What are the issues of redundancy after a period of absence

I read an article recently concerning the case of Charlesworth v Dransfields Engineering Service Limited (2017) UKEAT/0197/16/JOJ.

The case relates to a redundancy situation back in 2014 but the appeal was not heard by the Employment Appeal Tribunal (EAT) until January 2017. The situation is one that we have frequently given advice on; an employee was absent from work for some time, and this absence allowed the respondent to identify the possibility of restructuring the business in a way that deleted the absent employee’s post from the business and therefore saved costs (something like £40,000 in this case).

The employee (Charlesworth) who made the claim was employed by the respondent (Dransfields Engineering Service Limited) as a Branch Manager. Importantly the business was not achieving any level of profitability. The claimant developed renal cancer and was absent for two months due to having an operation. As you will be aware from previous Broadcasts the condition of cancer is automatically a protected characteristic in terms of disability.

After the period of illness the employee returned to work fit and was able to fulfil his role, however the employer, having undertaken a review, commenced consultation over the proposal for redundancy for the Branch Manager and unfortunately he was eventually dismissed on the ground of redundancy.

The case went to an Employment Tribunal (ET), at which the claimant argued that this was a sham redundancy in that there was no redundancy situation, and that the real reason for the dismissal was because of the disability. This claim was rejected by the ET. The ET found that the possibility of a restructuring that would enable cost savings to be made became apparent as a result of the claimant’s absence. However, the ET concluded that the claimant’s absence resulting from his disability was not an operative cause of his dismissal for redundancy.

The claimant appealed his case to the EAT on the basis that the original ET had failed to apply the correct causation test when dealing with Equality Act 2010 s.15. It was submitted that a cause or influence (however significant) is sufficient to constitute or to fulfil that requirement that it is “because of something arising in consequence of the disability“. It was argued that any cause, even if it does not operate on the mind of the putative discriminator and is therefore not an effective cause, is sufficient to satisfy section 15.

The EAT held that the causation requirement in Equality Act 2010 s.15 involved a two-stage approach.

  1. There must be something arising in consequence of the disability;
  2. The unfavourable treatment must be because of that something.

The question raised by the appeal was whether something less than an operative cause or influence is sufficient to satisfy the requirement that the unfavourable treatment is because of the relevant something. To the extent that it was being argued that a mere influence is sufficient, such an argument was not accepted by the EAT. The statute requires the unfavourable treatment to be because of something; nothing less will do. Provided the something is an effective cause (though it need not be the sole or the main cause of the unfavourable treatment), the causal test is established.

In this case, the ET had expressly accepted that in considering an Equality Act 2010 s.15 complaint it is not necessary for the claimant’s disability to be the cause of the respondent’s action, and that a cause need not be the only or main cause provided it is an effective cause. The EAT stated that there was no error of law in the ET’s approach.

The ET was entitled to ask whether the claimant’s absence, which it accepted arose in consequence of his disability, was an effective cause of the decision to dismiss him. To put that question another way, as the tribunal did, was the claimant’s sick leave one of the effective causes of his dismissal?

The ET accepted that there was a link between the claimant’s absence through illness and the fact that he was dismissed, the link being that his absence afforded the respondent an opportunity to observe that it could manage without anybody fulfilling the claimant’s role as Branch Manager. Nevertheless, the ET said that was not the same as saying that the claimant was dismissed because of his absence. This was a case where, on the facts found by this tribunal, it felt able to draw a distinction between the context within which the events occurred and those matters that were causative.

It is worth noting that the EAT commented that there will doubtless be many cases where an absence is the cause of a conclusion that the employer is able to manage without a particular employee and in those circumstances is likely to be an effective cause of a decision to dismiss even if not the main cause. This, however, does not detract from the possibility in a particular case or on particular facts, that absence is merely part of the context and not an effective cause.

If you have any employee concerns and would like to speak to me please contact the office on 01522 81 5100 and they will be able to direct you.


Are you prepared for a Brexit storm?

A day doesn’t go past now without a news item about Brexit and with major talks scheduled for December it’s all very tense. The magnitude of work required to leave the EU seems to be hitting home. Talking to colleagues there is a feeling that it will work itself out. It has to, doesn’t it?

There are likely to be many more twists and turns and a deal will probably be done, but on what terms? As a business owner this uncertain future doesn’t help when you are trying to plan, especially when it’s combined with a fragile UK economy and unstable political environment.

There has been a lot of talk about the tariffs that may come into play if there is a hard Brexit, aka “no deal”. Tariffs are a protectionist measure countries adopt to enhance the competitiveness of industries in their economies. They work by applying what is effectively a mark up on goods entering the country thus making them more expensive compared to home made products.

Under World Trade Organisation rules, which the UK has signed up to, tariffs are not allowed to put at a disadvantage or advantage one country against another. So for example the UK government could not hit back at France for forcing a hard Brexit by applying a 70% tariff on cheese. Instead the tariff that applies to the “most favoured nation” i.e. the lowest must apply to all others. This is known as the MFN rate.

With the MFN weighted average of the EU in 2013 being around 2.3% you might argue that the benefit of being in the single market was reducing. But that’s not the whole story as the MFN tariff varies quite a lot on different products. On cars for example it’s around 10%. If the UK matched this rate on Brexit then cars imported from Europe would cost around 10% more on 1 April than 31 March 2019.

One other issue we need to be aware of is the reverse. Exporters whose goods are currently flowing into Europe tariff free may see the effective price of their goods rise if tariffs are added and therefore their competitiveness reduce against their EU competitors.

I guess that the silver lining is that it won’t come to this BUT what happens if it does? What impact will it have on your profits? How prepared are you?

As I was writing this, this Facebook advert popped up on my feed re-enforcing my view that we need to start planning now.

However, whilst planning might be difficult one thing you can do in preparation is research. Many of my clients have supply chains that stretch into Europe. Some buy directly from companies in France, Spain and Italy et al. others from companies in the UK who buy from Europe. Do you know where the goods you buy come from and what would you need to do if there were a 2.5%, 5.0% or 10% increase in prices because of the application of a tariff? Can you source goods from UK producers? Does your business model need to change? These are all questions I think you should have the answers to just in case.


Slips, trips & falls

In 2002 20.2% of all reportable injuries were as a result of slips, trips and falls; this is second only to Manual Handling injuries which were at 36.9%. By 2010 this number has increased to 37%, with 28% of all fatalities in the workplace being as a result of slips, trips and falls. By 2012 slips, trips and falls accounted for 53% of all major reported injuries.

Regretfully, the Co-op has been heavily fined following an accident in which a customer was killed in a slipping accident. In July 2015 74-year-old Stanley May visited the Truro branch of the Co-op. In the chilled food aisle there was a wet area of flooring where water had been leaking from a faulty sandwich chiller. Mr May slipped over, striking his head. He died two days later in hospital.

We all know that it is not uncommon to see a slippery floor in a supermarket; this can be for a number of reasons; cleaning activities, dropped fruit, product spillages or leaking equipment. In my experience supermarkets, in general, act very quickly in dealing with any spillages and will have a supply of mops and buckets, wet floor signs, matting, etc. at the ready. However, in this case in Truro the chiller had been leaking for 44 hours prior to the accident but customers had been allowed unrestricted access to the area.

Management had initially taken the correct approach by attempting to stop the leak at source. Engineers had been called in when the machine broke down, but it had continued to leak. Staff had also put up a wet floor sign. However, the prosecution explained that the wet area of flooring extended beyond the sign so this appears not to have been adequate as a means of risk control.

Any risk assessment should examine the hazards associated with those at risk; visitors, young people, employees, etc. and in any public place, like a supermarket then the risk assessment should be extended to consider the elderly, disabled, people pushing prams, etc.

In this particular case the supermarket should have done more and the Co-op pleaded guilty to a charge of failing to protect members of the public, under section 3 of the Health and Safety at Work etc. Act 1974. It was fined £400,000 and ordered to pay prosecution costs of £50,000.

As the statistics above show, slips and trips are the single most common cause of major injury accidents in UK workplaces, therefore wet floors need to be treated seriously and with urgency.

There is a logical order in which to control and then eliminate the hazard.

  1. Fixing the leak
  2. Removing the source
  3. Contain the liquid in a tray
  4. If the wet floor cannot be avoided, or if there will be a delay in making the area safe, staff should follow pre-determined procedures.
  5. Following the clean-up, the floor should be left as dry as possible and then a wet floor sign displayed.

If you would like more advice on employee or health & safety issues please contact Andrew Tomlinson on 01522 815100.


Will the Chancellor consider OTS calls for changes to VAT registration threshold?

On the 7 November the Office for Tax Simplification (OTS) issued a report on VAT. The report suggested 23 steps that could be taken to make VAT simpler.

 The detail of the report can be found here.

https://www.gov.uk/government/publications/ots-report-on-routes-to-simplification-for-vat-is-published

Whilst these reports get highlighted in the accountancy press it’s unusual for them to be discussed more widely. It has been suggested however, that one recommendation might have been paving the way for an announcement in this tomorrows budget.

Chapter One discusses the benefits of reducing the VAT registration threshold, currently £85,000. This is one of the highest in the world and £65,000 higher than the EU where it is around £20,000. Apart from the c. £1.5bn a reduction might raise for the Treasury it is suggested that the current limit stifles growth.

“…there is clear evidence from academic analysis of HMRC data and from submissions to this review that the high level of the threshold is having a distortionary impact on business growth and activity”

This is because of the belief that small business owners choose to stay below the registration threshold partly to avoid the admin burden that registration causes but also to remain price competitive against others who are not registered. In my experience most of the unregistered small businesses will be the last in the chain, consumer facing. We’re talking of trades, independent retailers, health & beauty and other small consumer services.

Reducing the threshold would therefore either reduce the profits of small businesses that need to register or increase prices for consumers.

I can’t disagree with the conclusion drawn by the OTS as I’ve had conversations with clients about the pros and cons of breaching the threshold. A lower threshold would reduce these conversations and might encourage some business owners grow. It would however add an extra worry and administrative burden for many business owners.

There’s another factor that might encourage the Chancellor to consider reducing the limit. With VAT registered businesses reporting into the Making Tax Digital (MTD) programme from 2019 it would mean an accelerated implementation for many businesses.

It might be a huge amount of hot air but there are some interesting debates to be had and the Chancellor might just start them off on Tomorrow… we will see!


What is a days pay?

I was recently asked the question … “How do I calculate a days pay?”

Apparently an employee had used up their holiday entitlement but had then been offered the opportunity of going to a Test match at the Oval for the day. The employee had asked for this day to be counted as “unpaid leave” and the employer had no objections to this but was confused as to how to calculate a day’s pay.

My immediate thought was to do a simple calculation;

52 weeks in the year multiplied by 5 days per week gives 260 working days, therefore one day of unpaid leave is simply 1/260 x annual salary.

However, before I answered the query I thought it best to do some research, and I found that this calculation was used in Hartley v King Edward V1 College 2017; in this case it was a deduction from pay following a one-day strike.

The Court of Appeal had also used the same 1/260 approach as I had, but I found that the employees involved had appealed this method to the Supreme Court.

The Supreme Court overturned this calculation and held that, in the absence of any express contractual wording to the contrary, the correct rate of deduction is 1/365th of the employee’s annual salary. It also stated that this 1/365th approach does not apply where an employee on an annual contract has a set hourly rate rather than a fixed salary.

For more information about human resources or to discuss a particular employee issue please contact Andrew Tomlinson on 01522 815100.

Head of Human Resource at Nicholsons Chartered Accountants Lincoln HR


Make XERO your library for all finance related files and documents

Since XEROCON 2017 in early Autumn I have been spending a lot of time thinking about “frictionless finance”. How do we use technology to do finance related activities; better, faster and more accurately?

There is a lot of scope to add apps and set your systems and procedures up in an integrated way that will help with this but there are ways that you can work too that will also help you save time.

For me one of the best features in XERO is the ability to store an image of a purchase invoice or other documents actually with the transactional details. Not revolutionary but if used a real time saver. How often do you need to go and look for a purchase invoice, either because you want the supplier details or want to know how much “that” cost?

One question I often get asked when talking to clients about this is “Don’t  I need to keep paper copies for the taxman?” The simple answer to this is no. In the VAT section of the .gov website under record keeping guidance says:

“You can keep VAT records on paper, electronically or as part of a software programme. Records must be accurate, complete and readable.”

https://www.gov.uk/vat-record-keeping

So it seems logical that if you can copy documents and files to transactions and make them available when you need them, then why wouldn’t you?

XERO enables you to attach files to lots of different kinds of transactions such as; invoices, quotes, manual journals, accounts in your chart of accounts and stock items. You can even send attached files to customers with their invoices and you can attach the same file to many transactions.

Files or documents can be uploaded from your computer or other shared location or stored in the file library in XERO. To do this click on the little file icon next to the inbox icon on the header bar.

You can then create folders just as you would on your computer and manage your documents.

Another neat feature allows you to email documents to your file library.  You are allocated a unique email address and can create a V Card to store in your email address list. You could also share the V Card with colleagues making the process of getting emails to XERO; better, faster and more accurate!

For more information about files visit the XERO help centre by clicking on the image below.

If you want to learn more about XERO and how it can help your business please contact either myself or colleague Stephanie Smith on 01522 81 51100.


ATOL protected – what does it mean?

With the collapse of Monarch Airlines the risk of travelling with ATOL protection is very much at the forefront of everyone’s minds. But what does this in fact mean?

Anybody selling qualifying flights or holidays must be ATOL bonded to enable them to trade and sell such products. Annually the Civil Aviation Authority require such businesses to submit their renewal paperwork, and then 2 documents must be reviewed and approved by a qualified Reporting Accountant under the ATOL scheme. 

What does this mean though? There are new financial tests in place that the business must pass to enable them to renew their licence. In many cases Directors and Shareholders are being asked to invest heavily into their company by way of cash injection, confirmation of them leaving funds within the business, or converting their loan accounts into share capital so as to tie it up in the company. This is causing some real headaches for the smaller operators.

The reporting accountant is responsible for ensuring that the systems operated by tour operators are robust enough to capture all the necessary bonded bookings and ensuring that they pay the correct levy over.  The ATOL levy of £2.50 per passenger is what has now enabled thousands of Monarch passengers to claim back their money directly from the Civil Aviation Authority.

The Authorities are relying on the registered accountants to provide them with the assurances as to the accuracy of these operators’ data.

Always be aware of whether your flight is ATOL bonded for your own protection in the event of airline failure. For more information on the scheme visit the CAA website

Nicholsons are registered with ATOL to undertake reporting accountant work. If you require advice around ATOL reporting please contact me on 01522 815100.

 


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