In this episode of The Proskauer Brief, New York partner Howard Robbins and London partner Dan Ornstein discuss how U.K. laws affect U.S. employers. As if dealing with U.S. employment laws are not difficult enough, international businesses also have to face several challenges of local requirements. Tune in as we discuss many U.K. laws on discrimination, harassment, and retaliation, and their similarities to U.S. counterparts. In addition we will highlight what impact Brexit may have on U.K. employment law, including changes in relation to the protections of part-time or agency workers, and workers in the gig economy.
Howard Robbins: Welcome to The Proskauer Brief: Hot topics in labor and employment law. I’m Howard Robbins. And on today’s episode, I’m joined by Dan Ornstein, an employment colleague in our London office, and we’re going to discuss how to help demystify U.K. employment laws for U.S. businesses. Dan, thanks so much for being here. I know you’re across the pond.
Dan Ornstein: Howard, always great to speak to you.
Howard Robbins: As if dealing with U.S. employment laws weren’t difficult enough, international businesses also have to face up to challenges of local requirements. So Dan, is U.K. employment law radically different from U.S. laws?
Dan Ornstein: I think the good news is that it’s not radically different. Rather, a lot of U.K. employment law contains concepts and frameworks that at least are going to be familiar to U.S. lawyers and to HR professionals.
Howard Robbins: All right. That sounds promising so far. Can you give us a couple of examples of what we’d find comfortably similar?
Dan Ornstein: Sure. So take U.K. laws on discrimination, harassment, and retaliation, these have got a lot in common with U.S. counterparts. In fact, U.K. law was heavily influenced by the Civil Rights Act. So much so, in fact, that when I do diversity inclusion training, the U.S. training is often very similar to the U.K. training.
Howard Robbins: So Dan, what’s something that is different?
Dan Ornstein: Well, here, I think a good example is that it’s mandatory for every employee to have a written contract of employment that sets out, with real nitty-gritty, the terms of employment.
Howard Robbins: And that’s obviously very different from what we see in the United States, where really, it’s only high-level executives typically who have an employment contract.
Dan Ornstein: Absolutely.
Howard Robbins: Let’s turn back to discrimination law. Tell me more about the similarities and differences that you see in that area.
Dan Ornstein: Let me start with what I think are some notable differences from my experience. For example, age discrimination could be based on somebody being older or younger. And another difference is that every employee, even if they’re supervisors or not can be liable for discrimination. As to some similarities, well, like in the U.S., the legislation starts with a set of protected characteristics that will be very familiar to businesses in the U.S., for example, color, race, nationality, gender, gender reassignment, religion or belief, sexual orientation, disability, and age. And, and on top of this, the structure and basic rights are very similar in the U.K. and the U.S. So the key concepts in the U.K. are direct and indirect discrimination, which are analogous to disparate treatment and disparate impact, and likewise, as a concept of harassment, as well as victimization, which is almost identical to retaliation.
Howard Robbins: So other than these protected characteristics, can employers in the U.K. do whatever they want with respect to their employees or are there other protections?
Dan Ornstein: One other difference, and this is something that may surprise U.S. businesses, is that in addition to protection based on personal attributes, individuals can have protection by reason of their working status, for example, by being a fixed term or a part-time worker.
Howard Robbins: And that’s certainly going to be very different from the experience that U.S. employers have, because that’s a pretty common distinction here. Let’s turn to something a little different. Let’s talk about labor unions and collective bargaining. What kind of differences would U.S.-based employers see when they’re doing business in the U.K.?
Dan Ornstein: I think the first point is, similar to the U.S., trade union membership has dwindled significantly, especially in the private sector, and with that, so to is the influence of trade unions in the workplace. Though I would note that in the last couple of years, and I think this is the same as in the U.S., there’s been a slight increase in trade union membership from an all time low in the U.K., that was in 2016. So as to the rights of trade unions, I think these would be familiar to U.S. businesses. They include the rights to take industrial action and the right to collectively bargain. One thing I’d note as well is, there’s been considerable talk about cooperation between unions from different jurisdictions, and while we’ve seen a little bit of that, in practice, I think the talk has just been just talk and we’ve not seen too much international cooperation.
Howard Robbins: So for an employer who is trying to do a corporate deal that involves business operations in the U.S. and the U.K., or trying to reduce its workforce in the course of reorganization, what kind of consultation requirements are there? Are they different in the U.K., Dan?
Dan Ornstein: That’s a great question, Howard, because even where there’s not a trade union, and in particular, in a transactional context, there can be freestanding, collective consultation obligations. So the U.K. has a concept of collective consultation, where in specific circumstances, management on the one hand and employee representation on the other, must have what we call meaningful discussions with a view to entering into agreement about proposals made by management. Now, this doesn’t actually require the management to do what the employee representative want. It’s just a requirement to have good faith discussions and the union doesn’t have a right to veto. But again, whether the lack of agreement, you could see that it causes industrial relations issues. The most common situations where it’s required are, one, under legislation known as the transfer of undertaking, protection of employment regulations, which everybody calls TUPE. This is complex legislation and provides for the automatic transfer of employment in the context of transfer of a business. Here, in advance of a business transfer, a recognized trade union, if there is one, or an employee representative must be informed and in some cases consulted about any changes that are going to be made in connection with that transfer. Now, there’s no fixed timetable for this process, so rather, there needs to be a judgment of making sure you consult or provide the information in good time. And the second area where this arises is where there’s a reduction of force for 20 or more employees within a 90-day period. So here, we call those collective redundancies, and where there’s collective redundancies, there’s got to be consultation a minimum of 30 days before the first termination, or where a hundred or more people are being terminated, it’s got to be 45 days in advance of that first termination.
Howard Robbins: So, Dan, I’ll say that when I hear that, I think to myself, as a, a U.S. lawyer, that regardless of whether it’s a consultation or an agreement that’s required, it sure sounds like a lot of hurdles to go over when there’s a corporate deal going on or some kind of restructuring.
Dan Ornstein: You’re right. The consultation requirements must be built in to any transaction timetable. You don’t want your clients having a surprise delay to an acquisition.
Howard Robbins: Let’s suppose that I get it wrong, that I rush through it or didn’t have the right timing, what are the consequences?
Dan Ornstein: There can be severe financial consequences, up to 90-days pay per affected employee for collective redundancy and up to 13-weeks pay per employee in a TUPE case. And what’s really important is that this liability is viewed as penal. So if you get it wrong and especially if you deliberately flout the legislation, there can be a really significant liability.
Howard Robbins: Any other unpleasant surprises, Dan, whether it’s about terminations or other things that you want to let our folks know about?
Dan Ornstein: You know, I think termination is a really significant difference. So for example, in the U.S., we often have employees employed at will. In the U.K., every employee has a notice period, a minimum period of time of notice required to dismiss somebody. Now, that period will depend. It will be the greater of the contractual period or one week for completed year of service, up to a maximum of 12 weeks, and that ties very much in to termination costs. In fact, for senior executives, which is not dissimilar to the U.S., we’ll often see a six-month or even 12-month notice period. And another important factor is that if you dismiss somebody without giving them the notice, it doesn’t make the termination ineffective. Rather, it just triggers a liability to pay them the compensation that they would have otherwise received during their notice period.
Howard Robbins: So, Dan, if someone just has to go, if an employer feels like it has to get rid of somebody, they’re not actually stopped from doing that, but there’s a cost to it.
Dan Ornstein: You’re absolutely right. I’d say on terminations, Howard, I’d characterize the U.K. as a pay or comply culture. You can do it, but it has a cost. And as if the notice periods weren’t enough, employees also enjoy something called unfair dismissal rights, and these are creatures of statute that render a dismissal unfair and entitle an employee to extra compensation if the dismissal isn’t for a required reason or not carried out in accordance with a fair procedure. As to that compensation, the good news for employers is that compensation is capped at around 95,000 pounds, subject to certain exceptions, for example, discrimination or whistleblowing. So even then, and returning to the concept of the pay or comply culture, you can usually assess the cost of terminating someone by reference to unfair dismissal rights and their notice period.
Howard Robbins: And, Dan, this all happens in some kind of specialized court you’ve got in the U.K.?
Dan Ornstein: That’s right. All statutory employment claims are heard by employment tribunals, which are specialist employment courts.
Howard Robbins: How long a wait is it for that process to play out? Is this an interminable, years-long thing?
Dan Ornstein: From beginning to end, rule of thumb, about a year.
Howard Robbins: But again, it’s not going to be that somebody gets reinstated. It’s just a question of the price.
Dan Ornstein: That’s exactly right. A dismissal is effective even if it’s unlawful.
Howard Robbins: So before you and I make a hard exit from this podcast, let me ask you the question that everybody’s been waiting for, I think, which is, is this all going to change with Brexit?
Dan Ornstein: Well, the sensible answer for me to give would be to say that the uncertainty makes it impossible to say. But you know what, Howard, for you, I’m going to stick my neck on the line and give you my personal view, which is, I don’t think Brexit is going to make much change to U.K. employment law, not in the short term, the medium term, or the long term.
Howard Robbins: So I thought that in addition to concerns about cheese, that one of the main motivations for Brexit was getting out from under the influence of European laws and in particular, employment laws.
Dan Ornstein: You’re absolutely right, Howard, but really, it’s one of those issues that when you look at the detail, you can’t really see what changes are going to be made to employment laws. You know, there’s a lot of talk about taking back control, but our employment laws are very U.K. specific. Let me give you an example. The law on termination that we discussed is really U.K. specific. And similarly, while discrimination law takes a lot from Europe, in fact, the European law borrowed heavily from the U.K. law. And I just can’t see any political party, wherever they’re from, deciding we’re out of Europe, we can all discriminate freely.
Howard Robbins: So do you see Brexit bringing any change to the employment and labor landscape?
Dan Ornstein: It would be brazen for me to say that there won’t be any changes, but I can’t see that they’ll be radical. I think one potential change we may see will be in relation to the protections to part-time or fixed-term workers, or agency workers, or other workers in the gig economy. A lot of that legislation comes from Europe and I think a flexibility to rethink these protections may be something that comes under scrutiny and could be to the advantage of the U.K., especially given the proliferation of the on-demand economy and the challenges it creates.
Howard Robbins: Well, thanks, Dan. I know that comparisons between the U.S. and the U.K. will certainly make people think of George Bernard Shaw’s line that we are two nations divided by a common language and while there are some common concepts, there are certainly some important divisions as to how these apply in practice, which obviously create traps for the unwary. Thank you for joining us on the Proskauer brief today. Stay tuned for more insights on the latest hot topics in labor and employment law and you can check out our ILG blog through our website for updates on international employment law. And be sure to follow us on iTunes, Spotify, and Google Play.