201612.08

Business Law Legal Alert

Our Business Law Specialist, Spencer Laymond has published this – scroll down for more content.  He says : “The aim is to provide monthly to quarterly updates on a choice selection of legal developments which may affect SME business owners. I’m hoping it may be of interest both to you and some of your clients.  I’m going to keep the content deliberately non-technical, for an easy 5 minute read over a cup of coffee. If you would like more information on any of the below mini articles then please do let me know.”

You can contact Spencer at the Enfield office – 0208 363 4444

Recent Cases

UBER and the Gig Economy

Headlines

We may have all heard about the recent decision of the employment tribunal that Uber taxi drivers are workers, and so entitled to certain employment rights e.g. the National Minimum Wage, the entitlement to paid annual leave and the right to rest periods. This is despite Uber’s best efforts to argue that its business model was a technology platform facilitating passengers to contract with drivers.

Comment

We are seeing a number of businesses operating on the basis of being introduction agents between end clients and individuals. For example, cleaning companies, sandwich manufacturers and IT support to name just a few variations. The issue is not just the issue of the independent contractor / self-employed service agreement, possibly being flawed on the point as to the individual’s legal work status, but also the knock on effects. For example, if a self-employed worker could be genuinely employed, in the context of a technology platform business, if the contractor/ technology provider (employer in disguise) sells its platform, this may be caught by the Transfer of Undertakings (Protection of Employment) Regulations 2006. So the buyer may find itself inheriting unexpected employment liabilities, which thereby could reduce the value of the platform provider’s business.

Conclusion  

Businesses offering a technology platform service may need to be circumspect and factor in the possibility of their self-employed workers actually being regarded as employees.

I want to read the case report

https://www.judiciary.gov.uk/wp-content/uploads/2016/10/aslam-and-farrar-v-uber-reasons-20161028.pdf


The £40 million defective car park design

Headlines

Arcadis Consulting were sued by AMEC for £40m for a defective car park design.  A written design agreement was never formalised, and Arcadis Consulting alleged that a “letter of intent” with a proposed liability cap of £600,000 was valid. The High Court held, after its objective analysis of the correspondence, that there was no agreement between the parties on the liability cap.

Comment

A court cannot rewrite history and create terms where there is no evidence of a clear and binding agreement. To determine if an agreement has been reached, and in the present case relating to the liability cap, an objective assessment would have to be made of the communications between parties, by word and conduct i.e. has there been a final and unqualified expression of assent.

Conclusion 

This case is a bleak reminder of the risks, in the race to win work, if work is commenced informally, without dotting the eyes and crossing the tees. Proper pre-engagement compliance, to conclude formal engagement terms, whatever the service provider’s service, can avoid vital liability limitation clauses from being omitted. A very common scenario we see are website designers contracting without valid or validly incorporated limitation of liability provisions. This can create difficulties as often the loss of profit to a client if a website does not perform can be significant and greatly disproportionate to the design costs.

 I want to read the case report

http://www.bailii.org/ew/cases/EWHC/TCC/2016/2509.html


High Court Decision on Hair Dresser Restrictive Covenants

Headlines

A hairdresser sold her franchise business, and agreed to two, two year restrictive covenants (a) not to poach certain staff; and (b) not to be interested in a competitive business within 2 miles of the franchise holder’s premises in Windsor and Maidenhead. 16 months later the hairdresser set up a new business within 2 miles employing former staff members. The High Court held that the restrictions were enforceable.

Comment

The decision here is comfort for a buyer of a business, where the court has shown an unwillingness to intervene in a freely negotiated contract. In assessing enforceability of restrictive covenants, a court will look at a three step test (a) what does the covenant mean (b) is there a legitimate business interest requiring protection (c) does the restriction go no further than is reasonably necessary to protect that business interest?

Conclusion

A buyer of a business is likely to be able to secure a higher level of restrictive covenant protection than an employer. However, in an employment context, restrictions should be reviewed regularly, in line with seniority of an employee. Notwithstanding the court’s decision in this case, each restrictive covenant should be considered on its own merits. It is not a question of there being carte blance enforceability by the courts.

I want to read the case report

http://www.bailii.org/ew/cases/EWHC/QB/2016/2589.html


Events on the Horizon

And some events on the horizon to look forward to in 2017 and beyond:


By end of March 2017 Article 50 of the Treaty on European Union to be triggered before the end of March 2017, and the Queens Speech to include a Great Repeal Bill to repeal the European Communities Act 1972.  Brexit is one of the great unknown unknowns with many uncertainties. If clients have a contract with any international element, then it may be appropriate to consider how a hard or soft Brexit may impact the provisions.
Digital Economy Bill Amongst other things, the adoption of a new statutory code making it easier for the Information Commissioner to fine organizations who do not have regard to direct marketing rules.
Trade Secrets Directive The Trade Secrets Directive came into force on 5 July 2016, introducing a new definition of trade secret and what constitutes unlawful use of it. In the UK, information currently protected by confidentiality, may also obtain protection by this Directive.  In light of Brexit, it is unclear whether the UK will transpose the Directive into national law.
UK reform of consumer regime The UK has largely completed a comprehensive reform of UK consumer law, including the implementation of the Consumer Rights Act 2015. However, there are likely to be many questions arising from the technical detail of the new b2c regime affecting many SMEs in the years to come. For example, should clients restructure b2c contracts as “on premises” contracts?
Enterprise Act 2016 The Act received Royal Assent on 4 May 2016 and deals with a number of the government’s commitments to support the growth of enterprise in the UK. Of interest to SMEs is the establishment of a Small Business Commissioner to help small businesses resolve issues such as late payment. The government is currently consulting on the detailed regulations relating to the how the Commissioner’s complaint handling functions will operate.
Protection of micro and small businesses when purchasing goods and services The government is still considering its consultation on whether micro businesses (being a business with 9 or fewer employees), in the non-regulated sector, should receive further protection.
Trade Marks October 2017 may see proposed new reforms to trade mark law.
The General Data Protection Regulation Applicable from May 2018, subject to Brexit.  The GDPR has been regarded as an “ambitious, complex and strict law that is set to transform the way in which personal information is collected, shared and used globally”.

Disclaimer

This Business Law Legal Alert is not intended to provide legal advice, nor deal with all topics relating to its subject matter.