HR briefing - July
In the courts
Post-termination restrictive covenants
It has been a hundred years since the Supreme Court last looked at post-termination restrictions in employment. Its decision on two tricky drafting points will therefore be of great interest to HR and in-house teams. The case involved a senior recruitment executive who wanted to join a competitor, despite having agreed a relatively standard non-compete provision when she joined. The provision stated that she must not "engage or be concerned or interested in any business carried on in competition with any of the businesses of the Company". She asserted that the words 'interested in' would prevent her from holding even a very minor shareholding for investment purposes in a competitor, which would be unreasonable. The Court of Appeal accepted that analysis and ruled that the entire clause was therefore unenforceable. The Supreme Court agreed that "interested in" would include a small shareholding, and agreed that such a restriction was unreasonable and unenforceable. But, having reviewed the history of the doctrine of severance, whereby the courts can delete offending parts of a clause and enforce the remainder (sometimes called the "blue pencil test") it decided that those offending words could be severed leaving the remainder of the clause as a valid non-compete restraint. Severance will be available if (i) the unenforceable words can be removed without the need to add to or modify what remains; and (ii) removal would not generate any major change in the overall effect of the restraints.
Holiday pay has been one of the most active areas of employment law in recent years, and the trend shows no sign of slowing down. There have been two important developments this month. First, the Court of Appeal has confirmed the approach taken in a number of tribunal decisions that voluntary, as well as compulsory, overtime must be taken into account in calculating holiday pay, provided it is sufficiently regular and settled (which will be a question of fact and degree in each case). Second, the Court of Appeal in Northern Ireland (which is persuasive, not binding, in the rest of the UK) has overturned a key Employment Appeal Tribunal (EAT) judgment on the tricky issue of whether a correct holiday pay payment or the passing of a three-month gap, breaks the series of incorrect payments so as to disentitle an employee from brining a claim in relation to earlier incorrect payments. The EAT said that such a gap would break the series, but the Northern Ireland Court of Appeal has rejected that analysis. These decisions leave employers in a clearer position on overtime pay, but no wiser on how to estimate the overall liability for any historic shortfall in holiday pay.
The Equality Act prohibits less favourable treatment because of a protected characteristic (sex, race, age, sexual orientation and so on). It has been clear for a number of years that this formulation will cover discrimination where the perpetrator wrongly believes the victim has such a characteristic: so-called perception discrimination. The Court of Appeal has reviewed this rule in the context of disability discrimination, holding that an employee with a very mild hearing impairment suffered unlawful disability discrimination when she was turned down for a transfer because the manager believed her hearing would deteriorate and make her unsuitable for parts of the role. Progressive conditions, which have a relatively minor impact on a person's abilities at present but which are likely to cause more substantial impairments in future, are specifically covered within the disability discrimination regime, so the manager's perception that the employee's condition would worsen over time brought her squarely within this complex area of the law.
In the news
A number of pressure groups have campaigned over the years for a radical reshaping of the family-friendly leave framework to incentivise fathers to play a more active role in childcare and, thereby, level the playing field and decrease the negative assumptions made by some employers about women being in some way less committed to their careers or likely to have children and inevitably become less committed. The shared parental leave system introduced for children born from April 2015 onwards was intended to achieve a rebalancing of the work and family roles of men and women (taking a stereotypical heterosexual couple as the example for the sake of simplicity), but has been criticised because it makes the father's ability to take a longer period of leave contingent on the mother sacrificing part of her own maternity leave entitlement. Theresa May is reportedly in favour of creating a longer free-standing right to paternity leave, either in place of shared parental leave or alongside it. The proposal would see fathers have three months' paternity leave, paid on the same basis as maternity leave. The House of Commons Women & Equalities Select Committee proposed a similar scheme last year. If enacted, this would be a significant development for employees and businesses, and will be followed closely.