are you a director

Are you a Director – All you need to know!

Disputes between the company and a third party such as a supplier are commonly damaging to the company and those that are involved with them. However, Disputes in the boardroom between directors or between individual shareholders can leave devastation and have a long-lasting impact upon the company as a whole if not dealt with correctly.

Generally, over recent years, we have seen a shift in the weight of duties and regulations attached to directors with more and more responsibility and emphasis being placed on individual responsibility. It is advisable to refresh yourself and the others on the board of what is involved in terms of directors’ duties. In brief terms, as a director, you should always be aware of your duties and, in particular, your fiduciary duties. Don’t forgot to review the company’s articles and the director’s employment contract. Failure to comply with these could see you removed as a director of the company.

The most common fiduciary duties (which can be found in the Companies Act 2006) are:

  • To act in good faith in the best interest of the company
  • To act for proper purposes
  • Not to make secret profits
  • To avoid conflicts of interest

Differences of opinion and debates between directors, even the ones that get heated, are bound to happen from time to time. The issue arises when it prevents the company being properly run or causes deadlock. This is different from a shareholder’s dispute that can arise when a shareholder holds a difference of opinion on the direction of the company. For the purpose of this blog we are simply considering the issues that arise in a dispute between directors. In all of this, it is important to remember that, in some instances, removal of a director is good governance of the company

So how does it go wrong? Surely a director cannot simply be removed from their position?

A dispute can arise for a number of reasons, for instance disagreements over the company, personality clashes, conflict of interest, and lack of performance are just a few. In some instances, a director may decide to pay themselves high salaries, or keeping money in the company (for a rainy day), which can lead to disputes with the shareholders, because shareholders feel it should be paid out as dividend. The point is you may feel you have not done anything wrong for example, keeping the money in the company, but unless the “grievance “is addressed early and resolved quickly, it can, and will likely, raise its head as a dispute which eventually will need to be dealt with. Understanding each party’s rights from those of the shareholders to directors is paramount in understanding how to deal with the issue/dispute and resolving the same very quickly.

Ensuring you have acted correctly.

Key questions to ask yourself a director:

  1. Decision making at board level. Who has to attend in order to make a decision? The majority on the board could force through any decision that is made at board level (provided they turn up to board meetings).
  2. Have you acted properly as a director? Examples where this might not be the case include where:
    • you use company property for personal use
    • you divert a contract from your company, without approval of the shareholders or of the independent directors on the board because it benefits you in another company.
    • you lack the expertise for that specific role such as finance director and fail to maintain the information required for the performance of the business.
    • you breach the company’s articles

What if the board hasn’t acted correctly?

It is important to understand that it is possible for either a fellow director, shareholder or non- executive director can apply to the court for permission to bring an action on behalf of the company a 'derivative' action. So as a director you can be open to anyone who has an interest in the company bringing an action.

Am I my fellow director’s guardian?

Well, sort of. In general terms, you are not liable for the actions of other directors if you didn't know about them and took no part in them. However, you should be aware that if you ought to have known or turned a blind eye, this is not enough to protect you.

Directors must keep themselves informed about the business, and participate in its management, which means they should not sit by and let other director’s act without being prepared to challenge them.

Likewise, resigning as a director is not enough to protect you: you might still face action against you if, for example, the company subsequently became insolvent.

As you can see, the life and role of a director can be complex. The way to ensure the company is run smoothly is to know and understand your responsibilities and deal with issues quickly by seeking legal advice. Remember that the company’s legal advisors may not be able to advise you as a director due to a conflict of interest.

If you want to know about directors’ duties, board disputes, or director disputes please contact:

Rashmi Dube email: rashmi@legatuslaw.com www.legatuslaw.com

TCC Judgment to bring an end to ‘Smash and Grab’ Adjudications?

What is a ‘Smash and Grab’ Adjudication?

A ‘Smash and ‘Grab’ Adjudication is a term commonly used in the construction industry. What this refers to is a situation where a contractor has issued an Application for payment for example, no payment has been received nor has a payment notice or pay less notice been served. The contractor then successfully refers the matter to Adjudication for the full sum stated in the Application whether this represents a ‘true value’ for the works completed or not.

‘Smash and Grab’ Adjudications became more popular as a result of a case called ISG Construction Ltd v Seevic College [2014] EWHC 4007 (TCC) (“ISG”), where the employer did not serve a valid pay less notice or payment notice. As such, it was deemed that by failing to serve the requisite documents, they had in fact agreed the value of the Application for payment. They could not then proceed to refer a further Adjudication disputing the true value of the works completed within that Application.

What is the recent TCC Judgment?

Mr Justice Coulson’s Judgment in Grove Developments Limited v S&T (UK) Limited [2018] EWHC 123 (TCC) (“Grove”) does not follow this same principle.

In fact, he departs from the ISG case. Mr Justice Coulson decided that Grove was entitled to commence a separate Adjudication for the ‘true value’ of the works, but only after payment of the Interim Application had been made.

If his decision is followed, it is widely believed that this may result in ‘the end of an era’ in terms of ‘Smash and Grab’ Adjudications moving forwards.

Does it matter if a Payless Notice is not issued?

Although a subsequent Adjudication may be issued to determine the ‘true value’ of an Application, it is very much on the basis that you have to pay the amount of the Interim Application first and then argue about the true value later. Therefore, it is always good practice to follow the procedure set out in the contract to avoid getting into disputes about the value of Applications.

If you do not agree to the value of an interim Application:-

  1. Ensure that a valid payment notice/pay less notice is served as soon as possible;
  2. Check your contract regarding the time frame in which to serve your pay less notice – if it is out of time, it won’t be valid;
  3. Include sufficient detail within your payment notice/pay less notice as to how you have calculated the sums you wish to deduct and why – include as much detail and substantiation as possible;
  4. Make sure the document is clearly marked as a ‘pay less’ notice to avoid any ambiguity;
  5. Check your contract as to how the pay less notice is to be ‘served’ – does it need to be sent by recorded delivery or is email delivery sufficient?

In my opinion, I am not sure we have seen the end of the so call “Smash and Grab” adjudications. This is simply on the basis that where the subcontractor is successful then they MUST be paid irrespective of whether they bring a separate adjudication for the true value.

If you would like more information in respect of the above or want to discuss specific facts relating to your dispute, please do not hesitate to contact us on (+44) 01133021330 (Leeds) or (+44) 02078732279 (London) and speak to Rashmi Dubé. Alternatively, you can send us an email on hello@legatuslaw.com.

Buy Yorkshire: The Importance of Truth in Journalism (Holding the powerful to account)

2018 sees a new venue – First Direct Arena, Leeds.

The place is set out with ease. All the exhibitors in one room with sofa’s, tables and chairs to allow for networking to take place.

Having been a veteran to Buy Yorkshire, I found the new venue a delight. From the moment we arrived there was always a helping hand for any queries.

This year my interest was in communication and journalism. Given how we all now get our news from twitter and other digital formats, together with claims of “Fake News” or “Alternative Facts” what is the view from a panel of journalists? The panel “The Importance of Truth in Journalism” saw distinguished journalists consisting of Mark Cacsi Business Editor from the Yorkshire Post, Dia Chakravarty Brexit Editor for The Telegraph, Robin Pagnamenta Deputy Business Editor The Times and David Conn Sports Journalist for The Guardian. The panel was chaired by Simon Price, Mediacom Leeds.

The discussions centred around that there is a lot more “news” out in the public domain and that the landscape is shifting for journalism. Anyone can put out a news item on social media, but it does not mean that it is researched or balanced. Dia made a point that there must be a difference between opinion and researched investitive journalism. The panel agreed that all investigative journalism must be researched and balanced. There must be commitment to the story and as Mark said, “hold powerful to account”. It is not just the newspaper that has to have integrity, such as the Yorkshire Post that has been going for 270 years, but the journalist themselves. As a regional editor, you are answering to people daily as you will be passing them on the streets. Examples of such commitment were presented by The Guardian’s David Conn, that investigative journalism was important, particularly in keeping matters alive and having commitment to the story no matter how long it takes, for example, the Windrush story and Hillsborough.

The panel also held a consensus that the landscape of news and it’s presentation in newspapers is changing. Dia from The Telegraph commented that the next generation gets it’s quotes and news from Twitter and other social media platforms and tend to believe ‘they are based on fact’ when actually they are based on opinion. She used as an example of a recent Twitter feed that suggested Meghan Markle’s wedding dress had cost £300,000.00 and that the tax payer was footing the bill. The Tweet went viral. There was a subsequent tweet which, in essence, said the tweet was an opinion and not based on fact, this of course did not go viral.

David commented that ‘people forget the power of the press and the range of opinion’. Robin from The Times quite correctly stated that ‘whatever form of journalism is consumed… there has to be rigorous commitment to standards… traditional journalism needs to rethink what model works’.

Investigative journalism and newspapers cost money, whether that be in paper form or an online experience. We are now dealing with generations as Mark from the Yorkshire Post pointed out who have “not been in a record shop or seen a TV series normal…” the reality is “if people don’t pay for journalism we take away a cornerstone of our democracy’. The consumer will have to pay in order to keep journalism alive. From my perspective, in the combat of fake news, we need to keep our investigative Journalism and newspapers in business for a balanced view and to keep us all accountable.

Business Disputes – Takes time away from the business

As an MD or FD of a business, you simply want to avoid disputes. By their very nature, they are time consuming. There is also more at risk than simply a lack of payment in most business disputes, it could be the threat of professional negligence or tainting the company’s reputations in the market place.
In any type of business dispute the issue means :

  1. Time away from running or developing the business;
  2. Increases costs, not just in terms of the business’ time, but also legal fees which is an expense all businesses want to avoid if at all possible;
  3. May cause additional stress
  4. Employees being distracted or having to spend time in dealing with questions that arise out of the dispute.

What can a business do to avoid a dispute in the first place?

  1. Spend time with solicitors and ensure that you have the correct documentation in place such as contracts, Non-Disclosure Agreements, Joint Venture agreements, Shareholders and Partnership Agreements, Sale and Purchase agreements for assets or businesses as a whole, manufacturing agreements and distributions agreements. I know what you will be thinking “well of course you will say that, you are a solicitor” but trust me – the better the agreement, the harder it is to say the agreement is ambiguous or have any other interpretations. An example of when agreements are badly drafted include such things as using terms i.e. ‘Confidential Information’ but not actually defining that specific term within the agreement. This could then lead to parties having different interpretations of the term at a later date, leading to confusion and worse case scenario to a dispute.
  2. Ensure that you have a set of agreed terms to determine what you want out of the agreement with the other party. Don’t insist that the agreement must be a simple agreement, allow your lawyer to draft the agreement in the best possible terms to suit your business needs. Any good lawyer will approach this in a commercial way.
  3. Ensure the documents are executed correctly – what do I mean by this? Ensure that you and that the other party(s) sign the documents in accordance with what is dictated by the agreement. In particular, some agreements simply require the person to sign, others require it to be signed as a deed. It is important that you know what you are signing and the consequences of signing the documents accordingly. In some instances, such as in construction contracts, there is not always an ability to negotiate the terms of the contract but it is always a good idea to know what you are signing up for so you know if you can actually deliver of what the contract says and not what was verbally discussed!

What happens when you are in a dispute/or when the dispute first raises it head?

  1. As a dispute arises it is important to act quickly.
    a. Gather all documentation you have in respect of the dispute including emails. I know this is time consuming, but we often forget what has actually happened or believe a scenario that does not reflect what the emails show. It is therefore a good time to review the situation.
  2. Try and get the matter resolved quickly. You have two options (1) to take a conciliatory approach, (2) to argue the principal of the matter, which in some instances is just as important.
  3. If the dispute is not settled relatively quickly you should then look at instructing lawyers to assist in the dispute. The lawyers should consider alternative dispute resolution matters such as Mediation or a without prejudice meetings if appropriate. In some instances, however, this is only possible after a period of exchanges.

Settlement

Happy days if you are able to come to an agreement with the other party as to a settlement. If you do, it is always best practice to place any settlement agreement in writing.
We would recommend that lawyers draft the agreement to ensure that it actually covers what you intend it to cover, such things as the settlement being in full and final settlement or you may want it to remain confidential for example.

No Settlement – let’s head off to Court!

If there is no settlement, then in some instances issuing court proceedings is the only way forward.

It is important to note that court proceedings take a lot of time and energy from the business and also would increase the costs significantly. However, in some matters there is simply no other way to settle a dispute and could even mean your business is changing the law which could have a profound effect on others.
In any event, a dispute often starts off as something small and then starts growing. It can take over if not controlled. If you require any further information please email rashmi@legatuslaw.com call 0113 302 1330 or 020 787 32279

*Please note that this is not legal advice and is not intended to be relied upon. If your business is in a dispute you should always seek legal advice for your specific business needs.

Construction: What is Crystallisation and what does it mean?

This relates to disputes that arise between parties in respect of a construction contract. Before a party is able to issue a notice to adjudicate, the dispute has to be ‘crystallised’

If the dispute is not crystallised, then that party may have no right to issue an adjudication.

So, what does it actually mean?

What is ‘Crystallisation’?

Essentially, this means that there must be a dispute, a claim must have been made and the claim is
not admitted/disputed.

For a claim to be made, you are required to:

  • Set out your claim in writing (and send this to the intended respondent);
  • Ensure the claim is easily understood and clear;
  • Clearly detail what is being sought;
  • Highlight the basis for your claim

Why is crystallisation so important?

Crystallisation of a dispute is extremely important as the Courts can refuse to enforce decisions from adjudications if the notice to adjudicate has been served before a dispute has actually crystallised. That is to say, where one party formally presents the claim and the other party disputes the claim.

As adjudications can incur significant costs, then costs may have been incurred unnecessarily if it then transpires that the decision is unenforceable.

It sounds pretty straightforward…

The case law surrounding disputes and whether they have crystallised can be complex. Please do not hesitate to contact us should you wish to discuss the facts of your claim and we can provide specific advice tailored to your matter.

Someone has issued an adjudication against me but the dispute has not crystallised – what can I do?

It is not always the case that a decision becomes unenforceable due to the claim not being set out as above and the outcomes can differ on a case to case basis, dependant on the facts.

However, if you do find yourself in a situation where you do not consider the dispute to have sufficiently crystallised, then the jurisdiction of the adjudicator would need to be challenged as soon as possible and you would need to reserve your position in respect of jurisdictional challenges.

If jurisdiction is not challenged at the earliest opportunity, then this would make it more difficult to challenge any decision at the enforcement stage.

What if there is more than one dispute set out in my claim?

Parties can only issue a notice to adjudicate in respect of one dispute, the notice cannot include multiple disputes.

Should you have multiple disputes then these may need to be dealt with in separate adjudications, depending on the facts of the matter.

Points to note:

  1. It is so important to keep a good record of all documentation where you have detailed the claim and where the claim has not been admitted as you may need to rely on this should crystallisation ever come into question, whether during adjudication proceedings or at the enforcement stage.
  2. Set out your claim clearly.
  3. State your reasons clearly for any dispute.
  4. Seek advice on multiple disputes.

Case Study

In one particular case, Party A issued an adjudication against Party B and the Adjudicator’s decision was awarded in favour of Party A. As such, Party B believed they had a claim against Party C a result of this decision against them. Party B simply issued an adjudication against Party C for loss under the contract and believed that the claim was crystallised because they had provided a copy of the Adjudicator’s decision. The Claim was NOT in fact crystallised in this case as Party B did not set out the full claim and why they considered Party C responsible for the said losses contained within the decision.

Should you have any queries, or wish to discuss construction disputes in further detail, please do not hesitate to contact Rashmi Dubé or Siobhan Dexter on (+44) 1133021330 (Leeds) / (+44) 20 787 32279 (London). Alternatively, you can email rashmi@legatuslaw.com or siobhan@legatuslaw.com. More information can be found at www.legatuslaw.com

The Future of Retail

With the increasing appeal of online shopping, which allows consumers to benefit from an abundance of stores at the click of a button, as well as next day delivery, it’s no surprise that there is continuing debate and uncertainty about the future of the high street. But is it all as bad as it seems and is it simply a question of bricks versus baskets?

The Insolvency Service’s statistics for 2017 show that the retail sector had the third highest number of new insolvencies and just yesterday, it was announced that Toys R Us and Maplin had both entered administration. This, combined with the disappointing results posted by some retailers, such as Next, for the Christmas period and high-profile insolvency procedures for retailers such as MultiYork towards the end of 2017, suggest that the news for the retail sector seems to be all doom and gloom. However, research carried out by Gordon Brothers and discussed at a Turnaround Management Association (TMA UK) event in early February, suggests that there is not quite the retail apocalypse heading this way as the headlines might have you believe.

As might be expected, the discussion surrounding retail is often on the changes that technology has made to the sector. The positives being that when embraced, technology can drive sales and efficiencies, ultimately giving a retailer access to a global marketplace. Although this provides immense opportunity, as more people turn to online shopping, it has an adverse impact on the high street, leaving shops with a reduced footfall and in some instances forcing them to close altogether.

However, the research carried out by Gordon Brothers demonstrated that if retailers, whether online or on the high street, focus on seven key trends, then the retail apocalypse will not be quite so imminent as first believed. These key trends are: a personalised consumer experience; using big data and technology effectively; paying attention to changing consumer demographics and ways of shopping; being omni-channel retailers or at least embracing e-commerce; the polarisation of the discount and premium ends of the spectrum; paying attention to how different sectors are changing and evolving; and using retail space differently, especially to solve over-spacing. On the face of it, one of the main issues for Toys R Us and Maplin is the competition presented by online retailers. However, there were clearly other issues at play here, especially for Toys R Us. This was also one of the points highlighted by Gordon Brothers who showed that the distinction between successful retailers and those that fail is less about physical shops versus online offerings but rather, it is more about the service provided to the customers and the retailer’s ability to evolve.

Retailers feel that the future of the industry relies on them being progressive and using the technologies that are available to them to appeal to a much wider audience than would ever be possible when you rely on a shop front.

It is certainly the case that online stores often have cheaper overall costs, as they are not obliged to pay high rents for premium positioned properties, so they are able to pass on savings to the customer. Undercutting on price and having access to a wider portfolio of products from suppliers that can be based across the world makes them a powerful force for more traditional retailers.

In contrast, however, high street retailers see the advantages that come from a shopper experience, something that is more personal and that could subsequently build greater brand loyalty, which in turn is more likely to lead to future sales and advocacy.

With increasing pressure on the retail sector, as online shopping also drives further competition, it is clear that there needs to be a balance and that both bricks and mortar and baskets could, in fact, become ‘better’ bedfellows. It’s not difficult to see both points of view, but perhaps the question isn’t which option will dictate the future of the retail sector, but how can they better work together to the benefit of the customer.

With many experts agreeing that the retail market will continue to change, the debate doesn’t look like it will find a resolution any time soon, but in both instances, shoppers still expect service. For the most part we discuss retail as if every shop or online store is selling the same product, whereas we all know that this isn’t the case. What differentiates a brand is personality and that is best communicated through experience.

This can be harder for online retailers to replicate. People like people. In order to build brand loyalty, a consumer is going to expect more than a picture, a basket and a checkout function. However, this is where the use of social media can be a useful tool, especially among the younger demographic.

Whether you agree or otherwise, there is some confidence in the argument that until online and high street start to work more closely together, putting the consumer and their experience first, neither will reign supreme.

For further information, please contact Mara Gosling (mara@legatuslaw.com) or Rashmi Dubé (rashmi@legatuslaw.com) or by telephone on 01133021330 (Leeds) / 020 787 32279 (London)

Top Ten Tips for Commercial Property Tenants

Taking a lease of commercial premises for the first time can be a daunting experience, with even short-term leases often running to over 40 pages. Below are our top ten tips for new tenants although it is a good idea to have any Heads of Terms looked at by a qualified surveyor or solicitor to ensure that onerous terms are dealt with before they make it into the draft lease!

Limited Company
If you are a sole trader, it may be a good time to form a limited company rather than take the lease in your own name.

VAT
If the Landlord has chosen to do so, VAT will be charged on the annual rent, service charge and other sums payable under the lease. Check this at the outset as it will also affect the amount of Stamp Duty Land Tax payable.

Rent Deposit
Landlords may ask for a rent deposit or other security, such as a guarantor, for the payment of the rent. Such deposits vary in amount from one to twelve months’ rent. If VAT is charged, this will be payable in addition, but you may not be able to claim it back immediately as a VAT invoice will only be issued by the landlord in the event of rent arrears. Be certain that you know who will hold the rent deposit, what happens to the interest and when the rent deposit will be repaid.

Service Charge
This variable charge covering services, insurance and shared costs can mean a lot of unexpected expense. In a multi-let building, try and agree a service charge cap to limit what you have to pay each year and allow you to budget.

Rent Free Period
If the premises are in disrepair or alterations are needed to make them suitable for your use, a rent free period may be agreed with the landlord before you start trading. Make sure it is clear whether this covers just the annual rent or service charge as well.

Repair
Most landlords will want you to agree to “keep” the premises in “full repair”. If the premises are in disrepair when you take the lease, you will have to bring them up to scratch at your own cost. This obligation can be reduced by agreeing to keep the premises in no better condition than they are in when the lease is granted (as evidenced by a photographic schedule of condition). Beware of landlords trying to recover hidden repair costs through the service charge.

Alterations
Think about what internal and external alterations you wish to carry out and make sure these are permitted by the lease. The installation of internal partitioning is usually allowed without express consent from the landlord but be mindful that most alterations will need to be reinstated at the end of the lease.

Break Clause
If you are taking a lease for a term of more than five years, consider whether you need a tenant only break clause in the lease to allow you to exit early. Beware of break clauses that contain onerous conditions before they can be exercised; the only condition that should be accepted is the payment of the annual rent to the break date.

Right to Renew
Commercial tenants have automatic statutory rights to renew their lease at the end of the term. Often landlords will seek to exclude these rights so make sure you understand what you are agreeing to give up.

Landlord’s Costs
Whilst you may be asked, do not agree to pay the landlord’s legal or surveying fees. Each party should be responsible for their own costs.

Should you require any further information in connection with taking a lease of commercial premises, please contact Dawn Scargill at dawn@legatuslaw.com or Siobhan Dexter at siobhan@legatuslaw.com or 0113 302 1330 / 020 787 32279.

A company owes me money – what can I do next?

Are you a business that is owed money? Are you getting tired of your payment reminders constantly being ignored or tired of promise after promise that payment will be in your bank by the end of the week, only to find that it never arrives?

It can be a sticky situation; many businesses are not aware of their options and unfortunately end up having to write off the debt which inevitably has an impact on cash-flow. However, if your debt is a business to business debt, then do not hesitate to give Legatus Law a call as we are here to protect you and your business at every step.

There are a number of options that you can look at to recover the debts due to your company. The option which is most suitable for you will depend on the value of the debt and complexity of the matter.

Step 1 – A demand letter for payment
On many occasions, once a firm of solicitors are instructed in pursuing the debt, the debtor may make payment to avoid further proceedings being brought against them.

A demand letter is a request for payment to be made in the first instance. It details how the debt has arisen and what you consider to be outstanding and due for payment. The letter sets out a specific deadline by which payment should be received or alternatively, a full response would be required detailing why payment has not been made.

What information is required for a demand letter?

To send a demand letter out on your behalf, we simply require:

  • Background/summary as to how the debt has arisen, which can be done by a quick telephone conversation.
  • Copies of the outstanding invoices and details of any payments received.
  • Agreements/terms and conditions that were in place between the parties.
  • Copies of any relevant correspondence.

Should the matter be more complicated, we will discuss the requirement of any additional information from you.

Step 2 – If payment is still not received – Issue Court Proceedings
If the third party fails to make a payment following the demand letter and no agreement can be reached with the debtor in respect of payment, the next step is to issue court proceedings for the debt.

The process of issuing court proceedings will vary based upon the value and complexity of your case. Should you wish to discuss your options, please do contact us.

An Alternative option – Winding Up Petition
If a debt is undisputed and the debtor company is unable or unwilling to pay their debts as they fall due, then you can look to wind the debtor up. Please be aware that the debt due must be over £750.00. In some instances, your petition may attract support from other creditors and we can advise you on every step of this process.

Should you require assistance in respect of any outstanding sums due to your business, please do not hesitate to contact Rashmi Dubé or Siobhan Dexter on +44 207 873 2279 (London) / +44 113 302 1330 (Leeds) or email rashmi@legatuslaw.com or siobhan@legatuslaw.com.

December Newsletter

Click on the following link to view the December newsletter:
Legatus Law Newsletter: December 2017

Let it snow…

The snowfall this weekend in many parts of the country are causing much disruption with travel issues and school closures. It is helpful if businesses have given consideration in advance to the impact that adverse weather can have on the ability of workers to attend the workplace as a consequence of travel disruption and where there has been no such advance planning decisions may need to be taken on certain issues such as the pay of employees who are unable to attend work.

Businesses should develop a strategy for dealing with such disruption. Consideration needs to be given as to payment for the absence, homeworking or attendance at a different workplace and how contact should be maintained.

Are employees entitled to pay if they are unable to attend work due to the weather?

The answer depends on the employee’s express and contractual rights and the right not to suffer unlawful deductions from wages. There will be no unlawful deduction is an employee cannot show that they were entitled to the pay in the first place. This will depend on whether there is a contractual right for the employee to be paid even if they cannot attend work. Express rights can be found in the contract of employment or the staff handback if incorporated into the contract, and collective agreement and from custom and practice.

If there is no contractual provision and no evidence of custom and practice then the basic contractual position is that wages are not payable. The position with salaried workers is that if they cannot get to work they are not “ready” to work and therefore not entitled to be paid. However, whilst this is the practice that is commonly adopted by businesses, there is some case law that suggests a contrary position. It would appear that the tribunals are prepared to examine all the circumstances to establish whether a term can be implied. In order to avoid this uncertainty and challenge employers are best advised to make clear contractual provision as to what employee entitlement is in such circumstances.

However there are a number of business reasons why a business might want to pay employees in the event of bad weather preventing attendance – employee relations, bad publicity, and to avoid abuse of sick pay.

What are the alternatives?

Paid annual leave – employees could be offered the option of taking the absence as paid annual leave, assuming they have sufficient entitlement remaining. However, it is difficult to force an employee to take annual leave as they may not have sufficient remaining and there will be insufficient time available to enable the employer to comply with the notice requirements of the Working Time Regulations 1999.

Making up the hours – if employees don’t want to take annual leave or remain unpaid, it may be possible depending on the business to make up the hours by agreement.

Time off for dependants – where weather forces closure of schools and nursery, if employees need time off to make alternative arrangements but don’t want to take annual leave, they are entitled to exercise the statutory right to reasonable unpaid leave and cannot be subjected to a detriment for taking such leave. Some employers may have in place a Dependant Care Leave policy, which may provide for some paid leave.

Homeworking or attendance at an alternative closer workplace – this may be an option for some employers, where employees can undertake some work from home. This day and age modern technology in certain sectors facilitates this.

Practical steps for businesses

  • To avoid the legal uncertainly review contracts to specifically authorise deductions if this is the preferred option.
  • Implement an Adverse Weather Policy setting out how the business will deal with this situation.
  • Publicise and implement the policy before any likely period of disruption.
  • Consider home based working or from an alternative work place.
  • Decide upon and be clear on whether any period of absence will be paid.
  • Consider any health and safety implications.

Should you require any further information concerning the issues raised then please contact Sarah Turner on sarah@legatuslaw.com / 0113 302 1330 or 020 787 32279.