Budget 2018 Employment implications: the what and when
29 October was of course, Budget day. The key employment announcements and when they will come into force are:
National living wage and minimum wage increases
The Government has accepted the recommendations made by the Low Pay Commission and will increase the rates in April 2019 as follows:
- rate for 25+ year olds (the national living wage) from £7.83 to £8.21 per hour
- rate for 21 to 24 year olds from £7.38 to £7.70 per hour
- rate for 18 to 20 year olds from £5.90 to £6.15 per hour
- rate for 16 to 17 year olds from £4.20 to £4.35 per hour
- rate for apprentices from £3.70 to £3.90 per hour
IR35 (off-payroll working)
Existing public sector restrictions and rules on IR35 (workers providing services through intermediaries) will be extended to some private sector organisations. Under the controversial change, instead of the contractor having responsibility for determining their employment status for tax purposes, the client or hirer will need to make the call. They could be liable for any missing tax if they get the decision wrong.
Following the May 2018 consultation, the extension of the rule changes to the private sector will not be implemented until April 2020. The Government will carry out a further consultation in 2019 to refine the extension of IR35. Draft legislation is expected to be published in summer 2019.
The April 2020 change will only apply to large and medium sized enterprise as defined under the Companies Act 2006.
From April 2019, businesses liable to pay the apprenticeship levy will be able to invest up to 25% of the levy to support the training of apprentices in their supply chain. For smaller employers who are not liable to pay the apprenticeship levy, the "co-investment rate" for apprenticeship training will be reduced from 10% to 5%. This means that smaller employers will contribute 5% towards the cost of apprenticeship training, and the government will pay the balance.
The introduction of employer Class 1A National Insurance contributions on termination payments over £30,000 has been further delayed until April 2020.
Personal allowance and higher rate tax threshold
The personal allowance will be increased from £11,850 to £12,500 and the higher rate tax threshold will be increased from £46,350 to £50,000 with effect from April 2019.
Whistleblowing: NEDs personally liable to whistleblower for post dismissal losses
While the introduction of the 'in the public interest' requirement was the most heralded of the 2013 changes to whistleblowing protection, it was by no means the only significant change. Since 2013, protection extends to a worker who is subjected to detriment on whistleblowing grounds by another worker (widely defined) or agent of his employer. The employer will be liable for the acts of the co-worker or agent unless it can show that it took all reasonable steps to prevent the co-worker or agent from doing the act in question or acts of that description. In addition, a co-worker who has victimised a whistleblowing colleague may be personally liable for damages.
Dismissal consequent on detriment
Whistleblowers have two levels of protection under the Employment Rights Act 1996: protection from unfair dismissal by the employer (s103A) and protection from unlawful detriment by either the employer or a co-worker (s47B)
Last year, the Court of Appeal confirmed that in principle there is no obstacle to an employee recovering compensation for dismissal consequent on detriment via a detriment claim under s47B) with the employer being vicariously liable for actions of a wrong-doer co-worker, subject to any reasonable steps defence (Royal Mail v Jhuti).
Whether the statutory provisions allow a "detriment" claim to be brought where the detriment complained of is dismissal is controversial. The Court of Appeal rejected legal arguments that where the detriment complained of is dismissal, any claim is restricted to an unfair dismissal claim against the employer. According to the Court of Appeal 'dismissal consequent on detriment' claims are possible.
This month the Court of Appeal in Timis and another v Osipov, has further confirmed that an individual's personal liability for detriment which they cause to a whistleblower colleague can extend to liability for that colleague's dismissal. The Court of Appeal upheld a tribunal finding that the actions of two non-executive directors (NEDs) in giving an instruction to dismiss and implementing that instruction were actionable as a detriment claim (the NEDs fell within the extended definition of 'workers' for whistleblowing purposes). Where a distinct prior detrimental act done by a co-worker results in the whistleblower's dismissal, the whistleblower can still recover compensation for losses flowing from the dismissal.
Subject to any future successful appeal to the Supreme Court, the law now seems clear that in addition to the employer, individuals may be personally financially liable for their actions towards whistleblowers resulting in the whistleblower's dismissal. In Osipov the directors were personally liable for just over £2 million of losses, the employer company being insolvent.
A claimant who has been dismissed in circumstances where the dismissing officer was motivated by the claimant's whistleblowing will, in light of the decision in Osipov, now be able to do the following:
- Bring a claim for automatic unfair dismissal against the employer directly under s.103A ERA.
- Bring a parallel claim for dismissal consequent on detriment done by a co-worker against the co-worker and the employer vicariously under s.47B ERA.
There are Advantages and disadvantages of detriment claims over unfair dismissal claims, these are:
- Availability of injury to feelings awards;
- Significantly lower causation threshold test (materially influences rather than principal reason); and
- Potential recovery of damages from co-worker.
- Remedies of reinstatement/re-engagement not available;
- Basic award damages (current maximum £15,240) not available; and
- Availability for the employer to establish a reasonable steps defence.
In this case, the NEDs were reportedly protected by directors' and officers' liability insurance. Not all co-workers in situations like this will be directors and benefit from such insurance. Personal liability such as this is not unique. Individuals can be liable for discriminatory acts under the Equality Act. Employees and workers may already be aware of their potential individual liability for discrimination in the workplace, but they may be unaware of their liability with respect to whistleblowing colleagues. Employers should highlight this to workers in their whistleblowing policy and ensure the policy also makes it clear that victimisation of whistleblowers will not be tolerated.
Employer's vicarious liability in the 21st century
Can an employer be vicariously liable for injury caused as a result of the Managing Director's violent assault of an employee at an impromptu post-Christmas work party after-party? Potentially, held the Court of Appeal, overturning the High Court.
Vicarious liability is a common law principle of strict, no-fault liability for wrongs committed by another person. In an employment relationship, it involves an employer being liable for the wrongs committed by an employee where there is a sufficient connection between those wrongs and the employee's employment such that it would be fair to hold the employer to be vicariously liable. It does not matter that the employer itself has committed no wrong.
In Bellman v Northampton Recruitment Ltd, the MD owned the company, was its most senior employee and directing mind, and had full control over how he conducted his role. Following the company's Christmas party he and half of the guests went on to a hotel where some were staying. The company paid for taxis to the hotel with an unplanned after-party ensuing where drinks were put on a company tab. After conversation turned to work matters, the MD gave a drunken lecture to his staff about how his decisions on how the company was run should not be challenged. He ended by violently punching an employee resulting in a serious head injury.
The Court of Appeal held that, in such circumstances, the MD was "wearing his metaphorical MD's hat and establishing his authority in that role". Additionally, that party was not a purely social event happening to involve colleagues but rather a follow-on from an organised work event where the company paid for taxis and drinks. In those circumstances, there was a sufficient connection between the MD's wrongful conduct and his role, and accordingly the company was vicariously liable for his actions.
As the Court of Appeal states the MD "chose to wear his metaphorical managing director's hat" at the time of the incident. When considering where an incident has sufficient connection with the employer, it is not merely a question of whether the employee was 'at work' in a strict sense. Instead it is whether the employee was otherwise "clothed in the employer's authority".
Following a number of other appellate level judgments on employer vicarious liability over recent years, the courts have made it clear that for vicarious liability to arise, it is not a question of whether the employee was 'on the job' in a strict traditional sense when the act was committed. Instead, the question is was the employee 'acting within the field of activities assigned to them'.
Recent key themes in employer's common-law vicarious liability:
- The fact that the conduct of the employee is not for the benefit of the employer or even prohibited or antithetical to the employer's interests is no bar to vicarious liability.
- Liability will arise for conduct of employees which takes place 'within the field of activities assigned to the employee', or when the employee is 'clothed in the employer's authority'. It is not whether the employee was 'at work' in a strict sense.
Disability discrimination: job description not in itself a PCP
Did a requirement in a job description amount to a PCP? No, according to the Court of Appeal.
In Brangwyn v South Warwickshire NHS Trust, Mr Brangwyn, a carpenter providing occupational therapy to patients, has a severe phobia of blood and needles which amounted to a disability under the Equality Act 2010. The condition was so significant that he found it difficult to contemplate going to parts of the hospital where he might be confronted with his phobias.
Under his job description (which was in a standard form for pay band purposes), he was required to attend wards for meetings, and to collect patients. After attending two such meetings on the ward he went off sick. On raising a grievance he was assured that he would not have to go into areas of the ward where there were patients with open wounds (he could continue to collect and return patients to the ward's waiting area). However, his written job description was not changed in this regard. He claimed his anxiety that these requirements were still included in his job description prevented him from returning to work.
Was the failure to amend his job description a failure to make reasonable adjustments under the Equality Act? Was Mr Brangwyn subject to some provision, criteria or practice (PCP) which disadvantaged him by reason of his disability and could have been mitigated by some reasonable adjustment by the employer?
The Court of Appeal has upheld the tribunal's finding that although the job description still referred to attending the wards, the employer had made it clear that he would not be required to do so. Taking the situation in the round, the employer had not imposed a PCP. In particular, Mr Brangwyn's perception that despite the assurances and instructions being given, he might be required to carry out a task listed in his job description did not amount to a PCP. The employer made it clear that he would not be required to go into the areas of the ward where he would be exposed to blood or needles then or in the future. A mere self-induced perception or fear by the employee, not based on any actual conduct of the employer, would not be sufficient to establish a PCP. Accordingly the employer had not imposed a PCP simply by not amending the job description. As there was no PCP, the issue of reasonable adjustments did not arise.
Consultation on ethnicity pay reporting
Last year, a report by Baroness McGregor-Smith "Race in the Workplace", recommended mandatory ethnicity pay reporting by £20,000 pay band. While the Government supported the case for ethnicity pay reporting, it preferred a voluntary approach with businesses taking the lead. In light of recent figures indicating that only 11% of employers collect ethnicity pay data, the Government has issued a consultation on mandatory ethnicity pay reporting this month.
In the consultation, Ethnicity Pay Reporting, the Government sets out its proposals for a mandatory approach along similar lines to gender pay gap reporting, introduced in April 2017. The consultation seeks employers' views on practical matters including:
- the most appropriate method of reporting: one headline pay gap figure, several pay gap figures by ethnicity group; a pay gap figure by pay bands of every £20,000 or quartiles;
- the size of employer that should be subject to mandatory reporting (the Government's preference is employers with 250 or more employees); and
- how to alleviate the challenges of collecting and analysing ethnicity pay information. There is no legal obligation for individuals to disclose with which ethnic group they identify or on employers to collect ethnicity data and also issues around handling of special category data under the General Data Protection Regulation (GDPR)).
Ethnicity pay reporting featured in manifestos in last year's snap election. The Conservative manifesto said that the party would ask large employers to publish ethnic pay gaps and Labour's manifesto also expressed concern over the pay gap suffered by Black and Asian workers. It will be interesting to see what methodology the Government will choose following the consultation. Simply cutting and pasting the methodology used in Gender Pay Gap Reporting is unlikely to be suitable. In particular issues arise from:
Small statistical group issues
Ethnic minorities are exactly that - a minority. Many large employers will only have a small proportion of such employees. According to Office for National Statistics (ONS) figures amongst residents in England and Wales, 86% were White, 8% were Asian/Asian British and 3% were Black/African/Caribbean/Black British. The consultation recognises this issue. It notes that a headline pay gap figure does not reflect overall representation - a company with a highly paid non-white CEO might have good pay gap figures, but low minority representation in the wider workforce.
Classification of ethnicities
The granularity of ethnicity impacts on the complexity of reporting obligations. To avoid the complexity, one option suggested in the consultation is simply to calculate a pay gap of 'non-white' against 'white or white British'. By pooling all Black, Asian and minority ethnic (BAME) individuals together, this would help with the small groups issue - as sample sizes get bigger more reliable statistics may be produced. But, issues faced by one minority group are unlikely to be identical to those faced by another. For example, ONS data shows an overrepresentation of Asian workers in financial services, but an underrepresentation of black workers.
Finding a methodology resulting in meaningful data is no easy task. The consultation closes on 11 January 2019.
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