Employment Law Issues: Incentives

The Department for Business, Innovation and Skills has published draft documentation for employee-owned companies, including articles of association and an employee benefit trust deed.

The government has offered further concessions to persuade the House of Lords to accept the employee shareholder employment status provisions in the Growth and Infrastructure Bill.

The House of Commons has voted to retain the employee shareholder proposal in the Growth and Infrastructure Bill, which the House of Lords had previously voted to reject.

The minutes of the third meeting of the implementation group for employee ownership (set up as a result of the Nuttall review of employee ownership) have been published

The 2013 Budget included further details about the tax treatment of shares acquired in connection with the proposed new employee shareholder employment status. 

The minutes of the second meeting of the implementation group for employee ownership (set up as a result of the Nuttall review of employee ownership) have been published.

The minutes of the implementation group for employee ownership (set up as a result of the Nuttall review of employee ownership) have been published.

A review of key share schemes and incentives developments in 2012 and a look ahead to what we expect in 2013. (Free access.)

The government has published draft legislation for an exemption from capital gains tax (CGT) for shares issued to an individual in return for agreeing to take up the proposed new employment status of "employee shareholder" (previously named "employee owner").

The government has published its response to a consultation on how to implement the new "employee owner" status (to be renamed "employee shareholder" status). It has also tabled related amendments to the employee owner provisions in the Growth and Infrastructure Bill.

The Department for Business Innovation & Skills (BIS) has issued its response to the Nuttall review of employee ownership.

An Ask the team reflecting on the Chancellor's proposal that employees or new recruits might contract out of some employment rights and protections in exchange for capital gains tax exempt shares in their employer, by agreeing to a new employment status of "employee shareholderr" (originally named "employee owner"). This article looks at how it might work and some possible key issues, mainly from the perspective of our share schemes team.

In Cavenagh v William Evans Ltd [2012] EWCA Civ 697 the Court of Appeal held that a contractual PILON remained payable despite the employee's repudiatory breach which was discovered after the termination.

The Employment Rights (Increase of Limits) Order 2011 (SI 2011/3006) came into force on 1 February 2012.

In Hosso v European Credit Management Ltd [2011] EWCA Civ 1589, the Court of Appeal considered whether a claim for discrimination in relation to the provision of share options should have been brought under the Equal Pay Act 1970 or the Sex Discrimination Act 1975.

On 6 December 2011, HMRC published a response document in which it confirms it is consulting on an amendment to the tax exemption for legal costs on termination of employment in section 413A of the Income Tax (Earnings and Pensions) Act 2003. 

An Ask the team looking at whether agency workers acquire rights to share plan benefits and bonuses under the Agency Workers Regulations 2010 (SI 2010/93). 

The Enactment of Extra-Statutory Concessions Order 2011 was made on 30 March 2011 and came into force on 1 April 2011. It gives statutory effect to ESC A81, but is considered to be narrower in scope. HMRC has confirmed that it does not intend to amend the regulations.

In Hopkin v Financial Security Assurance (UK) Ltd [2011] EWCA Civ 243 the Court of Appeal rejected a redundant ex-employee's claim for the vesting of phantom performance share awards, despite a provision in the engagement letter (negotiated by the employee) that these awards would be "paid" on redundancy.

Acas has set out a revised timetable for the transitional provisions for the abolition of the default retirement age, suggesting that the regulations, when they are published, may not be as expected. UPDATE (18-Feb-2011). Draft regulations have been published. See Legal update, Draft regulations on the abolition of the default retirement age available.

The government will phase out the default retirement age from 6 April 2011. As a result, some employee share plans may require amendment.

A review of key share schemes and incentives developments in 2010 and a look ahead to what we expect in 2011.

A legal update on the publication of the Equality Act 2010 (Commencement No. 1) Order 2010 (SI 2010/1736).

A legal update about a new practice note looking at share options and other share plan awards held by a departing employee.

An article that considers the tax treatment of a non-contractual payment in lieu of notice.

An "Ask the Team" looking at provisions in share option and share award plans/contracts designed to block (ex-)employee claims for breach of contract relating to the way in which board discretion was (or was not) exercised in respect of an option or award.

An update on the incentives issues highlighted by the Court of Appeal's decision in Cook v MSHK Limited and Ministry of Sound Recordings Limited [2009] EWCA Civ 624.

A comment from Monica Kurnatowska, partner at Baker and McKenzie and member of PLC Employment's Consultation Board.

An article looking at the circumstances in which an employee may be able to claim compensation for loss of share plan entitlements on termination of employment, despite the inclusion of a clause excluding employer liability. (Free access.)

An "Ask the Team" about the difficulties which can arise if companies refer to share plan entitlements in offer letters and employment contracts.

An update about an article looking at the legal issues involved in forcing Sir Fred Goodwin to forfeit a portion of his RBS pension.

An update on developments relating to bonuses for those in the banking industry.

An update on an age discrimination case relevant to share schemes.

The Employment Appeal Tribunal has considered whether a contractual redundancy scheme, which did not mirror the statutory redundancy scheme, directly and indirectly discriminated on grounds of age.

An employment tribunal pre-hearing review has ruled on some of the issues in a claim for age discrimination about a US share incentive plan. Under this share plan, departing employees could keep their share awards if their combined age and years of service equalled at least 70 years.The claimant is a redundant ex-employee of a UK subsidiary, but the share incentive plan is operated by the US parent. It seems the US parent may be liable for unlawful age discrimination only if the tribunal finds the parent's age plus service rule and/or operation of the share plan aided unlawful age discrimination by the UK subsidiary employer. This will not be resolved until a future full hearing of the claim.

Our subscribers have access to updates on three recently decided employment cases: Update, Provision of an age-related element of a flexible benefits package is not discriminatory reports an employment tribunal decision that a worker was not subject to age discrimination, even though the cash value available to her under a new flexible benefits package was insufficient to pay the whole (age-related) premium for private health insurance available under that package. Update, ECJ: pay and pensions under the Fixed-term Work Directive reports a European decision (in an Irish case) about the requirement that employment conditions of fixed-term workers should be no less favourable than those of permanent workers. This was held to include a requirement that fixed-term workers should have equivalent pay and pensions entitlements. Update, EAT holds controlling shareholder was employee reports an Employment Appeal Tribunal decision that a controlling shareholder was (in the particular circumstances) also an employee. This will be of interest because controlling shareholders are often also executive directors and, if a dispute develops between the shareholder/director and the company about the director's incentive entitlements, whether or not remedies are available in employment law could be important. The report includes a useful review of how employee/non-employee status should be decided for controlling shareholders.

The latest edition of PLC Magazine includes a number of items that may be of interest to share plan lawyers:An article on the taxation of carried interest earned by managers of private equity funds, and proposals for change in this area (see Taxing carried interest: proposals for change).An article on Sir David Walker's final report and guidelines for disclosure and transparency in private equity (see Walker review: guidelines for not so private equity). An article on the updated versions of several of the Institute of Chartered Secretaries and Administrators' guidance notes relating to matters in the Combined Code on corporate governance (see Combined Code: ICSA guidance). An article on the Institute of Chartered Secretaries and Administrators' guidance note on Part 9 of the Companies Act 2006 (see Companies Act 2006: ICSA guidance). An article on the announcement that most of the provisions of the Companies Act 2006 due to come into force on 1 October 2008 will now come into force on 1 October 2009 (see Companies Act 2006: implementation date revised). An article on the European Court of Justice's decision that national laws on retirement are not excluded from the Equal Treatment Framework Directive (see Age discrimination: retirement ages). An article on the London Stock Exchange's proposed amendments to its admission and disclosure standards (see Admission and disclosure standards: LSE).

This week's question is from the in-house lawyer of a company traded on AIM. He is helping the remuneration committee draw up a list of the main terms of a new LTIP. The company is keen to comply with the ABI guidelines. What does the ABI expect a good leaver to receive under the rules of an LTIP?

This week's question concerns the tax position of some employees who are being made redundant. They participate in a company share option plan (CSOP).

The High Court has held that a bonus scheme described as discretionary creates a contractual obligation on the employer to exercise its discretion in a way which is not perverse or irrational.