Employment

Employment challenges in the home care sector
24 March, 2017

We share some of the employment challenges faced by our clients in the social care sector, in the wake of the BBC Panorama report this week that scores of care companies are withdrawing from their contracts with local authorities and 69 care providers have closed in the past three months.

As widely reported, the precarious state of the social care sector has knock-on effects for the NHS, with high numbers of hospital patients “bed-blocking” as they await the availability of a home care package.  The demographics of the UK population meanwhile are set to escalate the demand for social care services for decades to come.  According to the ONS, the percentage of the UK population aged 65 and over is predicted to increase to nearly 25% by 2045, and the Centre for Workforce Intelligence estimates that at least two million more carers will be needed by 2025 in England alone to cope with growing demand.

Trends in minimum wage compliance and employment costs

The primary concern among care providers is that increasingly the funding provision for adult social care is failing to meet the growing employment costs which they necessarily incur. This is in the context of the National Living Wage rate increasing next month from £7.20 to £7.50 per hour and on target to increase to around £9.00 per hour by 2020.

Focussed enforcement action by HMRC, together with various union and media-led campaigns, are at the same time not only reinforcing principles of due compliance with minimum wage legislation, but also developing the boundaries of what can properly be classified as working hours for these purposes.

For example, it is now firmly established that the time spent by a carer travelling between their home visits counts as working time.  This presents a particular cost burden for the employer in rural areas, where the locations of home visits may be spread out, which may not be reflected in the contractual rates paid by the local authority.  The legal analysis of on-call and sleep-in arrangements in relation to minimum wage compliance is particularly complex and the subject of recent appeal decisions which are difficult to reconcile.  The absence of sector-specific HMRC guidance does not help care providers in this respect.  An example of the boundaries of minimum wage compliance being developed is the growing pressure for pre-employment training to be classified as working time and so attract entitlement to payment at minimum wage levels.

On top of salary costs, the 1% minimum employer pension contribution under auto-enrolment will increase to 3% by April 2019, and larger care companies (with payroll costs over £3 million) from this April will also bear the cost of the apprenticeship levy charged at 0.5% of their paybill.

The 64 million dollar question – or maybe that should be the £2 billion question – is how far the additional Government spending for social care announced in this month’s Budget will go to address these growing employment costs for care providers, and also towards meeting increasing demands for social care services which flow from an ageing population.

Recruitment and the Brexit impact

Related to the issues of pay and minimum wage compliance are the challenges which care providers are facing with recruitment and retention.  There is already a reported shortage of qualified carers nationwide, and in some regions there are particularly acute difficulties in recruitment, and hence the pressure on care providers to keep their pay-rates competitive both with local competitors in this sector but also with other local employers.

A final issue of serious concern here is the impact which Brexit will have on the social care sector, which is even more dependent on EU nationals than the NHS.  EU migrants comprise 7% of the social care workforce across the UK, the figure in the South-East being 10% and in London 12%.  The sector’s dependency on EU nationals has increased by over 40% in a period of two years, based on Government figures released last month.  Care providers are particularly vulnerable to the risk of an exodus of their European employees in the run-up to the UK’s exit from the European union, and are at the forefront of those calling for guaranteed residency rights for EU migrants currently working in the UK and contingency plans to ensure that there can be a continuing inflow of EU nationals post-Brexit to meet the staffing needs of the care sector.   


Employer claims £15m for breach of confidentiality, but High Court awards only nominal damages
13 March, 2017

In Marathon Asset Management LLP and another v Seddon and another [2017] EWHC 300 (Comm), the High Court  found two fConfidentialormer employees liable for breach of their duties of confidence after confidential files were copied and saved onto one of their USB drives before they left the business. However, the ex-employer’s claim for £15m in damages was rejected, and the ex-employees were instead ordered to pay a nominal sum of only £2.  

The former employer was an investment management business (Marathon).  For months leading up to his departure, one of the employees (Mr Bridgeman) copied a large volume of confidential files onto USB drives. He wanted to have access to these files, which contained documents relating to Marathon’s clients, funds and business operations, because he believed that they would enable him to “hit the ground running” in setting up a competing investment management business.  In actual fact, very few of these files were subsequently accessed and there was no evidence that he derived any material benefit from them.    

Another employee (Mr Seddon) saved a small number of files onto a shared drive, enabling Mr Bridgeman to copy those as well. These documents were never subsequently accessed.  

Mr Bridgeman admitted that by copying the files, he had breached his duty of fidelity and good faith to Marathon, and accepted that he had breached some of the restrictions in his employment contract.

There were therefore two main issues for the Court to consider:

  1. Whether Mr Seddon was liable for copying the files; and
  2. What, if any, damages should be payable?

Was Mr Seddon liable for copying the files?

Mr Seddon was found liable for breach of his duty of fidelity and breach of contract for placing files on the shared drive, because he did so with the intention that Mr Bridgeman would copy them.

However, Marathon sought to hold him liable for the files that Mr Bridgeman had copied. It advanced a number of arguments, which were ultimately unsuccessful. One of them was that Mr Seddon was liable for breach of a contractual duty to report Mr Bridgeman’s conduct. There was no express term in his contract requiring him to do so. The question was whether there was an implied duty as part of his duty of fidelity and good faith. It was found that this would depend on the circumstances, and in these circumstances the argument was rejected.  

What, if any, damages should be payable?

Marathon didn’t allege that either Mr Bridgeman or Mr Seddon had made any financial gain from their breaches, nor did it allege that Marathon had suffered any loss.

Instead, it argued that the ex-employees should pay the value of what they took, or what they would have had to pay Marathon for it to have agreed to release them from their duties of confidence in the first place. Marathon claimed that that figure would have been £15m.  Its arguments were rejected.

Many of the documents that had been copied contained information which could have been obtained from other sources, but not without time and expense. Leggatt J commented that he would have been able to assess damages by estimating the costs that would have been incurred in obtaining that information from other sources, but Marathon had failed to advance that argument.

Comment

Although the case focused on a number of complex legal arguments, the following practical advice can be taken from it:

  1. If you want to oblige employees to report the misconduct of their peers, it is advisable to insert an express clause into their contracts. g. an express duty to protect the interests of the business.
  2. If you are considering issuing proceedings against a former employee in breach of their obligations, make sure that you focus on the financial realities of the situation to assess whether or not it is worthwhile. You should consider whether you have suffered a financial loss or whether the wrongdoers have benefited from an illegitimate financial gain.

Various developments in employment law
2 March, 2017

Employment law is always changing and there are several things going on at the moment.  Here is a summary of some of those developments.

Equality in the workplace

Last week we heard that Aviva had threatened to terminate contracts with suppliers that fail to promote women to senior roles, using its buying power to drive change.  The warning was aimed at suppliers that have failed to sign up to gender equality initiatives such as the 30% Club campaign. 

This week, Baroness McGregor-Smith’s Review into race in the workplace was published https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/594336/race-in-workplace-mcgregor-smith-review.pdf   In the Review the Baroness calls for the public sector to use its purchasing power to drive change.  She recommends that anyone tendering for public sector contracts should have to show what steps they are taking to make their workplaces more inclusive in order to be awarded the contract.   She urges employers with 50 or more employees to;

  • publish a breakdown of their workforce by race and pay band, on their website and in the annual report;
  • draw up five-year aspirational diversity targets and measure progress annually; and
  • nominate a board member to deliver on these targets.

This goes further than the 250 employee criteria for publishing gender pay gap data, which comes into force from April 2017.

The Government have responded stating that their preference is to rely upon pressure from investors to have a diverse workforce rather than legislation.  It will however monitor the progress over the next 12 months and “stand ready to act if sufficient progress is not delivered”. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/594365/race-in-workplace-mcgregor-smith-review-response.pdf

A Business Diversity and Inclusion Group will be set up and chaired by Business Minister Margot James.  This will bring together business leaders and organisations and will include Baroness McGregor-Smith, Sir Philip Hampton and Dame Helen Alexander (who are leading a review aimed at increasing female leadership in FTSE companies) and Sir John Parker (who is currently leading a consultation on recommendations to increase Black Minority Ethnic (BME) representation in the boardroom).

Holiday and commission

The holiday pay saga has been making its way through the courts for a few years and I’m sure you will have all heard of Lock v British Gas.  For the full background read Chris’ blog.  The Supreme Court has now refused permission to appeal to British Gas and the case will go back to the employment tribunal to calculate the amount Mr Lock is owed.  Employees are entitled to be paid holiday pay based on both their basic pay and any commission they earn. Unison have however warned that because the decision is based on the Working Time Directive, which is a European Directive, it could be at risk as a result of Brexit.

Employment status

Employment status and the gig economy remain very much in the press.  Patrick wrote about the Uber case in November and Chris wrote last week about the Pimlico Plumbers. The Government is currently considering employment status issues as part of the Independent Review of Employment Practices in the Modern Economy.  Patrick attended one of the Matthew Taylor ‘Modern Employment Review’ events last week, getting involved with some interesting discussions on topics such as employability, enhancing skills investment for all and the mismatch between the tax regime and employment law around self-employment and worker status.  The Review is expected to publish in June this year.

Trade Unions

The Trade Union Act 2016 came into force on 1 March 2017.  The Trade Union Act prohibits industrial action unless there has been a ballot turnout of at least 50%.  This actually means that the industrial action will not be protected by law and so it can be stopped by obtaining an injunction.

An additional threshold of 40% of support to take industrial action from all eligible members must be met for action to be legal in some public services such as health, transport, education, boarder security and fire sectors.

Compensation limits: the new compensation limits have now been published and will come into force from 6 April 2017. There will be an increase to the limit on:

  • the compensatory award for unfair dismissal from £78,962 to £80,541; and
  • a week’s pay for the purposes of calculating statutory redundancy payments and the basic award for unfair dismissal from £479 to £489.

Both apply to dismissals where the effective date of termination is on or after 6 April 2017.


Worker status – the plot thickens
22 February, 2017

The Court of Appeal recently handed down its judgement in the case of Pimlico Plumbers Ltd and another v Smith [2017] EWCA Civ 51.

Pimlico Plumbers, following on from the high-profile Uber and Citysprint cases, is the latest case in which the courts considered the important question of whether individuals are classed as employees, workers or self-employed individuals.

Why does it matter?

Different rights and obligations apply depending on whether an individual is classed as an employee, worker or self-employed.

Some core legal protections only apply to employees, such as the right not to be unfairly dismissed and the right to receive statutory redundancy payments; while workers are not entitled to these rights, they are entitled to minimum wage, holiday and sick pay; and, a self-employed/independent contractor’s rights are very limited since they are viewed to be operating as a business in their own right.

The Pimlico Plumber

Mr Smith was registered as a self-employed plumber (and benefitted from the associated tax breaks) and worked exclusively for Pimlico Plumbers from 2005 until 2011, when his contract was terminated. He brought a number of claims including unfair dismissal, wrongful dismissal, holiday pay and discrimination claims.

After considering the agreement between the parties and the reality of the working relationship, the Employment Tribunal (ET) found that Mr Smith was a worker rather than an employee – therefore a number of his claims were dismissed. The Employment Appeal Tribunal (EAT) upheld that decision and Pimlico Plumbers appealed.

In coming to its decision on whether Mr Smith was a worker or self-employed, the Court of Appeal (CoA) focussed on two key issues:

  1. whether Mr Smith was required to perform work personally; and
  2. whether Pimlico Plumbers was a client of Mr Smith.

The requirement to perform work personally

A requirement to personally perform services strongly indicates a worker or employee relationship. In this instance, the CoA held that whether Mr Smith undertook to perform work personally turned entirely on the terms of the contract.

The language used in the contract suggested that Mr Smith was to perform the services personally.

However, the contract permitted Mr Smith, subject to the prior approval of Pimlico Plumbers, to arrange for an external plumber to perform the work in his place and there was an informal practice of effectively swapping jobs/shifts with other Pimlico Plumbers.

The CoA concluded that this did not constitute a truly ‘unfettered right of substitution’ and as such Mr Smith had been required to perform the work personally.

Was Pimlico Plumbers a client of Mr Smith?

If Pimlico Plumbers was in fact a client of Mr Smith it would support the argument that he was acting as a business in his own right, rather than as an employee or worker of Pimlico Plumbers.

The CoA again agreed with the ET that Pimlico Plumbers was not a client of Mr Smith. Rather, Mr Smith was subordinate to, and an integral part of, Pimlico Plumbers.

Although his contract stated that there was no obligation for Pimlico Plumbers to offer work and no obligation on Mr Smith to accept work, the company’s contractual ‘manual’ provided for a minimum of 40 hours per week over 5 days and included stipulations about wearing company uniform and using a company van with Pimlico Plumbers’ logo. Also relevant was the fact that Mr Smith’s contract contained onerous restrictive covenants, including a prohibition from working as a plumber in Greater London for 3 months after termination of his contract.

The appeal was dismissed.

Advice

Although fact specific, this case highlights the difficulties faced for a business model that wants individuals to appear to the company’s clients as part of the company, but at the same time the company tries to maintain that the individuals are independent contractors rather than employees or workers of the company.

Mr Smith’s contract described him as an ‘independent contractor’ but the courts will look behind this and examine the reality of the relationship. In short, businesses need to think carefully about how they engage people if they want to avoid creating an employer/ employee or employer/worker relationship.

In light of the uncertainties posed by the ever changing labour market, the government has commissioned a review of employment practices in the modern economy.  Employment status is set to remain a hot topic for some time to come.


Workplace relationships – romantic fiction or horror story?
15 February, 2017

With good timing for St Valentine’s Day, interesting researworkplacech was published this week on the subject of workplace relationships by the employee engagement firm Perkbox.

A third of employees reported having a relationship with a work colleague at some point in their career, with a sixth of these relationships resulting in marriage or civil partnership. On the down side, one in seven employees reported that they had had to leave their jobs primarily because of a failed romance with a work colleague.

According to the study, general attitudes towards workplace relationships were broadly, but not universally, supportive. 67% of employees, and 62% of managers, believed that workplace relationships are not a problem as long as they do not interfere with work.  However a quarter of employers had policies in place discouraging romantic relationships at work, and in some cases (7%) employers sought to prohibit them in the wording of employment contracts.

Personal relationships policies

Employers which seek to introduce blanket prohibitions on personal relationships would be seen to fly in the face of reality, with the potential for adverse effect on recruitment, staff morale and retention. It could be argued, particularly where the employer is in the public sector, that such a prohibition would infringe the right to respect for private and family life under Article 8 of the Human Rights Act.  For similar reasons there has been little appetite in the UK for the implementation of “love contracts”, sometimes found in the USA, in which employees in a personal relationship are required to confirm that they have not been coerced into the relationship, with a view to the employer avoiding liability for subsequent sexual harassment claims.

The recommended approach for employers is to strike a fair balance between the protection of their business interests and a respect for the privacy of their employees, and to view workplace relationships as an issue of concern only where they have an impact on conduct at work. In particular it is common to see a relationships policy which requires employees to disclose personal relationships which present the risk of a conflict of interest or risk “pillow-talk” breaches of confidentiality.

Personal relationships between managers and their direct reports are a particular area of concern for employers, with for example the risks that these improperly affect the allocation of work duties and influence decisions about promotions and pay increases. Equally in this situation there are potentially catastrophic consequences for the line management relationship, and for the wider team, if the personal relationship between supervisor and subordinate comes to an end.

An appropriate disclosure policy will mitigate these risks, in particular enabling suitable safeguards to be introduced such as alternative reporting lines. In some contexts an absolute bar on personal relationships between managers and direct reports may be suitable.  For example in a case in 2007 such a policy operated by Hampshire Police was found to be justified in the aim of managing the risks of undue influence and favouritism affecting the integrity of the force.

It will also be appropriate for some organisations to have policies which address the risks of employees forming personal relationships with their clients/customers which conflict with their professional duties and responsibilities.

Employers must also ensure that the adoption and application of relationships policies do not create the grounds for discrimination claims. For example in 2015 Port Vale Football Club lost a sex discrimination claim after it dismissed its events sales manager over rumours of an affair with the club’s leading striker, against whom no action was taken even though the club had strict rules over player-staff workplace relationships.

Employers should have clear grievance and anti-harassment policies in place as a framework in which to address complaints of favouritism and to manage the situation where the ending of workplace relationships spills over into unwanted or disruptive conduct.

For those interested in further discussion on these issues, Radio 4’s “The Bottom Line” on Thursday 16 February is on the theme of “Managing Workplace Relationships”.


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