As the end of the year approaches, Kirsty Rogers, national head of employment at DWF, reviews some of the most important cases, regulations and legislation in the field of employment law over the past 12 months, as well as analysing the issues that in-house lawyers can expect to be dealing with in the months ahead
As yet another year passes and the New Year beckons, its time to take stock of where we are. As ever, the merry go round of changes relating to employees has been fairly busy and it’s useful to review what has happened, what is going to happen, and what technical issue or forthcoming legislation is being reviewed.
What to expect
Looking ahead, the following snapshot provides information on a few things you can expect.
Consultation on modern workplaces
The government published its plan for ‘a culture of flexible, family-friendly employment practices’ in May 2011. This includes the following key proposals.
Annual leave
Workers who are unable to take annual leave during one holiday year will be able to carry unused leave over to the next holiday year. This follows several European Court of Justice (ECJ) decisions on the interpretation of the Working Time Directive, with reference to the annual leave requirement.
To an extent this proposal may be overtaken by the case law. The Working Time Regulations appear to explicitly prohibit the carrying over of holiday from one holiday year to the next. However, a number of recent Employment Tribunal decisions have held that additional wording can be read into the Working Time Regulations to permit the carrying over of leave to the next holiday year when a worker is unable to take the holiday due to illness.
However there is a proposed amendment to the prohibition on buying out holiday so that employers will be allowed to buy out the additional 1.6 weeks leave provided by the Working Time Regulations (over and above the four weeks annual leave provided by the Working Time Directive) or in cases of genuine overriding business need to require employees to carry over all or part of the 1.6 weeks leave entitlement. This is likely to come in force in 2012.
Flexible working
The right to request flexible working will be extended to all employees with 26 weeks continuous employment. This is likely to come in force in 2013.
Flexible parental leave
Fathers will be allowed to attend antenatal appointments and there will be an 18-week maternity leave period followed by a new 34-week shared parental leave period. This is likely to come into force in 2015.
Employment Tribunal reform
Consultation has taken place on reform and this was publicised by the chancellor at his party conference when he confirmed that the qualifying period for unfair dismissal is set to rise from one to two years and that fees will be payable in employment tribunal cases.
It appears that any fee will be means tested and those on low incomes may not have to pay. There are varying reports on what the fees will look like in reality, ranging from an issue fee of £250 and a further listing fee of £1,000 and higher fees depending on the value of the case. The government has not yet launched a separate consultation into charging claimants a fee to commence a claim but fees for employment tribunal claims are expected to come into force in 2013
The full response to the consultation has not been published as yet but other points covered in the consultation include:
- increasing the tribunals power to strike out a claim or order a deposit payment;
- allowing Calderbank-style offers;
- introducing compulsory pre-claim conciliation;
- fining employers £5,000 where they lose a claim – payable to the Exchequer;
- raising the limit on costs awards from £10,000 to £20,000.
Auto-enrolment
From October 2012 employers in Great Britain will begin to be required to automatically enrol eligible jobholders into a pension scheme. The law will be implemented over a period of four years beginning on 1 October starting with larger employers. Each employer will be given a staging date from which the requirement will be mandatory.
Employees can opt out of the requirement but employers cannot encourage them to do so. Where employees have opted out they will be automatically re-enrolled every three years and will need to opt out again if they do not wish to be part of the scheme.
Employers will need to ensure there is a communication strategy in place as well as provision for their own pension scheme if they are not using the government scheme.
Employers who wish to do so can begin voluntary auto-enrolment as early as July 2012.
What is new and in force
While keeping in mind these likely developments, there have also been several new pieces of legislation that have been launched. They include:
The Agency Worker Regulations
In force since 1 October 2011, a full brief of the The Agency Worker Regulations is available in IHL195. The Regulations give greater rights to agency workers. An agency worker is now entitled to the same basic working and employment conditions as an employer’s permanent employees, provided they have been working for 12 weeks in the same or a comparable role.
From the start of an assignment there should be the same access to onsite facilities and information on permanent vacancies for agency workers and employees.
Bribery Act 2010
In force since 1 July 2011, this Act introduces a strict liability corporate offence of failing to prevent bribery by individuals acting on behalf of a company, or other organisation. Employers are required to show adequate procedures were in place to prevent bribery and corruption.
A bribe is defined in the Act as a ‘financial or other advantage’ offered, promised or given to induce a person to perform a relevant function of activity improperly, or to reward them for doing so.
The definition is broad and will cover many types of possible gain including hospitality and entertainment, Christmas or other gifts, sponsorship and publicity and political or charitable donations. It does not matter when the benefit is received, it can still constitute a bribe whether provided before or after an event and individuals can be liable even if they do not realise they are giving or receiving a bribe. Liability can also attach when an individual has not received a benefit but it has been offered or promised. It is so widely drafted it will be interesting to see how it is enforced but certainly organisations need to review and update, or launch a Bribery Policy and ensure that training is rolled out on it.
An organisation can also be liable when they have failed to prevent bribery by an ‘associated person’ for its benefit – this is the area where there has been the most concern as it is so difficult to control and the need to be vigilant on this is imperative.
Termination payments, legal fees and taxation
Employers are no longer able to deduct tax from termination payments at basic rate only. This follows guidance from HM Revenue & Customs in March and the Income Tax (Pay As You Earn) Regulations 2003, which effected this change from 6 April 2011.
Employers must also use an ‘OT’ PAYE code for post–P45 payments and in using that, the employer must withhold income tax at 20%, 40% and 50% as if the employee is entitled to no allowances. This is a complex provision and tax advice should be sought.
The tax concession that enabled an employees legal fees on termination of employment to be paid by their employer free of tax if ordered to be paid by a tribunal or court, or paid direct to the employee’s lawyer under a compromise agreement was narrowed by the enactment.
Additional paternity leave and pay
The Additional Paternity Leave Regulations came into force in April 2010. However they only apply to parents of children born, or adoptive parents matched, after the 3 April 2011. The Regulations allow eligible employees the right to take up to 26 weeks paternity leave if the mother or primary adopter returns to work early.
What is under review?
Aside from the legislation in force, we have also seen a review and changes to some of the legislation we expected to come into force. This is in part a response to the economy and also due to the change in government.
Specifically the changes are to the Equality Act 2010.
The following provisions were due to come into force:
- flexible working;
- socio-economic duty;
- combined discrimination;
- gender pay reporting;
- right to request time off for training;
- third-party harassment provisions.
Flexible working
The government has changed its view on how it should extend flexible working to all employees. In December 2010 Regulations were laid before Parliament in order to extend the right to request flexible working to parents with children under 18 from 6 April 2011. In March 2011 the government announced that this change would not occur.
Socio-economic duty
Section 1 of the Equality Act was intended to introduce a socio-economic duty to certain public bodies. Section 1 would have placed a duty on certain public bodies, when making decisions of a strategic nature about how to exercise their functions, to have due regard to the desirability of exercising them in a way that is designed to reduce the inequalities of outcome that result from socio-economic disadvantage. Section 1 is no longer going to be brought into force.
Dual discrimination
The Equality Act intended to bring in the concept of dual discrimination claims, eg claims could be brought by someone because they were, for example, a female Bangladeshi, as well as claims for being female first and Bangladeshi secondly. This has now been shelved, although there is a case law that suggests it could already be impliedly covered.
Gender pay reporting
The government has advised that it intends to work with businesses to develop gender pay reporting in the private and voluntary sectors. This will be aimed at those with more than 150 employees, although the aim is for all employers to comply.
Time off for training
All employers were expected to have to consider requests from employees for time off work to undertake study or training as of the 6 April 2011, but this was delayed following consultation. The right to request study or training time remains in force for those employers with more than 250 employees.
Third-party harassment
Currently, under the Act, employers are required to take reasonable steps to protect employees from third-party harassment. However the government considers that this obligation on employers is an unworkable requirement and is therefore consulting on its removal. While it remains in force there is still the risk of claims, however, in the light of the comments by the government, the risk seems minimal.
Cases of note that are passing through the tribunals and courts
Employment status of a partner
Tiffin v Lester Aldridge LLP
The Court of Appeal is due to consider whether a fixed-share partner’s appeal from the Employment Appeal Tribunal (EAT) on whether or not he is an employee or not should be allowed.
The EAT had decided that he was not and made it clear that there was no minimum level of profits or involvement in management decisions required before someone could be classed as a partner. The case makes clear that, while there may only be a few differences between salaried and fixed-share partners, those differences, such as voting rights, are often decisive in determining employment status.
Age discrimination: cost justification
Woodcock v Cumbria Primary Care Trust
The EAT decided that an employer could justify dismissing an employee early to avoid the cost of paying him an enhanced pension, casting doubt on another case, which stated that cost alone can never amount to objective justification in a discrimination case. The EAT commented that it should be possible to justify a discriminatory state of affairs provided that the cost of rectifying it is disproportionate in comparison to the effect of the discrimination. The case is on appeal.
TUPE: collective agreements
Parkwood v Alemo-Herron & ors
The Supreme Court has held that the question of whether the Acquired Rights Directive precludes national courts from giving a ‘dynamic’ rather than a ‘static’ interpretation of regulation 5(1) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 should be referred to the ECJ.
This ruling will be significant for public sector outsourcings. Under the static model, a private sector transferee can only be bound by the collectively agreed terms that apply at the date of transfer. Under the dynamic model, transferring rights would have the right to benefit from future pay rises and other changes to terms agreed between the unions and the public sector transferor after the transfer.
The current position is that TUPE only transfers static contractual terms. This is a Court of Appeal ruling.
TUPE: changing terms and conditions
Two EAT cases have dealt with the sometimes tricky issue of when it may be permissible to change terms and conditions of employees where there is a TUPE transfer.
Smith & ors v Trustees of Brooklands College
The EAT held that, when considering whether harmonising terms and conditions of employment after a TUPE transfer, the question is not whether there would have been no change to terms and conditions ‘but for’ the transfer, but rather to ask what was the reason for the change. In this case, teaching assistants who transferred were paid a full-time salary for part-time work. This was not a mistake but a consensual agreement. However, it was a pay arrangement that was outside standard practice for the sector. Clearly ‘but for’ the transfer the arrangement would have continued. However, the EAT held that the reason for the change was that the claimants were not paid in accordance with standard practice and this was a reason not connected with the transfer and therefore not prohibited by TUPE.
The difficulty in practical terms when seeking to harmonise terms and conditions after a TUPE transfer will be how to distinguish between a desire to harmonise terms and conditions (which could be transfer-related and not permitted by TUPE), and a change designed to alter terms and conditions that are not standard practice in a sector (which could be unrelated to the transfer and therefore not prohibited by TUPE).
Enterprise Managed Services Ltd v Dance
The EAT remitted this case to the Employment Tribunal and it is therefore difficult to draw firm conclusions from it. However, it does highlight that not all changes made to terms and conditions after a transfer will be impermissible. In this case the transferee had, pre-transfer, made changes to the terms and conditions of its own workforce to increase productivity and sought to introduce the same changes to the workers who transferred to it under TUPE. The EAT expressed the view that the reason for the change was to increase productivity and therefore not TUPE related, although it remitted the matter to the Employment Tribunal to look at the matter again.
Again, this case highlights the fact that a careful analysis will need to be taken in assessing what is the reason for making the change to the terms and conditions and whether that change is prohibited by TUPE.
Representation at disciplinary hearings
R v Governors of X School
This is a Supreme Court case, which held that the European Convention on Human Rights is engaged, in particular Article 6, when an employee is subject to disciplinary proceedings and the outcome of the disciplinary proceedings is likely to have a substantial influence on the determination of an employees civil rights. This means that an employee in these circumstances would be entitled to legal representation in disciplinary proceedings with a public employer. In this particular case the decision was that Article 6 was not engaged, as the outcome of the disciplinary proceedings were said not to have had a substantial influence on the proceedings with the Independent Safeguarding Authority. However the case is worthy of note as it made it clear that it could be. This will be relevant where the outcome of disciplinary proceedings in public employment could significantly damage an employee’s career.
This is by no means a complete list but gives a flavour of the current state of affairs and what we should be keeping an eye on.
By Kirsty Rogers, national head of employment and pensions, DWF LLP.
E-mail: kirsty.rogers@dwf.co.uk.
DWF’s writers can be reached via the DWF LinkedIn group ‘In Touchº - Keeping In-House Lawyers Informed’.
