Setting Up Business in the UK

Edward Wanambwa for The Lawyers Weekly

November 13, 2009

There are three legal systems in the U.K., covering England and Wales, Scotland and Northern Ireland respectively. While this article considers only the employment laws of England and Wales, most employment laws in Scotland and Northern Ireland are similar, and in many cases identical.

Canadian start-ups should obtain separate pension, tax and other legal advice before establishing businesses in the U.K.

Significant employment rights and restrictions in England and Wales (which derive from contract, common law, domestic legislation and, in some cases, European Union legislation) include:

- The right to a written employment contract. Employers must provide employees with a written statement of employment particulars within two months of commencing work, or face a possible claim and fine in an employment tribunal.

- An upper limit on working time. The majority of employees cannot be forced to work more than 48 hours per week unless they agree to do so.

- Minimum holiday entitlements. Employees have a minimum entitlement to 28 days of paid annual leave, which can be inclusive of eight annual public holidays.

- No right to benefits. There is no requirement to provide benefits such as private medical insurance, long-term disability insurance, dental insurance or life insurance.

- Statutory sick pay. When employees are off work due to illness or injury, they are entitled to statutory sick pay for a maximum of 28 weeks. This is not payable for the first three days in any period of entitlement.

- Minimum notice. When they have completed one month of continuous employment, employees are entitled to a minimum statutory notice period of one week, which increases by one week for each additional year of service up to a maximum of 12 weeks. Employers are free to offer longer contractual notice periods.

- Dismissal for reason. Employees with one year of service can only be lawfully dismissed for one of six potentially fair reasons: incapability or lack of qualifications, misconduct, retirement, redundancy (lay-offs), illegality or "some other substantial reason."

The employer is required to follow a fair procedure when carrying out the dismissal. Failure at the substantive or procedural level will expose the employer to a valid unfair dismissal claim; damages are normally capped at. However, in some unfair dismissal cases (such as dismissal related to pregnancy or whistleblowing), the dismissal is automatically unfair and the one year service threshold and upper limit on compensation are removed.

- Freedom from discrimination. Employees have the right not to be discriminated against on the grounds of sex, race, age, disability, pregnancy or maternity leave, marital or civil partnership status, gender reassignment, sexual orientation or religion or belief. Where discrimination is proven, there is no upper limit on compensation.

- Consultation regarding layoffs. If a Canadian business must make layoffs in the U.K., there will be a requirement to consult with employees. If the proposal is to lay off 20 or more employees in a rolling 90-day period, the business will need to consult (for at least 30 days) with "appropriate representatives" and notify the government.

- Data protection and privacy. This area is highly regulated. Generally, an employer requires an employee's consent to "process" most types of personal data. Such consent should be specific, informed and given voluntarily. There are risks associated with covert monitoring (particularly monitoring that involves real-time "interceptions" ) of an employee's personal correspondence.

- Mandatory rights. Employees working in the U.K. receive mandatory statutory employment rights despite any Canadian choice of law clause in the employment contract.

- Immigration clearances are required. Canadian businesses should ensure that appropriate immigration clearances are obtained from the U.K. Border Agency before sending Canadian nationals to work in the U.K.

Coming to the U.K. forearmed with knowledge of the core employment law framework, set out above, should help Canadian businesses ensure good employee relations with their U.K. workforce and navigate the potential pitfalls that can await the unwary employer.

Edward Wanambwa is a partner at CM Murray LLP, a firm based in London, England. He specializes in English employment, partnership and business immigration law.

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