Employment Eye September 2017

Welcome to the September 2017 edition of our employment law report: our monthly round-up of key employment law developments and what they mean for you.

  

Featured cases	Holiday pay & employee monitoring: two important post-scripts Two recent cases have provided important follow-up on two key issues: monitoring and holiday pay. The latest holiday pay case has confirmed the direction of travel on this issue; whereas a new European case on employee monitoring has reversed the previous position. As ever, those working with employment law are being kept on their toes. Sarah Maddock reports. Read more
Briefing	Proposed increase to State Pension Age – what does it mean for employers? July's edition of Employment Eye included a 'stop press' that the government proposed to increase State Pension Age from 67 to 68 - seven years earlier than expected.  Philip Woolham now looks in more detail at the wider ramifications for employers. Read more
News round-up	The latest employment news highlights including: an update on public sector exit payments; where we are on employment tribunal fees; revised compensation 'Vento' bands; the new Data Protection Bill; gig working; pensions changes, and our regular Brexit update.   Read more

 

 

Holiday pay & employee monitoring: two important post-scripts

Two recent cases have provided important follow-up on two key issues: monitoring and holiday pay. The latest holiday pay case has confirmed the direction of travel on this issue; whereas a new European case on employee monitoring has reversed the previous position. As ever, those working with employment law are being kept on their toes.  Sarah Maddock reports.

• Holiday pay and voluntary overtime

Since the publication of the well-known 2014 case, Bear Scotland v Fulton Limited, the question of the correct calculation of holiday pay has been a hot topic if you engage workers who are paid overtime or other payments over basic pay.

Although the Bear Scotland case settled this issue on the specific topic of non-guaranteed compulsory overtime payments, several questions remained unanswered. One of those key questions was whether the reasoning in Bear Scotland applied to employees who voluntarily worked overtime, not just those who were required to work overtime when requested (as in Bear Scotland). 

This outstanding issue has now been resolved by the Employment Appeal Tribunal (EAT), in a case called Dudley MBC v Willetts.  In this case, the claimants in question were employed under contracts with set contractual hours, but they also volunteered to perform additional duties, which were not contractually required. They also participated in on-call rotas for which they were paid a standby allowance, plus call-out payments if they were called upon to do work while on call.  The claimants' work was organised on a very flexible model: employees could drop on and off rotas to suit them. The employer had no right to require the employees to undertake the additional work. However, when the claimants took holiday, their pay was based only on their basic wages and they did not receive any payments to reflect their voluntary overtime, or other payments, including:

• out-of-hours standby pay
• call-out payments
• mileage allowances for work-related travel.

Relying on earlier caselaw, including the Bear Scotland decision, the employees contended that their holiday pay should have included the additional payments set out above, including sums to reflect their voluntary overtime.

The EAT agreed with the employees and said that their holiday pay should include voluntary overtime which is normally worked.  It also went on to say that holiday pay should include the additional payments set out above, including payments for mileage allowance which were in excess of the HMRC approved rate (as the excess would count as 'pay').

This decision is very much in line with the direction of travel on holiday pay, i.e. that whilst taking holiday, employees should (as far as possible) be in the same position financially that they would have been in if they had been working.  In accordance with the health and safety objectives of the Working Time Directive (from which our Working Time Regulations are derived), employees should not be deterred from benefiting from a break from work because it may mean a reduction in their take-home pay.

So, clarity has finally been provided on voluntary overtime and holiday, but there are some important points to note.

• This case (and the other recent holiday pay cases) are based on law which derives from the European Working Time Directive. Although this Directive is transposed into UK law through the Working Time Regulations and will, therefore, be retained post-Brexit, it is possible that after that point, the government may legislate to change the position.
• Voluntary overtime will only be payable during leave if it is 'normally' worked. The EAT did not provide any definitive guidance on what this means. It will be a question of fact and degree for individual tribunals (and, by extension, employers) to decide. In the Dudley case, payments made one week in five counted as 'normal pay'.
• The decision in Dudley (and the other holiday pay cases) applies only to the 4 weeks' annual leave to which employees are entitled under the Working Time Directive; it does not apply to
  • the additional 1.6 weeks' leave to which employees are entitled to under domestic legislation, or
  • to any other additional leave under the contract.

• Employee monitoring

As we reported last year, the European Court of Human Rights (ECHR) provided a headline-grabbing ruling when it said that an employer was entitled to read personal messages sent by an employee using a work-related 'instant messenger' service provided by the employer – notwithstanding that the messages concerned the employee's health and intimate private life. 

The ECHR originally said in Barbulescu v Romania (2016) that because the messages had been sent during working hours and in breach of the employer's explicit policy, the employer was entitled to monitor the messages without breaching the employee's right to privacy under the European Convention on Human Rights. Although this was widely misreported in the press as meaning that employers had an unfettered right to 'snoop' on their employees, the decision did confirm that employers had considerable scope to monitor private communications by employees, within specific confines.

The case was appealed to the Grand Chamber of the European Court of Human Rights, which has now performed a volte face on the original decision, and ruled in favour of the employee's right to privacy. The full appeal decision can be found here.  In summary, the Grand Chamber held that, although the employer had a policy which clearly stated that employees' use of electronic communications would be monitored, it did not expressly state that the content of messages would be monitored. This meant that the employee had a reasonable expectation that his messages would remain private. The Grand Chamber noted that an employer cannot totally eliminate private social life in the workplace, through its use of policies. Respect for private life and for the privacy of correspondence continues to exist, even if these may be restricted as far as is necessary.

 

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Proposed increase to State Pension Age - what does it mean for employers?

July's edition of Employment Eye included a 'stop press' that the government proposed to increase State Pension Age from 67 to 68 - seven years earlier than expected.  Philip Woolham now looks in more detail at the wider ramifications for employers.

How definite are the plans?

At this stage, the new State Pension Age (SPA) is still a proposal.  Nothing will happen before the next parliament.  The Labour Party has stated that if it forms the next government, it will keep the SPA at 66.  So it is by no means certain that the new SPA will happen, although if the Conservative Party forms, or is involved in, the next government, it is more likely.

What does this mean for both employers and employees?

It is likely that every employer will have some employees on payroll who want to retire at any time.  Various factors may influence an individual's decision on their retirement, but the state pension will make up the bulk of retirement income for most people - and that is where the change to SPA will make a difference: as a key trigger for retirement.

The minimum age at which people can access their pension funds tax-efficiently has increased in the past few years from 50 to 55.  Over time this may increase again.  It wasn't too long ago that someone I was talking to about pensions was shocked when I told them that they couldn't retire at age 50, even though the minimum age had changed some years ago.  Levels of pension and savings knowledge in this country are low: far too low for people to be able to make sensible decisions about how they will plan for retirement.

So whether or not employees are relying on state pension, or have private pension savings, the likelihood is that they will be looking at retiring later.

From an employer's perspective, the key issue then is how to assist, and if necessary, manage employees as they move towards retirement.

What happens if an employee can't afford to retire?

As final salary pension schemes fall away (except in the public sector), more and more people are basing their retirement on how far their own savings and assets will stretch – this may prove a challenge for many employees.

The knock on effect of this for employers is the risk of finding themselves having workers who do not want to be in employment; but can't afford to retire.

There is for most employers now no 'cliff edge' of a mandatory retirement age, when you could require an employee to leave.  If you have a policy on standard retirement ages, you will have to be able to justify it if challenged.

Most employers have also lost the ability to offer early retirement packages under a traditional pension scheme, where someone can be managed out early with the offer of an improved pension, and neither party feels they are losing face.  Where these do still exist they are often prohibitively expensive.

So there is an increasing risk that employees will be forced to stay in work when they are more than ready to leave, if only they could afford to.

If a lack of engagement leads to poor performance, then it is possible that you may wish to consider taking employees down a capability dismissal route, but this can be costly in terms of time, money and risk.

Is there anything you can do?

There is a balance to be struck between ensuring that those who want to retire can do so; and ensuring that those who you may not wish to retain are not forced to remain.

There are no easy answers.

The only real solution must be early and continued communication between employer and employees, and appropriate assistance and guidance made available throughout employees' working lives.

The government offers some help, including its proposed new pensions guidance service (which will incorporate a number of existing services).  Some employees will take their own advice, although not necessarily sufficiently early in their working life.  Auto-enrolment will undoubtedly increase levels of pension saving and awareness.

However, unless you sponsor a traditional pension scheme, employer's obligations are fairly light in relation to pensions.  No-one is suggesting a return to the time when employers underwrote the costs of their employees' retirement via final salary-type pensions.  Nor should employers necessarily be offering to pay for or provide employees with financial advice on an ongoing basis.  But it may be time for a greater level of connection and engagement, from publicising the benefits of pension scheme membership to trying to get employees to think about when they want to retire.  This should start as early in the employment relationship as possible, as early planning can mean that outcomes are much improved, and both employer and employee can feel more in control of the situation.  Working together to understand retirement expectations and costs must be the way forward.  Modern pension arrangements do place most of the burden on employees to manage their funds and plan for retirement, but employers can offer help to make the process more straightforward.

Retirement, in whatever form, and whether or not it means stopping work once and for all, going part-time, or even finding something else to do away from a former career, is one of the key events in anyone's life.  Helping employees understand their choices, and start to plan decades - not years or months out - will be mutually beneficial.

 

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Employment news round-up, September 2017

The latest employment news highlights including: an update on public sector exit payments; where we are on employment tribunal fees; revised compensation 'Vento' bands; the new Data Protection Bill; gig working; pensions changes, and our regular Brexit update.   

Reform of public sector exit payments

We understand from the Local Government Association that the government intends to commence a new consultation exercise on its proposals to introduce a new cap on public sector exit payments and introduce a claw-back mechanism where an exit payment is received and the individual is re-employed in the public sector within a year of payment.  This would mean that the timescales for the introduction of this reform would likely be pushed back to the first part of next year.

Please click here for a summary of the public sector cap and claw-back proposals.

Employment tribunal fees

Since the Supreme Court dramatically quashed employment tribunal fees on 26 July 2017, there has been a whirlwind of developments.

Reimbursement of fees

Initially, the President of the Employment Tribunals issued a case management order staying any claims or applications which relied on the Supreme Court's decision on fees.  This was subsequently lifted by a further case management order published on 18 August 2017, which confirmed that any applications for reimbursement of fees paid can go ahead in the normal manner. This will apply both to applications by claimants for fees paid, and also to respondent employers seeking repayment where they have been ordered to reimburse claimants' fees.

It is, therefore, important to undertake an audit of any claims where you may have paid a fee, and lodge an application for repayment.  A further announcement on the administrative procedures for dealing with reimbursement, and reinstatement of claims which were rejected for non-payment of fees, is expected shortly.

Time barred claims

In terms of the (perhaps more important) question of whether employment tribunals will allow extensions of time where claims were not presented at all because the claimant was deterred by the prospect of paying a fee, there is no official judicial guidance on this point as yet.  It is likely that employment tribunals will apply the usual tests of whether it is 'just and equitable' to extend time or whether it was 'reasonably practicable' for the claimant to present the claim within time.

Increased discrimination compensation – new 'Vento' bands

In a development that is now of particular relevance given the recent quashing of employment tribunal fees, the Presidents of the employment tribunals in England, Wales and Scotland have issued joint guidance on increases to the 'Vento' bands. This is the banding used by employment tribunals to calculate the level of compensation payable where an employer has been found liable for discriminatory treatment. The new bands apply to claims presented (not determined) on or after 11 September 2017.  The new bands are as follows.

• A low band of £800 to £8,400, for less serious or one-off cases of discrimination.
• A middle band of £8,400 to £25,200, for serious cases which do not merit an award in the highest band.
• An upper band of £25,200 to £42,000, for the most serious cases of discrimination,

Only the most exceptional cases of discriminatory conduct by an employer will exceed the £42,000 limit in the upper band.

In respect of claims presented before 11 September, the existing bands apply, which are as follows.

• A low band of £600 to £6,000.
• A middle band of £6,000 to £18,000.
• An upper band of £18,000 to £30,000.

The new guidance can be found here, with the uprated Vento bands set out at paragraph 10.

The bands in the guidance will be looked at again by the Presidents in March 2018, and annually thereafter. Any resulting changes to the guidance will come into effect in respect of claims presented on or after 6 April in each year.

Data protection – change ahead

If you have not done so already, it's time to start thinking about updating your data protection policies and procedures.  New data protection legislation is on its way, and the first step in the process has just been taken, with the Data Protection Bill ('the Bill') receiving its first reading in the House of Lords this month.

The Bill will replace the Data Protection Act 1998 (DPA) and will be supplemented by the General Data Protection Regulation (GDPR) until the UK leaves the EU. When the UK leaves the EU, the GDPR will be incorporated into UK domestic law under the European Union (Withdrawal) Bill.  The Bill will overhaul and update the UK's existing data protection framework, and all policies, procedures and contracts of employment will need updating. Managers will also need training in order to understand their new obligations.

We will be reporting on the Bill and practical steps you need to take in response in next month's edition of Employment Eye.

Gig working – the saga continues

Following hot on the heels of the publication of the July 2017 'Good Work' review of modern working practices, it has been reported that one of the most high profile gig worker cases of 2017 is on its way to the Supreme Court: an application for permission to appeal the decision in Pimlico Plumbers v Smith has been accepted.  In this case, the Court of Appeal found that a plumber who was ostensibly working as a self-employed contractor was, in fact, a worker.  Please click here to find out more.

And in a linked development, the latest in the current run of worker status employment tribunal claims has found that a cycle courier was a worker, and not a genuinely self-employed contractor.  In Gascoigne v Addison Lee Limited the tribunal found (in line with the reasoning of the other gig working cases) that the contractual documentation did not reflect the reality of the relationship between the parties.  This is another example of tribunals demonstrating their willingness to disregard written contracts and look at whether there is a genuine 'worker/wage' bargain between the parties.

Pensions news

Local Government Pension Scheme (LGPS) – death benefits for members' partners

Following a Supreme Court decision on the LGPS in Northern Ireland, the Department for Communities and Local Government (DCLG) has issued guidance as to how LGPS funds should pay death benefits to partners of members who were not married or in a civil partnership at the time of death.

Previous practice was to require the member during their lifetime to make a written declaration confirming the nature of the relationship.  Without this, unmarried partners were not normally eligible for the same benefits as spouses and civil partners.  It did not matter how long the relationship had lasted before the member's death, nor how financially interdependent they had been.

The Court found this to be discriminatory, primarily because it was not required for married couples or those in a civil partnership.  They simply needed to provide evidence of the marriage or partnership.  This could also be done after the member's death.

While only a recommendation, the DCLG guidance states that funds should not now require the declaration.  It is perfectly appropriate to ask for reasonable evidence of the nature of the relationship.  Existing declarations will also remain valid.  However, an unmarried partner should now be able to provide this evidence after a member's death, just like a spouse or civil partner can.

While it is not clear how many unmarried partners will be able to claim benefits, either retrospectively or in the future, LGPS funds will need to make provision for this change.  There will be cost implications as the total cost of benefits payable may well increase.

Similar requirements will apply to all public sector pension schemes, and private sector schemes may in some cases also need to reconsider how they deal with death benefits for unmarried partners.

NHS Pension Scheme – changes to 'retire and return' guidance

There have been a number of reports recently about senior managers and employees retiring, drawing pension benefits (including often large tax-free lump sums) and then returning to their post, or a similar one, a few days later.  They have covered a number of public pension schemes.

The practice also exists at more junior levels within the public sector, but it is the higher value senior examples that have caught the public eye.

The Department of Health has issued new guidance on the practice.  It does not prevent retire and return where there is a demonstrable need for it, but it is intended to deal with the perception, accurate or otherwise, that this is a routine perk for high-ranking NHS employees that costs the taxpayer money.

It applies to all employers within the NHS, including independent providers.  The key points in the guidance are as follows.

• Each employer must publish a clear policy as to how retire and return should be implemented.
• There should be no guarantee, or expectation on the part of the employee, that an application will be accepted.
• Any application should be considered purely on the grounds of service need and value for money.
• Employers should be able and ready to justify their decisions either way.

The guidance also offers alternatives that could be considered, including flexible retirement (drawing some benefits and working fewer hours in the same job), a change of role to a less demanding position and conventional part-time working, especially where this will not impact upon employees' final pension benefits.

The guidance really reflects existing good practice when considering retire and return, but it will now be important for all NHS employers of any kind to demonstrate they are following it should a decision to grant, or not to grant, retire and return benefits be challenged.

Pensions to be included in the definition of a 'week's pay'

In a case called the University of Sunderland v Drossou the Employment Appeal Tribunal (EAT) has decided that the calculation of a 'week's pay' under section 221(2) of the Employment Rights Act 1996 ('the ERA') should include employer pension contributions. This departs from long-established practice and increases the value of a week's pay, particularly where the value is not capped at the statutory maximum (currently £489). Many payments and remedies are calculated based on the statutory definition of a week's pay under the ERA, including the statutory cap on the compensatory award for unfair dismissal (currently the lower of either £80,541 or 52 multiplied by the amount of the claimant's week's pay).

The specific facts of this case concerned the calculation of an unfair dismissal compensatory award, but the decision has wider implications for how other compensation payments are calculated.  It will also apply to the calculation of remedies such as compensation for failure to comply with the Transfer of Undertaking (Protection of Employment) Regulations 2006, and the protective award for a failure to inform or consult in relation to collective redundancies.   This decision does not affect the calculation of a 'week's pay' for the purposes of unlawful deduction from wages calculations because these relate to wages payable to the worker.

Any questions? Please contact Philip Woolham, Senior Associate if you require further information on these, or any other, pensions issues.

Brexit news

• New government figures suggest that net migration has dramatically reduced, in response to the UK's decision to leave the European Union. Figures published by the Office for National Statistics show that net migration is currently at its lowest level for three years: at the end of March it was 246,000 compared with 327,000 the previous year.  More than half of the decrease is attributed to the fall in net migration of citizens of the European Union, down by 51,000 over the past year.
• It has been reported in the press that the government proposes to end free movement of people from March 2019, and introduce a selective immigration programme instead. The leaked document refers to income thresholds, right to work checks and criminal sanctions for companies and employees in breach of the new immigration rules.
• The European Union (Withdrawal) Bill has passed its second reading in the House of Commons, with a majority of thirty-six. The Bill will now move to Committee stage, for detailed line-by-line analysis.

 

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If you would like to discuss any of these topics, or any other aspect of Employment Law, please contact Head of Employment, Jodie Sinclair.