No poaching agreements between leading companies in the IT sector have recently caused a substantial scandal in Silicon Valley, California, resulting in tech industry businesses settling a major lawsuit by paying a reported US$324 million. Such agreements can be found all over the world; but are they enforceable in Germany?
Unite, the trade union that backed the majority of the claimants in Bear Scotland v Fulton regarding the calculation of holiday pay, has announced it will not appeal the Employment Appeal Tribunal decision. To read our alert on the decision, please click here.
What Has Happened?
One effect of the EAT’s judgment was to dramatically limit workers’ rights to bring Employment Tribunal claims for historic underpayments of holiday pay. It had been widely expected that Unite would lead an appeal to the Court of Appeal, so the union’s announcement that it won’t will be music to the ears of employers who are concerned about the potentially significant cost of such claims.
The bad news is that Unite’s decision not to appeal is not necessarily the end of the issue. Many cases were stayed pending a decision in Bear Scotland, and it is likely that these cases will now proceed and a new test case may well work its way up to the Court of Appeal.
What Does This Mean For Employers?
The EAT’s judgment is highly unlikely to be overturned within the next 12 months. In the meantime, employers can stand firm on requests made or claims brought for significant back pay that are outside outside the parameters set by the EAT.
By way of reminder, the EAT decided that a Tribunal can only deal with a claim for an unlawful deductions from wages if it is brought within three months of: i) the date of underpayment; or ii) if there has been a series of deductions, within three months of the last deduction in the series (unless the Tribunal decides that the deadline should be extended because it wasn’t reasonably practicable for the claim to have been brought in time).
As it is only the four weeks (20 days for a full-time worker) mandatory holiday required to be given to workers by the European Working Time Directive that must include overtime, etc., an underpayment claim relating to more than one period of holiday may only be considered by a Tribunal if periods of mandatory holiday have been taken within three months of each other. The EAT said that it made sense for mandatory holiday to be treated as having been taken first in the holiday year. This means that any additional holiday taken towards the end of the year will tend to break up the periods of mandatory holiday and so disrupt a workers’ ability to claim for them.
Over the past decade, there has been a significant increase in the number of physicians who have dropped out of Preferred Provider Organization (PPO) and Health Maintenance Organization (HMO) networks and attempted to negotiate their own financial reimbursement with insurance companies and self-funded health care plans related to medical treatment provided to participants whose plan are governed by the Employee Retirement Income Security Act of 1974, as amended (ERISA).
These moves have led to a corresponding increase in the number of health care benefit suits brought by out-of-network physicians and treatment centers seeking to gain through litigation that which they could not get through direct negotiations with insurers and plan administrators—higher reimbursement amounts for health care treatment from ERISA-governed medical plans.
The UK Court of Appeal has handed down its decision in Rodgers v Sunrise Brokers LLP [2014] EWCA Civ 1373, a case in which the High Court ruled that an employee who resigned in breach of contract remained employed by the employer, and was not entitled to be paid if he refused to come back to work. You can access our alert on the original High Court decision here.
Although the Court of Appeal rejected Mr Rodgers’ appeal in its entirety, it made some interesting observations, which should be taken into account by employers seeking to enforce restrictive covenants.
Background
Mr Rodgers had entered into a fixed-term employment contract with Sunrise Brokers LLP (Sunrise), under which he could not lawfully terminate the contract until September 2015. Thereafter, he was subject to a suite of restrictive covenants of between six and 12 months’ duration, which he accepted were reasonable.
Mr Rodgers walked out on 27 March 2014. Before doing so, he had accepted employment with one of Sunrise’s competitors and agreed to start work for that competitor at a later date. He refused to honour the rest of his contract with Sunrise.
Sunrise chose not to accept Mr Rodgers’ purported resignation, as it was in breach of the terms that had been agreed. The company instead took the view that the contract remained live, but refused to pay him on the basis that he was refusing to come to work.
The High Court Decision
Sunrise voluntarily agreed to shorten the length of the contract so that it would end in October 2014 instead of September 2015. The High Court issued an injunction holding Mr Rodgers to the terms of his employment contract until that date, but only enforcing his restrictive covenants until 26 January 2015. The restrictive covenants were therefore enforced for less than the six month period specified in Mr Rodger’s contract of employment.
The Court of Appeal Decision
The Court of Appeal sanctioned this approach. In doing so, it confirmed that the High Court was entitled to enforce the restrictive covenants for less than the six month period contained in Mr Rodger’s employment contract.
The Court of Appeal’s judgment is a useful reminder that, in order to obtain injunctive relief against an employee for the full duration of a restrictive covenant, an employer must show both that
It is easy to fall into the trap of only addressing the first of these requirements, but employers wishing to enforce restrictive covenants should assess whether or not they have an arguable case on both fronts. If they fail to do so, they could find themselves with a covenant that is both reasonable and theoretically enforceable, yet with no, or a reduced period of, protection from the Court.
All individuals involved in a proposed sale transaction have a personal stake in full federal, state and local legal compliance because of expanding doctrines of personal liability and successorship liability, notwithstanding transaction documents that purport to disclaim assumption of seller’s liabilities.
A law has been passed in France to encourage French employee buy-outs of small and medium-sized companies (SMEs). In companies with fewer than 250 employees, an owner will be required to inform French employees of an intent to sell the business or a majority share of the business no later than two months before the sale. Failure to comply with this new obligation may result in the sale being nullified.
As the economy continues to rebound and the United States again starts to see more movement in the employment market, employers are once again revisiting their severance pay and retention policies and developing an underlying rational of whether or not to provide these benefits and if so, how broadly among their workforce. However, it has become apparent that not everyone really understands the difference between severance arrangements and retention agreements and when one should be used instead of the other. Each accomplishes a different purpose and understanding the fundamental differences between the two will allow professionals to make an educated decision regarding which option is best for a given organization depending on its existing circumstances.
Reprinted with the permission of ThomsonReuters, © 2014, all rights reserved.
From today, 1 October 2014, employees and agency workers who have a “qualifying relationship” with a pregnant woman or her expected child are entitled to take unpaid time off during working hours to accompany the woman to two antenatal appointments.
This new right supplements the existing right of pregnant women to paid time off for such appointments.
The Regional Labour Court of Cologne (Regional Court) stated in a decision in late November 2013 that a German employer has the obligation to allocate break times of employees in an orderly manner, and presented the possible consequences of non-compliance with such obligation.
In the case under review, the German employer (a nursing home) had set up a work schedule for the night shift which, in total, included a one-hour break from work per shift per employee. However, the German employer did not allocate a certain timeframe (e.g., from 4 to 5 am) for the break times. Instead, the employees were supposed to arrange among themselves who, when and in what time intervals to take the one-hour break per shift.
The Regional Court stated in its decision that such practice does not fulfil the legal requirements of “breaks” that do not have to be compensated by the employer. Under German law, only breaks from work within the meaning of § 4 German Working Hours Act (Arbeitszeitgesetz) do not need to be compensated. Importantly, to be covered by such statute, the breaks must be determined in advance. The German employer does not meet his statutory obligation to determine the breaks if it is up to the employees to freely arrange their breaks among themselves. The reasoning behind this ruling is the risk that the employees actually might not take a break at all because they lack the employer’s consent.
In summary, even though the German employer in this case took into account a one-hour break per employee and shift, it did not determine the organization or timing of such breaks. Therefore, the breaks did not fulfill the requirements of § 4 German Working Hours Act. As a consequence, the German employer had to pay remuneration for the whole night shift (not taking into account any kind of break).
German employers should keep this decision in mind when scheduling breaks. The best option is to determine the conditions and the timing of breaks in the employment contract, or, if a works council exists, in a collective works council agreement binding upon all employees of the operation. Additionally, the German employers should control and monitor compliance with such determined break times in order to avoid unnecessary claims for remuneration.
Departing employees can represent a significant threat to UK business. This is particularly so in the case of senior managers and employees who have access to confidential information or who exert influence over key relationships with actual or prospective customers, suppliers or key members of staff.
Many employers seek to manage this threat by obtaining an employee’s agreement to a broad range of contractual post-termination restrictions (PTRs), often referred to as restrictive covenants. PTRs are generally designed to protect a business against a range of threats: former employees working for competitors, soliciting clients and poaching employees, etc. When they work, PTRs can be a very effective weapon in an employer’s arsenal, but there are potentially significant hurdles that must be overcome before they will be enforced by the UK courts.
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