This e-bulletin includes short summaries of the following recent developments. Please contact us if you would like more information.

1. ECJ privacy ruling: no green light for employer snooping despite media headlines

A recent ruling of the European Court of Human Rights should be viewed as a reminder to employers to exercise caution before monitoring their employees' use of internet and messaging services whilst at work. Media headlines framing the ruling as a green light for employers to snoop on their employees are misleading. In fact, the Court has confirmed that the right to privacy is engaged in relation to employees' personal activities on work devices, and therefore interference with this right must be justified and proportionate. Whether this is so will depend on whether private use is clearly prohibited; whether employees have been properly warned of the nature, scope and effect of monitoring; whether the employer accessed data more extensively than necessary; and whether its use was reasonable.

The case of Barbulescu v Romania concerned an employee's personal use of a Yahoo Messenger account set up at the employer's request to be used purely for work messages, and in contravention of an absolute rule prohibiting personal use. The Romanian court found the employee's dismissal for breach of workplace rules to be fair, concluding that the employer was entitled to check whether its workplace rules had been breached and to admit in evidence a transcript of personal messages sent by the employee.

The European Court ruled that the Romanian court had not violated the employee's Convention rights in so doing, given that the transcript had only been used to establish the employee's breach because the employee had denied the personal use. Significantly, the majority accepted that the workplace rule was an absolute prohibition and had been made clear to employees. The position would presumably have been different had the employee acknowledged his breach, if some personal use had been permitted under the workplace rules, or if the employer had failed to make the rule known. It was also relevant that instant messaging does not provide for a subject line which can be used to tag messages as "personal"– there would have been no need for the employer to access emails tagged as personal in the subject line to establish breach of the prohibition on personal use.

The ruling does not change the position under UK law: an employee may be able to claim constructive dismissal if there is a reasonable expectation of privacy and the employer's interference with personal communications is not justified. The position will depend on the employer's workplace policy on personal use, the extent to which it has made the policy and the scope and nature of any monitoring known to the workforce, and whether the monitoring has gone further than necessary to achieve a business need (eg, by accessing content of messages where monitoring traffic or recipients would be sufficient). Employers must also bear data protection law in mind, in particular Part 3 of the Data Protection Practices Code sets out guidance for employers considering monitoring employee communications. Steps should also be taken to ensure data obtained through monitoring is used appropriately, for example it should not be disclosed more widely than necessary.

Multinational employers should also bear in mind that data protection laws, and the extent to which monitoring may be permitted, will vary considerably between jurisdictions.

2. Tax on termination payments: injury to feelings payments are taxable

The Upper Tribunal has ruled that a payment in respect of injury to feelings due to a discriminatory dismissal is taxable in the same way as other payments in connection with termination and does not come within the exception for payments made "on account of injury to an employee". "Injury" in this context means a medical condition and does not include "injury to feelings". The Tribunal considered that conflicting EAT authorities were wrongly decided. (Moorthy v HMRC)

Employers should therefore ensure that tax is appropriately deducted from payments for injury to feelings in respect of a discriminatory termination. In contrast, payments for injury to feelings in respect of discrimination during employment can be paid tax-free. Where relevant, it will be important to expressly apportion any compensation between these two types of payment in the settlement agreement, to facilitate the different tax treatment.

3. Disability: EAT confirms "normal day-to-day activities" includes general work-related activities

Employers should bear in mind that, for the purposes of determining what amounts to a protected disability, "normal day-to-day activities" will be construed broadly and will include work-related activities, at least where these are general activities common across a number of occupations (and potentially even where specialised). 

In Banaszczyk v Booker the EAT ruled that warehouse operations involving lifting and moving cases of up to 25kg were "normal day-to-day activities", applying ECJ case law prohibiting barriers that interact with disability to hinder an employee's "full participation in working life". The EAT considered that large numbers of people carried out such activities across a range of occupations, in particular in warehousing and distribution. 

The employee was required (and unable) to comply with a particular pick rate set by the employer, but the EAT rejected the argument that the activity was to achieve the set pick rate (which would not be a "normal activity"); the pick rate was just a target speed set by the employer for the activity. 

It is also worth noting that the judge (obiter) doubted whether the 2011 statutory Guidance excluding specialised activities such as watchmaking from the scope of "normal day-to-day activities" remains entirely correct given ECJ caselaw.

4. Race discrimination: care needed over instructions on language to be used in the workplace

The recent EAT ruling in Kelly v Covance Laboratories serves as a reminder of the discrimination risks inherent in prohibiting employees from speaking in their native (non-English) language. In this case, the employee's claim that an instruction not to use Russian was direct race discrimination failed as the employer was able to show that the reason for the instruction was security concerns (over possible infiltration by animal rights activists), rather than the nationality of the individual. The fact that employees of other nationalities were treated in the same way was helpful evidence in support of the reason being something other than race.

Employers should ensure that they have a legitimate business reason for imposing a language requirement and should consider carefully whether this justifies extending the requirement to all social conversation between work colleagues in addition to work conversations. Any policy should be made clear and applied consistently to all employees. It would also be preferable to frame the requirement as one to speak English, rather than not to speak a particular foreign language.

5. Voluntary redundancy: excluding employee eligible for early retirement is prima facie age discrimination

The EAT has confirmed that excluding an employee who is eligible for early retirement from voluntary redundancy, due to the higher severance costs, is prima facie discrimination on grounds of age. The employer could not argue that the reason, severance cost, was something other than age, as the additional cost was directly referable to age. Therefore the employee's exclusion was age discrimination unless it could be objectively justified. (Donkor v Royal Bank of Scotland)

6. Bonus decisions: Wednesbury unreasonableness test is relevant

Last year's Supreme Court ruling (see here) that employers may be required to consider all relevant factors and discount irrelevant ones (the public law concept of "Wednesbury unreasonableness") when reaching factual decisions (Braganza) opened up the possibility that this duty might apply to other employer decisions, such as whether an employee is a 'good leaver' or some types of bonus decision. This argument was attempted in the recent case of Paturel v DB Services (UK) Ltd, where a banker sought to attack an employer's decision to award him a smaller bonus than two colleagues who were entitled to a guaranteed bonus.  On the facts the claim could not be substantiated, but it is of interest that the High Court accepted that Braganza has imported public law concepts into the law on employment contracts. Although the court did express caution about this development, noting that private employers do not necessarily have the same duties as public authorities to act in the public interest, this is unlikely to be the last we see of such arguments. Employers should consider carefully what factors are relevant to such decisions, in addition to ensuring that they act in good faith and that the decision itself is not capricious or irrational.

7. Zero hours workers: remedies now available

On 11 January 2016 individuals on zero hours contracts were finally given a legal remedy where their employer penalises them for breaching an (unenforceable) exclusivity term in their contract. (Exclusivity clauses in such contracts were made unenforceable on 26 May 2015.) Dismissed employees will be able to claim automatically unfair dismissal, without a minimum service requirement, while all workers will also be able to bring a detriment claim. Both will be subject to Acas early conciliation rules.

8. Data protection developments: proposed EU-US Privacy Shield and agreement on Data Protection Regulation

  • The EU Commission and the US have agreed on a new framework to facilitate the transfer of EU personal data to the US, the EU-US Privacy Shield, following the ECJ ruling that the old Safe Harbour framework was invalid (see here). The Article 29 Working Party (ie, the EU data protection regulators) have called on the Commission to send it full details of the agreement by the end of February so it can review whether it provides an adequate level of protection. The hope is for the arrangement to be adopted and in effect within three months. The Article 29 Working Party press release does not comment as to whether the regulators' amnesty over enforcement, which has now expired, will be renewed pending adoption of the Privacy Shield; UK employers should watch out for a press release from the ICO.  
  • The European Parliament and Council have reached agreement on the EU data protection reform package, paving the way for formal adoption in early 2016.  A detailed HSF briefing will be available shortly.

9. New resources from Acas and government

10. New HSF resources

  • The way in which employment claims are processed is likely to be the subject of some upheaval in the coming years. An interim report on the Civil Courts Structure Review written by Lord Justice Briggs includes proposals for an Online Court aimed at litigants in person for claims up to £25,000, and questions whether employment cases should be brought within the court structure. (Members of our team are involved in the Employment Lawyers Association working groups responding to these proposals, so please do get in contact if you have particular concerns or views you would like to share.) There is also the possibility of fixed costs being introduced for all court claims worth up to £250,000, as recommended by Jackson LJ in a recent speech at the IPA Annual Lecture. Our litigation blog discusses the Briggs report here.  In contrast, the Scottish government is consulting until 24 March 2016 on proposals to bring the Scottish employment tribunals within the framework of the First-tier tribunal in Scotland, and not the courts, post devolution. As drafted, the proposal would appear to allow claimants to "forum shop" where their employment or employer has some connection to Scotland – likely to be attractive given the Scottish Parliament's stated intention to abolish employment tribunal fees. We are still waiting for the outcome of the Ministry of Justice's review into tribunal fees in England and Wales.  
  • The European Parliament and EU Council have agreed the terms of a Trade Secrets Directive that aims to harmonise the definition and protection of trade secrets and undisclosed know-how across Europe. Once approved and adopted, the Directive could take effect early this year, with Member States then having a two year window in which to implement its provisions. Our detailed briefing is available here.  
  • Our incentives team have published briefings on the final EBA guidelines proposing the extension of bonus caps to all CRDIV firms, and the PRA's consultation on a proposal to give former employers power to reduce buy-outs granted by the new employer.  
  • Our environment and planning team has published a detailed ebulletin on new sentencing guidelines (applicable to sentences passed on or after 1 February 2016) for corporate manslaughter and health and safety offences. The new guidelines are expected to result in significantly larger fines being paid, particularly by large corporate defendants.  
  • Our cyber security team has published an article (which first appeared in the January/February 2016 issue of PLC Magazine) looking at the growing risk of cyber threats and setting out ten steps that businesses can take in order to prepare for, and react to, a cyber attack. Cyber security is a growing risk for all organisations, and data protection and cyber security issues need to be placed on the board agenda sooner rather than later, and before a cyber breach occurs not as a result of one. Organisations can then take steps to prepare themselves by assessing the specific risks to, and effects on, the business of a cyber attack, devising a cyber risk management strategy and incident response plan and embedding cyber risk management within the organisation.  
  • The latest in our HSF contract disputes practical guides, which considers good faith in commercial contracts, is available here. The three previous editions in the series can be accessed from this page of our Litigation Notes blog.