We’re here with practical legal information for your business. Learn about employment law, company law and more.

Setting up a business involves complying with a range of legal requirements. Find out which ones apply to you and your new enterprise.

While poor governance can bring serious legal consequences, the law can also protect business owners and managers and help to prevent conflict.

Whether you want to raise finance, join forces with someone else, buy or sell a business, it pays to be aware of the legal implications.

From pay, hours and time off to discipline, grievance and hiring and firing employees, find out about your legal responsibilities as an employer.

Marketing matters. Marketing drives sales for businesses of all sizes by ensuring that customers think of their brand when they want to buy.

Commercial disputes can prove time-consuming, stressful and expensive, but having robust legal agreements can help to prevent them from occurring.

Whether your business owns or rents premises, your legal liabilities can be substantial. Commercial property law is complex, but you can avoid common pitfalls.

With information and sound advice, living up to your legal responsibilities to safeguard your employees, customers and visitors need not be difficult or costly.

As information technology continues to evolve, legislation must also change. It affects everything from data protection and online selling to internet policies for employees.

Intellectual property (IP) isn't solely relevant to larger businesses or those involved in developing innovative new products: all products have IP.

Knowing how and when you plan to sell or relinquish control of your business can help you to make better decisions and achieve the best possible outcome.

From bereavement, wills, inheritance, separation and divorce to selling a house, personal injury and traffic offences, learn more about your personal legal rights.

Discrimination

Discrimination against employees on any grounds other than their ability to do the job is a bad idea - and could also be illegal. If an employee or potential employee brings a discrimination case against your business, you could be tied up in costly and time-consuming legalities for months. If they win, you could be liable for unlimited damages.

You need to make sure that your business, and your employees, do not act in a discriminatory way - either deliberately or by mistake. You also need to be ready to deal with any inappropriate behaviour or complaints.

Illegal discrimination

Test of discrimination

Setting standards

Equal treatment

Dealing with a complaint

Allowable discrimination

1. Illegal discrimination

Discrimination in employment is illegal when someone is treated less favourably because of one or more protected characteristics.

Racial and religious discrimination is illegal

  • This includes their colour, nationality or ethnic origins and their religious or philosophical beliefs.

Sex discrimination is illegal

  • This includes their gender (including whether someone has had gender re-assignment), marital status (including civil partnerships) or sexual orientation (actual or perceived).
  • Nor can you discriminate because of pregnancy or maternity.

It is illegal to discriminate without justification on the grounds of disability

  • Disability is defined as a physical or mental impairment which has a substantial and long-term adverse effect on the ability to carry out day-to-day activities.
  • Justification will depend on circumstances. You must investigate to see if the person could carry out the work with reasonable adjustments.

It is illegal to discriminate against anyone on the grounds of their age

  • There is no longer any default retirement age. You cannot force employees to retire at a set age unless it is objectively justified.
  • If you want to let an older employee go due to poor performance, you must treat them no differently to any other employee who is performing poorly and go through the standard dismissal procedures.

It is illegal to discriminate against fixed-term or part-time workers

  • These workers must be treated no less favourably than full-timers, with the same terms and conditions on a pro rata basis.

It is illegal to discriminate on the grounds of trade union membership

  • You must not discriminate against someone either because they are a member of a union or because they are not.

Positive discrimination is illegal, but you can use positive action during recruitment

  • If two candidates are equally competent but one has a protected characteristic that is under-represented, you are allowed to use that as a reason for selecting them over the other candidate.
  • You cannot select someone solely because they have a protected characteristic.
  • Anyone involved with employment, education, housing, the provision of services and the exercise of public functions must comply with equality and diversity requirements.

Look out for the less obvious forms of discrimination

  • You may still be discriminating even if you think you have good systems set up to avoid direct discrimination. See Test of discrimination.

Reasonable adjustments

When dealing with people at a substantial disadvantage because of disability, you must be prepared to make 'reasonable adjustments' to enable them to work or continue working.

If you treat them less favourably than others, without making reasonable adjustments, you are discriminating against them.

What is a reasonable adjustment will depend on the circumstances

  • For example, someone with mobility problems might need easier access, while someone with impaired hearing might need a telephone amplifier.
  • The best way of determining what adjustments would be required is to ask the disabled person what they would need to be able to do the job.

You may refuse to make adjustments only where it would be unreasonable

  • Where you can prove it would be impractical to make the adjustment.
  • Where the cost would be beyond your means and no assistance is available.
  • Where the adjustment would put you in breach of other legislation - eg health and safety regulations.

2. Test of discrimination

The test of discrimination is not what you set out to do, but how it affects the people on the receiving end. You may be involved in discriminatory practices without realising it.

If you treat somebody less favourably you are exercising direct discrimination

  • This can occur when you appoint, promote or dismiss someone, or deny access to training or other opportunities.
  • If an employee has evidence which suggests discrimination, it is up to the employer to prove it is not.
  • Direct discrimination may be found even if you acted on several grounds, only one of which is illegal - eg if you sack someone because she is incompetent and pregnant.
  • If you sack someone who is disabled for having poor attendance, but the poor attendance is caused by the person's disability, that counts as discrimination.
  • Direct discrimination is permissible only for very limited forms of allowable discrimination.

Discrimination by association or perception is also unlawful

  • Discrimination by association is discrimination against someone because they associate with someone who has a protected characteristic - for example, because they have gay friends.
  • Discrimination by perception is discrimination against someone because you think they have a protected characteristic (even if they do not) - for example, because you think they look too old.

Indirect discrimination is not allowed

  • Indirect discrimination occurs if you impose a 'provision, criterion or practice' which members of one group are much less likely to be able to comply with, and which is not justified by the requirements of the job.
  • For example, only employing factory packers who have GCSE English.

You must not victimise someone because of discrimination proceedings

  • You could be guilty of victimisation if you treat somebody less favourably because of actions (or potential actions) in connection with discrimination proceedings.
  • For example, sacking someone who has brought (or is threatening to bring) discrimination proceedings.
  • You could be found guilty of victimisation, even if the main discrimination case fails, if the allegations were made in good faith.

Your organisation may suffer from institutional discrimination

  • This occurs when your systems and practices disadvantage some groups when compared with others.

3. Setting standards

If you own or manage the company, you are responsible for your own actions, as well as the behaviour and actions of your employees and managers. Make it clear that discriminatory behaviour and harassment is not acceptable.

Have a code of practice

  • Ensure it is widely and clearly displayed.
  • Make breaches a disciplinary offence.
  • Take disciplinary action before poor behaviour becomes established.

Educate and train all employees

  • Pay particular attention to those who recruit or manage employees.

Establish and publicise a channel for complaints

Review your policies and practices regularly

Harassment and segregation

Harassment and segregation count as less favourable treatment, and therefore as discrimination.

Any conduct that is unwanted or offensive to the recipient counts as harassment

  • This includes graffiti, jokes, lewd or sexist remarks, verbal abuse or physical assault.
  • Employees can complain about offensive behaviour even if it is not directed at them.

Segregation on grounds of race or sexual orientation is also discrimination

  • This includes allocating different shifts or different jobs to different people from different races.

You can be held liable for your employees' behaviour

  • To defend yourself, you would need to convince a tribunal that you had taken all reasonable steps to prevent it.

4. Equal treatment

Even when you have a policy and consciously apply it, you still need to take steps to prevent unintentional discrimination. The main danger areas are recruitment, dismissal, redundancy, and choosing people for promotion or training.

Focus on the requirements of the job when hiring or promoting employees

  • Establish objective criteria for selection.
  • Establish what you expect the new employee to do, not be.
  • Offer equal pay and conditions for work of equal value.
  • The same applies when setting conditions of employment.

Be aware of what affects your own reactions, particularly when hiring or promoting

  • Look at all the evidence, not just that which supports your instinctive reaction.
  • Involve other people in the process.
  • Gather information about an individual's performance from a range of sources.

Maintain records as you go along

  • Be prepared to explain why you chose one person rather than another.

Consider monitoring the composition and pay of your workforce

  • Compare your workforce against the population as a whole and carry out an equal pay audit.
  • This will enable you to check which groups are under-represented and paid differently. Investigate why.
  • Under the Equality Act 2010 it is prohibited to pay women less than men are or would be paid for equivalent duties.
  • Individuals who discuss their pay to find out whether there is discrimination going on are protected from victimisation, even if their employment contract says they cannot discuss their pay.
  • If an employment tribunal finds you have breached equal pay provisions, they can order you to carry out an equal pay audit.

Make sure all dismissals (including redundancies) are justifiable on legal grounds

  • Damages for discrimination are potentially much higher than for unfair dismissal. No qualifying length of service is needed.

5. Dealing with a complaint

Treat all complaints seriously and make reasonable investigations before responding.

It is in everyone's interests that complaints should be resolved promptly

  • Get advice. You may want to consult a lawyer.
  • Investigate the complaint thoroughly and objectively. Be prepared to use an independent third party to mediate.
  • Activate your formal grievance procedure if necessary. This must comply with statutory requirements.
  • If the complaint is justified, be ready to offer redress and change your policies.
  • If the complaint is not justified, tell the complainant and explain your reasons.
  • Hold an appeal if requested.

Employees can complain to the employment tribunal

  • Contract and agency workers can also complain to a tribunal.
  • A complaint to the tribunal is more likely if they still consider your response inadequate.
  • They must first contact Acas and submit an Early Conciliation (EC) form. Acas will then provide conciliation to attempt to reach settlement between you.
  • If settlement is not reached, or either party refuses to engage, Acas will issue an EC certificate so that the employee can submit an employment tribunal claim.

Complaints must be made to the tribunal within three months

  • This can be extended by the amount of time spent in conciliation.
  • The employee (or the employee's legal adviser) may send you a questionnaire on discrimination.
  • It is advisable (though not mandatory) to complete the questionnaire, which will become part of your evidence. Contact the tribunal if you consider the questions to be unreasonable.

You can still settle before the hearing

  • You can use Acas or an independent mediator to help you settle the dispute. This would be voluntary for both parties. But if you reach agreement, it can be made binding.
  • A 'settlement agreement' (previously known as a compromise agreement) is also binding. This generally involves the employee (who must have received independent legal advice) waiving their right to go to the tribunal. If either side breaks the agreement, the other can sue.

The more work you have put into anti-discriminatory policies the better

If the complaint goes to the employment tribunal:

  • be prepared to explain your policies and how they are implemented;
  • produce any documents that show why you made the decisions you did;
  • explain the steps that you have taken to investigate and address the complaint.

If a tribunal finds against you they can award compensation

  • Tribunals can award unlimited compensation which takes account of injury to feelings and loss of earnings.
  • Evidence that shows you have taken all reasonable steps should mitigate the award.
  • The tribunal can also recommend that you take specific actions to prevent any repeat. If you ignore these recommendations, the compensation award may be increased.

6. Allowable discrimination

Some forms of discrimination are permitted.

Action can be taken to help groups seriously under-represented in the workforce

  • Under-representation is measured over the preceding 12 months.
  • Members of such groups can be offered more favourable access to training and work experience.
  • They can also be positively encouraged to apply for work. But decisions on selection for employment or promotion must not be based on illegal forms of discrimination.

Discrimination may be permitted where an 'occupational requirement' applies

  • It must be a genuine and crucial requirement in order to do the job - for example, requiring a model of a particular gender to advertise clothing for that gender.
  • The application of the requirement must be 'a proportionate means of achieving a legitimate aim'.

Signpost

Note

Employment law is complex and is changing rapidly. This factsheet reflects our understanding of the basic legal position as known at the last update. Obtain legal advice on your own specific circumstances and check whether any relevant rules have changed.

Expert quote

"Base decisions on explicit criteria drawn from the needs of the job. If you are prepared to be open and explain decisions, you are less likely to unwittingly discriminate." - Margaret Dale, employment consultant