Martineau Education Bulletin

May 2009

Welcome to our first monthly bulletin for AHUA members. We are delighted to have been selected as AHUA’s national sponsors and look forward to a productive working relationship with AHUA and its members.

If you have any comments on the format of this bulletin, or there are issues which you would like us to cover in future issues, please let me know.

Smita

Key contact:
Smita Jamdar
Partner and Head of Education
T: 0870 763 1332
E: smita.jamdar@martineau-uk.com

Contents

Strategy, Students and Governance

Student discipline: how sure do you have to be? | read
We consider the appropriate standard of proof that universities should apply in student disciplinary cases, in particular in the light of recent case law.
Representative directors | read
We examine the rights and obligations of company directors appointed by universities, focussing on the difficulties arising from conflicts of interest and the duty of confidentiality, as well as what can be done to resolve them.
Equality bill | read
We report on the recent publication of the Equality Bill, and summarise its potential impact on universities.

Finance, Technology and IP

E-learning environments get a second life | read
As the popularity of virtual worlds increases, we discuss the educational benefits of these worlds and the legal risks to universities that use them. We comment on issues relating to intellectual property, data protection & security and liability for content posted in discussion groups.
Outsourcing: when less is more | read
The first in a series of articles about outsourcing. Many universities use outsourcing as an effective tool to improve financial and organisational efficiency. This article looks at why, when doing so, it is preferable to adopt output based specifications.
Avoiding exposure | read
We comment on the steps universities should take, especially in the current economic climate, to minimise the risk of irrecoverable debts and undelivered services. We also highlight important recent guidance that universities should follow when bringing claims to recover debts or losses.

Estates

Who’s paying for energy efficiency? | read
From April next year universities are likely to find themselves carrying the costs and administrative burden of a new carbon reduction scheme. We look at what this means in practice.
Community infrastructure levy: a university perspective | read
Although universities will generally be exempt from paying the proposed Community Infrastructure Levy, we examine some related issues that universities should not overlook.

Human Resources

University wardens - a trap for the unwary | read
In this article we highlight some of the issues a university should bear in mind when employing resident wardens, particularly in the context of the national minimum wage.
Consultation on temporary agency workers directive | read
We report on the consultation document issued by the government on implementing the Temporary Agency Workers Directive. Responses are due by 31 July.

Full article details

• Strategy, Students and Governance

Student discipline: how sure do you have to be?| back to top

The question of the standard of proof to be applied in student disciplinary cases has long been a vexed one. The two standards of proof recognised by law are:

the balance of probabilities (civil standard); and
beyond reasonable doubt (the criminal standard)

The disciplinary procedures of many universities do not specify a standard of proof. A few state that the applicable standard is the criminal one.

Where no standard is specified, students have sometimes tried to argue that the charges they face are so serious or alternatively are so analogous to criminal proceedings that the criminal standard should apply, or that a higher version of the civil standard of proof should apply (sometimes known as the “sliding scale” approach). Disciplinary panels frequently find the practical implications of these fine legal distinctions difficult to understand and implement in their decision-making processes.

Recent legal developments make this a good time to review the current legal position on standard of proof in the context of student disciplinary procedures.

A case decided in the House of Lords last year categorically rejected the notion of a “sliding scale” in the civil standard of proof, where more serious allegations had to be proven to a higher degree of probability. The Lords held that the civil standard was “finite and unvarying” and meant simply that “a court is satisfied an event occurred if the court considers that, on the evidence, the occurrence of the event was more likely than not.”

The case also considered the issue of the cogency of the evidence required before a tribunal of fact, such as a disciplinary panel, could conclude that a particular event was more likely than not to have occurred. Prior to these decisions, the prevailing consensus was that the more serious the allegation, the more inherently improbable the chances that it had occurred, and therefore the more cogent the evidence had to be before a tribunal could be satisfied that it had occurred, even on a balance of probabilities.

The Lords viewed this analysis with caution. The inherent improbability of an event having occurred was a relevant factor in assessing the available evidence. So, in the case before them, there was nothing wrong with an initial assumption that it was inherently improbable that parents would deliberately harm their children. However, if there was some evidence that a child had been deliberately harmed whilst in the care of his parents, then the assumption ceased to be a valid one, and could no longer be a legitimate basis for saying that only the most persuasive evidence could justify a finding of deliberate harm. Rather, the seriousness of the allegation and the inherent improbability of it having occurred simply required the tribunal to “look at the facts more critically or more anxiously than in others before it can be satisfied to the requisite standard……they do not require a different standard of proof or a specially cogent standard of evidence, merely appropriately careful consideration by the tribunal before it is satisfied of the matter which has to be established.”

In many respects, this is a victory for common sense, which, if properly applied, should enable disciplinary panels to reach decisions on the facts more easily and robustly. Universities which still specify that the standard of proof in disciplinary cases involving students as “beyond reasonable doubt” should consider amending their procedures to refer to the civil standard instead.

© Martineau 2009

Smita Jamdar
Partner, Head of Education
T: 0870 763 1332
E: smita.jamdar@martineau-uk.com

Representative directors | back to top

There are many circumstances in which a university will have the right to appoint a director of a company. The company may be a wholly owned subsidiary of the university, a spin-out company in which the university has an interest (usually a minority interest) or it could be the university’s incorporated Students’ Union.

A “representative” director of a company owes duties to the company of which he is a director, and those override any duties owed to his appointor.

The duties of directors have been codified in the Companies Act 2006. It is not the purpose of this article to discuss those duties in any detail. Suffice to say that the duties are owed to the company (unless the company is insolvent or prospectively insolvent). That really means that the duty is owed to the members as a whole, because they are the persons who ultimately benefit from the success of the company.

Conflicts of interest

Where the company is a charity, the duties are still owed to the company but the overriding duty is to act in a way which promotes the achievements of the company’s (charitable) objects.

So, an appointed director is not there to promote the interests of his appointor. He is there to promote the interests or objects of the company. It follows that an appointed director is likely to find that he has potential conflicts of interest and, occasionally, actual conflicts, where the interests of the company and the appointor may diverge.

S.175 Companies Act 2006 states that a director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company. Such a conflict is often referred to as a “situational conflict”.

This is different from an actual conflict in a particular transaction or arrangement. Actual conflicts of interest in respect of particular transactions or arrangements are dealt with separately, and there are statutory powers requiring a shareholder to declare the nature and extent of his conflicting interest at a meeting of the directors. The articles of association will then set out whether the director concerned can vote on the specific matter, be counted in the quorum or even remain in attendance at the meeting.

It is situational conflicts which cause the greatest difficulty and which are often overlooked.

It might be said that nobody should take on a directorship if that involves a situational conflict. However, there are many circumstances in which the benefit to a company of having a particular person as a director outweighs the potential risk from a situational conflict.

But, who decides that? Who can authorise the director’s breach of duty?

If the company is a private company and not a charity, the other directors may do so provided that the company’s articles of association do not prohibit any such authorisation and, in the case of companies incorporated prior to 1 October 2008, a resolution of the members is required to give the directors the power of authorisation.

The position is different where the company is itself a charity, such as a Students’ Union incorporated as a company limited by guarantee. Here, a situational conflict can only be authorised by the directors if the company’s constitution (articles of association) enables them to do so.

Universities, and their appointed directors, should check whether or not the appointment gives rise to a situational conflict and, if it does, steps should be taken to enable the other directors to authorise it.

A situational conflict will almost certainly arise when the appointed director is also an officer or senior employee of the university. There must be a possibility of a conflict between the interests of the company and that of the university.

In most cases, the company ought readily to take steps to enable the situational conflict to be authorised by the directors. That authorisation may be given subject to conditions which might preclude the director from participating in certain discussions or negotiations.

However, it may not be easy to deal with situational conflicts which may occur if a university appoints one of its officers as a director of the incorporated Students’ Union. Here the company will be a charity and the directors will only be able to authorise a situational conflict if the articles of association enable them to do so.

Where a university’s Students’ Union has already been incorporated, its articles of association should be checked to see whether the directors have the necessary authorisation. If they do not, they will need to be changed by a special resolution of the members (students) of the Union company.

Where a Students’ Union is in the course of being incorporated, the university should check that the proposed articles of association would permit the directors to authorise any situational conflict which might arise if, for example, the university were to nominate one of its senior officers as a director of the Union company.

Confidentiality

Another issue which may arise in respect of appointed directors is that of confidentiality.

Directors of a company owe a duty to the company to keep all confidential information relating to the company confidential. That duty of confidentiality can only be waived by the company.

An appointed director has no right to pass on confidential information to his appointor unless there is some agreement by the company, probably in the articles of association, which enables him to do so. In the absence of a specific provision to this effect, the director’s duty of confidentiality overrides any duty he may have to his appointor.

Again, the articles of association should be checked to see that, where they contain rights of appointment, the appointor may receive information about the company through the appointed director.

© Martineau 2009

David Allison
Partner, Corporate Group
T: 0870 763 1588
E: david.allison@martineau-uk.com

Equality bill | back to top

The Equality Bill, which is intended to reform and harmonise existing equality legislation and introduce new equality measures, was published on 27 April 2009.

Key issues arising out of the Bill are:

Central and local government, and other public bodies such as strategic health authorities and RDAs will be under a duty to exercise their functions in a way that has due regard to the need to reduce socio-economic disadvantage and inequalities. Universities will not be caught directly by this duty, but may notice its impact in their dealings with these other public bodies.
The characteristics protected by the anti-discrimination legislation will be extended, so to age, disability, race, religion and belief, sex and sexual orientation will be added gender reassignment, marriage and civil partnership, and pregnancy and maternity.
The concept of “disability-related’ discrimination will be replaced by “discrimination arising from disability”. This is the government’s response to the House of Lords’ decision in London Borough of Lewisham -v- Malcolm, which reduced the amount of protection afforded to disabled persons. The new form of discrimination does not require there to be a comparator against which the treatment of the disabled person is to be judged, but does allow treatment which is detrimental to a disabled person to be justified if it is a proportionate means of achieving a legitimate aim.
Indirect discrimination (where an apparently neutral provision, criterion or practice has a disproportionate effect on certain groups) will in future cover all the protected characteristics.
Universities will be liable if a member of their staff is harassed on the grounds of any of the protected characteristics on more than two occasions by the same or different third parties, unless they can demonstrate that they have taken such steps as are reasonably practicable to prevent the harassment occurring. Once in force, this provision could require a review of the institutional approach to a range of student behaviours, including comments on social networking sites.
The burden of proof will be reversed in respect of all the protected characteristics. In other words, if there are facts which, in the absence of any other explanation, suggest that discrimination has occurred, the burden will shift to the university to prove that it has not discriminated in the manner alleged.
Universities will be under a single positive equality duty to eliminate discrimination, promote equality of opportunity and foster good relations in respect of all the protected characteristics, except marriage/civil partnership. This could lead to some challenging issues where, for example, promoting equality of opportunity for the LGB community might compromise good relations in the arena of religion and belief.
Possibly the most well-publicised aspect of the Bill are the new provisions relating to positive action. The Bill will enable positive action to be taken in relation to any of the protected characteristics to encourage better representation of the relevant group in the activity in question, to meet the needs of the relevant group, or to eliminate disadvantage suffered by that group. This may enable universities to develop specific training programmes targeted at particular groups. In relation to recruitment and promotion in employment, positive action is only permissible if the person with the protected characteristic is as qualified as the other candidate, and there is no wider policy of treating persons from that group more favourably. The effect of this is that it would be permissible for a university to elect to employ a female employee above an equally well qualified male candidate, but not if the university had a wider policy to recruit more women.

The Bill is making its way through Parliament and it is likely that some of these provisions may be amended. We will be closely following developments and will keep you updated in future issues of this bulletin.

© Martineau 2009

Joanna Forbes
Senior Associate, Education Team
T: 0870 763 1310
E: joanna.forbes@martineau-uk.com

• Finance, Technology and IP

E-learning environments get a second life | back to top

Gartner research predicts that by 2011, 80% of web users will be regularly visiting online virtual worlds - and the time people are spending there is already increasing. Real world companies looking to make money from this growing trend have already started opening and making money from in-world offices and showrooms.

The level of participation in Second Life (a 3D virtual world with over 15 million inhabitants) by colleges and universities suggests that a growing body of academics recognise the potential these interactive environments have as Virtual Learning Environments (VLE). But what are the educational benefits of these worlds, and what are the legal risks to universities that use them?

E-learning is of course nothing new to HE institutions in the UK. A study in 2005 showed that 95% of UK universities had some form of VLE and that many were already using software such as Bodington, Blackboard, WebCT and the increasingly popular open source model, Moodle, for providing web-based course tools.

Whilst they won’t replace off-line education or current e-learning tools, virtual worlds have the potential to support and enhance current e-learning in new ways, using 3D spaces as new learning environments to help evaluate academic performance and to allow students to access and interact with resources, their peers and teaching staff in truly innovative ways.

3D virtual worlds support a whole host of social interactions. Some universities have created virtual campuses which mirror their real world campus buildings in every detail, offering real time interaction with their students (through streamed media, video and audio, e-mail and chat) and providing live virtual seminars, lectures and virtual classrooms.

The immersive nature of the online environment can help enrich the way students learn and increase learner empowerment. Students can be virtual tourists visiting museums in other countries (where whole collections are made available to view in an interactive user space), meet with mentors and subject experts from around the world in a virtual lecture hall and even conduct experiments in virtual space not normally possible (or prohibitively expensive) in real life.

Specialised training-based learning scenarios within a virtual world allow educators to make more effective use of scarce staff time. Problem solving scenarios have become popular, as the virtual environment allows “life-like” and real-time role play training. Interactive virtual operating theatres and healthcare role play which mirror what could happen in theatre or on wards have been proven to lead to less anxiety in learners when they ultimately meet with real world experiences. In the US, real life emergency response training sessions run by Stanford University used to need the whole university campus to be shut. Now the whole scenario is recreated in a virtual world.

There is little doubt that the use of virtual worlds as an online learning resource offers great opportunities to meet the changing needs of students and their interaction with digital resources at both undergraduate and postgraduate level. But institutions who want to make the most of these new learning environments will need to take care to ensure that their staff and students are aware of the key legal risks.

The legal risks of VLEs

When investigating a university in the UK earlier this year the CLA (Copyright Licensing Agency) found that 70% of the materials in one segment of their WebCT environment were infringing copyright. Both students and lecturers had been posting content, articles and links in breach of third party licences and copyright.

Universities are legally responsible for the content they publish online. The use of new e-learning environments such as Second Life and other web-based applications such as Moodle that allow sharing of documents and files expose institutions to additional liability. As part of a regular legal health-check, institutions should revisit and ensure there is a unified policy on the use by students and lecturers of any online resources.

Issues which should be taken into account as part of developing an e-learning or VLE resource include:

Intellectual Property

Exercising control over what the university’s staff and students publish online is difficult. Indeed, the more control that a university operates over its e-learning environments (such as through editorial control and monitoring), the more legally responsible it could be for illegal, defamatory or infringing content.

Where students and staff are contributing to an online e-learning environment they should be made aware of the risks of posting or uploading materials developed by others. Some, but not all institutions have robust IP and online ICT policies, yet students and staff often believe that if content (especially educational content) is made available online it is free to use!

Students and staff need to understand the importance of obtaining consent before they contribute third party content to shared resources, since their institution may be responsible for secondary copyright infringement if that material is posted without permission. A copyright infringement action in the courts could seriously harm an institution’s reputation.

Practically speaking, the best way to limit liability is to continue to educate and raise awareness amongst staff and students of the risks of using third party content in an e-learning environment, and operate a fast-track take-down policy when alerted to infringing content.

The most important issue for a university is knowing that it owns or has a licence to use the IP in its e-learning materials. It is essential that the university carries out a regular legal healthcheck and updates and reviews its internal policies and procedures (especially IP policies), as well as staff, student and developer contracts, to ensure that the university has the right to re-use work created in its VLEs and can easily establish where that work came from.

Data Protection & security

Most things that students do in a VLE will generate personal data. When students enrol they should sign up to a data protection statement telling them how their data will be used. Universities should ensure that this statement covers all academic and ancillary purposes the data may be used for and, if an e-learning system is used, any processing on that system, such as for evaluation purposes.

The information collected about a student in an e-learning environment is extensive, from how many times they did a test to when they edited a wiki or submitted an assignment to their tutor. It could also list academic results and submitted work. As a “data controller” (as defined under the Data Protection Act) the institution is responsible for ensuring that data is held securely. This is especially important if the VLE is provided through managed hosting services (like WebCT) and a third party is acting as a “data processor”. If so, the institution must have a written contract with the hosting provider covering the processing of its students’ data.

Liability for content posted in discussion groups

Online tutorials, seminars or lectures are largely monitored by teaching staff. If the university maintains control over what is published it is likely to be considered a publisher, editor or author for defamation purposes. This would be true even for a small seminar group with only two students where a defamatory comment was posted: the closed nature of a tutorial group makes no difference (although the ease with which a student can be identified should act as a deterrent!).

Whilst monitoring of every message is not required, institutions should have an acceptable use policy warning users they will face disciplinary action if they post inappropriate messages and that the institution reserves the right to remove such material. This allows the university to remove content swiftly and minimise potential damage - it also gives a form of defence to the university for certain claims surrounding inappropriate content.

We would strongly recommend that all universities establish clear and robust policies to clarify what is acceptable use by students and staff of e-learning and other ICT resources - and which allow the university to act quickly in response to complaints. Universities should also be aware of their responsibilities to students in e-learning environments, especially their obligations under the Data Protection Act and discrimination legislation. If these issues are not addressed, a university could expose itself to unnecessary risks which could be damaging to reputation, as well as to its finances.

© Martineau 2009

Des Burley, Partner
Intellectual Property and Technology Team
T: 0870 763 1107
E: des.burley@martineau-uk.com

Outsourcing: when less is more | back to top

Universities outsource so extensively because this can be such an effective way of improving financial and organisational efficiency and allowing greater focus on core competencies. However, those objectives are often not achieved if requirements are not defined in the right way. In this article we look at the current best practice of specifying the required outcomes by using an output based specification.

What are they?

Essentially, an output based specification concentrates on what is to be delivered by the service provider (“output” based) rather than on what the service provider has to do in order to achieve such delivery (“input” based). At the risk of oversimplification, this example may help clarify the position.

A traditional IT service description might say:

“the supplier will provide ten Unix based servers running back up Manager 2000 to be located at the Manchester site and connected to the estate by a ten Mbps network link, maintained by no fewer than two technicians. The back-ups shall run every night between the hours of 6:00 pm and 6:00 am and copies shall be kept for one week”.

In contrast the output based specification concentrates on what the actual desired outcomes will be:

“The supplier shall provide that all of the user data is to be recoverable to within one working day, with 99.9% reliability. Constraint: Back ups must not interrupt work during business hours”.

At first glance these may appear very similar. However, the former tends to instruct the service provider how to do his job by specifying what hardware, software and people (etc.) are required. The latter focuses on what the outcome should be, irrespective of how the service provider achieves this. It is not entirely coincidental that the second option has less words than the first, although it may achieve more.

In practice there will always be some elements of output and input definition in any specification, but tending to specify requirements more by reference to outputs than inputs is a good thing most of the time.

Why take an output based approach?

The university’s interest as a buyer of outsourced services should not be so much in how the provider achieves delivery, but in what he delivers. Traditionally education institutions and others have tended to approach the procurement of important services under major contracts by spelling out the steps that the service provider must take in great detail, stating each individual item that should be provided. One can understand why that feels safer – it makes it as likely as possible that the provider will go through specified steps that the university associates, perhaps rightly, but perhaps also wrongly, with good service.

Whether that is the best approach is worth a second look. Occasionally but not usually, specifying inputs may be the right or even the only way to contract, particularly for very simple arrangements. However, spelling out all of the steps the supplier is to take has consequences that may not be entirely desirable. Specifying inputs reduces his discretion in how to deliver the service to the university. You have in effect made all of the service provider’s decisions for him about whether those steps actually translate into delivery of the service (outputs) the university requires. How can the university then complain if the provider delivers the inputs but the resulting services end up very different from those the university wished to have?

Universities are experts in providing education but not necessarily in operation of non-core activities such as construction, IT systems or infrastructure. One of the main reasons why it is often possible to obtain the organisational and financial efficiencies from outsourcing mentioned above is that the service provider has much more experience and expertise than the university does in the relevant area. He may also operate in that area on a far larger scale than the university by providing similar services to many customers, and be able to pass on economies of scale and other costs savings. Therefore, it makes commercial sense to let him decide how to satisfy the university’s requirements and concentrate on defining those requirements very thoroughly but by reference to outputs.

By doing so and leaving the service provider to use his expertise to decide how to achieve the outputs, it is also much easier to argue that he must be liable if he fails to deliver them properly. That helps with another of the main objectives of outsourcing, i.e. to pass as much risk to the service provider as possible. If the university tells the service provider exactly what steps to take (input specification), it can probably only make him responsible for taking those steps and delivering a series of inputs – in the example above: some hardware, software, connectivity and technicians which may or may not work well.

In other words, using an output based specification should make it easier for the university to pass the risks associated with such delivery to the supplier. In short, the more the university can tell him what you require and not limit how he achieves this, the better for the university – a real example of when less can be more. The long micromanaging version in the example above may not ultimately be better.

Less being more may not be a soft option. With an output based specification, the university probably needs to take even more care and time to carefully define its requirements than with one based on inputs.

However, with service requirements defined more closely in terms of what the university wishes to achieve and have delivered, it is more likely that the university will end up obtaining services closer to those which it ideally wished to purchase.

Also, it should be easier to make the service provider liable and compensate the university if the service does not match the output based requirement – risk will have passed to him. To achieve that it is essential the outsourcing agreement is written to match the service specification and details the risks, where they lie, and the consequences of failure to achieve services.

Such consequences should give the university rights to claim service credits, other compensation and perhaps to seek services elsewhere or take over management of a failing outsourced provision, as well as allowing the ultimate sanction of termination if need be.

The management and other provisions to be included in the outsourcing agreement will be the subject of future articles in this series.

© Martineau 2009

Peter Manford
Partner, Commercial Group
T: 0870 763 1390
E: peter.manford@martineau-uk.com

Avoiding exposure | back to top

Like many other areas of the economy, the higher education sector is feeling the squeeze of the global recession. Recently the Financial Times reported that some universities are presently running deficits of up to £7,000 per student on teaching, and in the 2009 budget DIUS was asked to make savings of £1.9 billion which includes £400 million from making universities and other education institutions “more efficient” by 2010.

Most universities have sought to increase income generated from commercial activities, privately-funded research and employer-facing provision in recent years, and may wish to rely more heavily on them in the future. However, in the current economic climate they are likely to face having to manage reductions in these income streams.

Customers and suppliers may face insolvency, leaving universities with irrecoverable debts or with vital goods and services undelivered, and the general economic climate calls for robust financial control mechanisms in order to limit the exposure of universities and to minimise the adverse impact of recession.

To avoid unnecessary financial exposure or business disruption, universities should review their credit and financial processes as well as their relationships with customers and suppliers, to identify any that appear to be at risk and to allow action to be taken before the need for legal proceedings. Warning signs might include unexplained and increased delays in payment or supply, or a decline in the quality of goods and services.

We recommend that the following steps are taken:

Customers

Universities should consider carrying out credit checks on new customers and customers with a history of late payments.
Payments on account should be obtained wherever possible. This is particularly important for customers with a poor credit history, and on projects in which the institution will be expected to go to significant expense in sourcing materials or obtaining services from external suppliers.
If payment on account cannot be obtained and the university is to extend a significant amount of credit to a customer, the university may want to obtain credit insurance to protect against bad debts or even late payments.
Universities should ensure that they have the correct name and legal status of the company. If invoices are raised against the wrong legal entity there may be difficulty obtaining payment. Raising credit notes and reissuing invoices will lead to inevitable delays in receiving payment.
Universities should invoice promptly and follow up late payment.
If the university is engaged in designing, engineering or creating a new product, it should ensure that the intellectual property rights are retained and should include a retention of title clause in the contract.

Suppliers

The university should ensure that it receives the goods and services being provided before making payment. The more expensive the goods or services to be supplied, the more important this is, because if the supplier becomes insolvent before the goods or services are supplied, not only may the university not receive the goods or services, but it may also struggle to recover a proportion or any of the sums paid.
If suppliers of services, for example the IT system, are struggling financially, the university may notice a decline, or even a complete breakdown, in the service. In this situation the university may wish to consider whether it can lawfully terminate the contract and obtain the services of an alternative supplier.
If a supplier of services becomes insolvent, an insolvency practitioner may try to novate the contract of supply to a new supplier. The insolvency of the original supplier may permit the university to lawfully terminate the contract and negotiate a better service at cheaper cost with a supplier of its choice.
Care should be taken where the supply contract is one covered by the EC Public Procurement regime. There are provisions that apply in situations of extreme urgency, without going through a full procurement process, but these may not apply in every situation.

Recent developments

In some circumstances, universities may need to bring a claim against customers or suppliers to recover debts or losses.

Customers or suppliers may be large limited companies, plcs or partnerships, but in some circumstances they may be individuals trading as a sole trader or individual consultant. Before commencing a claim, a claimant ought to send a detailed letter to the defendant setting out the basis of the claim and allowing a reasonable period for reply. New guidance to the court and legal practitioners recommends a minimum of 14 days to allow a debtor to respond. The guidance also stresses that litigation should be a step of last resort, and encourages the parties to use alternative dispute resolution, whether by entering into negotiations or by taking a more formal step such as mediation or early neutral evaluation.

Where the claim is a debt claim in which the claimant is a business and the defendant an individual, the guidance requires information to be provided to the debtor explaining that free advice can be obtained from organisations such as the National Debtline. This clearly extends to claims against students for unpaid tuition fees but, interestingly, the guidance does not distinguish between individuals acting as consumers and individuals running a business. Therefore the requirement to provide information may apply to sole traders and individual consultants.

Failure to comply with the guidance may lead to delays in the proceedings to allow for compliance and in some circumstances may even lead to costs awards against the party failing to comply.

The recession is likely to increase the risk of universities missing out on expected income or services because of business failure on the part of customers and suppliers. Reviewing and enhancing procedures to protect the university’s commercial interests in these difficult times should be a key step in the university’s management strategy. Where claims are necessary, it is important that appropriate action is taken in accordance with current procedures and guidelines.

© Martineau 2009

Andrew Holden
Associate, Commercial Disputes
T: 0870 763 1661
E: andrew.holden@martineau-uk.com

• Estates

Who’s paying for energy efficiency? | back to top

From April 2010, universities, along with other large electricity users, are likely to find themselves carrying the costs and administrative burden of a new carbon reduction scheme. This scheme is known as the Carbon Reduction Commitment or “CRC” and will be introduced by the Carbon Reduction Commitment Order 2010.

With few exceptions, any organisation which has a half hourly meter and which consumed at least 6,000 MWh of electricity during 2008 will be caught by the scheme. Organisations with half hourly meters but which consumed less will have reduced obligations under the Order.

Once caught an organisation must register for the scheme, monitor and report its energy usage on an annual basis and at the end of each year it must surrender to the Environment Agency (and the equivalents in Scotland and Northern Ireland) “allowances” equivalent to the amount of CO 2 emitted from its consumption of electricity, gas and other fuels, other than fuels used for transport.

The number of allowances to be surrendered is calculated by taking the amount of each fuel and converting it to tonnes of CO 2 emissions by reference to factors set out in the Order. One allowance allows one tonne of CO 2 to be emitted. Any electricity taken from the grid is converted to a CO 2 emission even if it is “green” energy.

Allowances will be issued by the Government on an annual basis. In the first three years of the scheme the number of allowances will be uncapped and so organisations can purchase as many allowances as they wish. In this phase, the price for each allowance will be fixed at £12.

In subsequent phases the number of allowances will be restricted and accordingly the price will be determined by the market.

If an organisation has too few allowances it can purchase additional allowances from organisations with too many and, in time, a market in the allowances is expected to develop. Further, additional allowances can be purchased but the price for these will be the price of EU emissions trading scheme allowances and so, again, is dependant on the market.

At the end of each year the Environment Agency will rank participants in the scheme against each other. The scheme is meant to be “revenue neutral” to the Treasury and so all funds raised from the issue of allowances will be paid back to participants following the end of the year. However, those participants who perform well will be paid a bonus at the expense of those who have done less well.

The Environment Agency will be writing to all consumers with half hourly meters in September 2009 seeking information about electricity consumption in 2008. Universities need to be thinking now about collating that information and nominating someone to be responsible for administering the scheme.

Although the CRC is intended to be a simple scheme, the legislation is complex and each situation needs to be considered carefully.

© Martineau 2009

Catherine Burke
Partner, Energy & Utilities
T: 0870 763 1552
E: catherine.burke@martineau-uk.com

Community infrastructure levy: a university perspective | back to top

The Planning Act came onto the statute books in November 2008 and included some new measures designed to simplify and speed up the planning process. One of the more controversial measures was the Community Infrastructure Levy (CIL), which has been promulgated as a means of ensuring developers pay for infrastructure and facilities such as highways, schools and hospitals arising out of development.

It was born out of several reports to the government, culminating in Kate Barker’s assessment that the existing s106 planning agreement system was inadequate and did not help deliver the infrastructure required to support development.

Originally planned to be in force by spring 2009, the government is now intending to publish detailed Regulations which will underpin the CIL. However, as yet nothing has been published, not even in draft, and we have no date when we may have a chance to see how the CIL may work in practice.

There was a late amendment to the Act itself which, in broad terms, exempts universities from having to pay a CIL. Universities should, however, be aware that some local planning authorities are instead utilising a tariff payment scheme on the grant of planning permission. Universities need to ensure that a tariff system has been properly incorporated within the local planning authority’s local plan system/frameworks, before it can legally be expected to make a contribution to a tariff.

The other key point to note is that if a university is selling land to a third party who is intending to use it for non-education purposes, then the CIL will take effect. This is likely, therefore, to have an impact on the purchase price which that third party is prepared to pay for the site.

Since its inception we have had some serious concerns as to how the CIL (and its proposed predecessor the Planning Gain Supplement) will operate in practice, but assuming this part of the Act is finally delivered in practice, what can universities expect?

In order for a local authority to bring in a CIL, up-to-date local development plans and regional spatial strategies must be in place. This means local development frameworks (LDFs) and Core Strategies must have been properly adopted so that the amount of infrastructure required can be properly assessed before developers might then be expected to contribute to such infrastructure. This assessment should include projected population growth. This assumes, of course, that local authorities in adjoining areas have all adopted LDFs. In practice, that is still not the case and won’t be the case for some time. Until then rigorously assessing a CIL and scoping and costing infrastructure requirements across a region may be difficult, if not impossible. We have seen some local authorities start to introduce a tariff system instead as a shorter term measure, but that must have been properly adopted if it is not to be left open to challenge.
Allied to this structural issue, there is then the question of charging, both at the macro level of assessing the costs of infrastructure identified through the LDF process, and then at a micro level for the levy or rate of charge itself. The charging schedule is expected to have a consultation process of its own, decoupled but linked to the LDF process, and providing for a minimum 6 week consultation process and a further independent assessment before adoption.
The government states that a CIL should not be an attempt to recoup finance for existing deficiencies, but we suspect that may happen in practice by accident if not design. Developers and landowners should be prepared to test and challenge the figures set by the local authority.
The rate of levy is expected to allow for different types of development which may place different demands on infrastructure. This will be another challenge for local authorities and will need to be robust enough to ensure types of development are not discriminated or penalised in any way - residential, office, distribution, retail and leisure uses can each generate different stresses on infrastructure.
All of this is predicated on local authorities deciding to introduce a CIL. At present it is discretionary. We strongly suspect it will be some time before a local authority takes a decision, having gone through the above processes, to introduce a CIL. Each local authority is at a different stage in its LDF process. More importantly, each local authority will have to decide if it has the administration and management support to administer the CIL. Crucially, given the current recession, they will also need to assess whether a CIL will act as a disincentive to businesses looking to inwardly invest in a region, especially if an adjoining authority chooses not to adopt a CIL.

It has been clear that the world is a very different place from when PGS and now CIL were first mooted. We have seen existing s106 agreements looking more strategically at infrastructure demands over the past few months, but the government clearly thinks that the s106 agreement process is broken and needs to be fixed. Will the CIL give the government and regions what they want in better investment in infrastructure? In our view, not while we continue to see low levels of development activity. The CIL is not the answer in the current climate or for as long as the time lag remains in the adoption of LDFs and core strategies.

© Martineau 2009

Clive Read
Partner, Property Group
T: 0870 763 1439
E: clive.read@martineau-uk.com

• Human Resources

University wardens - a trap for the unwary | back to top

A warden in a hall of residence may not seem like a typical employee. For a start, he or she might not have any specific duties to carry out other than being available to give assistance to students if needed. Nevertheless, universities should bear in mind that wardens have been found by the courts to be employees and, as such, are entitled to the minimum wage. So what does this mean in practice for universities?

The minimum hourly wage, which is amended annually, is currently £5.73 for employees aged 22 and above; £4.77 for employees aged between 18 and 21 and £3.53 for employees aged 16 and 17. From October these amounts will increase to £5.80, £4.83 and £3.57 respectively.

The good news is that universities can count towards the minimum wage a certain amount for providing accommodation to a resident warden. The not so good news is that this is limited to a current maximum of £31.22 per week (£31.57 from October) and is the only benefit in kind which can contribute to the minimum wage. Universities are required to keep clear and accurate records in order to demonstrate that the minimum wage requirements are met.

So how should a university measure the time worked by a warden? This is a particularly tricky issue. Although untested by the courts, it is likely that wardens’ work is classed as “unmeasured work” for the purposes of the minimum wage. In practice, this means that universities have two options. Firstly, they could pay each warden for every hour actually worked. This will be administratively onerous. Alternatively, they could enter into a daily average agreement in which both parties agree on the (anticipated) average number of hours to be worked each day. This must be a realistic figure. A university would not need to make a “top-up” payment to the warden if the hours in the agreement fell below the threshold for the accommodation off-set (£31.22 per week). However, the university should keep records, and the agreement should be reviewed periodically, in order to monitor whether the anticipated hours are correct and to ensure that the minimum wage requirements are met.

Importantly, voluntary workers who work for certain types of employer (ie charities, voluntary organisations, associated fund-raising bodies and statutory bodies) are excluded from the minimum wage requirement. Although untested in the courts, this is a possible alternative route for universities who do not wish to pay the minimum wage. However, this approach relies on wardens being willing to be engaged on a voluntary basis which may not always be the case.

A further point to note is that the Working Time Regulations stipulate that no employee should work more than 48 hours in any 7 days (over an average period of, usually, 17 weeks). This maximum is intended to be an aggregate figure, taking into account any teaching hours as well as resident warden hours. So, where there is a risk that a warden will exceed the threshold, a university would be well advised either to ask the employee to sign a contractual 48 hour opt out provision or, alternatively, to keep records of actual hours worked by the employee, in order to ensure that there is no breach of the Working Time Regulations.

Finally, it is advisable to draw up separate contracts for teaching and warden duties so that the teaching contract need not come to an end if the warden duties cease.

© Martineau 2009

Jo Bradbury
Associate, Employment & Pensions Team
T: 0870 763 1454
E: joanne.bradbury@martineau-uk.com

Consultation on temporary agency workers directive | back to top

On 8 May 2009 the government launched a consultation on implementing the Temporary Agency Workers Directive. The Directive entitles temporary agency workers to equal treatment as compared to permanent workers.

The government intends to make the right to equal treatment subject to a 12 week qualifying period (as is permitted in the Directive and in line with an agreement reached last year with the CBI and the TUC). We report on the key points under consultation.

Scope of the Directive

It is envisaged that the Regulations implementing the Directive will cover people seeking temporary work through an “employment business”. The consultation clarifies that an “employment business” is an organisation that introduces workers to hirers for temporary work only. The Directive would not apply to people who seek permanent employment through the sorts of agencies often referred to as head hunters.

The Regulations would apply to agency workers who are employed by, or have a contract for services with, the employment business and who work on assignment with a third party hirer. The self-employed, those working through their own limited company and agency workers on managed service contracts would be excluded.

Definition of equal treatment

Equal treatment is defined in the Directive as “at least the basic working and employment conditions that would apply to the workers concerned if they had been recruited directly by that undertaking to occupy the same job”. The definition of “basic working and employment conditions” covers duration of working time, overtime, breaks, rest periods, night work, holidays and pay. Agency workers who meet the 12 week threshold would therefore be entitled to the same rest periods and paid holiday as permanent employees.

The government proposes that pay should include basic pay plus any other contractual entitlements directly linked to work undertaken by the agency worker whilst on assignment. This might include payment for holiday, overtime, shift allowances, unsocial hours bonuses, and some bonuses which relate to personal and individual performance (such as piece work bonuses). It would, however, exclude company car allowances and occupational social security schemes.

12 week qualifying period

The government proposes that the qualifying period should be 12 calendar weeks. A new qualifying period would only begin if a new assignment with the same employer is substantially different. The government also takes the view that short breaks between assignments in the same role should not start the clock running again. It is seeking views on what would be an appropriate minimum break between assignments after which a new qualifying period would begin.

Comparator

The key factor in establishing “equal treatment” will be comparison with a permanent employee doing broadly similar work in the same organisation. Agency workers who believe they are not receiving equal treatment would have a right to ask the agency for written details of any matter relating to their equal treatment rights. The government acknowledges that, where there is no comparable worker, there might be circumstances where other factors are relevant. It intends to clarify what these circumstances might be in due course.

Liability

The consultation proposes that primary liability for compliance would rest with the agency whilst recognising that the agency will be dependent on information provided by the hirer relating to the agency worker’s equal treatment. The proposals suggest that an agency would have a reliable defence where it has taken “reasonable steps” or “best endeavours” to obtain accurate and relevant information from the hirer. The hirer would become liable if it became clear that the information it had provided was inaccurate or incomplete.

Collective facilities and permanent vacancies

Agency workers will also have access to collective facilities on the same terms as those employed directly. This will include, in particular, canteens, transport services and child care facilities. The intention is that this right will exist from the start of an assignment and not be subject to the 12 week qualifying period. Unusually, the Directive does allow for “less favourable” treatment in this context as long as it can be justified on objective grounds.

Agency workers will also have the right to be informed of permanent employment opportunities at an end user. Again, this right will not be subject to the 12 week qualifying period.

Potential impact of changes

Universities which use agency workers for short periods only will not generally be affected. However, where agency workers are taken on for longer than 12 weeks, universities will need to review their contracts, policies and procedures to ensure equal treatment.

As far as pay is concerned , users of higher paid agency workers (such as in engineering, IT and professional roles) are unlikely to be seriously adversely affected, because their agency workers are probably already better paid than comparable permanent employees. Users of lower paid “temps” in blue collar or lower paid work (for example, cleaning) are likely to be the worst affected.

What happens now?

The deadline for responses to the consultation is 31 July. The government will then seek views on the draft implementing Regulations and other issues to be addressed in accompanying guidance. Although the deadline for implementation of the Directive is not until 5 December 2011, the government has signalled its intention to introduce the necessary legislation in the current Parliamentary session.

© Martineau 2009

Susannah Nicholas
Professional Support Lawyer, Employment & Pensions Group
T: 0870 763 1493
E: susannah.nicholas@martineau-uk.com

© Martineau

The bulletin contains a summary of complicated issues and should not be relied upon for specific matters. You are advised to take legal advice on particular problems. Please contact us and we will be happy to assist.