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Quarterly UK employment update

a backward glance

   July to September 2019 - a backward glance

Development Impact on employers
The SC has given important guidance regarding restrictive covenants and when courts might sever wording from a contract to avoid a whole clause being unenforceable: Egon Zehnder Ltd v Tillman. Read our briefing. Whilst the SC decision usefully clarifies and updates the position of the courts, to increase likelihood of enforceability of such covenants, particularly for key staff, employers should review their contracts to ensure the restrictive terms are clear in meaning and necessary to protect the legitimate interests of the business.
The Gov’t has clarified how it will restrict the use of confidentiality (non-disclosure) clauses (including those within settlement agreements) for reporting to the Police and others but will also raise awareness of such clauses and their limitations through clearer contractual terms and access to information. Read our briefing. Failure to comply is likely to render clauses unenforceable and lead to additional awards in the ET. These reforms are expected later this year (accompanied by wider reforms such as a new statutory Code of Practice on harassment –see below). We recommend that employers act now to: review their contracts and settlement agreements (to ensure that confidentiality clauses are case-specific and not automatic) but also check that harassment, grievance policies, training, etc., are effective.
The CA has confirmed that an employer was wrong to cap holiday pay at 12.07% of annualised hours for a zero hour contract employee working term-time: it should have calculated such pay according to her average earnings over the 12 week period immediately before leave was taken: Brazel v The Harpur Trust. Although the sums involved are typically small, using 12.07% as a basis of holiday pay calculation for term time or zero hours workers is common practice in some sectors and will require a change for many employers. Read our briefing.
The EAT has concluded it is generally misconduct for an employee to engage in covert recording of meetings at work: Phoenix House v Stockman. It is good employment practice for employers and employees to notify an intention to record an internal meeting. Whilst disciplinary action may result, for clarity, employers should specify covert recording as an example of gross misconduct in their disciplinary procedures.

A recent EAT case serves as a reminder that legal advice privilege may be compromised if employers choose to selectively share parts of their legal advice with employees. In this case, their solicitor’s redacted, handwritten annotations to a dismissal letter were found to be disclosable as part of other legal advice voluntarily disclosed by the employer to the employee: Kasongo v Humanscale UK Ltd.

Waiving legal privilege to share advice can prove advantageous in disputes but should be embarked upon with caution. As this case demonstrates, where sensitive legal advice forms part of a wider transaction, it is not possible to “cherry-pick” which parts are withheld.

The Govt launched a series of Consultations in July regarding proposals to implement aspects of its Good Work Plan of 2018 (see previous briefing):

  • One-sided flexibility, aimed at introducing greater certainty over work schedules for flexible workers and potential compensation for late changes;
  • Proposals to support families, principally exploring options for reforming parental leave and pay; and
  • Establishing a new single enforcement body for enforcing employment rights, such as NMW and modern slavery.

Some aspects of the Good Work Reforms will come into force next year (see longer term forecast below) but the Gov’t has also revealed a next phase of proposals and ideas. Greatest political pressure currently is upon addressing contract transparency and protections for flexible workers, which will require employers to effect contractual changes but also change practice in work allocation and planning. The changes are likely to be formalised in late 2019/ early 2020 although reforming time off and pay for new parents is likely to be longer term. For an overview of the various Government Consultations issued in July 2019 see our summary document.

 

Sun / Clouds a short range forecast

   October to December 2019 - short range forecast

Development Impact on employers
The postponed date for Brexit is 31 October 2019 but a General Election in the UK is increasingly likely and may affect the direction of Brexit. Read our latest Brexit immigration briefings here and here. The outcome of an election will also shape future labour law strategy and the extent of ongoing alignment with current or emerging EU laws. The Party Conferences for the various UK political parties taking place this autumn will clarify policies expected to feature in pending election manifestos. The current Gov’t has several new workers’ rights in train to improve contract and pay transparency (as detailed below), whilst other parties are exploring greater intervention still in these areas.
Gov’t guidance providing further details of next year’s off-payroll (IR35) tax rules is expected. 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. The new IR35 rules and their extension to many private sector employers will be a significant change for users of this type of worker. They 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.
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.
Subject to a change of Gov’t in the UK, draft regulations which impose a financial limit on public sector termination payments may be brought into force, placing 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 by the end of 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 right to receive a written statement of terms is to be extended to all new workers from 6 April 2020 (formerly it only applied to employees) and there are some new inclusions for employees. In addition, those engaging agency workers will need to provide a “key facts” statement. Employers will need to plan ahead to ensure their employment contracts for new staff address all required terms (including the new additions). However, the greater change in practice will be providing this information to new workers.

 

Telescope - a long range forecast

   January to June 2020 - long range forecast

Development Impact on employers
The Gov’t has committed to extend redundancy protection for new mothers, so that suitable alternative employment must be offered (where available) within six months of a return from leave. Some additional protection for returners from ShPL may also be provided. Further review of how enhanced protection will operate in practice and the extent of wider protection for new parents is expected in early 2020. Once in force, redundancy and parental leave policies will need to be revised but employers will also need to consider carefully how to address competing claims for protection.
The SC is due to review what counts as work for minimum wage purposes for workers whose role involves “sleep-in” shifts at their place of work: Royal Mencap Society v Tomlinson-Blake. The CA has previously ruled that someone undertaking a sleep-in shift must be awake and working to receive NMW. A final decision will be welcomed but is likely to require further clarification of its application across differing factual circumstances and shift work practices.
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, despite the CA refusing to hear an appeal by Addison Lee against a finding of worker status of its couriers, other status cases are proceeding through the tribunal system: Uber BV v Aslam. As novel or tricky issues over employment status reach the upper courts, legal clarification will finally start to emerge. Employers who engage individuals on a non-employed basis should continue to carry out a review and risk assessment of their workers’ specific circumstances and arrangements.
The Gov’t is expected to issue a response to its Consultation on ethnicity pay reporting, setting out how it plans to take proposals forward. Despite express commitment to introduce this, how data must be collated and presented are fundamental questions awaiting Gov't clarification. Reporting ethnicity pay will require significant effort and buy-in from employers. A Gov’t pilot scheme seems likely at first during the course of 2020. 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, including how to reassure and encourage staff to share ethnicity data.
Employer preparation is needed for the Gov’t’s Good Work Plan proposals in force from April 2020, including: repeal of the Swedish derogation for agency 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). The holiday pay change will be significant for flexible workers and employers should be ready to adjust the way they carry out their calculations. 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 Gov’t 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.
From 6 April 2020 (postponed from 2019), all termination payments exceeding £30,000 will attract Class 1A NICs. The changes affect employer NIC liability only but will nonetheless need to be factored into the calculation of termination pay.
The Gov’t is likely to respond to its summer 2019 consultation proposals regarding ill-health at work, including a new right to request workplace modifications; improved guidance and simplification of/ increased access to SSP. Many employers already provide good ill-health support, such as accommodating employee absence and facilitating returns to work. However, staff departures due to ill-health remain high. These proposals aim to extend good practice but, if confirmed, will also require careful resourcing by employers.
Underpinning the Gov’t initiative regarding the use of confidentiality clauses (see above) is the broader issue of sexual and other harassment in the workplace. The Gov’t is expected to respond to consultation and confirm the re-introduction of protection from harassment by a third party; extending harassment protection to interns and volunteers and the period within which an ET claim must be brought. Whilst the Gov’t believes a statutory Code of Practice is the most effective means of encouraging proactive prevention steps against harassment by employers, pressure to bring back third party harassment protection has increased. Employers will need to adhere to the Code if they are to avoid liability for third party harassment through inaction/ omission. Read our briefing.

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
EAT Employment Appeal Trivunal
ET Employment Tribunal
Gov't The UK Government
NICs National insurance contributions
NMW The national minimum wage
SC Supreme Court
SHPL Statutory shared parental leave
SSP Statutory sick pay


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
June 2019