March 2022 - MLP Law

The Principle of Horseplay and Vicarious Liability

In the recent case of Chell v Tarmac Cement and Lime Limited [2022], the Court of Appeal held that a finding of direct liability could not be imposed upon an employer for an ill judged act by an employee.
 
Facts
Mr Heath detonated two explosive pellets close to Mr Chell, causing injury to his hearing. This happened in the workplace, namely on the premises of Tarmac. Mr Chell therefore claimed that his employer was vicariously liable for this act and should be responsible for paying compensation. To support his argument, Mr Chell cited a history of friction between fitters employed directly by Tarmac, and others, who had been historically employed by another business – stating that rivalries had arisen and were well known within the business.
 
In that context, it was argued by Mr Chell that the incident, which had damaged his hearing, was closely connected with work and was therefore the responsibility of the employer. He therefore claimed compensation.
 
Law
There is a long history of cases on employers’ vicarious liability. Vicarious liability has two basic requirements:
 
1. A relationship between the employer and the individual who caused the injury; and
2. A connection between this relationship and the wrongdoer’s act.
 
The potential vicarious liability of an employer is relevant where an employee causes injury in the context of work, as it means that the employer must bear the burden of appropriate recompense.
 
Mr Chell considered there was a close enough connection between Mr Heath’s action and the work he undertook for Tarmac. The Court, however, disagreed, stating there was not a close enough connection. The Court drew an analogy between the employer’s potential liability and the expected subject matter of a risk assessment – horseplay, ill-discipline and malice are not matters usually included. Those are acts the employee must know are outside the behaviour expected in the workplace.
 
In making its decision, the Court pointed to the fact that:
·         the pellets had been brought into the workplace by Mr Heath;
·         Mr Heath had entered an area not usual for him to be working in; and
·         that there had been no outstanding complaint or grievance made by Mr Chell, regarding Mr Heath.
 
Comment
This case serves to highlight the importance of having appropriate policies and training in place, especially those that emphasise appropriate conduct in the workplace. If employees then engage in risky or unprofessional behavior, the employer can counter any suggestion that it is variously liable by pointing to such policies, to underpin that the employee was acting outside the bounds of accepted conduct.
 
If you would like advice from the Employment team at MLP Law in respect of any of the issues raised here or more generally, please do not hesitate to get in touch on 0161 926 9969 or employment@mlplaw.co.uk, or follow us on Twitter @HRHeroUK.
 

The End of Covid Restrictions – What Now for Employers?


Yesterday saw the remaining Covid provisions relating to SSP end, meaning that entitlement to SSP for eligible employees reverts to applying from day 4 of their absence. Moreover, the government has removed the requirement to self-isolate, and is removing free universal testing from 1 April 2022. So, what does this mean for employers managing Covid risks in the workplace going forward?
 
Employers have a continuing duty to ensure the health, safety and welfare of their staff and will need to consider their approach within the context of the government plans to push for ‘business as normal’ regarding Covid, as part of any risk assessment.
 
In particular, employers will need to decide whether, despite the proposed lifting of the guidance, they will continue to require those who test positive (or have symptoms) to stay away from the workplace to avoid spreading Covid. This throws up various dilemmas, not least the issue of managing and paying employees who report for work, despite displaying symptoms of, or actually having, Covid.
 
Employee Attitude to Risk
If you do not have a testing requirement for staff, you will not necessarily know if employees have the virus. Therefore, the first issue to decide is whether you are going to insist on continued Covid testing for staff, which may in large part be dictated by your workforce’s attitude to risk. Indeed, some employees may be relaxed about the situation to remove Covid restrictions, regarding the risk from the continuing pandemic as no greater than the risk of a cold or mild flu. Others, particular those at higher risk, may be more concerned than before about the risk of contracting Covid on the commute or at work, particularly if the employer does not require testing and/or self-isolation. It is therefore important to be clear to staff regarding your expectations regarding if and when they should test for Covid, setting out the circumstances when they should do so. An employer would not be obligated to provide tests in those circumstances but doing so may help to facilitate compliance with such a request.
 
Employers should also be aware of any employees who may be more vulnerable than others to infection, as this may mean that more stringent requirements are adopted specifically for them (for instance, ensuring they do not work closely with any colleague in their team who has Covid or Covid symptoms, where such individuals are not required to stay at home).
 
Incentive
If the employer wants to encourage staff with Covid to stay away from the office (whether they are symptomatic or asymptomatic), it may need to incentivise them, for instance, by agreeing to pay their usual salary during their absence. Clearly, however, this may prove a costly approach.
 
SSP
A more attractive approach for dealing with employees with symptoms/Covid is to rely on your usual sickness absence procedures and pay. Some employees may be reluctant to stay away from work, if they feel well enough to attend, where this will have financial implications. It is therefore important to have robust sickness absence polices, making it clear that if an employee feels unwell or has a contagious illness (regardless of how they feel), then they are obliged to take sick leave. Employers may find it useful to have a consistent approach in respect of all contagious illnesses, including colds and flu.
 
Hybrid working
Given the relative success of remote working during the pandemic, many employers have introduced, or are considering, hybrid working, or agile working, which means that staff attend the workplace for part of their working time and work remotely from home (or elsewhere) for part of their working time. This may be an appropriate solution for some members of staff, to ensure they remain away from the workplace but can still work (and be paid as normal), if they feel well enough to do so.
 
Rely on Vaccinated Population
Alternatively, you may not want to insist that employees with symptoms/Covid stay away from the workplace at all, instead relying on current government guidance and high national vaccination rates to truly embrace ‘business as usual’. If your business does adopt such an approach, it is important to keep reviewing and following current government guidelines, as recent employment tribunal decisions demonstrate that there is a reluctance to sanction employers who act consistently with such advice.
 
If you would like to advice from the Employment team at MLP Law in respect of any of the issues raised here or more generally, please do not hesitate to get in touch on 0161 926 9969 or employment@mlplaw.co.uk, or follow us on Twitter @HRHeroUK.

Selling a Business? Here are some Tax Considerations to help you decide between Share Sale or Asset Sale

The sale of a company’s business can be structured as either:
 
•              a share sale – being a sale of shares in the company by its shareholders; or

•              an asset sale – being a sale of assets owned by the company

In a share sale, ownership of the company itself is transferred to the buyer. The company retains its assets (and liabilities) and continues to operate the business under the buyer’s ownership.

In an asset sale, a buyer is able to cherry pick which assets and liabilities (if any) and which parts of the target business it acquires.
Generally speaking, a seller (or sellers) will usually prefer to sell the shares of a company, giving them a clean break from the company and its business, whereas a buyer may prefer an asset   purchase in order to avoid acquiring any unexpected liabilities of the company.

However, the relative pros and cons need to be properly considered before deciding which   structure (shares or assets) should be used.
Whether the transaction is structured as share sale or an asset sale depends on factors including:
 
• the bargaining position of the parties

• the nature of the assets used in the target business

• any difficulties in transferring the assets including obtaining third party consents for the assignment of key contracts or leasehold properties

• the existence (or risk) of outstanding historical liabilities of the company, and

• the tax consequences of the particular transaction
 
Share sales — tax advantages for seller
Some of the tax advantages of a share sale for the seller include:
 
• Disposal of the company complete with all historical, continuing and any other
liabilities.

Essentially, the seller is able to walk away completely from the business it wishes to sell and have a clean break. However, the price the seller pays for passing responsibility for the company’s history to the buyer is, subject to the relative negotiating power of the parties, the provision of warranties and a tax indemnity (tax covenant) for everything relating to the period pre-completion.

• Where the seller is an individual, business asset disposal relief (formerly entrepreneurs’ relief) may be available to reduce the taxable gain provided certain conditions are satisfied.

• Where there is a corporate seller, substantial shareholdings exemption relief (SSE) may be available.
 
Asset sales—tax advantages for buyer
Some of the tax advantages of an asset sale for a buyer may include:
 
• By selecting the assets and business acquired, the buyer should be able to leave any historical tax liabilities with the selling company and so essentially, the buyer avoids taking responsibility for the target company’s historical, continuing liabilities and any potential and secondary tax liabilities.

• In an asset sale, the assets used in the target business are acquired individually and the price paid for each individual asset (usually the price allocated in the asset purchase agreement) will form part of its base cost in calculating any future chargeable gain (or allowable loss).

• The buyer may be able to obtain reinvestment roll-over relief (in connection with both gains realised on the disposal of tangible assets and credits accruing from the disposal of intangible assets). Where the buyer has made (or will make) gains on the disposal of its own assets (including intangible assets), it may be able to roll-over the arising gain (or credit) into the assets (assuming they are qualifying assets for these purposes and the acquisition is made within certain time limits) newly acquired under the asset purchase agreement.

• The buyer may be able to obtain tax relief for the cost of certain intangible assets acquired in the sale

• The buyer may be able to claim capital allowances in respect of plant and machinery.
 
Both legal and tax advice should be sought to determine whether the shares or assets route is the best for you and your company

If you wish to discuss the contents of this blog further please get in touch at corporate@mlplaw.co.uk or alternatively call 0161 926 9969.

‘Worker status’ leads to successful claim for Backdated Holiday Pay

Having succeeded in a previous claim, asserting that he was a worker and not self-employed, Mr Smith then capitalised on his worker status by claiming and being awarded £74,000 in unpaid holiday pay – Smith v Pimlico Plumbers [2022].
 
Facts
Mr Smith worked solely for Pimlico Plumbers and was sent out in one of their vans to do work on behalf of the company. Despite the company’s claim that Mr Smith was self-employed and, as a skilled worker, was in a strong bargaining position, he succeeded in his claim that he was a worker.   
 
Given his worker status, Mr Smith argued that he had been entitled to paid holidays and accordingly submitted a further claim for unpaid holiday pay in respect of the time he had worked for Pimlico Plumbers between 2005 and 2011.  During that time, Mr Smith had taken unpaid holidays and therefore claimed backdated holiday pay, in the amount of £74,000.
 
Law
In upholding the claim, the Judge outlined the following guidance for employers – stating that a worker can only lose the right to take paid annual leave at the end of the leave year, if the employer can show that it:
 
·        specifically and transparently, gave the worker the opportunity to take paid annual leave;
·        encouraged the worker to take paid annual leave; and
·        informed the worker that the right would be lost at the end of the leave year.
 
Comment
The case serves as an important reminder to employers, to be certain of the status of those who carry out work for your business and, more particularly in this instance, to have robust procedures in respect of annual leave for the individuals in your organisation who are entitled to it.
 
If you would like advice from the Employment team at MLP Law in respect of any of the issues raised here or more generally, please do not hesitate to get in touch on 0161 926 9969 or employment@mlplaw.co.uk, or follow us on Twitter @HRHeroUK.

How potential changes to Inheritance Tax & Capital Gains Tax may affect you in April 2022 Budget

During April 2022’s upcoming budget, it is expected that Rishi Sunak will announce increases to current Inheritance Tax and Capital Gains Tax (CGT) liabilities.

Examples of why IHT and CGT liabilities are likely to affect further estates going forward, is due to the increase in property prices, shares, jewellery, vehicles, savings and investments (outside of pensions) and life insurance pay-outs.

During 2021, HMRC collected a record-breaking £6 billion in IHT and CGT liabilities and, during the 2020/2021 tax year, HMRC collected a total of £10.61 billion in CGT liabilities.

What does this mean for you?

Rishi Sunak’s announcement may declare changes to the Inheritance Tax threshold, and estates that would currently be exempt from paying Inheritance Tax, may become taxable.

The announcement of the April 2022 budget reminds us how important it is that you review your Will and estate planning regularly to ensure it remains up to date with your current circumstances and the law.

We suggest our client’s review their Will every 3 to 5 years to ensure it is kept up to date.

How can we help?

If your Will is overdue a review and update, or you are yet to prepare a Will, please do get in touch and one of our experienced lawyers in our Wills, Trusts and Probate department would be happy to assist and ensure you take full advantage of any current tax allowances which you and your spouse or partner have available.

Please email our lawyers at wtp@mlplaw.co.uk or give us a call on 0161 926 9969.

What should P&O have done?

The news that P&O Ferries has decided to sack 800 employees and replace them with agency staff has been met with widespread criticism.
 
As all employers know, businesses must constantly evolve their workforce to meet their business needs, improve productivity or respond to changes in their industry or the wider economy. In some cases, this can lead to the need to make redundancies or restructure the business.
 
However, UK employment law requires employers to follow fair redundancy procedures, including a period of information and consultation and consideration of alternatives, before any decision to make redundancies is made.
 
What did P&O do?
 
P&O has been roundly criticized following reports that it made around 800 employees redundant, with immediate effect and without consultation, during a company-wide video call.
 
Much of the outcry stems from the shock felt by employees, unions and onlookers alike that such a large employer would apparently fail to follow even the most minimal of consultation processes.
 
So what should P&O have done?
 
P&O’s situation is one commonly referred to as a “collective redundancy” scenario. Briefly, this is where an employer proposes to dismiss as a redundant 20 or more employees at one establishment within any period of 90 days or less. In such circumstances minimum consultation periods will apply.
 
P&O proposed to dismiss 100 or more employees (in fact around 800 employees, according to reports), meaning that a consultation period should have commenced at least 45 days before any dismissals took effect. This minimum period is reduced to 30 days where an employer proposes to dismiss between 20 and 99 employees.
 
P&O should have provided representatives of the potentially redundant employees with key information about the redundancy in order to enable meaningful consultation to take place. This information should have included the reasons for the redundancy proposals, the number and description of employees it proposed to make redundant and how they would be selected.
 
Following the provision of this information, meaningful consultation should have taken place at a formative stage (i.e. before the decision had been made) and this should have included discussing ways of avoiding the redundancies, reducing the number of employees who needed to be made redundant and mitigating the consequences of redundancy.
 
From the reporting on the P&O situation, it appears that this consultation may not have taken place.
 
What are the consequences for P&O and will they be concerned?
 
A fair redundancy processes should balance the needs of the business with the rights of employees and failure to properly consult with employees, or follow the correct procedures, can lead to costly Employment Tribunal claims, including for a “protective award” for failure to inform and consult, as well as an ordinary unfair dismissal claim.
 
P&O’s potential liabilities may therefore be up to 90 days’ pay for each of the 800 affected employees, plus any losses of earnings flowing from each employees’ unfair dismissal (subject to the statutory cap compensatory awards, which is currently £89,493).
 
P&O may also be subject to criminal proceedings, both as a company and in respect of its directors in their personal capacities, if there was a failure to notify the Secretary of State of the redundancy proposals at least 45 days before any dismissals take effect. There is no limit on the fine which can be issued on conviction in such cases.
 
It seems unlikely that P&O was not aware of its legal position or the consequences of breaching the collective consultation requirements. More likely, P&O factored these risks into its decision and reached the conclusion that they are outweighed by the commercial benefits it feels the decision will bring. It is also possible that P&O has taken steps to mitigate the risks as far as possible, for example by offering enhanced redundancy terms in return for entering into a settlement agreement.
 
Assumptions made in this blog
 
This blog is for general purposes only and should not be relied upon as legal advice. This blog assumes that the P&O employees have the full benefit of UK employment law, as UK based employees working for a UK connected company. This may not necessarily be the case, however, as explored by leading employment law barrister Grahame Anderson in this Twitter thread. It also assumes that a sufficient number of employees were employed in “one establishment”, such that the collective consultation obligations applied, which may also not necessarily be the case.
 
Get in touch
 
Please don’t hesitate to contact the Employment Team at MLP Law if you would like any advice on collective redundancy situations. You can always reach us at employment@mlplaw.co.uk or @HRHeroUK or on 0161 926 9969.
 

The Intestate Estate of Una Stubbs

Una Stubbs was a talented actress who sadly passed away at her home in Edinburgh, at the age of 84 following a long illness. Her career in show business spanned more than 50 years.

Una Stubbs did not leave a Will and died intestate, which meant that her estate which was valued at around £1.3 million, consisting of her assets and liabilities at the date of her death, required a Grant of Letters of Administration, also known as a Grant ad colligenda bona, to be obtained by one of her sons.

What is a Grant of Letters of Administration?
A Grant of Letters of Administration is a document which appoints someone or, a group of individuals, called Administrators, to manage the administration of a deceased person’s estate. A Grant of Letters of Administration can be limited to certain actions, such as collecting in the assets and proceeds of the deceased individual’s estate from the relevant institutions and, also the sale of the deceased’s property.  

The Rules of Intestacy
As Una Stubbs did not write a Will during her lifetime, she had no say as to who her assets would pass to. The rules of intestacy distributed her estate to her three sons in equal shares.

If you do not make a Will during your lifetime, people may inherit your estate under the rules of intestacy against your wishes and your estate may be liable to pay Inheritance Tax that could have been avoided if you had made a Will.

How can we help?
If you would like to discuss making a Will to ensure that your loved ones will benefit from your estate, please contact our Wills, Trusts and Probate department by email at wtp@mlplaw.co.uk or give us a call on 0161 926 9969 and one of specialist lawyers will be happy to assist you.