Employment law update - Jane Fielding - ThinkHouse March 2015

David Lowe: These are just examples of how employment law changes every year and it's not just for the employment lawyer - we all need to have an understanding of these employment laws and how they're changing and the impact they'll have on our business.

In this session Jane Fielding, partner in our employment team, is going to take us through these big changes and what they mean to us.

So Jane, let's start with holiday pay Why is it causing such concern for employers and what's the Government doing about it?

Jane Fielding: There's been a flurry of cases over the last couple of years which have indicated that many employers are likely to have been under-calculating holiday pay, so when people have been going on holiday, the wages they've been receiving haven't been enough, and the main focus of the cases has been around overtime, but it also applies to elements such as travel allowances, any sort of element of remuneration. So the cases have looked at what is normal remuneration and that is what people are supposed to receive when they are on holiday.

One person not receiving the right amount of holiday pay may be a relatively small amount, but if you've got a large workforce and overtime, well, those sorts of supplements are regular occurrences, then that bill can quite quickly mount and some employers have been facing tens of thousands, if not hundreds of thousands of pounds of liabilities potentially.

The real sting in the tail, you see, is that the claims are run as unlawful deductions from wages claims and they can go back potentially to when the Working Time Regulations (which is where holiday pay claims come from) first came in in October 1998.

So you can see there's a long history there potentially, and I say potentially because the Government has stepped in to address this. What they've done is they've introduced some regulations which will be relevant for any claims lodged on or after 1 July, and what they say is that holiday pay claims, or indeed most unlawful deduction claims which don't relate to statutory payments like statutory maternity pay, can only go back two years.

Now that is going to obviously override case law, but case law itself for those claims that may be lodged up to 1 July says that people can still go back as long as there isn't a gap of more than three months between any particular deduction.

David: So when does shared parental leave come into force and how will it work?

Jane: Well, shared parental leave actually is potentially already in force because it applies for babies whose due date is on or after 5 April, so obviously if we've had some premature babies their parents could already be covered by this new regime.

So how it works is it's a new form of sort of family-friendly leave and the idea is that the mother and her partner jointly responsible for the care of the child can effectively do exactly what it says on the tin: share the leave so the mother will trigger the end of her maternity leave and, subject to qualifying conditions, that means that she and her partner, who could be male or female, it applies to married couples, same sex couples, cohabitees, can share the leave.

David: Will it affect the current regulations on maternity or other leave?

Jane: Maternity leave will remain, but obviously the woman has to end maternity leave for shared parental leave to be triggered.

Paternity leave, ordinary paternity leave, the two weeks shortly after the child's born, that remains the same. Adoption leave can also be curtailed in the same way to trigger shared parental leave, and parental leave which is the unpaid form of leave will also remain there.

The only one that's been abolished as part of this change is additional paternity leave, which was the six months that currently the father or the mother's partner can take during the first year of the child's life, that's going and being replaced by this.

David: Who is eligible for shared parental leave?

Jane: The gateway to eligibility is the mother being eligible for maternity leave or statutory maternity pay or maternity allowance and her ending that leave.

It's only available for employees and you've got to meet various eligibility criteria, the main one being having been employed for 26 weeks at the 15th week before the baby is born, or due to be born rather, so that's a bit of a convoluted test but it's basically the same one as for additional paternity leave at the moment.

And the individual who takes the leave has got to be expected to be responsible for the care of the child.

And the partner of the person taking the leave has to also meet an employment and earnings test and that's basically being able to demonstrate a certain level, quite a low level, of earnings over a certain period of time, and although it's called the employment and earnings test, those earnings can in fact come via self-employment, agency working or employment, so you can take shared parental leave as an employee by definition of your partner having the relevant earnings as a self-employed person for example.

David: What's the key point in-house lawyers need to be aware of to prepare for it?

Jane: I think there are three main ones to flag.

First of all it is a complicated regime, there are various notices and consents that have to be given by the person looking to take the leave, and because the leave can be taken either in one continuous block - which is the default position - or potentially if the employer agrees in up to three discontinuous blocks, each of which has its own notice requirements, then it can get quite complex. HR and managers particularly need to be on top of this and managers, I think particularly perhaps the less reconstructed ones, need to be aware that this is available for same-sex couples and in fact could be the first time somebody has enough incentive to come out at work, You can see the scope for potentially difficult conversations if the manager doesn't think it's an entitlement in the first place.

The other key thing, key business decision that people need to take here where they're offering an enhanced maternity scheme particularly, are they going to offer the same enhancement for shared parental pay?

And if they're not then they're going to need to have a defence lined up to any indirect discrimination claim that comes along as a result of that.

As long as they treat everybody on shared parental leave the same and just pay the statutory pay then there can't be a direct discrimination claim, but because, certainly in the short term, it's likely to be men rather than women that are taking this up, then there could be an indirect discrimination claim there.

David: Is there any good news for businesses in this new type of leave?

Jane: First of all, it could form part of an employer of choice's deliberate policy to really try and break down the gender balance and gender stereotypes in your organisation, but for any employer the flexibility can cut both ways - of being able to have these different blocks of time and swap shared parental leave with being at work - so you know, if you've got somebody who is in a function where there are particular spikes, so perhaps in accounts or finances where quarter end is a particularly busy time, you can see that actually it might be quite helpful to have somebody back for that busy period.

David: Zero hours contract, why are they so much in the news at the moment?

Jane: They are very much in the news because the Government has been focusing on them because advocates of zero hours contracts say again they're an instrument of flexibility, they have allowed during the recession certain people to have work who perhaps otherwise wouldn't have had any.

Their opponents of course say that they're exploitative and the particular focus of those who oppose them, and what the Government has been looking at recently, is the use of exclusivity clauses and zero hours contracts.

So those are where the employer says, OK this is a zero hours contract, we're not guaranteeing you any hours, however you have to have an exclusive arrangement with us so you have to sit and wait for us to offer you work, you're not allowed to go and provide your services to anybody else.

So it's a bit of a double whammy for people who are generally already seen as quite disadvantaged in the workplace, so the Government has brought in some provisions or is intending to under the Small Business Enterprise and Employment Bill (assuming it goes through before the election, which will ban exclusivity clauses in contracts) and there are also some anti-avoidance regulations to supplement that as well.

David: Why does it matter whether someone has worker status or not?

Jane: The reason worker status is important is that all statutory rights - which are the sort of bedrock of employment rights, and contracts can only enhance statutory rights rather than detract from them - depend on whether you are categorised as a worker, employed or self-employed.

And just to give you an example, if you're an employee in the sort of traditional master and servant sense, then you get the full range of employment rights from unfair dismissal, family friendly, all the way through to whistleblowing and discrimination.

If you're a worker, which is a broader test, then you are only entitled to discrimination protection, whistleblowing protection and working time, which obviously now, with the focus on holiday pay, it's becoming increasingly important whether you categorise somebody as a worker or not.

The Government again is reviewing worker status because it's felt that during the recession lots of quite creative ways of keeping people in work bubbled up and were found that actually many of those types of arrangements don't have a clear legal status and so people aren't always clear on what rights they have and therefore what they can enforce or they can't. And obviously if you're dealing with a transaction in a TUPE situation, for example, and you're working on the basis that you know 90%25 of these people are freelancers, consultants, words like that, they're self-employed, so they're not going to TUPE transfer.

Actually when we look at it and we look at the substance not the label and it turns out that many, many of those people are workers or employed, then that can change the commercial bargain and, you know, a party's willingness to offer indemnities for example, it can increase the risk.

David: Jane, I know that a fee regime was introduced for Employment Tribunal claims. What has that meant in terms of claims?

Jane: Yes, the Government introduced a fee regime in July 2013 so it's been with us sort of coming up to two years now, and rather than being free at the point of delivery like the NHS, the Tribunal Service now is something that you have to pay for.

So as a claimant you have to pay a fee to issue your claim and then you have to pay a further higher fee to have your claim heard, and the impact of that in most practitioners' views is that it has had a very material impact on the level of claims.

The latest statistics are showing that claims are down overall by 80%25 across the country and obviously there are some regional variations there and so it's having a very, very significant impact, combined with a couple of other changes as well that the Government has brought in.

At the same time as the fee regime, they also changed the rules around caps on unfair dismissal claims, so we have the traditional sort of mid £70,000 claim on compensation but we now also have a lower cap, which is 12 months' salary, not even salary and benefits, just salary. So if you have a low earner - £15,000, £20,000 - you're not arguing about are they at the £75,000 cap anymore. You know it's just the 12 months' salary which makes it an easier equation if you're trying to weigh up whether to settle or not, your maximum exposure is clear.

David: Jane, that's been a really useful overview. Thank you very much.

Jane: My pleasure, thanks.