dismissal?

The Employee can commence proceedings in the employment tribunal against the employer and any such proceedings should be commenced within 3 months of the termination date of the employment.

12. If the dismissal is found to be unfair what compensation can the employee obtain?

If the employer cannot show that the dismissal was one of the five permitted reasons or an employment tribunal decides that the employer acted unreasonably, the dismissal will be unfair. The Employee is successful will be entitled to a basic award (based on statutory redundancy pay) and a compensatory award which is up to maximum of £55,000. It is also possible for the tribunal in some circumstances to order re-instatement or re-engagement. If the employer refuses although the tribunal can not force this it can introduce additional fines.

13, 14, 15

Do you have collective/trade union law? If so, what rights does an employee have ? Does the employer have to accept collective/trade union law?

A collective agreement as such, is not normally enforceable in law, but its terms may become incorporated into the individual contracts of employment of the employees, and therefore have contractual force indirectly.

Unions can and do make ordinary contracts; contracts of employment, contracts for the supply of goods or services and so on, and they are, of course, legally enforceable in the normal way but collective agreements fall into a different category. In general terms, a collective agreement might be described as an agreement reached between a union and an employer as a result of collective bargaining. Such a collective agreement is not usually enforceable as a matter of law. The sanction for its breach is, ultimately, industrial action not legal action.

Although collective agreements are rarely legally binding in themselves, their provisions have traditionally had an enormous effect on individual employment relationships. There effect has traditionally been both normative, in setting standards of behaviour and contractual, in defining individual legal rights and duties.

Where a collective agreement is wholly or partially incorporated into an individual employee’s contract of employment the relevant terms become legally enforceable as part of that individual’s terms and conditions despite the agreement itself being binding in honour only between the employer and trade union.

The incorporated terms remain a legally enforceable part of that contract even when the collective agreement is terminated. See Gibbons v Associated British Ports [1985] IRLA Base 376 where an incorporated term was upheld when the parent local agreement had been terminated despite reference in the individual’s contract to “national or local agreements for the time being enforced”.

There is a statutory recognition procedure whereby a union can apply to the employer to be recognised and if this is refused there is a mechanism for this to be challenged.

16, 17, 18. Can an individual from another country come and work in your country? If so, is there immigration controls/work permits that need to be applied for? What criteria are used for any such applications?

Employees, who are not seconded overseas by their UK employer, and choose to accept employment from a non-UK employer outside the UK, will be subject to the employment laws of the country in which they are employed. An employee who is seconded by a UK employer to an associated company outside the UK may retain a contract of employment that is still subject UK law. An employee who is seconded outside the UK for more than one month must receive written details of:

The duration of the secondment

The currency in which he will be paid

Any additional remuneration and benefits provided

Any terms relating to repatriation

If that employee’s employment is terminated whilst ordinarily working outside the UK, then that employee may have the right to bring a claim in the UK against his employer for breach of contract but will have no statutory employment rights because at the time of dismissal the employee worked wholly or mainly outside the UK. The employee may, however, have statutory employment rights in the country where he works. This will depend on the relevant law in that country.

If an employer wishes to employ someone from another country then dependent on that country an application may have to be made for a work permit. This has to be completed by the company concerned although if there is no official representative in this country it can be signed on the company’s behalf by a Solicitor if instructed. It must be made before the individual is employed.

An employer based in Great Britain can make a work permit application if they need to employ a person to work in Great Britain to do a specific job, normally on a full time basis. The employee would become an employee of the British company and if the company has not applied for a work permit in the last five years, and then they should send documentary proof to show that they are still trading.

General criteria

Any application is set against the general criteria as follows:

Whether there is a genuine vacancy for an employee in Great Britain.

What skills, qualifications, and experience are needed to do the job

Whether the person is suitably qualified and experienced

Whether there are suitably qualified and experienced “resident workers” available

Normally work permits are only issued for jobs that need a high level of skill. Work permits can be granted for up to 5 years and may be renewable on application.

19. What does an employer have to do if he receives an application from someone who is not a national in your country for a job?

The employer will be expected to check the immigration status of the applicant by asking to see his passport or other such documentation confirming this. The employer should then not employ the applicant if he does not have permission to take paid or unpaid work in this country. If the applicant needs a work permit then this must be applied for before any work is offered to the employee.

20. What is the tax position for a foreign employee?

When an employee leaves the UK to take up full-time employment abroad for a period spanning a complete tax year, the Inland Revenue will normally treat him as ceasing to be a resident of the UK for tax purposes from the date of departure. From that date, all investment income and employment income relating to duties performed abroad will be outside the scope of the UK tax. Any income related to duties performed in the UK will remain taxable in the UK, subject to the provisions of any relevant double taxation treaty. Such treaties normally provide that an individual be taxed only in the country of his normal residence.

An individual’s residence will not normally be affected by a temporary period of absence which does not include a complete tax year. Employees ordinarily resident in the UK (most UK nationals who habitually reside in the UK and foreign nationals so residing with some degree of permanence) will be subject to UK tax on worldwide income. Those resident, but not ordinarily resident (indicating a lesser degree of permanence in the UK) will escape UK tax on earnings relating to overseas duties so long as they are not remitted to the UK.

Persons resident and ordinarily resident in the UK who are absent from the UK to work abroad may be eligible for an Inland Revenue concession. If the employee works abroad during a period which includes a complete tax year, and returns to the UK for visits for less than 183 days in any tax year and less than 11 days a year on average will be treated as neither resident nor ordinarily resident during his absence abroad.

21, 22, 23. Are employees protected in the event of a sale or a purchase of a business?

If so, what rights do employees have and what can they do about it?

What does an employer have to do in the event of a sale or a purchase of a business which includes employees?

Protection is afforded to employees by the Transfer of Undertakings (Protection of Employment) Regulations 1981, also known as TUPE. The Regulations were enacted to give effect to the EC Required Rights Directive 77/187 and are intended to protect the employees’ employment in the event that the undertaking where they work is transferred by the employer to a new owner.

Where TUPE applies the transfer of the undertaking will not terminate the employee’s contract although an employee has the right to elect not to transfer. In these circumstances the employee’s employment ends by operation of law and a claim can not be made. There will not be a dismissal simply because there is a transfer.

In a TUPE situation, the employee will transfer with the undertaking and will be employed by the new owner and is entitled to have is employment and the terms protected as that with his original employer. If there are any dismissals, whether actual or constructive and, whether before or after the transfer, and, if those dismissals are connected with the transfer, and they may be automatically unfair unless, there is an economic, technical or organisational (“eto”) reason. Liabilities for employment claims generally pass from the transferor to the transferee.

There have been many difficulties about whether or not TUPE applies. The best way to interpret the legislation is by looking at recent case law and in the case of Cheeseman & Others -v- R Brewer Contractors Limited [2001], the Employment Appeals Tribunal found it necessary to consider two questions when deciding when TUPE applies and this was followed by the European Court of Justice in Liskojarv & Another -v- Oy Liikenne Ab [2001];

Whether there is an undertaking?

Whether the undertaking transfers and retains its identity post transfer.

Employers also have duties to consult and inform employees about transfers. This whole area is fraught with difficulty and advice should be sought.

24. What is the position regarding agents in your country, briefly outline how agents are dealt with and what documentation is required?

Apart from The Commercial Agents (Council Directive) Regulations 1993, the salient points of which are set out below, there are no specific laws relating to persons wishing to act as agents in the UK, whether they are EU or non-EU citizens. Of course, such persons from outside the EU will have to comply with the relevant immigration requirements to be able to work here as an agent.

The Commercial Agents (Council Directive) Regulations were implemented in 1993 in order to create uniformity across the EU with regard to self-employed agents and as such, are the same throughout the EU.

A “commercial agent” means a self employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (the principal), or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal.

Amongst the most important provisions here are the payment provisions:

1. Regulation 7, which stipulates that an agent will be entitled to commission where a contract has been executed as a result of his action or, when he has brought a referral which has resulted in a contract.

2. Regulation 10, which stipulates when the payment of commission to the agent is to be made - payment will become due on execution of the contract by the principal, or, when execution by the principal should have occurred, or, when the third party executed the transaction. Payment of commission, at the latest, must be made on the last day of the month following the quarter in which it became due.

3. Regulation 17 details the entitlement to indemnity or compensation on termination of the agency contract.

The law in the UK has further evolved in the landmark decision of Ingmar GB Ltd v. Eaton Leonard Technologies Inc, where a British agent working for a principal in California, USA, was able to sue for his commission in an English court, even though the contract stated that Californian law governed the contract. This gives great comfort to an agent working in the UK, or indeed, the EU, to know that they can enforce their rights under the regulations in an English or domestic court, even though the principal is based in a non-EU country.

Generally, an agent working in the UK will generally not be liable in any way for any contract he negotiates with a third party on behalf of the ‘principal’, (the person giving authority to the agent authorising him to act on his behalf), and therefore the agent cannot be sued by the third party. However, if, through usual course of business/trade custom, an agent is seen as being able to be liable, or, where the agent may guarantee the third party’s performance for increased commission, then the agent may be liable if to the any third party or indeed, the principal.

Whilst there are no specific laws governing the supervision of agents, many areas of business have voluntary associations and, in particular incidences, an agent may have to be on an approved agent list to practice as an agent in England. For example, the Football Association is the body which regulates football agents in England and anyone wishing to act as a football agent will have to seek the approval of the F.A. to work here. It would be wise for anyone seeking to come to work in the UK s an agent to check and see whether they need to apply to become a member of the industry specific body.

Nick Hine

Thomas Eggar

England