Employment

Taylor-made ideas for overhauling employment law
13 July, 2017

The Taylor Review “Good Work” report published this week included a wide range of proposals for reforming employment law, in support of the expressed ambition that all work in the UK economy should be “fair and decent” with realistic scope for development and fulfilment.

Worker status

The report recommends keeping the distinction between employees and workers, although suggests renaming workers as ‘dependent contractors’.  The intermediate ‘worker’ status is viewed as helpful in applying basic protections to less formal working relationships.  It suggests that the legal definitions of employees and workers should be revised to reflect case-law principles (particularly the key elements of mutual obligation, personal service and control), with a greater emphasis on the aspect of control in the definition of worker status going beyond just supervision of day-to-day activities.

The report crucially proposes removing the requirement for workers to have an obligation to perform work personally, such that an individual would not forego worker status just because their contract includes genuine substitution powers.  This approach would, it is predicted, result in fewer employers operating bogus self-employment arrangements and more individuals enjoying at least basic employment law protections.

Individuals would be able to bring a Tribunal claim to determine their employment status without having to pay a fee, and the burden would be on the alleged employer to prove that the individual is not an employee or worker.

Workers would be treated as employed for the purposes of tax status, so establishing clear responsibilities for the payment of National Insurance contributions.

Sick leave and sick pay

The report proposes a number of reforms to the current system of statutory sick pay (SSP).  The right to SSP as a basic level of income replacement would be extended to all workers and employees, with the current earnings threshold removed.  The right to SSP would be a right from day 1, however would be accrued in line with length of service in the same way as the right to paid holiday.  Therefore employers would not be required to give the full 28 weeks of SSP to individuals who have only worked for them for a short time.

The report also states that more needed to be done to support employees returning to work after sick leave, and advocates introducing a statutory right to return to the same or a similar job after a period of prolonged ill health.

Written statement of terms

Under the report’s proposals, written statements of terms would be required to be given to workers as well as to employees on day one of their engagement.  Currently this statement can be provided up to two months after the start of employment.  The written statement of terms would include a description of statutory rights and thus the individual would have greater clarity about their entitlement to basic employment protections.

There would also be a stand-alone right to compensation if the employer fails to give a written statement, without this right being contingent on the employee successfully pursuing some other claim.

Zero hours contracts

The report stops short of making any recommendations for the prohibition of zero hours contracts, however it suggests (subject to further advice from the Low Pay Commission) that a higher rate of the National Minimum Wage could apply to hours which are not guaranteed by the employer.

It also proposes that workers on zero hour contracts should have the right to request guaranteed hours after 12 months, with the average weekly hours worked in the previous year as the starting assumption for any new contract.

Another proposal is that larger employers should have duties to make public information on their workforce structure including information about agency services and zero hours contracts.

Holiday pay

The report proposes increasing the reference period for calculating holiday pay, where pay is variable, from 12 weeks to 52 weeks.  This proposal reflects the ECJ cases of Lock and Williams that the reference period should be properly representative and reflect normal working.  This proposal is seen as recognising the seasonal fluctuations in much casual and zero hours work.

The report also suggests that individuals should be allowed the choice of rolled-up holiday pay, although the ECJ has ruled this practice as unlawful under the Working Time Directive.  For example a person paid at the national living wage of £7.50 per hour could opt to receive a rolled-up rate of £8.41 per hour in lieu of paid holiday leave.

The report proposes giving HMRC enforcement powers in relation to holiday pay in the same way that HMRC can enforce non-compliance with the National Minimum Wage.

Information and Consultation of Employees (“ICE”)

Since the ICE regulations were introduced in 2004, organisations with at least 50 employees are required to put in place arrangements for informing and consulting with workplace representatives about issues and changes in the business, where at least 10% of the employees request an information and consultation agreement.  The process can also be initiated by the employer.  In practice this legislation is often overlooked.  In 2011 only 14% of qualifying employers had an on-site consultative forum or works council.

The report recommends that the threshold for requesting ICE arrangements should be reduced to just 2% of the workforce.  It also proposes that workers should have the same ICE entitlements as employees.  These recommendations reflect the view of effective “worker voice” and participative consultation as integral to good employment relations.

Tribunal fees

Other than its proposal about claims to decide employment status, the report does not include any recommendations for the abolition or modification of the current scheme of Employment Tribunal fees.  This omission has been criticised in some quarters on the premise that workplace rights are only as good as their ability to be enforced.

Conclusion

The outcomes of the Taylor Review are due to shape the direction of employment law reform in the coming years, although it is difficult to predict which of its recommendations will be taken forward into legislative change and which will disappear into the long grass.  Clearly views will differ across the political spectrum whether the report itself was “good work” or fell short of expectations.


Gross Misconduct = Fair Reason for Dismissal….not always!
23 June, 2017

An employee with 2 years’ service has unfair dismissal protection, unfair dismissalmeaning that to be fairly dismissed an employer must follow a fair process and terminate for a fair reason.

Normally, an employer that made a finding of gross misconduct may expect to be able to dismiss an employee; however, as shown in the matter of Arnold Clark Automobiles Ltd v Spoor it is possible for a dismissal for gross misconduct to be unfair!

Background

Mr Spoor had been employed by Arnold Clark Automobiles Ltd (ACA) as a motor vehicle technician for 42 years and had a clean disciplinary record.

In a heated discussion he grabbed an apprentice in the area around collar. In a meeting with his manager the following day he admitted touching the apprentice in the neck area and apologised to the apprentice.

The manager informed Mr Spoor he did not plan to follow a disciplinary process and would instead issue him with a ‘letter of concern’ in accordance with ACA’s informal procedure.

However, when the manager informed HR of the matter (with a cover note stating: ‘Had some handbags between two guys here and we will be issuing [Mr Spoor] with this letter’) HR deemed that the allegation amounted to physical violence requiring a formal disciplinary process.

ACA’s disciplinary rules listed physical violence as an example of gross misconduct and stated that in the event of gross misconduct employees would normally be dismissed immediately and without notice or payment in lieu of notice.

The HR department took the position that ACA had a ‘zero tolerance’ policy towards physical violence and as a result Mr Spoor was dismissed without notice, despite his long service and unblemished disciplinary record. Following his unsuccessful internal appeal he brought a claim for unfair dismissal, wrongful dismissal and breach of contract.

Decision

The Employment Tribunal found that:

  • the investigation undertaken by ACA was not one that could be said to be within the range of reasonable responses open to an employer – in part due to ACA not considering the views of the manager and apprentice on the seriousness of the matter;
  • no reasonable employer would have dismissed Mr Spoor – in consideration of his length of service and clean record; and
  • Mr Spoor contributed to his own dismissal to the extent of 50%.

 

ACA appealed the decision. The EAT dismissed the appeal stating it was clear the dismissal was unfair. In particular, it said the use of ‘normally’ in ACA’s disciplinary rules indicated that ACA could use its discretion, which in the circumstances would have been appropriate, and that there was no evidence that ACA operated a zero tolerance policy towards physical violence.

Take Away

This case highlights that on its own a finding of gross misconduct does not necessarily mean it is a fair to dismiss the employee.

It is important, as when contemplating all disciplinary sanctions, to carry out a thorough investigation and to consider all of the circumstances – such as any mitigating factors, which could include length of service, disciplinary record, nature and seriousness of the offence, and how you have reacted to similar offences in the past.


Employment law after the general election
15 June, 2017

What changes to employment law can we expect in the near future brown ballot boxfollowing the outcome of the general election, as we see the formation of the new Government and we wait for the ink to dry on the goatskin parchment ready for the Queen’s Speech?

European employment rights after Brexit

However the Government’s plans and priorities towards Brexit may or may not be realigned, the legislative programme for the new parliament is bound to be dominated by the so-called Great Repeal Bill, which is intended to copy across all existing European legislation into domestic law, repealing the European Communities Act 1972 and seeking to end the jurisdiction of the European Court of Justice.  This process will ultimately involve overhauling all the primary and secondary legislation which implement EU legislation, for example the Working Time Regulations.

The implementation of other proposals from the Conservative manifesto will have a more immediate impact on employment law, and we may in particular see included in the Queen’s Speech those proposals which are likely to enjoy broad cross-party support.

Family leave rights

Two proposals stand out here.  Firstly it is planned to introduce a statutory right to take time off, for between 3 months and 12 months, for employees whose family members require full-time care.  The employee taking leave would retain their employment rights and be entitled to return to the same job.  This right would expand on the current rights to take reasonable time off to deal with emergencies involving dependants.  Its take-up may be limited however because the leave would be unpaid.  It is also possible that this right would be limited to larger employers only, for example those with at least 250 employees.  Secondly a new right to child bereavement leave would be introduced, possibly providing the right to up to two weeks’ paid leave (whether at actual pay or at a statutory pay-rate).

Leave for training

Currently only people employed by large employers, those with 250 or more employees, have the statutory right to request time off for training.  It is proposed that this right would be extended to all employees.

Mental health and the Equality Act

The Conservative manifesto included a commitment to expand the scope of disability discrimination under the Equality Act so as to cover those suffering from episodic and fluctuating mental health conditions, for example depression or bipolar disorder, which may not currently satisfy the definition of a disability.  How this would be achieved is not clear, but one option would be to specify certain mental health conditions as deemed disabilities, in the same way as cancer or multiple sclerosis.

Equality gap reporting

The challenge to the Government here may be that these proposals are seen as not going far enough, and so are liable to significant amendment before coming law.  There was a promise in the manifesto to require large employers to publish more data on the gender pay gap, but no mention of introducing penalties for non-compliance with the reporting obligations.  There was also a promise to introduce for large employers a new mandatory reporting requirement on the “race gap” in terms of pay disparity between employees from different ethnic backgrounds.

Worker voice at board level

The manifesto promise on this front would only apply to listed companies.  The proposal is that listed companies would be required to adopt one of a selection of measures to improve employee representation at board level.  The options would be the nomination of a board director from the workforce, creation of a formal employee advisory council or assigning specific responsibility for employee representation to a designated non-executive director.

Employment status and the gig economy

In the longer term (and here the crystal ball starts clouding over) there is a commitment to follow up the outcomes of the Taylor Review of modern employment practices with measures to ensure that the interests of those working in the gig economy, as well as those of traditional employees and the self-employed, are properly protected.

Conclusion

While the current state of uncertainty extends to the direction and timing of employment law reform, we can expect significant legislative changes to take shape in this area over the coming months.


Can an employer fairly make an employee redundant following a period of ill health absence?
7 June, 2017

In Charlesworth v Dranfields Engineering Services Ltd the Employment Appeal Tribunal (EAT) considered this question.

The Facts

The Claimant was a branch manager of the Respondent company.  The company was underperforming and was looking to cut costs in 2012.  The Claimant was admitted to hospital with renal cancer in 2014 and was absent from work for approximately two months.  Whilst he was off, the company realised it could manage without the Claimant’s role and identified that it could make a saving of £40,000 per year by deleting his post and absorbing his responsibilities into other roles at the branch.  

Shortly after returning to work, the Claimant was made redundant following a consultation process. The Claimant brought a number of claims, including one of discrimination arising from disability, all of which were dismissed by the Employment Tribunal. The Claimant appealed on the basis that he was dismissed because of his absence and therefore this amounted to disability-related discrimination.

The Outcome

The EAT dismissed the Claimant’s appeal asserting that whilst it accepted there was a link between the Claimant’s absence and his dismissal, the redundancy process was not carried out because of the Claimant’s absence. The Claimant’s absence simply gave the Company the opportunity to realise they could manage without anybody carrying out his role.

What this means

Where companies have carried out a review of their business and decided that a particular role may not be needed, that role can potentially be deleted. This is a useful decision for employers, who might otherwise have assumed that making an employee redundant would always be disability discrimination in circumstances where the realisation of not needing a specific role occurs during an individual’s ill health absence.  

Although this is a useful decision for employers, the EAT’s judgment contained a warning.  Employers should think about the reason why they are dismissing an individual as there will be many cases with similar facts where the employee is dismissed because of their absence. If the employee’s absence itself is the reason for the decision to dismiss, the dismissal would then amount to disability-related discrimination.   


Holiday pay: what constitutes a break in a ‘series of deductions’?
30 May, 2017

In the recent matter of Fulton v Bear Scotland the EAT considered, in relation to holiday pay, whether a gap of three months between non-payment or underpayment of wages (in effect underpaid holiday pay) breaks the ‘series of deductions’, therefore limiting an employer’s exposure.

Background

The primary purpose of the Working Time Directive is to protect the health of employees. It does this by restricting the hours that employees are able to work, such as requiring rest breaks and rest periods, and giving employees the right to a minimum annual leave entitlement.

Back in 2011 (Williams v British Airways) and 2014 (Lock v British Gas) respectively the European courts acknowledged and established that if an employee’s normal remuneration included certain commission, overtime payments, and other allowances, then these are to be included in the employee’s holiday pay – otherwise the employee might be deterred from taking annual leave, which goes against the aim of the Directive.

Bear Scotland v Fulton 2014 EAT

In November 2014 the EAT confirmed in the case of Bear Scotland v Fulton that the UK’s Working Time Regulations could be read to conform with the Working Time Directive. The EAT determined that the ‘normal remuneration’ principle applied in the UK and that three months between an underpayment of holiday pay broke the ‘series of deductions.’ The case was passed back to the employment tribunal to apply the law to the facts of the case.

At the time the decision caused some concern for employers, with the potential for claims for a ‘series of deductions’ going back multiple years. However, shortly after the above decision a cap of two years was imposed on back pay in unlawful deduction from wages claims.

Fulton v Bear Scotland 2016 EAT- Break of three months?

The employment tribunal stated it was bound by the decision of the EAT and excluded any claims where more than three months had passed between successive failures to make the correct holiday pay. The claimants appealed arguing that on this point the EAT had been making a suggestion rather than it being material to the decision.

Providing clarity, the EAT disagreed and confirmed that a gap of three months would break the ‘series of deductions’ meaning a tribunal could not consider earlier underpayments.

What does this means for employers?

The decision is good news for employers and limits their exposure to claims.

Further, case law and the position of the courts has been that the requirement for holiday pay to be calculated on ‘normal remuneration’ is limited to the minimum 20 days under the Working Time Directive (as set out and implemented by regulation 13 of the Working Time Regulations) rather than the statutory minimum of 28 days under the Working Time Regulations (regulation 13A of the Working Time Regulations provides for the additional statutory entitlement of 1.6 weeks/8 days).

On the basis that employers have the right to direct when an employee can take leave it follows that employers can determine when the 20 days under the Working Time Directive are taken.

Some employers include a clause in their employment contract, or a section in their holiday policy, expressly stating that the first four weeks of annual leave taken in any holiday year shall be deemed to be the leave derived from the Working Time Directive (regulation 13 of the Working Time Regulations).

Therefore, the likelihood of there being a gap of 3 months (and a break in the ‘series of deductions’) between the last of the first 20 days of annual leave taken in one holiday year and the first day of annual leave in the following holiday year could be quite high. 


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