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Apprenticeship levy bill published

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Draft legislation has been published which would require employers to pay an annual apprenticeship levy.

HMRC’s draft legislation provides that employers who pay employer’s national insurance contributions (NICs) will have to pay 0.5% of their total NIC bill each tax year less an allowance of £15,000. In practice, this means that employers who pay over £3 million in employer’s NICs in any given tax year would be caught by the new measures.

The draft, which is part of the Finance Bill 2016, is currently subject to comment and the levy is expected to apply from 6 April 2017.

The draft legislation has generally proved unpopular among employers, with some referring to it as a ‘payroll tax’. In any event, as the rules are slightly different to existing NIC legislation, employers can also expect to pay compliance costs to ensure that those who operate the payroll are aware of the rules before they come into force.

HMRC: Apprenticeship Levy
https://www.gov.uk/government/publications/apprenticeship-levy/apprenticeship-levy

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FCA and PRA publish first set of rules on regulatory references

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A joint policy statement was published by the PRA and the FCA on 15 February 2016 in relation to the implementation of the new senior managers and certification regime (SMCR), the senior insurance managers regime (SIMR) and the PRA requirement on regulatory references, most of which came into effect on 7 March.

The joint policy statement contains the final rules in relation to the application of the SIMR to Swiss insurers, as well as a first set of rules in relation to regulatory references, which will be implemented at a later date.

An earlier consultation in October 2015 raised some concerns that the FCA and PRA wished to consider further. Thus, only certain provisions came into force on 7 March 2016; namely, the requirement for PRA approved firms to provide a reference to new employers as soon as reasonably practicable in respect of those exercising particular functions, and the requirement to obtain references for candidates in relation to the past five years of their employment and/or holding of non-executive directorships.

Currently, there is no set template for regulatory references; the FCA plans to publish the final set of rules some time around summer 2016.

Strengthening accountability in banking and insurance: Implementation of SM&CR and SIMR; and PRA requirements on regulatory references, Policy Statement PRAPS5/16, FCAPS16/5

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Holiday pay must include results-based commission

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The calculation of statutory holiday pay should take into account results-based commission.

Mr Lock was employed by British Gas. Though he received a basic salary, 60% of his overall remuneration comprised commission on sales achieved. However, his holiday pay was calculated solely by reference to his basic pay. As a result of this, Mr Lock brought a claim against his employer.

Last July, we reported on the European Court of Justice’s decision that commission payments must be taken into account when calculating holiday pay, so as to avoid the worker being put at a disadvantage by using their holiday entitlement.

The Employment Appeal Tribunal has since confirmed that Mr Lock should receive holiday pay at a rate which includes both his basic salary and the sales-based commission he would normally receive.

It is unsurprising that the EAT has followed the European judgment on this point. The decision will have a particular impact on industries in which commission payments are a significant component of overall remuneration.

British Gas Trading Ltd v Lock and another UKEAT/0189/15

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ICO statement on data protection ‘Privacy Shield’ announcement

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As the EU and the UK reached a deal on a new data transfer agreement, aiming to provide protection for data transfers to the US, the Information Commissioner’s Office published a statement setting out its position. The EU-US Privacy Shield is intended to replace the Safe Harbour framework.

For the moment, the ICO’s position remains the same as set out in October – namely, that in response to complaints about the current Safe Harbour framework, the usual ICO regulatory policy will be applied.

However, the ICO advises organisations to take into account the future application of the Shield, and to highlight this information to companies in the US to whom they may be sending data.

ICO Blog, Safe Harbor: calmer waters on the horizon https://iconewsblog.wordpress.com/2016/02/11/safe-harbor-calmer-waters-on-the-horizon/

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Dismissal for information-sharing unfair where confidentiality policy not enforced

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The dismissal of an employee for sharing confidential information was unfair in circumstances where the business’ information-sharing culture was at odds with its formal confidentiality policy.

Mr Stimpson was employed by Citibank as a trader in its EMEA G10 Spot foreign exchange trading business from 2 January 1989. In his 2009 and 2010 appraisals his manager encouraged him to maintain contacts in the industry by joining an online Bloomberg chat room used by multiple banks. No guidance was given as to what should or should not be posted in such a chat room.

Around 31 January 2013, once the LIBOR rigging scandal had become public, FX spot traders (Mr Stimpson included) were told to stop using the Bloomberg chat room. Citibank conducted an investigation into its practices; as a part of this, Mr Stimpson was suspended on allegations that he had shared client confidential information with other traders in the chat room, in breach of Citi’s confidentiality policy.

Mr Stimpson argued in his defence that information-sharing was part of the culture of the FX market. He said that his managers not only gave no guidance as to how chat rooms should be used, but seemed to encourage the sharing of confidential information between banks.

Citibank informed Mr Stimpson on 20 November 2014 that he was dismissed without notice; this was some 5 days after Citi received a final notice from the Financial Conduct Authority stating that “the right values and culture were not sufficiently embedded in Citi’s G10 spot FX trading business”. Mr Stimpson’s appeal against his dismissal was unsuccessful, so he brought a claim for unfair dismissal against the bank.

The Employment Tribunal held that Mr Stimpson had been unfairly dismissed. It held that the dismissing officer had adopted a “rather blinkered approach” in looking only at the black letter of the policy rather than how far it was applied in practice. In particular, Citi had failed properly to consider Mr Stimpson’s arguments about the reality of FX culture, support for which was subsequently given by the FCA’s final notice.

Employers in all sectors are reminded by this case of the risks in dismissing an employee for non-compliance with a company policy which bears no relation to how business is conducted in practice.

Stimpson v Citibank N.A. ET/3200437/15

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Duty of care owed for gratuitous services given to friends

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A person owes a duty of care when doing work for free to do it to a standard which accords with the expertise they claim to have, even where the work is being done for their friends.

Ms Lejonvarn was an architect who was friends with Mr and Mrs Burgess. In 2012 the Burgesses obtained a preliminary design and a quotation in the region of £200,000 for landscaping works they were planning in their back garden. Ms Lejovarn suggested that the project could be completed with a smaller budget (one in the region of £130,000) and began to provide design and project management services. Ms Lejonvarn did not ask for payment and a formal contract was never discussed. As the project progressed, the Burgesses became concerned about the cost and quality of the work.

Their relationship deteriorated and the Burgesses hired an alternative landscape designer to finish the project. The Burgesses brought a claim against Ms Lejonvarn (with a value of up to £265,000) for the increased cost of the project and remedial works.

The High Court ruled that although the parties did not agree a contract, Ms Lejonvarn did owe a duty of care relating to the various services she provided. The court emphasised that the advice Ms Lejonvarn gave was neither ad hoc nor minimal and went beyond the kind of informal advice professionals often give to their friends. The case is currently pending full trial to determine whether Ms Lejonvarn’s actions breached the duty she owed.

The case is an abject lesson about mixing work and friendship.

Burgess & Anor v Lejonvarn [2016] EWHC 40 (TCC)

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