Changing goalposts

Companies must be more aware of their employment issues to avoid costly claims from disgruntled employees.

Companies must be more aware of their employment issues to avoid costly claims from disgruntled employees.

Companies must be more aware of their employment issues to avoid costly claims.

For Helen Green, fighting a court case against former employer Deutsche Bank was worth every penny. Claming she was bullied while working at the bank’s secretariat division, Green took the case to the High Court and was recently awarded £800,000 in damages.

The issue highlights the problems many employers now face regarding employment law. Indeed, claims can dent potential profits and even sink a company’s reputation. And it’s not just harassment laws that are worrying company directors, other upcoming and recent legislation includes age discrimination and TUPE.

Nevertheless, for lawyers such as Nick Humphreys – an associate at Bircham Dyson Bell – the damages awarded to former employees can be justified under the law and employers have to be aware of new legislation.

“What the judge had to do [in the case of Helen Green] was essentially gaze into a crystal ball,” he said. “He had to assess how long she would have been able to carry on working in that sort of job at the level of remuneration that she was earning.

“Was she going to earn more than £800,000 for the rest of her career if she had carried on unbullied or not suffered from other acts of harassment? According to the judge, the chances are she probably would have done.”

Humphreys suggests that big City firms such as Deutsche Bank are prone to harassment claims because people there are working in a stressful, competitive environment. In July 2003, Steven Horkulak won almost £1 million in damages after claiming he was bullied at City firm Cantor Fitzgerald. The interbroker dealer argued that Horkulak was paid a high wage to work in a demanding environment and had to cope with receiving abusive language, but this was thrown out by the High Court and Court of Appeal on the basis that people are not employed to be bullied.

Meanwhile, directors of smaller companies – making up the backbone of the UK economy – worry that they lack the resources and manpower to adapt easily to changes in employment law. Statutory harassment is just one of a plethora of legislation that employers must heed.

With the Employment Equality (Age) Regulations introduced in October 2006, for example, businesses must now look at the age range of their employees. “You shouldn’t have any form of arbitrary discrimination in the workplace where you’re dealing with people who are otherwise qualified and able to do a job of work, so the legislation should be encouraged,” Humphreys says.

“But from a more cynical perspective, it is inevitable that this is going to be used as yet another sword against employers when somebody is upset about a decision taken in the workplace.”

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) is another law that could hit unprepared businesses. Changes were made to TUPE in April concerning the employees of an insolvent company. Insolvent companies can now ring-fence certain employee debts, which are then met using the National Insurance fund, while the otherwise viable business of the company is sold and its acquirer may then change its employees’ contracts of employment to help save the business.

Humphreys argues that the only way companies can avoid problems with TUPE is to avoid ignoring it: “Provided people carry on working on the basis that TUPE is likely to apply in a situation in which it looks as if it should, then you can cater for all of the problems that come out of TUPE by having decent indemnities and warranties in the commercial sale documentation.”

Indeed, businesses cannot assume that they are immune to employment law claims, a belief that cost Deutsche Bank and Cantor Fitzgerald many thousands. “There’s a whole new layer of claiming potential liabilities that has to be put into the costing for the business,” Humphreys adds. “The more levels of claim they potentially have, the more the reserve that you may have to put in place and the more it squeezes the bottom line; this is unless you properly address these issues in the commercial sale documentation.”

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.

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