Employment Update - October 2015

22 minute read
28 October 2015

Our employment and equalities experts bring you their monthly update of legislation, law and ongoing cases.

This month's update covers:

and links to our recently published alerts

Back to the future for whistleblowing "in the public interest"

In 2013, changes to the protection afforded to whistleblowers came into force, including the requirement for an individual to have a reasonable belief that the disclosure they are making, to whoever they make it, is "in the public interest".

A driver for this change was to prevent an individual from claiming whistleblowing protection for disclosing a breach of their own contract of employment - being a failure to comply with a legal obligation. This reversed the previous 2002 Employment Appeal Tribunal (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.

For an individual to have made a protected "qualifying disclosure" they need:

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

Earlier this year, 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'. In particular, 'the public' can refer to a subset of the general public, even one composed solely of employees of the same employer. Also, it did not matter that the individual was mostly motivated by concern about his own position.

This month, the EAT in Underwood v Wincanton plc confirmed that following Chesterton the 'public interest' requirement may be met by a relatively small group of persons, and that those persons may be employees of the same employer who have the same personal interest in the matter as that raised by the claimant. In this case, a contractual dispute over the allocation of overtime by only four drivers was sufficient to establish a reasonable belief that the disclosure was "in the public interest".

These cases suggest that the "in the public interest" test is a very low hurdle indeed. The judicial interpretation of the new 'in the public interest' element suggest this amendment has very little impact on reversing the effect of Parkins v Sodexho Ltd, so that a worker cannot rely on a breach of his own employment contract where there are no wider public interest implications.

It will be relatively rare that a workplace issue with the potential to constitute a qualifying disclosure will solely affect one worker with no implications for any other workers. At the moment we appear to be back to where we started with workers being able to claim whistleblowing protection for disclosure of a breach of their own contract of employment as long as they can show some element of concern for colleagues in the same position.

A sequel to come... the Court of Appeal is due to hear the appeal in Chesterton, but not until mid- October 2016.

The elusive "first proposes to make redundancies" question

When is the duty to collectively consult triggered under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA)? The obligation is triggered when the employer first proposes that redundancies be made. But when does an employer first propose to make redundancies? In particular, must an employer consult about a strategic decision that would foreseeably or inevitably lead to collective redundancies such as a site closure? Back in 2007, the EAT held in UK Coal Mining Ltd v National Union of Mineworkers that, yes, they did.

In 2009, the Court of Justice of the European Union (CJEU) also purported to address this question in the Fujitsu case. However, the Fujitsu judgment blurred the issue. Was the CJEU saying that the consultation obligation arises:

  1. when the employer is proposing, but has not yet made, a strategic business or operational decision that will foreseeably or inevitably lead to collective redundancies; or
  2. only when that decision has actually been made and he is then proposing consequential redundancies?

The latest case on this issue to be back in the news is The United States of America v Nolan, which concerns the closure of a US military base located in Hampshire resulting in the redundancy of 200 civilian employees. The case has held the potential promise of providing an answer to this very blurry area for a number of years. Are we any closer to an answer? A little, but it is still some way off.

The story so far in seconds

  • The employment tribunal (2007) and EAT (2009) say the trigger is the proposal to close the military base.
  • However, in 2010 the Court of Appeal said, 'wait a minute, not so sure' following Fujitsu (a judgment it too found hard to follow) and referred the case to the CJEU.
  • The CJEU held on for 18 months before coming up with the less-than-illuminating answer that 'this one is outside our jurisdiction' as the EU Directive does not apply to 'public administrative bodies'.
  • Back to the Court of Appeal in 2014, who say, 'well, it is in our jurisdiction as the scope of those covered by TULRCA is wider than those covered by the EU Directive. The USA could have claimed state immunity back in 2007 but didn't, so let's proceed to a full merits hearing'.
  • 'Not so fast' says the USA, with a further jurisdictional appeal to the Supreme Court.
  • October 2015 and the Supreme Court confirms the Court of Appeal is correct on jurisdiction. So back to the Court of Appeal for determination, as necessary, on the outstanding UK Coal Mining/Fujitsu issue.

So, when does an employer first propose to make redundancies? Hopefully we are a step closer to getting an answer, although it will be several months before the case will be relisted before the Court of Appeal and, of course, the parties could always settle in the meantime. We can but dream that one day we will have an answer!

TUPE: change of client excludes a SPC but there could still be a 'business transfer'

In Aguebor v PCL Whitehall Security Group & Anor, the EAT gave a useful reminder that the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) contains two different gateways into protection. The first gateway is the business transfer (Regulation 3(1)(a)), which applies where there is a transfer of an undertaking or part of an undertaking. The second gateway is where there is a 'service provision change' (SPC) (Regulation 3(1)(b)).

These two tests are not mutually exclusive. Just because there is a change of supplier for a service but the factual scenario does not fall within the relatively strict SPC provisions does not mean there cannot still be a business transfer under TUPE. The business transfer test has proved difficult to apply in cases where the undertaking is based wholly or mainly on manpower. Nevertheless, it is open to the employer (or the employee) to try to rely on the business transfer test under which all relevant factors must be considered.

This case concerned the provision of security services at a business complex site. Originally, the site tenant contracted directly for the site security. Following a change in the tenant, the Landlord took over contracting for site security with a different supplier, resulting in a change in the 'client' in addition to the change of supplier.

The EAT confirmed that the Tribunal was correct to find that there had not been a 'service provision change' as the client had changed. However, the Tribunal was wrong to leap from a finding that there was no SPC to conclude there was therefore no TUPE transfer. The Tribunal should then have considered whether there was a 'business transfer'. Because the Tribunal had failed to do so, the case was sent back to another tribunal to consider that question.

TUPE: Employees temporarily laid off may still transfer as part of an organised grouping

In order to establish that there has been a transfer under TUPE by way of a 'service provision change' (SPC), there must be an organised grouping of employees, which had as its principal purpose the carrying out of activities on behalf of the client, existing immediately before the SPC. But do the employees who make up that grouping actually need to be carrying out the activities immediately before the alleged transfer? Can there be a SPC following a temporary cessation of work?

In Inex Home Improvements Ltd v Hodgkins and ors, Inex was a subcontractor carrying out painting and decorating work on a large construction project. It had a team dedicated to this work. The work under the project was released in tranches. Upon completion of tranche 8, the Inex employees were temporarily laid off in December as permitted by their employment contracts in accordance with the Construction Industry Joint Council Working Rule Agreement. The lay-off was expected to be temporary with further work due in January when tranche 9 was released.

A dispute arose between the client and the main contractor, resulting in a new main contractor being awarded the work under tranche 9. Did the lay-off mean the Inex employees did not transfer to the new sub-subcontractor as a SPC under TUPE as they otherwise would?

The tribunal held that the employees had not transferred because immediately before the transfer they were no longer "an organised grouping of employees", having been temporarily laid off. However, the EAT held that a temporary absence from work did not in itself prevent the employees forming a grouping for the purposes of the TUPE regulations. There was nothing in the TUPE regulations or in the case law which suggested it is a defining factor.

The EAT held that a temporary absence from work or a temporary cessation of work did not, in itself, mean there was no longer an organised grouping. Whether the employees remained an organised grouping was a question of fact dependent upon the purpose of the lay-off, its length and surrounding circumstances. The case was sent back to the tribunal to consider whether considering all relevant facts, the grouping of employees retained its identity as an organised grouping following the contractual temporary lay-off.

It is not unusual for a contract which is ending to have a period where the work reduces. Companies may not expect to gain staff who, before the SPC, have ceased to be primarily working on the contract which they have just won. Contractors need to be aware that it is the organised grouping that needs to be in existence immediately before the alleged transfer. This does not equate to the employees who constitute that grouping actually carrying out the activities immediately before the alleged transfer.

Contractors will need to look at what the group of employees had been doing over a longer period, not simply immediately before the transfer date. Potentially, employees who are laid-off (and so are literally doing no work at all on the contract immediately before it ends) can still transfer.


The concept of using equal pay reporting as a way of promoting more transparent and gender-balanced pay practices is not new. Section 78 of the Equality Act 2010 provides the power to implement regulations requiring private sector employers with over 250 employees to disclose pay gap information. However, section 78 has not yet been brought into force.

Under the Small Business, Enterprise and Employment Act 2015, the Secretary of State is required to introduce private sector equal pay reporting regulations under section 78 no later than 26 March 2016. Over the summer the Government carried out a brief consultation on the scope of the equal pay reporting to be required.

On 25 October, the Prime Minister tweeted a press release indicating that details of the scope and precise timing for the introduction of gender pay gap reporting will be out shortly and will include:

  • a requirement for larger employers to publish information about their bonuses as well as salaries for men and women as part of their gender pay gap reporting;
  • extension to include the public sector; and
  • plans to work with business to eliminate all-male boards in the FTSE 350

As to time scale, while the regulations are expected to be made in the first half of 2016, it is likely that implementation will be delayed beyond 26 March (possibly even in stages) to allow employers to prepare.

FCA/PRA announce new rules on whistleblowing

On 6 October, the Prudential Regulation Authority and the Financial Conduct Authority issued new policy statements introducing a package of new whistleblowing rules for the financial services sector.

The key changes include establishing and publicising internal whistleblowing channels and the appointment of a senior manager or director as the "whistleblowers' champion" who will have responsibility for overseeing the effectiveness of internal whistleblowing policies and procedures, as well as preparing the annual whistleblowing report to the board.

The new rules will apply to deposit-takers with over £250 million in assets, to PRA-designated investment firms, and to insurers subject to the Solvency II Directive, as well as to the Society of Lloyd's and managing agents. The rules will have the status of "non-binding guidance" for all other firms, who may wish to comply voluntarily.

Relevant firms have until 7 September 2016 to comply with the new rules. However, the requirement to appoint a whistleblowers' champion will take effect on 7 March 2016.

FCA/PRA consults on regulatory references

On 6 October, the FCA and PRA published a joint consultation paper "Strengthening accountability in banking and insurance: regulatory references".

The consultation follows on from earlier consultations and the recommendations of the Fair and Effective Markets Review published at the end of June this year. The proposals make changes to the way regulated firms provide references for candidates of certain roles.

From 7 March 2016, in relation to candidates for certain roles, for example those carrying out senior management functions, it is proposed that:

  • Firms must request regulatory references from former employers of candidates going back six years.
  • Certain prescribed responsibilities will be modified to include compliance with the regulatory reference rules.
  • Minimum specific disclosure requirements will be mandated, including the inclusion of concluded breaches of the conduct requirements of FCA Conduct Rules, PRA Conduct Rules or Conduct Standards, and Statements of Principle and Code of Practice for Approved Persons going back six years.
  • Disclosures to be in a standard format, including the need to confirm where there is no relevant information to disclose.
  • For those who have provided a regulatory reference to update previous references given in the past six years, where they become aware of matters that would cause them to draft that reference differently if they were drafting it now.

For all authorised firms:

  • Clarification that a firm must not enter into any arrangements or agreements that limit their ability to disclose relevant information.
  • Enhancing systems and controls requirements relating to the retention of records and the policies and procedures for both requesting and providing regulatory references.

The consultation period closes on 7 December. The final new rules are intended to be in place for the start of the new accountability regime in March 2016 with the changes applying to regulatory references provided on or after 7 March 2016.

Modern Slavery: Supply chain transparency

The Modern Slavery Act 2015 (section 54) will require all businesses:

  • which carry out any or part of a business in the UK
  • which supply goods or services
  • have an annual turnover exceeding £36 million

to publish a slavery and human trafficking statement each financial year.

The legislation expressly states that a business can comply with this requirement by simply stating that no steps have been taken to ensure its supply chain is free from slavery. For low profile businesses for which public reputation is of little importance, this might be a realistic option. However, for many businesses, this will not be an attractive approach.

The Modern Slavery Act 2015 (Commencement No 3 and Transitional Provision) Regulations 2015 have finally been published, under which section 54 comes into force on 29 October. However, under the transitional provision a commercial organisation with a financial year "ending before 31st March 2016" does not have to make a slavery and human trafficking statement in respect of that financial year.

Those businesses with a year-end of 31 March 2016 will be the first businesses required to publish a statement for their 2015-16 financial year. Going forward, the government expects organisations to publish their statements as soon as reasonably practicable after the end of each financial year, but ideally within six months.

For more on what this means for businesses see our alert Modern Slavery and Supply Chains - Legal requirements to apply in UK from October 2015.

Recent alerts

Pension entitlements

The Court of Appeal has confirmed that legislation which is intended to protect employees under anti-discrimination legislation cannot be relied upon to extend such protection to a period of time before the date the legislation was introduced.

Importantly, in the context of pension schemes, this necessitates identifying whether the benefit can be said to have accrued and become fixed at the point the discriminatory act is complained of.

For more detail see our alert Pension entitlements: changes to legislation do not fully undo the effects of the past.

Data protection

On 6 October, the CJEU held that the Safe Harbour regime is not so safe after all - despite the European Commission's finding 15 years ago that Safe Harbour provided an adequate means of protecting personal data for transfer to the US.

For more detail see our alert European Court of Justice today rules Safe Harbour not safe - will Safe Harbour stay afloat or will national regulators flee a sinking ship.

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