Employment Update - June 2015

17 minute read
01 June 2015

Wragge Lawrence Graham & Co's employment & equalities experts bring you the latest developments that may affect your business - what they are, and what you can do about them.

This month's update covers:

What now for employment law? The opening days of the new Conservative Government

Shortly after the election result we published our predictions on After the election - what now for employment law?

Since then we have had the Queen's Speech and the first of the Small Business Enterprise and Employment Act 2015 commencement orders. How have our predictions stacked up? Despite the adage "those who live by the crystal ball soon learn to eat ground glass", so far no lacerations.

So what has the Queen's Speech revealed? See our alert The Queen's Speech: What now for employment law?

26 May 2015 legislation in force

The Small Business, Enterprise and Employment Act 2015 (Commencement No. 1) Regulations 2015 was published the day before the Queen's Speech. Under the Regulations two important pieces of employment legislation came into force immediately on 26 May: the ban on exclusivity clauses in zero hours contracts and increased national minimum wage penalties.

Ban on exclusivity clauses in zero hours contracts

As of 26 May, any provision of a zero hours contract (ZHC) which prohibits the worker from doing work or performing services under another contract or arrangement is unenforceable. So ZHCs remain lawful, it is only exclusivity clauses that are banned.

For the first time we also now have a legal definition of a ZHC:

"a contract of employment or other worker's contract under which (a) the undertaking to do or perform work or services is an undertaking to do so conditionally on the employer making work or services available to the worker, and (b) there is no certainty that any such work or services will be made available to the worker."

This is simply a definition of a ZHC and in no way determines the actual employment status of individual working under such a contract: i.e. employee v worker.

While the ban in relation to ZHCs came into force on 26 May, the additional proposed anti-avoidance measures are not yet in force. In light of fears that some employers would try to avoid the ban by introducing one-hour contracts on minimum pay, in March the Coalition Government published draft anti-avoidance regulations. These will extend the ban on exclusivity clauses in ZHCs to include workers on 'prescribed contracts', being contracts that do not guarantee the worker a specified minimum income. The final version of the anti-avoidance regulations and date for their implementation are still awaited.

National Minimum Wage (NMW) increased penalty

Up to 26 May, the maximum financial penalty for employers who flout the NMW was 100% of the total underpayment, subject to a maximum of £20,000. This maximum penalty applied per notice, irrespective of the number of underpaid workers.

As of 26 May, the maximum financial penalty has been increased to £20,000 per worker. So whereas previously, where a notice related to ten workers each owed £20,000, the maximum penalty that could be levied was £20,000 now the maximum penalty will instead be £200,000.

As previously, penalties remain payable to the Exchequer.

Whistleblowing: EAT considers meaning of "in the public interest"

The Employment Appeal Tribunal (EAT) has upheld a tribunal's decision that a senior manager's disclosure to his employer about an issue which affected around 100 senior managers' contracts of employment, including his own, could form the basis of a reasonable belief that the disclosure was in the public interest and thus entitled him to protection under whistleblowing legislation.

The Enterprise and Regulatory Reform Act 2013 (ERRA) implemented a number of changes to the protection afforded to whistleblowers. Perhaps the change anticipated to be the most significant was the requirement for an individual to have a reasonable belief that the disclosure they are making, to whomever they make it, is "in the public interest".

For an individual to have made a protected "qualifying disclosure" to their employer, they will need to have:

  1. a reasonable belief that the disclosed information tends to show that at least one of six types of malpractice, is being committed or likely to be committed. One of the six types of malpractice covered being "failure to comply with legal obligations", and
  2. since 25 June 2013, the individual must also reasonably believe that the disclosure is "in the public interest".

The main reason for this change was to prevent an individual from claiming whistleblowing protection for disclosing a breach of their own contract of employment. This reversed the previous EAT decision in Parkins v Sodexho Ltd where the EAT upheld just that - that an individual could benefit from whistleblowing legislation by the self-serving disclosure of a breach of their own contract of employment.

We now have the first appellate level decision on the meaning of "in the public interest". The EAT in Chesterton Global Ltd (t/a Chestertons) v Nurmohamed held that an individual reasonably believed that his disclosure relating to an alteration to accounting figures, which negatively affected his and 100 other senior managers' commissions, was in the public interest.

What happened in this case?

Mr Nurmohamed was a Director at Chestertons' Mayfair office. He made three alleged protected disclosures to Chestertons. These disclosures focussed on alleged deliberate misstating of between £2-3 million of actual costs and liabilities throughout the whole business nationwide. This in turn negatively affected the earnings of 100 senior managers, including Mr Nurmohamed.

Mr Nurmohamed was subsequently dismissed and a tribunal found that he had been automatically unfairly dismissed, for having made a protected disclosure. A key point turned on the tribunal's finding that Mr Nurmohamed had made these disclosures in the reasonable belief that they were in the public interest.

On appeal, Chestertons argued that the tribunal was wrong to conclude that disclosures made in the interest of 100 senior managers was a sufficiently sized group to amount to a matter being "in the public interest". In addition, the tribunal should have objectively determined whether the disclosures were of real public interest.

On the first point, the EAT agreed with the tribunal that 100 senior managers was a sufficient group of the public to amount to being in the public interest.

On the second point, the EAT concluded that it was not for the tribunal to determine whether something "was in the public interest". Instead, the tribunal only had to determine whether Mr Nurmohamed reasonably believed his disclosure was in the public interest. The public interest test can be satisfied even where the basis of the supposed public interest is wrong or there was no public interest, provided the individual reasonably believed there was a public interest.

While Mr Nurmohamed was mostly concerned about his own position, the tribunal was able on the facts to conclude that he did have in mind a genuine concern for the other office managers and that was a sufficient group of the public to amount to being a matter in the public interest.

What does this mean?

This decision suggests the introduction of the 'public interest' requirement may not be as significant a change as many commentators thought. Even in cases were the individual is primarily concerned with their own self-interest, there may be potential for the individual to establish a belief that it is made "in the public interest", by referring to concern for colleagues who may find themselves in a similar positon. So "the public" for these purposes do not necessarily need to be outside the employer's workforce.

What counts as being a reasonable belief that the disclosure is in the public interest is far from settled. Chestertons is currently seeking leave to appeal to the Court of Appeal, and no doubt future cases will develop this area further. One to watch.

Back to the future for the 'establishment' criterion in collective redundancy consultation

On 30 April 2015 the Court of Justice of the European Union (CJEU) confirmed that the UK can legitimately limit the threshold for redundancies necessitating collective consultation to those where 20 or more redundancies are proposed at a 'single establishment'. For detail of this important judgment in the long-running Woolworths litigation see our alert Back to the future for the 'establishment' criterion in collective redundancy consultation - common sense prevails.

Postscript: On 12 May the CJEU handed down its judgment in Lyttle v Bluebird UK Bidco Ltd which is a Northern Ireland case arising from the closure of 12 Bonmarche stores. It too asked whether the duty to collectively consult is triggered where 20 or more employees are dismissed at a particular establishment or across the whole of the employer's business.

As expected, it mirrors the Woolworth's decision, again ruling that the Directive "requires that account be taken of the dismissals effected in each establishment considered separately". While acknowledging that it is for the referring tribunal to determine the matter, it nevertheless, concluded on the basis of the information before it, that each store was a "distinct entity" and " capable of satisfying the criteria...relating to the term establishment".

Managers beware of making inappropriate Facebook posts

A Unite workplace representative employed as a construction site rigger has won a claim for unfair dismissal on the basis he was unfairly selected for redundancy due to trade union related activities. An interesting feature of the case was the importance placed on comments posted on a personal Facebook account by the construction manager responsible for hiring.

What happened in this case?

In Mr J Kelly v Interserve Industrial Services Limited, Mr Kelly worked as one of 56 riggers/erectors on a power station site known as the Runcorn site. He was also elected as a Unite workplace representative.

In August/September 2013, the construction manager, Mr Collins, made Facebook posts expressing severe dislike for the "Liverpudlian elements" within the workforce. This was brought to the attention of the unions and became a serious issue due to the number of Liverpudlians working on the site. Mr Kelly, in his capacity as workplace representative, together with the GMB shop steward made a formal complaint. As a result, Mr Collins was disciplined and received a 12 month warning.

As the work at Runcorn was drawing to an end, the majority of the riggers were offered alternative work at the Capenhurst site. However, Mr Kelly was not offered alternative work and was instead made redundant. Mr Collins was the manager responsible for filling the Capenhurst site vacancies.

The question before the tribunal was whether the failure to offer Mr Kelly alternative work was because he was a workplace representative and a member of Unite. The tribunal concluded yes. In support of his claim, Mr Kelly pointed to the 'Facebook comments' incident.

The Facebook comments themselves were not targeted towards shop stewards or the union. However, Mr Collins was aware that Mr Kelly was the union representative who made the formal complaint against him as a result of the Facebook incident. The tribunal took account of adverse inferences from Mr Collins' attempt to down play down the significance of the Facebook incident, finding his evidence not to be credible.

The tribunal was ultimately satisfied that Mr Kelly was not offered a job as a rigger on the Capenhurst site on the ground that Mr Collins was motivated by Mr Kelly's role as a union workplace representative and his known activities in that capacity, namely the formal complaint following the Facebook comments.

Lessons to be learnt

Mr Kelly's case highlights why employers need to be concerned with the social media activities of all their employees, including senior managers even where the comments are not directed at a particular individual. Employers should:

  1. Get a social media policy in place. It must clearly set out the social media behaviours that are, or are not, acceptable to the employer.
  2. Train all managers on the policy highlighting what you, as an organisation, expect mangers' social media behaviour to be.
  3. Any complaint from an employee after personal social media activity from someone in a managerial role should also be dealt with appropriately and without adverse consequences for any offended employees.

Equality in the provision of goods & services

Employees are not the only individuals with protection from discrimination under the Equality Act 2010. Organisations that provide goods and services to the public are also at risk of such claims.

If you've been watching the news lately, you'll know that the issue of equality has never been more prominent, with a number of high-profile cases reminding those in customer facing service industries including the retail, hospitality and leisure sectors, that discrimination is an issue that should not be ignored.

For more detail see our alert Equality on the rise.

TUPE podcasts

TUPE club: Doing the deal: Service Provision Change situations can be particularly complex due to the nature of the deal and the balancing of different, usually conflicting, commercial interests. Here we discuss key legal issues and solutions in an outsourcing scenario with a keen practical and commercial focus.

TUPE & pensions: Update and analysis: A discussion of the latest changes in some key areas affecting organisations involved in a TUPE transfer.

Workplace pensions reform (WPR) changes to thresholds and limits

Some of the thresholds and limits used to determine worker status and contribution levels changed with effect on 6 April 2015. The WPR threshold and limits as amended are:

  • automatic enrolment earnings trigger - £10,000 (unchanged from the 2014 /15 figure);
  • lower limit of the qualifying earnings band - £5,824 (up by £52 from the 2014 /15 figure); and
  • upper limit of the qualifying earnings band - £42,385 (up by £520 from the 2014 /15 figure).

This means that the qualifying earnings band continues to be linked to national Insurance contribution thresholds.

The automatic enrolment earnings threshold will, however, no longer be linked to the personal allowance for income tax which rose to £10,600 on 6 April 2015. This difference may cause an administrative headache for some payroll systems.

For further information on Workplace Pension Reform see out Pensions team's four-part series Pension reforms - Are you ready?


NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.

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