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PRA consultation on variable remuneration buy-outs

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The Prudential Regulation Authority is currently consulting on whether to change the rules in relation to buy-outs of variable remuneration.

The current position is that employers can “buy out” new employees’ deferred bonus awards which have not been paid by the previous employer. The PRA is of the view that this arrangement allows individuals, simply by changing employers, to protect themselves against the possibility of their old employer clawing back bonus payments or recalculating them on the basis of conduct or risk relating to the bonus period only discovered after an award has been made, which is commonly referred to as ‘malus’.

The PRA’s proposal would make it possible for malus and clawback to be applied to the new employer’s buy-out awards where the old employer determines it to be appropriate. The old employer would have to explain the reason(s) for proposing malus or clawback and allow the employee the opportunity to rebut those reasons. This exercise would presumably require old employers to disclose confidential information to an ex-employee’s new employer, which may be a competitor.

The consultation is open until 13 April 2016, at which point the PRA will consider the responses received.

PRA Consultation Paper CP2/16

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Employer’s monitoring of messaging account did not breach right to privacy

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An employer’s decision to monitor an employee’s private messages on a work-related messaging account did not breach that employee’s rights to privacy.

Mr Barbulescu was employed as an engineer in charge of sales. He was asked by his employer to set up a Yahoo messenger account in order to respond to customer queries. Mr Barbulescu did so; however, he also used the account to talk to his brother and fiancée about sensitive personal matters from his work computer. The employer’s handbook prohibited personal use of company resources, including computers, during working hours and gave the employer the authority to monitor employees’ communications. The employer discovered Mr Barbulescu’s personal communications and dismissed him on that basis. He subsequently claimed that his employer had breached his rights to privacy in monitoring his communications.

The European Court of Human Rights held that the employer’s actions did not breach Mr Barbulescu’s rights to privacy. The court found that it was reasonable for an employer to want to verify that staff were actually working during working hours. It was also relevant to note that the employer had accessed the account expecting it to contain communications with clients, given that it was an account set up for work reasons.

Although the decision was widely reported in the media as giving employers the right to ‘spy’ on their employees, the impact of this decision in the UK will be limited considering the number of other provisions protecting employees from invasions of their privacy. This decision by no means gives employers free rein to monitor all of their staff’s communications in all circumstances.

It does, however, demonstrate the value in having a clear and unequivocal policy in the handbook to make employees aware that their personal communications may be monitored.

Barbulescu v Romania – 61496/08 [2016] ECHR 61