Stress and Recession

Over 13 million working days were lost in Britain alone last year due to stress related absence. This figure is expected to rise as the economy declines.

The cost to British business of sickness absence is felt in both financial and human terms; reduced productivity, low morale and poor health. 

At a time when cost cutting initiatives are high on the agenda, health
management strategy is key to the success of any business intent on riding out the recession.

Stress at Work – New Guidance

Recognition of the potential cost savings to be made in this areacomes in the form of new guidance for HR teams and line managers. The CIPD, Health and Safety Executive (HSE) and Investors in People have joined forces to launch new guidance on the management of workplace stress. This follows a research programme (sponsored by these organisations) which set out to identify and develop the management behaviours necessary to manage stress in others. 

The guidance (Line Management Behaviour and Stress at Work) highlights
four main management competencies which aim to help employers save on
both human and business costs. 

In essence, it  encorages Line Managers to be more "stress aware" and to take responsibility for managing stress issues in the workplace.

The HSE has also launched a new website aimed at helping businesses prevent work related stress. The site can be found at
www.hse.gov.uk/stress/index.htm and offers advice for employers, including guidance and case studies.

 

"Fit Notes"

The initiatives outlined above will help to pave the way for the
urgent and comprehensive reform of the approach taken to health at
work advocated by Dame Carol Black in her report "Working for a
healthier tomorrow" published on 17 March 2008. 

Amongst other things, this report called for a radical new approach to sickness
certification. 

The report recommended that the current paper sick note should be replaced with an electronic certificate system, linked to GP's computer system. Known as a "fit note", this would switch the current emphasis from what people cannot do to what they can do.

Consultation on "fit notes" was launched by the Government on 28 May
this year with a view to implementing the new system in spring 2010.
The consultation closed on 19 August.

It is generally acknowledged that the longer an employee is absent
from work, the harder it is for them to return, and there is evidence
to show that being out of work leads to a decline in physical and
mental health. 

The proposed change in the system of sickness certification is designed to facilitate an earlier, possibly phased, return to work. 

Currently, a GP must certify either that an employee need not refrain from work or that the employee need refrain from work for a specified period. 

  In contrast, the new "fit notes" will have three categories of ability to work;

• "fit for work", 
• "not fit for work", and 
• "may be fit for some work now". 

When a doctor selects the final category, he or she is asked to describe the functional effects of the employee's condition and has the option of indicating
appropriate arrangements to help the employee back into work, for example, a phased return, altered hours, amended duties, and/or workplace adaptations.

The changes have been welcomed by employers and trade unions alike and are seen as representing real progress in tackling long-term sickness absence. 

However, potential difficulties with the proposals have been identified as follows:

There is concern that the process may become a dialogue between the GP
and the employer, to the exclusion of the employee, thus leading to a
deterioration in the situation. This aspect will need to be managed
carefully in practice.

Another concern is that GPs are not (usually) occupational health
professionals and so may not have the expertise to make an informed
assessment of the employee's work-related capabilities. In practice,
this is likely to lead to an expanded role for occupational health
which, in itself, was one of the recommendations made by Dame Carol Black in her report.

There is a potential for conflict if the doctor and employee disagree about what the employee can do. If the GP assesses the individual as capable of carrying out light duties and the employee refuses, query whether the employer can insist on the modified return to work and take disciplinary action in the face of continued resistance from the employee. This point has not been addressed in the consultation.

Finally, the new system of electronic "fit notes" will not release the
employer from obligations under the Disability Discrimination Act 1995 ("DDA") because a doctors' recommendations in a "fit note" will not be
binding. However, suggestions made in a "fit note" may amount to
reasonable adjustments for the purposes of the DDA.

Whilst clearly a positive step forward, it remains to be seen how
successful the "fit note" will be in practice. What is certain,
however, is that health issues will continue to present a particular
challenge for employers (and hence employment lawyers) while the
economy remains in freefall.

UK : Immigant Overstayers : What to do

What is the legal position if an immigrant overstays the right to be here?

Potential Consequences for the Employee

First of all, by overstaying the employee is committing a continuing
criminal offence under section 24 (1)(b)(i) Immigration Act 1971. If
convicted, he may be liable to a fine or imprisonment of up to six
months.

However, since conditions prohibiting or restricting employment will
have lapsed when his leave expired, he will not be committing any
other offence under immigration legislation by continuing to work.

When he applies for permission to remain in the UK under the points
based system, the UK Border Agency will be aware from its information
and from the employee's passport that he is committing this criminal
offence. 

It is more likely than not that the Agency will choose to take no action against the employee providing overstaying is the sole offence committed and the period of overstay is less than six months. 

Indeed, it is even possible for the employee to file his application by way of the same day service at the Public Enquiry Office. It is not guaranteed that the Agency will continue to take such a relaxed attitude to those who overstay and the Government is continuously tightening UK immigration control.

Under paragraph 322 (1A) Immigration Rules HC 395, the Agency must refuse applications if material facts are not disclosed. It is strongly arguable that a
person's UK employment status at the time the application is filed will be regarded as a material fact which requires disclosure. If the fact of the employment is not disclosed on the PBS application form and it is discovered either as part of the application process (the Agency checks HMRC records for instance) or in the future, then the Agency will be able to take action to remove the employee from the UK.

If they consider that the employee has intentionally deceived them in
failing to disclose this information, he will face a mandatory ban of up to ten years from returning to the UK.

If, however, the employee ceases to be employed when his application
is filed, then it is likely that he would not be obliged to inform the Agency that he has previously been employed when he was an overstayer because it is unlikely that previous employment would be considered to be a material fact to this application. There is, however, currently no case law on this point.

Potential Consequences for the Employer

If the employee who is overstaying continues to be employed and discloses this fact to the Agency in his PBS application, as he must,  there is an increased likelihood that the Agency may take action against his employer under section 15 of the Immigration Asylum and Nationality Act 2006. 

(Again, information as to the identity of the employer would be available to the Agency through HMRC checks). 

If this action is taken against the employer, then this may lead to the Agency issuing a civil penalty of up to £10,000 and it could also downgrade or withdraw the employer's sponsor licence.

In addition, in relation to those employed on or after 29 February 2008, if the employer has on its files confirmation that the employee's leave has expired (for instance a copy which shows the expiry date was taken and retained on file) and it does not have evidence that the employee's leave has been extended, then, there is also a risk that the employer (and relevant persons)
risk criminal prosecution under section 21 of the same Act for knowingly employing a person whose 'leave has ceased to have effect'.

Of course, employers can also dismiss the employee if such a scenario arose, but should take care to ensure that its procedures are compliant with employment legislation to avoid unfair dismissal or discrimination claims.

Employees who are overstayers are always best advised therefore to
terminate their employment prior to the filing of an application in
order to avoid the above risks to themselves and their employer.

UK Employment Law : Recent Cases - Dec 2009

Claiming further holiday if sick during holiday leave 

The European Court of Justice (ECJ) has held that a worker who is sick during his annual leave is entitled to take replacement annual leave at another time. In rescheduling the leave, the employer's interests can be taken into account but if for business reasons the replacement leave cannot be taken in that leave year the employer must allow it to be carried over to the following holiday year. For further information on this see (Pereda v Madrid Movilidad SA)

Motive and race discrimination 

The Employment Appeals Tribunal has held that if disadvantageous treatment suffered by an employee is on the grounds of his or her race then it is irrelevant that the motives behind this were founded on good intentions. This case also confirmed that whilst an act of discrimination would usually constitute a breach of mutual trust and confidence and therefore support a finding of constructive dismissal, this is not necessarily always the case. In this case the employer, Amnesty International, had sought to avoid posting an employee to a role where her racial origins were perceived as causing significant risk to her and potentially to others. The motive therefore was understandable but it was still discrimination on the grounds of race. The good intention prevented it being an act of constructive dismissal. (Amnesty International v Ahmed)

Religion and belief discrimination

The Employment Appeals Tribunal has upheld an Employment Tribunal's decision that an individual's belief in man-made climate change and the existence of a moral duty to live in a way that mitigates or avoids it was capable of being a "philosophical belief" for the purposes of the Employment Equality (Religion or Belief) Regulations 2003. For further information on this see (Grainger plc and others v Nicholson)

Depriving an employee of early retirement pension was age discriminatory

The Employment Appeals Tribunal held that a Council's decision to dismiss Mr Wooster shortly before his 50th birthday so that he did not become entitled to an early retirement pension was age discriminatory. It is worth noting, however, that the Council did not attempt to put forward an argument that the discrimination was objectively justified which might have resulted in a different outcome. This decision is subject to an appeal. (London Borough of Tower Hamlets v Wooster)

Justification for age discrimination 

The employer's decision to dismiss Mr Woodcock in time for his dismissal to take effect shortly before his 50th birthday, and so benefitting from enhanced retirement benefits, was held by an Employment Tribunal to be justified. The tribunal noted that cost cannot be the sole justification for discrimination but considered that preventing an employee from becoming entitled to a windfall because of his age could be a legitimate aim. This is perhaps a surprising outcome. However, it is a non-binding tribunal decision and is subject to an appeal. (Woodcock v Cumbria Primary Care Trust)

Whether ongoing pension loss should be awarded as compensation for unfair dismissal 

The Court of Appeal held that the Employment Tribunal and the Employment Appeals Tribunal were wrong to award Ms Roberts compensation for ongoing pension loss where she had mitigated her loss of earnings by securing employment in a new job on more favourable terms. The tribunal had erred in considering her pension rights, which were less beneficial in her new role, separately from her other remuneration, which was better in the new role. The correct approach should have been to consider the remuneration package as a whole meaning that she had no entitlement to ongoing pension loss. (Aegon UK Corp Services Ltd v Roberts)

Retirement and age discrimination 

In the so called Heyday case the High Court has held that the UK's default retirement age of 65 is lawful and that employers can objectively justify both direct and indirect age discrimination. It should be noted that the default age is to be reviewed by the Government in 2010 and that this is likely to lead to a change. (R (on the application of Age UK) v Secretary of State for Business, Innovation and Skills)

TUPE and material detriment 

The Employment Appeals Tribunal has held that regulation 4(9) of TUPE which deems an employee to have been dismissed if he suffers 'a substantial change in working conditions to [his] material detriment' must, among other things, be interpreted subjectively from the employee's point of view. This makes it easier for an employee to establish a dismissal under Regulation 4(9) and will create much greater risk of dismissals being deemed to have occurred in TUPE situations where there is any change to the working conditions of the employees transferred. (Tapere v South London and Mauldsley NHS Trust)

Constructive dismissal 

The Court of Appeal has held that where an employee is constructively dismissed, the employer need not compensate him in full for the notice period if the employee has obtained alternative work elsewhere. The Court took a different approach to that in cases of actual dismissal, because in those cases it is considered good industrial relations practice to give full compensation during what would have been the notice period, had proper notice been given. (Stuart Peters Ltd v Bell)

Limited Company or sole trader for professionals?

Sole trading is the most popular, and simplest way to set up in business in the UK. 

What is a sole trader?

Setting up as a sole trader is an easy process. After informing HMRC of your intention to become self-employed, you can get going right away. Unlike using a limited company, you are personally liable for the finances of the sole tradership, and your liability for any debts incurred is potentially limitless.

For taxation purposes, your personal and business affairs are treated as one, and you account for your business income via the self assessment process each year.

Once you have told HMRC that you have started out as a sole trader, you are in business. 

Unlike the limited company structure, your business and personal finances are combined, and you will be taxed under the self assessment system.

Sole traders do not have to undertake most of the administrative tasks
required of limited companies (such as dealing with Companies House and corporation tax), however should anything go wrong with your business affairs, your liability is not 'limited' (as it would be using a limited company).

However, despite the popularity of the sole trader business structure,many IT contractors or other professionals prefer to work through a limited or umbrella company.

Why don't IT contractors or other professionals  set up as sole traders?

There are several reasons why this is the case:

1) Fundamentally, the Income Tax (Earnings and Pensions) Act 2003 - and previous Acts - prevent 'self employment' when an agency is involved, as the obligations of the Act would mean the recruitment agency would have to treat the contractor as an 'employee' and deduct PAYE and national insurance at source.

Chapter 7, s44 states:

"all remuneration receivable under or in consequence of the agency contract (including remuneration which the client pays or provides in relation to the services) is to be treated for income tax purposes as earnings from that employment."

2) Additionally, the agency (or client) could potentially be liable to pay any tax liabilities of any contractors who defaulted on their payments to HMRC.

3) From a contractors' point of view, your personal finances are protected if you work via a limited company and something goes wrong (assuming you run it in an above board manner), whereas as a sole trader your business and personal assets are treated in the same way.

In the absence of the tax legislation mentioned above, this reason
alone would probably be enough to dissuade contractors from becoming
sole traders.

The Income Tax (Earnings and Pensions) Act 2003 - and previous Acts -
prevent 'self employment' when an agency is involved, as the obligations of the Act would mean the agency would have to treat the contractor as an 'employee' and deduct PAYE and NICs at source.

Additionally, any agency or client who took on a sole trader contractor could also be liable for and tax on which the contractor had defaulted.

Even in the absence of any legislative reasons why you could not contract as a sole trader, the limited company route is far more tax efficient. Even if you are caught by IR35, you would still be better off as a limited company contractor.

Fingerprint Checks To Be Introduced On Entry To The UK

The UK Border Agency is introducing fingerprint checks for people arriving in the UK who hold a biometric UK visa, entry clearance or identity card for foreign nationals (ICFN) – this is therefore likely to affect many migrant workers from outside the EEA.

These checks was introduced in some ports from 30 November 2009, and the scheme will be fully implemented at all ports by March 2010. The fingerprint scans will be checked against those submitted when the visa, entry clearance or ICFN was issued. These scans will be in addition to the standard checks.

Employees who have previously submitted biometric information as part of an application should be made aware of the new procedure to avoid concern and the possibility of short delays at Immigration Control whilst the new process is implemented and trialled.

Employment Tribunals - What you need to know

The slightest mention of employment tribunals worries most small businesses, but there is often nothing to fear. 

It's important you don't ignore the issue, but rather take action promptly, as the progress and direction a claim follows will be determined against tight deadlines and the actions taken by both the employee (the Claimant) and the employer (the Respondent).

What to do First

Planning your defence to an employment tribunal claim is important, and this should be started as soon as you are aware of a claim lodged against you. 

The ET3 form will be the main document to set out any defence, and it's therefore important this is completed in sufficient detail (the reasons why are explained below) and returned in time: 28 days from the date the form was sent to you (not 28 days from date of receipt!).

A few steps to take immediately:

• read the ET1 claim form carefully, and make sure you understand the detail of the complaint made against you;
• think about why you resist the claim – what it is you disagree with and why;
• draft some clear notes of how you expect to defend the claim;
• don't be deterred on the detail of your defence due to the size of the boxes (5.2 on the form) – if the main detail of the defence can be structured briefly and included in this box that will be fine. If, however, you consider more details should be provided it is perfectly acceptable and common practice to write "see attached" in the box and provide a separate document headed "Grounds of Resistance" or something similar (this practice should not to be confused with "Other Information" box 6.1, as this is for other more general information, not the grounds on which the claim is resisted);
• the basis of your resistance needs to give a clear picture of why you think the claim should be rejected, but does not need to provide a story of events that led up to the action being complained about – the relevant parts of this information will normally emerge in witness statements;
• don't worry too much about the law now, and certainly don't stuff out the response with legal reasons why the claim should be resisted. The tribunal will align the facts to the law, and there'll be plenty of opportunity to suggest in law why the claim should fail, but this is not the time or place for that;
• get some professional advice immediately - you do only have 28 days to complete this, and while you will find plenty of information here that can help you prepare for an employment tribunal, it will be easier and more helpful to your case to get your ET3 completed and filed professionally. s;
• most importantly, don't delay taking action, and if there is simply a threat of a claim in the future (a solicitor's letter might state "our client has instructed us to file an ET1 if the matter is not resolved..." or something similar), give this your full attention – avoiding a claim altogether is much easier and cheaper than defending a claim successfully.

From Completing ET3s to Judgments and Beyond

For employers in receipt of an ET1 (the claim form an employee or other person will have filed against you) and ET3 (the form you need to return to have any chance of defending the case), there is no time for delay – a legal claim has been lodged against you, and it's important you submit a defence to it. The basis of your defence will be presented in this ET3 form, and time needs to be taken to ensure this is as accurate, comprehensive, and complete as possible.

Employers have 28 days from the date an ET3 was issued to file a completed response; a request can be made to extend the time limit, and this may be approved by an Employment Tribunal Judge if you have a good reason for the request, but it is strongly advisable not to delay preparations of your response unnecessarily – there is no guarantee any request will be approved.

A failure to submit an ET3 within the time limit will normally lead to a default judgement against you – the tribunal will assume that you have decided not to resist the claims, and they will therefore accept the claim as submitted.

There will be more to the process after a default judgement – the matter of awards will be determined at a further hearing – but if the employer has not filed an ET3, they will not be permitted to take any further part in the tribunal process at all.

For those employers failingto file an ET3 in time, with a default judgement entered against you, it can still be possible to get this set aside and submit a defence  to the claims. This is not something done easily, and employers are advised to seek professional assistance in trying to deal with this matter.

The employment tribunal process can be slow and tedious, with many supplementary events to attend to before the main hearing. Pre-hearing reviews, Case Management discussions, declaration of documents to be relied upon, the preparation and exchange of the bundle (the collective documents the parties will be using in the case), completion of a schedule of loss, the preparation and exchange of witness statements, and ACAS conciliation are all typical areas that need to be dealt with before you even get to an Employment Tribunal hearing. The completion of these will be required to a strict and tight timetable.

Even when a case is finally concluded and a judgment is sent to the parties, the case may not be over: employees (or employers, if your defence was not good enough) may appeal against the decisions of the tribunal. 

Alternatively, the employee may pursue legal action in the County Court to enforce payment of any award.

Avoiding Employment Tribunals

For too many small businesses, the start of an employment tribunal defence is assumed to be the filing of an ET3 – the form you'll be sent when an employee files a complaint against you.

In fact, an appeal to a tribunal is (or at least should be) often preceded by a disciplinary procedure, or will be influenced by other actions you have taken. 

Getting these steps right will significantly influence any outcome of a tribunal – or influence if a case is even brought. 

Whenever possible, any employer unsure of how to handle a disciplinary procedure should get advice at that stage, and aim to avoid the inconvenience of an employment tribunal at all.

About Employment Tribunals

An Employment Tribunal is a type of court, and failure to follow its orders could lead to a finding of contempt of court, a fine, and even a custodial sentence.

The panel is independent, and typically made up of an experienced employment lawyer (the Chairman – known as an Employment Judge), an individual nominated by an employer association, and another by the trade unions (together known as lay members). 

While the Chairman is identified, the background to the other panel members is not normally disclosed to the parties at a hearing. Despite their different backgrounds, and perceived interests, the vast majority of judgements in employment tribunals are unanimous. For some hearings, the Chairman can sit alone. And equally, if a lay member has been indisposed, a hearing can proceed with only a Chairman and one lay member; these cases will proceed subject to the agreement of the parties.

Employment tribunals are intended to be less formal than higher courts, and therefore there is no special dress code required. However, it is recommended that any attendees dress in a smart, sombre fashion, at least to show due respect to the court.

Parties to an Employment Tribunal – referred to as the Claimant (normally the employee) and Respondent (normally the employer) can represent themselves, or instruct anyone to present the case on their behalf.

Once your case has been allocated a hearing, the first thing most employment tribunals will do is read through parts of the bundle – the documents that will be before the tribunal. 

To get a clear idea of the case, the tribunal will normally read the ET1 (the employee's claim) and the ET3 (the employer's response) first. 

It's therefore important your response is clearly set-out so the tribunal will have an idea of why you resist the claim – your evidence at the hearing will be intending to support what you said in the ET3, and this is what the panel will be expecting during the course of the hearing.

Witnesses give their testimony and response to any questions under oath, although the "witness stand" constitutes nothing more than an isolated desk near the front of the room. 

A good Chairman will generally help to put a nervous witness at ease, and will control the questioning if this is unreasonable, or simply aimed at the vulnerability of the witness.

If time allows, judgements will be often given on the day (if the case is concluded in one day) or last day of the hearing, but where this is not practical a decision will be posted to the parties. Judgements can be given in either summary or full formats, the former simply mentioning the key points of the case, and the principal findings of the Tribunal, while the latter gives more detail for a case, and can be useful to determine whether an appeal should be pursued.

There are circumstances in which a review of a judgement (the Panel reconsiders its decisions, and may change any part of these) can be requested, but the grounds for this are limited, and a final decision on whether a review should be conducted by the Tribunal will be made by the Chairman alone, before the case even goes back to the full Panel.

The Employment Tribunals Service publishes statistics annually covering the number, type, outcome, and other details of all cases filed with it. The statistics will show that most employers are successful in defending claims against them, but this can give a misleading impression to employers: the cases where the employer could generally be expected to lose will have been settled out of court, typically including a gagging order restricting the publication of the settlement.

In general, despite government efforts to reduce the number of claims submitted to employment tribunals, the trend has been towards a greater number of complaints filed in recent years.

Default Judgements

A default judgement can be issued by a Chairman in cases where a complaint has been filed, and the respondent has not presented a response to the Employment Tribunal Office within the relevant time limit. An application may be made to have these judgements reviewed, although the details to be filed are comprehensive, with a time limit of 14 days from the date the judgement was sent to the parties.

Any application for a review of a default judgement must include the reasons why the judgement should be varied or revoked; and include the respondent's proposed response to the claim, an application for an extension of the time limit for presenting the response, and an explanation for the delay.

A default judgement does not include a decision on remedies, which will normally be dealt with at a later hearing. Although the respondent will be able to sit in the public area of the hearing, they will not be permitted to take any part in the hearing.

It is therefore important to ensure any claim is responded to within the limits prescribed in law, to avoid losing a case that could be defended successfully.

Jurisdiction – scope of cases heard by Employment Tribunals

The most popular types of claims made to employment tribunals include:

• Unfair dismissal
• Unauthorised deductions
• Breach of contract
• Sex discrimination
• Working Time Directive
• Redundancy pay

A more comprehensive list can be found in the reports available at: www.employmenttribunals.gov.uk/Publications/publications .htm

It is important for anyone reading the stats not to be misled by reading the figures selectively: in the year to March 2008, the number of unfair dismissal cases successful at a Tribunal is only 10% (a percentage based on all claims made, even those settled or withdrawn). This statistic in insulation hides the fact that more than a third (37%) were settled with ACAS conciliation, and nearly a third (32%) were withdrawn - which would often be due to a private settlement; in both cases there will normally be costs to the employer. In fact, only 19% of claims filed were unsuccessful at a hearing, so with the trend for claims increasing, employers should consider putting more effort into avoiding a tribunal claim at all.

Value of Awards

The value of any award made by a tribunal will vary according to the nature of the case. The amount of some awards are determined by law, although even these may have some influence of the tribunal – in certain circumstances, the tribunal can increase or decrease parts of an award by as much as 25%.

There are some awards that have to be calculated with some speculation influencing them: if an employee successfully wins a claim for unfair dismissal, and is still unemployed at the time of the hearing, the tribunal will have to speculate how much longer they may be out of work, and make an award accordingly; employers could also be liable to the government, for the cost of benefits claimed, in these cases.

While the law doesn't permit an award for "injury to feelings" in most cases, discrimination cases can attract awards for these, at the discretion of the tribunal. The tribunal also has complete discretion on the amount to award in discrimination cases, so cases involving discrimination invariably attract higher awards against the employer.

Employment Tribunal Offices

Any cases will normally be assigned to the Employment Tribunal Office covering the post code of the workplace. The offices are spread across the UK, with details available from the Employment Tribunals Service.

No Partnership Agreement - Accident waiting to happen!

Partnerships operating without a valid partnership agreement in place are a disaster waiting to happen!

It is estimated that only 30% of partnerships  have a legally binding partnership agreement – a shocking number when one considers the risks to the firm of not having one.

When a partner announces their intention to retire or leave, the first course of action should be to refer to the partnership agreement. A good partnership agreement ensures that other partners have a carefully structured plan to follow if one partner becomes seriously ill or dies. It will secure everyone's legal positions and ensure the continuity of the firm.

Trust

 
While it's advisable to draw up partnership agreements as early on in the partnership as possible, there is no legal obligation to do so. I've come across many situations where there's no written agreement in place and partners operate on trust alone. Naturally trust is a major factor in a partnership and many firms of accountants, architects and other professional services operate perfectly well without a written partnership agreement. However, it's a risky route that presents many dangers which partners may not be aware of.

If you already have a partnership agreement, it's worth checking that it's up to date, as an old agreement may not determine the right terms and conditions for your firm today. In many cases the agreement is not revised to take account of resignations, new appointments, retirements or even deaths, and this can often lead to difficulties both as to validity, enforceability and applicability of the agreement.

It's also essential to check that all partners have signed the agreement and that it's not just in draft form – failure on either of these counts will render it legally null and void.

The Partnership Act

 
In cases where there is no partnership agreement or where the agreement is void, the firm will be governed by the Partnership Act 1890, an archaic piece of legislation that could leave all partners vulnerable.* It's curious to think that a piece of Victorian statute can determine how 21st century partnerships operate, but if there's no valid written agreement of partnership terms and conditions in place, this could be the case.

The Partnership Act dictates that unless the partners have a written partnership agreement stating otherwise, any one of them, after 'an undefined time' has the right to dissolve the firm. No notice is required, and there are no defined timescales – meaning that in theory a partner could dissolve a firm within the hour if they so wished (although it's unlikely that many would go down this route as it helps no one and may result in the firm losing most or even all of its value in an instant).

Another thing to note is that the Act offers no restrictive covenant of any kind on a partner who is leaving. Unless there is a partnership agreement, a leaving partner can go immediately to work for the firm's main competitor. It also states that unless the partners have agreed otherwise, they are all entitled to an equal profit share. This may not be what is wanted and a partnership agreement setting out the details of profit share (or losses) is the only way round this.

Retirement and illness

 
Without a partnership agreement, if one partner wants to retire or is too ill to return to work, other partners can just take over the client base and make no goodwill payment. They can decide which clients they want and ask the ones they don't want to go elsewhere. They could buy out the retiring/sick partner, but valuation is likely to cause disputes.

The leaving partner is entitled to sell their share of the client base to an outsider. Without an agreement clarifying the position, the latter is fraught with difficulty and other partners have no say in who it is sold to. However, if an outsider buys the fees and the base practice is still going, clients may migrate back to it and the income multiple paid will be lower.  A proper agreement will make the position clear.

There may a dispute as to which clients belong to the departing partner. Some firms operate on the basis that each partner is a sole practitioner and they share office facilities – this is much easier to assess. In other firms, the managing partner might deal with the internal running of the practice and have a few clients of their own, which is far more complicated. For example, I met one man who runs the office and wants to retire. None of his partners are willing to pay for his clients or take on his workload.  He does not want to sell to an outsider so, despite being over 70 years old, he is still (unhappily) working there.

The Partnership Act also states that partners aren't entitled to interest on the capital they contributed to the firm, unless the partnership agreement says so. A well-drafted partnership agreement should cover the return of any capital invested and any interest to be paid. You don't necessarily want a leaving partner to demand immediate withdrawal all the capital they have invested in the firm, so a partnership agreement can specify timescale and terms. It should also cover the situation if a retiring partner owns the office property, for example, which can often be the case with a founding partner. It may be that the firm can lease it from the retiring partner, or even buy them out over a specified period.

Succession and disputes

 
One provision of the 1890 Act is that no person may be introduced as a partner unless every single existing partner agrees.

In this age of big partnerships, there can be dozens of partners. A partnership agreement can let the majority or a certain percentage carry the vote, so the appointment can go ahead even if some disagree. If you are retiring, you may have identified a candidate for succession from either inside or outside the firm. It is worth stating your case quite forcefully, especially if your agreement stipulates any future income for you comes from the success of the firm, or if you are to receive a goodwill payment on retirement and have a clawback clause.

Partnership agreements should cover how often partner meetings are held, drawings, retirement dates, time worked, holiday entitlement, and what would happen in the case of a partner's ill health or death (particularly with regards to payment structure).

It should also cover how to resolve disputes and in what order, from mediation, arbitration, or the expensive option of the courts. 

Partnerships without an agreement may be unaware that if one partner dies or is declared bankrupt, the partnership is automatically dissolved. What's more, if one partner defrauds the practice or clients, quite apart from the financial loss and the damage to the reputation of the practice, other partners can't expel that partner unless it is expressly agreed that there is a right of expulsion. While there may be other courses of action open to them, such as the fraud squad, it seems it is legally impossible to remove them from the partnership without an express agreement.

Death

 
In the case of a partner's death, it could be that their estate receives a certain percentage of GRF in a one off fee or in tranches. Purchasing insurance to cover any payments in case the worst happens is sensible, and yet it's estimated that only 20% of firms have it. 

If there is no legal agreement, the firm has no obligation to pay the estate anything.

In cases where the firm is owned by a sole partner, it is advisable to make an arrangement with your solicitor and leave a letter of instruction with a will so that they know to act quickly and sell the practice after your death before its value is reduced or gone altogether. It is advisable to sell within two weeks (maximum), this being the time that most people take as annual leave, but within days is better. The longer a sale is delayed, the lower the value of the firm.

Sole traders should also consider having an alternate in place, preferably in the geographical area of your clients so they can handle clients on your behalf should you fall ill or die. The most important thing is to keep the business, keep clients happy and ensure the work required is completed satisfactorily and within the timescale required, before clients and staff start to leave.

No doubt the lawyers among you will point out my inadequacies in interpreting the law, but I must admit the Partnership Act shocks me. If ever there was a case for instigating a written partnership agreement, this Act is surely it. Without one, it's a disaster waiting to happen.

Trading Disclosures Under The Companies Act 2006

Most of the trading disclosure requirements for UK companies under the Companies Act 2006 (the "2006 Act") came into force last year, on 1 October 2008- but for limited liability partnerships ("LLPs"), overseas companies, partnerships and sole traders, the requirements in the Companies Act 1985, or regulations made under that Act, continued to govern.

On 1 October 2009, two further exemptions to the trading disclosure requirements for UK companies came into force, completing the 2006 Act regime for UK companies, and those provisions in the 2006 Act (or regulations made under the 2006 Act) that set out the trading disclosure requirements for LLPs, overseas companies, partnerships and sole traders also came into force.

There is legislation other than the 2006 Act, such as the Insolvency Act 1986 and various e-commerce regulations, that place additional disclosure requirements on companies and businesses, and those requirements are not included in this overview.

UK Companies

Most of the trading disclosure regime for UK companies under the CA 2006 came into force on 1 October 2008, with the implementation of The Companies (Trading Disclosures) Regulations 2008 (the "Regulations").

On 1 October 2009, the Regulations were amended (by The Companies (Trading Disclosures ) (Amendment) Regulations 2009), adding two new exemptions.

Premises

A company (other than a company which has been dormant since incorporation) must display its registered name at:

• its registered office;
• any other location where it keeps records available for inspection (an "inspection place"); and
• any other location from where it "carries on business", unless that location is primarily used for living accommodation.
•  

The Regulations do not define what is meant by "carries on business". It is likely to extend to any location where the company operates, irrespective of how infrequently business is carried on there or how small the scale of that business is, unless the location is primarily used for living accommodation, in which case it is exempt.

Two new exemptions came into force on 1 October 2009:

• If the registered office or any inspection place or place of business has been moved to the premises of a liquidator, administrator or administrative receiver who has been appointed in relation to the company, the company is exempt from displaying its registered name at those premises;
• If every individual director of that company has been granted a "section 243 decision", the company is exempt for displaying its name at locations where it carries on business. The company's registered name must still be displayed at any inspection place.
•  

A "section 243 decision" includes a decision by the Registrar of Companies that a director's residential address is entitled to higher protection because the director (or someone he or she lives with) is at serious risk of being subject to violence or intimidation due to the activities of the company.

A company's registered name must be displayed at the premises so that it can be easily seen by a visitor at any time and not only during business hours. If a company shares its premises with five or more other companies, the company is only required to display its registered name for a minimum of 15 continuous seconds at least once in every three minutes.

All business correspondence and documentation

A company must disclose its registered name on all its business correspondence and documentation, including business letters, order forms, websites, cheques, invoices and demands for payment, orders for money, goods or services, receipts, promissory notes and bills of exchange, whether these are in hard copy or electronic form.

Business letters and order forms

An enhanced level of disclosure is required for business letters and order forms, whether in hard copy or electronic form, with the following disclosures required:

• the company's registered name;
• the company's place of registration, registered number and registered address;
• in the case of a limited company exempt from the obligation to use the word "limited" in its name, the fact that it is a limited company;
• in case of the an investment company (within the meaning of section 833 of the 2006 Act), the fact that it is such a company;
• in the case of a community interest company that is not a public company, the fact that it is such a company; and
• if the amount of share capital is stated, the amount stated must be its paid up share capital.
•  

If a company's business letter includes the name of any director (other than in the text or as a signatory) the letter must disclose the name of every director.

Emails

Business correspondence is often conducted primarily by email. 

An email must, at a minimum, disclose the company's registered name. But an email might also constitute a "business letter". Companies should consider adding the disclosures required for business letters to the boilerplate language that typically appears automatically at the end of all their emails. In the case of group companies, where staff may send emails on behalf of different group companies from time to time, it may be advisable to include the relevant information for all those companies in the boilerplate (although staff should always make it clear on behalf of which company they are sending a particular email). 

The Regulations require the disclosures to be "in characters that can be read with the naked eye" so making the disclosures available via a hyperlink from the email will probably not be enough.

Websites

Websites are subject to the same enhanced disclosure regime as business letters and order forms (see above). 

Where a website features a number of group companies, the website should include the required disclosures for all the companies and not just the parent company. The Regulations do not require the disclosures to be made available on each page of a website and it is probably enough for them to be made available on the home page. But if a particular webpage falls within another category of communication (such as an order form) the required disclosures will need to be made on that page.

Limited Liability Partnerships

On 1 October 2009, The Limited Liability (Application of Companies Act 2006) Regulations 2009 came into force. 

These regulations apply the trading disclosure regime for UK companies to limited liability partnerships ("LLPs"), with some modifications. For example, where a business letter includes the name of any member of the LLP (other than as a signatory or in the text), the names of all members must be included in the letter. This does not apply to an LLP with more that 20 members provided it maintains a list of all the members at its principal place of business, and the letter states the address of the principal place of business and that such a list is available for inspection there. If an LLP uses the abbreviation "LLP" or "llp" (or the Welsh equivalent) in its name, it must state that it is a limited liability partnership (or the Welsh equivalent) on its business letters, order forms and website.

For overseas LLPs, the trading disclosure regime for overseas companies (see below) applies with some modifications.

Overseas Companies

On 1 October 2009, The Overseas Companies Regulations 2009 came into force establishing the trading disclosure regime for overseas companies that have a branch or place of business in the UK (a "UK establishment"). This regime is closely aligned with the regime for UK companies.

Premises

An overseas company must display its name and country of incorporation at:

• any location in the UK where it carries on business; and
• at the service address of every person resident in the UK authorised to accept service on its behalf.

An overseas company is not required to display this information at a location where it carries on business if:

• the location is primarily used for living accommodation;
• if every director or permanent representative of the company has been granted as "section 243 decision" (see above); or
• it is the place of business of a liquidator, administrator or administrative receiver appointed in respect of the business.
•  

The relevant information must always be displayed at the company's service addresses. There are no exemptions from this requirement.

The information must be displayed in such a way that it can easily be seen my any visitor to the premises and must be displayed continuously (unless the company shares its premises with five or more other companies, in which case it is only required to display its name for 15 continuous seconds at least once every three minutes).

Communications: General

An overseas company must disclose its name on all its business correspondence and documentation that it uses for carrying on business in the UK, including business letters, order forms, websites, cheques, invoices and demands for payment, orders for money, goods or services, receipts, promissory notes and bills of exchange, whether these are in hard copy or electronic form.

Business letters, order forms and websites

There is an enhanced level of disclosure for business letters, order forms and websites, with the following disclosures required:

• the name of overseas company;
• where the UK establishment is registered;
• the UK establishment's registered number; and 
•  

if the overseas company is not incorporated in an EEA State:

• the company's country of incorporation;
• the identity of the register (if any) in which the company is registered in its country of incorporation;
• the number with which that company is registered in that registry (if applicable);
• the location of its head office;
• the legal form of the company;
• if the liability of the members of the company is limited, that fact;
• if the company is being wound up, or is subject to other insolvency proceedings or an arrangement or composition or any analogous proceedings, that fact; and
• if the company has share capital, and the amount of share capital is stated, the amount stated must be its paid up share capital.

If a business letter includes the name of any director (other than in the text or as a signatory) the letter must disclose the name of every director.

Partnerships and Sole Traders

On 1 October 2009, Chapter 2 of Part 41 of the 2006 Act came into force, establishing the disclosure regime for individuals and partnerships (including limited partnerships) carrying on business in the UK under a business name. 

The disclosure requirements are substantially the same as those under The Business Names Act 1985, which were repealed on 1 October 2009.

An individual carrying on business in the UK under a business name (which is a name other than his own surname) must disclose his own name on all business letters, written orders for goods and services to be supplied to the business, invoices and receipts and written demands for payment of debts. 

Likewise, a partnership carrying on business in the UK under a business name (which is a name other than the surnames and corporate names of all partners), must disclose the names of all the partners on these documents. Although the legislation does not expressly provide that these requirements apply whether the documentation is in hard copy or electronic form, it would be prudent to assume it covers both.

The same information must also be displayed in a prominent position at any premises where business is carried on and to which customers of the business or suppliers of goods and services to the business have access.

A partnership with more than 20 partners is exempt from the requirement to include the names of all its partners on its business documentation if a list of all the partners is kept at the partnership's principal place of business, no partner's name appears in the document (except in the text or as a signatory) and the document states the address of its principal place of business and that the list of the partners' names is available for inspection there.

UK:Identity Cards for Migrant Workers

The UK Border Agency ("UKBA") has now provided further information on applying for Identity Cards For Foreign Nationals (ICFNs).

Biometrics must be given as part of the ICFN application process and is currently obligatory for those applying for ancestry extensions, domestic workers, academic visitors and visitors for medical treatment.

 

From 6 January 2010, those applying for extensions of their work permits under Tier 2 must also provide biometrics, which means appearing in-person at a biometric collection centre. Highly Skilled Migrants will also be affected later in 2010.

 

This will involve changes to Sponsors internal systems to ensure the correct employee documentation is retained.  

The UKBA is still on target to introduce ICFNs for all migrants granted leave to remain for more than 6 months by April 2011.

Impact on the Tier 2 Extension Application Process

Unfortunately these changes are likely to increase processing times as migrants (and their family members) will have to submit their biometric details (fingerprints and photograph) in person before their application can be processed irrespective of whether they have already provided biometric details for entry clearance applications abroad.

Changes to the Submission of Biometric Details

The UKBA will allow biometric details to be submitted at some Post Offices across the country without the need for prior appointment. 

This will supplement the Biometric Enrolment Centres (in Croydon, Sheffield, Solihull, Cardiff, Liverpool, Belfast and Glasgow) and Identity and Passport Service Interview Offices (London, Brighton, Birmingham and Derby) where biometric details can currently be submitted by prior appointment. No additional fee will be charged to submit biometric details. 

Biometric Enrolment at Post Offices – Locations

Applicants living in London can currently submit their biometric data at a designated Post Office in Old Street. 

Battersea, Camden and Earls Court Post Offices are due to be added to the approved list shortly. 

The Public Enquiry Office in Croydon also offers appointments, as does the Passport Office in Elephant and Castle.

Outside London, biometric data can be submitted at specific Post Offices in Beckenham, Bracknell, Cambridge, Durham, Kingstanding, Middleton, Romsey, South Shields and Aberdeen.

Biometric Enrolment at Post Offices – Eligibility

Applicants who are required to give biometrics and who have submitted their application by post, may now qualify to submit their biometric data at designated Post Offices. Eligibility will be governed by the applicant's home address postcode. Those eligible will receive a letter of invitation from the UKBA, but may then simply walk-in (a prior appointment will not be needed). 

To prove eligibility, it is necessary to take the UKBA letter of invitation – the back page of this letter must be presented to the Post Office representative.

Applicants will also be charged a handling fee of £8.00, which will be payable by cash or debit card at the Post Office.

Applicants filing under the same day premium service will provide their biometrics when they attend their appointment

The UKBA estimates it should take an average of 10 minutes for each applicant to provide biometrics  . It is currently proposed that the ICFN will be sent via secure delivery to all successful applicants within 10 days of the date of their Home Office decision letter – same day production and issue of the card is not possible.  This may mean that some applicants are prevented from travelling until the ICFN, documenting their status in the UK, is produced and travel plans will need to be factored into planning timelines where leave is about to expire.

 What This Means for Employers

Migrants issued with ICFNs will no longer receive an endorsement in their passport as evidence of their valid leave to remain in the United Kingdom.  The ICFN rather than the passport will be proof of their status The UKBA will gradually expand the number of categories of migrant that must apply for ID cards.

A Sponsor will be required to closely examine the ICFN as part of any on-boarding or annual illegal working checks to ensure that it contains the migrant's name, a "valid until" date for their leave to remain and their immigration status and take a copy for its records that it can establish a Statutory Excuse against any civil penalty for employing a migrant without permission to work here.

ICFNs will only be issued to Tier 2 migrants who are extending their leave from January 2010 .New Tier 2 migrants (for example students switching into this category) will continue to have residence permits endorsed in their passports until further notice and the Sponsor must continue to keep a copy of the passport as evidence of current immigration status in the UK.

Sponsored migrants with ICFNs should ensure that they have both their passport and ID card when travelling, as the ID card cannot be used as a substitute for a valid passport. A passport will prove the holder's right to travel to their destination and their ID card will evidence their right to remain in the UK.

It is regrettable that applicants who have already provided biometrics overseas have to go through this process again at the extension stage and that the same day processing of applications will effectively disappear. 

Biometric Enrolment at Mobile Units

Mobile units currently exist to serve applicants who cannot attend a fixed biometric location due to medical reasons only.