We started July with an important and rare Supreme Court judgment on post-termination restrictive covenants, Tillman v Egon Zehnder Ltd. The Supreme Court provided clarity on what is "an interest" in a competitor and to what extent a poorly drafted restrictive covenant clause can be saved by the so-called "blue pencil". For more on this significant and rare Supreme Court judgment overruling some 99 year old case law, please see our alert Post-termination restrictions: the Supreme Court reinvigorates the blue pencil test.
Having covered this important judgment as a sneak peek in last month's Employment Essentials, we have picked a fresh five for July from the month's judgments and the plethora of announced proposed future legislation changes announced in the final days of Theresa May's premiership.
1. Disciplinary proceedings: covert recordings in the era of the smart phone
When an employee secretly records an internal meeting or disciplinary hearing with the employer, the general rule is that the recording of any parts of the meeting where the employee was present may be admissible before an employment tribunal if the tribunal believes it is relevant, but any covert recording of any private discussions of the employer's disciplinary panel will not be admissible on the grounds of public policy. The practice of covert recordings is distasteful, but does not necessarily render evidence obtained in that way inadmissible.
But is the act of making a covert recording inevitably gross misconduct on the part of the employee amounting to a breach of trust and confidence entitling the employer to dismiss them without notice?
Unsurprisingly given the broad test for unfair dismissal, the Employment Appeal Tribunal (EAT) in Phoenix House Ltd v Stockman, answered "it will depend upon an assessment of all the circumstances", but provided some helpful guidance on the relevant factors that should be taken into account in the era of the smart phone.
The EAT began stating that in the past, when covert recordings were not straightforward to obtain, it might be assumed that the motive was to entrap the employer or otherwise gain an unfair advantage. However, it is no longer difficult or uncommon for employees to record meetings without saying so, as most people carry a mobile phone capable of making a recording. It remains good practice for parties to communicate an intention to record a meeting (and it would generally amount to misconduct not to do so), but it is relatively rare for covert recording to appear on a list of examples of gross misconduct in a disciplinary procedure. It cannot be said that the covert recording of a meeting necessarily undermines the trust and confidence between employer and employee. Recordings might take place for a variety of reasons: to keep a record, to protect the employee from a risk of misrepresentation, or to enable an employee to obtain subsequent legal advice.
So the starting point is that it will generally amount to misconduct for an employee not to inform the employer that a recording is being made, but it will not necessarily amount to gross misconduct. Whether making a secret recording will amount to a breach of the term of trust and confidence will depend on:
- what is recorded - is it confidential information?
- the purpose of the recording - entrapment or simply to assist recall?
- extent of the employee's blameworthiness - is the recording made in defiance of an instruction not to do so or has the employee lied about making a recording?
- any evidence of the attitude of the employer to such conduct - what does the disciplinary policy say? Does it address the issue?
In light of the last factor, employers may like to review their disciplinary policies and add covert recording at any time as an example of gross misconduct (if it is not already there).
One consideration which was not addressed in the judgment is the privacy or data protection rights of those recorded without their consent.
2. Equality law reforms: harassment, NDAs and pay equality
On 11 July, the Government Equalities Office (GEO) launched a Consultation on Sexual Harassment in the Workplace.
This Consultation, which runs until 2 October, primarily focuses on sexual harassment, but equally applies to harassment related to age, disability, gender reassignment, race, religion or belief, sex, or sexual orientation.
The proposals include:
- Introducing a duty to prevent harassment in the workplace and a revised Statutory Code of Practice.
- Re-introducing explicit protections against third party harassment.
- Extending protection to interns and volunteers.
- Extending time limits for bringing a tribunal claim
In regards to the proposed new preventative duty, the GEO suggests employers will need to take "all reasonable steps" to prevent the harassment taking place, but just what will be considered "all reasonable steps" is not set out as yet. The re-invigorated Statutory Code of Practice on its way will hopefully fill in the needed detail. As regards the revised Statutory Code, the GEO has promised "technical guidance" later this year with the final draft to be published sometime in 2020.
For the moment, employers should ensure they have robust anti-harassment policies and procedures in place. The policy and procedures should be kept under review to take account of the evolving legislative ad social landscape.
On 21 July 2019, the Department for Business, Energy & Industrial Strategy (BEIS) published 'Confidentiality clauses: measures to prevent misuse in situations of workplace harassment or discrimination'. This was in response to its 4 March consultation, 'Confidentiality clauses: Consultation on measures to prevent misuse in situations of workplace harassment or discrimination' and to the Report of the Women and Equalities Committee Inquiry into the use of non-disclosure agreements (NDAs) in discrimination cases published on 11 June. Both the Consultation ad Inquiry addressed measures to prevent the misuse of NDAs in situations of workplace harassment or discrimination.
The Government confirms it intends to:
- Legislate to ensure that a confidentiality clause cannot prevent an individual disclosing to the police, regulated health and care professionals or legal professionals;
- Legislate so that the limitations of a confidentiality clause are clear to those signing them;
- Legislate to improve independent legal advice available to an individual when signing a settlement agreement (not only on the nature of the confidentiality requirement but also the limitation of relevant clauses);
- Produce guidance on drafting requirements for confidentiality clauses; and
- Introduce "new enforcement measures" for confidentiality clauses that do not comply with legal requirements.
The suggestion that there should be a standard form of wording for all NDAs has been rejected. Nevertheless, new robust legislation limiting the potential scope of NDAs is on its way. As for timing, the Government simply states it "will legislate to implement the relevant commitments we are making in this response when Parliamentary time allows."
For now, when settling a harassment or whistleblowing claim in particular, great care and thought is needed as to the use and wording of NDAs in settlement agreements, as they carry a risk of potentially damaging adverse publicity.
On 3 July 2019, the GEO published Gender equality at every stage: a roadmap for change which includes:
- A planned review of the Gender Pay Gap (GPG) reporting metrics and consultation on any proposed changes by 2021 with a view to reduce the GPG at both a sector level as well as by individual employers; and
- A review of the enforcement of equal pay legislation including assessing circumstances where mandatory equal pay audits could be appropriate and proportionate.
3. Parental rights law reforms: parental leave framework, neonatal leave, transparency & redundancy protection
On 19 July BEIS published a Consultation Good Work Plan: Proposals to support families including the following proposals:
Parental leave framework
The Government is to carry out a review of the various forms of parental (in a broad sense) leave and pay entitlements. The Government is considering "high level" reforms that will involve trade-offs from the existing system including around how leave is split between parents, flexibility, costs and timing of when leave can be taken. The current types of leave being looked at are:
- Paternity Leave and Pay for eligible fathers and partners;
- Shared Parental Leave and Pay for eligible couples;
- Maternity Leave and Pay/Allowance for pregnant women and new mothers; and
- Parental Leave for parents of older children.
The Government is also considering a very bold move to a new model for family-related leave, essentially wiping the slate clean and starting again to develop a modern comprehensive suite of family-related policies. This would be a daring political move as any wholesale revision will result in winners and losers compared to the existing framework.
The Consultation closes in this regard on 29 November 2019.
A new right to neonatal leave and pay is being considered. This would give both parents the right to receive one week of Neonatal Leave and Pay for every week that their baby is in neonatal hospital care, up to a maximum number of weeks (a cap) for babies who had spent a minimum of two continuous weeks in neonatal care immediately after birth. Essentially, Maternity and Paternity leave and pay periods will be extended. Views are sought in particular on the leave length cap.
The Consultation closes in this regard on 11 October 2019.
Proposals to increase transparency and visibility for employer work-life balance policies are also being considered. Under consideration are:
- A requirement for employers with 250+ employees to publish family-related leave and pay and flexible working policies on their own website.
- Statutory requirement to publish the policies on the government's Gender Pay Gap Reporting Portal.
- A requirement to say whether jobs may be open to flexible working in any job advert.
The Consultation closes in this regard on 11 October 2019.
Early this year, the Government consulted on extending redundancy protection for women and new parents. Currently, if a woman's role is made redundant 'while she is on maternity leave', she is entitled to be offered suitable alternative employment by her employer or associated employer if such a vacancy exists in priority to others also at risk of redundancy. The Government proposed this protected priority period starts from the earlier point at which a woman notifies her employer that she is pregnant and is also extended by an additional six months after she returns from maternity leave.
The Consultation sought views particularly as to when the six month extension after 'return from maternity leave' should start to run and whether the six month extension should also apply for those on other forms of parental rights leave.
On 22 July, BEIS published its Response to the Consultation Pregnancy and maternity discrimination: extending redundancy protection for women and new parents in which it confirms its plans.
- Ensure the redundancy protection period applies from the point the employee informs the employer that she is pregnant, whether orally or in writing.
- Extend the redundancy protection period for six months once a new mother has returned to work from Maternity Leave (ML) - this period to start immediately once ML is finished as opposed to after any holiday or other leave period tacked on to the end of ML).
- Extend redundancy protection for six months after returning from adoption leave.
- Extend redundancy protection into a period of return to work for those taking Shared Parental Leave (ShPL) subject to variations (e.g. fathers taking a very short period of ShPL are not in need of the same protection as a mother taking a long period of ML & ShPL.
- Protection will not be extended after a period of Paternity Leave.
These changes will significantly increase the potential number of those with priority for suitable alternative vacancies in a redundancy situation.
We await confirmation as to when these changes will be brought into force.
4. Off-payroll working reform: IR35 changes
IR35 refers to anti-avoidance tax legislation that applies where an individual worker provides services to an end client through an intermediary, such as a personal service company (PSC) or partnership, in circumstances where the individual would otherwise:
- for income tax purposes, be regarded as an employee or an office-holder of the client, and
- for National Insurance contributions (NICs) purposes, be regarded as in employed earner's employment by the client.
In 2017, changes to the IR35 regime were introduced for public sector employers essentially shifting the burden for compliance onto the end-user/hirer. The existing public sector restrictions and rules on IR35 are to be extended to medium and large private sector employers from 6 April 2020.
The final draft legislation and HMRC Response to the Consultation on implementing the extension was published on 11 July. As expected, the Government is pressing ahead with its plans to bring in this change on 6 April 2020.
Under the controversial change, instead of the contractor having responsibility for determining their employment status for tax purposes, the client will need to make the call. They could be liable for any missing tax if they get the decision wrong. The client/hirer will also have responsibility for passing the status notification down the chain and directly to the worker. There will be a statutory status disagreement process aimed at resolving any disputes around the determined status and measures aimed at preventing clients making blanket determinations.
The change will only apply to large and medium sized incorporated enterprises as defined under the Companies Act 2006. For unincorporated enterprises, it only applies to those with turnover exceeding £10.2 million.
Further HMRC guidance is to be published over the summer. While we await the further HMRC guidance, for more information please listen to our podcast, IR35 - what's new and what to do, in which one of our tax experts, Zoe Fatchen discusses this controversial change which is expected to bring in £3.1bn in additional revenues for the Exchequer between 2020 and 2024.
5. 'Right to request' law reforms: ill-health adjustments and work predictability
The Government has announced plans to introduce two new forms of 'right to request' - health work/workplace adjustments and work predictability - to operate in a way similar to the existing right to request flexible working, so a 'right to request' not a 'right to get'.
On 15 July the Department for Work and Pensions (DWP) launched a Consultation Health is everyone's business: proposals to reduce ill health-related job loss seeking views on different ways in which government and employers can take action to reduce ill health-related job loss.
The proposals on the reform of Statutory Sick Pay to allow for phased returns to work and the removal of the lower earnings level threshold requirement with more robust enforcement grabbed the news headlines. However, it is another proposed reform that may have greater impact for many employers - the introduction of a right to request work/workplace modifications on health grounds. These could include not only modifications to the working environment (workplace), but could also include changes to hours or tasks (work).
The proposed reform will:
- allow requests to be made by non-disabled employees;
- operate in a similar way to the existing right to request flexible working requests;
- whereas the duty to make reasonable adjustments puts the emphasis on employers being proactive in responding to the needs of disabled employees, under the right to request modifications on health grounds, the employer's obligation will be reactive to requests; and
- employers will be able to refuse requests on legitimate business grounds.
The Consultation closes on 7 October 2019.
On 19 July, BEIS launched Good Work Plan: one-sided flexibility - addressing unfair flexible working practices.
As recommended by the Low Pay Commission and announced in the Government's December 2018 'Good Work Plan', the Government confirms it will legislate to give all workers on flexible contracts (e.g. zero-hours workers) who have 26 weeks' continuous service the right to request 'a more predictable and stable contract'. Draft legislation is "to be prepared" and we await confirmation as to when it will be brought into force.
In addition to the above announcement, BEIS is now also consulting on proposals to introduce:
- a right to reasonable notice of work schedules; and
- compensation for shift cancellation or curtailment without reasonable notice.
The consultation element runs until 11 October 2019.