EMPLOYMENT LAW UPDATE SOCIAL MEDIA IN THE LAW FIRM WORKPLACE HR in LAW

1. EMPLOYMENT LAW UPDATESOCIAL MEDIA IN THE LAW FIRM WORKPLACEHR in LAW Susanne Foster, Esther Martin & Clare Murray CM Murray LLP 11th July 2012

2. Social networking sites • :901 million monthly active users at the end of March 2012 • : :340 million Tweets per day with 140million + active users • :161 million members at the end of March 2012

3. Summary • Benefits / Concerns of Social Media Use • Recent Case Law • Recruitment / Vetting • Data Protection Laws • Best Practice

4. The Benefits • Enables law firm employers to find different ways to approach the recruitment and selection of associates (NB: Generation Y employees) • Allows employees to business network and build professional relationships • Law Firm clients are increasingly using such media which may result in an increasing expectation that their law firms do the same (NB: Law Society Practice Note) • Provides an instantaneous, responsive and different method of communication internally and externally • Enables the sharing of knowledge, research and articles within online communities (particularly important in law i.e. a knowledge based business)

5. The (Potential) Key Concerns • Damage to client relationships / Firm reputation • Breach of Contract / Confidentiality Issues / SRA Code of Conduct • Cyber-bullying e.g. bullying, harassment etc • Discrimination Claims • Unfair Dismissal: • Privacy concerns under the Human Rights Act 1998: • Article 8 (right to private and family life, home and correspondence) • Article 9 (right to freedom of thought, conscience and religion/to manifest his religion or belief) • Article 10 (right to freedom of expression) • Qualified rights: Justified; in accordance with law; necessary etc • Breaches of Data Protection Act

6. Key Risk: Damage to client relationships and Firm reputation Preece -v- JD Wetherspoons plc, ET (2010) • Pub manager made inappropriate comments on FB about customers (whilst she was on duty): Fellow Employee 2: “are they barred now – D” Friend / Customer: “can’t believe you barred all those dear old nice people...” Miss Preece: “ha ha just has a phone call from the daughter callin me a snide b**** lol” Fellow Employee 1: “ha ha ha, that’s well funny!! She is right though... Shame on you picking on the old ladies ha ha ha!!” Miss Preece: “can u f..c of each plz lol” Fellow Employee 1: “only messin’ bout time some 1 told the moanin old hag lol”! X” Miss Preece: “fu...in hag!!!!!! Hope her hip breaks” Fellow Employee 3: “why does fun stuff happen the one night I am not working!” What happened?” Miss Preece: “Sandra an Brian barred ha ha ha!”

7. Key Risk: Damage to client relationships and Firm reputation Preece -v- JD Wetherspoons plc, ET (2010) • ET claim for unfair dismissal (not upheld) • Employer had email, internet and intranet policy which referred to employee use of sites such as FB and Miss Preece was aware that her actions were in breach of that policy • Miss Preece’s activities were in the public domain • Miss Preece’s mitigation argument that using FB to vent anger and upset at incidents at work not upheld (ET considered entries were more of a joke between friends; discourse took place over period of time; ‘hotline’ available to Miss Preece) • ET considered a final written warning may have been more appropriate (cannot substitute view)

8. Key Risk: Damage to client relationships and Firm reputation Whitham v Club 24 Ltd t/a Ventura, ET (2010) • ET claim for unfair dismissal (upheld) • Mrs Whitham, posted the following comments (outside of working hours): • Mrs Whitham: “I think I work in a nursery and I do not mean working with plants” • Team Member: “Don’t worry, takes a lot for the b******* to grind me down. LOL” • Former Team Member:“Ya, work with a lot of planks though!!! LOL” • Mrs Whitham: “2 true xx” • Mrs Whitham was suspended and a disciplined • Dismissal for a relatively mild comment on FB fell outside the band of reasonable responses • Comments on FB did not refer to a client nor was there any evidence of any actual or likely harm to the relationship • Relevant policy documents only sought to prevent disclosure of confidential information on such sites • ET took into account of Mrs Whitham’s exemplary record and mitigating factors to do with health and personal circumstances

9. Key Risk: Damage to client relationships and Firm reputation Crisp – v- Apple Retail (UK) Ltd (2011) • Claimant, posted number of FB posts e.g. “Mobile Me f***** up my timezone for the third in a week and woke me up at 3am? JOY!!” and “Apple!! “shakes fist”” • Employee suspended and disciplined • Mr Crisp argued FB page was private and was unrepentant in disciplinary hearing • Dismissed for gross misconduct for bringing Apple into disrepute; posts attacked Apple’s core value of protecting its image

10. Key Risk: Damage to client relationships and Firm reputation • ET claim for unfair dismissal (not upheld): • Training received on posting comments re Apple could amount to misconduct • Policy documents referred to speaking favourably and contained relevant guidelines • Importance of image to Apple entitled them to treat this as gross misconduct • Mr Crisp responded to questions by stating “no comment” – no help to Apple in understanding mitigating reasons • Article 8 - Mr Crisp had no control over how his comments might be copied and passed on to others. Even if article engaged use of FB information by Apple was justified and proportionate to protect its own reputation • Article 9 – Type of comments made not important to free expression and damaging to Apple’s reputation, therefore Apple could limit right

11. Key Risk: Harassment Teggart v TeleTech UK Limited NIIT 00704/11 • Mr Teggart posted obscene comments on FB (at home, on his own PC, in own time) about the promiscuity of a female colleague mentioning the name of his employer • A person claiming to be a member of the public reported the comments • Mr Teggart was dismissed for gross misconduct on grounds that he made offensive comments which breached the Company code of conduct and the comments brought company into disrepute • NI Industrial Tribunal dismissed claim of unfair dismissal

12. Key Risk: Harassment Teggart v TeleTech UK Limited NIIT 00704/11 • Decision to find Mr Teggartguilty of having brought the company into disrepute was “seriously flawed” (little evidence on this) • Comments satisfied the definition of harassment in the Company’s dignity at work policy; this was sufficient to justify dismissal of claimant • Articles 8, 9 and 10 of HRA not engaged • Article 8 – posting of comments on FB, Mr Teggart abandoned any right to consider his comments private • Article 9 – “belief” does not extend to a comment about the promiscuity of another person (refers to a philosophy, set of values etc) • Article 10 - must be exercised in a way that is necessary for the protection of the reputation and rights of others

13. Key Risk: Breaches of confidentiality Hays Specialist Recruitment (Holdings) Ltd and anor v Ions and anor (High Court, 2008) • Court did suggest that the transfer of information concerning clients and applicants to Mr Ions LinkedIn Network whilst still employed by Hays may amount to breach of duties as an employee • Highlights risk for businesses of confidential information being uploaded to social networking sites Consider employee’s: • Express confidentiality covenants • Implied duty of confidentiality (protection both during and after employment) • Obligations under Code of Conduct 2011 (Chapter 4 – Confidentiality & Disclosure)

14. Other possible risks Other possible areas to consider (not exhaustive): • Libel • Time Wasting • Personal injury claims • Intellectual Property Issues • False Advertising • Insider trading and market abuse • Agency law concerns • Criminal law

15. Case Law Summary • Nature of the comments made: are they minor comments? do they genuinely damage firm / reputation / client relationships? Do not take a disproportionate view • Is there a social media policy (or other policy) in place and has this been breached? What is the specific wording of any such policy / Can it be used as ground for disciplining / dismissal? • Has the employee received the policy and any training on it? • Full and proper investigation – statements for affected employees / third parties (if relevant). Remember ACAS Code • Consider: • Individual’s disciplinary record • Circumstances at the time • Individual’s health and personal circumstances • Any mitigating circumstances • Articles 8,9 and 10 – employees may struggle with this line of argument

16. Recruitment and Vetting • Checking on-line profiles: whilst not unlawful, not good practice • Details re candidate’s ethnic background, age, sexual orientation etc. should be part of separate monitoring process • Shoulder-surfing (NB: Certain US states legislating against such a practice) • Possible discrimination claims • HRA concerns • Data protection concerns – ‘vetting’

17. Data Protection Laws • DPA Code confirms: • Only personal information should be sought that is relevant to the recruitment decision to be made; and • It should be clearly stated to applicants the nature of and sources from which information might be obtained about the applicant • Candidate should be allowed to make representations regarding information that will affect the decision to finally appoint • DPA does not prevent monitoring • Carry out an ‘impact assessment’ to decide if and how to carry out monitoring

18. Best Practice - Law Society Guidance • Law Society guidance (issued December 2011): http://www.lawsociety.org.uk/productsandservices/practicenotes/socialmedia/5049.article • No requirement to follow but sets out standard of good practice for solicitors / firms to follow which will make it easier to account to SRA for actions. • Same ethical obligations apply to professional conduct in an online environment • Principle 2 (Integrity), Principle 3 (Independence), Principle 6 (Public Trust) • SRA Code of Conduct : Client Care, Confidentiality & Disclosure, Publicity and Relations with third parties • Consider putting in place a social media policy (although does state that for smaller practices this may not be necessary but consider electing one individual for overseeing social media activity) • Suggests points to include in your social media policy

19. Best Practice - Practical Considerations • Consider Firm approach to social media: embrace -v- discourage? (ban altogether? reasonable use?) • Properly drafted social media policy or email / internet policy (ACAS also recommend - http://www.acas.org.uk/index.aspx?articleid=3381) :- • ACAS recommends consulting with employees when putting together such a policy • Clearly explain the possible legal risks associated with social networking in the work place • Guidelines for employees for acceptable behaviour and examples of what may be deemed inappropriate • Clear guidance on the protection of a company’s confidential information when using social networking sites and also confidentiality and privacy of third party information • Link to related policies e.g. confidentiality, anti-harassment and bullying, data protection etc and update those policies if relevant (e.g. cyber-bullying) • Consequences of breach i.e. grounds to discipline or dismiss for gross misconduct • Compliance with SRA Handbook & Code of Conduct 2011 • NB: Rapidly changing area – policy will need to be updated on regular basis to keep apace with changes

20. Best Practice - Practical Considerations • Effectively communicate policy with staff indicating agreement ideally by signing acknowledgment • Training – use the first few weeks of employment to establish acceptable standards of behaviour with regard to social media • Recruitment: • ACAS recommends you use at least 2 different recruitment methods in any event. Bear in mind exclusion: 10 million people in the UK have never used the internet. • Be cautious if using social networking sites to vet potential candidates • If using as part of recruitment process, allow prospective candidate to comment on findings • Disclaimer • Sample principles / policies available online: Coca-Cola, HP, Intel, Volvo etc

21. UPDATE:EMPLOYMENT LEGISLATIONHR in LAW Esther Martin esther.martin@cm-murray.com @MsEstherMartin

22. Recent Developments April 2012 Unfair Dismissal: Two year qualifying period Tribunal Procedures: Judges to sit alone Maximum Costs Awardsand Deposit orders increase Witness expenses Statutory awards: SSP, SMP, SPP etc. increased July 2012 Pensions: Auto-enrolment begins

23. Future Developments • Enterprise and Reform Bill 2012-13: • Protected conversations • Settlement agreements • Mandatory pre-claim conciliation • Whistleblowing legislation amended • Financial penalties for employers • Legal Officers • Unfair dismissal compensatory awards

24. Future Developments Published Consultations: - Discrimination Questionnaires • Tribunal Recommendations • Third Party Harassment provisions (Equality Act 2010) • Collective Redundancy Rules • Modern Workplaces

25. Future Developments • Parental leave (increase to 4 months) by March 2013 • Flexible working for all employees by 2015 • Fees introduced for employment tribunal claims by December 2013

26. New SRA Requirement for Law Firms Diversity Data Collection Principle 9, SRA Handbook: “You must…run your business or carry out your role in the business in a way that encourages equality of opportunity and respect for diversity” • Law firms now required to report diversity statistics to the SRA annually • From 2013 statistics must be published

27. PARTNER, EMPLOYEE, OTHERHR in LAW Clare Murray Clare.murray@cm-murray.com @ClareMary

28. Spot The Odd One Out Statutory Maternity Leave & Pay Unfair Dismissal • Discrimination • Protections • TUPE Rights

29. Spot The Odd One Out Mezzanine Partner Salaried Partner Fixed Share Partner Junior Equity Partner

30. Spot The Odd One Out Nicole Kidman Mimi Rogers • Penelope Cruz • Katie Holmes

31. Why status is important • A Fixed Share Partner (FS Partner) may have employment rights • A formal consultation process may need to be followed to exit an FS Partner for conduct, performance or redundancy reasons • An FSP’s complaint may need to be dealt with as a grievance • Restrictive covenants more likely to be enforceable against genuine partners than employees • Ensure FS Partners are correctly assessed for tax and NI • Exiting Partners may raise it to improve their negotiating position

32. Statutory rights available only to Employees (not Partners): • Unfair dismissal • Statutory Redundancy Payment • Collective Redundancy Consultation Rights • TUPE protections • Statutory Maternity & Paternity Leave & Pay • Statutory Minimum Notice of Termination • Written reasons for dismissal • Continuity of Service • (And others)

33. Who is an Employee? • s.230 Employment Rights Act 1996: “..an individual who has entered into or works under.. a contract of employment” “..contract of employment means a contract of service..whether express or implied..oral or in writing”

34. Who is an Employee? A contract of service will exist if 3 basic conditions are fulfilled: • The individual agrees to provide own work and skill in performing a service, in return for pay; • Agrees to be subject to employer’s control to a degree sufficient to make employer the master: (control inc. what is to be done, how, where & when); and • The other provisions of the contract are consistent with a contract of service

35. Who is an Employee? Autoclenz v Belcher and others [2011] • Car valets working under label of being self-employed; • Key points included: • Written terms stating that they were self-employed not sufficient – they did not reflect reality • Look at the whole relationship and not solely documentation • What are the parties’ actual legal obligations? • Tribunal found sufficient control to be employees • Tribunal could disregard terms suggesting self-employed if they did not reflect actual obligations in reality

36. Partner, Employee, Other? Starting point to identify a genuine partner: s.1 Partnership Act 1890: “Partnership is the relation which subsists between persons carrying on a business in common with a view of profit” s.1(3) PA 1890: “The receipt...of a share of the profits of the business is prima facie evidence that he is a partner in the business but ..does not of itself make him a partner in the business..

37. Range of Factors “..impossible to say …. a salaried partner is or is not necessarily a partner in the true sense. He may or may not be a partner depending on the facts….” “What must be done is to look at the substance of the relationship between the parties … and not..any mere label attached to that relationship.” “One must in every case look at the terms of the relationship to ascertain whether or not it creates a true partnership” Stekel v Ellice [1973] Megarry J

38. Range of Factors Sharing in profits and losses Sharing in liabilities Capital Investment Participation in management Ability to hire, fire & sign cheques Participation in surplus assets on winding up of the Firm Held out as a partner, inc name on firm notepaper Guaranteed pay Indemnity against liabilities from Partners No capital requirement Subject to control No such rights No participation Not held out V. V. V. V. V. V. V.

39. Range of Factors • Critical question – did they intend to create a partnership rather than another relationship? • All features of the agreement have to be considered to establish that intention • The absence of profit sharing, capital or dominant management rights does not undermine or negate other evidence of partnership

40. Status of LLP Members? • A Member of an LLP can be an employee of it • S 4(4) Limited Liability Partnership Act 2000 “A member of a limited liability partnership shall not be regarded for any purpose as employed by the limited liability partnership unless, if he and the other members were partners in a partnership, he would be regarded for that purpose as employed by the partnership” • On the facts, would he have been regarded as a partner? • If not, on the facts would he have been an employee? (NB just because he’s not a partner, doesn’t mean he’s automatically an employee)

41. Tiffin v Lester Aldridge LLP (2012) • Solicitor employed by LA as an associate • Promoted to salaried partner • Appointed to fixed share partner as a stepping stone to equity • Fixed profit share, plus 5 profit share points • Capital contribution of £5,000 • Signatory to bank accounts • Issued with P45 • Tax and NI as self-employed • Signed Members Agreement on LLP conversion • Entitled to participate in the surplus assets on winding up of the firm in proportion to his capital • Certain voting rights, though not on all matters

42. Tiffin v Lester Aldridge LLP (2012) Was served notice by the partnership Claim to ET for unfair dismissal, breach of contract and Redundancy: rejected – he was a partner, not an employee Appealed to EAT arguing he was in reality an employee • He was not involved in management of the firm as FS Partners’ voting rights were “minimal” • His share of profits and capital were too small • The ET decision placed too much weight on labels rather than reality

43. Tiffin v Lester Aldridge LLP (2012) EAT: There is no certain minimum number or types of rights to vote or to participate in management decisions to qualify as a partner “..in many large professional partnerships, all but a few of the partners have any right to participate in the overwhelming range of decisions made by the firm and yet they are clearly partners”

44. Tiffin v Lester Aldridge LLP (2012) Court of Appeal: • Members’ Agreement reflected the parties’ intention to set up a partnership • No suggestion by Tiffin that Members’ Agreement was a sham • No minimum threshold requirement for managerial involvement or profit share • He did have a real voice in the firm’s management by his (more limited) voting rights • Tiffin contributed to the capital, took a profit share and had a voice in management • He participated in surplus assets on a winding up • Held: Appeal rejected - he was a Partner

45. Partner, Employee, Other? No 1 • CIO in investment management firm • Fixed profit share, paid gross in 12 mthly instalments • No Capital • 6 months notice to retire • Paid sick and holiday time • Share options with 3 year vesting • Could sign bank mandate & hire staff • New members agreement gave him – 1/11th share in profits and 1/11th in sale proceeds on disposal of the firm

46. Partner, Employee, Other? Held: Partner • The parties intended it to be a partnership & acted consistently with the Partnership Agreement • He never suggested he was an employee or that partnership agreement was a sham until termination by the firm • He had considerable autonomy • No capital but had financial risk & received sweat equity Kovats v TFO Management (2009)

47. Partner, Employee, Other? No 2 • Employee of law firm became salaried partner, then agreed new partnership arrangements for him • Guaranteed profit share with a 1/18th share in net profits • No capital • Paid tax and NI on self-employed basis • Contractual obligations of full time & attending, perform assigned duties and comply with reasonable requests • Held out as a partner in the firm • Offered a compromise agreement on exit

48. Partner, Employee, Other? Held: Employee • Tribunal decided as a matter of fact that the new arrangements had not changed the fundamental nature of the previous relationship; only his remuneration had changed • He was not regarded as being part of the Partner hierarchy • No risk of losses of the firm • Parties conducted themselves as if he were an employee Williamson & Soden v Briars (EAT) (2011)

49. Key Practical Points to Remember • Consider – do we intend appointment to be as a partner? • Clearly document the relationship you intend to be in effect • Written terms not necessarily determinative - court will look at the whole picture and the reality of the relationship • Check written documentation is an accurate reflection of the relationship, otherwise it runs the risk of being held to be a sham • When determining partner/employee status, certain key indicators will need to be present – try to satisfy as fully as possible • Take tax advice (or risk being held to ransom) • If there is doubt about whether an individual is an employee, be cautious and follow objective and fully documented selection and consultation processes before expulsion

50. Key Practical Points to Remember Remember: • Partners are covered by discrimination protections • LLP Members are covered by Whistleblowing protections (Bates Van Winkelhofv Clyde & Co)