i

A–Z of employment law January 2017

Apprenticeship Levy ..................................................................................................................................................2

Brexit .........................................................................................................................................................................2

Data Protection .........................................................................................................................................................3

Disability Discrimination .............................................................................................................................................3

Equal pay ..................................................................................................................................................................4

Financial Sector .........................................................................................................................................................4

Gender Pay Gap Reporting .......................................................................................................................................5

Gig Economy .............................................................................................................................................................6

Holiday pay ...............................................................................................................................................................6

Illegal working ............................................................................................................................................................7

Religion and Belief Discrimination ..............................................................................................................................7

Salary sacrifice ..........................................................................................................................................................7

Scotland ....................................................................................................................................................................8

Trade Union Act .........................................................................................................................................................8

Tax free childcare scheme .........................................................................................................................................9

Termination Payments ...............................................................................................................................................9

Tribunal fees ............................................................................................................................................................10

Whistleblowing ........................................................................................................................................................10

Zero hours contracts ...............................................................................................................................................10

Contents

1

Employment Timeline 2017–2018Click on the linked headings below to find out more about each change.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018

Apprenticeship Levy

Brexit

Data Protection

Disability Discrimination

Equal pay

Financial Sector

Gender Pay Gap Reporting

Gig Economy

Holiday pay

Illegal working

Religion & Belief Discrimination

Salary sacrifice

Scotland

Trade Union Act

Tax free childcare scheme

Termination Payments

Tribunal fees

Whistleblowing

Zero hours contracts ?

2

Apprenticeship Levy

April 2017

From April 2017, UK employers with an annual wage bill of £3 million or more will pay an apprenticeship levy. The aim of the levy is to help fund apprenticeships across the UK.

The levy will be set at 0.5% of an employer’s annual wage bill, with each employer receiving an allowance of £15,000 per year to offset against the levy. This means that whilst the levy will apply to all employers, only those with a pay bill of £3 million or more will pay the levy. The allowance can only be used once where a group of companies are connected but connected companies can choose how the levy is split between each company.

The levy will be collected from employers via PAYE.

Our insight

Apprenticeships are devolved to the respective administrations throughout the UK. Employers should investigate how the funding will be utilised in each devolved region of the UK and seek to adapt their apprenticeship and training schemes, where necessary, in order to benefit from the available funding. HMRC has commented that employers that are committed to training will get more back than they put in via the levy by training a sufficient number of apprentices.

Like all policy decisions, some organisations and sectors will benefit more than others. It is estimated that only 2% of UK employers will be subject to the levy, whilst access to the scheme will be available to all.

Employment law like all other areas will be impacted by Brexit.

Changing the employment law landscape is unlikely to be a priority whilst the UK government navigates the triggering of article 50 and the subsequent negotiations with the European Union.

For the time being, or at least until the UK leaves the European Union, it will be business as usual with all employment law derived from the EU continuing to apply. Beyond that point, it is difficult to predict. It is anticipated that the majority of employment law derived from the EU will remain unchanged for the foreseeable future.

For the most part, it has become settled law and so it is unlikely that there will be political appetite for change. In the longer term, the UK government of the time may seek to repeal or revise areas that have not been particularly well received such as:

■ elements of the Working Time Regulations (including the calculation of holiday pay and the overlapping of holidays and sickness);

■ the Agency Worker Regulations; and

■ perhaps the inability to introduce a cap on discrimination compensation awards.

Brexit

‘For the time being, or at least until the UK leaves the European Union, it will be business as usual... Beyond that point, it is difficult to predict.’

3

General Data Protection Regulation (GDPR)

The European GDPR will apply in all EU member states from 25 May 2018.

The Information Commissioner’s Office confirmed that, following the UK’s exit from the EU, the GDPR will not directly apply to the UK but that it will need to show ‘adequacy’ if it wishes to trade with the Single Market on equal terms. In effect, many of the GDPR’s obligations will need to be adhered to by UK organisations.

The GDPR brings various changes for employers, including changes to DSAR rights and the ‘consent’ to data processing that can be given by employees.

Case: Dawson-Damer and others v Taylor Wessing LLP and others

We await the judgment of the Court of Appeal in Dawson-Damer which is anticipated to provide guidance on the duty to respond to data subject access requests, in particular whether and when the disproportionate effort exemption applies.

In 2015, the High Court in this case refused to order compliance with a data subject access request where it was not reasonable or proportionate to comply. The High Court gave useful guidance on the disproportionate effort exemption, in particular that a data controller is only required to supply such personal data as is found after a reasonable and proportional search. It is hoped that further guidance will be provided by the Court of Appeal’s judgment in due course.

Our insight

Employers should familiarise themselves with the implications of the GDPR on their data protection practices. In particular, preparations for compliance should begin now, even with Brexit on the horizon.

Case: York City Council v Grosset EAT

Mr Grosset was employed as Head of English at a secondary school. He suffered from cystic fibrosis. As a result of increased workload, Mr Grosset struggled to allocate the necessary time to attend to his condition, resulting in him suffering from stress and exacerbating his condition further. Whilst Mr Grosset was on sickness absence his line manager discovered that Mr Grosset had shown the 18 rated film Halloween to a class of 15 and 16 year olds. This was deemed to be gross misconduct. The employer was aware of Mr Grosset’s disability but concluded that the misconduct did not arise in consequence of his disability.

The EAT confirmed that Mr Grosset had been fairly dismissed. However the EAT also upheld the decision that Mr Grosset had been subject to discrimination arising from his disability (under section 15 of the Equality Act 2010). The employer had knowledge of Mr Grosset’s disability and therefore could not side-step the knowledge component of section 15 through its own reasonable conclusion that the misconduct was not linked to his disability.

The Employment Tribunal considered medical evidence, which had not been available to the employer at the time of dismissal, when deciding whether the dismissal could be objectively justified. The EAT confirmed that the Employment Tribunal was entitled to do so.

Our insight

This case is useful reminder to employers that disability discrimination cases can be difficult to navigate, even for employers with the best of intentions and who follow a fair procedure. Employers should tread carefully when discounting that the reason for proposing to dismiss a disabled employee is not caused by their disability. Such situations will likely present a litigation risk for employers as tribunals, in deciding whether an act can be objectively justified, may take information into account that was not available at the time of the employer’s decision.

Data Protection

May 2018

Disability Discrimination

January 2017

4

ASDA equal pay claims

This is an equal pay claim brought by female workers in Asda stores.

The female check-out staff and shelf stackers are arguing that they should be paid the same as male workers in Asda’s distribution centres on the basis that their jobs are of equal value.

The claimants have overcome the first hurdle as the Employment Tribunal has ruled that the mainly female store workers can compare their jobs with the predominantly male group of employees in Asda’s distribution centres.

It is reported that Asda is considering its options to appeal this preliminary point.

Further preliminary or main hearings have not yet been listed but are eagerly awaited. This is one for private sector employers to look out for – as successful claims may lead to increased focus on equal pay within the private sector.

New rules relating to regulatory references will come into force on 7 March 2017. These rules form part of the senior managers regime (SMR) and the senior insurance managers scheme (SIMR) introduced in March 2016 for deposit-takers, PRA investment firms and certain insurance firms.

Regulatory references have been designed to help firms prevent the re-cycling of ‘bad apples’ between firms.

What do the new rules entail?

■ Firms will be required to seek references from all previous employers in the last six years, whether or not the employer is based overseas or out-with the financial sector.

■ Mandatory disclosures to include:

– Details of concluded breaches of individual conduct requirements;

– Findings that individuals are not fit and proper; and

– Any disciplinary action as defined by section 64C of the Financial Services and Markets Act 2000. This is restricted to formal written warnings, suspension or dismissal, and reduction or recovery of the person’s remuneration.

■ In addition to mandatory disclosures, firms will retain the obligation to disclose other “relevant information”.

■ Firms will be required to update references given over the past six years where new information has become available, which is significant for an assessment of fitness and propriety.

Our insight

Firms captured by the rules should ensure that they are familiar with their obligations.

Whether these new rules will have the desired effect and prevent the re-cycling of ‘bad apples’ remains to be seen. The FCA rules are clear that there is no requirement on firms to reveal that an employee resigned during the course of an investigation. Disclosure only extends to concluded breaches. In addition, there is no duty for firms to investigate potential misconduct post-termination.

Financial sector

March 2017

Equal pay

January 2017

5

Private sector employers with more than 250 employees will be required to publish data detailing the differences in pay between their male and female employees. This will include:

■ the mean and median gender pay gaps and bonus pay gaps

■ the proportion of men and women receiving a bonus

■ the proportion of men and women working at each quartile of the organisation’s pay distribution.

After some delay, the final draft gender pay gap reporting regulations were published in December 2016 and are expected to come into force on 6 April 2017, subject to parliamentary approval. They provide some clarity on some (but not all) of the gaps and inconsistencies left by the previous drafts.

The reporting reference date has been changed to 5 April 2017, meaning that relevant employers’ first reports will be due on 4 April 2018. Each report will relate to the previous year’s data.

The Government intends to introduce similar reporting obligations to the public sector in England in April 2017. In Scotland and Wales, public sector pay reporting is within the remit of the devolved administrations.

Our insight

With reports being published on a government website, gender pay gap reporting has the potential to affect how an organisation is viewed by job applicants and the wider public. The voluntary accompanying narrative will be key to explaining pay anomalies and how the organisation is working to address these.

The first report must utilise data from 5 April 2017 onwards so it is worth employers investing time now to ensure that their systems can collate the required information.

Gender Pay Gap Reporting

April 2017

‘With reports being published on a government website, gender pay gap reporting has the potential to affect how an organisation is viewed by job applicants and the wider public. The voluntary accompanying narrative will be key to explaining pay anomalies and how the organisation is working to address these.’

6

The emergence of the ‘gig economy’, in which temporary positions are common and greater reliance is placed on short-term freelance contractors, is creating considerable debate across the UK. Critics point to exploitative practices and insecurity for workers, whilst champions of the ‘gig economy’ point to its flexibility and fruitful opportunities.

There were some noteworthy developments involving the ‘gig economy’ in 2016:

1. HMRC set up a specialist employment status and intermediaries team to ensure companies are paying the correct level of tax and national insurance contributions. The aim of this taskforce is to clamp down on companies incorrectly classifying their workers as self-employed.

2. The Employment Tribunal decided that UBER drivers were in fact workers.

Case: Aslam and others v Uber BV and others

At the end of last year the UBER decision brought the ‘gig economy’ and employment status into the spotlight. Two UBER drivers brought proceedings against UBER (the creator of the app for connecting taxi drivers with passengers in a number of locations throughout the world). The drivers successfully argued that they are workers and are accordingly entitled to a number of employment rights including the national minimum wage, holiday pay and statutory sick pay.

UBER on the other hand argued that the drivers were ‘driving partners’ and therefore self-employed. The Employment Tribunal was not persuaded by this argument and issued a strong judgement that the drivers are workers.

Case: Dewhurst v CitySprint UK Ltd

In another ‘gig economy’ case, the Central London Employment Tribunal has found that a courier for the firm CitySprint is in fact a worker, rather than a self-employed contractor. The employment tribunal looked beyond the contract to determine the actual agreement between the parties. The tribunal held that the claimant was entitled to two days of holiday pay due to her status as worker. (It should be noted that national minimum wage was not an issue in this case).

Our insight

The outcome of these cases will be of interest to organisations that rely on business models similar to that operated by UBER and CitySprint. Whilst these cases are fact specific it provides a strong indication that more claims will follow in sectors reliant on the so called ‘self-employed’ model.

The Prime Minister instructed a review of modern employment practices in October 2016, with the expectation that it will include zero hour contracts and the so called ‘gig economy’. The outcome of the review is expected in spring 2017. This review may act as a springboard for changing modern employment practices in the UK or at the very least provide some guidance on the ‘self-employed’ model which is becoming increasingly prevalent across the UK.

Organisations should be alert to potential developments in this area and keep a careful watch as the UBER appeal progresses. It is anticipated that the ‘gig economy’ will come under increasing scrutiny in 2017.

The correct calculation of holiday pay has been a thorny issue in employment law in recent times. Judgments or appeals are awaited on the following questions:

■ the inclusion of overtime and results-based commission in the calculation of holiday pay

■ limitations on workers carrying over holiday that they have not been able to take for reasons beyond their control.

A number of other points are also unclear such as the length of reference period to be taken into account for back-pay and the treatment of annual bonuses and other variable pay. Unfortunately there is no expectation that these points will be addressed by the senior courts any time soon. Without detailed guidance from the courts or legislation, we expect the uncertainty surrounding holiday pay to continue during the course of 2017.

Gig Economy

January 2017

Holiday pay

January 2017

7

The start of 2017 saw the closure of an HMRC consultation on denying employers the NICs employment allowance for one year where they have faced a civil penalty for employing illegal workers. Should the Government proceed with this initiative it is expected to commence in 2018.

Our insight

It is anticipated that immigration and illegal working will remain high on the Government’s agenda following the UK’s vote to leave the European Union. The outcome of Brexit negotiations may impact greatly on employers reliant on EU workers. This is an area to watch for those who may potentially be affected.

Case: Achbita v G4S Secure Solutions NV

In this case, which is before the Court of Justice of the European Union (ECJ), the Advocate General gave an opinion in May 2016 that an employer’s ban on wearing visible religious, political or philosophical symbols in the workplace was not direct discrimination against a Muslim employee who wished to wear a headscarf. Whilst such a policy may amount to indirect discrimination, the Advocate-General considered that this could be objectively justified by the employer’s desired goal of religious and ideological neutrality due to its broad range of clients.

Case: Bougnaoui and another v Micropole SA

In this similar case, also before the ECJ, a different Advocate-General gave a contrasting opinion in July 2016 that dismissing an employee for wearing a headscarf in breach of a direct instruction banning religious symbols in the workplace did amount to direct discrimination. The Advocate-General considered that this was also likely to amount to indirect discrimination.

Our insight

It is hoped that there will be clarity once the ECJ issue their decision in these cases. The decisions are expected to be issued any day. We will keep you updated as matters develop.

In the 2016 Autumn Statement, the Government confirmed that, as expected, tax and National Insurance relief on salary sacrifice arrangements will be reduced from April 2017, following which the only salary sacrifice arrangements which will continue to benefit from the relief are its most popular uses:

■ Enhanced employer pension contributions

■ Cycle to work scheme equipment

■ Ultra-low emission cars

■ Childcare benefits.

Existing arrangements will be protected until April 2018 (or April 2021 for cars, accommodation and school fees).

Our insight

Employers should ensure they keep on top of the new limitations and will wish to review their benefits packages, employment contracts and staff handbooks accordingly.

Illegal working

January 2017

Religion and Belief Discrimination

January 2017

Salary sacrifice

April 2017

8

Employment Tribunals

The administration and management of employment tribunals in Scotland is to be devolved to the Scottish Parliament. To achieve this, the Scotland Act received Royal Assent on 23 March 2016. The timetable regarding these devolved functions remains unknown.

There has been considerable push back from the legal profession in Scotland in respect to the Scottish Government’s proposals for the devolved Employment Tribunal (with concerns Scotland could end up with a second rate system compared to England). Discussions are also on-going with the English Tribunal Systems to ensure a consistent approach is adopted to avoid forum

shopping across the difference jurisdictions (this is particularly important given the possibility that different feeing arrangements may apply).

Tribunal fees

The Scottish government announced its commitment to abolishing tribunal fees in Scotland in its agenda for 2015/2016. It had been anticipated that reform for tribunal fees would take place sometime in 2016. Due to the delay in the devolution of the administrative and management functions of the employment tribunals, this has been pushed back with the expectation that there will be further developments in 2017.

The Act received Royal Assent on 4 May 2016. The key changes are:

■ New ballot thresholds for industrial action.

■ Provision for electronic balloting.

■ Six month time limits on ballots (or up to nine months if the trade union and employer agree).

■ Increased notice to employers of industrial action from seven days to 14 days (or seven days if the trade union and employer agree).

■ Requirement for members to opt-in to making contributions to the political fund of a trade union.

Two sets of regulations were made in November 2016 to bring into force:

■ the power to make regulations defining “important public services” for the purposes of a 40% ballot threshold requirement for industrial action in such services. The draft regulations were published in December 2016 and are expected to come into force on 1 March 2017.

■ the power to make regulations to determine a transitional period for opting in by union members make contributions to the political fund of a trade union.

■ section 4 of the Act, establishing a review into electronic balloting.

A revised Code of Practice on Industrial action ballots and notice to employers has been published but the date it will come into force is yet to be confirmed.

The Scottish government and the Welsh National Assembly both voiced objections to the Trade Union Bill during its passage through parliament. In June 2016, it was announced that the Welsh Assembly Legislative Programme would include legislation to repeal sections of the Act.

Our insight

The major provisions are not yet in force and it remains to be seen how the Act will apply in Scotland and Wales.

Scotland

January 2017

Trade Union Act

March 2017

9

A new tax-free childcare system will be introduced in early 2017 under which working families will be able to claim 20% of childcare costs:

■ for children under the age of 5 (except in the first year of the scheme’s operation when the claim can be made for children under the age of 12)

■ for children with disabilities under the age of 17.

The amount claimed will be capped at £2,000 per year.

The scheme is expected to replace the current system of childcare vouchers for new employers.

Our insight

There is not expected to be a mandatory role for employers in the new tax-free childcare scheme. However, the change could have a significant impact on payroll and benefits management so it is one to monitor.

In December 2016 the UK government published draft legislation for implementing the reform of tax and national insurance contributions (NICs) treatment of termination payments.

The following changes will come into force in April 2018:

■ All termination payments above £30,000 will be subject to employer class 1 NICs. Employee NICs will remain exempt.

■ The treatment of payments in lieu of notice will be simplified so that it will be subject to tax and NICs as earnings (as if the employee did in fact work their notice).

■ Make the following changes to the exemptions of termination payments:

– Remove foreign service relief; and

– Clarify that the exemption for injury does not apply in cases of injured feelings.

Our insight

The government’s aim is to simplify the treatment of termination payments and reduce manipulation of the rules.

These changes will create additional costs for employers in circumstances where the termination payment is in excess of £30,000.

In the meantime, the current rules will continue to apply. It is best practice for employers to provide a breakdown of any termination payments to ensure that the correct tax treatment is applied. Getting this wrong could lead to HMRC seeking to recover unpaid tax and NICs, including penalties and interest, from the employer.

‘Getting this wrong could lead to HMRC seeking to recover unpaid tax and NICs, including penalties and interest, from the employer.’

Tax free childcare scheme

April 2017

Termination Payments

2018

10

Pre-employment protection – children’s social care

In November 2016, pre-employment protection was announced for whistleblowers in the children’s social-care sector. This protection will be included in the Children and Social Work Bill 2016–2017 (which is not yet in force). It will extend whistleblower protection to job applicants to children’s social care posts in local authorities to ensure that they are not treated unfairly as a result of having previously made protected disclosures.

Code of Practice

The Government intends to review the existing code of practice on whistleblowing by the end of 2017.

Case: Chesterton Global Ltd and another v Nurmohamed – 8 June 2017

This case considered the ‘public interest’ test introduced by the Enterprise and Regulatory Reform Act 2013 in which a disclosure will only be protected if the employee reasonably believes that it is made in the public interest.

The EAT held that the ‘public interest’ test can be satisfied by a small sub-section of the public. This sub-section may be comprised solely of employees employed by the same employer who have the same interest in the matter as the claimant employee personally. This case has been appealed to the Court of Appeal. This was due to be heard in October 2016, but has now been delayed to June 2017.

Our insight

To date, the EAT has set a low threshold for prospective whistleblowers to be able to pass the ‘public interest test’.

For now, employers should be mindful that employees may be protected by whistleblowing law where they make a disclosure about their terms and conditions which also affect other employees (as was held by the EAT in Underwood v Wincanton in 2015).

In October 2016 the PM instructed a review of modern employment practices, with the expectation that it will include zero hours contracts and the so called “gig

economy”. The outcome of the review is expected in spring 2017, so employers should watch this space.

Case: R (on the application of Unison) v Lord Chancellor and another – due to be heard in Supreme Court on 27 & 28 March 2017

Unison has challenged the introduction of tribunal fees on a number of occasions without success. In one final push, Unison sought permission to appeal to the Supreme Court, which was granted in February 2016, and the case is due to be heard on 27 and 28 March 2017.

Our insight

In June 2016, the House of Commons Justice Committee urged the UK government to reform tribunal fees to restore access to justice at the employment tribunal. Reform may be on the horizon as the UK government has been reviewing the impact of tribunal fees. It is unlikely that fees will be abolished but they may be reduced to a more affordable and proportionate level. The Government has said that its post-implementation review of tribunal fees will be published as soon as possible in 2017. The potential timetable for reform is currently unknown given the political priority of Brexit.

Tribunal fees

March 2017

Whistleblowing

June 2017

? Zero hours contracts

Spring 2017

11

Stuart McBride | Partner and Head of Employment (Bristol)

T 0333 006 0329 E stuart.mcbride@TLTsolicitors.com

Robert Bourns | Partner (Bristol)

T 0333 006 0266 E robert.bourns@TLTsolicitors.com

Jonathan Rennie | Partner (Glasgow)

T 0333 006 0757 E jonathan.rennie@TLTsolicitors.com

Charlotte Warren | Business Development Executive

T 0333 006 0837 E charlotte.warren@TLTsolicitors.com

Esther Smith | Partner (Bristol)

T 0333 006 0966 E esther.smith@TLTsolicitors.com

Ed Cotton | Partner (Manchester)

T 0333 006 0492 E ed.cotton@TLTsolicitors.com

Mark McQuillan | Partner (London)

T 0333 006 1472 E mark.mcquillan@TLTsolicitors.com

Get in touchAs the year progresses, we will be keeping you up to date with developments as and when they happen.

If you would like direct updates on a particular area of the law, please contact our Business Development Executive, Charlotte Warren, or another member of the Employment team.

tltsolicitors.com/contact

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