About four years ago, my HR manager left after working with us for five years. During her time with the company, she had made allegations of discrimination on two occasions, neither of which were proved. Other than that, she had a good work record. Recently, I received a request for a reference from another security firm that is seeking to employ her. Am I allowed to mention the allegations she made, even though she left my firm over a year ago?
If an employee makes a complaint of discrimination against an employer, whether proved or not, the employer may not treat the employee less favourably (detrimental treatment) because of that allegation. Referring to such a complaint in a reference would amount to subjecting the employee to a detriment on account of the original complaint, meaning the employer could be found liable for unlawful victimisation.
The employment law offence of victimisation applies to any detrimental act or an omission on the part of an employer because an employee made a complaint, or made an employment claim, or assisted another employee to do either or both about discrimination. It does not matter whether the complaint was valid, as long as it was made in good faith (with an honest belief in it).
Following the introduction of the Equality Act 2010, in October, there has been some doubt about whether victimisation of a former employee is unlawful. This has not yet been tested in the employment tribunals and courts. Given this uncertainly, it would be a risky move for an employer to refer to the discrimination allegations. Furthermore, it is difficult to see what would really be gained from making such a comment, given that her employment record was, on the whole, good. The potential risks involved suggest it would be safer not to mention the discrimination complaints.
Nick Hobden is partner and head of employment at Thomson Snell & Passmore, a law firm
An informal collaboration made official
I run an animation studio and, last year, we began an informal collaboration with a production studio to refer business to one another. This relationship has proved fruitful to both of us and we are considering a joint venture. This will obviously involve formalising the deal we have at the moment. What should I be aware of to ensure a joint venture would work for us all?
You must first decide what structure the joint venture will take. It will either be a separate corporate entity in which both parties take an equity stake, or a purely contractual arrangement between two separate parties. Your choice depends on the level of formality appropriate for tax, trading and other considerations. For these purposes, though, I will assume the joint venture is a corporate entity.
Next, you need to decide what your objective and exit plan will be (ie trade sale, flotation, buy-out etc) and see if these correspond with those of the other party. Don’t let the desire to formalise a good thing blind you from the need to establish at the outset the purpose of the joint venture and the “end game”. You need to establish what each party’s contribution will be in terms of finance, services and assets. If not equal, will the shareholding reflect contribution? How the profits will be distributed should be identified and could correspond with each party’s shareholding.
It is also crucial to work out how the joint venture will be controlled: the division of powers between the board and the shareholders, and the shareholder parties themselves.
If you have a minority shareholding, reasonable minority protections should include guaranteed board representation, veto rights over key decisions and rights to “tag along”, should the majority shareholder sell his shares externally.
If the shareholding is to be on a 50:50 basis, you must decide how to resolve a deadlock situation.
Above all, whatever is agreed must be set out clearly in a shareholders’ agreement. Resolving later disputes between the parties without one is invariably much more costly and the remedies less satisfactory.
Philip Stephenson is head of company commercial and Jonathan Steele a solicitor in the team at Barlow Robbins, a law firm
Responsibilities as non-executive director
After retiring in 2008, I took on three non-executive directorships in the north-west of England. One of my companies, a plant hire firm, is now feeling the pinch of the recession. I understand I could be personally liable for the debts of the company if it becomes insolvent. Is this correct?
The short answer to this is: yes. If a business is found to be wrongfully trading – that is, if a company carries on trading when the non-executive director (NED) knew, or ought to known, that it would go into liquidation – then this can lead to personal liability. This is the case even in a limited liability company when directors normally have no personal liability for the company’s debts. If the company does not have the assets to pay the creditors, the creditors can come after your personal assets.
So the key is to act quickly. Many NEDs are often removed from the day-to-day actions of the business and could be excluded from important information about business performance. If you fear there may be a problem, demand to see monthly, if not weekly, accounts. Do not allow yourself to be kept in the dark. If there is a problem, take all steps to minimise potential losses to creditors. This process does require expert advice, so speak to an insolvency specialist at the earliest point.
Jeremy Oddie is an insolvency partner at Mitchell Charlesworth, an accountancy firm
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