Key Developments in Employment and TUPE - Louise Clifford - ThinkHouse September 2016

Michael Luckman: Louise Clifford is a director in our Employment team who will be bringing us up to date with recent changes in employment law and TUPE. So Louise, what are the key changes that General Counsel need to be aware of in this area?

Louise Clifford: Well the one I think I would flag as potentially having the greatest impact in the next 12 to 18 months is the introduction of mandatory rules on Gender Pay Gap Reporting for large employers.

It's something that has been on the cards for a while, it's been talked about since 2010 when the original power to introduce regulations was first created but it's only now that we actually have draft regulations and it looks likely that we will be getting the revised regulations any time soon with a view to them being brought in either later this year or at least very early next year.

It is going to affect all large employers so the draft regulations at the moment only cover private and voluntary sector employers with at least 250 relevant employees, but we have also got a consultation underway at the moment which makes it clear that these rules or very similar rules are going to be rolled out to the public sector as well.

Michael: There is a trend towards legislation forcing companies to publish information. In your area, what information are they going to be asked to publish?

Louise: The rules are going to cover three broad categories of information, so the first category is basically information about average differences in pay between male and female employees.
The second category again is looking at average information but this time focused on bonus pay, so the average difference in bonus pay between again male and female employees and also the proportions of male and female employees who are actually receiving bonuses.

And then there is a third category which is publishing information in relation to pay quartiles. Now there is a bit of debate at the moment about what that actually is going to look like but hopefully that is going to be something that is tidied up by the revised regulations when we get those.

Michael: And no doubt there are some key dates that Counsel ought to keep in mind as these things roll out?

Louise: Well I think the first critical date is going to be April 2017, because that's when employers are going to have to take their first snapshot of pay data for the purposes of producing their future reports. Employers are going to have some time to actually collate the information, analyse it and then publish their reports but what they do need to be aware of is that in terms of bonus pay, effectively the clock has already started to run because rather than taking a snapshot in April you are effectively looking at bonuses paid within the 12 months leading up to April 2017, so employers need to have systems in place already to capture that data and, of course, to analyse it in due course.

Michael: If a business identifies a gender pay gap, what are the risks?

Louise: There are some legal risks potentially. I know a lot of employers are concerned about the potential equal pay risk for them here and I think they are right to be concerned. The public sector in particular has been really hit the effect of equal pay claims in recent years.

That said, I think if an employer is going to be publishing a gender pay gap that does not necessarily mean that there is any discrimination necessarily that could give rise to an equal pay claim. There are lots of contributing factors which influence the gender pay gap, some of which are within the employer's control and some which aren't. So I think that the first point is that employers should not panic if they are in a position of having to publish details of a gender pay gap but they do need to be analysing the reasons behind that and working out what they can do to reduce it.

Employers are also going to be worried, of course, not only about the legal consequences but the negative perceptions, internally and externally, if they find themselves having to publish particularly a significant gender pay gap between men and women. So what I expect to see is that a lot of employers will be actually undertaking initiatives alongside these publishing requirements that are actually aimed at driving a reduction in the gender pay gap. So things like initiatives designed to increase the representation of women in more senior roles and that type of thing.

Michael: Moving on to TUPE then, are there any valuable lessons that we can learn from recent cases on TUPE?

Louise: Yes, I think what we have seen in TUPE terms is a continuing flow of cases around the Service Provision Change Test which was originally introduced to try and cut down on potential arguments in the context of outsourcing situations about whether TUPE applied or not. I think that the problem we have seen is that a lot of employers involved in contracting and sometimes tribunals have fallen into the trap of thinking that the Service Provision Change Test is going to apply in any outsourcing or insourcing situation and actually there were some key conditions that need to be satisfied.

One of those, for example, is being able to establish that there is an organised grouping of employees whose principal purpose is providing services to the client and we've seen one recent example of a case where the outgoing employer was not able to establish an organised grouping because their employees, although they were spending a lot time on a particular contract - upwards of 70%25, were actually working for lots of other clients as well. In those circumstances the appeal court had set aside the tribunal's decision that TUPE had applied.

Obviously it's a big risk for employers who are involved in big outsourcing contracts because they find themselves, when that contract ends, in a position where TUPE doesn't apply then there is obviously a big redundancy bill potentially there for the employer.

Michael: There has been a lot of publicity over the last year, two years, about holiday pay, have we got any changes coming up there?

Louise: Well again we have seen quite a lot of case law in the last couple of years, which has shown that when we are looking at what's often known as regulation 13 leave - this is the first 20 days leave that is guaranteed by the European Working Time Directive - employers have got to be paying the equivalent of normal remuneration and there's been lots of questions over what normal remuneration actually is.

What we are starting to see now is clarity from the courts, which establishes that that can include things like non-guaranteed overtime, voluntary overtime, potentially commission, which would have been earned if an employee hadn't been on holiday. And we've seen quite a few first instance decisions coming through the UK tribunals this year, where the UK tribunals are now finding routinely that voluntary overtime can be included in holiday pay. It's all going to come down effectively to the regularity of payment and whether the payments can be treated as constituting part of normal remuneration.

So if there are employers who have not yet reviewed their own holiday pay practices, then certainly now would be a good time to do that as we see an increase in litigation.

Michael: We've had shared parental leave now for I think 12 months, how does that appear to be working?

Louise: Yes, you're right we have had shared parental leave since April 2015, so we've had a full year of operation. This is the leave that can be shared effectively between parents in the first year of a child's life. All reports suggest and our experience bears this out in practice, that there has actually been really very little take up by fathers of the right to shared parental leave. There are a number of reasons that have been talked about as contributing to that, so the most obvious one is the kind of financial concerns of fathers because shared parental leave is only paid at a statutory minimum rate, it's not the employee's actual level of pay that they would receive when they are off, so that obviously is a factor that's going to be very relevant in deciding whether or not employees take it.

Another issue is that people are saying that employers are not really promoting this very much and there are concerns in there about career progression and the impact that having an extended period of leave is going to have on potentially the careers of both parents.

So for all these reasons the take up has been very low. The report suggests that where employers are prepared to enhance shared parental pay and pay it at the higher rate - more akin to the levels of maternity pay that they might be paying - then as you would expect, there is a high level of take up. But I think it is probably an area where employers might start to focus on it more as we start to get into gender pay gap reporting and looking at the potential ways in which the gender pay gap can be closed.

Michael: I've heard of something called grandparental leave, should I be encouraging my children to start families so I can have some extra holiday?

Louise: Well it's hard to get clear statistics but the early reports are that the take-up has actually been very low. The most obvious reason for that is the financial impact on families because shared parental pay is only paid at statutory minimum rates unless an employer chooses to enhance it. So I think it's possibly one of those areas where we may see more interest or more promotion of the leave from employers as we get into gender pay gap reporting and looking at potential ways to close the gender pay gap, but for now it has not had a huge numbers take up.

Michael: I am sure my children would breathe a sigh of relief to hear that.

Thank you very much Louise that has been very interesting.