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Quarterly UK employment update

a backward glance

   April to June 2019 - a backward glance

Development Impact on employers
The right to receive a payslip has been extended to all workers (formerly it only applied to employees) from 6 April 2019. In addition, employers are now required to state the hours being paid for on payslips where the amount of wages or salary varies by reference to time worked. Organisations and their payroll suppliers need to ensure that the payslips they produce are compliant and that payroll software and time-recording practices have been appropriately updated.
The ET maximum penalty for an “aggravated” breach of a worker’s rights increased from £5,000 to £20,000 from 6 April 2019. See Government Guidance. “Aggravating features” are not legally defined but include deliberate or malicious acts by employers, which ETs may factor in to their assessment of compensation. The size and resources of the employer will be taken into account, as will any mitigating circumstances.
The national living wage increased to £8.21 in April 2019. Rates for younger workers and apprentices also went up. Meanwhile, the Low Pay Commission consultation on raising the national living wage rate in 2020 (to around £8.67) has closed and the findings are awaited. Employers must ensure their pay systems and workplace practices achieve compliance with the regulations and applicable minimum rates of pay. Many employers may not appreciate how their established payroll practices make them vulnerable to inadvertent, technical breaches.
The CA has concluded it is not sex discrimination for an employer to pay less to men who take shared parental leave than it pays to women on statutory maternity leave: Ali v Capita Customer Management Ltd and Hextall v Chief Constable of Leicester. Subject to any appeal (which we understand is being requested), employers need not seek to change shared parental leave or pay schemes.
The CA has confirmed that voluntary overtime pay is likely to constitute “normal pay” which should be included in the calculation of holiday pay unless it is exceptional: Flowers v East of England Ambulance Trust. Read our briefing. Although an appeal seems likely, a further critical aspect of the law which remains unclear and is unlikely to be resolved for quite some time, is how far back any such claims for payments should go. The law is therefore far from settled on this issue.
The Gov’t has stepped up its pressure on companies to comply with modern slavery reporting duties (read our briefing) and is consulting on how to incorporate modern slavery (and diversity) metrics into its procurement decisions. A Gov’t appointed review has recommended strengthening existing reporting legislation. Read their report here. We recommend that businesses required to report under the Modern Slavery Act should not delay publishing their latest statement for the 2018 financial year.
The CA has overturned an EAT decision on trade union legislation which had restricted an employer’s ability to change employment terms in a unionised workplace without collective agreement: Kostal v Dunkley. Read our briefing. This will be welcomed by employers because it opens up the possibility of making a direct offer to employees, e.g. as a temporary solution to an impasse with the union, if they are not being asked to relinquish their future collective bargaining rights. The union is applying for permission to appeal to the SC.
The CJEU has ruled that the Working Time Directive requires Member States to ensure that employers keep daily records of the working time worked by each worker to ensure compliance with limits on working time and the right to daily and weekly rest periods. Read our briefing. This judgment casts doubt on whether the UK’s record keeping rules comply with the Directive's requirements. However, the power of enforcement lies only with the HSE. Pending any response from the Gov’t or the HSE, employers should review what records they keep as failing to accurately record time worked can jeopardise an employer’s ability to successfully defend working time and minimum wage claims.
Two new EU employment directives have been finalised for a 2022 implementation: on work-life balance rights, covering paternity, parental and carers’ leave/pay as well as flexible working; and on transparent and predictable working conditions, including a change to written statements and new minimum employment rights which are principally aimed at the casual workforce. Depending on the UK’s Brexit terms and Gov’t policy, these directives may apply in the UK. The first would introduce 5 days' unpaid carers' leave per year and some changes to UK family leave/pay rules, the second reflects many policy aims already contained in the Good Work Plan. Read our update on the Plan.
The CA has confirmed it is unlawful direct disability discrimination to treat someone less favourably based on a perception that they have a progressive condition which could result in future disability (as per the Equality Act 2010): Chief Constable of Norfolk v Coffey. Read our briefing. This case represents the first time the UK courts have addressed the issue of perceived disability discrimination. An appeal to the SC seems likely but employers should beware making recruitment or promotion decisions based on a perception that an employee’s health may deteriorate.

 

Sun / Clouds a short range forecast

   July to September 2019 - short range forecast

Development Impact on employers
A Gov’t Consultation to finally impose a financial limit on public sector termination payments has been published, along with draft regulations. Once in force, this will place a cap on most exit pay in the sector of £95,000. Various exemptions and deviations will apply. A phased implementation is envisaged but the cap could apply to most public sector bodies as early as October 2019. Employers need to plan ahead for departures and to assimilate the various exemptions, etc., once the draft regulations are approved. Pension payments are likely to prove particularly contentious, if not exempt. Read our briefing.
The Gov’t is considering new conditions for the use of confidentiality (non-disclosure) clauses and rendering any non-compliant clause included in a settlement agreement void (read our briefing). A new statutory Code of Practice on sexual harassment and a further consultation on changes to the Equality Act are also likely to be published this summer. Regardless of whether the Gov’t acts, we recommend that employers: review contracts and settlement agreements to ensure that use of confidentiality clauses is managed on a case by case basis and is not automatic; and review harassment policies, training and associated grievance/complaints procedures for effectiveness.
The CA is due to decide whether the Agency Workers Regulations are breached where a difference in entitlement to basic terms is compensated for by the payment of an enhanced hourly rate; and whether agency workers must be provided with precisely the same number of working hours as the hirer's employees: Kocur v Angard Staffing Solutions Ltd. The EAT held that each term must be looked at individually rather than taking all the employment conditions as a package. Depending on the CA decision, this may have implications for temporary staffing costs and management.
The SC is to decide whether a restrictive covenant that prohibited being 'interested' or 'concerned' in a business was enforceable and, if not, whether it could be severed from a contract, leaving other restrictions intact: Egon Zehnder Ltd v Tillman. If the SC sides with the CA's restrictive approach to enforceability, employers should review covenants and update them where necessary.
Further details will emerge regarding the revising and extending of the off-payroll (IR35) tax rules into the private sector. Responsibility for determining the tax status of workers who supply their services via an intermediary, such as a personal service company, will transfer to the end user from April 2020 with liability for any unpaid tax also changing. This will be a significant change for users of this type of worker who should be taking preparatory steps as soon as possible, at very least to assess the extent to which personal service companies are engaged. The impact on costs might also prompt some clients to rethink employment models or renegotiate contracts for the supply of contractors. Read our briefing.

 

Telescope - a long range forecast

   October to March 2020 - long range forecast

Development Impact on employers
The postponed date for Brexit is now 31 October 2019 but, pending confirmation of who will be the next UK Prime Minister in July 2019, uncertainty still prevails. In the meantime, to ease the transition for workers in the event of no deal, EEA workers are able to stay in the UK for up to three months from arrival; apply for settled status through the EU Settlement Scheme; or seek permission to stay for up to three years under the European Temporary Leave to Remain scheme. Employers are reminded to be aware of their key EU workers and their rights to work in the UK after Brexit so that they can offer support and/or contingency arrangements. It will not be necessary to distinguish between EEA citizens in terms of checking employees’ right to work based on their date of arrival, until January 2021. Visit our Brexit hub for news and guidance for employers.
An EU directive on whistleblowing, agreed earlier in 2019, is likely to apply in the UK notwithstanding Brexit and will need to be implemented within the next 2 years. Its scope and implications will mean that implementation will be significant for UK employers. Read our briefing. Although the UK has something of a pioneering history with its whistleblowing laws, implementing the provisions of this directive will require some significant changes to UK law but, moreover, to employer obligations and workers’ rights.
The SC is due to hear Uber’s appeal against the decision that its drivers were workers, entitled to holiday pay and the minimum wage. Meanwhile, the CA is deciding whether Addison Lee should be allowed to appeal findings of worker status in cases brought by drivers and cycle couriers and a number of other status cases are proceeding through the tribunal system. Success for the claimants could encourage others to argue their status has been misclassified. Employers who engage individuals on a non-employed basis should consider carrying out a review and risk assessment.
Late in the year the Gov’t may respond to recent consultations, setting out how it plans to take forward proposals for ethnicity pay reporting and extended redundancy protection for pregnant women, maternity returners and those taking shared parental leave. Reporting ethnicity pay will require significant effort and buy-in from employers. Those who already collate ethnicity pay data may need to revise their approach. For the remainder, a raft of policies and procedures will need to precede pay reporting, from what ethnicity data is collected, how, and the steps taken to reassure and encourage staff. If the redundancy proposal is adopted, employers will need to give a wider range of employees priority over alternative vacancies.
Employers will need to start preparing for some of the Gov’t’s Good Work Plan proposals from April 2020, including: repeal of the Swedish derogation for agency workers; particularised terms for all workers; a 52 week reference period for statutory holiday pay; and a lower threshold for setting up information and consultation arrangements (e.g. staff councils). Further consultations are also likely later this year, including on employment status definitions; one-sided flexibility; and a proposed right to request more predictable and stable hours. Employers should review and update their standard contracts and statements of particulars and get ready to adjust the way they calculate holiday pay. The scrapping of the Swedish derogation will be a significant change in some sectors. Affected employers should review their arrangements with employment businesses, as well as their employment models (for a progress update on the Plan, read our briefing).
The Govt is expected to publish regulations setting out the detail of the new right to two weeks’ paid parental bereavement leave, which is due to take effect in April 2020. Employers should review internal policies for consistency with the new regime once the regulations are published.
The SC will decide whether a dismissal can be automatically unfair on the grounds of whistleblowing when the person who takes the decision to dismiss is unaware of the disclosures and the evidence relied on by them was tainted by another manager: Royal Mail Group Ltd v Jhuti. The SC is likely to address wider issues in the case, such as compensation. However, the case will determine what knowledge is imported to a decision maker and whether employers must introduce safeguards into their disciplinary process to protect against internal cover ups or evidence manipulation.

NB this update covers England, Wales and Scotland. It does not cover developments that apply only in Northern Ireland.

 

Key        
Key
CA Court of Appeal
CJEU Court of Justice of the EU
EEA European Economic Area (EU countries and also Iceland, Liechtenstein and Norway)
EAT Employment Appeal Trivunal
ET Employment Tribunal
Gov't The UK Government
HSE Health and Safety Executive
SC Supreme Court
WTR UK Working Time Regulations


For further information, please contact:

Diane Gilhooley
Global Head of Employment and Pensions

dianegilhooley@eversheds-sutherland.com
Tel: +44 207 919 0533

Previous updates

March 2019