Can you put a price on love?

JonathanGolden

 

Should you be entitled to damages when no loss has been suffered?

Sometimes an employee has clients who give their work to an employer only because a particular employee works there, and the employer will lose those clients’ custom once the employee leaves.

Sometimes that employee has post-termination restrictions that prevent them from still dealing with those loyal clients after leaving, but they continue to deal with them anyway.

Strictly speaking, the employer has suffered no loss (because the clients would have gone anyway) but there has still been a breach of contract by the employee.

The idea of Wrotham Park damages is to address that situation: where an employee breaches their restrictive covenants, but the employer suffers no loss because of this.

The problem is that this situation is, essentially, a licence to kill (or at least a licence to breach a contract) that sits uncomfortably with upholding a contract and the principle of fair play.

The Supreme Court decided that Spring 2018 was the right time to return to this thorny issue, known as Wrotham Park damages.

In Wrotham Park, the principle of a “hypothetical bargain” or “licence fee” damages was introduced, by which the courts awarded damages based on the price the employee would have negotiated to be released from their restrictions.

This unrealistic and hypothetical after-the-event situation made commercial sense, but was untested and seemed to break the principle that you have to suffer a loss before getting damages.

Recently the Supreme Court, having reviewed this carefully, came to the conclusion that, generally, an employer can only claim for their financial loss.

The Supreme Court was also not prepared to move away from the idea that identifying the value of the loss is essential to an award of damages for breach of contract, but that if the breach by the employee can be shown to damage a valuable asset, or if a protected right is infringed, then “negotiating damages” can be used (an esoteric concept and one that’s likely to be limited to intellectual property and confidentiality rights being infringed by the departing employee).

As a result, an employer will either have to show loss of business or goodwill (which may be impossible) or seek damages based on the gain made by the departing employee by breaching their contract (restitutionary damages – another esoteric concept in employment law).

This leads us to questioning the price of love.

The reason is that, for the moment, an employee with a very loyal personal following can breach their restrictions and can still come out of the situation smelling of roses.

The solution for the employer is commercially romantic, rather than legal:   never allow any one person in your organisation to own the client – companies must ensure that their key clients are looked after by a team of staff interacting with the client at various levels within the organisation; and make your clients love your organisation, not individuals.

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Compensation (and shared parental things) made (slightly) easy(ier)

WynLewis

For those of you who like to know such things, these are the new rates for the main statutory payments and for the new capped amounts for compensation from 6th April 2015 onwards.

The exception – one wonders why, but let’s thank the Government anyway for this extra layer of complexity – is that the SMP, SAP and ShPP rates apply from 5th April 2015 (i.e. one day earlier).

             

SMP/SAP/ShPP:

up to £139.58 (from £138.18) per week.
MA:

up to £139.58 (from £138.18) per week.
SSP:

       

up to £88.45 (from £87.55) per week from 6 April 2015.
National Insurance:

the lower earnings limit applying to NICs, below which employees are not entitled to SSP, SMP, SPP, SAP and ShPP, will increase to £112 (from £111) per week.
Week’s Pay:

up to £475 (from £464) (maximum)
Basic Award:

up to £14,250 (from £13,920) (maximum)
Compensatory Award:

up to £78,335 (from £76,574) (maximum)

                                       
And, for those of you who are puzzled (who isn’t?) by the Byzantine rules of Shared Parental Leave and Pay, you’ll be pleased to know that BIS has published an online calculator to help work out the entitlements to time off and pay on the birth of a child, taking account of existing maternity and paternity leave rights under the new shared parental leave scheme which will apply to babies due on or after 5 April 2015.
It’s here:  https://www.gov.uk/government/news/calculate-your-leave-and-pay-when-you-have-a-child   Enjoy.

 

Changes to watch out for in April

CarolineLeaver

Below is a round up of the changes in employment law we can expect in the next few weeks:

Employment tribunals and compensatory awards – The maximum compensatory award will increase from £74,200 to £76,574 (subject to the limit of one year’s pay which has existed since July 2013) in respect of dismissals that take place on or after 6th April 2014.

Employment tribunals and a week’s pay – The maximum of a week’s pay increases from £450 to £464 in respect of dismissals and other entitlements on and from 6th April 2014. A week’s pay is used to calculate, amongst other things, the basic award for an unfair dismissal and the statutory redundancy payment.

It is worth bearing in mind that if an employer is about to commence a redundancy process, there will be a saving to the business if the redundancies are completed before 6th April 2014.

Employment tribunals and discrimination questionnaires – Discrimination questionnaires will be abolished from 6th April 2014. Although some employers found questionnaires cumbersome as collating the information could be onerous and they saw little value in them, others found them useful to prompt a quick resolution, either through early settlement or showing that no discrimination took place, and so preventing unnecessary proceedings.

Instead of questionnaires, there will now be a new ‘informal’ approach. The government considers that this non-legislative approach, which is set out in Acas guidance, will be “fairer for all” and that this will enable businesses to better challenge any unreasonable requests for information. The guidance has now been issued by Acas and includes advice on how individuals can ask questions and why employers and service providers should respond. http://www.acas.org.uk/media/pdf/m/p/Asking-and-responding-to-questions-of-discrimination-in-the-workplace.pdf

Therefore, repealing the statutory questionnaire procedure does not prevent individuals who believe that they have been discriminated against from using other means of obtaining information. It will simply remove the statutory mechanism, not the scope for establishing facts about whether discrimination has occurred. There is no legal obligation to answer any questions. However, a Tribunal may look at whether a business has responded and, if so, how they have responded as a factor when considering their decision on a discrimination claim. Also the Tribunal can actually order a business to provide answers as part of the process in any event. These are issues a business would need to weigh up when considering whether to reply and what to say.

Employment tribunals and Acas conciliation – the early conciliation scheme will start on 6th April 2014 and there will be a transitional period between 6th April and 5th May 2014 during which time prospective claimants can participate in early conciliation which will become mandatory in respect of claims presented on or after 6th May 2014. The intention behind the introduction of conciliation periods is to give the parties an opportunity to settle any claims before a claim is submitted, thereby reducing claims and making the tribunal system more effective.

Before lodging a claim, a prospective claimant must send Acas information of the claim in the prescribed manner and then Acas will forward this information to a conciliation officer. The officer must try to promote settlement within one month and if settlement is not reached, either because settlement is not possible in the conciliation officer’s view or the period expires, the officer must issue a certificate to that effect. A claimant may not submit a claim in tribunal without this certificate.

The introduction of fees in the employment tribunal on 29th July 2013 and the effect they have had on the number of employment tribunal claims (please see our earlier blog on this topic) may have a significant effect on the parties’ willingness to settle.

Individuals may be more willing to settle (and may therefore settle for a lower amount) in order to save the issue fee. Employers, on the other hand, may show an increased tendency to “wait and see” whether the claimant is serious, and may therefore be less likely to settle (or less likely to offer anything other than a derisory sum in settlement) until after the fee has been paid.

Only time will tell.

Employment Tribunal statistics: the introduction of fees in tribunals is resulting in a staggering reduction of claims. Is it all good news?

JonathanGolden

Many of us predicted that the introduction of fees in July 2013 for claims in Employment Tribunals would reduce the number of claims being brought. However, none of us anticipated a staggering 79% drop in the number of applications lodged in the last quarter of 2013 (compared with the same period in 2012).

Is it good news for employers? Generally it is because troublesome claimants with weak claims who were clogging up the system and wasting management time and cost seem, for the moment at least, to be a thing of the past. However, there is a sting in the tail because successful claimants can generally expect to recover their fees from employers, and the Employment Appeal Tribunal has recently confirmed that this applies to appeals as well. And as from 6 April 2014, tribunals will also be able to impose financial penalties on employers where it is decided that an employer has acted unreasonably, for example where there has been malice or negligence involved in an employee’s treatment. Penalties will be 50% of the award made to a claimant and subject to a cap of £5,000.

Is it good news for employees? Not really because any penalty awarded goes to the government’s Consolidated Fund and not to them.

Is the new system serving the interests of justice? The government would say it is because it is increasingly taking a utilitarian view of access to justice, namely that a tribunal system which is not bogged down with bad claims and pays for itself must be good for the majority of legitimate claimants because it produces an efficient and sustainable system of justice.

We, and most employment lawyers, feel instead that it is a travesty because the tribunal system no longer serves the people it was set up to protect; individual justice has been lost. True enough, many of the time wasters will be among the 79% of claims not brought, but so too are the majority of the bread and butter claims by employees who have not been paid their salary or who have been summarily dismissed without justification.

Even without being a cynic, it is easy to see that the tribunal system no longer serves the majority of its constituency: for those who can actually afford to pay lawyers (a shrinking minority), the new cap of £76,574 as from April 2014 on normal awards and the inability to recover costs (rather than tribunal fees) even if successful make most claims uneconomic. For the low paid, the lack of a costs regime puts them in the hands of ‘no win, no fee’ lawyers who need a quick solution in order to make claims pay, and who are reluctant to front any fees. The government and employers are happy, as they can report that claims are reducing as are the costs of a bloated system.

I feel that the balance is wrong and there is likely to be a market solution found with both employers and employees having to insure themselves against the possibility of claims, and the insurers acting as gatekeepers, only allowing legitimate claims with good prospects of success to proceed and managing the costs in any claim or defence they support.

Change in the level of unfair dismissal compensatory award

CarolineLeaver

There is a new limit on the maximum compensatory award for unfair dismissals.   For terminations which fall after Monday, 29th July 2013, the limit of the compensatory award in most types of unfair dismissal claims is now 52 weeks’ pay or £74,200 (as at 1st 1 February 2013), whichever is the lower.  The limit remains at £74,200 for terminations on or before 28th July 2013.