Friday, 30 July 2010

Grossing Up Awards

When drafting a schedule of loss employment lawyers often forget to gross up compensation awards - a new case adds more detail...

In accordance with the principle set out in Shove v Downs Surgical plc [1984] 1 ALL ER 7 an employment tribunal must gross up any award it makes over £30,000 in order to ensure that the Claimant receives the net award made by the Employment Tribunal. For example an employment tribunal makes an award of £36,000. The first £30,000 is tax free but tax is applied to the 6,000 above it.

It is best to consult an accountant when working out this element of the award. Often tribunals will add a flat rate of say 40% when grossing up an award but as the judgment referred to below suggests annual personal allowances should be taken into consideration.

A very recent case of, Yorkshire Housing v Cuerden is an authority for the proposition that personal injury and injury to feelings awards that pre-dates the termination of employment are not taxable and should therefore, not be subject to grossing up.

The same case is also an authority to say that pension loss awards should not simply have the highest tax rate applied to the whole award but rather, marginal tax rates for each element of the award should be taken into account.

Vital law referred to by His Honour Judge Peter Clark in the judgment:

Income Tax (Earnings and Pensions) Act 2003 (ITEPA).

The general rule that termination payments are taxable, subject to the £30,000 threshold (s403), is subject to this exception under s406:

"This chapter does not apply to a payment or other benefit provided –


(b) on account of injury to or disability of, an employee."

HMRC website where it is stated, by reference to the Special Commissioners' decision in Walker v Adams [2003] STC 269, that awards for injury to feelings in respect of pre-termination discrimination are not to be treated as taxable employment income, whereas awards arising on termination of employment are taxable under s401.

BAILII case number: [2010] UKEAT 0397_09_1607

Appeal No. UKEAT/0397/09

This article is for academic purposes only and does not represent formal legal advice

Monday, 26 July 2010

Freshfields Moves to Swell Ranks of Women Partners

27th July - Freshfields has introduced a pilot mentoring scheme for senior female associates in order to boost its ranks of women partners...

Six female senior associates from departments across the firm will take part in the pilot, as part of the "Strategic Excellence Leadership Programme". It should be rolled out more widely if the scheme proves a success.

Billed as focussing on career development and how to be a role model and positive influence, the pilot will include two one day workshops and regular sessions with a senior partner mentor. Senior associates will also take part in monthly hour long coaching sessions with consultancy firm Aspire, which specialises in women's development, according to the Lawyer.

The ECJ ruled in November 1997 that positive sex discrimination in favour of female candidates for job promotion is not necessarily contrary to EC law ( Marschall v Land Nordrhein-Westfalen 2001 ICR 45, ECJ case C-409/95).

Thursday, 15 July 2010

Employers Feel the Bite as Increase in Employment Law Knowledge Sees Rise in Claims

As the effects of the recession tell, recent annual statistics for employment tribunal services show claims submitted reached a record figure this year – up 56% on last year...

The most popular types of claim accepted by the tribunal were for unfair dismissal (57,400), unauthorised deductions from wages (75,000) and breach of contract (42,400). These showed an increase from last year's figures of approximately 8%, 54% and 23% respectively.

The figures come as no surprise to employment lawyers, who have noticed a significant upward trend in litigation against employers in the last 12 to 18 months.

Inevitably the recession has been a factor in this as employees who have little prospect of securing alternative employment feel they have no alternative and nothing to lose by bringing an employment tribunal case against their ex-employer.

The Dickinson Dees Employment Tribunal Trends Index shows that, if the current trend continues, employers will face around 370,000 more tribunal cases in the next three years (years ending 2011 to 2013) than they did in the previous three (years ending 2007 to


With an estimated average cost of £7,000 for every tribunal commenced,2 recession- battered employers will spend around £2.6bn more defending themselves in the coming three years than the previous three – an increase of 46%. James Wilders, an employment partner at Dickinson Dees, which specialises in advising employers, said:

“Since 1998 there has been an almost inexorable rise in the number of employment tribunals, with an average of 20,000 more new cases each year than in the previous one. This has been driven by numerous changes in employment law and regulations, combined with the increased damages available encouraging people, an increased awareness of workers’ rights and no-win-no-fee legal advisers to mount more cases.

Wednesday, 7 July 2010

Employment - More Time Limit Case Law - Will it Ever Stop?

What happens when an employee listens to his employer when he is wrongly told that he had 3 months in which to present an unfair dismissal claim when he only had 6 weeks? I know what you are thinking - would you honestly believe anyone you are about to bring an unfair dismissal against - no is the obvious answer, but some do...

Northamptonshire County Council (Appellant) v Mr D Entwhistle UKEAT/0540/09/ZT

The crucial element in the latest case to come off the conveyor belt is that the Claimant contacted a solicitor, who negligently failed to notice the error. The Claim was subsequently submitted 2 weeks out of time.

It was held allowing the appeal, that it was reasonably practicable for Claimant to present claim in time because if his solicitor had given him advice of the kind he should reasonably have been given the employer’s mistake would have had no effect.

Although widely reported this case does not vary from the general rule seen in Dedman as explained by, Lord Denning MR said: “Ignorance of his rights – or ignorance of the time limit – is not just cause or excuse, unless it appears that he or his advisers could not reasonably have been expected to have been aware of them. If he or his advisers could reasonably have been so expected, it was his or their fault, and they must take the consequences .

Dedman [1974] ICR 53

Implementation of Equality Act Begins in October..

The first wave of implementation of the Equality Act will go ahead to the planned October timetable following the publication of the first commencement order in Parliament next week. This will pave the way for the implementation of landmark provisions to protect disabled people from discrimination and tackle the gender pay gap.