Working Relations October 2017


  • The Supreme Court declared Tribunal fees to be unlawful (since they were introduced) because they hinder access to justice, and as a result, the Employment Tribunals and Employment Appeal Fees Order 2013 has been quashed.
  • The FCA published its consultation paper (CP17/25) on the extension of the Senior Managers & Certification Regime (SMCR) to all FCA-solo regulated firms.

Action points

All FCA-solo regulated firms should engage in the consultation process if they wish to and start preparations for implementation of SMCR late next year.

Key dates to remember

FCA consultation on the extension of SMCR closes. 03 November 2017.
FCA “technical” consultation paper expected in relation to Extension of SMCR. Q4 2017
Other future developments elexica summary available


Upcoming events

Calls and seminars in the next month which might be of interest include:

Details of breakfast briefings, conferences and telephone conference calls covering developments in employment law are available here.

General developments

FCA Consultation Paper on Extension of SMCR published

On 26 July 2017, the FCA published its consultation paper (CP17/25) on extending the Senior Managers & Certification Regime (SMCR) to all FCA solo-regulated firms. The proposed new regime will replace the current FCA Approved Persons Regime. The consultation will close on 03 November 2017, with the final rules being published in Summer 2018. We then expect a phased implementation from late 2018.

For further information regarding the proposed extension of SMCR, please visit our SMCR Extension microsite.

We are currently in the process of developing a toolkit to help firms progress implementation of SMCR in a cost effective way. The structure of that toolkit can be found here.

BSB Consultation on Certification Guidance

The Banking Standards Board (BSB) has launched a Consultation Paper seeking views on draft guidance designed to assist firms in dealing with risks and issues that may arise when assessing the fitness and propriety of staff under the Certification Regime. Final guidance will be published following the consultation, which is due to close on 29 September 2017. Further information is available here.

Whistleblowing: new rules for UK branches of overseas banks

From 07 September 2017, new whistleblowing rules came into force for UK branches of PRA-regulated banks (and insurers) based outside the EEA and UK branches of all overseas banks regulated by the FCA.

Affected UK branches of overseas banks are now required to tell their UK-based employees that they can blow the whistle to the FCA and the PRA through their respective whistleblowing services. The FCA rules require this notification to be included in the firm's employee handbook or equivalent document. In the case of banking groups with both UK subsidiaries and UK branches, staff working for the UK branch need to be told about the subsidiary's whistleblowing arrangements, allowing them to raise concerns.

UK branches of overseas banks are not required to implement any other of the FCA’s rules related to whistleblowing which came into force in September 2016 (although they represent good practice guidance for all FCA regulated firms).

Vento Bands increased

Following the consultation in July/August 2017, the Presidents of the Employment Tribunals have increased the bands of compensation for injury to feelings in discrimination cases. The bands were last formally updated in 2009.

The new bands are now:

  • a lower band of £800 to £8,400 for less serious cases
  • a middle band of £8,400 to £25,200 for cases that do not merit an award in the upper band, and
  • an upper band of £25,200 to £42,000 for the most serious cases.

The increase follows the decision in Pereira de Souza v Vinci Construction UK Ltd [2017] EWCA Civ 879, in which the Court of Appeal held that the 10% uplift to general damages in civil claims for matters such as pain and suffering or mental distress (known as the "Simmons v Castle" uplift) also applied to discrimination awards in the employment Tribunal.

The new bands will be set out in formal Presidential Guidance and apply to claims presented on or after 11 September 2017.

EHRC publishes strategy to reduce pay gaps

The Equality and Human Rights Commission has published a strategy entitled “Fair opportunities for all: A strategy to reduce pay gaps in Britain”, which sets out what needs to change to reduce gender, ethnicity and disability pay gaps. The strategy makes six key recommendations:

  1. unlock the earning potential of education
  2. improve work opportunities for everyone, no matter who they are or where they live
  3. make jobs at all levels available on a flexible basis
  4. encourage men and women to share childcare responsibilities
  5. reduce prejudice and bias in recruitment, promotion and pay decisions, and
  6. report on progress in reducing pay gaps.
Proposed Corporate Governance reforms published

The Government has published its response to its Green Paper (November 2016), setting out its proposals for reform. Many are felt to be much less rigorous than had originally been suggested.

The Government’s key proposals include:

  • shareholder rights over executive pay - listed companies will be "named and shamed" on a public register if 20% or more of shareholders vote against executives’ remuneration.
  • pay ratio reporting - the Government will legislate to require quoted companies to report annually the ratio of CEO pay to the average pay of the UK workforce.
  • holding periods for share-based remuneration - the FRC will be invited to consult on increasing the minimum vesting and post-holding period from three to five years to encourage companies to focus on long-term outcomes when setting pay, and
  • greater board representation - the Government will invite the FRC to consult on a new provision to require premium listed companies to adopt one of three alternatives for greater employee representation at board level: either (i) a designated non-executive director; (ii) a formal employee advisory council; or (iii) to nominate a director from the workforce.

Further detail is available here.

New Tribunal guidance for calculating pension loss

The fourth edition of the Tribunal’s Guidance on Compensating Pension Loss has been published, replacing the previous edition dating back to 2004, which was deemed to be no longer reliable. The new guidance is entitled “The Principles” in order to avoid confusion with the associated Presidential Guidance. The main Principles set out how to cover different types of pension losses in the employment Tribunal.

There is also a new Agenda to be used for preliminary hearings, with a new question 3.5 dealing with pensions.

Government introduces Data Protection Bill to Parliament

The Government has published the Data Protection Bill, which will replace the Data Protection Act 1998 and incorporate the EU’s General Data Protection Regulation (GDPR) into UK law, which comes into force in May 2018. The Bill will ensure that the provisions of the GDPR will continue to apply in the UK after Brexit.

The Bill is designed to bring our data protection law into line with the digital age and to empower people to take control of their personal data. The Information Commissioner will have its powers strengthened in order to enforce the regime. Organisations which fail to comply may be subject to significant fines, with the maximum set at either 4% of global turnover or £17m, whichever is higher. Employers relying on consent will need to review their consent mechanisms in order to comply with the GDPR, which requires a very high standard.


Statutory developments

New corporate offence of failing to prevent the facilitation of tax evasion

A new corporate offence of failing to prevent the facilitation of tax evasion came into force on 30 September 2017 under the Criminal Finance Act 2017. Whilst it was already a criminal offence in the UK to evade tax, or to deliberately or dishonestly facilitate the commission of tax evasion, there will now be corporate liability where such facilitation occurs in a business context.

In the same way as the Bribery Act, an employer may be held strictly and criminally liable for the actions of its staff, agents or other persons associated with it, unless it can demonstrate it had reasonable "prevention procedures" in place. Employers therefore need to consider whether additional procedures or relevant training should be implemented.

Recent cases

Whistleblowing: public interest requirement

Chesterton Global Ltd v Nurmohamed - Court of Appeal

In this case, the Court of Appeal considered the "public interest" test: a disclosure will only be a qualifying disclosure if the worker reasonably believes that the disclosure is "in the public interest".

Mr Nurmohamed was an estate agent paid commission, along with approximately 100 other colleagues. He believed that his employer was exaggerating expenses to decrease profits and therefore reduce commission payments, amounting to some £2m. This allegation was capable of being a protected disclosure, provided it fell within the provision that he had to reasonably believe it was in the public interest.

The Court of Appeal found that it did. Whilst it will be heavily fact dependent, the court confirmed that a disclosure which is in the private interest of the worker can also be in the 'public interest' in circumstances where it also serves the (private) interests of other workers too.

Further information on the implication of this judgment is available on elexica here.

Employee imprisoned for breaching court order

OCS Group UK v Dadi & ors - High Court

The High Court imposed a sentence of six weeks imprisonment on an employee for breaches of an interim injunction in a dispute over confidential information.

Mr Dadi was an employee of OCS Group UK, an aviation cleaning contractor at Heathrow. His employer alleged that he had sent its confidential information to his private email, and served an interim injunction on him. Before seeking advice, Mr Dadi committed several breaches of the order, including deleting around 8,000 emails and tipping off others about the injunction. After obtaining legal advice, he then admitted breaching the order and cooperated with OCS Group UK in trying (unsuccessfully) to recover the deleted emails.

The court took a number of factors into account in sentencing, and imposed the minimum term of imprisonment appropriate with regard to each of the breaches, considering imprisonment necessary given the need for continuing compliance with orders in this case, and as a warning to others.

Holiday pay: voluntary overtime

Dudley Metropolitan Borough Council v Willetts - EAT

The EAT held that voluntary overtime worked for a sufficient period of time on a regular and/or recurring basis should be included for the purposes of calculating holiday pay.

The case started when a number of claims for holiday pay were brought against the Council by a group of employees responsible for the maintenance of council houses. They worked a fixed number of hours per week (usually 37) which counted as their normal working hours. In addition, once in every four (or five) weeks, they were on call and worked additional voluntary hours. However, these voluntary hours were excluded for the purposes of calculating their holiday pay.

The EAT upheld the Tribunal’s decision. Holiday pay must correspond to "normal pay" - in other words, that which is normally received.

Employment Tribunal fees

R (on the application of UNISON) v Lord Chancellor - Supreme Court

In a momentous judgment handed down on 26 July 2017, the Supreme Court declared Tribunal fees to be unlawful (and have been since the time they were introduced) because they hinder access to justice. As a result, the Employment Tribunals and Employment Appeal Tribunal Fees Order 2013 (Fees Order) has been quashed and Tribunals have stopped taking fees. The Government plans to put arrangements in place to refund those who have paid.

Baroness Hale gave a separate, short, judgment on the indirect discrimination aspects of the fees regime, concluding that it was indirectly discriminatory to charge higher fees for type "B" claims (which include discrimination claims) than type "A" claims.

Suspension can amount to breach of trust and confidence

Simone Agoreyo v London Borough of Lambeth - High Court

In this appeal case, the High Court concluded that the suspension of a teacher amounted to a breach of the implied term of mutual trust and confidence.

Ms Agoreyo was a teacher with 15 years’ experience at a community primary school in South London. She started work as a Year 2 teacher on 09 November 2012, but was suspended only five weeks later because of the alleged force she used in three incidents involving two particular children. The key issue was whether it was reasonable and/or necessary for Ms Agoreyo to be suspended pending the investigation.

The High Court held that the suspension was a knee-jerk reaction, adopted as the default position, and therefore amounted to a repudiatory breach of contract. It was influenced by the potential stigma associated with suspending a qualified professional such as a teacher and the impact on their future career.

Further information on the implication of this judgment is available on elexica here.

Restrictive covenants: the test for severance

Tillman v Egon Zehnder Ltd - Court of Appeal

In this case, the Court of Appeal clarified the test for severance in relation to post-termination restrictive covenants.

Ms Tillman commenced work for Egon Zehnder, a global headhunting firm, in 2004 as a Consultant under a contract of employment containing restrictive covenants. Having worked her way up the ranks, Ms Tillman resigned in January 2017, hoping to start work for a competitor firm. The question was whether the non-compete in her contract prevented her from starting work with her new firm for six months after termination.

In its decision, the Court of Appeal held that the words “interested in” included a shareholding, and the covenant was therefore impermissibly wide. The Court therefore considered the test for severance. First, the Court held that severance can only be applied to separate covenants and not to parts of a single covenant. Second, the three-fold test set out in Sadler v Imperial Life Assurance Company of Canada [1988] IRLR 388 still applies and, in particular, “it must always be doubtful whether parts of a single covenant can be deleted without the contract becoming “not the sort of contract that the parties entered into at all””.

Further information on the implication of this judgment is available on elexica here.

Addison Lee cycle courier was a worker

Gascoigne v Addison Lee Ltd - Employment Tribunal

As the latest in a string of claims brought by individuals working in the so-called "gig economy", the Tribunal held that a cycle courier was a worker for the purposes of statutory holiday under the Working Time Regulations 1998.

Whilst the contract sought to assert his status as an "independent contractor", the Tribunal held that this did not portray the relationship correctly. Gascoigne was required to perform the work personally, under the direction of the company. He worked continuously for the company when logged on. The company set the rate of pay and his weekly "invoice" was effectively a payslip in all but name. Moreover, he did not negotiate the contract or understand the terms he worked under, which the Tribunal considered illustrated he was in need of protection.

The case follows a similar case brought against Uber last year, where taxi drivers were also deemed to be workers. Uber’s appeal is currently being heard at the EAT.

Breach of sex equality clause can constitute constructive dismissal but not sex discrimination claim

BMC Software Ltd v Shaikh - EAT

BMC appealed against the Tribunal’s decision allowing Shaikh’s claims regarding equal pay.

In the Tribunal, Shaikh alleged that two male comparators were paid more than her and succeeded on her claims regarding equal pay, constructive unfair dismissal, wrongful dismissal, and discrimination by constructive dismissal under the Equality Act 2010 section 39(2)(c). The Tribunal found that her employment contract had an implied statutory equality clause, which BMC had breached, and that BMC failed to make out the material factor defence.

In the appeal, the EAT determined that although a breach of the implied equality clause (in the form of a failure to pay a woman the same as a man for like work) was clearly a form of sex discrimination, a complainant could not succeed in both an equal pay claim and a sex discrimination claim under section 39(2)(c) in respect of that breach. The EAT also held that the Tribunal had not adequately explained its reasons for why BMC had failed to prove the material factor defence.

Simmons v Castle uplift applies to employment Tribunal discrimination awards

Pereira de Souza v Vinci Construction UK Ltd - Court of Appeal

The Court of Appeal has held that employment Tribunals in England and Wales must apply the 10% Simmons v Castle uplift to compensation for injury to feelings and psychiatric injury in discrimination claims. Section 124(6) of the Equality Act 2010 requires compensation awarded in the Tribunal to correspond to the amount that would be awarded in the county court. The Court recommended that Presidential guidance be issued for Tribunals to assist in calculating injury to feelings and personal injury compensation to reflect the uplift.

Other cases

Incorrectly naming respondent on Early Conciliation certificate was a "minor error" which should have been overlooked (Chard v Trowbridge Office Cleaning Services Ltd - EAT)

Claim deemed inadmissible where director was named on the Early Conciliation form and the company on the ET1 (Giny v SNA Transport Ltd - EAT)

Early conciliation certificate valid despite naming two respondents (De Mota v DR Network and anor - EAT)

Reducing a compensatory award for unfair dismissal by 35% and not also reducing the basic award was held to be perverse (University of Sunderland v Drossou - EAT)

Employer pension contributions count towards a week's pay under the ERA 1996 (University of Sunderland v Drossou - EAT)

Tribunal under duty to consider stigma future loss in whistleblowing claim (Small v Shrewsbury and Telford Hospitals NHS Trust - Court of Appeal)

Non-executive directors held jointly and severally liable to whistleblower for post-dismissal losses (International Petroleum Ltd and others v Osipov and others - EAT)

EAT ruling that claimants working in Asda’s retail stores can compare themselves with higher paid men who work in distribution centres (Asda Stores Ltd v Mrs S Brierley and others - EAT)

Claimants do not bear initial burden of proof in discrimination cases (Efobi v Royal Mail Group Ltd - EAT)

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.