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Lessons to be learned

18 July 2016

Lessons to be learned - read more

Some important reminders of the principles of employment law

The long running saga between Sports Direct’s Mike Ashley and the Business, Innovation and Skills Select Committee came to an end − for the time being − on 7 June 2016, when Mr Ashley gave evidence in relation to treatment of employees by Sports Direct.

Alleged issues for Sports Direct employees and agency workers at its warehouse in Shirebrook came to light between October and December 2015 through investigations by the Guardian newspaper, BBC and the union, UNITE. The allegations came to the attention of Parliament and the Committee, which are gathering evidence for a report on the working practices and the treatment of employees.

Committee hearing

During the Committee hearing on 7 June, Mr Ashley announced that he was overseeing an internal ongoing investigation into the treatment of employees that would ‘never’ be completed because there would always be something to consider. Following the allegations (see below for a full list), he made a number of admissions during the hearing:

  • The fine system was unacceptable although the disciplinary system was necessary but needed to be implemented correctly
  • Workers have been paid less than the national minimum wage as a result of compulsory security searches and this process has now been streamlined to avoid this issue (UNITE is reported to be in discussions with Sports Direct and HMRC about the back payment of 200 employees)
  • Those on zero-hour contracts should be full time employees.

He admitted: ‘I’m not Father Christmas. I’m not saying I’ll make the world wonderful’. Mr Ashley did make a pledge to make changes within 90 days, to inform MPs of progress and update them if this deadline is not met.

Although we may never know the full extent of the issues, and many of the allegations may not be accurate or may have been embellished by those who reported them, there are lessons to be learned from this case.

At the very least it serves as a useful reminder of some fundamental principles of employment law.

The allegations

  • Tough disciplinary system of six ‘strikes’ (not to be confused with industrial action) following which workers were automatically dismissed. There were instances of workers allegedly being given a strike for issues such as excessive talking, spending too long in the toilet and taking a day off due to ill health.
  • Fines for workers if they were late by a minute or longer.
  • Security searches of all workers lasting 15 minutes or longer at the end of shifts, time spent on which was unpaid.
  • 79% employees on zero-hours contracts and employees paid with a prepaid card with charges for use payable to Sports Direct.
  • 110 ambulance call outs in one year to Shirebrook, including 38 people with chest pains and five involving women going into labour or miscarriage. One worker had her baby delivered in the toilets. It has been argued that this high rate of ambulance call outs was as a direct result of fear of having a ‘strike’ and members of staff being too scared of the disciplinary policy to call in sick.

National Minimum Wage

Readers will no doubt be aware of the National Minimum Wage, particularly following the Government’s implementation of the National Living Wage − £7.20 per hour for eligible workers and in effect another category of the National Minimum Wage bandings. For many employers, ensuring compliance with the National Minimum Wage is relatively straightforward.

However, checking compliance can be a complex task. Employers must consider, among other things, the type of work undertaken, whether aspects of the workers’ pay should be included or excluded, and what the worker is doing when ‘working’.

For example, consideration must be given to whether a worker is undertaking salaried work, time work, unmeasured work or output work. Further, the employer must decide what the ‘pay reference period’ is for the worker, which is usually a month but not always.

The intricacies of National Minimum Wage calculations are beyond the scope of this article but the simple point to remember is to take advice if you are unsure – because the consequences can significant, as the Sports Direct case illustrates. Particularly when what might be viewed as relatively small underpayments are multiplied by numerous employees and extend to long periods of time.

Failures to pay the National Minimum Wage can result in proceedings being brought in the Employment Tribunals by an affected worker, or enforcement action being taken by HMRC, which can lead to significant fines for the employer.

Six strikes and out

Any threat of automatic dismissal after six ‘strikes’ is not consistent with the ACAS Disciplinary and Grievance Code of Practice, or good HR practice.

It is a fundamental part of any disciplinary process to investigate the situation and assess the facts. During the hearing, the disciplinary officer is expected to independently assess all the facts. If necessary, they will interview witnesses and the employee in question, and consider all of the evidence in order to reach a decision on whether or not misconduct has been proven. They must then decide what, if any, sanction should be applied.

Although a rule such as this is likely to reduce the possibility of inconsistent sanctions being applied, it is in itself a potential issue when considering the fairness of a dismissal.

The more significant risk is that if the application of such a rule were tested in the Employment Tribunals, it would be held to be sufficient to upset the fairness of a dismissal, because, in effect, the sanction is already determined (among other issues).

Factors about sanctions that ought to be considered include the nature of the offence itself, the length of service of the employee, whether any relevant live warnings are on the employees record and the mitigation that is presented by the employee. By ignoring at least three of these factors, a finding of unfair dismissal is a strong possibility.

Sick/maternity leave

It is clearly in both employers’ and employees’ interests to minimise absence due to ill health. However, employees should not be scared of taking sickness absence when it is appropriate to do so. Likewise, pregnant employees or those on maternity leave after giving birth should not be discouraged from enforcing their rights.

Clear and unambiguous policies governing such absences are recommended and staff who are absent for legitimate capability reasons should not be subjected to disciplinary action.
A disciplinary procedure should apply to issues of conduct; a capability procedure should apply to issues of capability.

Pregnant employees benefit from a variety of enhanced protective rights beyond many other employees. If you are unsure of what action you should take in respect of a pregnant employee, seek advice as the repercussions of error can be significant.

Reputation

As the highly publicised Sports Direct matter illustrates, employment law issues make for good news stories. They can also have a significant impact upon shareholder confidence. According to a BBC report, Piers Hillier, Chief Investment Officer at Royal London Asset Management raised concerns about the allegations: ‘Mr Ashley suggested ... that he has no oversight or knowledge of large parts of the company’s business; this is extremely concerning for investors’. Proof, if any were needed, that employment law disputes matter and can have significant reputational and financial ramifications for companies.

Lydia Newman is an Employment Solicitor

Read more employment law expertise from Lydia Newman.

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