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Collective Redundancy Consultation: European Court Judgment is Good News for UK Employers

by Katie Clark and Paul McGrath | Jul 16, 2015 | Employment

Background

UK legislation provides that, when a UK employer proposes to make redundant 20 or more employees at one establishment within a period of 90 days or less, the employer is required to collectively consult representatives of those affected, prior to implementing that proposal. Failure to do so can lead to the employer being required to pay up to 90 days’ pay to each affected employee (a Protective Award).

In 2013, when considering the lawfulness of the collective redundancy process carried out by Woolworths in the throes of its closure, the UK Employment Appeal Tribunal caused havoc by deciding that the words “at one establishment” should be deleted from the legislation.

The deletion meant that, in order to avoid liability for a Protective Award, an employer proposing make 20 or more redundancies, anywhere in their UK business, within the relevant timeframe, needed to collectively consult about those proposals, no matter how geographically disparate and wholly unconnected the proposed dismissals might be.

Response

The Court of Appeal, thinking that this really could not be right, asked the European Court for a preliminary ruling on the issue.

The way the European system works is that an Advocate General (AG) first considers the question and then delivers his opinion. The European Court then uses the AG’s opinion to assist it in coming up with its Judgment. The European Court can disagree with the AG, but it usually follows the AG’s recommendation.

In this case, the AG decided that, in his opinion, the term “establishment” in UK legislation means the local employment unit to which the relevant workers are assigned to carry out their duties.

European Court Decision

On April 30, 2015, the European Court confirmed that the trigger for collective redundancy consultation is a situation where, within a 90 day period, an employer proposes to make 20 or more employees redundant at one establishment, as opposed to anywhere within its UK business, as had been suggested by the UK Employment Appeal Tribunal.

The court’s decision therefore narrows the instances in which employers will be required to collectively consult about proposed redundancies in the United Kingdom. The focus will now return to how many redundancies are proposed at each establishment within the UK business over the 90 day period. Whether or not a particular site or office qualifies as an establishment for collective redundancy purposes will be determined by the familiar tests used previously.

Effective Employee Suspension Agreements to Facilitate Compliance Investigations

by McDermott Will & Emery | Jul 10, 2015 | Employment

The proper handling of employees who are under investigation, is crucial to ensuring effective compliance investigations that minimize disruption to the organization. The first step often involves entering into a suspension agreement with employees whose conduct is being investigated.

Read the full article.

Supreme Court Rejects Latest Challenge to Affordable Care Act: What Are Employers’ Obligations Going Forward?

by Jacob Mattinson | Jun 30, 2015 | Benefit Controversies, Employee Benefits, Employment, Fiduciary and Investment Issues, Health and Welfare Plans

On June 25, 2015, the Supreme Court of the United States upheld one of the main pillars of the Affordable Care Act (ACA): the tax credits that allow millions of Americans to afford health care insurance on the public exchanges. In King v. Burwell, Chief Justice Roberts, writing for a 6–3 majority, held that middle- and low-income individuals who purchase health care insurance through a federally facilitated health care exchange are entitled to the same tax credits that are available to purchasers through state-run health care exchanges. The ruling puts to rest one of the remaining challenges to the general framework of the ACA. Accordingly, our On the Subject discusses how employers should continue to plan for compliance with the current and upcoming obligations required under the ACA.

Read the full article.

Ruling of First Impression: Employees Working Abroad Do Matter for Thresholds of Corporate Co-determination in Germany

by Bettina Holzberger and Dr. Sandra Urban-Crell | Jun 26, 2015 | Employment, Labor

In a February 16, 2015, decision from the Regional Court of Frankfurt a. M. (ref.: 3-16 O 1/14), the court determined that employees working outside of Germany have to be taken into account when determining whether or not the statutory thresholds that trigger corporate co-determination in Germany are met.

In this case, a new shareholder of Deutsche Börse AG initiated a proceeding against Deutsche Börse AG, arguing that its supervisory board was not staffed correctly due to its failure to count employees located outside of Germany when applying German statutory requirements regarding co-determination.

There are two main statutes in Germany based on which employees’ co-determination in a supervisory board can become mandatory. One statute states that, in companies with more than 500 employees, one-third of the supervisory board members shall be employees. Another statute states that, in companies with more than 2,000 employees, the supervisory board needs to be staffed with half of its representatives from the employees’ side.

The court found that neither statute contained any indication that only employees working within Germany count when determining if the above mentioned thresholds are met. Thus, according to Frankfurt’s Regional Court, employees working outside Germany have to be counted when determining the 500-employee or the 2,000-employee thresholds. In the specific case, when considering employees working in Germany and working outside of Germany, Deutsche Börse AG would have had to staff its supervisory board with half of its representative from the employees’ side.

The decision contradicted prevailing opinion regarding the employees counted when determining the statutory thresholds. Most companies assumed that requirements under German labor laws would not be extended to workers located outside of Germany. For this reason, employees not working in Germany have not historically been counted for the purpose of co-determination statutes.

The decision is not legally binding yet. Certainly, the defendants are going to appeal until the German Federal Supreme Court renders its final judgement. The decision is of particular relevance for many mid-sized companies because taking into consideration employees working abroad may, in many cases, result in exceeding the applicable thresholds, and thus in being obliged to establish a co-determined supervisory board. In addition, the occurrence of a cross-border transaction could result in an employee headcount that exceeds the co-determination statutory thresholds.

McDermott will continue to monitor the law in this area.

UK Employment Seminar: HOW TO…Deal with Maternity Dilemmas

by rshankar | Jun 24, 2015 | Employment

Juggling maternity rights and practical employment issues can be notoriously difficult, and has the potential to make what should be a happy event seem rather daunting, for both employer and employee.

We see the same questions arise time and again on some particularly thorny maternity topics, including HOW TO:

Deal with bonus, commission and holiday entitlement during maternity leave, in a way that is lawful and fairly balances the interests of the new mother, the rest of the team and the business
Handle flexible working requests and the right to return to work (including what to do if you would prefer to keep the maternity cover)
Conduct a redundancy exercise when employees on maternity leave are among those “at risk”

In this session, we will give you pragmatic and straightforward answers to these issues, and other, tricky questions, along with practical tips on how to navigate your way through the issues.

Thursday, June 25, 2015
8:45 am – Registration and breakfast
9:00 – 10:15 am – Employment seminar and discussion

McDermott Will & Emery UK LLP
110 Bishopsgate
London EC2N 4AY

To register for the event, click here.

Increase in UK Employment Protection Awards

by Katie Clark | May 29, 2015 | Employment

The compensation limits on Employment Tribunal awards and certain other amounts payable under UK employment legislation increased as of 6 April 2015. The key changes are set out below.

Increase in UK Employment Protection Awards

What Does This Mean for Employers?

The changes took effect on 6 April 2015 and apply to dismissals that occurred on, or will occur after, that date.

It is important for employers to note that

If an employee was given notice prior to 6 April 2015, but the notice period expired on 6 April or will expire on a future date, the new limits above will apply to that dismissal.
If an employee’s employment is terminated by means of a payment in lieu of notice, the effective date of termination (EDT) is the actual date the dismissal takes effect, plus the amount of statutory notice applicable to the employee, i.e., one week per year of employment, up to a maximum of 12 weeks. If the statutory notice would take the EDT to or beyond 6 April 2015, the new limits will apply.

An employer’s exposure in the event of an unfair dismissal claim will also rise and should therefore be factored into decision-making regarding litigation or settlement strategies.

SEC’s Large Payouts to Compliance-Officer Whistleblowers Highlight Need for Companies to Pay Prompt Attention

by Eugene I. Goldman | May 19, 2015 | Employment

On April 22, 2015, the U.S. Securities and Exchange Commission (SEC) announced that it had awarded $1.4 million–$1.6 million to a compliance officer-turned-whistleblower who aided the SEC in an enforcement action against the officer’s employer. This marks the second time an employee with an internal audit or compliance function—who does not typically qualify under whistleblower rules—received an award under the SEC’s whistleblower program dictated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Read the full article.

McDermott’s Todd Solomon Discusses Same-Sex Employee Benefits with the Wall Street Journal

by Diane Morgenthaler and McDermott Will & Emery | May 14, 2015 | Benefit Controversies, Employee Benefits, Employment, Executive Compensation, Fiduciary and Investment Issues, Health and Welfare Plans, Retirement Plans

As the U.S. Supreme Court weighs whether gay couples are constitutionally entitled to marry, more companies in states with marriage equality have begun to mandate that gay employees marry in order to maintain benefits, including health care coverage. In a recent interview with the Wall Street Journal, McDermott partner Todd Solomon discusses the shifting terrain of coverage and benefits that companies offer unmarried gay partners. McDermott lawyers have been monitoring domestic partnership benefits for almost two decades, and, as Mr. Solomon notes, the landscape is definitely changing.

Read the full article, “Firms Tell Gay Couples: Wed or Lose Your Benefits,” in the Wall Street Journal.

DOL Final Rule Prohibiting Discrimination against LGBT Individuals in Government Contracting Effective April 2015

by Brian Tiemann, Jacob Mattinson and Todd Solomon | May 12, 2015 | Employment

“Final rule from the Department of Labor, effective as of April 2015, provides that federal contractors may not discriminate on the basis of sexual orientation and gender identity. The U.S. Equal Employment Opportunity Commission (EEOC) similarly takes the position that employers may not discriminate on the basis of sexual orientation or transgender status.”

Read the full article.

McDermott to Host Benefits Innovators Roundtable Series – May 19 in New York City

by rshankar | May 5, 2015 | Employment, Health and Welfare Plans, Privacy and Data Security, Retirement Plans

McDermott Will & Emery will be holding the next invitation-only Benefits Innovators Roundtable series in our New York office on May 19, 2015. These roundtables offer senior, experienced professionals an opportunity to discuss employer-provided benefits best practices with peers and experienced McDermott employee benefits lawyers. Previous events in this series have led to spirited discussions on a broad range of cutting-edge topics.

This session’s topics will include:

Lawsuits by health service providers
Hot issues in data privacy
Brainstorming sessions on: the U.S. Supreme Court’s 2015 term (including King v. Burwell), legislative proposals, 401(k) issues and recent U.S. Department of Labor actions.

If you are interested in attending, please contact Donna Baker.

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