Weekly Round Up…

Employee Shareholders

It is now confirmed, the rules on Employee Shareholders status will take effect from 1 September 2013.  This is a radical development in employment and tax law – not only does it introduce a new type of employment status altogether which subverts the long-standing restriction on contracting out of unfair dismissal rights, but with the attraction of potentially massive tax and CGT savings there are bound to be attempts to exploit the legislation with new employment structures.  We will be analysing and dissecting the legislation at our forthcoming seminars.

GAAR

The General Anti-Abuse Rule became law on 17 July with the 2013 Finance Bill receiving Royal Assent.  As we reported back in May we did not envisage any impact on mainstream umbrella companies if the rules were enacted as set out in the draft (which they have been), however it is important for practitioners to get to grips with the new rules and understand when they might apply and when they will not.  The best way to stay abreast of developments is to subscribe to our seminar and training package.

Important change to Appeal Tribunal rules

On 29 July 2013 the Employment Appeal Tribunal (EAT) rules changed in order to accommodate the new fee regime.  As you may be aware there are a number of changes being introduced both in the Employment tribunal and the EAT on 29 July.  We will be producing a detailed summary of all the main changes for our Affiliates.  However, prior to doing this we wanted to outline one particular change in EAT procedure that you are unlikely to be aware of but is of some importance.

Presently, there is a procedure known as a Rule 3(10) hearing and over the years it has become increasingly significant.  When an appeal is initially filed by either party it enters what is known as the ‘sift’.  The ‘sift’ is where an EAT Judge reviews the appeal on paper and assesses whether it complies with EAT rules and whether it has a reasonable prospect of success.  If the EAT Judge decides that it doesn’t (without hearing from either party) the appeal is automatically rejected in writing.  In this situation if you wish to proceed with your appeal you have the right to an oral hearing where you can seek to persuade a Judge in person that the appeal has some merit and that it should be heard in full.  The right to this initial oral hearing is enshrined under Rule 3(10).

From 29 July Rule 3(10) will cease to exist and the right to an oral hearing following the rejection of an appeal on paper will end.  This is a significant develop and removes a tool used by numerous advocates on numerous occasions.  A vast number of successful appeals (including some conducted by members of the Chartergates team) have at first been rejected at the initial ‘sift’ stage.  Without the Rule 3(10) hearing those appeals would have been in jeopardy.  We can only hope that given the removal of Rule 3(10) the initial sift will take a more reasonable and measured approach.

Employees competing with their employer

A common issue faced by many employers is the threat of an employee resigning and competing against the employer regardless of covenants and confidentiality clauses.  In this situation an employer has to act quickly and apply for an interim injunction requiring the employee to cease activities, so that the issues can be heard at a full hearing.  This ensures that irrevocable damage is not done by the employee but that a full and fair hearing is staged at a later date.

An interesting case concerning an application for injunctive relief is Whitmar Publications v Gamage.  In this case three employees resigned from their employment with the intention to compete. Fearful of the consequences the employer applied for an injunction to force the employees to cease their competition.  The employer argued that the steps to compete being taken by the employees were more than merely preparation but were in fact proactive steps to compete.  As this was an urgent application the court had to make a quick assessment of the evidence in order to determine whether they should grant the injunction until a more considered assessment could be undertaken.

In assessing whether the employees actions were more than merely preparatory the court took into account emails between the employees.  One such email referred to destroying any evidence of their plans.  The Judge on assessing evidence of this nature asserted that a ‘badge’ of competition (rather than preparation) is the ‘secrecy’ with which people conduct their business.  On the basis of this apparent secrecy the Judge was satisfied that the employees were acting in competition and therefore granted the injunction.

This is an interesting case and reminds us that employees do not have carte blanche to start competing with their employer before the expiration of notice or covenants.

Self-employment less burdensome

Well from an administrative perspective at least. This is a possibility given a consultation that HMRC have put out there with regard to the collection of Class 2 NIC.  The flat rate of Class 2 NIC currently is £2.70 per week and counts towards specific state benefits only, such as the basic state pension, employment and support allowance and maternity allowance.  Since April 2011 Class 2 NIC can be paid monthly or 6 monthly by direct debit once a person has registered as self-employed. The proposal is for collection of Class 2 NIC to be done via the Self-Assessment system along with Class 4 NICs and Income Tax making life easier for the self-employed and of course for HMRC.

The full consultation document is available here.  It makes quite interesting reading believe it or not.