Business Brief: March 2019

Welcome to the March 2019 edition of the Gaby Hardwicke Business Brief. We publish the Business Brief regularly and it contains information on important legal developments, forthcoming legislation and other items of interest to you and your business. Our aim is to update you on the most important issues in the shortest possible time and to give you advance warning of regulation, with advice on how to minimise its impact.

We hope that you find this newsletter useful. If you have any comments or suggestions, please email us or call David Getty on 01323 435900.

This month's articles:

Employee right to be accompanied to a disciplinary hearing

Employees have the right to be accompanied to a disciplinary hearing. The employee’s right is to have a companion present with them and that such a companion must fall into a certain category of individuals. One such category by way of example is a fellow ‘worker’.

Furthermore, an employee has the right to postpone the hearing and rearrange it within five working days in order to accommodate the companion. For example the companion may be away on holiday.

However, there was a case in the Employment Appeal Tribunal (EAT) in 2018 which found that the employer had acted unreasonably when it refused to rearrange the hearing until two weeks after the proposed date in order to accommodate the employee’s companion. The employer went ahead with the hearing in the employee’s absence and then went on to dismiss her. The EAT upheld the tribunal’s decision that the dismissal was procedurally unfair given that the employer had an overriding duty to act reasonably and in refusing to postpone the hearing for a short time to allow the employee’s companion to attend it had acted unreasonably.

This may seem like a harsh decision where the employer had a fair reason to dismiss the employee and had also followed the letter of the law by allowing the employee only up to five working days to postpone the hearing.

For further information please contact Paul Maynard.

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Employment law changes from April 2019

From 1 April 2019 employers must pay national insurance contributions on any part of a termination payment that exceeds £30,000. It should be noted that this is not payable on the employee’s national insurance. This means that employers will be paying out more money than previously where termination payments exceed £30,000. They will have to pay 13.8% on the balance above £30,000.

Additionally, from 6 April 2019 all ‘workers’ will be entitled to an itemised payslip. Previously, only employees were entitled to an itemised payslip. This change therefore widens the scope of who must be supplied with an itemised payslip as the definition of ‘worker’ is wider than the definition of an employee. For example ‘workers’ covers agency staff, casual staff, zero hours staff and so on.

Another important change will affect staff whose pay varies depending on how many hours they work. From April 2019, their payslip must state the exact number of hour they are being paid for.

For further information please contact Paul Maynard.

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New statutory rates of pay from 1 April 2019

Both the National Living Wage (NLW) and National Minimum Wage (NMW) are set to rise in April 2019.

The new rates are as follows:

  • NLW (25+): £8.21 per hour
  • NMW for 21-24-year-olds: £7.70 per hour
  • NMW for 18-20-year-olds: £6.15 per hour
  • NMW for 16-17-year-olds: £4.35 per hour
  • NMW apprentice rate: £3.90 per hour

Other statutory rates are also set to rise as follows:

  • Statutory sick pay: £94.25 per week
  • Statutory maternity, paternity, adoption and shared parental payments: £148.68 per week
  • Accommodation offset: £7.55 per day

For further information please contact Paul Maynard.

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Restrictive covenants – what is a substantial benefit?

The Upper Tribunal (Lands Chamber) recently considered an application to modify a restrictive covenant.

To summarise, the case concerned a woman who owned a cottage. On her land was an old barn. She was granted planning permission to convert the barn into residential accommodation. However, she was prevented from implementing the planning permission due to a restrictive covenant attached to the title of her land. She therefore applied to the tribunal to modify the restrictive covenant to enable her to convert the barn. However, a neighbour objected to the restrictive covenant being modified.

The tribunal had to consider whether the covenant gave the objectors practical benefits of substantial value. This case turned on the ‘substantial value’ issue. It was found that where the neighbouring objector’s property would diminish in value by 2.5% (in this case this was £65,000) this was not substantial and therefore the applicant was successful in obtaining a modification to the restrictive covenant. Whilst £65,000 may seem like a substantial sum, in the context of a property worth £2.6m and focusing on the 2.5% figure, the court did not consider it ‘substantial’.

For further information please contact Daniela Catuara.

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Overage agreement problems

Disputes frequently arise in the context of overage agreements. Essentially these are agreements that seek to secure an additional sum of money for a seller of land after completion, if certain conditions are met. An overage obligation is usually negotiated where there is a reasonable expectation by the seller that the land will be redeveloped or that a valuable planning permission will be granted in the future.

A case concerning an overage agreement recently reached the Court of Appeal in which it was a condition of payment that the developer would obtain planning permission for 60 residential units. The developer obtaining planning permission for 60 units. However, due to a number of building regulation issues and restrictions it was not possible to implement the planning permission for 60 units. The number of units that could be built as a result was less than 60. The developer therefore argued that it was not liable to pay the overage payment. The seller disagreed and argued that payment should be made given that the condition of getting planning permission for 60 units had been met. The court found in favour of the seller and against the developer. It found that a sophisticated developer should have realised the risks involved and the terms were clear. The developer could have avoided the problem with better drafting of the terms of the agreement so that the definition of planning permission was clearer or it could have had a planning-conditional contract where building regulation problems could have been covered in the terms.

For further information please contact Hannah Bambury.

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Drugs test dismissal deemed unfair

A 61-year-old diabetic bus driver failed an on the spot drugs test and was subsequently summarily dismissed for gross misconduct. The tribunal found the dismissal to be both wrongful and unfair.

Firstly, it was unfair because the tribunal found that, in the circumstances, the employer acted unreasonably. It had not taken into account the possibility that the drug sample had been contaminated and thus the result might be inaccurate, as alleged by the employee. In this particular case, the employee alleged that he regularly dealt with money during the course of his job and he also had a tendency to lick his fingers and the saliva sample taken from him (which tested positive for cocaine) could have been contaminated as he had never used drugs. Instead, he provided a follicle of his hair for testing (which did not show any trace of cocaine in his system) but the employer did not take that into account because it was not carried out by the employer’s approved tester.

The tribunal found that the employer had not acted within the range of reasonable responses, either when carrying out its investigation or when deciding to dismiss the employee. The tribunal said that a reasonable employer would have retested the employee. The employer did not consider the employee’s unblemished history and long-standing service of 21 years and simply applied a strict and rigid policy.

Furthermore, the tribunal was not satisfied that the employee was under the influence of drugs whilst he was at work. Being under the influence of drugs whilst on duty and failing a drugs test were, according to the tribunal, to be treated distinctly.

For further information please contact Paul Maynard.

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Tenant successfully sued after commercial premises fire

A tenant had a lease of commercial premises, specifically a restaurant. The lease contained a clause requiring the landlord to insure the premises. The premises was defined as the tenant’s demise, which was the ground floor and basement of the building.

A fire broke out as a result of the tenant’s negligence and caused damage to the restaurant and the rest of the building. The insurer indemnified the landlord under its policy in relation to damage to the whole building but then sought to sue the tenant for the damage to the rest of the building. As the landlord was only required to insure the premises and not the building, the insurer’s claim against the tenant for damage to other parts of the building succeeded. It is therefore advisable for tenants when negotiating a lease to ensure that the insurance obligation on the landlord (if there is one) covers the whole building rather than just the premises demised to it.

For further information please contact Ian Hoare.

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Was an unsigned contract binding?

In a recent High Court case this question came before the court and the court found that, on the facts, there was no binding agreement. A long-draft contract had been prepared and was being negotiated between solicitors. Whilst the negotiations ensued the parties took some steps that were in accordance with the intended agreement. The dispute arose when negotiations broke down and one party no longer wished to contract with the other party but the other party considered there to already be a binding agreement despite the contract not being signed.

Each case will turn on its facts. In this case the court took into account a number of relevant factors such as:

  1. The parties were negotiating a long form agreement;
  2. The parties had instructed solicitors to conduct the negotiations;
  3. Negotiations need not state ‘subject to contract’ albeit such a label would be helpful where the parties do not intend to create a contract;
  4. The complexity of the subject matter of the contract;
  5. The fact that a contract provides for it to be signed does not by itself mean that it is only capable of being accepted if it is signed by the parties. Previous trading history will be relevant as well as anything in the draft contract or other communication as to when it will be binding.

For further information please contact Jeremy Laws.

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Breach of copyright – re-posting a photograph on the internet

The European Court of Justice (ECJ) recently ruled in a case concerning a pupil who used a photograph he found on a travel website for a school presentation. He did not obtain the consent of the copyright owner. After using the photo for the presentation the school then published the photo on its website.

The photographer claimed that there was a breach of copyright as he had only given permission to the travel website to use the photo, not anyone else. The court agreed with him. The judgment noted that had the pupil provided a hyperlink to the photo on the travel website that would not have been a breach of copyright. The reasoning behind this is that the copyright owner would retain control of the use of the photo as he would be able to remove it if he wished and thus the hyperlink would no longer be effective.

For further information please contact Jeremy Laws.

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Could a developer exercise an option to purchase land without paying a deposit?

This was a case concerning a couple and a developer where the couple granted an option to the developer to purchase a plot of land with the intention of then building a house on it.

An agreement was drawn up and entered into. The clause concerning the option was broken down into two parts: 1) the developer exercised the option by giving written notice to the couple during the relevant period; and 2) on the exercise of the option the developer was to pay a deposit of 10% of the purchase price to the couple.

The developer gave written notice to exercise the option within the relevant period. The couple did not accept that the notice was valid as the deposit had not been paid.

The court found in favour of the developer and held that the requirement to pay a deposit was not a condition precedent of exercising the option. Payment of the deposit was to be made once the option had been exercised. That said, payment of the deposit was still a condition of the contract. On the facts of this particular case the court found that the parties had reached an agreement to waive the requirement to pay a deposit and therefore the couple were prevented from insisting on payment of the deposit. The developer recovered damages from the couple for loss of profit.

For further information please contact Cathy Allen.

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Disclaimer and copyright notice

This service is provided free of charge for information purposes only. The information and opinions contained in this bulletin are not necessarily comprehensive and do not purport to give professional advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this service.

© Gaby Hardwicke March 2019

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