ABG Employment Newsletter – December 2012

Government proposals for employee owner status

In October the Chancellor announced the Government’s proposals for a new type of employee ownership arrangement. A consultation paper has now been issued on these proposals. The idea is for employees to give up some of their employment rights in exchange for shares in their employer worth between £2,000 and £50,000.

If introduced, the arrangement would involve a new employment status, “employee owner”, in addition to the two existing concepts of “employee” and “worker” in employment legislation.

Under the proposals businesses would have a choice about the type of contract/status they could offer to individuals. Those given the new status of employee owner would generally have the same rights as normal employees but with the exception of redundancy pay and unfair dismissal rights (except where the dismissal is automatically unfair or amounts to unlawful discrimination) and they would only have the right to request flexible working when they returned from parental leave.

Employers who opt to engage staff as employee owners would be able to include a provision in their contract requiring them to surrender the shares when employment comes to an end. The employer would have to buy back the shares at a reasonable value.

There is still little detail about exactly how this new concept will work in practice, but the Government believes it will be attractive to fast growing businesses that are prepared to reward employee ownership.

Employee bound by new unsigned contract following promotion

In a recent case the High Court held that an employee was bound by the terms of a new contract which was issued to him after he had been promoted, even though he had not signed and returned it to the employer. The new contract contained restrictive covenants which the employer was seeking to enforce against the employee after he had left to join a rival.

In disputing the employer’s claim the employee argued that he was not bound by the restrictive covenants as he had not signed the contract. However this argument failed because he had applied for private medical insurance cover and had joined the employer’s defined contribution pension scheme, both of which were made available to him under the new contract.

This case shows that it is possible for an employee to be bound by new contract terms, such as restraint clauses, even if the employee has not actually signed and returned the contract. However, this will only be where, in continuing to work, the employee’s conduct is only referable to his having accepted the new terms. Sometimes the change in the contract terms does not require any response from the employee at all and in these circumstances his conduct will be consistent with the original contract terms continuing and so he will not be bound by the new terms.

So it remains true that the safest course of action is always to ensure that, not only is a new contract issued when new terms are introduced, but that it is also signed and returned.

Collective redundancy consultation and meaning of “establishment”

The law on collective redundancy consultation imposes a consultation period of 30 days where an employer is proposing 20 or more redundancies at one establishment. The consultation period increases to 90 days where there are 100 or more redundancies at one establishment. The question sometimes arises as to what is an “establishment” for this purpose. In some past cases it has been decided that a number of sites which are geographically separate can amount to one establishment if they fall under central management.

In the most recent case the EAT has placed greater emphasis on the physical work location and overturned a tribunal’s decision that for collective consultation purposes the “establishment” at which redundant teachers worked was the education service of the local authority and not their individual schools. The EAT said that the judge had focussed too much on the mobility clauses in the teachers’ contracts and where they could theoretically be instructed to work and on the council’s central control over their recruitment and dismissal. The EAT said that the term “establishment” relates to a physical presence and is largely directed at the place of work to which the employees are assigned.

This decision is a useful ruling for employers who are contemplating multi-site redundancies, although it should be borne in mind that, even if the 30 day consultation period is not triggered, a process of individual consultation with the affected employees remains essential in order to avoid potential unfair redundancy claims.

Personal devices at work

ACAS has published some useful guidance on the use of smartphones and other electronic devices at work. Some organisations have a “Bring Your Own Device” policy under which employees are allowed to access company resources and data on their personal devices. Whilst this may achieve a costs saving for the employer through not having to buy the device, there are risks if the practice is not managed properly. It is recommended that under a BYOD policy it should be made clear that business use should be isolated from personal use and also employers should consider making provision for remotely deleting sensitive data from personal devices.


The comments in this note are of a general nature only. Full advice should be sought on any specific problems.

Christopher Gigg 
[email protected] 
+44 (0)115 934 3310

Kathryn Meir
[email protected]
+44 (0)115 934 3308