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10 Employment Law myths debunked

1. TUPE only protects employees for 2 years.

This is a common myth which originated from two cases heard by the Employment Appeals Tribunal in 1999 and 2000.

In one of these cases, the employee had 2 years’ service and the change was deemed to be related to the transfer. In the other case, where the employee had over 2 years’ service, the change was deemed not to have been as a result of the transfer. People therefore assumed that any change after 2 years would never be related to the transfer, when in actual fact these decisions were fact-specific and had nothing to do with the length of time that had passed.

Changes in terms and conditions post transfer are generally not permitted unless they were made for an economic, technical or organisational reason (ETO), entailing a change in the workforce.

2. Probationary periods aren’t useful.

It is a common misconception among employees that they are protected against dismissal once they have passed their probationary period. This is only the case after 2 years of qualifying service.

Employers used to commonly use probationary periods to restrict access to occupational pension schemes, but this is now irrelevant due to auto-enrolment.

Probationary periods can still be useful, particularly as employees can be subject to shorter notice periods during their probation period, for example.

Probationary periods may also be useful if the employer provide specific contractual benefits, such as medical insurance or enhanced sick pay, which they want to restrict access to.

3. You must exclude an employee who is pregnant or on maternity leave form any redundancy exercise.

For both pregnant employees and employees on maternity leave, the normal rules about the redundancy process apply whereby you must remove any disadvantage that the employee may have as a result of their pregnancy or maternity leave.

Under the Maternity and Parental Care Regulations, women on maternity leave have the right to be offered a suitable alternative vacancy if they are going to be made redundant. This right extends to vacancies with associated employers where the employer is part of a group company.

However, this protection only takes effect at the point that the employee is chosen for redundancy and only applies to employees on maternity leave.
 
You must therefore include women on maternity leave in the pooling and selection process for redundancy and you must select for redundancy fairly. Failure to do so can lead to claims from both employees who are on maternity leave and employees who are not on maternity leave.

4. You don’t have to take into account an employees’ disability if they have committed misconduct.

It is a well-known fact that you have to factor in an employee’s disability in capability dismissals. The most common claim relating to disability is for discrimination arising from a disability under section 15 of the Equality Act 2010, whereby an employee is treated less favourably as a result of their disability. This applies to all types of dismissal.

Therefore in a redundancy exercise, you should not only discount any absences related to the disability, you should also factor in whether their performance is affected by their disability.

It can also be relevant to gross misconduct, particularly if an employee suffers from a disability which can cause lapses in their judgment and they commit an act which would ordinarily be considered gross misconduct. In this scenario you would need to take their disability into account.

However, employers can rely on the defence that their actions are a proportionate means of achieving a legitimate aim and therefore the mere fact that an employee is disabled is not a shield to dismissal.

5. An employee who has exhausted their sick pay, won’t be paid their notice.

This is not always the case.

Where the employee is entitled to at least 1 week more than the statutory notice (maximum 12 weeks), they will not be entitled to any pay for the duration of their contractual notice, regardless of whether the employee or the employer gave notice.

Where the employee is entitled to notice that is equivalent to the statutory notice, they are entitled to full pay (or average weekly pay where the employee does not work set hours), for the duration of the statutory notice period, even if they have exhausted all their sick pay, or where they are entitled to Statutory Sick Pay only.

Any payments such as sick pay which are made to the employee during their absence can be offset against the notice pay due, provided that they are still receiving these payments at the time notice is given.

6. You cannot make someone work their notice period

Notice is required to lawfully terminate a contract of employment and the requirement to give notice is normally a term of the written contract. Where there is no written contract or no express term, the statutory notice will apply.

The contract of employment will continue as normal during the notice period, unless the employer and employee agree otherwise. The employee is therefore obliged to work their notice and the employer is required to pay the employee and fulfil all of its obligations under the contract.

Practically speaking, the employer needs to consider whether or not the employee wants to remain at work.

Employers may want to consider reducing the employee’s client contact, placing them in an alternative role, or putting the employee on garden leave if the contract of employment contains and express power to do so.

7. Legal action will be effective if an employee breaks their notice period.

In reality, there is not much you can do if an employee ignores their notice period, but a failure to work the required notice will be a breach of contract.

To succeed in a claim for breach of contract, the employer will need to show that it has suffered a loss as a result of the failure to work the notice. The most common example of this is where the employer had to hire a temporary member of staff to cover for the outgoing employee.

A more drastic option could be to seek an injunction to keep the employee out of the job market for the duration of the notice, but it will be for the Tribunal to decide whether or not to enforce such an injunction.

The employee’s conduct can be reflected in their reference, however by the time you have provided the reference, the employee is likely to have already secured alternative employment.

8. You can always dismiss an employee with less than 2 years’ service.

Not always.

 Although it is generally thought that an employee can be dismissed right up to the two year anniversary of their employment, it is actually 1 year and 51 weeks, as the length of service is extended by the statutory notice period.

 Furthermore, there are additional safeguards in certain situations which mean that an employer cannot always dismiss an employee who has less than 1 year and 51 weeks service. These include:

  • Dismissals connected with any of the protected characteristics under the Equality Act 2010;
  • Dismissals for health and safety reasons;
  • Dismissals in connection with the Working Time Regulations;
  • Dismissals for performing functions as an employee representative;
  • Dismissal for asserting a statutory right; and
  • Dismissals in connection with making a protected disclosure.

A dismissal for one of the above reasons may entitle an employee to bring a claim for unfair dismissal and potentially discrimination, despite their short service.

9. You never tax termination payments under £30,000.

There is no straight forward yes or no answer.

From 6 April 2018 all payments in lieu of notice (PILONs) are subject to tax and national insurance contributions, regardless of whether there is a PILON clause in the contract of employment or not.

 As the employee’s entire notice period is now subject to tax, employers need to make sure that they have calculated how much of any relevant termination award is considered to relate to the employee’s notice period. The remainder of the award will then be exempt from tax and NI contributions, up to £30,000.

Employers cannot agree a shorter notice period with the employee, waive the notice period entirely or make a bulk payment in order to avoid tax and national insurance contributions and HMRC are becoming more vigilant in relation to termination payments.

Practical examples:

  • Where an employee works their notice in full, any award made will not be subject to tax.
  • Where an employee does not work their notice and there is a PILON clause in the contract, the amount of the award which represents notice pay will be subject to tax and the remainder of the award will be tax free.
  • Where an employee only works part of their notice period, the amount of the notice period that the employee has not worked will be deducted from the termination payment and subject to tax and the remainder will be tax free.
  • Where there is no contractual notice, the employee would be paid their statutory notice pay calculated on their length of service and this amount will be subject to tax. The remainder of any termination payment will be tax free.

10. You can’t give a negative reference

You can give a negative reference, but employers should do so at their own risk.

Only certain industries such as those regulated by the Financial Services Authority are required to give a reference by law, so employers can choose whether or not to provide a reference and, if so, how much information they wish to provide.

The referee owes a duty to take reasonable care to ensure that the reference is true, accurate and fair and does not give a misleading impression of the employee. Employers must ensure that any negative comments are supported by reliable evidence which they reasonably believe to be true.

There are several potential claims open to employees where a negative reference has been provided, which include but are not limited to:

  • Disability discrimination, particularly where comments are made about performance, attendance or sickness absence;
  • Defamation;
  • Malicious falsehood, where the reference contains untrue words that were published maliciously;
  • Negligent misstatement where an employer provides an inaccurate reference and the prospective employer relies on this reference; and
  • Breach of contract.

As an alternative, an employer may choose to provide a very basic reference which simply outlines the employee’s dates of employment and role.

Key contact

Mini Setty, Partner

Mini Setty

Partner

Call 01904 610886

Key contact

Kate Hindmarch, Partner

Kate Hindmarch

Partner

Call 01522 888555