Employment law 2016 review: another year over...

28 minute read
13 December 2016


A year of two halves. We began the year with David Cameron as prime minister expecting the employment law year to be dominated by the rallying cry of trade unions opposed to the passing and implementation of the Trade Union Bill. The Trade Union Act 2016 did become law on 4 May. Bringing the Act's provisions into force was proceeding full steam ahead when it hit - the Brexit iceberg!

The fateful 23 June saw all bets off when it came to expected legislative changes. The significant reforms to industrial action plummeted down the Government priority list. The final detail of what employers will actually need to include for the planned Gender Pay Gap Reporting promised for 'summer 2016' has only just been quietly published on 6 December. Other plans, such as the extension of shared parental leave to grandparents and the review of non-compete clauses, seem to have evaporated.

While legislative priorities are now enveloped within the fog of Brexit, the courts and tribunals have continued to provide another eventful year with hot topics such as the perennial favourite of holiday pay and the new kid on the block -  'the gig economy' .

As 2016 draws to a close, we run through our pick of the 2016 cases and developments to remember.

Working Time

We begin with the poster-child for complaints that EU regulations undermine flexibility and increase cost of hiring staff - working time. Indeed some say the Working Time Directive (WTD) was a major factor in the Conservatives' falling out of love with Europe. Having negotiated an opt-out from the Social Chapter in the 1990s, John Major's government was reputedly furious to see the WTD badged not as 'social' but as 'health and safety'.

This year we have had more on calculation of holiday pay and the importance of rest breaks.

Holiday pay

Once again employers are reminded that when it comes to calculating holiday pay, the worker should receive their normal pay. To work out normal pay it is the pay they regularly receive.

In the continuing saga of Lock v British Gas Trading Ltd, this year the Court of Appeal confirmed the Working Time Regulations can be interpreted compatibly with the WTD so as to include results-based commission payments in the calculation of holiday pay for the first four weeks’ annual leave.

As is the case for overtime, the key is REGULAR RECEIPT. This case concerned commission earned month-on-month making up 60% of the worker's monthly income. To employers' relief, the Court of Appeal stressed the principles from this case do not translate to a scenario where a worker receives a single, large, results-based annual bonus.

Rest breaks

Unless they fall within one of the exemptions, a worker is entitled to a rest break away from their work station of not less than 20 minutes where daily working time is more than six hours. While employers are not required to ensure workers take their rest break, can working practices discourage the taking of breaks and cross the line into positive prevention of taking breaks?

Departing from previous case law, the Employment Appeal Tribunal (EAT) in Grange v Abellio London Ltd held that a claim for 'refusal' to permit rest breaks can be brought where the employer fails to make provision for such breaks, even if the worker does not expressly request them. Employers must take active steps to ensure their working arrangements enable workers to take the rest breaks they are entitled to. Workers cannot be forced to take rest breaks but they are to be positively enabled to do so - remember this is a health & safety provision!

Employment Status

The world of work is changing. 15% of people working in the UK's labour market are now self-employed, with increased numbers carrying out casual work or working in the "gig economy".

In October a review of modern working practices to keep pace with new business models was launched. 'The future world of work and rights of workers inquiry' is considering questions such as: "Is the term 'worker' defined sufficiently clearly in law at present? If not, how should it be defined?"   

The current hot topic is employment status: employee, worker or self-employed? Who are 'employees' entitled to the full range of employment protections?  Who are 'the self-employed' genuinely in business on their own account with very little protection? And increasingly being asked, who are those somewhere in the middle classed as 'workers' entitled to some key employment rights, notably holiday pay and the national minimum wage?

Do they know which status?

Difficulty often arises in identifying the boundaries between employee, worker and self-employed status. It doesn't help that in classification for tax purposes only two categories, employee or self-employed, are used nor that the definition of 'worker' can vary depending on which statutory provision you are looking at. No single factor will be determinative of employee status. When determining employment status, the process is more of an art. It involves "painting a picture from the accumulation of detail", with control, personal service and mutuality of obligation being key factors.

It has long been known that 'mutuality of obligation' is crucial to the establishment of employee status. This year the Court of Appeal has also thrown 'mutuality of obligation ' into the pot when determining worker status (Secretary of State for Justice v Windle & Arada). In this context, it appears the test is merely used to determine whether there is sufficient mutuality of obligation to found a contract at all. By contrast, when applying the test of 'mutuality of obligation' to establish 'employee' status, more is required. For employee status, it must be shown, broadly speaking, that there is an obligation to provide or pay for work on the part of the employer, and an obligation to perform that work on the part of the employee.


Coinciding with launch of the Inquiry, the employment tribunal delivered its timely and entertaining judgment in the Uber case. The tribunal held that drivers engaged by Uber were not self-employed, but instead were 'workers' legally entitled to national minimum wage, paid annual leave, and whistleblowing protection. The tribunal rejected Uber's arguments that it was not a transport provider, but merely a technology platform providing an app which self-employed drivers could utilise. The reams of contrived contractual documentation did not reflect the reality. Uber’s business was more than the contractual documents asserted it to be. Uber wasn’t merely providing its app for use by self-employed drivers, it was selling a taxi service, employing the drivers as 'workers'.

Student workers

In a very different context, is a university student undertaking a work place organised by the university a student or a worker when it comes to discrimination protection? The answer - both. The Court of Appeal held that a student can bring a discrimination claim in the employment tribunal as a 'worker' directly against a placement provider. This makes bringing a claim much easier and cheaper, the alternative being to claim through the civil courts against the university as agent of the placement provider under the education provisions of the Equality Act 2010 (Blackwood v Birmingham & Solihull Mental Health NHS Foundation Trust).


We began the year hoping to receive Court of Appeal guidance as to whether the EAT's very wide interpretation of the 'in the public interest' is correct. According to the EAT 'the public' can be a very small subset of the general public composed solely of employees of the same employer. Furter, it does not matter if the individual whistleblower was mostly motivated by concern for their own position. Unfortunately, the long awaited Chesterton appeal has been 'bounced' (yes, that is the technical word the courts use) back to June 2017 due to lack of judicial time. 

In the meantime, we have learned:

  • An allegation about an individual's cramped working environment may possibly be in the public interest as a threat to health and safety and as the employer was a charity supported by the public (Morgan v Royal Mencap Society)
  • Where an individual alleges breach of a legal obligation, they must be able to identify a belief that there is a legal obligation, as opposed to merely industry guidance, in this case Financial Conduct Authority guidance on the sharing of passwords (Eiger Securities LLP v Korshunova).

Finally, in a two for one offer, an agency worker may have employee status in relation to the agency itself. This does not prevent that same individual having 'worker' status in relation to the end-user for hte purposes of whistleblowing protection, which uses an extended definition of 'worker'. If the agency and end-user both substantially determine the terms then both are the 'employer' for the whistleblowing purposes. Significantly, there is no need to ask who, between the agency and end-user, determined the majority of the terms (McTigue v University Hospital Bristol NHS Foundation Trust). 

Pay disparity

In February, the Government published and consulted on the draft Gender Pay Gap Reporting (GPGR) regulations requiring private employers with 250 or more employees to publish gender pay gap information by April 2018 and annually thereafter.

A number of concerns were expressed over the initial draft concerning the definitions of pay and bonus pay and confusion over what were the pay 'quartiles' to be used.

The final version of the draft regulations initially promised for 'the summer' did not materialise. Instead, we did get a consultation on extending GPGR to the public sector intended to mirror the private sector requirements. On 6 December, we quietly found the (hopefully) final version of the draft regulations published on legislation.gov.uk without announcement.

Lots of changes from the original version, but on the plus side the government does appear to have taken on board many of the concerns raised. What we now have is:

  • A reporting 'snapshot' date of 5 April rather than the original 30 April making the first reporting deadline 4 April 2018 not 29 April 2018.
  • The wider definition of 'employment' contained in the Equality Act 2010, subject to certain exceptions, is to be used when determining who is a ‘relevant employee’ for the purposes of the regulations. This means the broader category of 'workers' will also be included (the language doesn't help the employee v worker understanding as for these purposes relevant employee includes workers).  
  • Only "full-pay relevant employees" are included - so those on reduced or nil pay due to being on family friendly, sickness or other leave are excluded.
  • Pay quartiles are to be calculated by dividing the workforce into four equal sized groups, as opposed to dividing the overall pay distribution into four equal proportions as originally indicated - legislative draftsmen don't like maths, either.
  • There are also tweaks as to the definition of 'ordinary pay' and 'bonus pay'. Particularly welcome is clarification around bonuses paid via securities and also to calculating the 'hourly rate' for comparison purposes.

The required form and manner of publication remain the same, being on the employer's website and also a designated government website.

Private sector equal pay claims 

There was a time when equal pay cases rare. Then the noughties saw the public sector equal pay claimsarrive providing a bounty of cases with plentiful technical appeal points. Until now private sector equal pay claims were sparse, but this year we see an increase in cases within the private sector.

 A claim by 7,000 female Asda shop workers claiming equal pay with Asda's mainly male distribution depot has started. According to Lord Falconer QC, representing Asda this case "will have the single largest effect on the economy of the UK in recent years" - we wonder if Uber, Deilveroo and CitySprint would agree?

We have not yet had the substantive hearing, which will no doubt be appealed.  But we have had a failed High Court challenge - the High Court swiftly seeing through Asda's flattery that only High Court judges had the intellectual ability to deal with such a demanding and complex case - perhaps not the best starting point for going before the employment tribunal.

We also have two pending appeals on preliminary points, the most significant of which concerned the choice of comparators. Asda argued that the division of its corporate structure into Retail and Distribution operations meant that there was no single body that had pay-setting powers for both the shop workers and the depot workers. However, the tribunal found Asda's executive board had budgetary control and oversight over both operations with power to introduce pay equality.  The litigation continues.


Pregnancy and maternity

In the summer, the Women and Equalities Select Committee released a report calling for action in light of what it called a 'shocking' increase in workplace pregnancy discrimination. According to the report, the number of expectant and new mothers forced to leave their jobs has almost doubled since 2005. Certainly this year, there have been a notable series of pregnancy/maternity related sex discrimination cases:

  • Are childcare vouchers 'remuneration' or a 'non-cash benefit'? In Peninsula Business Services Ltd v Donaldson the EAT declared HMRC guidance classifying such a salary sacrifice scheme as a 'non-cash benefit' was simply wrong. The EAT found that employers that make deductions from an employee’s salary in return for childcare vouchers do not have to continue to provide the vouchers during maternity leave. In this case, the employer's salary sacrifice childcare vouchers scheme, which required employees to agree to suspend their membership during maternity leave, was not discriminatory.
  • The Glasgow ET awarded a new father nearly £30,000 for sex discrimination as his employer offered enhanced contractual shared parental pay to mothers but not to fathers. Note this case concerned a like for like shared parental pay entitlement comparison not a shared parental pay v enhanced maternity pay comparison which remains a grey area.
  • The Bristol ET found that an employer's rostering practices were indirectly discriminatory towards breastfeeding mothers, as well as in breach of the health and safety provisions for breastfeeding mothers contained in the Employment Rights Act 1996.

What are normal day-to-day duties?

The EAT in Banaszczyk v Booker Ltd, held that  'warehouse operations', such as manually lifting and moving heavy cases could constitute 'normal day-to-day activities' for the purposes of disability under the Equality Act 2010. The EAT went on to cast doubt on the accuracy of the EHRC's 2011 'Guidance on matters to be taken into account in determining questions relating to the definition of disability' in relation to "highly specialised” activities. This case appears to mark a significant step in the widening of the UK “day-to-day activities” concept. Moving closer to the European concept of 'normal day-to-day activities' being viewed within the context of the worker’s professional world having its own norms.

Long hours culture

Can an expectation or assumption that a disabled employee would regularly work late amount to a provision, criterion or practice (PCP) triggering the duty to make reasonable adjustments? Maybe. The EAT in Carreras v United First Partners Research held that working late does not have to be presented as an instruction to cause a disadvantage. Employers should beware that if an employee can establish the existence of a long-hours culture, this may be enough to amount to a 'practice' under the Equality Act 2010.

Reasonable adjustments and pay protection

In G4S Cash Solutions (UK) Ltd v Powell, the EAT held that an employer's duty to make reasonable adjustments under the Equality Act 2010 may extend to maintaining the salary of a disabled employee who has been moved to a less skilled role.

In this case, a long serving maintenance engineer was moved to a newly created role on his existing pay. A year later the employer attempted to significantly reduce his pay. The EAT accepted that it would not be an everyday event for a tribunal to conclude that long-term pay protection is required. However, there may be cases such as that of Mr Powell, where pay protection would be a reasonable adjustment.

This is an important decision establishing that the duty to make reasonable adjustments may extend to pay protection where an employee is transferred to a lesser role. Having said that, this case is not saying that pay protection will always or even normally be considered a reasonable adjustment an employer will be required to make where transferring a disabled employee to an existing vacant lesser role.

Immigration status

In Nayak v Royal Mail Ltd, the EAT held that the employer's genuine and reasonable belief that an employee was no longer permitted to work in the UK was sufficient to show that his subsequent dismissal for 'some other substantial reason' (SOSR) was fair. There was ample evidence demonstrating the employer's attempts to establish the employee's immigration status over a period of several years and the employee's persistent failure to co-operate.

In a discrimination context, we have also had Supreme Court confirmation that treatment due to precarious immigration status is not race discrimination. While immigration status is a function of nationality it is not the same thing (Taiwo v Olaigbe and Onu v Akwiwu).

These cases may take on added significance in a post-Brexit world if those currently entitled to work in the UK lose that right.

Managed exits

Exit negotiations 

Since July 2013, employers and employees have been able to enter into 'off the record' discussions and negotiations about the parting of ways on the basis of mutually agreed terms, without fear that the negotiations will later be used against them in an unfair dismissal claim.

Three years on we have the first appellate level guidance on the scope of pre-termination negotiation confidentiality under section 111A of the Employment Rights Act 1996. We now know that unlike common law 'without prejudice' privilege rules, section 111A privilege extends to the fact that the negotiations have taken place, not just the contents of those negotiations. Furthermore, section 111A privilege cannot deliberately or inadvertently be waived by the parties (Bailey v Faithorn Farrell Timms LLP).

Managing exits for employees who are pregnant or on maternity leave 

Employees on maternity leave are not exempt from being dismissed or selected for redundancy in a genuine redundancy situation where there is no suitable alternative vacancy. Once the dismissal takes effect, the maternity leave period automatically comes to an end. However, provided the employee fulfils certain qualifying conditions the right to receive statutory maternity pay (SMP) survives termination of the contract.

For employers negotiating exit packages for pregnant employees and those on maternity leave they should note:

  • A contractual PILON payment constitutes contractual remuneration. As such, it should be set off against the employer’s liability to pay SMP. However, non-contractual PILONs are a different story (Ladiverova v (1) HMRC (2) Chokdee).
  • A large annual bonus paid in the 'relevant period' must be included in the calculation of SMP. In addition, SMP liability cannot be negotiated and settled under a Settlement Agreement, even under the auspices of ACAS (COT3) (Campus Living Villages UK Ltd v HMRC and Sexton).

Discipline & dismissal

Lessons from this year's crop of unfair dismissal cases.

Exaggerating sickness 

It will usually be considered misconduct or gross misconduct for an employee to take sick leave and/or claim sick pay when not genuinely unfit for work. But what about a situation where an employee has suffered an injury but is exaggerating its severity?

In Metroline West Ltd v Ajaj, the EAT has held that it was fair to dismiss an employee who exaggerated the extent of an injury preventing them from returning to work for gross misconduct. In addition, an employee who deliberately misrepresents that he is unfit to attend work will be in fundamental breach of contract.

Silent advice

As regards a disciplinary investigation, HR should make sure the advice it gives to the investigator is limited to questions of law, procedure and process, and does not stray into areas of culpability. While the investigator may seek advice from HR, the conclusions set out in the report on culpability should be their own (Dronsfield v Univerisity of Reading).

What code is this?

Does or doesn't the Acas Code of Practice on Disciplinary and Grievance Procedures apply where an employer is considering dismissing an employee for SOSR? This has been a recurring question since the Code came into force in 2009: although the Code applies to 'disciplinary situations' it does not expressly exclude SOSR dismissals as it does for redundancy or the non-renewal of a fixed-term contract.

This year the EAT has confirmed that the Code only applies to dismissals where there is 'culpable conduct' whether in the form of misconduct or poor performance which requires either correction or sanction. Where poor performance is a consequence of genuine illness, the Code will not apply (Holmes v Qinetiq).

In Phoenix House Ltd v Stockman and anor, the EAT also confirmed that the Code does not apply to a SOSR dismissal for breakdown in the working relationship.


It has been 10 years since the concept of 'service provision change' (SPC) was introduced by TUPE 2006, heralding a new era in TUPE developments and case law. Service provision changes (SPC) were intended to make life simpler for those dealing with TUPE transfers. To establish a SPC transfer there must be an 'organised grouping of employees' which has as its principal purpose the carrying out of the relevant 'activities' on behalf of 'the client'. 10 years on and the path is not always easy, especially when dealing with the commercial realities. This year we have learned:

  • There can still be a SPC when only part of a service transfers because it has been split into different functions (Arch Initiatives v Greater Manchester West Mental Health NHS Foundation Trust & ors).
  • A reminder that 'chance or happenstance' is irrelevant when considering whether the group of employees is dedicated to a particular client. In this case, the group of employees worked across contracts rather than in any kind of identifiable teams. The fact that nearly 70% of their work had been for one major client did not mean that there was a grouping of workers dedicated to that major client's work (Amaryllis v McLeod and others).
  • When considering whether activities which are no longer carried out by a contractor on behalf of the client and are now carried out by a subsequent contractor are ‘fundamentally the same’, a common-sense and pragmatic approach should be taken. Some differences in the way the activities are carried out does not necessarily mean there is no SPC (The Salvation Army Trustee Company v Bahi and ors)
  • A temporary cessation of work by a subcontractor (due to a commercial dispute with main contractor) does not by itself necessarily prevent a SPC from taking place. It is a question of fact as to whether an organised grouping of employees retains its identity (Mustafa and anor v Trek Highways Services Ltd).
  • 'The client' means an organisation that is in a position to carry out the activities either itself or by commissioning them from others to carry them out on its behalf. As such there was no SPC where a previously council subsidised bus service was replaced by an unsubsidised independent commercial venture (CT Plus (Yorkshire) CIC v Black and ors).

The 2016 awards 

The 'Fashion police' Award

and the winner is …Portico

…for sending a temporary receptionist, Nicola Thorpe, home for daring not to wear high heels. The massive public outcry following the story breaking led to a Parliamentary Select Committee Inquiry into workplace dress codes.

The 'Cunning plan' Award

and the winner is …The Independent Workers Union of Great Britain (IWGB)

…for their attempt to get the 'worker' status issue decided quickly for Deliveroo couriers. Instead of a tribunal claim they have gone for a union recognition request.  If Deliveroo reject the recognition request - as they deny the couriers are 'workers' - the union can apply to the Central Arbitration Committee for determination - a much quicker process.

The 'Who knew' Award

and the winner is …(again) the London Central Employment Tribunal

…in finding that the role fulfilled by the drivers was integral to Uber's primary business as a 'transport provider', it distinguished the earlier case of Quashie v Stringfellows. Apparently the services of the lap-dancers were merely ancillary to Stringfellow's primary business which is not a lap dancing club but a restaurant - who knew?!

The 'Nice try' Award

and the winner is …Lord Falconer, QC

… for arguing before the Court of Appeal that employment tribunal judges would not be up to the job of dealing with the complexities and subtleties of the large-scale equal pay claim Asda faced. In the words of the Court of Appeal, "any judge will be challenged by the volume of material and the intricacy of some of the arguments which are... the meat and drink of complex equal pay claims…very few High Court judges have experience in this field, whereas a number of highly able ET judges do". 

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