Backhouse Jones seminar

Ever an entertaining speaker, Ian Jones of specialist road transport law firm, Backhouse Jones, took care of proceedings at their recent transport law seminar. The event looked at: the roles of directors, operator’s licences, holiday pay and how not to end up in front of a Traffic Commissioner. 

Chris Peat’s report focuses on some of the key messages of general interest to readers. These should not be construed or relied upon as legal advice and an appropriately qualified person should be contacted when legal guidance is required on specific issues.

Who’s in charge?

First to present at the event was Backhouse Jones Director, Jonathon Backhouse, who looked at directors and their roles. He started by outlining that whatever their director role and title might be, in the Traffic Commissioners’ view they were equally responsible in law for the business. There was also no distinction in respect of their status, whether an Executive Director in full or part time employment with a company or a Non-executive Director who is not an employee, but involves themselves in the affairs of the business in an advisory or supervisory manner.

Jonathon explained that directors have a number of statutory duties (which are set out in the Companies Act 2006, including a duty to act in the best interests of the company and a duty to exercise independent judgement etc). The company’s constitution will define the aims of the company and how those aims are to be achieved. The directors must act in accordance with this.

He said it is important for anyone who makes decisions on how a company is run to be listed at Companies House. He said it is even worth identifying those with a vanity title of director, even if they are not part of the executive board, adding ‘who carries the can’ is of great interest to Traffic Commissioners.

This also applies to what are known as Shadow Directors, those who are not listed and do not have a title of director, but who pull the strings nevertheless. He gave the example of a husband and wife team where the lady is named as the official director but who acts on behalf of her husband who works behind the scenes. It is not an offence to be a Shadow Director, unless disqualified from being a director of a company. ‘So register yourself as a director, because you’re going to be considered one anyway,’ said Jonathon.

He then discussed Traffic Commissioners and how they will consider how much a director is to blame for any non-compliance or issue they may have with the company. He said that once a Commissioner revokes a licence, the next question will be: ‘Why shouldn’t I disqualify the directors?’

To summarise, Jonathon said you owe your duty to the company alone. He suggested directors leave their personal agenda outside the boardroom. It is always safer to disclose any concerns or a conflict; you cannot be criticised for saying you have any disagreements, but you can be for not saying anything despite having them.

Who holds the licence?

Andrew Woolfall, Backhouse Jones Director, was next to speak, taking as his subject who holds the operator’s licence. He said Backhouse Jones often sees mismatches in licences, for example, a company may declare itself a limited entity, yet its finances relate to someone else. Traffic Commissioners are cracking down on the finances being in the name of the operator.

It is important to know what kind of business you are, claimed Andrew. Are you a sole trader, a limited company, etc? If you subcontract work out, are the sub-contractors’ licences correct? You must check, reminds Andrew.

Have you checked your licence is in the right name? Most companies start life as a sole trader, he said, but he asks whether this is still the case later on. Is the sole trader still the operator? He gave the example of businesses where the father holds the licence, but the children run the company. Andrew has even had cases where the licence holder is dead. He warns not to assume you are operating legally just because there is a licence there, it is important it is in the right name.

‘Most of the problems with licences we find are with partnerships,’ he said. If there is a sleeping partner, then it is key to remember they still have responsibility. Traffic Commissioners are particular about partnership changes, he said. If you are a partnership, there are two potential scenarios which might arise. Firstly, if a partner leaves or dies, reducing the number of partners from, for example, five to four, this will, in the absence of a partnership deed (which should define what happens when a partner leaves or dies and may provide for a continuation of the partnership) result in the termination of the partnership. Secondly, if a partner leaves or dies, reducing the number of partners from two to one, the partnership will terminate. This is a complex area of law, where any changes to a partnership are to be made, advice should be sought prior to those changes taking affect. Discrepancies with licence holders are often found during investigation into issues arising from tachographs and other similar compliance concerns.

A misconception with licences, according to Andrew, is that they are transferable. He said, ‘We spend a great deal of time sorting out errors when companies get bought and sold. Don’t just assume that if you use large city lawyers, they know about licences.’

Finally, he said to make sure the basics on the licence are correct, so is your name spelt right? The person going to a Public Inquiry has to be the person on the licence.

Holiday pay

Steven Meyerhoff spoke next, covering issues surrounding holiday pay. Starting with the basics, he said every employee is entitled to 5.6 weeks statutory paid holiday per year and then considered what should be included in holiday pay. This is equivalent to 28 days for those who work five days a week and is made up of the right under the Working Time Directive to a minimum of four weeks’ leave, and the domestic right to an additional 1.6 weeks’ annual leave each year.

On allowances and bonuses, if these are provided on a regular basis, then they ought to be included in holiday pay. However, if it is a discretionary reward, then it need not be paid. So, for example, a regular bonus related to not having an accident must be included, whilst a Christmas bonus need not be. In other words the payment must be intrinsically linked to the performance tasks under the contract.

Steven reminded the audience that paid holidays have been made law by the European Commission as a social directive, to address any health and safety concerns. The legal basis is that employees should be encouraged to take their full annual leave as it avoids fatigued staff.

Avoid TC trouble

James Backhouse took to the podium to take the audience through how to avoid finding themselves before the Traffic Commissioners (TCs). Finance will be considered when an inquiry is launched by a TC, but the main causes of troubles are maintenance and tachograph issues.

He reminded the gathering that just because a vehicle has passed its MOT, it is not necessarily roadworthy at the time of an investigation. After all, a vehicle may have passed its MOT a week ago with the bare minimum tyre tread depth, but a few days down the line it may then be on the wrong side of legal.

Driver defect reporting failures are one of the most common issues relating to getting in trouble with TCs, claims James. He asked who has the key maintenance responsibility and many of the audience answered correctly: the driver. He asked whether drivers know this; do they consider themselves to be part of the maintenance process? Also, do you consider drivers to be a part of the maintenance regime?

In James’ experience, poor management of the records and maintenance process is another major cause of TC interest. He said it is the Transport Manager’s responsibility to keep these, but it is the Director’s responsibility for making sure the Transport Manager is competent and does the job properly.

As an example, a problem arises when a driver reports a defect and the fitter takes a look, following which he puts ‘no fault found’ on the records. This is ‘unacceptable’, says James, as there is no proper analysis of why no fault was found. Bus drivers know their vehicle and drive it a lot more often than fitters do. The latter, he says, perhaps only drive it around the yard to try and find out what the fault is.

A proper description is required when the fitter signs off a vehicle after a reported fault. This must be written in a clear way with ‘no swear words’ or use of slang. It is important to remember that these documents may be read out at court hearings.

Hasty repairs are to be avoided at all costs, even if they are for small faults. ‘Small faults cause big problems,’ he said.

Tachograph and domestic hours non-compliance is another invitation to get a visit from the Traffic Commissioner, according to James. He said, ‘It is amazing how many people use tachograph switches incorrectly.’ The Traffic Commissioner will be more interested in whether you have a poor tachograph system in place, rather than individual, one off incidents. It is the Transport Manager’s and Director’s responsibility to ensure this is not the case. At its most serious, he has seen collusion between management and drivers to falsify records. He also reminded the audience that TCs are now focusing on bus reliability and punctuality.

One way to avoid ‘getting into hot water’ is to use external audits and to get an internal KPI system. Getting advice early is something he suggested too, relating how Backhouse Jones’ Backup scheme could help in achieving this. The package provides legal advice for operators from 0.26p per vehicle per day including discounts available for CPT members.