The difference between freehold and leasehold

To make your home your castle, be sure who owns the drawbridge – by Conveyancing expert Sarah Avern

The Government has announced plans to tackle unfair leaseholder arrangements on new build properties, but in the meantime, as the Spring housing market gets into full swing, it’s worth understanding the difference between freehold and leasehold property.  

Increasing property prices and high population densities have seen a big increase in the number of leasehold properties across the country, as houses are split into flats and new apartment blocks are built, so there are now 1.4 million leasehold houses across England.  

And while leasehold arrangements are generally seen as a simple route to managing multiple occupancy buildings, over the past twenty years there has been a big increase in the number of houses being sold by developers on a leasehold basis.  These sales have seen ground rents being set at much higher levels than the ‘peppercorn’ arrangements that were typical previously, and with scheduled increases.  In the worst examples, leases include terms to allow the ground rent to double every ten years.  

The new measures announced by the Government will target such practices, including a ban on leaseholds for almost all new build houses, and changes will also be made so that ground rents on new long leases – for both houses and flats – are set to zero.  The government say that it will also make it cheaper and easier for existing leaseholders to buy-out their freehold, and that there will be routes to redress for those facing the most onerous terms.

We must wait for the detail and timetable for the introduction of these changes, which are anticipated to happen during 2018, but in the meantime, whether buyer or seller, it is worth being prepared by understanding the basis on which a property is being sold.  For prospective buyers, knowing the right questions to ask could save a lot of wasted time and resources.  And for sellers, it can ease a sale if you pre-empt any concerns and know the answers to the questions you may be asked.  

  • What form of ownership? 

It’s important to check exactly what form the ownership takes, and then ask the right questions. If it’s freehold, you will own the property and the land it sits on, but there may be other responsibilities that are not so obvious, such as contributing towards maintenance of a private shared access road.

If it’s a shared freehold, then you will own your personal space in the property, and generally a share of the land and the shared spaces.  Any maintenance is likely to be subject to agreement between all the freeholders, and the cost shared between everyone.  

If it is leasehold, then you will be buying the right to live in the property for the remaining duration of the lease, with the land, the structure of the building and shared spaces owned by the freeholder, who may be an individual landlord or a property management company.  They will hold the buildings insurance and will consult with leaseholders about any works that are required, collecting service charges from each leaseholder to pay for all maintenance and managing such work. The owner of a leasehold property is effectively a tenant in a very long-term rental, having to pay an annual ground rent and ask for consent to make any changes to the property.  

  • It’s a lease, so how long does it have to run? 

Leases of between 99 and 999 years are commonly granted and generally the value of a property will reduce as the lease gets closer to the end, but don’t expect to snap up a bargain if you’re looking for a mortgage as lenders are unlikely to make a loan on a property with anything less than 25 years left to run.  If a property has only a short time left on the lease, you can ask the seller to seek an extension, but expect to pay for the benefit.  A lease extension can be requested at any time by a leaseholder.

  • How much is the ground rent? 

Normally ground rent will apply only if it’s a leasehold property.  Ground rent can be a fixed charge or one that will change over time, so check out how much is being paid currently, but look through the small print as well, to be sure there are no big increases on the way. If any escalation is written in, then it should not allow for a rise that is more than the retail price index. Again, if you are seeking a mortgage, a lender will be looking to see affordability not just in the headline purchase price, but also in the ongoing costs of ground rent and the service charges. 

  • How much are the service charges? 

Service charges can strike fear in the hearts of leaseholders, even when they have very deep pockets, as all work is likely to be relative to the size and standing of the overall building. Be quick to ask for evidence of the service charge budget and the accounts for the past three years and don’t be afraid to ask around about the freeholder. The agent may assure you it’s a big property management company with the right infrastructure, but if research shows they have a poor reputation in getting work done, or in the amounts being charged on, you’ll be glad you checked.  

  • Are repairs and maintenance up to date?

Take a good look at how well things are maintained as you view the property and then check it out against those service charge accounts you’ve asked for. If everywhere is looking a bit run down, there’s no evidence of regular work being done in the accounts, and there’s very little being held in the pot for future works, you can expect a big bill, or an increasingly rundown environment. A survey is just as important when buying a flat as when buying a house. And importantly, be clear about the proportion you must contribute.

And finally, for the seller, it’s always a good idea to get your ‘house in order’ by tackling paperwork before the sale board goes up. There are forms requiring detailed information about the property itself and one covering all the fixtures and fittings. If it’s a leasehold property you will have to complete one covering details around the lease such as the rent, service charges, insurance and future work. By working with your lawyer in advance to prepare all the forms that will be required, you’ll be well prepared to answer all the questions your potential buyer may have for you.  

This is not legal advice; it is intended to provide information of general interest about current legal issues.

Employment Bulletin – April 2018

May welcomes ‘Good Work Plan’ to improve worker rights

The government is set to launch its ‘Good Work Plan’ to keep employment laws up-to-date with the changing world of work in the modern economy.

It follows recommendations made in the Taylor Review of working practices and it is hoped that millions of workers will benefit from the reforms.

The government will seek to protect workers’ rights by:

  • taking further action to ensure unpaid interns are not doing the job of a worker
  • introducing a new naming scheme for employers who fail to pay employment tribunal awards
  • quadrupling employment tribunal fines for employers showing malice, spite or gross oversight to £20,000 and considering increasing penalties for employers who have previously lost similar cases.

The government says it will ensure workers are paid fairly by:

  • providing all 1.2 million agency workers with a clear breakdown of who pays them and any costs or charges deducted from their wages
  • asking the Low Pay Commission to consider the impact of higher minimum wage rates for workers on zero-hour contracts
  • considering repealing laws allowing agencies to employ workers on cheaper rates.

The government will increase transparency in the business environment by:

  • defining ‘working time’ for flexible workers who find jobs through apps or online so they know when they should be being paid
  • launching a task force with business to promote awareness and take-up of the right to request flexible working introduced in 2014
  • making sure new and expectant mothers know their workplace rights and raise awareness among employers of their obligations
  • launching a new campaign to encourage more working parents to share childcare through Shared Parental Leave – a right introduced in 2015.

In some cases the government plans to go further than the review’s proposals, including:

  • enforcing vulnerable workers’ holiday and sick pay for the first time
  • a list of day-one rights including holiday and sick pay entitlements and a new right to a payslip for all workers, including casual and zero-hour workers
  • a right for all workers, not just zero-hour and agency, to request a more stable contract, providing more financial security for those on flexible contracts.

Prime Minister Theresa May said: “We recognise the world of work is changing and we have to make sure we have the right structures in place to reflect those changes, enhancing the UK’s position as one of the best places in the world to do business.”

 

Manager ‘unfairly dismissed’ for refusing pay cut

A shop manager has won her unfair dismissal claim after she was sacked for refusing to accept a new contract on a lower pay grade.

The manager had worked for her employer for 18 years.

The company restructured its employment model, merging the roles of shop manager and deputy manager into one new position.

The new contract offered to the manager meant her annual salary would have fallen by almost £5,000.

She would also have lost the benefits of double pay on bank holidays and time-and-a-half pay on Sundays, and been required to work five days between Monday and Sunday, as opposed to five days between Monday and Saturday.

The manager was offered a supplement of almost £5,000 on her wages for her first year in the new role.

She refused to sign the new contract, despite several meetings with her managers in which she was warned that it could result in her being dismissed.

The manager received a letter from her employer terminating her employment, although she was invited to re-apply under the new terms.

She took the case to an Employment Tribunal, which ruled in her favour.

The judge said the employer’s actions were “dismissive” and displayed “unreasonable inflexibility… evidenced by its approach to her grievance”.

 

Whistleblower awarded £45,000 over constructive unfair dismissal

A school dinner lady has been awarded £45,000 in compensation after she was subjected to bullying because she reported a breach of policy by her colleague.

The employee became aware that some of the kitchen equipment was being taken off site for private use by a member of staff.

She reported the breach, but no investigation was made. The employee made another complaint which led to the resignation of the alleged offending staff member.

However, the employee claimed she was subjected to bullying after it became known that she had made the initial complaint. She reported the hostile working environment, but no action was taken by her managers.

She felt she had no choice but to resign and made a claim of constructive unfair dismissal.

The tribunal ruled in her favour. It stated that the bullying allegations “ought to have been investigated by management’ and that the employer “did not adequately respond” to the complaints.

She was awarded £45,000 in compensation.

 

Firm halts progress of family who set up rival business

A firm that bought a clothing business from a group of family members has won a court injunction to prevent them setting up in competition.

The court heard that the family had sold their business for a substantial sum. The new owners employed the family members under contracts containing restrictive covenants preventing them setting up a rival business while still employed or for 12 months after resigning.

All the family members then resigned shortly after the takeover.

The new owners alleged they breached the covenants by creating a competing business while still employed, soliciting other employees and customers, and using confidential information.

The court found in favour of the new owners. It said they had presented a strong case that the family had been building up a new competitive company while still in employment, had made use of connections with customers, suppliers and employees, and of confidential information to secure orders.

It granted an interim injunction enforcing the covenants until the issues could be dealt with at a full trial.

The court also granted the new owners springboard relief. This is an injunction that prevents an employee gaining an unfair advantage or head start by abusing his employer’s trust and resources while secretly setting up a rival business.

The order is designed to leave the employee in the same position he would have been in if he had resigned and obeyed the terms of his contract before setting up a new business.

Post Brexit direction on Intellectual Property Rights

Brexit negotiators have finally thrown a light on the future of intellectual property rights, with an indication that EU-wide rights will be replaced with equivalent UK rights after the end of the transition period.

Currently the EU Trade Marks (EUTM) and Registered Community Designs (RCD) are valid in both the UK and the rest of the EU, which had given rise to questions as to validity once the UK had left the EU. Now, the draft withdrawal agreement includes eight articles relating to intellectual property, detailing how such EU and Community registered designs are likely to be treated over coming years. 

Said corporate and intellectual property law expert Sean Byrne of Coventry based Band Hatton Button solicitors: “This detail was much-needed, and helps in understanding the best path to adopt for registrations as we head through Brexit. As currently stated, it suggests that separate UK and EU trade mark and registered design applications do not need to be filed, which was the belt and braces approach taken by many, pending an announcement on how conversions would be treated post-Brexit.”.

“We do not know whether this conversion will happen automatically, or whether it will require action by the holder of the rights, or indeed whether a charge will be levied, but it does give some reassurance that holders of EU trade marks registered before the end of the transition period can expect an enforceable intellectual property right in the UK post-transition, and that the renewal date will be the same.  Similarly, anyone holding a Community registered design right will become the holder of a UK registered design right.”

It is also expected that a new UK unregistered design right will be created, to provide the wider protection currently offered by the EU unregistered design right.  

The draft agreement also sets out that protection will continue post-transition for international registrations of trademarks or designs which designate the EU via the Madrid or Hague centralised application systems for registration in multiple jurisdictions.  The UK was already an independent signatory to the Madrid Protocol, and will independently accede to the Hague Agreement in June 2018.  The UK will also continue to be a member of WIPO – the World Intellectual Property Organization – which administers these international processes.  

Sean added:  “Post Brexit, alongside any UK registrations, businesses seeking protection in Europe will be able to register an EUTM or RCD to cover all remaining EU Member States.  However, filing through WIPO may become the simplest option, as it will cover the UK, the EU and countries such as the USA or Japan, with 68 countries signed up to the Hague Agreement and 116 to the Madrid Protocol.”   

For national protection, solely within the UK, trade marking, registered designs, patenting and copyright is administered by the Intellectual Property Office (IPO) and governed by the Intellectual Property Act 2014.  

As the Brexit negotiations continue, the IPO has said it is keen to hear views on the transitional arrangements from those involved in managing IP issues day-to-day, by emailing: EUenquiries@ipo.gov.uk

ENDS

Web site content note:  

This is not legal advice; it is intended to provide information of general interest about current legal issues.

5 Year Anniversary Heralds New Era

A new era is being heralded at a Band Hatton Button as we celebrate our five year anniversary since we were formed. We are looking to the future by building on our strong growth and development as we celebrate the special anniversary on 6 April.

Wake-up call for small companies on bribery process

The activity of political consulting firm Cambridge Analytica has been hitting both headlines and the Facebook share price, following accusations that it used the personal data of millions of Facebook users to sway the outcomes of the 2016 US presidential election and the UK Brexit referendum. Executives from the company were also filmed by an undercover journalist apparently suggesting that honey-traps and bribery might be used to discredit politicians. 

The company denies the allegations, saying that the Channel 4 news story was edited to misrepresent the conversations and explaining that its staff will actively try to tease out any unethical or illegal intentions from prospective clients, because legality and reputational risks are critical in assessing new projects. In the statement, the company highlights how it uses such meetings to make an informed decision about who to engage with, in line with the guidance of the UK’s Bribery Act.

The Bribery Act came into force in 2011, with the aim of simplifying and consolidating existing law on corruption and creating a new crime of failing to prevent bribery.  In simple terms, bribery is defined as giving or offering a person a financial or other advantage with the intention of inducing them to act improperly. It is also a crime to ask for or to receive an inducement in return for acting improperly.

And having the right processes in place to comply with the tough standards introduced by the Act is not just the concern of big business.

In R v Skansen Interiors Limited, a contracting company employing 30 people was charged with failing to prevent bribery under Section 7 of the Act, resulting in the first contested trial of this offence since the Act came into force in the summer of 2011. The action was taken despite the company self-reporting the illegal conduct of its former managing director in making bribes to win contracts.

The company had anti-bribery and anti-corruption policies in place, and had identified and stopped the largest bribe payment before it was paid, but the measures were found to be insufficient to meet the defence under the Act.

Said Jon Wilby, Head of Litigation with Coventry solicitors Band Hatton Button: “The outcome of this case illustrates the difficulties that smaller companies may face in trying to act responsibly and keep within the law.  Certainly, Skansen thought they had matters well covered, and by taking action to self-report may have imagined that their actions would have been considered exemplary, rather than falling short.

“What is interesting is that by the time the case was heard, the company had become dormant, so no financial penalty could be imposed and the only sentence could be an absolute discharge. When the judge asked why the prosecution had been brought in such circumstances, the Crime Prosecution Service said that it was in the public interest and they wanted to send a message to others.”

He added: “The message is loud and clear – you must have processes and policies that meet best practice conditions, whatever the size of your business, and be able to demonstrate how it is embedded within the culture of the company.  That will be demonstrated through regular risk assessments, ensuring staff are kept up to date on procedures, undertaking due diligence on clients and agents, and making sure written documentation hits the right standard and matches up to the requirements of the Act.”

www.justice.gov.uk/guidance/bribery.htm – R v Skansen Interiors Limited

Web site content note:  

This is not legal advice; it is intended to provide information of general interest about current legal issues.

Our new Online Conveyancing Tool is Live!

We are excited to launch a new product which enables clients to get quotes for residential conveyancing services at the touch of a couple of buttons.

Band Hatton Button have teamed up with ‘Perfect Portal’, a LawNet partner, to launch a web tool which gives clients a full quote for their legal needs based on a few quick questions. The quote is then emailed to the client outlining what the legal fees for their conveyancing will be, and it also includes all of the extra costs involved in a transaction such as stamp duty, land registry fees etc.

The conveyancing market is hugely competitive and we are well aware that we constantly need to adapt and evolve to remain up to speed and keep up with the our peers. We are hugely committed to interacting with clients in the way they wish, and also to developing technology, so this solution ticks two huge boxes for us. Research also shows that generation Z (those born in 1995 or later and a generation that are a big target market for us) are huge users of technology and with the average age of someone in the UK buying their first home being 30 years old embracing technology is very key for us.

As a firm we strive to make the conveyancing process less stressful, speedy and efficient and so launching this product ties in perfectly with our approach. We are also passionate about being open and honest about our pricing and the quote that clients receive is clear, transparent and contains no hidden extras.

This new product means clients can get an instant quote any time of the day using any device. They can also then instruct us if they wish by clicking to do so and then we will start the ball rolling at our end.

The system will also be hugely beneficial to us internally as our Client Relations Team will be using it to provide clients with instant quotes when they call us so it streamlines the whole process.

Perfect Portal also share our ethos of “providing a human touch” so we know this will be a perfect partnership!

The ‘One Minute’ Conveyancing Quote!

Property sellers and purchasers can now receive a conveyancing quote in one minute thanks to a new online tool.

Solicitors Band Hatton Button, who are based on Warwick Road in Coventry city centre, are teaming up with Perfect Portal to launch an online system which asks prospective clients some simple questions relating to their transaction.

This information is then analysed instantly before a quotation – including stamp duty and other extra costs – are emailed to the prospective client, who can then decide whether to instruct a solicitor at the click of a button.

Sarah Avern, Head of Residential Property at Band Hatton Button, said: “This is the tool that Y and Z generations have been crying out for when it comes to buying or selling a home.

“Those born in the late 80s and early 90s are currently setting out to buy their first home and are big technology users, but they’re also time poor, so this tool will help us to connect with what is a massively competitive market.

“It is also designed to make the house-buying process much less stressful and more efficient.

“Comparing conveyancing prices can be a lengthy and complicated process as extra costs aren’t always added on, but the Perfect Portal service includes everything up front within a minute.

“This service will further improve our overall efficiency as our Client Relations Team will also be able to provide quick quotes over the phone using the online system, freeing up our solicitors’ time to focus on their clients’ matters.

“Adapting to reflect consumer behaviour is vital for us as a firm, and we are expecting this new approach to conveyancing to become the norm in the future.”

The online service is being launched on www.bandhattonbutton.com from 22nd March.

GDPR – What You Need to Know!

With the GDPR implementation date of 25 May fast approaching, our Compliance Partner Jon Wilby gives a quick re-cap (or heads-up if it’s somehow passed you by until now) of the minimum that all businesses need to know about the new data protection laws.

-GDPR applies to any data from which a living person resident in the EU can be identified. For most businesses this means customers/clients, employees and individual suppliers/contacts.

-It regulates how the data can be processed lawfully (anything else is unlawful, which is a criminal offence punishable by hefty fines). Processing covers the collection, storage, use, sharing, alteration and destruction of personal data.

-Lawful processing of personal data must fall into at least one of these categories:

  1. Explicit consent (failure to opt out is not consent).
  2. Performance of a contract with the Data Subject.
  3. To comply with a legal obligation.
  4. In the public interest/for the purpose of some official authority.
  5. Necessary for legitimate business interest reasons which are not outweighed by the privacy rights of the Data Subject.

-Personal data must be processed in a transparent manner, kept up-to-date, limited to the specified purpose, kept securely and in a form that permits identification of the data subject for no longer than is necessary.

-The data subject’s rights include:

  1. To be informed about the processing of their personal data
  2. To have access to it
  3. To rectify errors
  4. To object to the processing
  5. To be forgotten

-In order to comply with the regulations all businesses must:

  1. Carry out a data audit as follows:
  • What personal data do we hold
  • About whom
  • Why do we have it
  • What do we do with it
  • Is it shared with others and if so are they GDPR compliant?
  • How do we access the data?
  • Do we need to keep it?
  1. Identify the lawful basis for processing the data. If that is the legitimate business interest grounds you must carry out a privacy impact assessment to justify your reasoning that your legitimate interests for processing the data (for example marketing mailshots) is not outweighed by the risk of harm to the data subject (e.g. loss of data/invasion of privacy).
  2. Prepare a privacy notice. Examples will be popping up in normal commercial situations very soon, but you must make sure that the privacy notice is relevant to your business. There are specific requirements: check on the Information Commissioner’s office website ico.org.uk or your trade or professional body might be able to give guidance. If you are unsure, take legal advice.
  3. Check that anyone you share personal data with is GDPR compliant – ask them to confirm this. You are jointly liable with them for any unlawful processing of personal data that you share with them.
  4. Put a system in place to monitor data protection including policies if necessary (we can help you draft those) and keep it under review as you would any other asset or risk facts or affecting your business.

Jon Wilby has prepared more detailed briefing notes that are available on our website (www.bandhattonbutton.com/gdpr-updated-guidance/) and has delivered a seminar on GDPR compliance (if you would like a copy of the notes from that seminar please contact Sarah Jordan via SCJ@bandhattonbutton.com). To discuss any particular issues or concerns around GDPR compliance for your business please do not hesitate to contact Jon Wilby via JJW@bandhattonbutton.com or on 024 7649 3116.

Employment Bulletin – March 2018

Employer’s attempt to ‘soften the blow of dismissal’ backfires

Employers should be careful not to mislead an employee they wish to dismiss, even if it’s to soften the blow for the person losing their job.

Concealing information can lead to a claim for compensation, as seen in recent case before the Employment Tribunal.

It involved a company that decided to dismiss an employee after becoming dissatisfied with his performance. However, rather than setting out the performance issues, it told the employee that his duties were to be outsourced.

This was intended to “soften the blow” and ensure that he worked his full notice period of three months.

The misinformation led the employee to believe that he should transfer to the new provider under TUPE arrangements and that the company had failed to comply with its duties to inform and consult him. He resigned when the company refused to provide him with details of the ‘new provider’ who didn’t, in fact, exist.

When the truth eventually emerged, the employee took legal action to recover the three months’ notice pay that he had lost by resigning.

The case went all the way to the Employment Appeal Tribunal, which found in his favour. It held that it was true that on the facts of this particular case the employer had no duty to tell the employee of the reason for his dismissal. However, if it elected to give a reason, the implied term of trust and confidence required that it should not mislead the employee.

The employee’s claim for damages should therefore succeed.

 

Increase in claims after employment tribunal fees ruled unlawful

There has been a sharp rise in the number of employment tribunal cases since the Supreme Court ruled in July that the fees charged to bring claims were unlawful.

Figures released by the Courts and Tribunal Service show that claims rose by 64% between July and September. The National User Group of Employment Tribunals say the number of claims has doubled in some areas.

Meanwhile, a survey by the CBI found that 90% of businesses think the removal of fees will lead to a rise in vexatious claims that have no merit.

The fees were introduced in 2013, with employees having to pay up to £1,200 to bring a claim. Following a challenge by the union Unison, the Supreme Court ruled that the fees were discriminatory, unlawful and unconstitutional.

The Ministry of Justice (MoJ) accepted the ruling and has started refunding fees paid by claimants over the last four years. However, it noted that the court had not challenged the right to charge fees, only the amount that was being charged.

In a statement on the ruling, the MoJ said: “The Supreme Court judgment noted that ‘fees paid by litigants can, in principle, reasonably be considered to be a justifiable way of making resources available for the justice system and so securing access to justice’. The court ruled, however, that we hadn’t set the fee at the right level to deliver that outcome.”

The Lord Chancellor, David Lidington, said recently that the government would still like to charge a fee but had to be careful to ensure that tribunals remained accessible and affordable.

This suggests that any new fee structure would have to be low enough to ensure employees were not discouraged from bringing genuine claims.

Firms may wish to check that their employment policies are up to date to reduce the risk of facing costly and time-consuming claims from employees.

 

Top businesses must show how they stop sexual harassment

The recent sexual assault scandals involving MPs and Hollywood actors has prompted the Equality and Human Rights Commission to write to leading companies telling them they’ll face legal action if they fail to deal with sexual harassment.

The letter to the chairs of FTSE 100 companies and other leading employers reminds them of their legal responsibility for the safety and dignity of their employees in ordinary workplaces across the country.

It says: “As you will have seen, recent high-profile testimonies demonstrate pervasive sexual harassment in contexts as diverse as Hollywood and Westminster, and the lack of redress for those women and men who experience it. The Equality and Human Rights Commission is gathering evidence on the most effective means to prevent and respond to this issue.”

The Commission asks them to supply evidence of what safeguards they have in place to prevent sexual harassment, what steps they have taken to ensure that all employees are able to report instances of harassment without fear of retribution, and how they plan to prevent harassment in the future.

The letter explains that where the Commission discovers evidence of systemic failings, it will consider exercising its enforcement powers. This could include undertaking investigations into organisations which it suspects may be failing to take reasonable steps to protect employees.

The Commission’s Chief Executive, Rebecca Hilsenrath, said: “Sexual harassment is rife across all of our industries. We accept it far too easily, in terms of the culture we live in. Accountability lies with leadership. It is not enough to report a nil return. We need to take responsibility to ensure that no woman will ever be intimidated from reporting, be challenged by the difficulty of doing so or frightened of the implications for her career.

“We want to find out what is working and what the barriers are and identify the leaders who are making a difference.”

Although the letter has so far only been sent to the largest companies and organisations, it shows how seriously the issue of sexual harassment is being taken. Employers may wish to review their current policies to ensure they protect their staff from unwanted attention, and their businesses from costly harassment claims.

 

Firefighter ruling sparks new heat for employers

The standby arrangements for Belgium’s volunteer firefighters are set to cause new headaches for employers with workers who are paid flat rates for time on-call or when sleeping in the workplace, with a judgement that will affect companies across the European Union.

The Court of Justice of the European Union (CJEU) has ruled that volunteer firefighter Rudy Matzak is a ‘worker’ and that within the meaning of the Working Time Directive his time on standby is ‘working’ time.

Under that Directive, ‘working time’ refers to “any period during which the worker is working, at the employer’s disposal and carrying out his activity or duties, in accordance with national laws and/or practice”. It applies to all sectors, including both public and private, and ‘rest period’ refers to any period not classed as working time.

When he was on call, Mr Matzak had to be at home and able to fulfil the requirement of an eight minute response time to reach the fire station, and the Court said that this obligation to remain “physically present at the place determined by the employer and the … constraints resulting from the need to reach his place of work within eight minutes” meant that he was limited in how he could pursue his personal and social life.  This contrasted with a worker who may be asked simply to be contactable.

The knock-on effect for employers of standby time being deemed to be working time is that it has to be taken into account when complying with rest periods, working hours and the National Minimum Wage.

The judgement follows hard on the heels of last year’s hearing by the Employment Appeal Tribunal of three cases – Focus Care Agency Ltd v Roberts, Frudd v The Partington Group Ltd and Royal Mencap Society v Tomlinson-Blake – which said that businesses must conduct a ‘multifactorial evaluation’ as there was no clear, hard and fast way to distinguish between on-call workers who are considered to be ‘at work’ and those who are not.   In that judgement, the factors highlighted as likely to be a ‘working’ situation included whether an employee was on site to comply with a regulatory or contractual obligation, whether they would be disciplined for failing to remain on stand-by, and if they had to keep a listening ear and respond, and the extent to which they had to initiate action.

“This latest judgement adds to the already complex minefield for compliance with on-call workers,” said employment law expert Mark Ridley of Coventry based Band Hatton Button solicitors.  “It’s in Belgium, but as we are still part of the EU, it is just as important here.

“Whether or not a worker on standby is ‘working’ will depend on the circumstances of each case, but the fact that the issue is complicated with grey areas does not mean that businesses can ignore it – ignorance of the law has never been a valid defence.  Back-pay for up to six years could be due and that could mean substantial sums.

“For any situation that seems unclear, it’s worth getting some independent advice.   An easily made change to the way that on-call systems are operated might clarify things and take an employee out of a potential ‘working’ situation.”

In any situation where the on-call claim is found to be ‘working’ time the National Minimum Wage Regulations (NMW) will apply.   The NMW Regulations apply to any eligible worker, whether or not they are paid by the hour and calculations must be made according to the payment basis, to check if the equivalent hourly rate is at the right amount.  New rates for the National Minimum Wage come into force from April 2018, applicable to the various rates, including the National Living Wage for eligible workers aged over 25, and other age-related rates.

Year 25 and over 21 to 24 18 to 20 Under 18 Apprentice
April 2017 £7.83 £7.38 £5.90 £4.20 £3.70

Court of Justice of the European Union: Case C-518/15 Ville de Nivelles v Rudy Matzak

Web site content note:  

This is not legal advice; it is intended to provide information of general interest about current legal issues