Working Relations October 2018

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October has seen a number of interesting developments, including Government consultations on mandatory Ethnicity Pay Reporting and SMCR (Statements of Responsibility and Responsibilities Maps), SRA guidance on new transparency rules for law firms, as well as the Autumn Budget and draft employment legislation in the event of a no-deal Brexit.

There have also been several significant cases, in particular the findings that Morrisons was vicariously liable for the actions of a rogue employee who leaked employee personal data online, and that the Lloyds Banking Group must equalise its guaranteed minimum pensions for men and women.

Key Developments

Ethnicity Pay Reporting

On 11 October 2018, the Government published a consultation seeking views on mandatory Ethnicity Pay Reporting (EPR) by employers. The consultation comes in response to the Government’s findings that not enough progress has been made in removing barriers to entry and progression in the labour market for all ethnic groups.

The deadline to respond is 11 January 2019. We will be submitting a response to the consultation which will incorporate client input.

Further information is available on elexica here.

GEO publishes summary of gender pay gap information provided by employers

The Government Equalities Office (GEO) has published a summary of the 2017/18 gender pay gap (GPG) data provided by employers to comply with their GPG reporting obligations. Key findings include:

  • while 57% of employers have more women than men among their lowest paid employees, only 33% have more women than men among their highest paid employees.
  • as of May 2018, 48% of in-scope employers had published an action plan outlining how they intend to tackle their GPG, and
  • 40% of employers said it had been "very easy" or "easy" to make the GPG calculations, while 17% said it had been "difficult" or "very difficult".
Brexit - new employment draft statutory instrument

The Government has published a new draft statutory instrument (The Employment Rights (Amendment) (EU Exit) Regulations 2018), which is intended to make a number of technical amendments to employment law in the event of a no-deal Brexit. The amendments ensure the legislation is clear by removing or amending language that is no longer appropriate once the UK has exited the EU.

The Government has also published an Explanatory Memorandum, which provides useful supporting detail. In particular, it highlights the position with European Works Councils (EWCs), which is more complex. In the event of a no-deal Brexit, the SI attempts to replicate the current position as far as possible under the TICE Regulations but confirms that no new requests to set up an EWC after exit day can be made. If EWCs are to continue in their current form, it would require a reciprocal arrangement with the EU. The SI will not result in any other substantive changes to UK employment law.

SMCR: FCA consults on proposed guidance on statements of responsibilities and responsibilities maps (GC 18/4)

The FCA has published a consultation (GC18/4) on proposed guidance to give FCA solo-regulated firms practical assistance and information on preparing Statements of Responsibilities (SoR) and Responsibilities Maps for Senior Managers. When the SMCR is extended to all FCA solo-regulated firms on 9 December 2019, all Senior Managers must have an SoR setting out their roles and responsibilities, and all enhanced firms must have a Responsibilities Map, setting out how their firm is managed and governed. The deadline for comments on GC18/4 is 10 December 2018.

For further information, see our elexica article.

The SRA’s new transparency rules

From 06 December 2018, new transparency rules will require law firms to publish the prices of certain services prominently on their website, including the cost of handling unfair and wrongful dismissal claims as well as immigration, residential conveyancing, and other services.

Firms will be required to publish details as to what the price will include, the cost of any standard disbursements, the experience and qualifications of the individuals that will be working on the matter, in addition to the estimated timescales and stages that are involved with each matter. Guidance has been provided by the SRA with example templates to comply with the new rules.

Autumn 2018 Budget

The Government’s Autumn Budget, delivered on 29 October 2018, included the following key measures:

  • an increase in national minimum wage and national living wage (to £8.21 per hour)
  • an increase in the income tax personal allowance to £12,500 and the higher rate threshold to £50,000
  • employer Class 1A national insurance contributions on termination payments over £30,000 will not be introduced until April 2020
  • the off-payroll public sector rules will be extended to the private sector from 06 April 2020, and
  • businesses liable to pay the apprenticeship levy will be able to invest up to 25% of the levy to support training apprentices in their supply chain.

However, the Chancellor candidly admitted that a no-deal Brexit would require a new Budget that “set out a different strategy for the future”. For our expert commentary, please see here.

BoE first annual whistleblowing disclosures report

The Bank of England (BoE) and the PRA has jointly published their first annual disclosure report, as required by the Prescribed Persons (Reports on Disclosures of Information) Regulations 2017. The report states that there were 141 disclosures received during the period from 01 April 2017 to 31 March 2018, of which 116 were qualifying disclosure within the meaning of 43B of the Employment Rights Act 1996. Of those cases, 28 were referred to the FCA and 1 to the NCA.

Shared Parental Leave and Pay (Extension) Bill published

The Shared Parental Leave and Pay (Extension) Bill 2017-19 has been published, under which self-employed contractors would be entitled to shared parental leave and would allow the mother’s statutory maternity allowance to be shared with her self-employed partner after the birth/adoption of a child. The Bill was introduced in February 2018 and is due to have its second reading on 23 November 2018.

Progress report on court and tribunal reform

The HM Courts and Tribunals Service (HMCTS) has published its Reform Update on the progress of its ongoing programme of reform. The report states that a new employment tribunals service will be developed that works better for its users, including the ability to resolve some cases online and by video. The HMCTS expects to start work on the project in 2020 and to conclude it by mid-2021.

Key cases

Court of Appeal upholds vicarious liability finding after malicious data breach

Wm Morrison Supermarkets Plc v Various Claimants - Court of Appeal

The Court of Appeal confirmed that Morrisons was vicariously liable for the actions of a rogue employee who leaked employee personal data online, where they were otherwise in compliance with data protection legislation.

The employee, S, was employed as an internal IT auditor. He became dissatisfied with Morrisons and copied employee personal data onto a USB stick, which he took home, and posted online. S has since been convicted of criminal offences, including under the Data Protection Act 1998 (DPA). The affected Morrisons employees claimed damages for the misuse of their private information, breach of confidence, and for Morrisons’ breach of statutory duty under s.4(4) of the DPA. In the High Court, any primary liability of Morrisons was dismissed, but it was found vicariously liable for S’s actions. Morrison’s appealed to the Court of Appeal on two grounds, both of which were unanimously dismissed.

Morrisons are expected to appeal to the Supreme Court. They face paying significant damages under the DPA, and it is expected that the level of fines would be even larger under the GDPR legislation now in force.

Further details are available on elexica here.

Refusal to bake cake with slogan supporting gay marriage was not discrimination

Lee v Ashers Baking Company Ltd and Others - Supreme Court

The Supreme Court held that the Christian owners of a bakery had not discriminated on the ground of sexual orientation, religious or political belief when they refused to provide a cake to a gay customer bearing the words ‘Support Gay Marriage’.

Lady Hale stated that the reason for the refusal to make the cake was based on the owners’ religious objection to the message on the cake and to gay marriage, rather than to the personal characteristics of the customer. The owners would not have provided that cake to a heterosexual person and likewise the owners would have provided a cake to Mr Lee had the cake not bore the message “Support Gay Marriage”. She commented that just because less favourable treatment given to an individual has something to do with sexual orientation does not necessarily mean that the less favourable treatment is on the grounds of or because of their sexual orientation.

MD's drunken assault on employee was "in the course of employment" rendering company vicariously liable

Bellman v Northampton Recruitment Limited - Court of Appeal

The Court of Appeal held that a company was vicariously liable for a violent attack carried out by the managing director on another employee.

It was held that the drinking session precluding the attack was not a seamless extension of the Christmas party. However, because the drinks took place on the same night as a paid-for work event that was orchestrated by the managing director, and the conversation which led to the attack included discussions regarding the managing director’s status, the court found the employer to be vicariously liable. The decision highlights that there should be a broad application of the ‘close connection’ test in relation to incidents of assault by an employee.

Lord Justice Irwin was keen to point out that the facts of this case were unusual. It should not be taken as authority for the proposition that employers will always be found liable for the violent actions of their employees.

Causation test for discrimination arising from disability must not be applied too strictly

Sheikholeslami v University of Edinburgh - Employment Appeal Tribunal

A university professor had taken a leave of absence from her department due to work-related stress and depression. During her leave, she requested a transfer out of her department, which was denied. She refused to return to work in her department, due to the alleged hostility of her colleagues. The professor’s employment was later terminated, due to the expiry of her work permit, which could not be granted due to the fact she was not working.

Following the termination, the professor brought a claim based on both discrimination arising from disability and a failure to make reasonable adjustments. These claims were rejected by the tribunal.

On appeal to the EAT, it was held that the tribunal had erred on both grounds. The Tribunal had applied too strict a causative test on whether the discrimination arose from the professor’s disability - it should have considered the wider question of whether the professor’s refusal to return to work was “in consequence of” her disability, rather than the binary “because of” test it had applied.

Interim injunction preventing alleged breach of non-disclosure agreement and identification of claimant

ABC & Others v Telegraph Media Group Limited - Court of Appeal (Civil Division)

The Court of Appeal granted an interim injunction, stopping the Daily Telegraph from publishing information obtained from employees of a company, allegedly in breach of non-disclosure agreements, about alleged discreditable conduct by a senior executive.

It was concluded to grant an interim injunction and order a prompt trial. Focusing on the defence of public interest, there was (i) no evidence that the settlement agreements were procured by bullying, harassment or undue pressure by the appellants; (ii) a public benefit in the enforcement of contract, freely entered into by the parties settling their disputes; and (iii) an employee’s concern to maintain confidentiality. Temporarily, this was enough for the court to conclude there was sufficient likelihood of the appellants defeating a public interest defence at trial, especially under the circumstance where publication could result in potentially immediate, irreversible and substantial harm to the appellants.

Unfair dismissal: withholding evidence from disciplinary hearings

Mr J Hargreaves v Governing Body of Manchester Grammar School - Employment Appeal Tribunal

The EAT has held that a teacher who allegedly “grabbed” a pupil by the throat and “shoved” him against the wall was not unfairly dismissed, despite several witness statements being withheld from the disciplinary panel which took the decision to dismiss.

Following an investigation in which a number of witnesses corroborated the account given by the pupil, a disciplinary panel concluded that the allegations against Hargreaves were proven and he was dismissed. At first instance, the tribunal found that the decision was within the reasonable band of responses. Hargreaves appealed, highlighting the “significance” of witness evidence withheld from the disciplinary panel and himself. He said the fact they saw nothing untoward was corroboration of his account. The EAT disagreed: the fact they had not seen the confrontation did not mean it had not happened.

The case highlights the “heightened duty” on the employer when investigating potentially career damaging allegations. A thorough investigation is paramount and careful consideration must be given to what is and is not presented to a disciplinary hearing.

Part-time worker paid 50% of full pay for 53.5% of full-time hours less favourably treated

British Airways plc v Pinaud - Court of Appeal

Mrs Pinaud, a member of cabin crew for BA, had to be available to work for 130 days per year, as compared to a full-time worker who had to be available for 243 days per year. She therefore had to be available for 53.5% of the days of a full-time worker, but she received only 50% of the pay. BA argued that she actually worked less days than her comparator (i.e. less than the 130).

The Court of Appeal held that a requirement to be available for 53.5% of the number of days in return for 50% of the pay was prima facie less favourable treatment of a part-time worker. The case has now been remitted to the tribunal to consider the justification defence and, if that is rejected, remedy. The outcome of this case will determine 628 similar cabin crew claims against BA.

Guaranteed minimum pensions: schemes must equalise benefits for men and women

Lloyds Banking Group Pensions Trustees Limited v Lloyds Bank PLC & ors - High Court

In a landmark decision, the High Court has ruled that pension schemes which provide guaranteed minimum pensions (GMPs) must sex equalise their benefits.

Importantly, the Court ruled on a range of permissible approaches to equalisation and held that the employer can generally insist on the least expensive lawful option from an actuarial perspective.

The High Court did not decide (i) whether a simpler approach could be adopted in respect of those members for whom the cost of rectification would outweigh the additional benefit to members or (ii) the approach to be taken for benefits previously transferred out of a scheme. We understand that these outstanding issues are to be considered at a further hearing in December 2018, the judgment however is unlikely to be available until early 2019.

The decision has provided much needed clarity on a longstanding issue, however, the decision could add millions of pounds of pensions liabilities to relevant employers’ schemes. Further details on the case, and the implications for employers and trustees are available on our pensions update here.

Directors personally liable to whistleblower for post-dismissal losses

Timis & anor v Osipov - Court of Appeal

The Court of Appeal has upheld the decision that individual co-workers can be personally liable on a joint and several basis with the employer for a whistleblower’s post-dismissal losses.

Mr Osipov was the CEO for IP ltd, during which time he made protected disclosures. The two appellants, Mr Timis and Mr Sage who were non-executive directors (NEDs) of IP Ltd, then dismissed Mr Osipov. The tribunal found that the principal reason for Mr Osipov’s dismissal was the fact that he had made protected disclosures and IP Ltd was found liable for unfair dismissal. The two NEDs were held jointly and severally liable with IP ltd for Mr Osipov’s losses because their conduct in relation to Mr Osipov’s dismissal amounted to unlawful detriment. The EAT upheld the decision.

The NEDs appealed to the Court of Appeal on the basis that they were precluded from being individually liable where the detriment in question amounts to dismissal. The Court of Appeal disagreed, reasoning that to construe the law in this way would produce an incoherent result, affording whistleblowers less protection than those who had suffered other forms of discrimination. Underhill LJ also stated that once Parliament had decided to make co-workers personally liable for whistleblower detriment, there was no reason why this would not be the case where that detriment amounted to dismissal.

Future developments

Recent changes


Previous Training

All other training materials relating to Employment, Pensions and Incentives across the European Union are available here.

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.