(i) Advise a couple setting up a retail business what advantages and disadvantages they may encounter with an unincorporated business structure and explain the consequences of incorporating their business.
The couple setting up a retail business is free to start any form of business according to the investment they propose to make. Investment depends on the size of the business proposed. Again they have to decide whether the capital they have will be sufficient for the type and size of the business proposed. A business structure is advantageous or disadvantageous according to the size of the business proposed. The owners of the proposed business being a couple and the type being a retail business, the size will be neither small nor big. A moderate size for a decent type of retail business will be adequate. Several business structures in practice are the sole proprietorship, the ordinary partnership, the limited liability partnership (LLP) and the company. Among these, the LLP and the company are created by means of the process known as incorporation and they are the incorporated business structures. They are also known bodies corporate. The remaining structures of the sole proprietorship and the ordinary partnership are unincorporated business structures as they are created without the formality of incorporation. It may be relevant to state that the Law Commission has recommended that ordinary partnerships can have corporate personality.
Sole proprietorships and partnerships are unincorporated business structures and hence they can be easily started by the owner couple without waiting for permission through the process of incorporation. In respect of sole proprietorship, either of the couple can be owner and the other can operate as the manager. If the funds being invested are owned by either of the couple, that person alone can be the proprietor of the business though it is not a bar for a person without capital from being the proprietor. Advantage of proprietorship business structure is that it is easy to start but liability arising out of business will rest on the proprietor and it is unlimited and hence, any personal assets belonging to the proprietor can be attached by the creditors of the business and by the government for any statutory liabilities due from the business. The proprietor only needs to register himself with HM revenue and customs as self-employed.
The ordinary partnership is another unincorporated business structure in which both the couple can be partners by means of a deed known as partnership deed though it is not a mandatory requirement for partnership business as there can be an oral agreement between the partners. Again liability is unlimited in this business structure and the partners’ personal assets are liable to be attached by its business creditors and the government for statutory liabilities owed by the firm and the partners in their personal capacities. A unique feature of this structure is that the entity formed through this process is called firm and hence it is separate from the partners. The partners can operate their business in the name of the firm and also maintain bank accounts and books of accounts in the firm’s name. The arrangement of the firm is to enable the firm to continue after the exit of any of the partners by resignation, death, or expulsion as the partnership deed may have stipulated. A partnership at will is the one which allows any of the partners to opt to retire from business and the rest of the partners to continue the business with a reconstituted firm along with additional partners if any. The partners are jointly and severally liable to the business and other dues of the firm. An advantage is that a partnership can be started with a limited capital without the hassles of incorporation. It is ideal for a business which does not require huge funds for the capital. The couple can start a retail business under the partnership arrangement.
Both the sole proprietorship and partnership being unincorporated business structures, they cannot raise huge funds as capital for the business except borrowings through commercial banks. For the partnership, there should be minimum two members as partners and maximum 50 members as partners as stipulated by the Partnership Act 1990. Partners can choose to retire from the partnership anytime they wish.
The company is an incorporated business structure for starting of which there should a minimum two members for private limited company and seven members for a public limited company. There is a cap on membership for a private limited company whereas such a limit is not enforced on a public limited company. The liability of members is limited to the extent of unpaid portion the shares if any. The liability being limited, members can start any business with huge risks involved where a human agency cannot bear the risks personally attached with the business. The capital is issued to public in terms of number of shares and the aggregate value of such capital paid for by the members is called the capital of the company. Shares are freely transferable by the existing members to outsiders and this feature is a definite advantage of being an incorporated entity. The entity of the company is separate from its members and hence the entity can continue to operate its business without being closed down by the exit of members.
Limited Liability Partnership (LLP) is an alternative to private limited company or ordinary partnership, An LLP is statutorily governed and a partner’s liability is limited to the unpaid portion of shares held by its existing members. It is governed by Limited Liability Partnership Act 2000. Though such kind of firm is the best suited for professional firms, the couple herein can operate their retail business in this business structure for reasons of its limited liability and its ability to attract bank loans by virtue of its size and funds generating capacity.
(ii) The Equality Act 2010 (EA 2010) imposes responsibilities on employers in respect of their employees and their employment contracts. Assess the potential consequences for managers and directors where the provisions of EA 2010 are ignored.
Equality Act 2010 is a consolidation of a wide range of anti-discrimination laws passed since the 1970s ensure everyone is treated fairly. It is applicable to businesses of any size. All employers regardless of their size are covered by this Act. The Act lays down the following protected characteristics. They are age, disability, gender reassignment, marriage and civil partnerships, pregnancy and maternity. Race. Religion and belief, sex and sexual orientations. There are the protected characteristics in respect of which employees are not to be discriminated against by the employers. The Act protects people with any of the above protected characteristics against discrimination in employment, while applying for employment, or while at the workplace. Potential claims against discrimination that can be defended by the employees as a fair treatment or practice are 1) Indirect discrimination, 2) Direct age discrimination and discrimination arising from disability. An employer can defend himself by demonstrating that treatment or practice complained against is a proportionate means of achieving a legitimate aim only if the treatment or policy is as a result of need and only if there are no less discriminatory means of achieving the legitimate aim. Thus, a construction company’s policy of employing people above 18-years at its more hazardous building sites can be justified as it protects young people from the associated health and safety risks as they lack inexperience and are physically less developed. Further, recruitments should be free from prejudice in order to get the best possible candidate for the job. Thus, the Act aims that the recruitment process should avoid racial discrimination and any overseas qualifications should not be rejected as not being equal to UK qualifications. The application forms designs should not adversely treat the disabled people such as by printing in small size that people with visual impairments cannot reward. Similarly, it would be unlawful on the part of the employer to prefer a younger candidate on the ground that they must be hungry and dynamic so that they could perform better. Any advertisement for recruitment in any media including the notice board should not create an impression that it is discriminatory. For example, if the advertisement gives preference for a man or job, it becomes unlawful sex discrimination unless the job requirements are such that only a woman or man will be suitable for the job. Instead of advertising gender-specific job-titles such as waitress, handyman or sales girl, it would be desirable to advertise as salesperson. There should be no age limits mentioned in the advertisements unless it can be objectively justified. Words such young and dynamic or mature person that can show age discrimination should be avoided.
As regards health or disability, an employer allowed to enquire from a job applicant about his health or disability only if he is offered a job on some basis and he is already included in the merit candidates to be kept on reserve for being offered employment should any vacancy arises. Questions about health or disability can be asked only if it is for the purpose of assessing the candidate’s ability to perform an intrinsic function for a particular job. If pregnant women or women on maternity leave should not be refused a job on a ground of ill-health attributed to pregnancy. A pregnant woman need not disclose that she is pregnant while applying for a job. So, a pregnant woman cannot be dismissed for not having disclosed her pregnancy. Similarly, an employer cannot ask a woman candidate whether she would like to have children as this is not a prerequisite to be considered for a specific job. The employer cannot deny flexible working hours if the employee so demands..
The Equality Act 2010 prohibits less favourable treatment on the grounds of age both direct and indirect which is unlawful unless it is justified by the employer. The justification will generally be under exceptional circumstances which not all organisations can meet when challenged at the Employment Tribunal. Such a justification will be found in posts for which the employer already has a retirement of age far below 65 due to nature of the jobs such as emergency services requiring a certain level of physical fitness or those requiring high level mental fitness such as air traffic controllers. Justifications can also be found in areas where Default Retirement Age (DRA) does not apply such as partners in a law firm. As DRA has been scrapped, employers must ensure that management of their employees’ performance is not discriminatory and not inconsistent to avoid possible litigation from the disgruntled employees who may be discriminated against on the grounds of age. Employer should apply non-discriminatory and consistent policies across the organisation. Employer should ensure that the managers are updated with latest procedures and trained in handling employees’ performance. Employers should conduct regular meetings or discussions with their employees regardless of their age for their performance review, know their expectations and future plans within the organisation. It is not discriminatory if all the employees are taken into confidence regarding their future plans without singling out the older workers. The meetings or discussions should be held with transparency and honesty. No discriminatory questions should be posed which would imply that an older worker is ready for retirement. The appraisal process is the ideal time for such discussions. It does not mean employers have to treat all the employees in exactly the same manner but should make sure there is consistency and fairness. In case of underperformance of an employee, employer must identify the cause. Neglecting on the poor performance by older workers can also be categorized as a discriminatory act of the employer by other employees. Employer should avoid assuming that older workers are associated with underperformance. All cases of underperformance should therefore be dealt with promptly through right and fair procedures and any resultant dismissals should only be on the basis of capability. Employers must also make sure that they comply with Equality Act when dealing with older employees who might have acquired disabilities in their old age and therefore not discriminated against .
Under this new enactment compulsory retirement is a kind of direct age discrimination. Direct age discrimination is legally valid if the employer can justify it by showing that it is in pursuit of a legitimate aim and that compulsory retirement is necessary to achieve that aim , The aims that courts have recognized are 1) giving access to employment for younger generation, 2) there must be a planned departure of existing and entry of new staff. 3) fair participation in employment opportunities by both new and old generations. 4) mix of experienced and new staff for sharing ideas and experiences among themselves. 5) avoiding situations dismissing the employees on the grounds of capability and thus avoiding humiliation to the employees concerned and 6) avoiding necessity of having to prove employees’ unfitness after a certain age.
In this connection it is relevant to cite the case Seldon V Clarkson Wright and Jakes . In this case a solicitor who was a partner of the law firm was compulsorily retired at the age of 65 as per their partnership agreement. Supreme court dismissed the solicitor’s appeal as the employers could successfully establish two aims of “intergenerational fairness and dignity . An employer must show that his policy of retirement is reasonable as it is necessary in the above circumstances. An employer need have a policy if there are less discriminatory ways of meeting the aims are available.
For example, if it is possible to do without retirement age, then implementation of a retirement age will be considered disproportionate. Thus in the case of European Commission v Hungary, the ECJ ruled that reduction of retirement ages of Hungarian judges from 70 years to 62 is against equality principle enshrined in the Equal Treatment Framework Directive as an unjustified discrimination on the grounds of age .
As a matter of fact, Equality Act 2010 is also in pursuance of this directive that prohibits discrimination in employment on the ground of age among other grounds. Disproportionateness is judged by the importance of the aim vis-a-vis the negative aspects of the disadvantage to employee community. This is a question of fact
References
ACAS. (2011). Working WIthout Defaualt Retirement Age. ACAS.
Equlity And HUman Rights Commission. (n.d.). The Equality Act: Guidance for Small businesses. Equality and Human Rights Commission.
Europa.eu. (2000). Council Dircetive 2000/78/EC of 27 November. Official Journal L 303, 0016-0022.
European Commission v Hungary, C-286/12 (Court of Justice of the European Union November 6, 2012).
Insley, J. (2012, April 25). Age discrimination ruling allows employers to set retirement dates. the Guardian.
Legilsation.gov.uk. (2010). Section 13(2) Equality Act. http://www.legislation.gov.uk/ukpga/2010/15/contents.
Roach, L. (2014). Company Law Concentrate. Oxen, Oxford: Oxford University Press.
Seldon V Clarkson Wright and Jakes, UKSC 16 (para 50 2012).
Thompson, H. (2011). Retirement. In WorkPlaceLawGroup, Employment Law and Human Resources Handbook 2012. Cambrdge: Kogan Page Publishers.
