Every business has valuable knowledge and confidential information - for example, knowledge of clients and contracts or technology - that it considers invaluable to its success. If an employer wishes to protect the use of this information both during and after a period of employment, restrictive covenants may be included in an employee’s contract.
The standard types of covenants are where restrictions are placed on a former employee being able to work in similar employment for a competitor. This is to prevent poaching of clients or customers of the former employer, or to prevent a former employee from dealing with former clients or customers, regardless of which party approached the other. Where employee poaching is concerned, a non-poaching covenant can also be used, which prevents an employee poaching former colleagues.
Restrictive covenants can be introduced as part of specified employment contracts before commencement of work but should not be used for all staff as this would only be frowned upon if it was later taken to court.
It will be largely applicable to the more senior staff - those in contact with the sensitive information that it is necessary to protect. Having such clauses set out in the contract from the outset may help to deter employees from joining competitors and may warn off potential new employers.
However, it can also be put into operation at a later date if an employee accepts promotion, or if their duties have changed. In this case, negotiation may be required as some will not willingly agree to the restrictions being introduced and it could be crucial to be able to prove that the employee agreed to the clause.
In order for a restrictive covenant to be enforced it must be considered to be reasonable and necessary to protect the business interests. Therefore, it is important that a restrictive covenant is carefully drafted and regularly checked to ensure that it is updated if necessary.
When invoking restrictive clauses, employers should consider what they want to achieve and the commercial repercussions of taking a particular stance in relation to publicity, client relationships, management time and cost, etc. Legal action in this area can involve a substantial amount of time and money.
Recently released research has revealed that nearly a quarter (23%) of employees are concerned that at least part of their job could soon be automated, as employers flock towards the latest technology.
Analysis suggests that up to 30% of UK jobs could potentially be at risk of automation by the 2030’s - lower than the US or Germany, but higher than Japan. More than 10 million UK workers are at high risk of being replaced by robots within 15 years as the automation of routine tasks gathers pace in a new machine age. However, in many cases the nature of jobs will change rather than disappear.
Those with the highest risk are male workers and certain industries, such as transport, retail and manufacturing. Education, health and social care are not likely to be as affected, as it is difficult to automate tasks undertaken in those areas.
Jon Andrews, the head of technology and investments at PwC, said: “There’s no doubt that AI and robotics will rebalance what jobs look like in the future, and that some are more susceptible than others.”
He went on to say, “What’s important is making sure that the potential gains from automation are shared more widely across society and no one gets left behind. Responsible employers need to ensure they encourage flexibility and adaptability in their people so we are all ready for the change. In the future, knowledge will be a commodity so we need to shift our thinking on how we skill and up skill future generations. Creative and critical thinking will be highly valued, as will emotional intelligence.”
The report predicted that automation would boost productivity and create fresh job opportunities, but it also stated that action was needed to prevent the widening of inequality that would result from robots increasingly being used for low-skill tasks, such as in the construction industry.
Robots that can lay six times as many bricks a day as humans have already replaced humans on a handful of sites in America. The firm who developed the robots - called SAM (Semi-Automated Mason) plan to introduce them into the UK within the next two years.
Scott Peters, president of Construction Robotics, told The Times, “We are going to be going over to the UK in the coming months to meet with some companies and see if we can find a home for Sam there.”
According to Construction Robotics, SAM has the ability to pick up bricks, apply mortar and lay the bricks but humans will still need to set up the robot and supervise.
Australian company Fastbrick Robotics has also developed a proof of concept for a commercial bricklaying machine called Hadrian X which can, from the computer aided design of a house structure handle the automatic loading, cutting, routing and placement of all bricks to build a complete house in two days. Delivery of the first commercial prototype of Hadrian X is due later this year.
Some of Britain's biggest construction firms have warned that the automation of the industry is likely to result in mass layoffs and Alison Carnwath, chairwoman of Land Securities, stated at the Institute of Directors' annual convention, “Five years ago I'd have smiled wryly if somebody had said to me that robots would be able to put up buildings in the City of London. I tell you we're not that far off, and that has huge implications."
From time to time, employees sustain injuries - either occupational or non-occupational - which involve them having a prolonged absence from work.
Often, a number of these employees have major difficulty in recovering enough to be able to return to their former jobs within a suitable time-scale. As a result, employers must consider how to terminate the relationship without infringing federal or state law.
Most employees want to get back to work as soon as possible after an injury. No one expects to be fired from work after returning from a painful recovery. State and federal laws protect workers from unjust and illegal firings based on breach of contract, various forms of discrimination, employer retaliation and disability.
In most states, any employee is liable to be terminated at the will of the employer, provided it is not for a reason prohibited by law, public policy or a contract right. An employer cannot terminate an employee because the employee has filed a workers’ compensation claim, or has a health condition that constitutes a disability; has taken a qualified leave of absence for a serious health condition, or has rights under a labor agreement or employee handbook. Montana is the only state which requires an employer to have just cause to fire an employee, once the employee has completed a probationary period.
The U.S. District Court for the District of Kansas recently ruled that a railroad employee with carpal tunnel syndrome who re-injured his hands at work could pursue his wrongful discharge claim even though he chose not to return to work when instructed.
Millennium Rail Inc. employed Danny Smith in February 2012 as a repairman/welder to fix rail cars. According to Millennium Rail, Smith was an inefficient worker and during the twelve months from January 2013 the company wrote him up three times for being inefficient - and suspended him for three days. The next month, he took approved leave under the Family and Medical Leave Act (FMLA) to have carpal tunnel surgery and returned from this leave with the same pay, title and responsibilities as before. Soon after returning to work, he fell and re-injured his hands. Smith's workers' compensation attorney sent Millennium Rail a letter seeking coverage for surgery related to the fall. Smith's doctor sent Millennium Rail a note stating that until Smith had surgery, he would be unable to use the tools essential to performing his duties. At this time, Smith and another employee - Lee Davis - applied for a switchman position with the company. Millennium Rail selected Davis for the position and Smith was left in a job that he was not able to do.
Smith submitted FMLA paperwork to take leave to have the surgery but did not confirm that the paperwork was approved. Millennium Rail had Smith assessed by another physician, who was of the opinion that she could not detect any sign of pain or weakness in his hands and that Smith could work without any restrictions. No third assessment was undertaken.
On April 1, 2014, Smith attempted to take FMLA leave. He moved to Oklahoma to stay with his brother as he could not afford housing while not working - and his FMLA paperwork was never processed, although it was apparently discussed internally at Millennium Rail. The company's compliance and claims specialist wrote that Millennium Rail's doctor believed Smith could return to work and that the company either needed to bring him back to work or terminate him.
On April 10, Smith was sent a letter instructing him to return to work on April 16 or he would have voluntarily resigned. Smith did not receive the letter until April 15 and as he realized that he could not return to work he did not respond to the request, so therefore was deemed to have resigned. He filed claims against Millennium Rail under the Americans with Disabilities Act (ADA) and the FMLA and under Kansas law for workers' compensation retaliation and violations of OSHA and also sued his supervisor under the FMLA. Millennium Rail sought summary judgment against Smith's claims and to bar Smith from receiving damages.
The court granted summary judgment against Smith's ADA claim for failure to accommodate him by promoting him to the switchman position, finding that Millennium Rail legitimately believed Davis to be more qualified. They also dismissed Smith's OSHA retaliation claim, finding that he had not submitted an OSHA claim before his termination.
However, the court denied summary judgment as to the remaining claims. They found that Smith could establish that he was constructively discharged by Millennium Rail as Millennium Rail's requirement that he return or quit was not clearly supported by medical evidence and supported a potential claim of constructive discharge.
As some of the larger businesses begin to publish pay ratios, many executives will fail to receive a pay increase this year. A new analysis by PwC shows that the pay of senior executives is actually falling for the first time in recent history.
In one fifth of the cases reported, CEO’s decided to voluntarily waive their salary increase. However, it would appear that most companies have introduced best practice remuneration as a result of shareholder activism, rather than the decision being made by the CEO of the company.
Tom Gosling, head of PwC Reward Practice says, “There’s no doubt the new voting rules introduced last year have given shareholders more power and helped to bring stability to executive pay.”
The report goes on to state that 98% of companies have introduced ‘clawback’ which is a measure to reduce or recover bonuses and long term incentive plans in certain circumstances.
The Investment Association Executive Remuneration Working Group and the BIS Committee have both recommended significant changes to pay design, but FTSE 100 companies are showing no signs of making a fundamental change. Whilst 63% of the forty FTSE 100 companies evaluated are proposing new remuneration policies, there is very limited structural change in pay arrangements with conventional long-term incentive plans remaining the usual.
Tom Gosling states, “Pay is getting harder to earn, with almost all companies introducing the ability to claw back bonuses and many lengthening the time executives have to hold on the shares they get from long term incentives. Remuneration committees are really raising the bar for executive pay.”
There is also increased attention to fairness in pay policies, as shown by four of the forty companies covered by PwC’s report, disclosing a ‘CEO to average employee’ ratio.
This month, the Business, Energy and Industrial Strategy Committee said businesses needed to improve corporate governance and tackle excessive executive pay to restore public trust. It highlighted the damage done at Sports Direct and BHS and the extreme executive salaries paid in recent years despite no wage increase for many workers. It continued by suggesting that employees should sit on remuneration committees.
Tom Gosling - of PwC - added, “Although we don’t think pay ratios are the answer, it’s good to see companies taking steps to address the fairness question. This is an area where business will need to do more to rebuild trust with the public and we’re likely to see proposals from the government to encourage this in due course.”
This month a new requirement comes into force that necessitates the gender pay gap being published within the next year – and every subsequent year. It applies to both private and voluntary employers with 250 or more employees and any employer failing to comply by April 2018 will be contacted by the Equalities and Human Rights Commission.
Gender pay is the difference in average pay between the men and women in a company and is different from equal pay - which means men and women must be paid the same for equal or similar work.
Sam Smethers of the Fawcett Society, which lobbies for gender equality, says that this new rule is “...the most significant legal change since the Equal Pay Act”.
The rules will be enforced by the Equality and Human Rights Commission and the companies affected must publish details on their own websites and through the government gender pay gap reporting website. They are obliged to provide data about their pay gap; the proportion of male and female employees in different bands; the gender bonus gap and a breakdown of how many men and women get a bonus.
A new study by TotalJobs points towards the fact that a significant number of employers are unprepared for the new requirements. The survey of 145 employers found that 82% were not reviewing their gender equality and equal pay policies as a result of the new legislation, whilst 58% did not have complete salary information across roles and gender. A third of employers were not reassessing remuneration as a protection against gender discrimination.
MP Justine Greening stated, “I am proud that the UK is championing gender equality and now those employers that are leading the way will clearly stand out with these requirements.” She added that the government would prefer to work in partnership with employers on conformity rather than imposing sanctions. “......we’ll keep an open mind about whether we need to go further in terms of regulations and sanctions, but the important thing is to win over hearts and minds.”
The Equality and Human Rights Commission stated on their website that where they had evidence that companies were not publishing the data, they will take steps to make sure that they do, by improving companies’ awareness and understanding of the new requirement.
Research by the Commission has found that there are still substantial pay gaps throughout Britain. This year, they intend to publish a report that will help employers to look at possible causes of their pay gap and suggest action they can take to improve it. In addition, they will make recommendations to the government to help close the gender pay gap across Britain.
The Women’s Equality Party have said that the current proposals do not go far enough and that businesses should be leading the way in tackling the complexity of the gender pay gap.
By 2025, millennials have been projected to make up 75 percent of all U.S. employees - an increase from about 1 in 3 workers today.
The number of young people completing a college education and looking for quality jobs continues to grow and as companies everywhere get bigger, they are establishing a fully integrated base of millennials in their workforce.
Despite the fact that younger workers are often stereotyped as being too reliant on technology and hopping from one job to another, many employers value their new and fresh perspectives and attitudes. Lisa Chui, vice president of finance and HR at Ubiquity Retirement and Savings (a San Francisco based retirement benefits company) states, “They speak up and if they have ideas, they want to share them.”
“They walk in the door with a greater awareness and a greater sense of balance and new ideas” says Steve Wolfe, executive vice president of operations and administration at the Chicago-based staffing and employment agency Addison Group. “That contributes to bringing about better solutions. They can come in and contribute right out of the gate if they have the right environment.”
However, many HR professionals are finding that they may need to update their recruitment strategies to successfully connect with younger workers who expect faster and more-informal communications as well as frequent feedback.
“What recruiters fail to grasp is that this is a generation where the accelerated speed of communications is extraordinary,” says Warren Wright, president of consulting firm Coaching Millennials of Washington, D.C.
But their work does not end when they employ a millennial – they must update their strategies for retaining younger workers by showing them a clear career path forward for promotion. Lisa Chui says, “The trend is for HR to be a resource, not just a rule enforcer.”
A LinkedIn survey of more than 13,000 members of that generation found that 93% are interested in hearing about new job opportunities and 66% are open to speaking to a recruiter. Thirty per cent state that they can see themselves working at their current company for less than a year. However, by comparison, the Bureau of Labor Statistics states that older US workers tend to stay in their jobs for over four and a half years.
The same LinkedIn survey shows that there is often a divide between recruiters’ messaging to millennials and what these young people want to know about new job opportunities. It found that when millennials hear about a new job opportunity, they are less likely than members of other generations to know anything about the company; to find out more about the organization, they are more likely than members of other generations to follow it on social media and the most important information they want to know about the company is its culture and values.
The top obstacles to accepting a job for millennial workers are not knowing what the organization is like, applying and not hearing back and not understanding the role.
Hannah Ubl, a generation expert at BridgeWorks, a generational consulting company in the Minneapolis-St. Paul area states, “Millennials are looking for authenticity. They want to understand what the company is about and who works there”. She also pointed out that, “You lose millennials when you don’t respond right away.”
She went on to say that recruiters should reach out to thank an applicant for applying and then offer a timeline for when he or she will hear from HR again. “Texting might feel like it’s bridging into personal space, but millennials don’t see it as an issue”, she says. “It’s old-school to wait for a phone call.” She added, “If applicants sign a waiver, you can text them”.
It falls on companies to adjust their recruiting procedures to accommodate the influx of the millennial generation and where successful, this will minimize staff turnover rate.
Is it OK to request W2’s from job applicants to verify their income before extending a job offer?
According to employment attorneys, the practice of employers asking job applicants for copies of their W2 forms to verify employment and compensation comes with substantial legal risks.
Technically, requesting a W2 from a job applicant is not prohibited, but it can raise issues that HR experts suggest should be considered before taking this step. The tax forms disclose information that could be related to the applicant’s health – for example, sick pay could suggest that the applicant has a health problem; previous salary, if used to determine future salary could form the basis for a claim of discrimination; periods of unemployment would be revealed which, in certain states, is a protected trait when it comes to hiring staff.
W2 forms also include a section that details dependent care benefits an employee has received, which can give a hint as to parental status. According to the Equal Employment Opportunity Commission, questions about marital status and the number and ages of children are often asked, which can be construed as evidence of intent to discriminate against married women or women with children – violating the Civil Rights law of 1964. To circumvent this, companies may try to obtain the information by requesting the tax form, W2 which - on the face of it - would not be illegal but could be a cover for illegal activity.
In addition, requesting W2’s could have a negative effect on the applicant, who may consider this action to be inappropriate and intrusive and not wish to continue with the job application.
Although a federal bill - sponsored by Republican Eleanor Holmes Norton - aimed at preventing employers from asking job applicants to provide a salary history has stalled, many employers still avoid asking questions about an applicant’s salary history.
An increasing number of states and cities are also passing their own versions - New York City and New Orleans have already instigated salary history laws which prohibit city agencies and public and private companies from requesting pay history.
Massachusetts has passed a law that bans employers from asking for salary history until the offer of employment has been made. This will become enforceable in July 2018 and in Rhode Island, it is unlawful for an employer to require an applicant to provide a federal or state income tax return or related tax documents as a condition of being considered for employment (RI Gen Laws Sec. 28-6.9-1).
TotalJobs has stated that in 2011, a government report declared that ‘over the next decade, the changing age profile of the workforce will be the most significant development in the UK labour market, as a third of workers will be over 50 by 2020’.
The report explained that employers will be expected to respond to this demographic shift, by making work more attractive and feasible for older workers – enabling them to work up to and beyond pension age. However, older workers are not yet seeing this level of progress and half of employees aged 45 years and over believe that workplaces ‘naturally cater towards younger employees.’
According to research by Lee Hecht Harrison/Penna, employees believe that ageism is the most frequent form of discrimination in the workplace. They found that a fifth of UK employees feel discriminated against in promotion decisions and of these the most common cause of inequality is age (39%), followed by gender (26%) and employment status (22%).
HR professionals were also surveyed but they were most likely to be of the opinion that gender was the most widespread form of inequality – but that 94% of all promotions processes were fair. However, 29% of the employees surveyed felt that the promotion processes at their company was unfair.
In a recent TotalJobs survey, when older workers were asked about their main fears in the workplace, health issues topped the list with 30% of the employees surveyed citing it as their main concern. This was followed by 27% concerned about being out of touch with technology and 24% worried about not being able to learn new things quickly. Despite these concerns, two thirds of those surveyed stated that their desire to adapt to changes in working practices had either been sustained or increased with age.
A spokesperson for the Chartered Institute of Personnel and Development (CIPD) stated that the wealth of experience that older workers bring to the workplace must start to be embraced - sooner rather than later - and added, “HR needs to start encouraging employers to see older workers as an opportunity rather than a challenge. These skills and lengthy experience can benefit the wider workforce and the business as a whole.”
The report suggested ways for employers, employees and HR to manage workplaces with a diverse age range, using tools such as a space created to encourage knowledge sharing; an area designed to support and maintain cognitive health and alertness and standing desks and ergonomic furniture. Another recommendation was a ‘meal consultant’ to encourage healthier eating.
Lynda Gratton and Andrew Scott, professors at London Business School and authors of The 100 Year-Life, warn that many companies could resist having a diverse workforce in the future stating that for organisations – and especially HR departments – it “.....sounds like a nightmare as companies like conformity and simple predictable systems that are easy to run and implement. So don’t be surprised if large numbers of institutions resist these changes.”
The UK Pensions Regulator has - as part of its strategy to provide simpler guidance for occupational pension schemes - published new investment guidance for Defined Benefit (DB) trustees. It follows the general principles outlined in its Defined Contribution (DC) investment guidance with some special issues designed for Defined Benefit schemes.
The Regulator said in a statement accompanying the report that it expects trustees to have ‘suitably documented investment arrangements that are appropriate for their scheme’s circumstances, including their level of complexity’.
The guidance covers Investment governance, setting investment strategy, implementing the investment strategy and monitoring investments. Effective governance is needed to provide a good investment strategy. This will involve delegation and monitoring; forming part of an integrated risk management process; having stable scheme objectives and long-term plans; having total risk consistent with risk appetite; involving risk-taking that is understood and balanced, and allowing for the scheme’s future cash flow and liquidity requirements.
The law requires that trustees are familiar with the basic legal principles of pension scheme investment and the guidance includes factors and approaches to consider when investing scheme assets to fund defined benefits. It emphasises the importance of “focused, timely monitoring” and how trustees may benefit from putting together an investment monitoring dashboard. It is suggested that this could provide an “at-a-glance financial position” of a scheme’s current state in terms of meeting objectives, potential risks and issues.
Fred Berry, TPR head of investment consultancy said: "Good investment governance is essential to all pension schemes, indeed to any institutional investor, and we expect them all to adhere to those common principles.
The investment strategy is one of the most important drivers of a scheme’s ability to meet the objective of paying the promised benefits as they fall due, and we expect trustees to set this in the context of their integrated risk management approach.
It’s important to set clear investment objectives for your scheme and to identify how and when they should be achieved. Our guidance states that trustees should focus on areas that have the most impact for meeting their scheme’s objectives, and identify the necessary skills for the board of trustees of their scheme. It also provides some practical guidance on how to get the best from their advisers."
In March, a controversial bill called the Preserving Employee Wellness Program Act (H.R.1313) was introduced to the House by Republican Virginia Foxx, who stated, “Employee wellness programs have long enjoyed bipartisan support because they result in lower health care costs and a healthier workforce.”
She added that the legislation, “....will ensure employers have the legal certainty they need to offer this innovative benefit, which provides working families with greater control over their health care dollars.”
According to the House Education and the Workforce Committee, which last week passed the new legislation by 22 to 17, an increasing number - about 61% - of companies offer workplace wellness programs. Nearly 90% of large organizations offer them, with participation growing when Obamacare allowed employers to offer 30% of the value of their benefits in incentives, although surveys have shown that few do offer that big a benefit.
Experts say that these programs were originally introduced to assist employees to get and stay healthy and to improve their safety. It was also the aim of companies to increase productivity and to keep down health insurance costs, but there are those who raise privacy concerns.
Opponents of the bill believe that employees should not feel under pressure to participate in health screening that collects blood samples to check for high levels of cholesterol, or other factors that when discovered, enable treatment to be given to help prevent diseases such as diabetes and heart disease. They claim that compelling employees to undertake genetic counselling would leave them open to discrimination by employers, who are being empowered by the bill to penalize those employees not joining workplace wellness programs that collect this type of information. Additionally, they are also against employers providing incentives - for example, discounts on health care premiums - for screenings that ask about family medical history.
However, the sponsors of the bill say that it would clarify conflicting rules for incentives paid to employees who participate in voluntary health screenings – some of which could include genetic testing. The Society for Human Resource Management (SHRM) reports that a fact checking website states:
“H.R.1313 does not allow employers to force all their workers to submit to genetic testing.” In short, “The bill allows offering benefits for ‘voluntary’ workplace programs that may include ‘health risk assessments’ but does not enable mandatory genetic testing of employees.”
Currently health and genetic information is protected under federal nondiscrimination and genetic privacy laws. This means employers are not allowed to use workers' genetic information in employment decisions and they are not allowed to request or purchase their employees' genetic information unless it is a part of a wellness program that is voluntary.
SHRM’s Vice President of Government Affairs, Mike Aitken told NBC News, “Employers do not have access to this genetic information. Information can only be collected and shared with a third-party provider such as a health care professional.”
But critics say the new bill could provide employers with a way around.
Asda, which is owned by the US giant Walmart, claims that 95% of its staff will be better off under a new deal, due to be introduced in October.
Staff will be offered a higher wage - £8.50 per hour - for a new contract, but signing up to the new contract will be voluntary. It has been designed to replace the zero-hours contract presently in force and given the seal of approval by the GMB union who state, “These new flexible contracts will help to ensure job security; ensure those accepting them are on the same terms and – best of all – ensure that people will earn more money as a result. The new contract involves quite a few changes, but as it’s voluntary, this allows colleagues to choose whatever suits their circumstances best.”
The ‘flexible’ agreement means that Asda’s staff can work around the store on different days and hours to suit their circumstances, but they must be available to work on Bank Holidays, if required. However, if they wish to take this time off, it will come out of their 28 days annual leave.
In addition, all breaks will be unpaid and the night shift deal presently in place will alter. Instead of receiving an extra £2.04 per hour for work between the hours of 10pm and 6am, the unsociable hours will be cut down to 12 midnight to 5am – but the extra wage earned will rise to £2.54 an hour.
Asda stated that it was “maintaining its commitment not to use zero-hours contracts and staff will be guaranteed minimum hours.” They added, “Whilst the new contract will require colleagues to be flexible, fair and reasonable notice will be given for any changes to rotas and consideration will be given to those with care requirements outside of work.”
Despite the GMB approving the use of the new contract, concerns have been expressed that employers are using them to take the edge off the increase in the national living wage, due to come in force in April. Last year, People Management reported that some organisations had cut overtime rates; reduced premiums for weekend or evening work or cut perks offered to employees in response to the new national living wage.
Research by the British Chambers of Commerce showed that ‘sharp increases’ in the national living wage would cause many employers to put into practice cost reduction measures such as cutting staff hours or increasing the cost of goods and services.
But Andrew Weir, employer services manager at HR and payroll firm Moorepay, expressed the opinion that Asda’s measures were sensible. He called on other employers to follow suit, provided that legal minimums such as provision of adequate rest breaks, etc. are upheld.
Sarah Peacock, partner in the employment team at law firm Blake Morgan, told People Management “There was a lot of publicity when the national living wage was introduced about employers that were changing terms and conditions to minimise the detrimental impact on their business, leaving some employees no better off. It may be that employers like Asda are now taking a long term view to make sure they can offer well above the NLW while achieving benefits for the business.”