Newsletter
What's new in the world of work - A Global People and Reward Update (Spring 2018)
International
Whistleblowing is on the rise
We recently published the results of our second whistleblowing survey – gathering opinions from 2,500 business managers across Germany, France, Hong Kong, the UK and the US on attitudes to whistleblowing. According to the survey’s findings, almost half of business managers have been involved in whistleblowing, suggesting that there has been a shift in behaviour since 2014, when only 34 per cent reported the same level of engagement. Similarly only 13 per cent of business managers now claim that their employers are discouraging whistleblowing, down from 40 per cent in 2014.While the trend is in the right direction, organisations still have a clear interest in ensuring that the right whistleblowing framework and culture is in place to encourage employees to speak up without fear of retaliation
Please see our report here for full details of the trends revealed by the survey.
Global unions reach settlement on Bangladesh Accord with multinational brand
IndustriALL Global Union and UNI Global Union have announced a settlement with a multinational apparel brand to remedy life-threatening workplace conditions. The settlement concludes an arbitration process under the Bangladesh Accord for Fire and Building Safety, which was set up in the immediate aftermath of the Rana Plaza textile factory collapse in 2013.The case, heard at the Permanent Court of Arbitration in The Hague, was filed in 2016 after the global unions complained that basic safety features at the brand’s known supplier factories had not been timely addressed.
The brand, which cannot be named under the terms of the settlement, has agreed to pay US $2 million towards remediation at more than 150 garment factories in Bangladesh. It will contribute a further US$300,000 into IndustriALL and UNI’s joint Supply Chain Worker Support Fund, established to support union-backed efforts to improve pay and conditions for workers in global supply chains.
All necessary safety improvements need to be completed by the Accord’s expiration in May 2018.
This was the second arbitration case settled under the accord. In December 2017, IndustriALL and UNI reached another agreement with a brand using more than 200 factories in Bangladesh. However, the terms of that settlement were kept confidential.
Please note that a new version of the Accord was signed in June 2017 and will go into effect and extend the accord’s protections until 31 May 2021.
European Union
Pregnant women may be terminated in case of collective redundancies
In Porras Guisado v Bankia S.A. (C-103/16), the European Court of Justice (ECJ) ruled that even pregnant women may be terminated in case of collective redundancies. However, the employer must inform the relevant workers of the grounds for dismissal and the factual criteria according to which they were selected for dismissal.Please read our blog post examining this decision.
ECJ clarifies the notion of working time: stand-by time is not rest time and thus needs to be paid
The controversy over the qualification of stand-by duty and/or availability time as working time has been addressed on several occasions by the ECJ. In the latest decision in Matzak (C-518/15), the ECJ stated that the amount of time a Belgian worker (volunteer firefighter) spends at home to be ready to work within 8 minutes in case of call by the employer needs to be considered as working time.The determining factor for the qualification as ‘working time’ according to the Directive 2003/88 is the requirement that the worker be physically present at a place established by the employer to be able to immediately provide the services requested. In the presence of such an obligation, the stand-by duty cannot be considered as a period of simple “availability” which is where the worker – while having to be always reachable – is not obliged to be present at a certain place.
The decision will be potentially be relevant to all industries making use of “on call employment” (eg health sector and also platforms).
ECHR rules video surveillance of employees breaches their right to privacy
In the case Lopez Ribalda v Spain, on 9 January 2018, the European Court of Human Rights (ECHR) ruled in favour of five Spanish employees that had been dismissed on the basis of video material that proved they were stealing from the supermarket they worked in. The employees alleged the video material had been obtained in breach of their right to privacy.The Court found that the dismissals were nevertheless valid on other grounds.
Please read our blog post, which analyses the ECHR’s reasoning also in light of the previous Barbulescu v Romania decision.
Advocate General gives opinion in two cases concerning compensation for fixed term workers
In two recent cases referred by Spanish courts (Grupo Norte (C-574/16) and Montero Mateos (C-677/16), the AG suggests that it is not discriminatory for a fixed term worker to receive less compensation (or none) on the expiry of the contract compared to worker dismissed on objective grounds. According to the AG, fixed-term workers are not in a comparable situation with respect to permanent workers because termination of their employment is predictable, whereas economic difficulties leading to dismissals for objective reasons are not generally predictable. Therefore, the payment of compensation on the dismissal of a permanent worker is intended to compensate the frustrated expectations that the employment will not continue – expectations which the fixed term worker cannot legitimately have.The ECJ has yet to give its judgment in the cases and may decide to follow the AG’s opinions which would mark a change to previous case law.
Categorisation of workers: ECJ holiday pay judgment
On 29 November 2017, the ECJ handed down its judgment in the holiday pay case - King v The Sash Windows Workshop.The key takeaway points from the judgment are:
• if a business wrongly categorises its workers as self-employed and, on that basis, does not allow them to take paid holiday; and
• those individuals later successfully claim that they are ‘workers’; and
• those individuals did not take any or all of their four weeks ‘EU holiday’ during the time they were classified as self-employed,
those workers will be able to claim successfully for backdated holiday pay in respect of that untaken holiday and there should be no limit on the number of years for which they can claim that backdated holiday pay.
For further details, please see our blog post here.
Improved transparency and predictability of working conditions across the EU
The European Commission issued a proposal for a new Directive on 21 December 2017, which updates existing obligations to inform workers in writing of their working conditions. It further creates new minimum standards to ensure that all workers benefit from more predictability and clarity as regards their working conditions.The proposal also reduces administrative burden on employers, for instance by giving them the possibility to provide the requested information electronically. The proposal forms part of the European Social Pillar initiative, on which we reported in our previous editions.
In particular, the Commission aims to:
• align the definition of worker to the case law of the ECJ;
• extend the scope of the Directive to new/atypical forms of employment (such as on-demand workers, voucher-based workers and platform workers);
• ensure that workers are provided with an updated and extended information package directly at the start of employment, instead of two months following the starting date (as is currently the case);
• create new minimum rights, such as the right to greater predictability of work for those working mostly with a variable schedule, the possibility to request transition to a more stable form of employment and receive a reply in writing, or the right to mandatory training without deduction from salary; and strengthen the means of enforcement and redress as a last resort to solve potential conflicts.
In accordance with the ordinary legislative procedure, this proposal will now be examined by the European Parliament and the Council.
Citizens’ rights after Brexit
On 28 February the European Commission published its draft of the agreement for the UK’s withdrawal from the EU. The outlines of the agreement were sketched out in the joint report of the EU and UK negotiators of 8 December 2017 (please see our briefing here) and in the EU’s supplementary guidelines of 29 January 2018.The Commission draft contains a few proposals which go beyond the December report, in particular eligibility for acquisition of EU citizens’ rights which will continue beyond Brexit will not end with UK withdrawal on 29 March 2019 but will now continue until the end of the transitional period.
The agreement would apply to all EU citizens residing in the UK before the end of the post-Brexit transition period (currently proposed by the EU as 31 December 2020), and all UK citizens in an EU Member State before that date, as well as their family members.
The agreement also provides that for EU citizens who arrive in the UK during the transition period, their family members would be able to join them in the UK after the transition period ends on the same basis that they are currently able to. The same position would apply to family members of UK citizens living in the EU. This contradicts the position taken by the UK in the Home Office Policy Statement, which is that where an EU citizen arrives in the UK during the transition period, family members who join the citizen after the transition period ends will be subject to the rules applicable to their nationality: if they are an EU citizen, they will be subject to the post-Brexit immigration regime agreed between the EU, and if they are a non-EU national they will be subject to the immigration rules that apply to non-EU national family members joining British citizens in the UK (e.g. they will have to meet an income threshold of £18,600 per annum).
So-called “frontier workers” who reside in the EU and work regularly in the UK (or vice versa) during the transition period would continue to have the right to do this after the period ends.
The agreement also proposes that UK citizens who reside in one EU Member State at the end of the transition period would not be able to exercise free movement rights in order to move to another EU Member State thereafter.
Recognised professional qualifications including those in the course of obtaining approval are grandfathered. However, by implication, after the end of the transitional period it will be necessary to obtain recognition of qualifications directly in the host state, unless agreement can be reached on recognition of qualifications in the future relationship agreement.
Asia
Asia employment law horizon scanning 2018
The past 12 months has seen a number of legal developments, including changes to working time regulations in Hong Kong, Japan, South Korea and Taiwan. The need for higher data protection standards has resulted in new data privacy regimes in China and the Philippines (not to mention GDPR, the new EU data protection regime, which enters into force this May and will impact on Asia based employers). Whistleblowing has also come to the forefront, with existing laws being reviewed in Australia. Lastly, the #MeToo campaign has reached Asia as well, with a renewed wave of awareness over issues of sexual harassment, particularly in Australia and Singapore. Read more in the 2018 edition of our Asia employment law horizon scanning, which discusses legal developments in 14 jurisdictions (Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, Vietnam). Laura ChapmanAustria
30% Gender Quota for Supervisory Boards
On 1 January 2018, Austria has joined the ranks of the other few EU countries that have a gender quota for supervisory boards. The new law for gender equality applies to any corporation (AG, GmbH, SE or Gen) (i) with a supervisory board made up of at least six shareholder representatives, (ii) listed on the stock exchange or having more than 1,000 employees, and (iii) in which at least 20% of the workforce is female and 20% male. It mandates that 30% of the supervisory board members must be female and 30% male otherwise the appointment is deemed null and void (so-called "vacant chair penalty"). Under certain conditions, the relevant quota may be satisfied by the employee representatives on the supervisory board alone.Belgium
Tax efficient employee incentive
The new Employee Profit Sharing Premium entered into force in Belgium on 1 January 2018. The new regime allows employers to distribute all or part of the company’s profits to their employees in cash. Its favourable tax and social security treatment and its straightforward way of implementation make the Employee Profit Sharing Premium an interesting opportunity to incentivise your employees. Please read more in our briefing.Whistleblowing in the financial industry
New obligations on whistleblowing procedures came into effect in late 2017 and early 2018 for persons and entities falling under the scope of the anti-money laundering law or subject to financial supervision by the Financial Services and Markets Authority (FSMA). Please read more about the new measures in our recent briefing.France
A new French data privacy bill
The Council of Ministers has adopted a draft law on the protection of personal data to adapt French data protection law to the new European legal framework, and more specifically to the General Data Protection Regulation (GDPR), which will come into force on 25 May 2018.The bill provides for the abolition of most of the filing/authorisation formalities currently required before carrying out personal data processing, and significantly strengthens the power of control and sanction of the French data protection authority (the CNIL).
This bill will be examined in Parliament. Moreover, it is intended to be supplemented by an order making more detailed changes to national legislation on data protection.
New measures for “material risk takers” in banks
Following the Macron labour law reforms published in September 2017, the French Parliament is discussing proposed legislation concerning material risk takers (MRTs) for purposes of remuneration policies applied by banks in accordance with the Capital Requirements Directive (CRD) IV:• The bill allows for malus and clawback (enabling an employer to reduce the amount of deferred bonus that will be paid to the employee or to recover bonus already paid) on grounds of misconduct. Currently such clauses are generally unenforceable in France.
• The bill also provides that the amount of bonus to which the employee is entitled or that has already been paid is not taken into account to calculate severance payments or to calculate the damages granted for unfair dismissal.
Clarifying dismissal grounds
Several decrees were published at the end of 2017 in order for certain provisions of the administrative orders published on 22 September 2017 to be enforceable. One of them contains more detail on the new right for the employer to clarify the dismissal grounds after notice of dismissal.Until now, the rule was that the employer was bound by the terms of the dismissal letter once sent and could not add or remove anything. If the letter was not sufficiently detailed, this was enough to make the dismissal unfair, typically giving rise to an obligation for the court to award at least six months’ pay in damages.
The decree provides that the employer can clarify the dismissal grounds stated in the dismissal letter if the employee so requests within 15 days from notification of dismissal (the employer has 15 days to respond). If no request is received from the employee, the employer has 15 days from the date of the dismissal letter to provide clarification if it so wishes.
The administrative orders provide that if the employee does not ask for clarification of the grounds stated in the letter, and then if he/she later wins an unfair dismissal claim, the damages are capped at one month’s pay.
Therefore, employees are likely to ask for clarification.
“Neutrality” clauses in companies’ internal regulations
The French Supreme Court has accepted, subject to certain conditions, that the “internal regulations” that must be adopted by private sector companies with at least 20 employees can include a “neutrality” clause forbidding employees from wearing any visible political, philosophical or religious signs. In order to be valid, the clause must cover all three areas (religious, political and philosophical) and must only apply to employees in contact with customers. In addition, the employer must, before considering a possible dismissal, attempt to find a redeployment position for the employee concerned. This decision follows two recent preliminary rulings by the ECJ that subject to certain conditions, general neutrality clauses can be compatible with the Directive prohibiting discrimination based on religious beliefs.Germany
IG Metall and employers reach deal on work-life balance
IG Metall and employers have reached a deal on wages and working hours in the metal and electrical sectors that establishes a benchmark for workers’ right to determine their work-life balance.The sector-wide collective agreement has a duration of 27 months and was signed between IG Metall and the Südwestmetall (South West) employer’s organization, after several rounds of negotiation and a series of 24-hour “warning strikes”.
The agreement is for a 4.3% pay increase from April plus further annual one-off payments of 27.5% and 12.3% of the monthly salary. The deal also means employees will have the right to reduce their weekly working hours from 35 to 28 hours for a period of up to two years, while employers in return will be able to agree with more workers on longer 40-hour weeks to meet spikes in demand. Also, employers may reject the working time reduction if too many employees wish to do so at the same time. Beyond that, employees who need time for family and caring responsibilities may exchange the 27.5% one-off payment against 8 additional days off.
It is likely that employer organizations in other regions will sign up to the same terms.
Changes to German employment law in 2018
On 1 January 2018 some relevant changes to German employment law took effect:• Various amendments to the new Maternity Protection Act from 2017 came into force. One of the changes is that maternity protection now also applies to school pupils, students and interns as well as to persons in an employee-like relationship (e.g. freelancers). Moreover, the special protection of pregnant women against dismissal has been extended to "preparatory measures" to such decision. Therefore, a dismissal taking place after the protection period may be held void if certain preparatory steps took place during the protection period. Employers will have to consider closely to what extent investigations, formal preparation steps for dismissal or the search for alternative candidates are allowed during the protection period.
The reform on the other side also provides employers with more flexibility regarding pregnant employees' working hours. The existing ban on work on Sundays and public holidays is being relaxed and pregnant employees are allowed to work at night if they consent to it and certain criteria are satisfied.
• According to the new Pay Transparency Act (see our Summer 2017 edition), from 1 January 2018 employees are under certain circumstances entitled to request individual pay-related information in order to check equal pay. In companies with regularly more than 200 employees the employer must at least every two years disclose the average gross salary he pays to comparable employees of the opposite sex and which criteria he applies for the wage setting, if so requested by an employee. The act does not stipulate direct sanctions for non-compliance, however, a lack of information may give employees reason to claim compensation in accordance with the German Equal Treatment Act.
Federal Employment Court submits case on agency workers to ECJ
On 16 November 2017 the Federal Employment Court submitted a case to the ECJ (2 AZR 90/17) asking if agency workers need to be taken into account for the relevant thresholds for mass dismissal notification. According to Sec. 17 of the German Dismissal Protection Act (based on the European Council Directive 98/59/EC) employers have to notify the German Federal Employment Agency about mass dismissals that concern a certain percentage of employees. Non-compliance results in the dismissals being null and void.The employer had taken the position that agency workers were to be taken into account with regard to the threshold. As a result, less than the relevant 10% the workforce would have been affected by the dismissals, and thus no notification would have been required. The previous instance (Higher Employment Court Düsseldorf) did not take agency workers into consideration for the threshold and consequently held the mass notification necessary and the mass dismissal void. We recommend to employers planning mass dismissals to notify the Federal Employment Agency if the relevant thresholds were met when disregarding any agency workers while waiting for a decision by the ECJ.
Italy
Legal protection of whistleblowing
A new law regulates whistleblowing for the first time in Italy, with a view to prevent illegal or unethical behaviours within private and public organisations.With regard to selected private employers, the new piece of legislation provides for several guarantees for whistleblowers, such as:
• the need for employers to implement measures to report any illegal conduct that takes place within the workplace. These measures must guarantee the anonymity of the whistleblower;
• the protection for whistleblowers against retaliatory or discriminatory actions taken by the employer, such as dismissal, demotion or transfer, which are considered null and void. Such protection is ensured by providing that the burden of proof (that any such measure adopted after the whistleblowing is not related to it) rests with the employer; and
• the need to provide, within the employer’s disciplinary code, sanctions against those who violate the protections safeguarding whistleblowers as well as against those who report facts that turn out to be unfounded.
Social contribution exemption when signing new open-ended employment contracts
In order to foster employability of young people, the Budget Law 2018 provides for a 50% social contribution exemption for 36 months up to a maximum of EUR3,000 per year for employers who hire individuals under the age of 35, as of 1 January 2018, under an open-ended employment contract.Active policy measures for job creation regarding the Relocation Voucher
The Jobs Act reform of 2015 provided for a Relocation Voucher for the unemployed to benefit from employment research services offered by employment agencies or authorized private firms. However, many of the changes set forth by the new regulation on active policy measures for job creation, including the Relocation Voucher, have actively been put in place only in 2018. To make the Relocation Voucher a generally applicable measure, the Budget Law 2018 provides for EUR5 million in 2018 and EUR15 million per year in 2019 and 2020.The Netherlands
Works council consultation when engaging an investment banker ahead of a sale process
Two judgments rendered by the Enterprise Chamber of the Amsterdam Court of Appeal (the Enterprise Chamber) may impact M&A transactions involving target companies or groups of companies with works councils in the Netherlands.In both cases, the relevant ultimate shareholder – a private equity fund – was looking to sell one of its portfolio businesses through an auction sale.
The Enterprise Chamber ruled that the engagement of an investment banker by the ultimate shareholder of the Dutch target to investigate the possibilities of a potential sale of its portfolio company was subject to the prior advice of the works council of the relevant Dutch subsidiary located at a lower level in the group, on the basis that the ultimate shareholder could be considered a co-entrepreneur.
One of the judgments provided important guidance on the timing of the consultation process. The key takeaways from the decisions are as follows:
• It is important to check whether there are Dutch works councils established within the target group at a very early stage in the sale process. Even the decision to engage an advisor (like an investment banker, a consultant or a law firm to carry out a vendor due diligence etc.) may be subject to works council’s advice. The Enterprise Chamber seems to more easily look through corporate structures, especially in case of private equity structures, and qualify the ultimate shareholder as co-entrepreneur of the Dutch works council’s company.
• In case of an auction sale, works councils should be involved at an early stage and kept informed on the status of the process. A request for advice will only formally have to be filed once the final bidder is selected, bearing in mind however that in the consultation process the company should be able to provide clear and objective reasons as to why it decided to ultimately choose a particular bidder over another.
• Signing Protocols (whereby both parties commit to sign an agreed form of SPA once the consultation is completed) should be used with diligence. The wording of the Signing Protocol should allow sufficient room to argue that the transaction is not a done deal. Furthermore, in order to decrease the risk of challenge, the use of a Signing Protocol should preferably be discussed and agreed with the relevant works council upfront.
Statutory Minimum Wage applicable to certain service agreements
As of 1 January 2018, the Minimum Wage and Minimum Holiday Allowance Act also applies to certain individuals engaged on the basis of a service agreement who do not qualify as entrepreneur for tax purposes (e.g. employees working via online platforms). The reason is to stop “improper” use of a service agreement (rather than an employment agreement) and prevent improper competition based on employment terms and conditions offered to such individuals. As of 1 January 2018, the gross statutory monthly minimum wage for full-time employees was increased from EUR 1,565.40 to EUR 1,578 for employees aged 22 and older.Amended remuneration rules for Senior Executives in the Public and Semi-Public Sector
In our Summer 2017 edition, we reported about the amendments to the Senior Executives in the Public and Semi-Public Sector (Standards for Remuneration) Act. In short, this Act applies to public, government related institutions (e.g. houses of parliament, municipalities etc.) and semi-public sector institutions (companies performing public tasks and who receive public funds, e.g. certain healthcare providers). As of 1 January 2018, changes were implemented in relation to the remuneration for Senior Executives of which the most important are:(i) increase of the maximum annual remuneration from EUR 181,000 to EUR 187,000 gross;
(ii) the “top official” who held such a position for at least twelve months and who subsequently holds a non-top executive position at the same institution, will continue to be considered as a top official for another four years;
(iii) recognition of the fact that top officials are entitled to a statutory severance payment awarded by a court, even if that severance exceeds the maximum severance of EUR 75,000 gross under the Act.
Qualification of working relationship Act further postponed
In our Summer 2017 edition, we informed you about the introduction of a new system of ‘model agreement’ approved by the Tax Authorities which, if used, would provide for a rebuttable assumption that the relevant individual qualifies as an independent contractor for the purpose of wage withholding tax and social security purposes. In order to give employers and employees the opportunity to prepare for this change, enforcement was postponed until 1 July 2018. This transitional period was extended once again until 1 January 2020. During this period, the government will not impose any fines and/or additional tax assessments unless in case of obvious abuse. Furthermore, obvious abuse will be more closely monitored after 1 July 2018.Annual increase of statutory severance payment
If an employment agreement existing for two or more years is terminated by initiative of the employer, in principle, a mandatory statutory severance payments must be paid regardless of the applicable procedure of termination (exceptions do apply). With effect from 1 January 2018, the cap on this statutory severance payment was increased from EUR 77,000 to EUR 79,000. If the relevant employee earns an annual gross salary exceeding EUR 79,000, the cap will continue to be the annual salary.Russia
Unscheduled inspections by the State Labour Inspectorate and a risk-oriented approach to state supervision of migration
For an overview of recent changes to Russian legislation which specify the procedures and grounds for conducting inspections by Russian labour and migration regulatory authorities, please click here.Spain
Self-employment regulations reform
The Spanish Parliament recently approved Law 6/2017 on urgent reforms of self-employment, which seeks to adapt the regulation to the circumstances of each self-employed individual, providing them with flexibility in the context of the sharing economy. The purpose of the new law is mainly to improve self-employment conditions in terms of social security contributions.This law enhances flexibility in accordance with self-employed individuals’ needs and favours a broad recognition of rights. As such, the most relevant measures that have been approved and entered into force on 1 January 2018 are the following:
• Flat tariff: for social security contributions, self-employed individuals may benefit from the monthly flat tariff of EUR50 for a one-year period. Prior to the reform, the flat tariff was only applicable for 6 months. This benefit applies to individuals who register themselves to the self-employed social security system for the first time or who resume an activity without having been registered the last 2 years. The following reductions period has been increased from 18 months to 24 months, whereas for individuals under 30 years (35 if they are women), such period has been increased from 26 to 30 months.
• Base of contribution: the base of contribution may be modified up to 4 times per year, in accordance with the individual situation.
• Registration: self-employed individuals may register to and unregister from the Social Security regime up to 3 times per year.
• Surcharges: the law reduces the surcharges for payments outside the legal period from 20% to 10% if the pending amounts are paid within the first month following the expiration of the legal period of payment. In addition, the law further improves the association rights of self-employed individuals and establishes that accidents suffered on the way to work qualify as a work-related accidents.
UK
UK Government’s response to the Taylor Review of modern working practices
On 7 February 2018, the UK Government published its response to the Taylor Review (we reported on the Review Report itself in the Summer 2017 issue of this newsletter). The ‘Good Work’ response asks more questions than it answers, with almost 150 consultation questions set out in its four consultation papers.For details of the response, please see our blog post here.
MPs propose overhaul of employment framework
On 20 November 2017, two House of Commons Select Committees – the Work and Pensions Committee and the BEIS Committee – published a joint Report entitled ‘A framework for modern employment’ and a draft Bill.For details of the proposals and the draft Bill, please see our blog post here.
Financial Reporting Council consults on new UK Corporate Governance Code
On 5 December 2017, the Financial Reporting Council (the FRC) published the revised UK Corporate Governance Code (the Code) and revised Guidance on Board Effectiveness for consultation.For details of the revised Code and Guidance, please see our briefing.
The consultation closes on 28 February 2018 and the new Code is expected to apply for reporting years beginning on or after 1 January 2019.
Investment Association launches public register of listed companies which have faced significant shareholder opposition
On 19 December 2017, the Investment Association - the trade body that represents UK investment managers – launched the world’s first public register of listed companies which have received votes of 20% or more against any resolution or which have withdrawn a resolution prior to their Annual General Meeting in 2017. The register can be accessed here.Listed companies should be aware that the aim of the register is not only to focus attention on the companies which face shareholder rebellion but also to track whether and how boards are responding to shareholder concerns.
Employer vicariously liable for a data breach by a rogue employee
In Various Claimants v WM Morrisons Supermarket PLC, the High Court held that an employer was vicariously liable for the actions of an employee who had leaked the payroll data of around 100,000 employees in order to damage the employer - on the basis that there was a sufficiently close connection between the employee’s illegal acts and his employment, even though those acts were deliberately aimed at damaging the company.The case is the first UK group action case involving a data breach. It sends a worrying message to businesses which could now face the risk of potentially high-value claims even if they handle personal data in a compliant manner.
For further details, please see our blog post here.
Pensions issues on the horizon for 2018
To help our clients prepare for the year ahead, we published an alert on 18 January 2018, setting out the key dates on which the most important legislation and court decisions that are relevant to both employers and trustees of defined benefit and defined contribution pension schemes are expected. Please see our alert here.VAT treatment of pension fund expenses
In November 2017, HM Revenue & Customs (HMRC) updated its VAT Manual to confirm that its existing policy for the recovery of VAT by employers in relation to pension fund expenses, which was set to end on 31 December 2017, would continue to apply.For further details about the recovery of input VAT on pension fund expenses, see our alert.
Life assurance and overseas pension schemes
As announced in the 2017 Autumn Budget, the government will legislate in the Finance Bill 2018-19 to modernise the tax relief for employer premiums paid into life assurance products and certain overseas pension schemes. This will extend the existing exemption to cover policies when an employee nominates any individual or registered charity to be their beneficiary. The change will have effect on and after 6 April 2019.Auto-Enrolment: Minimum employer contributions to DC schemes
On 6 April 2018, the transitional period for calculating minimum employer contributions to defined contribution schemes will end, and the minimum of a total contribution of 2% of qualifying earnings will rise to 5%. On 6 April 2019, the minimum will reach a total amount of 8%. If an employer has chosen to use scheme certification, there will be corresponding incremental increases in the applicable contribution rates on these dates.UK Pensions Risk – Dividends under the spotlight
Recent high profile insolvencies have demonstrated that corporate groups can face intense and sometimes high public scrutiny if they make decisions that could detrimentally impact a defined benefit pension scheme operated within the group.Our latest briefing on managing pensions risk considers what corporate groups and their directors can do to ensure that their corporate decision-making properly considers and addresses the impact of corporate activity on group pension schemes (and to ensure that such steps are properly documented). Please see our briefing here.
Our briefing on pensions issues on dividend payments focuses on specific issues which need to be taken into account when companies with UK defined benefit pension schemes are considering paying dividends. Please see our briefing here.
