The Employment Law 2017 Horizon

02 February 2017

The Brexit cloud and the top ten 'business as usual' developments to look out for.




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The Brexit cloud

The dominating legal, as well as political issue of 2017 is, hands down, Brexit. How will Brexit work in practice and how will "The Great Repeal Bill" convert existing European legislation into domestic legislation? On 17 January Theresa May, in her blueprint for Brexit speech said:

"...as we translate the body of European law into our domestic regulations, we will ensure that workers' rights are fully protected and maintained. Indeed...not only will the Government protect the rights of workers' set out in European legislation, we will build on them...we will make sure legal protection for workers keeps pace with the changing labour market - and that the voices of workers are heard by the boards of publicly listed companies for the first time... and that the voices of workers are heard by the boards of publicly listed companies for the first time."

So existing employment laws are here to stay, but how they will be further developed remains to be seen. Exactly how are 'voices of workers' to be heard by the boards of publicly listed companies? The Government's Corporate Governance Reform consultation, which runs until 17 February, suggests "there should be higher expectations for companies to engage with employees and others, but that they should be able to select the mechanisms most appropriate for their business."

The Prime Minister also said in her speech:

"...leaving the European Union will mean that our laws ...will be interpreted by judges not in Luxembourg but in courts across this country. Because we will not have truly left the European Union if we are not in control of our own laws."

What does this mean for existing European case law which significantly impacts the interpretation of legislation currently derived from European law once converted to purely domestic legislation? The Working Time Regulations spring immediately to mind. It is not yet known how the domestic courts' approach to interpreting legislation might change after Brexit. The judgments of the European Court, and the EU law itself, are likely to remain relevant to deciding cases on domestic legislation originating from EU law. But then again perhaps not - we will have to wait to see how "the Great Repeal Bill" addresses the issue.

The top ten 'business as usual' 2017 developments to look out for

While employment law is certainly not immune to Brexit uncertainty, life in the world of employment law goes on. Here we offer our pick of the top 10 employment law hot topics for 2017 employers need to know:

  1. Employment status: The Taylor Report (June), Court of Appeal guidance (March); more gig economy cases on their way
  2. Gender pay disparity: Gender pay gap reporting (April); large-scale private sector equal value claims
  3. Trade union reform: Industrial action reforms (March); sweet-heart unions (February/March)
  4. Apprenticeship Levy: New levy (April)
  5. Holiday pay: Calculating holiday pay; carry-over of untaken leave
  6. Discrimination: Arising from a disability; long hours culture; indirect discrimination; retirement
  7. Tribunal fees: Judicial challenge (March); Government review
  8. Whistleblowing: In the public interest (June)
  9. Data protection: General Data Protection Regulation; in the courts
  10. Labour market enforcement: Unscrupulous employers; criminal sanctions

1. Employment status

The Taylor Report - no simple answer

The world of work is changing. The so-called 'gig economy' is changing the face of the employment landscape. The Taylor review on employment practices in the modern economy launched back in October, has the difficult task of reporting on whether employment law is keeping pace with new business models. The law for determining employment status has been almost entirely developed through a complex body of case law, but has it kept pace with the changing roles and ways of working flowing from advances in technology?

Matthew Taylor and his team have taken on no easy task, but clarity for determining employment status is much needed, not only for employees, workers and the self-employed, but also for businesses when considering the costings of their chosen business model. A complex area of employment law, the trick for the Taylor Report recommendations will be, to paraphrase Albert Einstein, to "make things as simple as possible, but not simpler."

The Taylor Report is due to be published in June and will be essential reading for all employers, HR professionals and employment law advisors.

The gig economy - a growing queue of claims

Last year in Aslam vs Uber BV and others, an employment tribunal decided that Uber drivers were workers rather than self-employed, thereby entitling them to employment rights such as working time limits, holiday pay and national minimum wage. On 5 January, in Dewhurst v Citysprint, a cycle courier was likewise held to be a worker. Appeals to the Employment Appeal Tribunal (EAT) are likely in both cases this year, as well as a number of similar tribunal claims pending against companies including Addison Lee, eCourier and Hermes.

And it is not just drivers and riders. This month the Court of Appeal considers the case of Pimlico Plumbers Limited & Anr v Smith. In this case, the EAT considered that the degree of financial risk taken by the plumbers and the lack of an obligation on Pimlico to provide work and pay, were inconsistent with employee status. However, the EAT did find that the plumbers were workers, since there was an obligation to provide services personally and no unfettered right to provide a substitute.

Fresh Court of Appeal guidance on determining employment status will hopefully be with us sometime in March, but in the meantime you can read 'Spotting employees, workers and the self-employed in today's 'gig economy'

2. Gender pay disparity

Gender pay gap reporting

To quote actress, Emma Watson, "the reality is that if we do nothing it will take 75 years, or for me to be nearly a hundred before women can expect to be paid the same as men for the same work." In the drive to tackle gender pay disparity in the UK, the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 come into force on 6 April, subject to parliamentary approval.

Any private or voluntary sector organisations with 250 or more employees will be obliged to calculate their gender pay gap. While the 4 April 2018 publication deadline for the first GPGR reports is some way off, the reports must be based on pay data snapshot as at 5 April 2017, including bonuses paid within the 12 month period ending on 5 April 2017. The gender pay gap information should include both employee pay and bonus pay, alongside information regarding the ratio of men and women in each quartile of the company's pay distribution.

Similar provisions come into force in relation to public sector employers with 250 or more employees on the slightly earlier date of 31 March and a corresponding 30 March 2018 publication deadline based on pay data snapshot of 31 March 2017.

Will the reporting duty drive forward gender pay equality? While the reporting duty will not itself correct gender pay gap, it is a step towards getting businesses to take further action towards tackling this complex societal issue. For more information, see Gender Pay Gap Reporting: comparison of key changes

Equal pay for equal value?

Large-scale equal pay claims are no longer the preserve of public-sector workers. Asda is in the thick of an equal pay battle with 7,000 female shop workers. So far, the female shop workers in Asda Stores Ltd v Brierley and others have overcome a number of preliminary challenges Asda has thrown their way. The EAT will consider the appeals by Asda on the preliminary points at the end of April. Subject to the outcome of the preliminary point appeals, we may actually get to the substantive hearing late in 2017.

Asda is not alone. Similar claims by female shop workers at Sainsbury's are also pending before the tribunal.

3. Trade union reform

The industrial battle lines are drawn

Many of the controversial provisions of the Trade Union Act are expected to come into force on 1 March, subject to Parliamentary approval (by no means a certainty).

As the law currently stands, provided the union allows all those being called upon to take action to vote, they only need a simple majority of those who do vote to be in favour to validate the action. This has allowed action to be called on a very low turnout with, say, only 10% of the actual membership voting in favour. From 1 March new strike ballot and picketing reforms are expected to come into force, where the changes include the controversial new minimum turnout threshold of 50% of the electorate.

In key public sectors there will be an additional threshold of 40% of support from all members eligible to vote. This means required turnout of 50% or more of those who can vote and 40% of those who can (as opposed to who do) vote in support of the action. This change is also expected to come into force on 1 March in relation to the public sectors of health, education, fire, transport, and border security. Regulations making the same change in relation to the key public sector of nuclear decommissioning are being delayed.

Changes to union political funds are also expected to come into force on 1 March, though subject to a 12 month transitional period so the full effect of this change will not be felt until 1 March 2018. Currently, union members not wishing to contribute to the union's 'political fund' must actively opt out of contributing to the 'political fund'. This will be reversed to an 'opt in' system - a change likely to have a significant impact on the future funding of the Labour Party.

In 2015 the then Government consulted on proposals to remove provisions preventing an employment business from supplying the employer with agency workers to perform the duties normally performed by a striking worker. The Government is said to still be considering its response to the 2015 consultation, making such changes this year, or in future now appears increasingly improbable.

Will attempts by the Welsh Assembly to block implementation of many of the Act's provisions in Wales succeed? The "are they or are they not related to devolved matters" debate. We wait and see - the answer possibly being in the Wales Bill currently going through Parliament, which further clarifies what are and, importantly, what are not devolved matters.

See Trade Union Reform - the industrial battle lines are drawn!

Sweet-heart unions

In 2014 the EAT held in R (on the application of Boots Management Services Ltd) v CAC, that an existing agreement with a union to collectively consult over facilities for union officials and consultation machinery blocked another union's application for statutory recognition. It made no difference that the existing agreement expressly excluded bargaining on matters to do with working conditions, terms of employment, hours, pay and holiday.

An appeal to the Court of Appeal was heard back in November with its judgment expected soon.

4. Apprenticeship Levy

The new levy looms

From April 2017 the new Apprenticeship Levy will see large employers paying 0.5% of their annual wage bill towards the cost of apprenticeship training. Information about the Levy has been met with confusion and concern as to how it will work in practice.

In the run up to April, employers should start to calculate their likely contribution and, if part of a group company, how the £15,000 annual allowance will be most effectively split between them.

See The Apprenticeship Levy looms: How will it all work?

5. Holiday pay

Calculating holiday pay

What constitutes 'normal remuneration' for calculating holiday pay will continue to be a hot topic for 2017.

2017 will bring the next instalment in the long running case of Lock v British Gas Trading Ltd. British Gas are now seeking to challenge in the Supreme Court, the Court of Appeal ruling that the Working Time Regulations can be interpreted compatibly with the European Directive to include regularly earned results-based commission payments in the calculation of holiday pay for the first four weeks' annual leave.

Should this further appeal be rejected, it will be back to the tribunal later this year for argument on the question of defining Mr Lock's loss. In particular, what happens where the commission rate already includes an element of 'rolled-up' holiday pay?

As for inclusion of regularly worked overtime, we also expect further EAT guidance on how often overtime needs to be worked to be regular.

What a carry on

It is now well established that the prohibition on carry-over of untaken annual leave contained in the Working Time Regulations 1998 does not apply where a worker is 'prevented' from taking their annual leave due to sickness absence or family related leave. Is a worker also 'prevented' from taking their annual leave in circumstances where an employer has wrongly classed an individual as an independent contractor, therefore denying any right to take paid holiday? Does carry over equally apply in such cases and if so how much can be carried over? These are questions pending before the Court of Justice of the European Union (CJEU) in Sash Window Workshop Ltd v King, a case referred by the Court of Appeal.

This case takes on an added significance in light of the rise in worker status cases. Unless the CJEU limits the carry over period, a finding of worker status could result in several years of unpaid holiday pay being due. It may also be one of the last UK employment laws case references to be heard by the CJEU.

6. Discrimination

Discrimination arising from a disability

Was a disabled employee treated unfavourably when he received an ill-health retirement pension based on his final part time salary, rather than the full time salary he had received before his working hours were reduced as part of a reasonable adjustment? In June, the Court of Appeal will consider this question in The Trustees of Swansea University Pension & Assurance Scheme v Williams.

So far, the EAT has held the disabled employee was not unfavourably treated: as the ill health retirement scheme only applied to disabled people, it inherently benefited disabled people.

Discrimination arising from a disability is still a relatively new concept first introduced by the Equality Act 2010 and the Williams case is the first case to address the meaning of 'unfavourably' in this context. The 2017 appeal hearing will provide some much needed guidance for employment lawyers and those in HR.

Long hours culture a PCP?

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? The Court of Appeal is due to consider this question later this year in Carreras v United First Partners Research. The EAT has so far held that working late does not have to be presented as an instruction to cause a disadvantage. If the disabled employee can establish the existence of a long-hours culture, this may be enough to amount to a 'practice' under the Equality Act 2010.

Indirect discrimination - when the 'why' just can't be explained

Early this year, we expect to receive Supreme Court guidance on the significance of the cause of group disadvantage in indirect discrimination cases. For an individual to establish a prima facie case, is it necessary to show not only why the PCP had disadvantaged the group, but also why they as an individual have been so disadvantaged.

There may be some cases where it is clear why an individual was so disadvantaged. However, in other cases, as in Home Office (UK Border Agency) v Essop and Others there may be no clear explanation as to why an individual was affected by the interaction between the PCP and the protected characteristic. Essop concerned strong statistical evidence that older, ethnic minority candidates had a poor success rate in the civil service exam, but why that is the case is unknown.

A shifting customary retirement age

Age discrimination is the only form of direct discrimination that is capable of justification. In May, the Court of Appeal will consider the appeal in Cockram v Air Products plc. Could the aim of 'intergenerational fairness' justify forfeiture of unvested stock options when the employee retired at age 50? The long serving individual retired in accordance with the terms of the employer's defined benefit pension scheme. However, the provisions of the multi-national employer's Long Term Incentive Plan required the employee retired at the 'customary retirement age'. At the time of Mr Cockram's retirement the 'customary retirement age' in the UK had shifted to 55.

7. Tribunal fees

Good things don't come cheap

The end of March will not only see the trigger of article 50, but also the Supreme Court consideration of the legality of tribunal fees in The Queen on the application of Unison v The Lord Chancellor & anr. Ever since tribunal fees were introduced at the end of July 2013, Unison has been challenging their legality on the basis that they prevent workers from having access to justice and that they indirectly discriminate against workers with protected characteristics i.e. sex and disability, since Type B claims (which include discrimination claims) are in the higher level fee bracket.

Separately, the Government is expected to finally announce the outcome of its review of fees. Should fees be abolished (unlikely) or be reduced (possibly), employers may see claim levels rise.

8. Whistleblowing

In the public interest

In June, the Court of Appeal will consider 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. Further it does not matter if the individual whistleblower was mostly motivated by concern for his or her own position.

Should the Court of Appeal agree with the EAT, it appears that workers are 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.

9. Data protection

All hands on deck

The General Data Protection Regulation does not come into force until 2018, however the frightening consequences of non-compliance (a fine of up to 20 million euros or 4% of the offending company's worldwide turnover) mean that preparation for its implementation will be a priority for employers this year.

Employers are likely to be preparing for this by amending current or drafting new policies to deal with the incoming changes and by making a detailed assessment of the personal data that they hold and whether they have the permission they need to hold such data.

From the courts:

  • We should soon receive Court of Appeal guidance on the duty to respond to subject access requests. The case of Dawson-Damer v Taylor Wessing LLP and others considers the circumstances in which a request may be deemed unreasonable and/or onerous.
  • In October, the High Court will hear the claim of some 6,000 current and former employees against WM Morrision PLC for damages as a result of a data breach by a disgruntled former employee who illegally shared on line a spreadsheet containing bank, salary and national insurance details of 100,000 Morrison staff.

10. Labour market enforcement

It's a fool's game

Companies perceived to be flouting employee rights has attracted much media attention in recent years. Further Government consultation on ways of tackling the problem of unscrupulous employers is likely this year.

The Magistrate's Court is also getting involved this year. Employers must give notice to the Insolvency Service when they are proposing to make 20 or more employees redundant at one establishment within a period of 90 days or less. Under scarcely used provisions in the Trade Union and Labour Relations (Consolidation) Act 1992, failure to notify is a criminal offence.

Magistrates are to hear the criminal prosecution of David Forsey and Robert Palmer in relation to the closure of a USC warehouse (owned by Sports Direct). USC gave 200 warehouse employees 15 minutes' notice of redundancy and did not alert the Insolvency Service.

The Government appears increasingly willing to pursue potential criminal sanctions against directors of failed corporate entities which have left taxpayers picking up a hefty tab for their failure to comply with employment legislation.

So far Mr Forsey has managed to put off his day in court through a series of jurisdictional challenges. His latest challenge (that the prosecution in England was not valid as the warehouse in question was located in Scotland) will be heard on 1 February.


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