ICAEW.com works better with JavaScript enabled.

Employment law pitfalls and how to avoid them

Author: ICAEW Insights

Published: 16 Nov 2021

Employment law specialists from Edwin Coe outline common mistakes and complex issues that employers may grapple with and how these can be avoided with a better understanding of the legal issues.

In a webinar hosted by the Small Practitioners Community, Linky Trott, partner and head of employment at Edwin Coe, and Ruth Hickling and Emma Sangeelee, partners in employment, shared their insights on employment issues they have seen in practice, with examples illustrating how these may occur or be avoided. ICAEW Insights provides an overview of some of the key points discussed.

Redundancy and potential selection pitfalls

Redundancy was the first issue raised in the webinar, with Hickling highlighting that it arises out of specific circumstances. The statutory definition of redundancy is covered by section 139 (1) of the Employment Rights Act 1996. It may include a business closure, workplace closure or move (such as the closure of a site or move to a new site), or where there is a reduced requirement for employees to do work of a particular kind. It is the latter that often causes problems, according to Hickling.

There are a number of reasons why the business may have reduced requirements, such as the introduction of new technology, loss of a large client or internal reorganisations, she explained. The key here is to look at the roles affected, not the individual employees. Hickling said: “It's the job description, that role or function, that should be the starting point for an employer to consider whether that role or a number of roles are redundant or not.”

Hickling provided the example of a factory owner whose orders for a specific product are cut by 60%. She discussed different scenarios the factory owner might consider and how this relates to the selection process.

A selection pool would usually include employees with the same or similar skills, but there can be situations where only one employee is carrying out a particular role, said Hickling.

“You use the selection criteria to choose between those in the selection pool. And it's important that these criteria are relevant to the role… They need to be objective, capable of independent verification and measurable,” she added. They also need to be non-discriminatory, with Hickling highlighting the potential pitfall of indirect discrimination.

Hickling further indicated it is best to have two managers agreeing on the assessment and the marking of the selection criteria for employees.

After a fair selection process, the next stage considers whether suitable alternative employment is available. “An employer should never assume that they know all an employee's hidden talents or experience, or the very different roles that an employee may be willing to take on,” Hickling said. “Only after consideration has been given to that issue [suitable alternative employment], including a discussion with the employee as part of the consultation process, should the employer proceed to make a decision to dismiss any redundant employees.”

‘Some other substantial reason’ dismissals

Hickling next covered “some other substantial reason” dismissals, which fall under section 98(1)(b) of the Employment Rights Act. “It must be used with great care and consideration, first of all, to ensure that the reason you are using will qualify as a potentially fair reason for dismissal at all ,” Hickling said.

She added: “Substantial means the reason must be just that, substantial, not frivolous or insignificant. But this is a very subjective interpretation and will depend on the facts and the type of the case in each situation.”

Hickling also pointed out that the reason must justify dismissal as opposed to any lesser sanction.

According to Hickling, “It is a very difficult reason to get right. It is definitely not to be viewed as a catch all, and it will be vital to follow a fair procedure.”

Under effectively a two-stage test, it's the employer’s burden of proof to show that some other substantial reason is the sole or principal reason for the dismissal, she said. Having established this, she added, the employer must then show that the decision to dismiss was reasonable in all the circumstances.

Internal communications disclosable in litigation

Imagine an internal email from an MD to human resources that says it has been a bad year and three people need to go from the sales team. It then identifies three employees to look at. Or an email asking HR to calculate the statutory redundancy payment for a specific employee before a fair selection process has been started. These are two examples given by Trott, who highlighted how internal communications are disclosable in the event of litigation, including unguarded emails between colleagues.

Looking at the first example, Trott said: “That is pre-determining a fair selection of individuals as opposed to identifying rules. So any process of redundancy that's undertaken later, if it's litigated, this document will be disclosable.”

Trott detailed the wide variety of communications that could be included within the document description, including hardcopies, emails, text messages, voice messages, audio files and photographs. These could be stored on servers, memory sticks, mobile phones, back-up systems, the cloud and elsewhere, she explained.

Although there are exemptions such as that covered by legal advice privilege, she highlighted: “Something will be covered by legal advice privilege if you send it to your lawyer or your in-house lawyer, where the dominant purpose of that communication is to seek legal advice.” But she added: “What I see quite often and which doesn't work is an exchange of emails between managers where they just cc in their lawyer in a sort of FYI kind of way. The dominant purpose of that communication is not to seek legal advice, so just copying your lawyer in will not attract legal advice privilege to those communications.”

Disciplinary proceedings and grievances

Looking next at the topic of disciplinary hearings and grievances, Trott pointed out that an automatic halt of the disciplinary process is not always necessary when a grievance is received from an employee.

For example, if it is a complaint about the person who's hearing the disciplinary, the process could potentially be continued by having somebody else hear it. The grievance would still need to be dealt with, said Trott, who added that there are circumstances in which you do need to hold the disciplinary process and hold the grievance.

She said: “Have a look at the grievance and the substance of it and just pause for thought. It may not be necessary to derail the disciplinary process.”

Miscalculating holiday pay

An area that employers can struggle with is how to calculate holiday pay and whether this should include, for example, regular overtime, allowances and commission.

In the webinar, Trott explained three differences that employers should understand when looking at this complex topic. These relate to the European Working Time Directive (which suggests workers are entitled to four weeks’ leave or pro rata equivalent); the UK Working Time Regulations (which implemented the European Working Time Directive but also enhanced it) and then an employee’s contract of employment. The latter could potentially include further enhancements of an employee’s holiday entitlement.

Trott also outlined possible claims that could be brought for underpayment of holidays and time limits that relate to such claims under the Deduction from Wages (Limitation) Regulations 2014. This provides that you can’t go back more than two years, explained Trott. However, this does not apply in Northern Ireland, where the rules are different.

Obligations owed to disabled employees and occupational health advice

Employers’ obligations to disabled employees is another complex area. Under the Equalities Act 2010, disabled is defined as having “a physical or mental impairment that has a substantial and long-term negative effect on your ability to do normal daily activities”.

Sangeelee explained protections that disabled employees have, as well as an employer’s duty to make reasonable adjustments and not to discriminate because of something arising from disability.

“Some common mistakes that we see really arise from employers not understanding what their obligations are in any particular circumstance,” Sangeelee said. Such mistakes may include making assumptions about disability status, making assumptions about what does and does not arise from disability, forgetting the reasonable duty to make reasonable adjustments and rigid views or a closed mind to different ways of working.

Sangeelee also highlighted the importance of taking occupational health advice at an early stage.

View the on-demand webinar for a more detailed discussion of these issues and potential pitfalls.

Recommended content

ICAEW Community
Small Practitioners polaroid
Small Practitioners

The Small Practitioners Community provides sole practitioners and small firms with bespoke content, webinars, exclusive benefits and networking opportunities.

Join for free
A megaphone
Stay up to date

You can receive email update from ICAEW insights either daily, weekly or monthly, subscribe to whichever works for you.

Sign up
Daily summaries
Three yellow pins planted into a surface in a row
News in brief

Read ICAEW's daily summary of accountancy news from across the mainstream media and broader financing sector.

See more