2011 Employment Law Review
Welcome to the inaugural issue of Employment Law Review, which will be a regular report from Dechert's Labor and Employment Practice. In this edition, we examine some of the most important employment law developments of the past year in Belgium, England and Wales, France, Germany, Luxembourg, Russia and the United States, focusing on both new legislation and case law developments.
Change to notice periods for workers With effect from 12 April 2011, new legislation modified the length of the notice periods for workers whose employment began after 31 December 2011. The minimum notice periods for terminating the employment of blue collar workers have been increased by 15%:
Old notice period
New notice period
28 days (unchanged)
> 6 m and
> 5 yrs and
> 10 yrs and
> 15 yrs and
> 20 yrs
The notice period for terminating the employment of white collar workers whose gross annual remuneration exceeds 31,467 EUR (anno 2012) has now been reduced by 3% to 30 days per year of seniority:
New notice period
91 days (legal minimum)
> 3 yrs and
> 4 yrs and
> 5 yrs and
182 days (legal minimum)
> 6 yrs
30 days per begun year of seniority
Notice periods to be given by a resigning employee have also been increased:
New notice period
> 5 yrs and
> 10 yrs
> 15 yrs + salary exceeding 62.934 EUR
New employer's contribution to the Fund of Closing of Undertakings
From 1 January 2012, when terminating the employment agreement of a white collar worker whose gross annual remuneration exceeds 62.934 EUR, employers must contribute a sum equal to 3% of the termination cost to the Fund of Closing of Undertakings. A Royal Decree must still provide for the specific modalities and terms of payment of this new contribution.
New (limited) tax exemption
Upon termination of an employment agreement after 1 January 2012, salary paid during the notice period or the termination indemnity will be exempt from taxes up to an amount of 615 EUR (for the 2012 year). This amount will be updated annually in accordance with the consumer index and from 1 January 2014, the amount will be doubled.
New method for valuation of the taxable benefit in kind from the use of a company car
From 1 January 2012, the taxable value of a company car will be determined by application of a formula based on the catalogue value of the car. This is calculated based on the price invoiced including VAT, the cost of any and all options without taking into consideration the eventually awarded price reduction(s) as well as the CO² value of the exhaust gasses produced by the car.
Cars using gasoline, LPG or gas:
catalogue value x [5,5 + ((CO²exhaust-115) x 0,1)] % x 6/7
Cars using diesel:
catalogue value x [5,5 + ((CO²exhaust-95) x 0,1)] % x 6/7
catalogue value x 4 % x 6/7
Measures to keep older workers at work
The new government has decided to amend the pension rules in an effort to keep older workers at work. Among these amendments, for early retirement pension allowances claimed after 1 January 2013, the minimum age for early retirement (currently at 60) will be increased by 6 months each year, so that it is 62 by the year 2016. Also, the minimum length of a professional career needed to claim the benefit of early retirement (currently 35) will be increased to 38 in 2013, 39 in 2014 and to 40 from 2015.
Conventional bridge pension is renamed "Unemployment with extra company allowance" This new name more closely reflects what it is — i.e. a system of unemployment benefit whereby after termination of their employment, older employees who meet conditions of age and length of professional career are entitled to receive an extra allowance from their previous employer in addition to the legal unemployment benefits paid out to them by the state. Recipients of this payment will now be encouraged actively to continue to look for a new job while retaining the benefit of the extra allowance payable by the former employer.
ENGLAND AND WALES
Increase in compensation limits
The maximum compensation that the Employment Tribunal can award for unfair dismissal (save in exceptional cases) and the basis upon which statutory redundancy payments are calculated will increase from 1 February 2012. A week's pay (for the purposes of calculating the basic award in unfair dismissal cases and statutory redundancy payment entitlements) will be capped at £430 (the current limit is £400). The basic award is calculated by applying a formula based on age, length of service and a week's pay. As a result of this increase in a week's pay, the maximum total basic award for unfair dismissal will from February be capped at £12,900. The maximum compensatory award (save in the prescribed exceptional cases) will be capped at £72,300 (the current limit is £68,400). As a result of these increases, the maximum amount which a successful claimant for unfair dismissal can recover (i.e. the basic and compensatory awards) will be capped at £85,200.
Agency Workers Regulations 2010
The Agency Workers Regulations came into force on 1 October 2011 and apply to workers offered temporary work through an employment agency. The objective of the European Temporary Agency Workers Directive 2008 (which is imported into UK law by the Regulations) is to harmonise certain basic working and employment conditions for temporary workers supplied through employment agencies such that they are in no worse position than if they had been recruited directly by the end user organisation for which they carry out work (the "hirer").
Under the Regulations, temporary agency workers now enjoy the same basic working and employment conditions as if they had been employed directly by the hirer to perform the same or a similar role. This right will accrue after the agency worker has worked for the hirer for 12 weeks.
In addition, temporary agency workers now enjoy the right to access information about a hirer's comparable permanent employment vacancies and the use of a hirer's facilities and amenities. These rights will apply immediately from the outset of a temporary assignment.
Abolition of the default retirement age
The statutory ability to retire employees at the "default retirement age" of 65 was an exception to the age discrimination legislation implemented in 2006 which provides that employees should not be treated less favourably because of their age unless the treatment can be objectively justified.
Following the abolition of the default retirement age on 6 April 2011, employers are no longer able to instigate retirement at the default retirement age. They now have two options available to them - to cease compulsorily to retire employees or to adopt a compulsory retirement age for part or all of the workforce.
Given the uncertainty associated with justifying a compulsory retirement age, the majority of employers are likely to abolish compulsory retirement. This will undoubtedly require a change of mindset such that older workers are managed according to the same principles as others. Dismissals will only be fair if effected for one of the five potentially fair reasons (capability, conduct, redundancy, illegality or some other substantial reason) coupled with a fair procedure.
The abolition of the default retirement age does not close the door entirely to employers introducing or maintaining a compulsory retirement age for all or part of the workforce. Since compulsory retirement is age related, to maintain compulsory retirement risks age discrimination claims unless in the particular circumstances the compulsory retirement age adopted by the employer can be justified. To avoid successful claims of unlawful age discrimination, employers will need to be able to objectively justify a compulsory retirement age by showing that it is a proportionate means of achieving a legitimate aim.
The Income Tax (Pay As You Earn) (Amendment) Regulations 2011 now require a post-termination payment that is made to a departed employee to be taxed using the 0T tax code (which utilises the 20%, 40% and 50% rates) rather than only the 20% basic tax rate previously used.
The Additional Paternity Leave Regulations 2010 and the Additional Statutory Paternity Pay (General) Regulations 2010 came into force last year and extend paternity leave for employees who are expecting a baby or matched for adoption by up to an additional 26 weeks.
Bribery Act 2010
The Bribery Act 2010 created four new criminal offences with broad extra-territorial effect, including a strict liability offence where a commercial organisation fails to prevent bribery. The Act also requires adequate procedures to be in place to prevent bribery. Therefore an awareness of these offences and an appreciation of their operation are important for commercial organisations, individual executives and employees alike.
In addition to these legislative changes, there have been a number of interesting cases on various aspects of employment protection in the UK. A selection is as follows:
Consistent treatment: The employer's knowledge
In Orr v Milton Keynes Council, it was held that an employer cannot be deemed to know all the facts known to its employees when deciding whether a dismissal is reasonable. Provided that a fair and thorough investigation is carried out, only those facts known to the decision-maker at the time are relevant in determining whether the dismissal was unfair.
In British Airways plc v MAK, it was held that the Employment Tribunal had jurisdiction to hear race and age discrimination complaints bought by employees who were resident in Hong Kong but who performed their duties as cabin crew on flights between Hong Kong and London. The Court of Appeal found that the employment tribunal had been...
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