10 big issues construction will face in 2007 (News analysis)

If you thought 2006 was bad for red tape, there's plenty more on the way this year. Will Mann sifts through the worst of it.

Free-standing harassment claims

Last year's House of Lords' decision in the Majrowski -vs- Guys & St. Thomas' NHS Foundation Trust case means employees and subcontractors now have a freestanding right to bring harassment complaints against their employers under the Protection from Harassment Act.

It had always been thought that this Act only applied to individuals. "But claims can now be brought against employers where bullying, supervision or management (which an employee or subcontractor considers unacceptably strong), persistent rudeness, threats or intimidation, are alleged to have taken place at work," says Nick Chronias, partner in the employment practice of law firm Beachcroft.

"Construction employers therefore need to ensure they have harassment policies in place and that they reinforce them with training and reminders to staff about their importance. Any complaints of harassment must be taken very seriously, as ignoring them could be very costly, both financially and in terms of corporate reputation."

Construction (Design and Management) Regulations

The new CDM regulations come into effect in April. They are "the most radical change to construction health and safety legislation since 1994, the year when the existing CDM regulations came into effect," according to John Malins, associate at law firm Davies Arnold Cooper.

The new regs make those with the greatest control and influence over a project, namely the project team, responsible for health and safety. They also introduce a new role of co-ordinator in place of the planning supervisor who will be appointed by the client. "The co-ordinator will be required to 'identify and extract' all information required to secure the health and safety of anyone engaged in construction work," says Malins.

The other big change is that ultimate responsibility - and consequently, liability for health and safety - rests with the client for all construction projects. While the client can delegate the duties under the regulations, for example to the co-ordinator, it nonetheless retains liability for complying with the regulations.

"Contractors, employers and designers would be wise to review their obligations now," warns Malins. "Any projects straddling the April 2007 effective date will be subject to the new regulations, which apply to all construction projects lasting more than 30 days or involving more than 500 person days of construction work."

Enhanced maternity rights

The Work & Families Act 2006 came into force on 1 October, and affects mothers of children expected or born after 1 April 2007.

Statutory maternity pay (SMP) will extend from six to nine months, with SMP able to start on any day of the week rather than on the Sunday following the start of maternity leave. All employees will be entitled to up to one-year's maternity leave regardless of length of service, while also allowing employees 10 'keeping in touch days' where they can come back to work without in any way compromising their maternity rights.

There are similar changes to adoption rights. "Employers will need to change their maternity and adoption leave policies to comply with these changes," says Nick Chronias, partner in the employment practice of law firm Beachcroft. "The government is also consulting about radical proposals to allow mothers to transfer up to 26 weeks of unused maternity leave to the natural or adopted father of the child with the aim of bringing that into force in 2009."

Payment of subcontractors for public holidays

As things stand, construction companies can include public holidays in a subcontractor's entitlement to four weeks' paid holiday under the Working Time Regulations (WTR).

However, when the WTR is amended in 2007, construction companies will face substantial extra costs, warns Nick Chronias, a partner in the employment practice of law firm Beachcroft. "The paid leave entitlement will increase to 24 days in October 2007 and 28 days the year after that, although the government may phase in the changes in order to cushion the extra cost," he says.

"However, all construction employers that currently include public holidays in the four-week holiday entitlement for employees or subcontractors, need to start calculating the cost implications of this.

"When the law is settled, employers will have to amend contracts with employees and subcontractors in order to reflect the changes," Chronias adds.

Corporate manslaughter and corporate homicide

The government has finally delivered on its promise to make it easier to prosecute companies for manslaughter. The Corporate Manslaughter and Corporate Homicide Bill is expected to become law in 2007. The existing common law offence of corporate manslaughter will be abolished and replaced with a new statutory offence.

"Critics of the Bill say that it does not go far enough, as no-one will be imprisoned under the legislation," says Fiona Gill, partner with law firm Davies Arnold Cooper. "They are campaigning for the introduction of personal liability for directors and senior managers. The government has so far refused these demands."

The new offence will lead to the police investigating more work-related deaths. This will have an effect on the construction industry, as 28% of work-related deaths in 2005/06 were construction-related.

"Companies should be preparing now for the new legislation by carrying out a compliance check on safety policies and systems and, if necessary, seeking specialist advice," advises Gill.

To date, very few companies have been successfully prosecuted for manslaughter and these have all been small firms.

Control of Asbestos Regulations

The Control of Asbestos Regulations 2006 (CAR) came into effect on 13 November 2006. They introduce a simpler, but stricter, single limit for permissible work on asbestos without a licence.

"Previously the licensing regime included absolute exemptions for work with asbestos cement," explains Stuart Armstrong, senior associate on law firm Pinsent Mason's dispute resolution and litigation team. "While there are no absolute exemptions anymore, where worker exposure will be 'sporadic and of low intensity', and is below the Control Limit (0.6 fibres/cm³), then a licence is not required.

"In addition, it is permissible to work with asbestos cement or textured coatings containing asbestos if the Control Limit of 0.1 fibres/cm³ is not exceeded."

From April next year, anyone involved in removing asbestos above the Control Limits must be licensed and approved by the United Kingdom Accreditation Service (UKAS).

Crackdown on Managed Service Companies

HMRC believes Managed Service Companies (MSCs) have been used for widespread tax avoidance, and is planning a crackdown, which is likely to commence in April 2007.

"The Revenue will treat all payments made to workers employed by MSCs (including dividends) as payments of employment income, which are subject to PAYE and NICs payable by the MSC," says Rebecca Power, tax associate at law firm Pinsent Mason's construction group.

"In the case of non-payment by the MSC, the debt will be transferred to an appropriate third party, for instance, the MSC scheme provider."

The government is considering to what extent the legislation should cover other parties that have "materially benefited from the MSC's provision of services," she adds. Conceivably, this could extend to the end-users of the services, such as contractors.

Overhaul of the Construction Industry Scheme

Currently, the Construction Industry Scheme (CIS) ensures a basic level of tax is deducted from subcontractors' pay through a system of cards, certificates and vouchers. A new CIS will belatedly be introduced in April 2007.

"It will require construction employers to contact HM Revenue & Customs (HMRC) to confirm that the contract is one of self-employment and ask whether the subcontractor should be paid net or gross," explains Nick Chronias, a partner in the employment practice of Beachcroft. "Employers will then be obliged to pay the subcontractor as per the net or gross instructions given by HMRC, while in addition submitting a monthly return to HMRC showing what has been paid to subcontractors and any deductions made."

The old paper system will go, placing a big administrative burden on contractors, since thousands of subcontractors pay tax through the CIS. "Construction companies should be putting in place, or have put in place, systems for contacting HMRC and templates for the monthly returns they will be required to provide," warns law firm Chronias.

Workplace smoking ban

From 1 July in England and from 2 April in Wales and Northern Ireland it will be illegal to smoke in all substantially-enclosed public places, including workspaces and company vehicles carrying more than one worker. It is already illegal to do so in Scotland.

Further rules are set out in the Smoke Free (Exemptions & Vehicles) Regulations 2006. The exact regulations defining substantially-enclosed places are being considered by Parliament.

"One of the key questions for construction employers is at what point during a building's construction will it switch from an open space to enclosed premises, which are covered by the Act," says Nick Chronias, partner in the employment practice of law firm Beachcroft.

"Construction employers will be responsible for ensuring there are clear 'no smoking' signs at premises, ensuring clear instructions and policies are prepared for the use of company vehicles that are shared by workers. Failing to do so could result in a summary conviction and a penalty fine for both the employee and employer."

Age Equality Regulations

The Employment Equality (Age) Regulations came into effect on 1 October 2006, but the first test cases are likely to kick-off during 2007.

They create a new claim of direct age discrimination, for example where employers refuse employment to anyone above or below a fixed age, and introduce the concept of indirect age discrimination - for example, requiring an employee to have five years' experience to obtain a post - which is indirectly discriminatory because it is harder for a younger employee to comply than an older employee.

"Compensation for age discrimination has no fixed limit," warns Tom Potbury, associate at law firm Pinsent Masons's employment group. "Construction employers should beware because discrimination is rife in the industry. For instance, traditional assumptions that older workers cannot do heavy work could land employers in hot water.

"However, employers have a defence to such claims if the discrimination is justified. For instance, refusing new employment to over 60s might be justifiable if an employer could show its training costs for that employee would be disproportionate given that their future employment will be relatively brief."

[Contract Journal, 10 January 2007, pp 14-15]