September 2016 Credit Management magazine

HR MATTERS
HR ROUND UP
Gareth Edwards looks at cases involving Tottenham Hotspur, Brexit and its
impact on employment law and data theft by an employee.
TAX TREATMENT OF PAYMENTS
DOES a ‘termination by mutual consent’
clause change the tax and NIC
treatment of a payment made under a
settlement agreement? This question
was examined recently in a case involving
Tottenham Hotspur Football Club.
In 2011 the club wished to reduce its wage
bill as its income had declined. Peter Crouch
and Wilson Palacios were employed by Spurs
under fixed-term contracts. The contracts
contained a clause which confirmed that they
could be terminated early by mutual consent.
The players were contractually entitled
to remain at Spurs until the expiry of their
respective fixed-term contracts and be paid
in full for the duration. However, in doing so,
they would be unlikely to be selected to play
and would consequently lose match fitness,
appeal to rival clubs and the potential to
be selected for their national teams. From
Spurs’ perspective, they would not succeed in
reducing their wage bill. The parties therefore
agreed to terminate the contracts. The players
received a significant payment from Spurs in
exchange.
If the payments were ‘earnings’, they were
subject to deductions for tax and NICs. If the
payments were compensation, no liability for
Class 1 NICs arose and the players were able
to receive £30,000 free from tax.
HMRC determined that the payments were
earnings because the terms of the players’
contracts provided for early termination by
mutual consent and therefore any payment
received in consequence of implementing
those terms was from the employment.
The First-Tier Tax Tribunal found, however,
the payments were compensation for the
surrender of rights. The tribunal pointed
out that the inclusion of a mutual consent
clause was irrelevant. The tribunal also
found a breach of contract is not necessary
in order for a payment to be regarded as
compensation for the surrender of rights.
Gareth Edwards is a partner in the
employment team at Veale Wasbrough
Vizards.gedwards@vwv.co.uk.
DEALING WITH
DATA THEFT BY
EMPLOYEES
THE Information Commissioner’s Office (ICO)
has prosecuted an employee who transferred
his employer’s clients’ data to his personal
email address before leaving and starting a
new job.
Mr Lloyd worked at a waste management
company and emailed the details of 957
clients to his personal account before leaving
to start a new job at a rival company. The
details contained personal information,
contact details of customers, purchase history
and commercially sensitive information.
The ICO prosecuted Lloyd under s.55
of the Data Protection Act 1998, which
states that a person must not knowingly or
recklessly obtain or disclose personal data or
the information contained in personal data,
without the consent of the data controller. He
was fined £300 and ordered to pay £405.98
costs and a £30 victim surcharge.
BREXIT AND UK EMPLOYMENT LAW
FOLLOWING the UK’s vote to leave the EU
what might happen to employment law?
A significant amount of the UK
employment law derives from the EU. Key
areas are: discrimination rights; collective
consultation obligations; transfer of
undertakings regulations (TUPE); family
leave; working time regulations; and duties
to agency workers.
Most UK employment law that derives
from Europe comes from directives, which
– unlike regulations – are not directly
applicable and automatically binding.
Directives are implemented into domestic
law by Acts of Parliament and secondary
legislation. They will therefore continue in
force unless they are specifically reformed or
repealed.
However, some UK employment law is
purely domestic in origin and therefore will
not be directly affected by the outcome of
the referendum. Such legislation includes
the right not to be unfairly dismissed.
Many of our workplace rights, such as
annual leave entitlement, go beyond the
minimum standards of the EU and there
is no reason to suppose that they will be
reviewed or challenged.
An overhaul of UK employment law
stemming from the EU is very unlikely. Such
legislation has become part of the UK’s
workplace culture, and wholesale reform
would be incredibly costly and disruptive.
However, there are areas, such as the EU
derived Agency Workers Regulations and
some areas of the Working Time Regulations
(for example, recent ECJ decisions on
holiday pay), that have been the subject
of significant criticism. We may therefore
anticipate that these areas come under
review following the UK’s exit.
That being said, over the next two years,
the Government will need to negotiate
the terms of our exit. The UK’s stance in
respect of employment law will likely be
largely dependent on these terms. In order
to maintain an ongoing trade relationship
with the EU, the UK may find itself under
significant pressure to accept EU social and
employment regulation.
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September 2016 www.cicm.com
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