Eight key changes to business legislation

By Robert Outram

14 May 2015

From shared parental leave to data protection, what are the effects of new legislation on business? Robert Outram finds out.

1. Shared parental leave

Almost every business is an employer, and employment law is subject to perhaps more frequent change than any other. High on the agenda are new provisions for shared parental leave (SPL), which came into effect on 5 April.

Broadly, SPL will allow eligible couples to share up to 50 weeks of leave during the child's first year. Mothers still need to take a minimum of two weeks' maternity leave immediately after birth but can then shorten the remainder of their maternity leave. Any untaken portion of maternity leave can be shared between the parents.

Amanda Jones is partner and head of the employment and pensions team with law firm Maclay Murray & Spens. She notes that even though the legislation is now in effect, there are still many unknown factors in terms of how it will play out.

Amanada says: "What we don't know is whether people will choose to take advantage of SPL and will employers encourage it, for example by extending enhanced maternity pay to shared leave?"

Some employers choose to pay more than the statutory amount for employees on maternity pay, but it is not mandatory for them to apply the same rate to SPL as to maternity leave, so working mothers might find they are putting their enhanced maternity pay at risk by opting for SPL.

One problem for employees and employers alike could simply be understanding the new rules, especially with regard to which individuals are, or are not, eligible for SPL.

"The regulations are very complex and they are not all in one place. Some are new regulations and some are amended. It is much more complicated than it needs to be. I believe employers should embrace shared parental leave, however. You could have a vital female member of staff back to work earlier as a result."

Amanda Jones

2. Holiday pay

The next big legal issue for employers will be holiday pay, as the ramifications of Lock v British Gas Trading continue to be absorbed. Put simply, the ruling, by the European Court of Justice last year, means holiday pay must include "normal" remuneration such as commission and overtime, not just basic pay.

There are still some questions over what this means in practice, says Jones, not least in terms of what counts as "normal" remuneration. If commission levels tend to be higher at some times of the year than others, should this be taken into account when calculating holiday pay?

3. Fit for Work scheme

Employers also need to be aware of the new "Fit for Work" scheme, introduced by the Department for Work and Pensions. This scheme is intended to cut sickness absence, and employment and support allowance claims, by getting sick employees back to work more quickly. In England and Wales it has been outsourced to Maximus, the company taking over the work capability assessment contract from Atos. In Scotland Fit for Work is being delivered by the Scottish government.

Under Fit for Work, GPs and employers can refer employees for an occupational health assessment once they have been off sick for a month, provided there is a reasonable prospect of the employee returning to work. The employee must consent before a referral can be made.

Finally, the decision by the coalition government to introduce higher fees for employment tribunal claimants led to a significant reduction in cases being brought to tribunal. This area is now being devolved to the Scottish government, which raises the prospect of much lower fees being charged north of the border and, potentially, "jurisdiction shopping" by claimants if they have a choice about where they bring their claim.

4. Competition law

Since April 2014 in the UK, competition law has come under the aegis of the Competition and Markets Authority (CMA), which took over from the Competition Commission and the Office of Fair Trading.

That change was in the name of simplification, but as from April this year there are now two bodies tasked with enforcing competition law, as this has also been added to the remit of the Financial Conduct Authority (FCA), which regulates the financial sector.

The FCA will have the following powers:

  • Under the Competition Act 1998 to enforce against and fine for breaches of domestic and EU competition law prohibitions on anticompetitive agreements (for example, cartels) and abuses of a dominant position; and
  • Under the Enterprise Act 2002 to make a Market Investigation Reference to the CMA. The new system involves "concurrency", that is two regulators whose powers and remit overlap.

Rod Lambert, a partner and head of regulatory with law firm Brodies, comments: "With concurrency, you run the risk of 'double jeopardy'. For example a company could make a 'leniency application' to the CMA [effectively, coming clean to the CMA regarding an anticompetitive arrangement in return for lenient treatment] but there is a risk the FCA could still choose to fine the company."

The FCA will also impose a duty to "self-report" any breach of law, including competition law, a company believes it may have committed. This already exists with bribery legislation, but as Rod points out, breaches of competition law can be much less clear cut than breaches of, say, anti-bribery legislation. For example, certain actions may only represent a breach if the company concerned has a "dominant position" in the market, but it may not know for sure whether it is in a dominant position or not.

Catriona Munro, partner in the EU, competition and regulatory team with Maclay Murray & Spens LLP, comments: "The requirement… to deal with the FCA in 'an open and co-operative way' could pose a risk of firms that do not understand competition law walking blindly into a competition investigation, by disclosing information to the FCA without appreciating its relevance.

"Potentially, financial institutions could lose the right to seek leniency. Leniency provides successful applicants with total or partial immunity from competition law fines, but may not be available if the regulator already knows about the conduct."

Catriona Munro

Catriona adds: "Prevention is better than cure! All businesses should be looking to check whether they are complying with competition law."

5. Insurance law

The Insurance Act 2015, which comes into force in August next year, will bring in a raft of changes that could alter the balance of power between the insurer and the insured.

One of these is the duty of "fair presentation", under which the insured is required to provide "every material circumstance" that the insurers ought to know, or to provide "sufficient information" such that the insurer realises that further enquiries may be necessary. This marks a change from the current regime under which the insured must provide all information material to the risk in question, whether or not it is requested.

In a similar vein, simply failing to provide all relevant material information would not be sufficient to invalidate a claim. Under the new Act, the breach of duty of "fair presentation" must be shown to be "deliberate or reckless" if the insurer is seeking to avoid the contract.

Pamela Stevenson, insurance partner with law firm Weightmans, explains that warranty breaches will also be less onerous from the insured's point of view.

"Under the Act, the effect of a breach will be less severe. Any warranty breach by an insured suspends the insurer's liability until the breach is remedied but then, once remedied, the policy resumes in full force."

Pamela Stevenson

The Act also clarifies that insurers are not liable to pay fraudulent claims, and allows for non-consumer contracts to include terms that are less favourable to the insured than those set out in the Consumer Insurance (Disclosure and Representations) Act 2012 Act, providing that the insured is made aware of this and agrees.

6. Health and safety

A number of critics felt that the UK had returned to the Victorian age when the Enterprise and Regulatory Reform Act 2013 came into force. This legislation removes the right of claimants to rely directly on a breach of health and safety regulations when making a claim for a workplace injury.

Instead, claimants have to rely on the common law of negligence, which places a heavier burden on them to prove the employer was at fault. The UK government is under fire on two fronts over this, according to Weightmans' Pamela Stevenson.

First, the European Commission is reportedly looking into whether the legislation is in breach of EU law.

Also, she says, moves are under way in the Scottish Parliament to reverse the legislation in Scotland, with a draft bill proposed by Richard Baker MSP, for which consultation has just ended. Should the bill succeed, it will ensure that a breach of health and safety regulations in itself could be used to support an injury claim.

If it goes through, Pamela comments, insurers might seek a judicial review as it is by no means clear whether the Scottish Parliament has the power to effectively strike out this piece of UK law.

Meanwhile, Richard is also championing the Culpable Homicide (Scotland) Bill, which would make it easier to establish that company directors could be held liable for a workplace death. So far it has proven harder to bring a conviction under Scottish law than in England and Wales, because the former takes a different view of corporate responsibility, in legal terms.

Pamela Stevenson says: "If this goes through, companies should make sure they have a paper trail to show how directors came to the decisions they did."

7. Intellectual property

After years of negotiation the European Union is close to rolling out a single patent regime covering most EU member states. As Brodies' partner Robert Buchan explains, this is a big deal in the sphere of intellectual property: "This means a fundamental change to the way patent rights are applied and enforced."

The "unitary patent" means a single patent can be filed that will provide protection across all participating member states, in a single court and for a single fee. It also means that a patent infringement across several countries can be dealt with by application to a single court.

Those countries that have not yet signed up - including Italy, Croatia, Spain and Poland - have expressed some reservations about the language issue. The scheme currently requires patents to be recorded only in English, French and German.

Robert says: "There is a real political will to ensure costeffective protection for patents."

He warns, however, that the unitary patent also represents a risk. For example, if a court in one country declared a patent to be invalid, the patent could be struck out across all the countries in the scheme, effectively the majority of the European market.

The regime will present patent owners with a dilemma, Robert says. Do they need protection across Europe? The unitary patent is less costly than filing separately in 25 countries, but will probably be more expensive than filing three or fewer countries, which is what most companies do now. Also, owners will have to decide what to do with their existing patents, as these could be adopted into, then enforced under, the new system as unitary patents.

The European Union is also looking into protecting trade secrets. These are not part of the patent regime but may still be important, like the secret recipe to a well-known fizzy drink.

The EU's draft directive introduces a common definition of trade secrets, as well as means through which victims of trade secret misappropriation can obtain redress. It will make it easier for national courts to deal with the misappropriation of confidential business information, to remove the trade secret infringing products from the market and for victims to receive damages for illegal actions.

8. Personal data protection

More change on the European front is expected in the field of personal data protection. Grant Campbell, who heads up Brodies' intellectual property, technology and outsourcing practice, says:

"The EC has not been impressed with how some member states have implemented the EU data protection directive. So next time it will be based on regulations that will apply directly, rather than having to be implemented by member states."

Grant Campbell

"The coming EU legislation will tighten up 'consent' rules, and consent will have to be unambiguous. Rights like the 'right to be forgotten' [that is, to be removed from social media, search engines and websites] will be enhanced," he adds.

The value of so-called "big data" - using the vast amounts of information held on customers in smart ways, to help target a company's offering - may be impacted, with new restrictions on profiling using data that could identify an individual.

The new legislation is expected to stipulate that, when data processing is outsourced, both the client (the "data controller") and the company undertaking the processing (the "data processor") will both be liable, not just the former.

Grant comments: "This elevates data protection legislation to the same arena as competition and antitrust law. Fines could reflect a percentage of a firm's global turnover, for example.

"It will require a step change in the way companies address data protection. They will have to record the steps they have taken to protect personal data. Many organisations will have to work hard to comply, even by 2017 [when the directive takes effect]. Many have not taken it seriously enough until now."


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