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Employment Monthly Briefing: November 2006 NEWSDirectors’ duties The Company Law Reform Bill received Royal Assent on 8 November 2006. One of the main objectives of the Bill is to clarify the area of law relating to the duties of a company director by way of statutory statement. Currently, the duties of a director are governed by common law rules and general equitable principles, which have been established through case law. It is hoped that the new legislation will clarify the duties and finally set them out in one place. The duties will apply to all directors, shadow directors and in some cases, to former directors. The statement will contain seven general director’s duties. The seven duties are: • The duty to act within the company’s powers • The duty to promote the success of the company • The duty to exercise independent judgement • The duty to exercise reasonable care, skill and diligence • The duty to avoid conflicts of interest • The duty not to accept benefits from third parties • The duty to declare an interest in any proposed transactions of arrangement with the company Flexible working consultation – extension of right The DTI has published its response to the consultation ‘Work and Families Act 2006 – Draft Flexible Working Regulations.’ The Work and Families Act 2006 contains a primary power to extend the right to flexible working to carers of adults. There has been considerable debate as to who should be covered by this right. The Government has confirmed that the definition of ‘carer’ that it intends to be covered is: An employee who is or expects to be caring for an adult who: • Is married to, or is the partner or civil partner, of the employee; or • Is a near relative of the employee; or • Falls into neither category but lives at the same address as the employee The term ‘near relative’ includes parents, parents-in-law adult children, adopted adult children, siblings (including those who are in-laws), uncles, aunts, grandparents and step-relatives. The changes are expected to come into force on 1 April 2007. Compensation limits for 2007 The new limits for tribunal claims have been announced. Under the Employment Rights (Increase of Limits) Order 2006 SI 2006/3045 the new limits will be as follows (current figures in brackets): - A week’s pay - £310 (£290) - Minimum basic award for defined dismissals – £4,200 (£4,000) The new limits apply where the 'appropriate date' falls on or after 1 February 2007. RECENT CASES
Reference Guide: Compensation for Future Loss of Earnings Scope v Thornett CA (A2/2006/0339) The Court of Appeal ruled that an employment tribunal had made an error in reducing unfair dismissal compensation awarded for loss of future earnings to take into account the fact that if the Claimant had not been dismissed she would have been made redundant six months later. The Court held that the tribunal had not erred by speculating on what might happen in six months time, as there was evidence in the case, which indicated that the employment would not have continued indefinitely. However, the Court ruled that the decision could not stand because the tribunal had failed to express the reasons for its decision with sufficient clarity. Discretionary bonuses Commerzbank AG v Keen [2006] EWCA Civ 1536 The Claimant bought a claim against his former employer, Commerzbank. There was a provision in the Claimant’s employment contract stating that no discretionary bonus would be awarded if the employee were no longer employed by the bank. The Claimant argued that the bank had breached an implied term of the employment contract not to exercise discretion irrationally or perversely when determining the size of his department’s bonus pool for the years 2003 and 2004. He also argued that the bank had breached the implied term because they did not award his 2005 bonus, the year in which his employment terminated. He claimed that the provision in the contract was unreasonable and therefore caught by S.3 of the Unfair Contract Terms Act 1977. The bank applied for summary judgement, but the application was rejected. The bank appealed to the Court of Appeal. The Court allowed the appeal, stating that 'it would require an overwhelming case to persuade the court to find that the level of a discretionary bonus payment was irrational or perverse in an area where so much must depend on the discretionary judgment of [CB] in fluctuating market and labour conditions'. The employee had not provided any evidence to support his claim, so it could not succeed. The Court held that an employee could not rely on the Unfair Contract Terms Act 1977 to circumvent a contractual clause which states that an employee must still be in employment in order to participate in a discretionary bonus payment. This note has been prepared for general guidance only and should not be used as a substitute to obtaining legal advice. It is recommended that professional advice is sought in relation to specific cases, and practical commercial telephone advice is always available from the MLM Employment team. MLM Solicitors ©2006 |
