Employment Eye - January 2017

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

Briefing	Workforce law – what to expect in 2017 and beyond   Sarah Maddock summarises forthcoming employment law changes and action points for employers. Read more
Featured case	Trouble ahead? Expired warnings lawfully taken into account where the employer expected future misconduct issues. Read More
News round-up	Employment law news in brief for January 2017 Julian Hoskins with this month's employment law news in brief, including the Supreme Court's decision on the Brexit process, public sector gender pay gap reporting and developments on 'gig' working, diabetes and disability discrimination. Read more

Workforce law – what to expect in 2017 and beyond  

Sarah Maddock summarises forthcoming employment law changes and action points for employers.

 

Date	Development	Action points
Early 2017	Public sector exit payments – cap and claw-back regulations. Regulations imposing a £95,000 cap on public sector exit payments and separate regulations allowing for claw-back of exit payments made to high earning public sector employees were expected to come into force by the end of 2016. These reforms are now awaited and expected to commence early this year.	Severance arrangements, policies and procedures should be reviewed to ensure they will reflect the requirements under the regulations. Workforce planning should be in place to take account of possible impact on staffing. Managed exit strategies may need re-thinking to take account of increased risk of tactical litigation by employees seeking to obtain avoid the severance payment cap. Please click here for our article outlining the changes and their practical impact.
	New tax-free childcare scheme introduced and childcare vouchers will be phased out.	Publicise new scheme to employees. When the new scheme is in place, close childcare voucher scheme to new entrants. Adjust any budgeted employer National Insurance contributions savings expected from running a voucher scheme.
March 2017	Following the Supreme Court's decision on 24 January 2017 that Parliamentary approval is required to invoke Article 50 of the Lisbon Treaty (thereby starting the clock ticking for our exit from the European Union by March 2019), it may be that the March 2017 timescale for commencing the Brexit process will be delayed.	Despite Theresa May's speech this month outlining her broad approach to the UK's departure from the EU, pro-active and detailed preparation remains difficult until the precise terms of exit are known – especially since the Supreme Court's decision on Parliamentary approval. However, please click here for our infographic on Brexit planning in the short, medium and long term.
28 and 29 March 2017	Employment tribunal fees. Supreme Court is scheduled to hear UNISON's appeal in its challenge to the legality of the introduction of tribunal fees. The government's long overdue report on its review of employment tribunal fees has been promised for early in 2017.	One to watch, but no immediate action to take.
31 March 2017	Public sector gender pay gap reporting – first data gathering exercise. Please click here for final draft public sector gender pay regulations and please see this month's Employment News Round-Up for a summary of the requirements for the public sector (except for the 'snap shot' date, the requirements for the public sector are the largely same as for the private sector - please click here for details of private sector requirements).	Public sector employers with more than 250 employees must undertake their first 'snap shot' data gathering exercise, to publish their pay data by 30 March 2018. In advance of 31 March 2017, you may wish to undertake a 'dry run' data gathering exercise to ensure you have the required data available.
1 April 2017	National Living Wage increases from £7.20 to £7.50 per hour. National Minimum Wage adult rate increases from £6.95 per hour to £7.05 per hour (and younger workers' rates increase according to age).	Payroll budgets and forecasts will need adjusting accordingly.
2 April 2017	Statutory Maternity, Paternity and Adoption Pay increases from £139.58 per week to £140.98 per week.	Payroll budgets and forecasts will need adjusting accordingly.
5 April 2017	Private sector gender pay gap reporting – first data gathering exercise.	Large employers must undertake their first 'snap shot' data gathering exercise, to form the basis of the first gender pay gap reports by 4 April  2018. As with the public sector duty (see above) prudent employers may wish to undertake a 'dry run' data gathering exercise , in advance of 5 April 2017. Please click here for a detailed explanation of the final draft private sector gender pay gap regulations.
6 April 2017	Reform of IR35 off-payroll working through Personal Service Companies.  Public sector engagers will be responsible for determining whether payments made to contractors through Personal Service Companies (PSCs) should be subject to PAYE deductions and, if they are, making the payments due. Please click here for draft legislation.  Comments on the draft Finance Bill 2017, implementing this proposal, close on Wednesday 1 February 2017.	Assess your current arrangements for paying contractors via PSCs and consider whether you need to make any changes. Please click here for a full briefing on this topic and details of how we can help.
June 2017	Deadline for government departments to complete consultation process and implement reform of exit payment arrangements.  This raft of requirements is separate from the introduction of regulations imposing the new cap and claw-back of public sector exit payments (see above). Current proposals include setting maximum exit payments and redundancy payments for all staff; setting maximum salary levels for exit payments for all staff; tapering exit payments made close to retirement; and limiting employer-funded pension top up payments.	If not started already, public sector employers should be formulating and consulting on proposals now.   Please click here for an overview of the new requirements.
During 2017	Employment status will continue to be a keenly followed topic, especially in the context of the 'gig' economy and employment through new technology platforms. Whilst an employment tribunal found against Uber last year (please click here for an explanation), this case is expected to go to the Employment Appeal Tribunal this year. New Acas guidance on employment status has been promised for this year. Publication of the Taylor Review into Modern Employment Practices is expected before the end of this year.	Keep your contractual modelling under review, to ensure that you retain the contractual flexibilities you require. The law on employment status has not changed as yet, but may be set to do so.
	Trade union reform. The Trade Union Act 2016, which introduces various reforms to the requirements for lawful industrial action, will come into effect in stages throughout 2017. Dates for implementation have not yet been announced. Please click here for details of the 'important public services' covered by more stringent ballot requirements and click here for an overview of the reforms generally (scroll down to view relevant section). Non-statutory guidance has been published this month on industrial relations and important public services – please click here for a copy.	Changes will bite if industrial action is threatened or takes place. In order to be prepared for this, you may wish to review any internal guides, policies and procedures which will need amending when the reforms take effect.

Looking further ahead…

There are a number of employment law developments to prepare for in the longer-term.

• EU General Data Protection Regulation (GDPR). Notwithstanding the UK's departure from the European Union, the GDPR will be implemented on 25 May 2018, with fines for data protection breaches set to rise from £500,000 to €20,000,000 (or up to 4% of the total worldwide annual turnover of the organisation, whichever is higher).  If you need to make substantial changes to your data protection policies and procedures, preparation needs to start now. For more information on the GDPR generally please click here; and for a summary of the GDPR post-Brexit please click here. For further information and training on preparing for the GDPR, please contact Emma Godding or Jonathan Moore in our Information Law Team.
• Grandparental leave was announced back in 2015, and sources inform us that the proposal is still 'on the table', but the consultation promised in 2016 has yet to materialise. It is thought that a consultation will be launched in June 2017 and this new type of leave will be introduced in 2018, mirroring the existing Shared Parental Leave arrangements in place for parents.
• Tax simplification. A simplification of the tax and National Insurance treatment of termination payments would be welcomed by employers and lawyers alike, and is expected to be introduced in April 2018.  Draft legislation has been published but is likely to be subject to further amendment, before the new regime comes into effect.

 

Trouble ahead?

Ashley Norman looks at expired warnings lawfully taken into account where the employer expected future misconduct issues.

The background

Unfair dismissal

Under the Employment Rights Act 1996 (ERA 1996), a dismissal must be for one of the 'potentially fair reasons' set out in section 98. An employment tribunal must then decide whether the employer acted reasonably in dismissing the employee for that reason, in accordance with equity and the substantial merits of the case.

Expired warnings

Although most employees might assume that an expired warning is automatically expunged from their record, as if the original misconduct had not taken place, the truth is more complicated (as Oscar Wilde famously said, the truth is "never simple").

In a case called Diosynth v Thomson (2006), Mr Thomson was given a 12-month warning for failing to carry out a safety process. A few months after the expiry of that warning there was a fatal explosion. An inquiry found that Mr Thomson and several of his colleagues had failed to carry out that same process. Mr Thomson was dismissed, Diosynth making it clear that - but for the previous warning - he would not have been dismissed. The Court of Session held that the employer acted unreasonably in taking into account an expired written warning when deciding a subsequent disciplinary outcome.

However, two years later, the Court of Appeal (CA) came to a different conclusion on similar facts.  In Airbus Limited v Webb (2008) the CA decided that, in some circumstances, an expired warning can be taken into account when making a decision to dismiss. In that case, the employee in question was one of a number of employees found guilty of gross misconduct; however, whilst the other employees only received final written warnings, the claimant was dismissed because the employer took into account the claimant's expired warnings. The CA said this was fair because the wide ambit of section 98 of the ERA means that employers are not required to ignore expired warnings for all purposes and in all circumstances.

The facts

Whilst, at the time of his dismissal, Mr Stratford had no live warnings on his disciplinary record, he had been issued with a total of 17 warnings during his employment with Auto Trail VR Limited ('Auto Trail'). When he was found guilty of yet another disciplinary offence (using his mobile phone on the shop floor, despite this being expressly  "strictly prohibited" in Auto Trail's handbook), Mr Stratford's manager took the view that enough was enough, and dismissed Mr Stratford.  The manager decided that, taken on its own, Mr Stratford's most recent offence was not sufficiently serious to warrant dismissal; but, it was part of a pattern of behaviour which made it likely that further disciplinary issues would arise in the near future.

An employment tribunal found that Mr Stratford's dismissal was fair.

Mr Stratford appealed.

The decision

In Stratford v Auto Trail VR Limited, the Employment Appeal Tribunal (EAT) upheld the employment tribunal's decision that Mr Stratford's dismissal was fair, notwithstanding that the employer had taken into account expired warnings.

The EAT decided that that the tribunal was correct to find that the dismissal was fair, taking account of Mr Stratford's previous record, along with the most recent offence, which the manager was entitled to treat as an indication as to how the future was going to go if Mr Stratford remained in employment.

The EAT considered the decisions in Airbus and Diosynth (see above) and noted that the wide scope of section 98 of ERA 1996 means that a tribunal is entitled to find that a dismissal for misconduct could be fair – notwithstanding that, in making its decision to dismiss, the employer had taken account of an employee’s previous similar misconduct, which was the subject of an expired final warning.

The EAT said that fact of the previous misconduct, the fact that a final warning was given in respect of it and the fact that the final warning had expired at the date of the later misconduct would all be objective circumstances relevant to whether the employer acted fairly.

Therefore, Auto Trail VR Limited had been entitled to take into account Mr Stratford's poor employment history and likely future misconduct when making its decision to dismiss.

What does this mean for me?

The legal distinctions in cases of this type are finely balanced. The development of the case-law on expired warnings suggests that

• where an employee is guilty of misconduct which is not a dismissible offence, then an expired warning cannot be taken into account in order to 'convert' that conduct into a dismissible offence (as in the Diosynth case)
• where an employee is found guilty of misconduct which could warrant dismissal, then an expired warning may be taken into account when deciding on a sanction.

However, in this case, the EAT appears to have overlooked that the manager felt that Mr Stratford's most recent offence only warranted a final written warning, but then went on to dismiss him because of his generally poor record and doubts about his future conduct. It does not appear that Mr Stratford was aware, prior to his disciplinary meeting, of the relevance of his disciplinary record when the employer was deciding on the appropriate sanction – suggesting a possible procedural flaw in the dismissal process.

Whilst this case, therefore, appears to increase the scope for employers to take the fact of an expired warning into account when deciding whether to dismiss, it would be prudent to ensure that this approach is made in clear in disciplinary policies and procedures, which are drawn to the attention of employees. The relevance of employment history should also be highlighted to employees as part of a fair disciplinary procedure.

 

Employment news round-up, January 2017

Julian Hoskins with this month's employment law news in brief, including the Supreme Court's decision on the Brexit process, public sector gender pay gap reporting and developments on 'gig' working, diabetes and disability discrimination.

Brexit news

• On 17 January 2017, the Prime Minister set out her '12 point plan' for leaving the European Union, which she envisages as including also leaving the single market, maintaining full immigration control and securing the rights of EU citizens living in the UK. Whilst, of course, the final position will depend on the outcome of negotiations with the other EU states, employers will be reassured by the intention to protect their current EU workforce and will, no doubt, be keen to ensure that any future immigration controls on EU workers will meet demand in their sector.
• On 5 December 2016, the Supreme Court heard the government's appeal against the High Court's ruling that the Royal prerogative does not empower the government to invoke Article 50 of the Lisbon Treaty, which would begin the process of the UK leaving the European Union. On 24 January 2017, the Supreme Court ruled that Parliamentary approval is required in order for Article 50 to be invoked. It is important to note that the Supreme Court's ruling covers the constitutional process for leaving the European Union, and does not affect the political process itself in terms of the timetable for leaving or how our relationship with the European Union will be governed after we have left. That said, given the opposition to the government's current proposals that has already been voiced in Parliament, it may be that the March 2017 deadline for triggering Article 50 of the Lisbon Treaty will slip, simply due to pressure of Parliamentary time. At present, it seems unlikely that Parliament will seek to block the Brexit process entirely.
• The Institute for Employment Studies (IES) has published a paper analysing data at national and trust level to map the regions and NHS trusts in England who may be most vulnerable to the associated risks of Brexit and population growth. The analysis forecasts that areas with a high projected rate of population growth of over-85s and above average employment of nurses from the European Economic Area are most at risk of facing greater pressures in those health economies. Please click here to read the report.
• The Department for Exiting the European Union has published a list of FAQs on the Brexit process, including, for example, whether there will be a second referendum (there will not) and confirming that the current status of EU nationals living in the UK remains unchanged. Please click here for the full list.

Public sector gender pay gap reporting

The final draft public sector gender pay gap reporting regulations have now been published and are available here.  As expected, the public sector measures mirror the private sector gender pay gap reporting requirements (which are summarised here). The main exception is that the date for the first 'snap-shot' data gathering exercise for public sector employers is 31 March 2017 (rather than 5 April 2017 for the private sector). This means that the first gender pay gap reports for the public sector must be published by 30 March 2018.

In brief, the regulations require all public sector organisations with over 250 employees to report on the difference between men and women's average earnings (even if the analysis shows no average pay difference).  Reports must be undertaken annually and cover:

- median and mean gender pay gap figures (including bonuses, which would cover clinical distinction / excellence awards and any other additional performance related payments for non-clinical staff);

- the percentage of men and the percentage of women who received bonuses;

- the number of men and the number of women in each 'pay quartile'.

Note that the 250 employee threshold triggering the requirement to report uses the 'normal' definition of 'employee' under the Employment Rights Act 1996; but the data must be gathered in relation to a wider category employee, including apprentices and all individuals engaged to undertake work personally, including contractors (unless the data in relation to contractors is not available or it is not practicable to obtain that data).

Gender pay reports must be published on the employing organisation's website for at least three years, and provided to a portal maintained by the Secretary of State. Unlike the private sector gender pay gap reporting regulations, there is no requirement for public sector employers to produce a signed statement of the employer's measurement of its pay gap.

More developments on the 'gig economy'

Following hot on the heels of the recent defeat of the taxi company, Uber, in the employment tribunal (click here for a summary) another employment tribunal has looked at the question of employment status in in the 'modern economy' or the 'gig economy'.  In Dewhurst v CitySprint UK Limited, a cycle courier was held to be a worker, despite contractual documentation which described her as a self-employed contractor.  The claimant's work is allocated via mobile phone and a radio controller, and each day she logs in to CitySprint's electronic tracking system, only logging out when she goes home at the end of the day. The contractual terms between CitySprint and its couriers expressly state that there is no mutuality of obligation, and payment is by 'invoice'; but, in practice, the company automatically pays couriers at the end of the week.  Although couriers are expressly allowed to send substitutes, this is not an unfettered right; the substitute must fulfil certain criteria.  Similarly to the Uber decision, the employment tribunal was prepared to go behind the contractual documentation and consider the reality of the relationship between the parties when deciding the legal status of the worker.  Moreover, the employment tribunal said that the legalistic language used by the courier company aroused 'suspicion' and highlighted the unequal bargaining power between the parties.

Whilst the recent employment tribunal decisions on employment status have been made in the context of organisations utilising new technology platforms, they appear to illustrate a wider trend that employment tribunals are quick to look behind contractual documentation in order to establish the true nature of the relationship between parties. Express contractual terms will be just one factor employment tribunals should take into account. This is something that prudent employers would do well to remember, regardless of whether their workforce is engaged under traditional or modern arrangements.  

LGA paper on local government reward strategy

The Local Government Association has published a paper on Applying a Reward Strategy in Local Government. Please click here to read the full report, which looks at how local authorities have changed their delivery models in order to meet the growing demand to 'do more with less' and how this impacts on reward structures. It then looks at what constitutes a rewards strategy, considers the importance of align reward with business and workforce strategies and briefly summarises how certain local government service models align with different approaches to reward.

Type 2 diabetes and disability discrimination

According to Diabetes UK, there are nearly five million people in the UK suffering from diabetes and, of those, 90% have type 2 diabetes. Therefore, the question of whether type 2 diabetes should be classed as a disability, for the purposes of the Equality Act 2010, will be an important issue for employers – at present, the Act and its accompanying guidance do not specify whether diabetes is covered.  As we reported in our March 2015 news update, the Employment Appeal Tribunal (EAT) considered that dietary-controlled type 2 diabetes does not amount to a disability, because refraining from sugary drinks (and other minor alterations to diet because of medical conditions, such as nut allergies) should not come within the ambit of the Equality Act 2010. 

However, this analysis was called into question this month, again by the EAT, in a case called Taylor v Ladbrokes Betting and Gaming Limited.  The EAT in Taylor did not go as far as ruling that type 2 diabetes should be considered a disability; but did say that the medical evidence at the employment tribunal stage had been misconstrued, and should be re-considered by the tribunal. This leaves open the possibility that progressive illnesses, such as type 2 diabetes, could be covered by the Equality Act 2010.

It is by no means certain that this argument will be successful, but employers should be aware that it is possible that employees with type 2 diabetes could be covered by the Equality Act 2010.

"She only makes the teas and sweeps the floors."

On a somewhat bizarre note, the government has released a list of the oddest excuses it has encountered for non-payment of the national minimum wage – for example, one employer argued that foreign workers were not entitled to be paid the minimum wage and another employer claimed that there was no need to pay staff while they were not actually serving customers because the rest of the time they were just on 'standby'.  For the full list, please click here.

Whilst the release of this is accompanied by a comment that there is "no excuse" for not paying the minimum, many employers inadvertently find themselves falling foul of the labyrinthine national minimum wage regulations; this is all too easy to do, particularly if staff work irregular hours and / or if their work includes travel time. Please contact me (or your regular Bevan Brittan contact) if you would like us to undertake a national minimum wage 'health check' for you or assist with your response to an HMRC investigation.  

First labour market enforcer appointed

In a separate, but related, development, the first Director of Labour Market Enforcement has been appointed: the role will be taken up by Sir David Metcalf, who was a founding member of the Low Pay Commission and a former chair of the Migration Advisory Committee. This is the latest example of the increasing trend for the government to focus on employers' self-regulation – as I highlighted in my article for HR Bullets at the beginning of last year (please click here to view).