Employment Eye January 2018

Welcome to the January 2018 edition of our employment law report: our monthly round-up of key employment law developments and what they mean for you.

 

Featured Case	Getting out of a fix Alastair Currie looks at a case which provides useful guidance on the tricky question of fairly dismissing employees on fixed term contracts. Read more
Briefing	2018: what to expect and key actions There will be a lot of 'new' in this new year for all those working with workforce law. Sarah Maddock provides a key dates tracker, with action points. Read more
News round-up	Our first employment law news update of the year covers: pensions, 'perceived' disability claims, compensatory rest breaks, new gender pay gap enforcement proposals, privacy notices for schools, DBS changes and the latest on tax-free childcare schemes. Read more

 

2018: what to expect and key actions

There will be a lot of 'new' in this new year for all those working with workforce law. Sarah Maddock provides a key dates tracker, with action points.

 

Date	Development	Action points
Early 2018	Public sector exit payments Promised for this time last year, the public sector 'cap and claw-back regulations' have yet to be published but are expected in the first half of this year. We understand that there will be a new consultation exercise undertaken on the regulations. These two sets of regulations will impose a £95,000 cap on public sector exit payments and will allow for claw-back of exit payments made to high earning public sector employees. Please click here for our article outlining the changes and their practical impact.	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 avoid the severance payment cap.
By March / June 2018	Corporate governance reform – draft legislation The government's response to its 2016 Green Paper on corporate governance reform identified a number of new proposals intended to tighten regulation of executive pay, increase employee involvement at Board level, and reform corporate governance in large privately-held businesses. Draft secondary legislation is expected by March 2018, with the reforms in effect by June 2018.	Review company pay structures and reporting practices to identify any gaps in alignment with the new proposals.
30 March 2018	Gender pay gap reporting Deadline for large public bodies (i.e. those with over 250 employees) to publish their first gender pay gap reports.	Data gathering exercises should now be under way and the resulting data must be published on your website (with optional narrative explanation) and on the government's portal.
1 April 2018	National Living Wage (workers over the age of 25) increases from £7.50 to £7.83 per hour. National Minimum Wage adult rate increases from £7.05 per hour to £7.38 per hour.	Payroll budgets and forecasts will need adjusting accordingly.
4 April 2018	Gender pay gap reporting Deadline for large private sector and voluntary sector employers (i.e. those with over 250 employees) to publish their first gender pay gap reports.	As with public sector reporting, data gathering exercises should now be under way and data published on your website (with optional narrative explanation) and on the government's portal.
6 April 2018	Reform of taxation of settlement payments From 6 April 2018, all payments in lieu of an employee's normal notice period must be taxed at an amount equivalent to the employee's basic pay, even if the employee does not have a contractual pay in lieu of notice clause. These payments can no longer be classified as 'compensation' within the £30,000 tax exemption. Also from 6 April 2018, payments for injury to feelings will be taxable, except where the injury is a psychiatric injury or other recognised medical condition.	Payroll systems will need to take account of this change, and the impact on compensation received will need to be factored into termination negotiations.
	Childcare voucher schemes close to new entrants. Schemes for existing users can, however, remain in place.	Publicise closure of existing scheme to new entrants. Adjust any budgeted employer National Insurance contributions savings expected from running a voucher scheme.
9 April 2018	Statutory Maternity, Paternity and Adoption Pay increases from £140.98 per week to £145.18 per week.	Payroll budgets and forecasts will need adjusting accordingly.
25 May 2018	EU General Data Protection Regulation (GDPR). 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).	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).
During 2018	Employment status is likely to continue to take centre stage this year, with two important worker status cases due to be heard (see below). Furthermore, the government's formal response to the 'Good Work' report by Matthew Taylor is expected before the end of this year. Please click here for our summary of the employment law aspects of the Good Work report.	Legislative reform will be needed for many of the workforce proposals put forward by the Good Work report, so there are no concrete steps to take now in response to the report; but keep an eye out for a consultation and draft regulations.
	NHS whistleblowing protections The draft Employment Rights Act 1996 (NHS Recruitment- Protected Disclosures) Regulations have been published for consultation. These regulations will prohibit NHS employers from discriminating against applicants who appear to them to be whistleblowers. The consultation on the draft regulations closed in May 2017 and a response is awaited. The regulations are expected to be in force by the end of this year, but no implementation date has been announced.	In advance of implementation, prudent employers will be raising awareness of this change amongst resourcing managers, and considering whether specific reference will need to be made to the regulations in any recruitment policies and procedures.

 

Cases to watch

• 'Sleep-ins' and the minimum wage

On 20 March 2018, the Court of Appeal will hear an appeal against the decision in Focus Care Agency Limited v Roberts, on the application of a 'multifactorial test' to determine whether a worker is entitled to the national minimum while they are present at work, even if asleep. The Court of Appeal will consider whether employees who are required to sleep at work are undertaking 'time work' for the whole time they are present at work; or whether they are only entitled to be paid the national minimum wage for the time that they are awake and carrying out their duties. Please click here for our summary of the application of the multi-factorial test for sleep-in arrangements.

• Equal pay: private sector / retail employers

On 23 October 2018, the Court of Appeal will hear an appeal against a decision that a predominately female group of supermarket retail employees can compare themselves with a mainly male group of distribution depot employees, for the purposes of an equal pay claim of work of equal value (Asda Stores v Brierley – please click here for our summary).

• Disability discrimination and long working hours

On 1 November 2017, the Court of Appeal heard Carreras v United First Partners Research, which concerns the question of whether an expectation, rather than a strict requirement, for employees to work long hours amounts to a 'provision, criterion or practice' for the purposes of a disability discrimination claim. A decision is awaited.

• Carry-over of unpaid holiday / Working Time Regulations

On 20 / 21 November 2018, after having referred a question to the European Court of Justice (ECJ), the Court of Appeal will consider whether a commission-only salesman was entitled to 13 years' unpaid holiday pay, where his contract did not allow for paid leave and he was, therefore, deterred from taking holiday (The Sash Window Workshop Limited v King – please click here for our summary of the ECJ's decision).

• Employment status

On 20 and 21 February 2018, the Supreme Court will consider the employment status of a plumber, purportedly engaged as a self-employed contractor (Pimlico Plumbers v Smith – please click here for our report on the Court of Appeal decision). On a similar point, by 20 November 2018, the Court of Appeal will hear the appeal in Uber v Aslam, regarding the employment status of taxi drivers who obtain bookings using the Uber App. Please click here for our summary of the Employment Appeal Tribunal's decision)

Looking further ahead…

• From 6 April 2019, all termination payments over the £30,000 threshold will be subject to employer National Insurance Contributions.
• Brexit will continue to be a key issue this year and into next year, both in respect of its impact on staffing levels and the likely future shape of our arrangements for engaging EU workers.   According to the joint report from EU/UK negotiators, the current understanding is that EU workers residing in the UK will be entitled to apply for a 'settled status', with a cut-off date of 29 March 2019. This is, however, not legally binding and is subject to change as the UK's negotiations with the EU play out.
• During 2020, parental bereavement leave and pay is expected to be introduced. Watch this space for updates on the progress of the Bill introducing this reform (the Parental Bereavement (Pay and Leave) Bill).

 

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Getting out of a fix

Alastair Currie looks at a case which provides useful guidance on the tricky question of fairly dismissing employees on fixed term contracts.

The background

The Fixed-term Employees Regulations ('the Regulations') prevent the less favourable treatment of fixed-term employees, compared to permanent employees:

• as regards the terms of their contract; or
• by being subjected to any other detriment by their employer.

Fixed-term employees are entitled to be treated no less favourably than comparable permanent employees by reason of their fixed-term status. The right not to be treated less favourably includes the right to be informed of vacancies for permanent posts in the employer’s establishment. However, if any less favourable treatment takes place, it may be objectively justified.

A fixed-term employee employed under successive fixed-term contracts for four years or more must be treated as a permanent member of staff (unless the continued use of fixed-term contracts can be objectively justified).

Fixed-term employees are also covered by the general requirements of the fair dismissal regime set out in section 98 of the Employment Rights Act 1996 ('the ERA'). Accordingly, the dismissal of a fixed-term employee (including by non-renewal of their contract) must

• fall within one of the potentially fair reasons for dismissal – in these circumstances, the relevant potentially fair reason would usually be 'some other substantial reason' ('SOSR'); and
• the dismissal must also comply with the general test of fairness: whether the employer acted fairly in all the circumstances, in accordance with equity and the substantial merits of the case.

The facts

In The Royal Surrey County NHS Foundation Trust v Drzymala, the claimant, Dr Drzymala, was employed by the Royal Surrey County NHS Foundation Trust ('the Trust') as a locum consultant in Oncology, under a series of fixed-term contracts. However, when a permanent post-holder was appointed instead of her, through a competitive procedure, the Trust did not renew Dr Drzymala's last fixed term contract. When the Trust notified Dr Drzymala that her contract would not be renewed, it did not mention the possibility of an appeal, or suggest other roles which might be suitable (apart from one role as a Specialty Doctor, which was a lower grade and which Dr Drzymala rejected).

Dr Drzymala brought a successful claim for unfair dismissal. The Trust appealed, its main argument being that the dismissal was fair because it had complied with the Regulations:

• it had not subjected Drzymala to a detriment because of her fixed-term status, and
• it was only under an obligation to treat Dr Drzymala as a permanent employee once she had been employed on successive fixed-term contracts for at least four years; and
• it had complied with its duty to provide information about vacancies.

The decision

The Employment Appeal Tribunal ('the EAT') gave the Trust's argument fairly short shrift, and upheld the employment tribunal's finding of unfair dismissal.

In doing so, the EAT emphasised that when a fixed-term employee's contract is not renewed, that is a "passive" dismissal, in that it occurs by lapse of time; but there may still be a requirement for an employer to exercise their judgment – as was the case here, where the employee in question was competing for a permanent post and the employer had to decide which candidate to prefer.

The fact that the employer had complied with the Regulations did not make the dismissal necessarily fair. The EAT highlighted that the Regulations sit alongside the unfair dismissal regime, and complying with the Regulations does not have the automatic knock-on effect of making it fair to dismiss.

The EAT also considered the question of seeking alternative employment for a fixed-term employee when a contract expires. The EAT agreed with the employer on this point: that there is no general obligation on an employer to discuss alternative employment every time a fixed-term contract is due to expire; whether or not it is fair do so will depend on the facts of the case.

What does this mean for me?

Although this case does not have anything new to say about the law relating to fixed-term employees, it provides a useful reminder that complying with the Regulations will not automatically mean that a fixed-term employee will be fairly dismissed. When considering the non-renewal or early termination of a fixed-term contract, it is important to take a step back and remember that it amounts to a dismissal and must, therefore, comply with the usual general requirements for fairly dismissing employees.

For my comment on this case in the context of appointing locum doctors under the NHS (Appointment of Consultants) Regulations, please click here.

 

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Employment news round-up, January 2018

Our first employment law news update of the year covers: pensions, 'perceived' disability claims, compensatory rest breaks, new gender pay gap enforcement proposals, privacy notices for schools, DBS changes and the latest on tax-free childcare schemes.

Pensions news

Extending auto-enrolment

We have reported before on the government's ongoing review of how automatic enrolment is progressing. In December 2017, we had some important concrete proposals as to what might happen in the next few years. These were included in a document called Maintaining the Momentum (available here), which covers a lot of ground on automatic enrolment in particular and the wider UK pension scene. Two major proposals are:

• The minimum age to qualify for auto-enrolment will drop from 22 to 18. The £10,000 minimum annual pay level (or equivalent) will remain, although it will be reviewed. Given that most workers aged 18 and above working full time should meet the minimum pay requirements via the Minimum Wage, this could put another 900,000 younger workers in scope for enrolment. It would also add up to four years of saving to those workers' accounts if they stay enrolled. They will, as ever, be able to opt out if they wish.
• Contributions by both worker and employer will be paid from the first pound of pay to the current statutory limit of £45,000 per year. At the moment, the first £5,876 is not counted as pensionable. Some schemes don't apply these limits, but these are the minimum thresholds to count as auto-enrolment compliant.

These changes should happen in the mid-2020s, although it's not completely clear as to precisely when yet. The government is keen to bed in the 'steady state' higher contribution rates before making further changes.

The other area of discussion is a possible parallel arrangement for self-employed people, who tend to save less in pensions than employees or workers (but of course may have other assets, in particular their businesses, which can be used to fund retirement in due course).

There had been speculation that a deduction of income via an additional National Insurance contribution for self-employed people who met the same age and pay criteria as workers would be proposed. This would be diverted to a suitable pension arrangement, possibly the National Employment Savings Trust (NEST). These workers could opt out in the same way as any other person who was automatically enrolled.

However, while the government says it is committed to investigating this area further, its latest update does not contain any specific proposals.

University strike action over pensions changes

The Universities and Colleges Union (UCU) has announced that 61 universities will be affected by a programme of strike action, starting in February, on changes being made to the Universities Superannuation Scheme (USS).

USS is the pension scheme for academics at most long-established UK universities. It has historically mirrored benefits in public sector schemes.

However, because USS is not a public sector scheme itself, it has to be run the same way as other pension schemes, including dealing with deficits (the difference between assets and promised benefits). Employers need to fund the deficit, which has proved increasingly expensive.

USS has announced the closure of its 'defined benefit' section. This provides a guaranteed and calculable benefit via a combination of pay and length of service. Benefits already built up will be preserved, and employers will have to keep funding the deficit. All future benefits would be in USS's defined contribution (money purchase) section. There is no guarantee as to what these benefits will be – it depends on how big members' funds are when they draw them. 

The change is driven by cost and risk to employers. There is no deficit funding in the new section, and total costs are generally lower.

The UCU has balloted for strike action because of the lack of guarantees and the risk that members' benefits will be lower after the changes, and because the overall pension offer would be very different from new universities and other higher education institutions. These institutions generally provide benefits via either the Teacher's Pension Scheme or the Local Government Pension Scheme, so are not affected.

At the time of writing, talks aimed at averting the strikes have not succeeded, so staff from those universities will begin action with a two-day strike from 22 February, with the possibility of further five-day strikes. Staff will also work strictly to their contracts, including refusing to provide cover and not rescheduling cancelled sessions.

Perceived disability discrimination

The recent Employment Appeal Tribunal case of Chief Constable of Norfolk v Coffey confirmed that an employer can be in breach of its duties under the Equality Act 2010 if it discriminates against a non-disabled job applicant based on the employer's perception that they would be disabled in the future. This is the first case to confirm that claims for perceived direct disability discrimination are permissible.

The case confirms a new route for claims against employers, in addition to a conventional claim for discrimination based on an actual, existing disability.

In order to minimise the risk of being caught by a claim of this type, employers would be well advised to ensure that any action taken in relation to perceived disability (even if the perception related to a future condition) can be clearly backed up by reasons which are not linked to the disability – for example, because medical evidence shows that the operational costs of supporting a person with that particular condition cannot be sustained. As this type of claim would be limited to direct discrimination claims (because an actual disability is required for other disability claims), the treatment of an employee or job applicant must be clearly severable from the perceived disability in question.

Calculating compensatory rest breaks

The Employment Appeal Tribunal decision in Crawford v Network Rail Infrastructure Ltd clarifies how rest breaks for workers not entitled to normal rest breaks under the Working Time Regulations 1998 ('the Regulations') should be implemented.

The Regulations are clear that such workers are entitled to an "equivalent period of compensatory rest" of twenty minutes. The Tribunal's decision confirms that such workers require a continuous rest break of at least twenty minutes to be compliant with the Regulations. Mr Crawford's duties to provide relief cover meant that he was unable to take a continuous rest break of this duration. He was instead allowed to take a number of shorter rest breaks, which cumulatively exceeded the minimum twenty minute requirement. The employer's approach was not deemed to be compliant with the Regulations.

Local authorities: Department for Education updates privacy notice model documents

The Department for Education's model privacy notices used by schools and local authorities to inform staff, parents and pupils about the collection of their data were updated on 3 January. The updated model notices are intended to assist local authorities to comply with the forthcoming Data Protection Act 2018. This Act implements the more stringent data protection requirements set out in European Union's General Data Protection Regulation (GDPR) coming into force on 25 May 2018.

The model notices can be found on the government's publication website. A link is provided here.

Please click here for our five key GDPR points for HR.

For more information about how we can assist you with the GDPR please click here.

Gender pay gap – 'naming and shaming' proposals

Qualifying organisations must publish their gender pay gap data by no later than 30 March 2018 (for the public sector) and 4 April 2018 (for privately owned businesses and charities). The Government Equalities Office (GEO) is responsible for the administration of the reporting requirements.

The main enforcement action available to deal with non-compliance is to publish the names of employers who have not reported their pay data by the relevant date. The GEO has indicated in correspondence with employers that it plans, in early 2018, to 'name and shame' non-compliant employers. An official announcement of this intention is awaited.

New online service for basic DBS checks

From 17 January 2018, the Disclosure and Barring Service (DBS) launched a new online application form for individuals in England and Wales to obtain a basic criminal records check certificate. Individuals are no longer required to apply to DBS Scotland (who previously administered the scheme), and the cost will continue to be £25 per certificate. The change is anticipated to increase the turnaround time for certificates to be produced.

Organisations undertaking multiple basic disclosure checks will continue to do so via a Responsible Organisation, who submit checks on their behalf through the DBS.

Tax-free childcare scheme open to parents of children under age nine

With effect from 15 January 2018, the tax-free childcare scheme is now open to parents of children whose youngest child is under nine, or who turned nine on 15 January 2018.

The scheme is due to open to all remaining eligible families with children under twelve on 14 February 2018.

Existing childcare voucher schemes can continue to operate, but from 6 April 2018, they will be closed to new entrants (see our Employment Law tracker above).

 

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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.