Employment, commercial, pension & tax updates

Read some of the latest cases and judgements that may affect you.

Indirect discrimination: protected characteristics

Businesses should be made aware of an ECJ judgment that will have huge implications for indirect discrimination law in the UK. The court held that a person may claim indirect discrimination under the Race Directive (2000/43/EC) even though they do not possess the protected characteristic that has given rise to the discriminatory practice in question. If everyone is intended to be the beneficiary of the rule against indirect discrimination, it will become harder for businesses to identify who might bring a claim. People who could not previously establish that they belonged to a disadvantaged group may seek to bring claims if they are "suffering alongside" a disadvantaged group.

A man making a request to work part-time for childcare reasons and being refused, on the basis that there is a requirement to work full-time, is a good example. He would struggle to establish that he belonged to a disadvantaged group (it being commonly accepted that a requirement to work full-time disadvantages women more than men due to their greater role in childcare). However, this case strongly suggests he could bring his claim as a person suffering alongside the disadvantaged female group.

Partnership: joint liability of partnerships

A Court of Appeal decision provides a warning to owners of businesses that trade as a partnership. The court held that a partner was jointly and severally liable to a third party for the breach of fiduciary duty of another partner (L). This was the case even though L's breach of duty occurred after L had resigned from the partnership.

In this instance, the innocent partner was not exonerated from liability arising from acts that were sufficiently closely connected with the acts that the defaulting partner had been authorised to do, as they were regarded as being done in the ordinary course of the partnership's business.

The partners were also held to be jointly and severally liable for the claimants costs in pursuing the claim and appeal, subject to a 50% reduction to reflect the fact that the claim in negligence had failed.

Pensions auto-enrolment: guidance for businesses

The Pensions Regulator has issued further guidance for small and micro employers in response to research that suggests they need support in choosing a pension scheme for auto-enrolment purposes. The Regulator now estimates that 1.8 million small and micro employers are likely to reach their staging dates over the coming three years, up from the previous estimate of 1.3 million. According to the Regulator, the rise is attributable to an increase in small business start-ups and a decline in the number of business failures. The peak is likely to occur in the second quarter of the 2017/18 financial year when about 349,000 mainly micro employers reach their staging dates.

Data protection: monetary penalty notices

According to its annual report, in 2014/15, the Information Commissioner's Office (ICO) imposed civil monetary penalties amounting to over £1 million, including fines for data loss (£692,500) and unsolicited marketing communications (five penalties totalling £386,000). The ICO also prosecuted in 13 cases involving unlawfully obtaining or disclosing personal data, resulting in ten criminal convictions.

SMEs: tax relief for research and development expenditure

Small or medium-sized enterprises (SMEs) in financial difficulties will be reassured by a First-tier Tribunal (Tax Chamber) decision concerning research and development (R&D) relief. The tribunal held that debt restructurings, such as debt-for-equity swaps, should not lead to a loss of R&D relief, as long as the investor leaves the day-to-day management of the business in the hands of the existing management team.

In this case, a company remained entitled to R&D relief as a SME despite a banking group being a substantial shareholder. The group's shareholding was such that, absent any exemption, the group's balance sheet would have to be taken into account in applying the SME limits (leading the company to lose SME status). However, the group was an "institutional investor" and was therefore ignored for these purposes as it was not involved in the day-to-day running of the company, and did not provide the company with financial strength or advantage exceeding that of other SMEs.

Working Time Regulations: statutory holidays and sickness absence

The Employment Appeal Tribunal (EAT) has held that the Working Time Directive (2003/88/EC) does not require workers on sick leave to provide evidence that they are physically unable to take annual leave to carry over accrued unused statutory holiday to a subsequent leave year. It is sufficient that they are absent on sick leave and do not choose to take annual leave during that period.

However, the EAT also held that the right to carry over leave is not unlimited. Consequently, businesses should read the Working Time Regulations 1998 (WTR) as permitting a worker to take annual leave within 18 months of the leave year in which it accrues where they are unable or unwilling to take it because they are on sick leave. Accrued leave that goes beyond that cut-off period will lapse.