Discrimination against limited company can be unlawful

The EAT has confirmed that a limited company is able to bring a claim for discrimination under the Equality Act 2010. In EAD Solicitors LLP and others v Abrams, the EAT rejected the notion that it is only individuals who are protected.

For tax reasons, Mr Abrams, a former member of EAD Solicitors LLP, formed a limited company to take his place in the LLP as he approached retirement age. Once he reached the age at which it had been agreed that, were he still a member in his own right, he would have retired, the LLP sought to remove his company as a member. Mr Abrams brought a claim in the employment tribunal, listing himself and his company as the first and second claimants respectively.

In the first instance, it was held by an employment judge that a limited company could bring a claim under the Equality Act. Dismissing the LLP’s appeal, the EAT confirmed that there is no requirement for the victim of alleged discrimination to be a natural person – a body corporate, an LLP, charity or other ‘person’ are all covered by discrimination legislation.

This decision has wide-ranging implications that extend outside the employment law sphere. The Equality Act also applies to other commercial areas including the provision of goods and services and the disposal of premises. It therefore means it is possible for any of the types of “person” considered above to bring a claim in those wider contexts if it suffers discrimination because of the protected characteristic of a person associated with it. The decision leaves open a number of questions on how this will work in practice but it is an area to watch and a further example of the recent trend for extending discrimination protection beyond its traditional boundaries.

“Safe Harbor” regime ruled invalid by the ECJ

In a significant decision, the ECJ has found that the “Safe Harbor” regime, which facilitates the transfer of personal data from the EU to the US, is invalid. Following revelations made by Edward Snowden about mass surveillance activity carried out by US government agencies, the ECJ no longer regards the Safe Harbor arrangements as providing adequate protection for European users’ personal data.

You can read more about these issues in our previous articles:

Supreme Court decision on collective redundancies – uncertainty remains

The Supreme Court has confirmed in United States of America v Nolan that s188 of the Trade Union and Labour Relations (Consolidation) Act applies to a collective redundancy situation at a US military base situated in the UK. The USA, having failed to assert state immunity, was not exempt from compliance with the statute. The case will now go back to the Court of Appeal to determine an issue of broader importance, namely when does the obligation to collectively consult arise? Does the obligation arise when the decision to close a workplace (or part of one) is taken; or is it after that decision, when the employer is subsequently considering redundancies?

Regrettably, when the case was previously referred to the ECJ, it decided that it had no jurisdiction to consider this because of an exemption for public administrative bodies contained within the Collective Redundancies Directive. This means that, even when the substantive timing issue is finally decided in the Court of Appeal (which is likely to be in 2017), there will still be no decision from the ECJ, the ultimate court, on this point. The position will therefore remain uncertain until such time as another case is referred to the ECJ.

Whistleblowing: Public interest test satisfied by just four employees

The impact of the introduction of the “public interest test” for disclosures made under the Public Interest Disclosure Act 1998 has been further eroded by case law following the EAT decision in Underwood v Wincanton. Overturning the Employment Tribunal decision, the EAT held that a dispute between an employer and four employees regarding the way in which overtime was allocated to drivers, was capable of being in the public interest.

This decision followed the reasoning in the recent case of Chesterton Global Ltd v Nurmohamed where a small group (100 senior managers) was sufficient to satisfy the public interest test. This public interest test was originally brought in by Parliament to prevent employees blowing the whistle for breaches of their own contract of employment. In light of these recent cases, it appears that the threshold for establishing a “public” interest is extremely low. This means that individual contractual disputes may well be capable of satisfying the public interest test, in spite of Parliament’s intentions.

TUPE: staff laid-off temporarily not precluded from being part of organised grouping

The EAT has confirmed in Inex Home Improvements Ltd v Hodgkins and others that, in a service provision change scenario under TUPE, employees who had been involved in the relevant activities prior to transfer should not be deprived of their status as an organised grouping of employees during a temporary absence from work. Although it will be a question of fact in each case, the temporary cessation of workers is just one factor to take into account and is not fatal to the application of TUPE.

This is not surprising: if employers could circumvent the application of TUPE by placing employees on temporary lay-off before the service provision change, this would represent a major flaw in the regulations. However, it is useful clarification, particularly following the case of BT Managed Services Ltd v Edwards  which we reported on last month. In the latter case, an employee on long-term sick leave did not transfer, but the Inex decision confirms that “normal” temporary absences do not prevent TUPE from applying.

Modern Slavery Act 2015 – new rules now in force

Section 54 of the Modern Slavery Act 2015 came into force on 29 October 2015. This introduces a requirement for businesses with a turnover of £36 million or over to publish an annual ‘slavery and human trafficking statement’. This statement should demonstrate the measures taken by companies for whom the provision applies to tackle slavery and human trafficking, within their own business and in their supply chains. The obligation first applies to companies with a year end of 31 March 2016.

The Home Office has issued guidance on producing a slavery and human trafficking statement. A more detailed discussion of the new requirements is found in our article, Modern Slavery Act 2015.

Pension benefits discrimination: rights determined by EU law in force at the time

In O’Brien v Ministery of Defence; Walker v Innospec & Ors, the Court of Appeal has considered two cases on the interrelation between pension entitlement and discrimination law. In both cases, individuals complained about historic pensions rules which, under current discrimination law, are now unlawful.

Mr O’Brien worked from 1978 to 2005 as a part time judge but only qualified for a pension from 7 April 2000 when the UK became obliged to implement the Part Time Worker’s directive. He claimed that this was discriminatory and that his pension entitlement should be calculated from the date that he commenced work. Mr Walker retired in 2003, and entered into a civil partnership in 2006, following the enactment of The Civil Partnership Act on 5 December 2005. On learning that his civil partner would only receive an annual payment of £500 on his death, whereas, had he been married, his wife would have received two thirds of his entitlement, he sued the pension trustees for sexual orientation discrimination.

The Court of Appeal dismissed both appeals because the principle of ‘no retroactivity’ applied, in that EU law could not be applied retrospectively (save for exceptional circumstances). What was legal in 2003 – for example denying a survivor’s pension to a same sex partner – could not be retroactively made unlawful by legislation that came into force in 2005. Further, while the ‘future effects’ principle means that legislation applies immediately to the future effects of a situation which arose under old law, this did not help Mr O’Brien. In his case, the pension right had accrued at the time of service to which it was referable. This means that although the payments would be made on retirement, which was after the change in the law, the right to receive that pension had been accrued before the change to the law, so to require the pension fund to increase his entitlement would have been to give the law retroactive effect.

These decisions appear to be harsh for the individuals involved but it is an established principle that laws should not apply retrospectively. It is, however, possible that further changes will be made to the law in this area, as a government review on pensions survivor benefits and sexual orientation is ongoing, with final conclusions seemingly delayed pending the outcome of these cases.

Zero Hours Contracts – new protection

Draft regulations have been published by the government in a bid to stop employers trying to prevent zero hours workers from working for a different employer. The Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015 (the “Regulations”) will enable zero hours workers to bring a claim for unfair dismissal (subject to a qualifying period) where the reason for their dismissal is for failing to comply with an exclusivity clause. They will also give zero hours workers the right not to suffer any detriment where they have failed to comply with the exclusivity clause. No commencement date has yet been set.

The Regulations came shortly after the publication by BIS of best practice guidance on the use of zero hours contracts.


New rules on whistleblowing announced by PRA and FCA – impact on settlement agreements

The PRA and FCA simultaneously announced a raft of new whistleblowing rules “designed to build on and formalise the good practice already widespread in the financial services industry” and which seek to encourage individuals to raise any concerns about malpractice and poor behaviour. The new measures will largely come into force on 7 September 2016 and will apply to deposit-takers with assets greater than £250 million, PRA-designated investment firms and insurers and to the Society of Lloyd’s and managing agents. For other regulated firms, the rules will act as non-binding guidance. Several new measures are being introduced, including the requirement to appoint a Senior Manager as a whistleblowers’ champion and, perhaps most significantly for employment practitioners, a new requirement to put text in settlement agreements explaining that workers have a legal right to blow the whistle.

We consider the new whistleblowing rules in more detail in this article.

FCA and PRA consult on regulatory references

The FCA and PRA issued a joint consultation on 6 October 2015 on proposals for regulatory references as part of the wider package of reforms that aim to improve accountability in banks and insurers.

Key proposals include requiring firms to request regulatory references from former employers of candidates applying for certain functions going back six years, and mandating the inclusion of concluded breaches of the conduct requirements of FCA conduct rules going back six years. Perhaps the most onerous proposal is to require relevant firms to update previous references given in the past six years, where they become aware of matters that would cause them to draft that reference differently if they were drafting it now.

The consultation is considered in more detail in Eleanor Porter and Polly James’s article on the consultation on regulatory references.

Shared Parental Leave for Grandparents

The government announced its intention to extend the Shared Parental Leave regime to working grandparents. The move will allow eligible grandparents to take time off and share parental leave and pay to help care for their grandchildren.

Recruitment sector: changes to the regulatory framework including stopping EEA-only recruitment

The government has launched a consultation seeking views on proposed changes to the Conduct of Employment Agencies and Employment Businesses Regulations. It intends to keep regulations which provide protection for work-seekers, but remove certain business to business regulation and seeks to simplify the legislation where possible. The paper also puts forward a proposal to ban employment agencies and businesses from recruiting solely from other European Economic Area (EEA) countries without advertising in Great Britain.

Senior Managers Regime to be extended to all FSMA authorised persons

HM Treasury has published a policy stating its intention to extend the senior managers and certification regime to all persons authorised under the Financial Services and Marketing Act 2000. The expansion to all financial services firms is designed to enhance personal responsibility for senior managers as well as providing a more effective and proportionate means to raise standards of conduct of key staff.

The key features of the extended regime, which the government intends to implement during 2018 are:

  • an approval regime focused on senior management, with requirements on firms to submit robust documentation on the scope of these individuals’ responsibilities;
  • a statutory requirement for senior managers to take reasonable steps to prevent regulatory breaches in their areas of responsibility;
  • a requirement on firms to certify as fit and proper any individual who performs a function that could cause significant harm to the firm or its customers, both on recruitment and annually thereafter;
  • a power for the regulators to apply enforceable Rules of Conduct to any individual who can impact their respective statutory objectives.