Working Relations July 2017

Highlights

  • The snap General Election and subsequent Queen’s Speech set out the forthcoming legislative programme for the next parliamentary session.
  • Gender pay gap reporting came into force on 06 April 2017.
  • There were two conflicting sex discrimination cases on whether enhanced maternity pay should match shared parental pay (Ali v Capita Customer Management Ltd, and Hextall v Chief Constable of Leicestershire Police).

Action points

  • Employers should watch out for the appeal decisions in Ali and Hextall (above) and take appropriate advice.
  • If they haven’t already done so, employers (with over 250 employees) should prepare to ensure that they are ready to publish gender pay data in line with the new regulations before the deadline of 04 April 2018.
  • All non-bank FCA-authorised firms should be alive to the forthcoming consultation on the extension of the Senior Managers & Certification Regime, expected this summer.

Key dates to remember

Summer Consultation expected on extension of Senior Managers Regime to all Financial Services and Markets Act authorised persons. Our microsite on the new regime is available here
07 September 2017

PRA’s rules on Whistleblowing in UK branches of overseas banks expected to apply from this date.

Our whistleblowing toolkit is available here
Other future developments elexica summary available

Recent video podcasts

General developments

Consultation on extending the SMCR

The FCA’s website makes it clear that consultation on the extension of the Senior Managers and Certification Regime is expected to take place during the summer of 2017. All non-bank (and non-insurer) FCA authorised firms need to begin focussing on the new regime, which is intended to take effect in 2018. This will replace the current approved persons regime for these firms.

We will provide updated information following the consultation regarding the extension of the regime as soon as it becomes available. Further detail is available on our SMCR Extension microsite.

FRC to review UK Corporate Governance Code

The Financial Reporting Council (FRC) has announced plans to carry out a fundamental review of the UK Corporate Governance Code. The FRC will seek input from a range of stakeholders, including its recently established Stakeholder Advisory Panel.

Annual compensation increase

Compensation limits which may be awarded by employment tribunals are reviewed annually. The following limits have effect in any case where the appropriate date falls on or after 06 April 2017:

  • limit on amount of compensatory award for unfair dismissal: rose from £78,962 to £80,451 (note subject to the further cap so that the limit is the lower of £78,962/£80,451 or 52 weeks’ pay)
  • a week's pay rose from £479 to £489.

Further details available.

Increases to statutory payments

From 01 April 2017, the national living wage (for workers aged 25 and over) increased from £7.20 to £7.50 per hour and the national minimum wage also increased as follows:

  • for workers aged 21 to 24 from £6.95 to £7.05 per hour
  • for workers aged 18 to 20 from £5.55 to £5.60 per hour
  • for workers aged 16 to 17 from £4.00 to £4.05 per hour, and
  • the apprentice rate increased from £3.40 to £3.50 per hour.

Statutory maternity pay, statutory paternity pay, statutory adoption pay and statutory shared parental pay increased from £139.58 to £140.98 per week (or 90% of the person's average weekly earnings if lower). Statutory sick pay increased from £88.45 to £89.35 per week.

Tribunal fees

The MoJ published its post-implementation Review of the introduction of fees in the Employment Tribunals in January 2017, concluding that the regime was working well and its objectives had broadly been met. However, the substantial reduction in claims prompted further consultation on changes to:

  • extend access to the support available under the Help with Fees scheme
  • exempt from fees certain proceedings which relate to payments from the National Insurance Fund (where conciliation is rarely a realistic option and which often involve insolvent employers).

Comments were requested by 14 March 2017.

The fees regime has attracted criticism from the House of Commons Justice Committee, the Women and Equalities Select Committee and the Law Society on the basis that it has harms access to justice. Nonetheless, the Conservative manifesto (published May 2017) made no mention of the regime, so substantial reform is unlikely at this time.

Further details are available here.

Tribunal reform

The Government has issued its response to its consultation on reforming the employment tribunal system. The response makes it clear that the Government will be:

  • delegating judicial functions
  • aiming to digitise the whole claims process
  • providing for some claims to be determined online (but not complex claims)
  • allowing tribunal panels to be tailored to particular cases.

The necessary measures will be brought forward “as soon as Parliamentary time allows”.

Further information is available on elexica.

Employment Tribunal judgments online

The Ministry of Justice has launched its website of employment tribunal decisions.

Taylor Review published: recommended changes to employment status

Matthew Taylor’s long-awaited “Review of Modern Working Practices” has finally been published.  The review sets out some substantial recommendations with significant implications for employment law.

The Review was commissioned in October 2016 by Teresa May to consider how employment practices needed to change in order to keep pace with modern business models, and there is particular focus on ‘platform’ or ‘gig economy’ workers who provide their services through apps or digital platforms.  The report has now been titled “Good Work: The Taylor Review of Modern Working Practices” and the emphasis is on providing “fair and decent” work for all. 

The report makes a number of recommendations for clarifying the law on employment status and associated employment protections, which now fall to the Government to take forward.  The key recommendations are summarised on elexica here.

ACAS has published new guidance against the backdrop of the report, which can be found here.

Fathers in the workplace inquiry

The Women and Equalities Select Committee has launched an inquiry after research revealed that many fathers do not feel adequately supported in the workplace. The purpose is to understand the challenges employers face in assisting fathers to balance their working and childcare arrangements.

Government promises action on workplace dress codes and high heels

On 06 March 2017, the e-petition on workplace dress codes and high heels was discussed in the House of Commons. The e-petition, signed by over 150,000 people, called for it to be illegal for employers to require female employees to wear high heels at work. As a result, the government intends to take action to tackle discriminatory dress code practices, including developing guidance for employers in conjunction with ACAS, the EHRC and HSE and requested that employers review their dress codes.

Race in the workplace: The McGregor-Smith Review published

Barone‎ss McGregor-Smith's review into issues faced by businesses in developing Black and Minority Ethnic (BME) talent in the workplace has been published and makes some recommendations that will be of interest to all employers.

The review estimates that the potential benefit to the UK economy from full representation of BME individuals through improved participation and progression is £24bn a year, which is approximately 1.3% of Gross Domestic Product.

The review’s recommendations

The review makes 26 recommendations. Those most of interest to employers include that:

  • All employers with more than 50 employees should set aspirational targets to increase diversity and inclusion throughout their organisations. Notably, the review suggests that in setting those targets organisations should consider the make-up of the area in which they operate. This means that organisations, for example, in London, would need to consider these targets against a backdrop of over 40% of the working population in London being from a BME background.
  • All employers with more than 50 employees should publish a breakdown of employees by race and pay band. The review goes further and suggests that ‎the Government should legislate to make this a mandatory requirement.
  • All employers with more than 50 employees should identify a board-level sponsor for all diversity issues, including race.

Organisations within the Financial Services sector will recognise that many of the above are similar to the recommendations that came from the Gadhia review (Empowering Productivity). The most significant difference is that there is no recommendation that executive bonuses should be tied to achieving an organisation’s internal targets on equality, which would one of the most controversial aspects of the Gadhia review.

An elexica article containing further information on the Review is available here.

Electronic balloting (industrial relations)

Sir Ken Knight CBE has been asked to undertake an independent review of electronic balloting (or e-balloting) in the context of industrial relations, focussing on the delivery of secure methods of e-balloting for determining whether or not industrial action should be taken. Responses were requested by 10 May 2017.

Further detail is available here.

Publications

Statutory developments

Impact of the General Election on employment legislation

The General Election, which took place on 08 June, ended in a hung parliament with the Conservative party short of an overall majority. Teresa May remains Prime Minister in a minority government, with the support of Northern Ireland's Democratic Unionist Party. The deal is unlikely to lead to any major shift in the Conservatives plans for employment law reform outlined in their manifesto.

An elexica article containing further information on the Conservatives plans for reform is available here.

Due to the nature of the snap election, certain pending employment legislation did not complete its parliamentary progress in time. Specifically, the Finance Bill which contains changes to the law on taxation of termination payments was not enacted. However, the Government has indicated that it will seek to introduce the changes at the earliest opportunity in the next Parliament.

The Queen’s Speech 2017

Following the General Election, the Queen’s Speech on 21 June 2017 set out the Government’s legislative programme for the 2017-2019 parliamentary session. The key points to take away are:

  • Gender pay gap - the Government intends to make further progress in tackling the gender pay gap.
  • Taylor Review - the Government is looking forward to publication of the report of modern working practices shortly.
  • National Living Wage - this will increase to 60% of median earnings by 2020, after which it will continue to increase in line with median earnings.
  • Immigration - The Immigration Bill will establish a new national policy on immigration post-Brexit.
  • Data Protection - A new Data Protection Bill will replace the Data Protection Act 1998 and implement the new EU General Data Protection Regulation (GDPR), allowing the UK to continue to share data with EU member states post-Brexit.
Gender Pay Gap Reporting

The Gender Pay Gap Regulations came into force on 06 April 2017.

Employers in Great Britain with more than 250 staff are now required by law to publish the following four types of figures annually on their own website and on a government website:

  • Gender pay gap (mean and median averages).
  • Gender bonus gap (mean and median averages).
  • Proportion of men and women receiving bonuses.
  • Proportion of men and women in each quartile of the organisation’s pay structure.

Employers were required to take a first data snapshot on 05 April 2017, which should be analysed and published on a date of their choosing, but no later than 04 April 2018. Numerous employers have now published their figures, including most recently Virgin Money and PWC.

Further detail is available here.

Guidance from ACAS and the Government Equalities Office can be found here.

Whistleblowing: annual reporting for prescribed persons

The Prescribed Persons (Reports on Disclosures of Information) Regulations 2017 (SI 507/2017) came into force on 01 April 2017. The Regulations impose a new duty on all prescribed persons to produce an annual report on whistleblowing disclosures made to them by workers. Prescribed persons are regulators and other bodies to whom a worker can make a protected disclosure instead of, or in addition to, their employer. BEIS has produced guidance providing advice on how prescribed persons can comply with legal requirements.

Trade Union Act 2016

The main provisions of the Trade Union Act 2016 came into force on 01 March 2017, including:

  • Ballots: 50% turnout requirement (section 2).
  • Ballots in "important public services": additional 40% support requirement (section 3).
  • Information requirements in relation to voting papers and information provided to members on the result of a ballot (sections 5 and 6).
  • Union supervision of picketing (section 10).

BEIS has published the Picketing and Code of Practice: Industrial action ballots and notice to employers, to reflect the provisions of the Act.

Recent cases

Discrimination

Obligation to match enhanced maternity pay with shared parental pay?

Ali v Capita Customer Management Ltd - Employment Tribunal

The Tribunal held that failing to offer enhanced pay for Shared Parental Leave (SPL) where the employer offers enhanced pay for maternity leave amounted to direct sex discrimination.

Mr Ali was employed by Capita, having TUPE transferred to it from Telefonica. He sought to take SPL when his wife, who was suffering from post-natal depression, wanted to return to work after a short period of maternity leave. Capita confirmed that he could take SPL but that it would be unpaid. Mr Ali was aware that Capita offered enhanced maternity leave for the first 14 weeks of maternity leave for female employees who had transferred across from Telefonica and therefore challenged their refusal to offer him any pay. The Tribunal found in his favour.

However, the decision is at odds with the earlier Tribunal decision in Hextall v Chief Constable of Leicestershire Police, which found that it was not possible to compare a man on SPL with a woman on maternity leave.

Both the Hextall and the Ali cases are being appealed, so we will report on this decision when it becomes available.

Dr Anne Sammon outlines the significance for employers over the latest tribunal decision concerning enhanced maternity pay here.

Previous issues of Anne’s thoughts on workplace rights for parents are available here.

Redundancy dismissal unfair as tainted by indirect sex discrimination

Fidessa Plc v Lancaster - Employment Appeal Tribunal

The Claimant was dismissed by reason of redundancy following her return to work part-time after maternity leave. She brought claims of direct and indirect sex discrimination, harassment, less favourable treatment as a part-time worker and unfair dismissal.

At first instance, the Tribunal found that:

  • she had been subjected to less favourable treatment because of sex amounting to a detriment and to harassment when she learned that her manager had reacted to the news of her pregnancy by saying “oh f*ck she’s pregnant”
  • she had been subjected to less favourable treatment on grounds of her part-time status by requiring her to work on site after 5pm when it had been agreed that she could leave work at 5pm to collect her daughter from nursery
  • she had been subjected to indirect sex discrimination because the new position offered as an alternative to redundancy was subject to the PCP that she work on site after 5pm, which placed women (and the Claimant) at a disadvantage and could not be justified as the work could have been done remotely, and
  • whilst the redundancy process was not a sham, it was rendered unfair by reason of the taint of direct and indirect discrimination.

The EAT largely upheld the Tribunal's decision. The finding of direct discrimination and harassment was remitted to the Tribunal because there was no express finding as to the detrimental effect of the manager’s remark on the Claimant. Nonetheless, this did not undermine the finding that the dismissal was rendered unfair by the taint of both the direct and indirect sex discrimination.

Also, the fact that the employee took annual leave immediately after her maternity leave did not prevent her from relying on Regulation 4 of the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000.

Refusing five-week holiday to attend religious festivals not indirect discrimination

Gareddu v London Underground Ltd – Employment Appeal Tribunal

It was accepted that attending religious festivals could be a genuine manifestation of religion or religious belief. However, the EAT found that the Tribunal had not been wrong to find that the Claimant was not genuine in asserting that he required a five week period over the summer off work, in order to attend religious festivals with his family, as a manifestation of his religion or belief. The Tribunal was entitled to make findings of fact on the evidence as to whether the individual was asserting this specific period as a matter of artifice, or not genuinely or in good faith; or whether on the other hand, he was doing so genuinely and in good faith.

Headscarves and religious discrimination

Achbita v G4S Secure Solutions - European Court of Justice

The CJEU held that the employer’s policy of banning all visible religious, political or philosophical symbols was not direct discrimination as it affected all religions equally.

It also considered that such a policy was capable of constituting indirect discrimination, but that an employer’s desire to project an image of neutrality was a legitimate aim provided it applied only to customer-facing employees.

Bougnaoui & ADDH v Micropole SA - European Court of Justice

In an accompanying case, the CJEU had to consider whether an employee’s dismissal for wearing an Islamic headscarf at work following a customer’s objection to wearing it was directly discriminatory. The CJEU held that it was directly discriminatory and could not be defended on the grounds that the customer’s request was a “genuine and determining occupational requirement”.

Age discrimination

Harrod v West Midlands Police - Court of Appeal

The Court of Appeal held that the decision of police forces to compulsorily retire officers after 30 years’ service to meet budget cuts imposed by central government was not indirect age discrimination.

Equal Pay

Equal pay claims involving different work cannot be included on same ET1

Farmah & ors v Birmingham City Council and four other cases - Employment Appeal Tribunal

Equal pay claims involving claimants doing different jobs cannot be included on the same ET1 under rule 9 of the Tribunal Rules 2013, which allows claims 'based on the same set of facts' to be combined.

The core of an equal pay claim is a comparison of a female claimant’s job with a male comparator’s job. If claimants are performing different jobs, their claims will not be based on the same set of facts, since each claim involves a comparison of a different job with the work of the male comparators.

Post-termination restrictions

Six-month non-compete assessed at time of contracting in light of the parties' expectations of future promotion

Egon Zehnder Ltd v Mary Caroline Tillman - High Court

Mrs Tillman was a senior employee at the time of her resignation, but was first hired in a more junior role. She had received two promotions without signing any new restrictive covenants. Mrs Tillman has been recruited with “high hopes” for future promotion.

The High Court upheld the six-month non-compete restriction in her initial contract on the basis that it was reasonable at the date of the contract in light of what was contemplated by the parties at that time. The restriction was not void for being wider than reasonably necessary.

The case therefore suggests that the courts will broadly take into account the prospective contemplation of the parties at the point of contracting, which may be relevant to junior employees and trainees in certain professional fields. It is, however, a useful reminder that employers should revisit and tailor covenants upon promotion.

Misuse of confidential information

Kerry Ingredients (UK) Ltd v Bakkavor Group Ltd - High Court

Whilst this is not an employment case, the principles are useful in relation to employment cases involving breach of confidence.

Where the information taken has a limited degree of confidentiality, the duration of any injunction should be limited to the time it would take someone starting from information in the public domain to reverse engineer or compile the information. Accordingly, in this case, the Judge granted a springboard injunction for one year to cancel out the headstart that Bakkavor had gained by its improper use of the confidential information.

Marathon Asset Management LLP & anor v Seddon & Bridgeman - High Court

In this case, the High Court found two former employees of the Claimant liable for breaching their duties of confidence, but rejected the Claimant’s claim for substantial damages (£15m).

Crucially, the case was not brought on the basis that the misuse of confidential information had caused the Claimant to suffer any loss or resulted in the Defendants making any financial gain. As a result, the Claimant was awarded the nominal sum of £2.

In the case of one of the Defendants, the copied files were never subsequently accessed or used. The other defendant made limited use of a few files, but the Claimant had not sought a remedy for the use actually made.

The case serves as a useful reminder that a claim for damages must be focussed on the reality of the situation, and not hypothetical outcomes.

Privilege

Simpkin v The Berkeley Group Holdings plc - High Court

The High Court refused an employee’s application to restrain his former employer from relying on allegedly privileged documents, which were sent from his work email account to his personal email account.

The employee argued that the email in question (containing an analysis of his expectations under a long-term incentive plan) attracted legal advice privilege and litigation privilege because it was sent from his personal email account to his solicitor to obtain advice regarding divorce proceedings.

However, the Court found that the email was not confidential and the employee could have no reasonable expectation of privacy because he had signed his employer’s IT policy agreeing that emails sent from his account were company property and were created during the course of his employment.

Even if the email was confidential and privileged, the Judge would have exercised his discretion to refuse relief due to the employee’s lack of clean hands: there was a stark conflict between his witness evidence and the evidence in the email attachment.

Employment status

Plumber was a worker, not a self-employed contractor

Pimlico Plumbers & Charlie Mullins v Gary Smith - Court of Appeal

The Court of Appeal upheld the decision of the Employment Tribunal that the plumbers employed by Pimlico plumbers are workers and not independent contractors.

In a fact-sensitive decision, the Court held that the plumbers were required to provide personal service and were not in business on their own account.

The decision comes at a time of significant interest in employment status, and is likely to be an important authority in future cases.

TUPE

CJEU: 'Pre-Pack' administration does not disapply TUPE protection

FNV v Smallsteps - Court of Justice of the European Communities

A Dutch trade union sought a declaration that employees had transferred after a group of childcare centres were acquired via a “pre-pack” administration. The CJEU considered whether Article 5 of the Acquired Rights Directive 2001 prevents TUPE from applying in the context of an employer going into liquidation or administration (under equivalent Dutch law).

Article 5 of the Directive states that employees will not transfer where “the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of a competent public authority”.

The CJEU interpreted this strictly. In situations where a business is being salvaged, such as an administration, TUPE would apply and the employees would transfer. In contrast, TUPE would not apply where a business is being liquidated for the benefit of creditors.

Service Provision Change - actual activities carried out before transfer relevant

Tees Esk & Wear Valleys NHS Foundation Trust v Harland & ors - Employment Appeal Tribunal

In the context of a Service Provision Change, the tribunal must consider the principle purpose of the organised grouping immediately before the service provision change.

In this case, the purpose of the team, a group of 11 employees put together to care for one individual, had changed such that by the time of the transfer, the majority of the carers were required to undertake work for other service users. As a result, the EAT agreed that there was no transfer because the dominant purpose of the organised grouping was the provision of care to other service users immediately before the transfer.

DSARs

Court of Appeal orders subject access compliance

Dawson-Damer & ors v Taylor Wessing LLP - Court of Appeal

Mrs Dawson-Damer (and her children), the beneficiaries of a Bahamian trust, submitted subject access requests (SARs) to law firm Taylor Wessing in the context of proceedings for breach of trust in the Bahamas. Taylor Wessing acts for the Bahamian trustee company, which administered the trust.

Taylor Wessing declined to provide the information requested in the SARs, relying on the legal professional privilege exemption in Schedule 10, paragraph 7 of the Data Protection Act 1998 (the DPA).

At first instance, the High Court dismissed the appellant’s application to compel compliance with the SAR. However, the Court of Appeal overturned that decision and made an order compelling compliance on the basis that:

  1. The legal professional privilege exemption under the DPA only applies to documents which carry legal professional privilege for the purposes of English law.
  2. Taylor Wessing could not refuse provide information on the basis that any search for non-privileged material would require disproportionate effort. When relying on this exemption, a solicitor must show that it has carried out a reasonable search of its files.
  3. The fact that the purpose of the SAR was to obtain information for use in the Bahamian litigation was not a sufficient ground to refuse to exercise its discretion to compel compliance.

The case provides useful clarification on the application of exemptions under the DPA. It makes clear that some level of search will be necessary where reliance is placed upon the legal professional privilege exemption.

By way of reminder, the General Data Protection Regulation (GDPR) will make changes to the law relating to subject access requests from May 2018, as the UK will still be a member of the EU at this time. However, there is some uncertainty as to what the position will be post-Brexit.

Court of Appeal refuses to order further steps to comply with subject access requests

Ittihadieh v 5-11 Cheyne Gardens RTM Company Ltd & ors - Court of Appeal

The Court of Appeal refused to order data controllers to take further steps in subject access compliance. It is another useful case regarding the DPA exemptions, the purpose of SARs, proportionality of searches and exercise of court discretion under section 7(9) of the DPA.

The case confirms that a data controller's implied obligation to search for documents on receipt of a SAR is limited to what is reasonable and proportionate. In line with Dawson-Damer (above), the judgment recognises that there can be no objection to a SAR made in connection with actual or contemplated litigation.

Employee loans

No implied term waiving obligation to repay on voluntary redundancy

Ali v Petroleum Company of Trinidad and Tobago - Privy Council

Mr Ali was employed by the respondent company. While he was studying for a degree, the company made him a monthly allowance in the form of a repayable loan. The letter offering the loan stated “Repayment of this loan will be waived if you return and work for the company for a period of five years”. Mr Ali did not serve a further five years with the company after his return because he took voluntary redundancy.

The question before the Privy Council was whether the living allowance loan was, in the circumstances, repayable by him or not.

The Board held that it was repayable.

  • There was an implied term that repayment would be waived if the employer prevented the employee from completing his five years' service.
  • Mr Ali’s volunteering to opt for the redundancy scheme, did not mean that the company had, on its own initiative and without repudiatory breach or compulsion, prevented him from serving out the five years.

Interestingly, similar arguments could be used in relation to, for example, repayment of training costs or repayment of enhanced maternity payment schemes.

In all cases, clear contractual drafting rather than relying on implied terms would be preferable.

Other cases

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.