Employment Eye January 2019

Welcome to our latest round-up of recent employment law developments and what they mean for you.

 

Featured case	Pensions: when is someone treated unfairly due to a disability? Philip Woolham reports on an important case which shows how employment and pension law can mix, often in a complicated way.   Read more
Briefing	Key themes and reforms for 2019 What are the five most important workforce themes and employment law reforms for employers to look out for in 2019? Jodie Sinclair provides a summary.   Read more
Brexit and your workforce	Brexit and your workforce Bhavika Badola provides a briefing on legal and practical staffing issues linked to Brexit: the immigration White Paper, dealing with Settled Status and HR business planning – what are the next steps?   Read more
News round-up	Employment news round-up, January 2019 Anne Palmer summarises the latest employment law news in brief, including the latest on employment status, gender pay gap reporting and changes to ‘right to work’ checks.   Read more

 

Pensions: when is someone treated unfairly due to a disability?

Philip Woolham reports on an important case which shows how employment and pension law can mix, often in a complicated way.

 

The background

Most pension schemes have provisions for employees to take benefits early if they suffer from ill-health or a disability. This can be for physical or mental reasons. If, usually following medical reports, the scheme decides that a member can no longer work, either permanently or sometimes temporarily, that person will receive an immediate pension. Pension benefits for ill-health are often generously increased. For example the member may get credit for service to normal retirement age (which can be decades if the member is young). They are often costly. In this case, the employee's salary was also enhanced, which is more unusual. In both cases, the employer must meet the costs.

Employers are also required, under the Equality Act 2010, to ensure that disabled employees are not treated unfavourably because of something arising from their disability. Unless any unfavourable treatment can be justified, it will amount to a form of disability discrimination.

So what happens when an employer has already accommodated the employee's disability by allowing them to move to part-time hours (with reduced pay and pension benefit build-up), but the employee unfortunately later cannot continue to work, and receives an early pension due to ill-health? The pension would be lower because of the part-time working. Is this in itself unfavourable treatment and therefore discriminatory, because the pension would have been higher if it had been calculated on a full-time basis? This was what the Court looked at in Williams v The Trustees of Swansea University Pension & Assurance Scheme and another.

 

The facts

The Claimant, Mr Williams, could no longer continue to work, and he met the pension scheme's criteria for early retirement due to ill-health or disability.

However, he had been working part-time for three years, at half his previous full-time salary. Part of his pension was based on that lower salary, albeit enhanced as set out in the scheme's rules. Mr Williams claimed that this was unfavourable treatment because of his disability and was therefore discriminatory: he was only paid less because of his disability. Therefore his pay enhancement should have been calculated as if he was still working full-time.

There was no argument that the trustees of the pension scheme had applied the rules correctly. The question was whether those rules, and their interaction with his move to part-time working, constituted disability discrimination.

The case was first heard at the Employment Tribunal. The Tribunal agreed that Mr Williams had been 'unfavourably treated', the test for this type of disability discrimination. The case went to the Employment Appeal Tribunal (EAT), who found that there had been no unfavourable treatment. That decision was appealed to the Court of Appeal, and was then appealed again to the Supreme Court.

 

The decision

The Supreme Court agreed with the EAT. There had been no unfavourable treatment.

There is no doubt that Mr Williams would have received a higher pension had he retired due to ill-health directly from full-time employment. However, the Court found that the relevant 'treatment' was the payment of a pension, not the reduction of hours.

The Court said that these should not be linked. Given that the only reason that Mr Williams was entitled to a pension was due to his disability, he had not been unfavourably treated. If he had still been able to work full time, he would not have been entitled to early retirement on the grounds of ill-health.

Here, when his employer had adjusted his conditions to allow him to work part-time, that had meant that he had been able to continue to work. Therefore, he would not have been able to claim early retirement from full-time work due to ill-health at that point.

There was therefore nothing unfavourable in the way Mr Williams had been awarded an ill-health early retirement pension. Only by putting him in an unrealistic employment position, that of moving directly from full-time work to immediate retirement due to ill-health, could he have received the higher pension.

 

What does this mean for me?

This is a useful case which will be welcomed by employers, as it sets out, at Supreme Court level, how employers should deal with disability discrimination cases when the level of pension payments are affected as a consequence of an employee’s disability. There is no obligation on employers and pension schemes to 'turn the clock back' to a point where an employee might have had better benefits as a result. So long as the decisions leading the employee to the point they are at when benefits are payable are correct, there is no need to enhance them.

 

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Key themes and reforms for 2019

What are the five most important workforce themes and employment law reforms for employers to look out for in 2019? Jodie Sinclair provides a summary.

 

1. Brexit: legislation and staffing issues

It almost goes without saying that one of the big concerns for all those working in HR and employment law in the coming year will be the impact of our withdrawal from the European Union (EU).The immediate effect on the employment law landscape is likely to be minimal: all EU derived employment law will be absorbed into our domestic legal framework on exit day. Subsequent to that, the government may eventually repeal or amend certain aspects of legislation which originated in the EU, but employment law is not thought to be a high priority area for reform. The more pressing issue for employers will be dealing with staffing and skills shortages, workforce planning, getting to grips with a new immigration regime and dealing with Settled Status. For more detail on these and other Brexit related workforce issues, please click here for a briefing from Bhavika Badola, one of Bevan Brittan’s immigration law specialists.

 

2. AI/ML and the workforce

The rapid growth of Artificial Intelligence (AI) and Machine Learning (ML) will be a dominant workforce issue in 2019. The full extent of the effect of this for HR is yet to be seen, but it is thought by some commentators that the role of HR and in-house Counsel in this “fourth industrial revolution” will be to assist in re-shaping and redesigning the way in which a workforce operates, rather than simply overseeing redundancies. Whilst there is likely to be some job displacement as a result of new technologies, many organisations utilising AI/ML report a shift in utilisation rather a reduction in head count. For example, removing dull, repetitive ‘rules based’ elements of a role can mean that an employee shifts their focus to more productive and engaging elements of their work.

In order to stay ahead of the curve, HR professionals must be mindful that the growth of the capabilities and applications of these new technologies is matched with an increasingly restrictive regulatory environment. The General Data Protection Regulation (GDPR) was incorporated into UK law last year under the Data Protection Act 2018. The GDPR regime will bed in over the course of 2019, and we may see claimants utilising its restrictions on automated decision making and data storage. In addition, there may be push back against the use of any automated systems which fail to accommodate employees with disabilities, in breach of the ‘reasonable adjustments’ provisions of the Equality Act 2010. Please click here for our briefing on key GDPR points for HR, including the new restrictions on automated decision making.

 

3. Employment status and ‘on demand’ working

During the course of 2019, the prevalence of employment status and ‘on demand’ working issues is set to continue. And a new area of focus likely to develop in relation to ‘professional gig workers’, such as IT and finance contractors, as a consequence of the forthcoming reforms to IR35 (more this on later).

In terms of employment status generally, it is thought very likely that Uber will appeal the decision of the Court of Appeal in Uber v Aslam, upholding an employment tribunal’s decision that Uber drivers are ‘workers’ and not self-employed contractors. Uber has been given permission to appeal, and a hearing at the Supreme Court is expected during the course of 2019. Click here for more on the Court of Appeal decision.

In response to the recent focus on employment status and ‘on demand’ working, the government has now published its new industrial strategy: the Good Work Plan.

Key changes designed to support the ‘on demand’ workforce and reform employment status are as follows. 

• Employment status: new legislation will be introduced with the aim of refining and clarifying the employment status tests, and improving the alignment between the tests for tax purposes and for general employment purposes.
• Agency workers: the ‘Swedish derogation’ (where agency workers are not entitled to equal pay if the agency provides the worker with a permanent contract of employment and pays them between assignments) will be abolished from 6 April 2020.
• Continuity of employment: the government will increase from one week to four weeks the period required to break continuity of employment, making it easier for casual employees to accrue employment rights.
• Holiday pay: the reference period for calculating a ‘week’s pay’ for holiday pay purposes will be increased from twelve to fifty two weeks (or the number of complete weeks in employment), with effect from April 2020.
• Written statements of employment: from April 2020, all employees will have the right to a written statement of terms from day one, and the statements must contain more detailed information.
• Zero-hours contracts: staff working under contracts with no minimum hours will have a right to request a more stable contract after twenty six weeks engagement.
• State enforcement of holiday pay rights for vulnerable workers will be introduced. Plans for a single labour market enforcement body with new powers and resources will be brought forward to early 2019.

Whilst issues around ‘gig working’ have, to date, related mainly to lower skilled workers, the focus in the coming year (and beyond) will shift towards providers of professional ‘on demand’ services, with reform of the IR35 taxation rules. This scheme was originally introduced as a means of clamping down on ‘disguised employment’. In circumstances where, but for the existence of an intermediary / Personal Services Company, the relationship between the parties would have been an employment relationship, then deductions must be made for National Insurance Contributions and employee income tax. However, it is thought that there are low levels of compliance with this scheme because responsibility for assessing IR35 status and making the appropriate deductions has rested with the contractor in question. In April 2017, public sector organisations were required to assess IR35 status and make the appropriate payments. It was announced in the Autumn 2018 budget that this will be rolled out to medium sized and large companies in the private sector. A consultation will be published in the Summer of 2019, with legislation expected to come into force in April 2020. Employers need to use this lead-in time to prepare for these changes, ensuring there are systems in place to assess employment status of contractors working through intermediaries and make the correct deductions from payments. Given the complexities around the definition of employment status and the likelihood of imminent reform in this area, a blanket approach is unlikely to be sufficient.

 

4. Sexual harassment and NDAs / ‘gagging’ clauses

The issue of dignity at work remains high on the political, social and legislative agenda and is set to stay there in 2019. In December 2018, the government announced twelve action points in response to the July 2018 Women and Equalities Select Committee's report on sexual harassment in the workplace. The key announcement is that the government will ask the Equality and Human Rights Commission to develop a statutory code of practice on sexual harassment, although there is no timescale for this to be introduced.

The government has said that it will consult on the following proposals.

1. Whether to introduce a mandatory duty to protect workers from sexual harassment (the government has indicated that it is not convinced about the merits of this proposal)
2. How to strengthen and clarify laws in relation to third party harassment. There is no suggestion that the (now repealed) third party harassment provisions which were contained in the Equality Act 2010 should be re-introduced.
3. Whether new protections are necessary to protect interns and volunteers from sexual harassment.
4. How to improve the way in which non-disclosure agreements (NDAs) are used, and how best to enforce any new requirements. The outcome of this part of the consultation may encompass the way in which confidentiality clauses are used in Settlement Agreements.

 

5. Employment tribunals

The steady increase in tribunal applications continued into the end of last year: during the period July – September 2018, single claims received by employment tribunals’ increased by 13%, compared to the same period last year; and multiple claims rose by 30%. It is anticipated that this trend will continue in 2019 and beyond. This is not only because there is no expectation that fees will be re-introduced this year, but also because the government will consult on extending employment tribunal time limits for all claims under the Equality Act 2010 from three months to six months. This is in response to the Women and Equalities Committee report (see above) and, if implemented, could result in increased claims

Coupled with the increased likelihood of litigation in the coming year, employers will also be exposed to greater financial risk. With effect from 6 April, 2019, the maximum penalty for an aggravated breach of employment rights will increase from £5,000 to £20,000.

Furthermore, this year sees increased reputational risk for employers who do not pay employment tribunal awards. The names of employers which fail to pay employment tribunal awards of £200 or more will be published on the gov.uk website and in press releases, every quarter, along with the amount of the unpaid award. The scheme applies to unpaid awards registered with BEIS from 18 December 2018 onwards.

 

Brexit and your workforce

Bhavika Badola provides a briefing on legal and practical staffing issues linked to Brexit: the immigration White Paper, dealing with Settled Status and HR business planning – what are the next steps?

The White Paper on Immigration has provided greater clarity on plans for a post-Brexit system that will prioritise skilled workers.

From 2020, there will be a more restrictive immigration policy in place, with the same rules applicable to individuals whether they are from the European Economic Area (‘EEA’) or the rest of the world.

But a substantial burden will remain on employers trying to manage complexity and compliance, amid concerns that recruitment and hiring difficulties in the UK have now reached critical levels.

Latest figures show that the number of job vacancies has risen by 40,000 since last year to a near record of 848,000, with the number of people in work standing at 32.48 million - also close to an all-time high (source: ONS UK Labour Market, December 2018).

Both public and private sector organisations can’t get enough skilled people they need both now and for future investment, and are worried that Brexit will increase difficulties in retaining workers from EEA countries.

 

Skilled workers

 

The new immigration system is intended to create a flexible and less bureaucratic system to meet the needs of employers and sponsored licence holders. Home Secretary Sajid Javid says this will place the focus on “talent and expertise, rather than where people come from”.

The Paper’s key proposals are to:

1. end the cap on skilled workers
2. scrap the requirement for employers to carry out a resident labour market test before hiring a worker from overseas; and
3. introduce an intermediate skills level at Required Qualifications Framework (‘RQF’) level 3–5 (which represents skills at A’Level standard or equivalent, for example) – in line with the recommendations of the Migration Advisory Committee (‘MAC’).

It will enable two new work routes for “highly skilled and skilled” workers with visas lasting for up to five years through employer sponsorship, and transitional time-limited route (up to 12 months) for temporary short-term work, in which workers can move between employers (with no specific sponsorship requirement).

Individuals meeting the “highly skilled and skilled” criteria will be entitled to bring their dependants to the UK, to switch to other immigration routes and, in some cases, to settle in the UK permanently.

At present, non-EU migrants must earn more than £30,000 a year to work in the UK. The government – under pressure from employers in the health, social care, construction, agriculture and other sectors - will consult on whether or not this threshold should be retained for all overseas workers.

 

Low skilled and temporary workers

 

The government is also proposing to introduce a "time-limited" transition route for temporary short-term workers at any skill level from certain "low risk" countries, in order to ease pressure on employers of lower skilled workers following the end of free movement from the EU. The Home Office recognises that the adjustments will be difficult under this scheme, particularly for the social care sector, but concerns are unlikely to be alleviated with the proposed temporary short term work route under which individuals cannot stay for more than 12 months, access benefits, bring dependants, nor settle in the UK, extend or switch routes. There is also a cooling-off period that applies for a further 12 months to prevent people effectively working in the UK permanently.

The government would also retain the right to close the scheme "if economic conditions in the UK warrant that", and will fully review it in 2025.

Employers with a workforce relying on low skills and EU/EEA workers will need to carefully review the new intermediate sponsored route for RQF Level 3 – 5 for permanent employment where appropriate, and the shortage occupation codes, which the government has asked MAC to review (likely Spring 2019) – involving jobs where there are not enough resident workers to fill vacancies.

 

EU Settlement Scheme

 

The status of EU citizens (and their family members) when the UK leaves the EU on March 29 next year has been a key question. The Government recently undertook phase two testing of its proposed EU Settlement Scheme, launched its public test and has decided to scrap the £65 fee (and £32.50 fee for those under 16) millions of EU citizens were going to have to pay to secure the right to continue living the UK after Brexit.

Whilst the settled status fees will be waived when the scheme is launched on March 30 2019, it is unclear how fees will be reimbursed to those who have already paid them, as part of the pilot scheme and/or whether systems for the public test can be updated quickly enough to respond to the government’s decision to scrap the application fees.

A first phase pilot, that tested the online application process with selected applicants from the NHS in the North-West, has reportedly proved successful.

The government has implemented the second phase (November-December) involving staff in the higher education, health and social care sectors across the UK.

After successful limited pilots of the system, the next testing phase of the EU Settlement Scheme is opening more widely. This means, from January 21 2019, EU citizens who hold a valid passport and any non-EU citizen family members who hold a valid biometric residence card will be able to take part in a public test phase of the EU Settlement Scheme before the scheme is fully rolled out in March 2019.

Under the scheme, EU citizens can apply for 'settled' or 'pre-settled' status:

• Settled status - EU citizens and their family members who have been continuously resident in the UK for five years, by 31 December 31 2020, will be eligible for settled status, enabling them to stay in the UK indefinitely.
• Pre-settled status - EU citizens and their family members who arrive in the UK by December 31 2020, but will not yet have been continuously resident here for five years as at that date, will be eligible for pre-settled status, enabling them to stay until they have reached the five-year threshold. They can then apply for settled status.

EU citizens and their family members who obtain settled/pre-settled status will have the same entitlements as before Brexit. That is, their entitlement to work, healthcare, study, public services, pensions and other benefits will not change.

EU citizens with settled or pre-settled status can continue to travel on national identity cards until 2025.

Individuals who already have British citizenship/indefinite leave to remain will be continue to be unaffected by Brexit. However, settled status will provide extra rights and those with indefinite leave to remain, permanent residence (not valid after 31 December 2020) and applying to move from pre-settled status to settled status can therefore change to settled status free of charge if they wish.

 

Compliance – Brexit deal or ‘no deal’

 

The White Paper acknowledges the administrative burden on employers, and says the new system will be more business-friendly.

If there is a Brexit deal, free movement for EU nationals will continue during the implementation period, meaning organisations will be able to employ EU nationals without any restrictions until December 2020.

If there is a ‘no deal’ scenario, EU/EEA nationals already in the UK by March 29 2019 can remain, but it is unclear if free movement will continue for EU nationals arriving post-Brexit until, for example, the new immigration system is rolled out or a sensible transition period is set by the government.

After 2021, the Home Office will not require employers to undertake retrospective right to work checks on existing EU employees, and from the end of January 2019, employers will be able to request online right to work checks. Helpfully, the government has confirmed that employers will not need to make additional right to work checks to differentiate between recent arrivals in the UK and settled residents if there is ‘no deal’.

Employers have long complained that the UK has one of the most expensive visa systems in the world, and that’s unlikely to change. The need to obtain prior entry clearance may mean employers also needing to allow additional time before they can employ individuals whilst the new immigration system is rolled out.

 

Business planning - next steps

 

It’s a critical time for organisations that rely on overseas staff to keep their businesses running and provide the required levels of skills they need from both workers from EEA and non-EU countries.

Human resources departments have a vital role to play in ensuring organisation remain agile and can retain their talent pipeline.

As well as recruitment strategies, HR departments may also need to:

1. as a first priority, consider whether the organisation will need to hire non-UK workers to meet workforce needs. If so, it should register now as sponsors or ensure that its licence remains up to date and valid, if there is one in place (and thereafter issue certificates of sponsorship to their employees). This could take four months to secure, and will also involve substantial record keeping and reporting obligations, with the added worry that any non-compliance risks employers losing their licence and ability to recruit overseas staff
2. employ new retention strategies, with greater support for existing EU staff to encourage settled and pre-settled status applications
3. develop a proactive communications strategy that provides a channel for employees to ask questions and seek support to apply for Settled or Pre-Settled status so your workforce is not left without the legal status to live and work in the UK
4. seek to facilitate the change needed to reduce demand for low skilled migrant labour, as future arrangements are transitory in nature and short-term. This could mean offering flexible hours of work to encourage unemployed and/or those with childcare responsibilities into the workplace to help fill vacancies post Brexit.

Ultimately, with public policy around migration and employment still fluid, organisations will also need to remain agile, engage in scenario planning and keep closely aware of new opportunities that arise as the new post Brexit employment landscape takes shape.

Please contact me, or email the immigration team - Immigration.Law@bevanbrittan.com - if you would like any specific advice on dealing with any of the issues outlined above. Our team of specialist immigration lawyers has been supporting clients on a wide range of Brexit related matters, including practical guidance on securing and supporting your overseas workforce, training for staff and managers on dealing with settled status and drop-in settled status surgeries.

 

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Employment news round-up, January 2019

Anne Palmer summarises the latest employment law news in brief, including the latest on employment status, gender pay gap reporting and changes to ‘right to work’ checks.

 

Employment status update

Two decisions have been published recently, further refining our understanding of how employment status is assessed by employment tribunals – and, by extension, how employers should be applying the relevant tests to their workforce.

The Court of Appeal’s decision in Uber v Aslam was published in December 2018, and upheld the Employment Appeal Tribunal’s (EAT) decision that Uber drivers are ‘workers’, and are, therefore, entitled to bring claims for the national minimum wage, rest breaks, holiday and whistleblowing protection.

The Court of Appeal interfered very little with the EAT’s reasoning that Uber is more than a ‘technology platform’ facilitating access to numerous self-employed drivers; the drivers are integrated into the company’s organisational structure to a sufficient extent that they are providing their services personally to the company and the relationship between Uber and its drivers is not one of ‘client and customer’.

Uber have been given permission to appeal to the Supreme Court, so it is likely that employers will have to wait before being provided with a definitive view on this case. In the meantime, Uber’s hopes of success at this final hurdle will have been raised by one of the Judges in the Court of Appeal who, disagreeing with the majority view, thought that the contractual arrangements between Uber and its drivers were capable of being interpreted as genuinely self-employed contracts, in line with numerous contractual arrangement between conventional taxi drivers and taxi operating companies. Watch this space….

In a decision on the same topic, the EAT has recently considered the question of whether the ability to send a substitute is always fatal to finding that there is an employment relationship between an individual and the organisation for which they are working. The question of whether there is a right of substitution (the right for an individual to send a replacement to do the work required) is one of the factors which may be taken into account by an employment tribunal when considering employment status. In a case called Chatfeild-Roberts v Philips & Universal Aunts Limited, the EAT held that a live-in carer could still be classed as an employee, notwithstanding that she had sent a substitute to undertake her work from time to time. The replacement individual was only asked to work when the claimant was on holiday or undertaking jury service. As such, the employment tribunal found (in line with the Pimlico Plumbers decision – summary here) that a right of substitution is not necessarily fatal to a finding of employment status.

 

Discrimination ‘disguised’ as redundancy – appeal hearing

Last Summer, the Employment Appeal Tribunal made a controversial decision on legal privilege, holding that legal advice on how to ‘cloak’ a potentially discriminatory dismissal as redundancy had to be disclosed to an employment tribunal, and was not subject to legal advice privilege. That decision has been appealed to the Court of Appeal and is timetabled to be heard on 2 October 2019.

 

Brexit

Following the government’s historic defeat in its vote on the EU Withdrawal Agreement in the House of Commons on 15 January 2019, we are currently no further forward in understanding exactly what the post-Brexit future holds; at the time of writing, another House of Commons vote is imminent.

Notwithstanding the eventual outcome of the current state of play in relation to our withdrawal from the European Union, employers remain in a position where they need to get to grips with the impact of Brexit and proposed new rules on overseas recruitment. Please click here for our briefing on the immigration and workforce implications of Brexit and what you should be doing now in order to prepare, whatever the eventual outcome.

 

Immigration health surcharge increase

Last October, the government announced that it intended to increase the Immigration Health Surcharge (IHS). This increase was delayed, but has now been introduced, with effect from 8 January 2019. The IHS has increased from £200 to £400 a year for non-European Economic Area (EEA) and non-Swiss nationals, and Tier 5 Youth Mobility Scheme workers and students are now required to pay £300 a year (currently £150). The IHS allows workers who participate in the scheme to access NHS services.

 

Changes to ‘right to work’ checks

With effect from 28 January 2019, new online ‘right to work checks’ will be available for employers. This is the extension of the Home Office Right to Work Checking Service, which was introduced last April. Under the scheme, employers can access online records of an individual’s right to work in the UK and see whether they are subject to any restrictions. Currently, paper documents must be viewed in addition to the online service, but an online only check will be sufficient from 28 January 2019, provided the individual in question is eligible for the scheme.

The online checking service can be used by non-EEA nationals who hold biometric residence permits or biometric residence cards and EEA nationals who have been granted immigration status under the EU Settlement Scheme.

From 28 January 2019, employers can also accept short-form birth and adoption certificates together with a National Insurance number when conducting right to work checks, making it easier for British citizens who do not hold a passport to demonstrate their right to work.

 

Gender pay gap reports – latest developments

It has been reported in the press that a quarter of all gender pay gap reports are not compliant with the requirements of the scheme. Since 2017, organisations with more than 250 employees have been required to publish online information showing average differentials in pay between men and women employed in their workforce. Research has shown that many organisations are falling short of the requirements in the regulations, whether by publishing data for the wrong year, identifying the wrong ‘responsible person’, or publishing data which does not stack up, because the median pay data does not match the pay quartile data. There is no specific fine, penalty or employment tribunal claim that can be brought against an organisation for failure to provide correct gender pay gap reports, or for failing to publish gender pay gap reports at all. However, an organisation which does not comply with the regulations may face negative publicity and possible investigation by the Equality and Human Rights Commission.

The Equality and Human Rights Commission has published a report this month urging employers to publish a narrative alongside their gender pay gap statistics. Although this is not a compulsory requirement, employers which find that they have a gender pay gap and may wish to explain the reasons for any pay differential and what the employer intends to do to remedy the situation.