Changes to Employment Law from 1 October 2013

On 1 October 2013 a number of changes to employment law come into force including changes to the Equality Acts, the regulation of directors’ pay, minimum wage increase and a change in health and safety legislation. Employment law specialist Stephen Levinson looks at these in more detail.

Equality Act 2010

From 1 October 2013 the liability of employers for failure to take steps to protect its employees from third-party harassment comes to an end. The change is introduced by s 65 Enterprise and Regulatory Reform Act 2013. This is in respect of any contraventions occurring on or after 1 October 2013. No doubt the government sees this as a removal of a burden on employers. Commentators have pointed out that the probable effect is to make advising both employers and employees more difficult. When a complaint is made, an employee will probably seek to rely on the health and safety laws or alternatively the general harassment provisions under the Equality Act. The potential scope of these provisions is unclear. Other commentators take the simpler view that this is a burden that should, in fairness, not have been removed at all. Some existing policies and terms of business with third parties may need to be reviewed, but it is unlikely to be a sensible move to stop training employees to be alert to these risks and to take preventative steps where appropriate.

Directors’ pay and reporting on remuneration and sex

The campaign against unjustified fat-cat pay continues with the introduction on 1 October 2013 of a new regime regulating the pay of directors of quoted companies. Remuneration policies will have to provide more information about how pay has and will be paid and its connection with performance. These policies will have to be reflected in the directors’ remuneration report. This last requirement should give both shareholders and the ‘teenage scribblers’ food for thought and potential ammunition for annual meetings. The shareholders will have a binding say on remuneration policies. These rules on remuneration policies could have a considerable impact on termination packages if what is proposed is not in line with the approved policy. It is unlikely that any public company would relish the task of having to get additional approval from shareholders for such a proposal. Therefore, anticipate some creative drafting designed to build in maximum flexibility while at the same time not proving too alarming for the shareholders. Payments to former directors have to be included in the single figure setting out as a single figure for the total pay directors have received.

Also on 1 October 2013 the new rules on the content of the Strategic Reports of Companies comes into force with the passing of another set of regulations – Companies Act 2006 (Strategic Report and Directors Report) Regulations 2013. Of particular interest to employment lawyers is the requirement on quoted companies. They will now have to provide a breakdown of the sex of all directors, the numbers of those of each sex who are not directors but are senior managers and a similar breakdown for all employees. Those campaigning to increase the number of women on boards will no doubt welcome this information about the pipeline of potential female directors, as will all those bringing sex discrimination claims, particularly given the abolition of questionnaires. What the government takes away with one hand, it gives (something) back with the other.

Social Security and Minimum Wage

At the other end of the pay spectrum, from 1 October 2013 the principal rate for the minimum wage increases to £6.31 per hour. This appears to be a relatively small increase (£0.22), but recent research has confirmed the existence of a widespread failure to comply with these rules, particularly in the hospitality and cleaning sectors. Next time you visit a really cheap restaurant, it may occur to you to wonder quite how the low prices were achieved. Also now that the Agricultural Wages Board in England and Wales has been abolished, the national minimum wage will apply in the agricultural and horticulture sectors. Anyone advising, however, needs to keep in mind that there will be a distinction to be drawn between those employed before 1 October 2013 and those employed after that date. Terms and conditions incorporating terms of the Agricultural Wages Order will continue for the former category. Do not tear up your copies of the AWO just yet.

The new Universal Credit scheme intended eventually to replace six different benefit schemes was supposed to begin to come into effect from October this year and be gradually implemented by April 2014. Amongst other benefits, it replaces income-based Jobseeker’s Allowance, Income Support and Housing Benefit. The trials to date have received very mixed reviews and the agenda is so politically fraught that reading the crystal ball for its development is going to be very hard. The oldest cliché of having to watch the space is clearly applicable.

Health & Safety

Finally a huge change in the culture of the regulation of health and safety is introduced (also on 1 October 2013) by the abolition of automatic strict liability under s 47 of the 1974 Act. Under this provision, injuries to employees were actionable by employees despite any reasonable preventable steps taken by the employer. One of the most hallowed provisions of the old Factories Acts, the change has caused much protest from the trade unions. The need to prove negligence will undoubtedly make cases harder to prove. Clearly this eases a burden on many businesses. It remains to be seen whether the reduction of risk will be reflected in a corresponding reduction in insurance premiums. The holding of breath is not recommended.