Autumn blows in new employment law changes

October 13, 2013

October has seen a number of developments in employment law – was it the winds of change or just the government tinkering in the name of cutting red tape? Here we summarise the new law and the implications for employers.

Director’s Remuneration

The most significant change, much more than simply tinkering, is the implementation under the Enterprise and Regulatory Reform Act 2013 (“ERRA”) of a new voting and disclosure regime for the remuneration of directors of quoted companies. The changes brought about by the ERRA will introduce a binding vote, at least every 3 years, on future remuneration policies.

Since 2002 quoted companies have been required to prepare a director’s remuneration report for each financial year. This had to be sent to every shareholder of the company and be approved by ordinary resolution, but entitlement to the remuneration was not conditional on said shareholder’s approval. In effect, before 1 October 2013 shareholders only had an advisory role when it came to remuneration reports.

However, from 1 October 2013, shareholders will have the power to approve a director’s pay, and will have a binding vote on pay policy and exit payments. 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 who are required 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 quoted companies must have their remuneration policy approved by the start of the second financial year to begin on or after 1 October 2013.

Abolition of Third-Party Harassment

Now for the tinkering… the third-party harassment provisions, currently found in the Equality Act 2010 (‘EA’) will be repealed by section 65 of ERRA.

Section 40(2)-(4) of the EA has been repealed as the Government felt that there is no evidence to suggest that the third-party harassment provisions were serving a practical purpose, or were an appropriate or proportionate manner of dealing with the type of conduct that they were originally intended to cover. Claimants who are harassed by third-parties after 1 October 2013 will no longer be able to rely on section 40(2)-40 (4) in the EA, which provides that the employer will, in certain circumstances, be liable where an individual is harassed by a third-party e.g. a client, visitor or supplier.

A supposedly welcome change for employers but they are not entirely in the clear when it comes to protecting staff from harassment by third parties. Employees may still be able to argue, under section 26 of the EA, that an employer’s inaction in a situation involving third-party harassment amounts to unwanted conduct ‘related to’ a protected characteristic that violated their dignity or created an intimidating, hostile, degrading, humiliating or offensive environment for them.

This uncertainty means that employers should continue to take steps to reduce the chances of harassment by third parties, and where it occurs to implement measures to prevent a repeat of such harassment.

National Minimum Wage

The National Minimum Wage has increased to £6.31 from £6.19 for workers aged 21 or above. The National Minimum Wage will also increase for apprentices to £2.68 from £2.65. 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. As a result of the changes, National Minimum Wage will now apply to agricultural workers.

Crime and Courts Act 2013

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. We will have to wait and see the impact of this in practice, if any.


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