Legal Briefing

EMPLOYING PEOPLE IN SCOTLAND – WHAT DOES AN ENGLISH QUALIFIED IN HOUSE COUNSEL NEED TO KNOW?

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Scotland | 01 April 2011

In many respects employment law in Scotland is the same as that in England and Wales. Although Scotland has its own Parliament with law-making powers, the regulation of employment north of the border remains reserved by Westminster and those Acts with which English practitioners are familiar apply equally in the Scottish context.

However, as a firm with an employment law team that has extensive experience of employment litigation on both sides of the border, Brodies is well placed to identify the differences that do exist. This article highlights some key practical areas where the different legal system in Scotland affects employers. It also looks at how to ‘kilt’ a compromise agreement, and at differences in Employment Tribunal practice and procedure, and gives an overview of the different civil court structure applying to the enforcement of restrictive covenants.

To begin with, however, it is worth noting that the Scots law of contract is different to the law in England. Its civil (as opposed to common law) origins, coupled with the separate legal system, can have an impact on interpretation and practice.

It is outside the scope of this article to examine this in detail, but an example can be found in the treatment by the Scottish and English courts of loss under share option schemes as a head of claim for breach of contract – contrast the English position as set out in Micklefield v SAC Technology Ltd [1990], with the Scottish decision upholding a clause providing that damages could not be recovered under the relevant share option scheme in Chapman v Aberdeen Construction Group plc [1991].

Generally, employers should be aware that:

  • Prescription rules differ. In Scotland, contractual claims relating to a contract of employment will prescribe after five years. In comparison, in England, the typical time limit for a contractual claim is the expiry of six years from the date when the cause of action accrued.
  • The law relating to the execution of written documents differs in Scotland. In Scotland the Requirements of Writing (Scotland) Act 1995 provides statutory guidance on how documents should be executed to be ‘self proving’.
  • Scots law does not recognise the concept of counterparts. A document signed in counterpart is not validly executed under Scots law.
  • The Contract (Rights of Third Parties) Act 1999 (the 1999 Act) does not apply to Scotland. Third party rights are dealt with under a common law principle known as ius quaesitum tertio.
  • The Scottish Tribunal system is separate to the English system. It has its own president and it issues its own practice directions. Further details about the practical differences between litigating before a Scottish Tribunal and those in England and Wales are discussed below.
  • The Scottish Civil Court system is also different to that in England and Wales. In place of County Courts, Scotland uses a system of regional Sheriff Courts. The broad equivalent of the High Court is the Scottish Court of Session that sits in Edinburgh.

COMPROMISE AGREEMENTS

Employment lawyers in Scotland are often asked to review compromise agreements used by companies operating across the UK to ensure that they comply with Scots law. This process is known informally as ‘kilting’.

In general terms, when asked to kilt a compromise agreement the following issues should be noted:

    • Consideration. While the allocation of consideration to things like restrictive covenants does not invalidate the agreement under Scots law (and may, in fact, be required to address tax risk issues), consideration is not required for a Scots contract to be enforceable.
    • Third party rights. References to the 1999 Act should be removed from Scots law compromise agreements as the 1999 Act does not extend to Scotland. Replacement wording simply narrating that third parties are intended to have the right to enforce some or all of the terms of the agreement can be inserted. If there is a specific concern that a third party should be able to enforce a Scottish contract, consideration should be given to specifically naming the third party in the agreement.
    • Jurisdiction and governing law. Generally speaking, solicitors in Scotland who are asked to advise employees will be more comfortable with that role if the agreement is governed by Scots law. Many of the larger Scottish law firms do have dual-qualified employment lawyers within their practices but individual employees may not always be able to or want to access a lawyer in one of the larger practices.
    • Schedules. Check the designation of any schedules to the agreement. Schedules should have the following wording at the beginning:

‘This is the Schedule referred to in the foregoing agreement between [x] and [x].’

  • Counterparts. Check to ensure that the agreement does not provide for it to be executed in counterparts unless it is to be governed by English law. This is because Scots law does not recognise execution by way of counterparts.
  • References to courts. Compromise agreements often refer to the County Court or High Court. This is particularly the case in repayment clauses. Ensure that references to the appropriate Scottish Courts (Sheriff Court and Court of Session) are inserted.
  • Legal adviser. Compromise agreements governed by English law typically refer to the qualified adviser as a solicitor of the senior courts of England and Wales. This should be amended to refer to a solicitor qualified in Scotland.
  • Protection from harassment. Check references to the Protection from Harassment Act 1997, as the Scottish provisions differ to those applicable in England and Wales.

EMPLOYMENT TRIBUNAL PRACTICE

In the Scottish Employment Tribunal system, the vast majority of cases that involve professional representation feature a solicitor or consultant. Barristers (known as advocates in Scotland) are less common. The specialist Scottish employment Bar is very small (in comparison to England) and usually involved in particularly high-value or complex cases.

  • Documents. The Scottish Tribunal system has issued its own specific practice directions covering the disclosure of documents prior to the tribunal hearing. This simply requires legally represented parties to exchange a list of the documents on which they will rely 14 days prior to the hearing.
  • Case management. It remains less common in the Scottish system for the tribunal service to actively manage a case prior to the hearing. Standard case management directions have not yet been adopted across Scotland.
  • Witnesses. The most significant difference between the systems in Scotland and England relates to witnesses. In Scotland, witness statements are generally not used. Instead witnesses give evidence at the tribunal through examination-in-chief. Witnesses are not usually allowed to remain in the tribunal room while other witnesses are giving evidence. This means that Scottish litigants do not have the same level of prior notice of the opposing parties’ case that typically exists in English proceedings through the exchange of witness statements.It is possible to apply for an order from the tribunal requiring the exchange of witness statements, but many Scottish employment judges remain resistant to this. Witness statements are the exception rather than norm. While most Scottish solicitors draft precognitions (witness statements that are not exchanged with the other side), preparation for Scottish tribunal cases is not ‘front loaded’ to the same extent as in England. For those used to practising south of the border, this can be a frustrating experience, but effective representatives will use the other mechanisms for exchange of information about the claim or defence in advance of the hearing to similar effect.

CIVIL COURT PROCEDURE: ENFORCING RESTRICTIVE COVENANTS

In Scotland, restrictive covenants can be enforced through obtaining an ‘interdict’ (injunction) from the Scottish Civil Courts. Interdict proceedings can be raised either in the Sheriff Court or in the Court of Session. In practice, most interdict proceedings are raised in the Court of Session. This is because any order issued by the Court of Session takes effect across the whole of Scotland. By contrast a Sheriff Court order is only enforceable within the Sheriffdom in which the Sheriff Court is situated.

Interdicts can be applied for on an interim basis. The Scottish Court system operates a system of caveats. Any person can lodge a caveat with either a Sheriff Court or the Court of Session. In relation to restrictive covenants, the primary purpose of the caveat is to ensure that the person holding the caveat is given advance notice of an interim interdict application regarding that person. In circumstances where restrictive covenant litigation is likely in Scotland interested parties should always lodge caveats.

The Court of Session operates a specific commercial court. Most restrictive covenant disputes can be heard within the commercial court. If a party is found to have wrongfully obtained an interdict that party will be liable in damages. These damages will include the losses suffered as a result of compliance with the interim order.

There is no equivalent of the speedy trials arrangement in Scotland. After the interim hearing a full hearing in respect of any damages claim is likely to take place six to 12 months after the initial hearing. In practice, this means that most restrictive covenants disputes are effectively resolved one way or the other at interim stage.

The practice relating to requesting undertakings is similar north of the border to that followed in England and Wales. However, parties in Scotland should consider whether or not the situation justifies proceeding without notice. If notice is given, the employee will doubtless lodge a caveat; if no notice is given, they may not, meaning that the employer’s application could be heard unopposed. The failure to give notice could count against the employer in expenses and force a recall hearing, but the benefit of obtaining an unopposed interim order may outweigh this risk.

It is, of course, open to every practitioner in the UK to handle Scottish employment matters or indeed appear before the Tribunals in Scotland but it makes sense to do the homework beforehand. If in any doubt, Brodies is always happy to talk through the issues that can arise and give advice where appropriate on the potential impact of any of the points raised in this article.