Commercial news vlog - January 2022: climate-related disclosures, smart legal contracts, hybrid working and more

Commercial news vlog - January 2022: climate-related disclosures, smart legal contracts, hybrid working and more

 

In association with Iain Larkins from Radius Law, we discuss:

  • Corporate & Commercial
  • Data Protection
  • Advertising & Marketing
  • Employment

Corporate & Commercial

Mandatory climate-related disclosures coming soon

The Government has confirmed that, subject to Parliamentary approval, new Regulations will come into force on 6 April obliging large private and publicly quoted companies to make annual climate-related disclosures. Detailed information is included in the Consultation Response available on the Government website.

See: BEIS publishes consultation outcome on mandatory climate–related financial disclosures

See Practice Notes: Mandatory environmental reporting and Corporate reporting and audit—environmental sustainability and climate change tracker

Non-executive liability

It’s a common misconception that non-executive directors do not bear the same liability as executive directors, but actually the liability is the same. In a recent case1, a non-executive director of a company being investigated for VAT fraud was disqualified as a director for four years. It was acknowledged that he had no day-to-day involvement in the company, but he signed off the company’s financial statements without investigating the auditor’s concerns about the fast growth of the business.

See Practice Notes: Non-executive directors and the listed company board—corporate governance roles and responsibilities and Directors' duties—nature, scope, interpretation and application

Law Commission's paper on smart legal contracts

The Law Commission has confirmed that ‘the current legal framework is clearly able to facilitate and support the use of smart legal contracts’

A smart legal contract is a legally binding contract, which some or all of the obligations are recorded in and/or performed automatically by a computer program.

The Law Commission has acknowledged that there will be some obstacles to navigate with deeds which must be witnessed and attested and determining jurisdiction and applicable law – so recommends that express choice of law and jurisdiction clauses are included.

In responding to concerns about interpreting coded terms, the Law Commission has stated that the appropriate legal test is ‘what a person with knowledge and understanding of code would understand the coded term to mean’.

Appendix 3 of the Law Commission Paper helpfully includes a non-exhaustive list of issues that parties may wish to address in their smart legal contracts.

See: Law Commission concludes that the law of England & Wales can accommodate smart legal contracts

See Practice Note: Smart legal contracts

The meaning of ‘all reasonable endeavours’.

Contracts will often state whether a party is to use ‘reasonable’ or ‘best endeavours’ to do something.

It is commonly understood that a ‘reasonable endeavours’ obligation will be discharged if one reasonable path is taken, whereas ‘best endeavours’ requires all reasonable actions to be exhausted, even if that means sacrificing a party’s own commercial interests.

Sometimes there are twists on these well understood terms including obliging a party to use ‘all reasonable endeavours’.  A judge in a recent case2 that concerned a contractual obligation to use ‘all reasonable endeavours’ explained that it is a high standard and any ‘passivity or inactivity is likely to be construed as a breach’

The judge found that the defendant had not met this obligation even when, conceptually, this may have involved a commercial sacrifice on its part.

See Practice Notes: Reasonable and best endeavours, Good faith in commercial agreements and Exclusivity in contract negotiations


Data protection

Fines

There has been a recent flurry of data protection fines or notice of fines.

  • Amazon has been fined €746 million by Luxembourg's data protection authority and was also ordered to make various changes to its processes. The specifics are not publicly available, but it is understood to relate to Amazon's advertising targeting system being carried out without an appropriate lawful basis. Amazon has filed an appeal and won an initial victory when a Luxembourg court ruled that the data protection authority’s order for Amazon to make certain changes by 15 January 2022 lacked ‘precision’ and would ‘likely cause serious and irreparable’ harm to the company.

     

    See: Amazon fined record €746m for EU GDPR breach  and Amazon gets initial victory in appeal against Luxembourg EU GDPR decision on targeted ads

  • The UK Information Commissioner (ICO) has issued a notice of intent to impose a £17m fine on Clearview AI Inc. The investigation focused on Clearview AI Inc’s use of images and  data scraped from the internet and the use of biometrics for facial recognition. It is alleged that Clearview holds a 10 billion image database and fails to comply with UK data protection laws in several key ways. A final decision from the ICO is not anticipated until mid-2022.

     

    See: ICO announces provisional intent to fine Clearview AI Inc £17m

  • The ICO has fined the Cabinet Office £500,000 for uploading the 2020 New Year’s Honours recipient list which accidently included a ‘supposedly’ deleted field that contained the addresses of more than a thousand people, including those with a high public profile.

See: ICO fines the Cabinet Office £500,000 over New Year Honours List data breach

See Practice Note: UK GDPR and EU GDPR—sanctions and enforcement

Please also check out the LexisNexis interactive GDPR Fines, Penalties & Enforcement Tracker

Supreme Court rejects class action against Google

The case of Lloyd v Google3 concerned a ‘opt-out’ representative claim class action for Google’s alleged tracking of users' internet activity without their consent.  The claim sought a uniform sum on behalf of over 4 million Apple iPhone users.  The claim was brought under the old Data Protection Act 1998 and the Supreme Court determined that this law does not provide a right to compensation without evidence of material damage or distress.  Also, as the wrongful use and damage or distress caused may differ from person to person, the claim as formulated would not meet the ‘same interest’ requirement for representative claims.

 Unfortunately, the Supreme Court focused exclusively on the old Data Protection Act 1998, so the position under current data protection law has not been definitively resolved

See: Landmark Supreme Court decision curtails representative claims for data protection breaches (Lloyd v Google LLC)

See Practice Notes: Starting a UK GDPR compensation claim—a practical guide, Responding to a UK GDPR compensation claim—a practical guide and Representative claims


Advertising & Marketing

ICO issues opinion on adtech

At the end of November, the ICO published its Opinion on ‘Data protection and privacy expectations for online advertising proposals’. This is a continuation of the ICO’s broader adtech and real-time bidding (‘RTB’) report.  RTB is the process where web adverts are sold at the ‘blink of an eye’ based on the user profile.

The opinion has a tone of frustration of the lack of progress since the ICO first expressed privacy concerns about the adtech sector in mid-2019 when it stated that it considered all current real time bidding practices to be non-compliant with GDPR.

The ICO notes some of the industry’s proposals aimed at improving user choice and users’ ability to express preferences with online tracking but does not seem satisfied that any of them have been successful.

It also mentions Google’s Privacy Sandbox – a proposal to move away from tracking cookies but notes that none of these proposals are fully developed yet.

The Opinion states the principles which the Commissioner expects any adtech solution to meet to comply with data protection:

  • Data protection by design should be incorporated during the design phase of any initiative;
  • User choice - must allow meaningful control and the ability to exercise data subject rights;
  • Accountability must exist across the processing supply chain and include transparent responsibilities for market participants;
  • Purposes of data processing must be clearly explained, necessary and proportionate; and
  • Reducing harm by ensuring that privacy risks are addressed (such as through DPIAs).

See: Commissioner’s Opinion on novel adtech published

See Practice Notes: Adtech and programmatic advertising—introduction and Adtech and programmatic advertising—data use

Guidance on environmental claims and social responsibility

New guidance on misleading environmental claims and social responsibility in advertising has been published by the Committee of Advertising Practice (CAP) and the Broadcast Committee of Advertising Practice (BCAP).

This new guidance aims to assist marketers and agencies with interpreting the rules concerning environment-related advertising issues and provides a general overview of the principles underpinning the ASA's rules more generally.

See: New guidance on misleading environmental claims in advertising published

See Practice Note: Environmental claims in advertising


Employment

Guidance from Acas warns employers that the practice of fire and rehire should only be used a last resort

To change contracts of employment some employers have resorted to fire and rehire tacticswhich involves terminating an employee’s contract of employment and subsequently offering alternative terms of employment (often less favourable).

Acas has now published advice to employers, which warns against the practice of fire and rehire and encourages them to consider the following to make changes to contracts of employment:

  • the necessity of amending contracts of employment in the given circumstances;
  • consultation requirements;
  • how to deal with changes to employment contracts where variations are agreed; and
  • how to deal with changes to employment contracts where variations are not agreed.

See: Acas releases findings of its fire and rehire practices exercise

See Practice Note: Changing terms and conditions of employment

SMEs can claim back sick pay from Government

To support businesses during the recent surge in coronavirus cases, the Government is reintroducing the Statutory Sick Pay Rebate Scheme. The previous scheme ended on 30 September 2021.

This means small and medium sized businesses with fewer than 250 employees can seek reimbursement for Statutory Sick Pay for up to two weeks where staff have been off sick due to a coronavirus related absence occurring from 21 December 2021 onwards.

See: Government announces temporary reintroduction of SSPRS

See Practice Note: Coronavirus Statutory Sick Pay Rebate Scheme (CSSPRS)

New UK guidance on hybrid working

The Chartered Institute of Personnel and Development (CIPD) has, on behalf of the government’s flexible working taskforce, published new practical guidance on hybrid working. The guidance covers areas as varied as recruitment, health and safety, and ensuring policies and practices are inclusive and fair.

See: CIPD launches new hybrid working guidance for employers

See Practice Note: Hybrid working

Ownership of employee-created IP

A recent Court of Appeal decision4 has highlighted some key issues for any business which uses software developed by employees.

The employer claimed that it was the owner of software that had been developed by the employee because it was mostly created in the course of his employment and any earlier software was assigned to it by an agreement between the parties in 2008.

Whilst the employer was ultimately successful, the court case caused it much disruption and unrecoverable costs spanning over three years.  The employee’s key argument was that if the intention of the contract had been to capture software that was partly developed before his employment and outside normal working hours it would have been much clearer on this point.

See: Court of Appeal ruling on ownership of copyright in software created in 'personal time'

See Practice Notes: Copying software and copyright, Copyright—subsistence and qualification and Copyright—authorship and ownership

Ruling on dismissing a disabled employee

A recent Employment Appeal Tribunal (EAT)5 ruling concerned a disabled employee who following a two-year long period of sickness absence, was dismissed on the grounds of ill-health capability. The employer considered that the dismissal was a proportionate means of achieving the legitimate aim of the efficient running of the department, but the EAT ruled that before resorting to a dismissal employers must consider other less discriminatory measures. In this case, for example, it was not clear why the employer was unable to appoint a temporary replacement for the Claimant.  

See Practice Notes: Discrimination arising from disability and Entitlement to claim unfair dismissal

National Minimum Wage - EAT decision muddies the waters.

It had generally been understood that for the purposes of calculating whether an employer has complied with national minimum wage (‘NMW’) that it is the net pay after the employee has paid for items required for the work such as a compulsory staff uniform, but the EAT has ruled in a recent case6 that it is the net pay after any expenditure in connection with employment.  In this case the employee, a mini-cab driver, purchased an optional uniform and at his choice hired a car from a company connected to the employer rather than using his own car.  The EAT ruled that his wage after these optional costs must meet or exceed the NMW.

See Practice Note: National minimum wage


Cases, laws, decisions referred to in this Bulletin
Disclaimer

Nothing in this Bulletin, or on the associated website, is legal advice. We have taken all reasonable care in the preparation of this Bulletin, but neither we nor the individual authors accept liability for any loss or damage (other than for liability that cannot be excluded at law).

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About the author:
Iain founded Radius Law in September 2013 which has been designed to meet the exacting standards that Iain had of his law firms during his time as an in-house counsel.

 

Iain’s in-house career spans 14 years with the 7 years from 2006 to 2013 being the General Counsel and Chief Compliance officer for the Mercedes-Benz UK Group. In this role he led a team of 18 staff.
Iain has previously been recognised in the Financial Times Innovative Lawyers report as a thought leader in legal management. He has spoken regularly and had published articles particularly on how to measure legal value.

Aside from legal management, Iain has significant expertise in regulatory work, particularly competition law and anti-bribery. Iain has led the implementation of large scale compliance programmes and also managed regulatory investigations.

Outside of the day job Iain has a passion for community projects and has been a non-executive director of a housing association and also established a debt advice centre. This social conscious approach continues in Radius Law with a bold commitment to pay 10% of profits to charity.