Dates for new employment laws
The Government has implemented one of the recommendations of the Better Regulation Taskforce, by agreeing to fix commencement dates for domestic employment regulations.
There will be two dates, 6 April and 1 October each year. These dates will not apply to existing European Directives, where deadlines, where deadlines have already been set, but from January 2004 the DTI will plan their coming into force on a case-by-case basis. For new Directives, the DTI will aim to negotiate three-year deadlines for implementation, so as to allow time for consultation, and commence the new law at one of the two new fixed dates.
From 2004, the DTI will also publish an annual statement of forthcoming employment regulations every January. An e-mail alert system has already been implemented in respect of the DTI's employment relations website.
ETs: territorial jurisdiction
Although the Government considered the changes made by the Employment Relations Act 1999 to the territorial jurisdiction of Employment Tribunals in its recently completed review of the Act, no new changes have been proposed. Unfortunately, those changes are now vexing the Employment Appeal Tribunal.
First, in the case of Lawson v. Serco Ltd, the Appeal Tribunal decided that tribunals had jurisdiction to hear unfair dismissal cases if the employer was incorporated or carried on business in England or Wales, irrespective of where the employee was based. So Mr Lawson, who had been working on Ascension Island in the South Atlantic, was able to pursue an unfair dismissal claim against Serco because it was a UK registered company, with its head office in the UK.
A few weeks later, on 15 April 2003, a differently constituted Appeal Tribunal came to a different decision on jurisdiction in the case of Bryant v. The Foreign and Commonwealth Office. The Tribunal upheld the traditional jurisdiction position, that employees working overseas could not claim unfair dismissal simply because their employer carried on business in the UK. In this case, the Applicant was working in Italy, was paid in Italy, and employed on local terms and conditions and her contract was subject to Italian law.
Unfortunately, there was no reference to the earlier Serco decision in the later Bryant case, so we have two conflicting decisions. The result is, of course, unsatisfactory and the DTI's decision not to clarify this aspect of the law is all the more regrettable. Hopefully, the uncertainty will be resolved by the Court of Appeal without too much delay, but in the meantime employers must be aware of the risk they will face claims under UK employment law from foreign employees – at least, if the UK provides more favourable rights for employees than the place of their employment.
That risk could be avoided or at least minimised by making sure foreign employees were employed by the relevant foreign incorporated subsidiary rather than by a home incorporated company. Of course, that will not always be practicable, and in those cases employers should be conscious of the risk they may be running.
Transfer of Undertakings
Transfer of Undertakings cases continue to plague the domestic and European courts. In the case of Alamo Group Europe v. Tucker and Twose of Tiverton Ltd, we do now have clear judicial authority that liability for a failure on the part of the transferor to inform and consult the transferring workforce is a liability which is transferred under TUPE to the transferee, even if the transferee is not at fault in that regard. Transferees need to take careful note of this decision, and make sure they obtain appropriate financial protection under the wording of the transfer contract.
In the case of Fairhurst Ward Abbots Ltd v. Botes Building Ltd, the Employment Appeal Tribunal held that it would not interfere with an Employment Tribunal's decision on TUPE's application. So, even where an undertaking was split into sub units following the transfer, and the transferee argued that it had not retained its identity after the transfer, the employees still had protected rights under TUPE.
The latest news from the DTI is that their consultation paper on revisions to the Transfer of Undertakings Regulations will now emerge in the summer.
Directors: breach of duty and conspiracy
In the case of British Midland Tool Ltd v. Midland International Tooling Ltd (2003 ALL ER (D) 174), the High Court has held a number of full-time working directors of a private company liable to pay hundreds of thousands of pounds in damages. The Court heard that a number of directors had hatched a plan to go into competition with the company for which they were then still working. One of them subsequently retired, but the others continued as directors for a while longer, before themselves resigning and immediately activating the new business.
The judge held that implementation of the directors' plan necessarily involved a breach of fiduciary duty by those individuals who remained, for the time being, directors of the claimant. It was established law, the judge held, that a director's duty to act so as to promote the best interests of the company prima facie included a duty to inform the company of any activity, actual or threatened, which might damage those interests, even where that involved telling tales on himself. The directors were therefore liable for the tort of conspiracy.
The decision would seem to make it easier for companies to take effective legal action against a group of directors who plan to go into competition before they have quit. Even though this decision should have a deterrent effect on directors who might be minded to quit and set up on their own, it is still no substitute for having appropriate restrictive covenants in the contracts of key worker-directors and key employees.
First published in Chartered Secretary, June 2003
