Termination of employment

Compensation Limits and Statutory Payments For 2011

British Pounds and CalculatorThe UK Government has announced the annual changes to the statutory limits on certain Employment Tribunal awards and other amounts payable under employment legislation. These will take effect on 1 February 2011.

The changes are set out in the Employment Rights (Increase of Limits) Order 2010 (pdf). The most important ones are:

  • The statutory limit on the amount of a 'week's pay' will increase from £380 to £400. Among other things, this figure is used to calculate statutory redundancy payments and the 'basic' award for unfair dismissal. (As a result, the maximum redundancy payment/basic award will rise from £11,400 to £12,000.)
  • The maximum compensatory award for unfair dismissal will go up from £65,300 to £68,400.

The maximum that an unfairly dismissed employee can recover (basic award plus compensatory award) will accordingly be £80,400.

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Not Everyone Can be a Witness to the Handing of a Notice of Termination

The Inspector General for the Protection of Personal Data is of the opinion that an employee participating in a termination meeting where a notice is to be given to another employee must have official authorization for the processing of personal data. Such authorization is within the employer's discretion. It should, however, be in writing for evidentiary purposes. The employer has an obligation to run a register of employees who hold such authorizations. The authorised employees are obligated to keep all personal data to which they have access confidential. Granting access to personal data, including knowledge normally gained in a termination meeting, in breach of these formalities may trigger criminal liability.

The Reason for Mutual Agreement on Termination of Employment

The Supreme Court stresses that the reason for termination which is valid for legal purposes is the actual reason and not necessarily the reason which the parties "resolve" to have and put in their agreement. The reason for termination of employment is very important even when termination is made upon mutual agreement. For example, if the reason is economic, it will ensure severance pay for the employee and make it easier for him to obtain unemployment benefit. Therefore, stating in the agreement that the reason is economic often encourages the employee to accept termination. However, in the case of a dispute the court will examine what the actual cause was and will not rest with confirming the reason "agreed" by the parties. This is the conclusion from the ruling of the Supreme Court of 4 November 2010 (II PK 109/10).

10 Tips for Employers with Operations in China

The continuing growth of the Chinese economy means that even more foreign companies are looking to the People's Republic of China (or the PRC) to expand their operations. However, while many new operators in China are focused on lower labor costs or the vast potential market, these foreign businesses often neglect to fully educate themselves about Chinese employment laws and rules critical to their operations' success.

Indeed, the rapid evolution of the Chinese labor environment in the face of ongoing social changes presents many challenges for both foreign and domestic companies. Below, we summarize 10 key considerations for global businesses with employees in China and highlight some common mistakes.

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Unfair Dismissal Qualifying Period May Be Doubled

YouAreFiredIII.jpgThe UK's Coalition Government has announced that it may increase the qualifying period of service for claiming unfair dismissal from one year to two years.  How likely is this to happen and what would the timescale be?

The qualifying period applies to standard unfair dismissal claims, but not to certain categories of 'automatically' unfair dismissal (e.g. whistleblowing, maternity, health & safety and trade union related dismissals).  There is also no qualifying period in the UK for claims of unlawful discrimination.

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Physically Slapping a Client May Not Constitute an Act of Gross Misconduct

Before dismissing an employee for misconduct, an employer must be attentive to the circumstances which led the employee to commit the alleged offense, especially when the individual concerned has seniority and has never before been subject to any rebuke or criticism by his/her superiors.

In a recent case, the French Supreme Court (Cour de cassation) ruled that slapping a client does not automatically justify a dismissal for gross misconduct.

In this case, the misconduct was rejected on the grounds that the employee who served as cashier had acted in "self-defense" against an aggressive and threatening client. The employee concerned didn't get any help, despite calling for that; her supervisor attended the scene without intervening.  As a result, the dismissal has been judged illegal.

This entry was written by Jean-Benoît Cottin.

Severance Pay for Dismissed Board Member

A Member of the Management Board whose employment is terminated solely because of his dismissal from the Board is entitled to statutory severance pay. It follows from one of the recent judgments of the Supreme Court (of 2 February 2010; II PK 184/09). The termination of employment of a Board Member because of dismissal from the Board is considered dismissal for reasons "not related to the employee" within the meaning of the Law on Special Principles of Dismissing Employees for Reasons not Related to Employees. According to this law, every employee dismissed for such a reason is entitled to severance pay. Its amount depends on salary and seniority but is subject to a cap of the equivalent of approx. EUR  5,000. In an individual case, the assumption that the reason for termination of employment is "not related to the employee" may be challenged by proving that the dismissal itself was due to reasons related to the employee and in consequence employment was terminated for the same reason.

Is it Lawful to Dismiss a Chief Accountant When Changing the Owner of the Company Assets?

In its recent ruling of May 27, 2010, the Constitutional Court of the Russian Federation stipulated that it is lawful to dismiss the chief accountant in case the owner of the company assets is changed.

This ruling has been issued by the Constitutional Court in view of consideration of Mrs. Bachalova's appeal regarding violation of her constitutional rights by part 1 of article 75 and paragraph 4 of part 1 of article 81of the Russian Labor Code.

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Recent Developments Regarding Mandatory Retirement Ages in the UK

Removal of Default Retirement Age for Employees

Age discrimination legislation in the UK currently permits employers to retire employees at the age of 65 or older (the default retirement age or "DRA"). The new UK government has announced that it is proposing to phase out the DRA from April 2011, with such retirements ceasing completely on 1 October 2011. After 1 October 2011, employers wanting to retain a retirement age will need to demonstrate that it is "objectively justified" - in other words that it is a proportionate means of achieving a legitimate aim or aims. The proposals are subject to a consultation that will run from 29 July 2010 until 21 October 2010.

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Huge Increase in Employment Tribunal Claims

YouAreFiredIII.jpgThe latest annual statistics (PDF) published by the UK's Tribunals Service have revealed a very significant increase in claims received by Employment Tribunals, which are now at their highest ever level. The number of claims in 2009-10 rose to 236,100, representing a 56% increase on the number of claims lodged in 2008-9. However, the report suggests that this is largely attributable to a rise in the number of multiple claims (i.e. arising out of the same or similar circumstances).

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