2 Oct 2013

1 October is a key date for employers.  It is one of the key dates the Government uses to implement changes to its employment law regime.

The changes are a mixed bag for employers. Some of the changes businesses will view as being for the better, some might be regarded as for the worse. So what’s changed?

Employers no longer liable for Third-Party Harassment ?

One piece of good news is that the provisions of the Equality Act 2010 (‘EA’) which made employers liable for harassment of their employees by third parties e.g. clients, advisers or suppliers, are repealed by the Enterprise and Regulatory Reform Act 2013 (‘ERRA’) yesterday. The reason for the change is that the Government believes that there is no evidence to suggest that the old regime served any practical purpose, or that it was an appropriate or proportionate way to deal with the type of conduct that it was originally intended to cover.

Employers should still take care because they may still be liable for the acts of a third party if they take no action when there is third-party harassment which amounts to unwanted conduct ‘related to’ a protected characteristic that violated the employee’s dignity or created an intimidating, hostile, degrading, humiliating or offensive environment for them.

Shareholders to approve Director’s Remuneration

One change that many businesses do not believe is appropriate is the change to directors’ remuneration.

The ERRA implements a new voting and disclosure regime for the remuneration of directors of quoted companies. From 1 October 2013, shareholders will be given a binding vote on company pay policies for the first time. Shareholders have the power to approve director’s pay, and will have a binding vote on pay policy and exit payments.

Since 2002, quoted companies were required to prepare a director’s remuneration report for each financial year which had to be sent to every shareholder and approved by ordinary resolution but directors’ entitlement to the remuneration was not conditional on shareholder approval. Shareholders only had an advisory role when it came to remuneration reports. The changes brought about by the ERRA will introduce a binding vote, at least every 3 years, on future remuneration policies.

A director’s remuneration report is now to comprise of (1) an annual statement; (2) an annual report on remuneration; and (3) a directors remuneration policy.

Companies with a 30 September year-end will be the first to comply with the new regime. At their 2014 AGM (or earlier general meeting) they will be required to propose an ordinary resolution on the remuneration policy and an advisory resolution on the annual remuneration report. All companies must have their remuneration policy approved by the start of the second financial year to begin on or after 1 October 2013.

Once the remuneration policy is approved, companies cannot change the policy without calling a special meeting when shareholders are consulted. If Directors authorise payments without shareholder approval they will be personally liable under the law.

The changes are designed to give shareholders more influence following the investor pay revolts two years ago, known as the “Shareholder Spring”. This is an area that the Fox Williams’ team will be monitoring closely and we will keep you update about progress.

Increase in the National Minimum Wage rates

The National Minimum Wage increased yesterday. For those workers aged 21 and above the rate of pay increases from £6.19 to £6.31. Apprentices’ rates of pay increase from £2.65 to £2.68. Youth rates (workers aged 18 to 21) will increase to £5.03 from £4.98, and the rate for workers aged 16 to 17 will increase to £3.72 from £3.68. The National Minimum Wage rates will now apply to agricultural workers.

Although any increase in costs is not great news, most employers are used to an annual increase and have budgeted accordingly.

Changes to Courts and Tribunals

From 1 October 2013, all 170 county courts in England and Wales will be merged into a single body. Judges will also be able to sit in a wider variety of courts and tribunals. This means that Deputy District Judges will be able to sit in Employment Tribunals, and District Judges and Circuit Judges can sit in the EAT (Employment Appeal Tribunal). An interesting development for those involved in tribunal litigation!

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