Our next round-up will be in 2017.  We would like to take this opportunity to wish all our readers the very best for the Festive Season and the coming New Year.

1. Gender pay gap: final form reporting regulations laid before Parliament

The Government has published its long-awaited final form draft regulations on gender pay gap reporting. Subject to Parliamentary approval, the new requirements are due to apply to private sector employers with 250 or more employees from 6 April 2017. A draft Explanatory Memorandum states that supporting non-statutory guidance will be published after Parliament has approved the regulations, which is not expected before the New Year.

Key changes include:

  • As expected (to mirror the consultation on the public sector duty), the date for the snapshot to be taken has shifted from 30 April to 5 April; the first set of data will need to cover 6 April 2016 to 5 April 2017 and be published by 4 April 2018.
  • Employers must report the median gender bonus pay gap as well as the mean.
  • The pay quartile wording has been clarified to specify that the workforce is to be divided into four equal-sized groups.
  • The previous definition of employee (by reference to individuals ordinarily working in GB and under a contract of employment governed by UK law) has been removed altogether, with the explanatory notes stating that the s83 Equality Act 2010 wider definition (including those with a contract personally to do work) will apply. Partners, including members of LLPs, are expressly excluded. There is also an exception from the reporting duty for workers with a contract personally to do work in respect of whom the employer does not have, and it is not reasonably practicable to obtain, the relevant data.
  • To avoid the distortion caused by employees receiving lower than usual pay while on various types of leave, only 'full-pay relevant employees' are to be included in the data on hourly rates of pay.
  • There are new provisions specifying how to calculate the gross hourly rate of pay, covering employees with no normal working hours and the pro-rating of bonus. There is also helpful clarification as to when remuneration in the form of securities, securities options and interests is to be treated as paid.

Employers will need to take action now, in particular to ascertain whose data must be included (given the broader definition of employees, which could extend to some self-employed contractors or 'consultants'), to ensure they have the tools in place to collect the necessary data (particularly for casual workers), and to begin to consider how that data may be presented in terms of an accompanying narrative. For further details, see our briefing here.

The Minister for Women and Equalities has also launched an online tool to show the gender pay gap by occupation, available here.  Greater disclosure of pay information by private sector employers will increase the potential exposure to equal pay claims. Until now, these claims have been restricted largely to the public sector where pay information has often been more readily available. The retail sector has already seen an increase in claims, including the much-publicised claim by around 7000 (mainly female) Asda store workers to equal pay with (mainly male) depot workers. In a preliminary decision, the employment tribunal recently held that the depot workers satisfied the Equality Act threshold for comparators, namely that they were employed by the same employer on 'common terms' (as there was a significant correlation in a broad way between the terms in retail and distribution, including strong similarities in the respective handbooks), and that there was a 'single source' of those terms which could remedy any unequal treatment. The employer's argument that retail and distribution were two separate business divisions managed separately did not prevent there being a 'single source', as the executive board and its subcommittees exercised budgetary control and oversight over both divisions and could, or could subject to the overarching control of the US parent company, have introduced equality. Many employers will have a similar structure with board oversight over separate divisions; subject to a successful appeal, this ruling removes one potential defence to claims against such employers. (Asda Stores Ltd v Brierley)

Employers should also bear in mind that it may not be possible for them to defend equal pay (or other) claims in a vacuum, and that tribunal decisions on previous similar claims against them could be taken into account where they contain relevant findings of fact (eg, as to whether certain jobs are equivalent). In the context of equal pay litigation between employees who had TUPE transferred from a council to a new employer, the EAT in Birmingham City Council v Bagshaw decided that an employment tribunal was entitled to order third party disclosure from the council of the judgments and orders made by other tribunals in equal pay cases against the council, where the judge was aware they contained relevant findings of fact and the claimants had been unable to access the judgments from the Employment Tribunal Register of Judgments at Bury St Edmunds. From early 2017 there will be an online database of all new employment judgments.

2. Working time: employers must ensure that workers can take rest breaks

Employers should review their working arrangements to ensure they allow workers to take their statutory rest breaks.  Rejecting earlier conflicting EAT authority, the EAT in Grange v Abellio took a purposive approach to the Working Time Regulations in ruling that a worker can bring a claim for denial of their right to a rest break, despite the worker not having made an explicit request for a break which was refused, if the arrangements in effect prevent the worker from exercising their entitlement. This can be contrasted with the position where the worker is able to take a break but chooses not to for their own reasons – employers are not required to force an employee to take a break.

3. Settlement agreements: the inclusion of statutory maternity payments should be express

Where an employer is negotiating a settlement agreement with an employee who is or will be entitled to statutory maternity pay (SMP), the agreement should expressly set out the sum of SMP being paid (which will be subject to NICs) in order to discharge the employer's obligation to pay this.  In Campus Living Villages UK v HMRC & Sexton, the employer had to pay over £41,000 of SMP on top of the agreed settlement sum, as the claimant had received a substantial discretionary bonus within the 8 week relevant period used to calculate the higher rate of SMP. It was not sufficient for the settlement agreement simply to state that the agreement was in full and final settlement of all claims, as claims for SMP cannot be contracted out of. Of course employers can reclaim the majority of an SMP payment from the government.

4. Vicarious liability claims: employers may owe duty of care to employees in the conduct of the defence 

The Court of Appeal has ruled that an employer (or, in this case, a quasi-employer, in the form of a Police Commissioner) being sued for vicarious liability for the actions of its employees may arguably owe a duty of care to those employees, in relation to the conduct of that litigation, not to sacrifice their interests and professional reputation without good reason and reasonable warning. This duty could impact on the preparation and conduct of the defence, for example, in determining what reasonable steps should be taken to strengthen the defence, and also on the decision to settle the claim. In James-Bowen v Commissioner of Police for the Metropolis the Commissioner had settled a claim for vicarious liability for an assault allegedly carried out by police officers. The Court refused to strike out the claim that the failure to take steps to strengthen the defence, which lead to the settlement of the claim, was a breach of the duty of care to the officers. Their claim to damages for economic loss as a result of the loss of reputation and consequential damage to their careers was allowed to proceed to trial.

However, the Court did reject arguments that there was an implied retainer between the claimants and the Commissioner's lawyers. Assurances given by the lawyers that they were acting in the claimants' interests and would protect them were simply an informal recognition of the parties' shared interest in defeating the claim. Further, on the facts, the Commissioner had not expressly assumed responsibility to protect their interests.

The decision has potentially wide ramifications for all employers facing claims that they are vicariously liable for their employee's wrongdoings.

5. Unfair dismissal: reliance on inappropriate final warning could render dismissal for gross misconduct unfair

In Bandara v British Broadcasting Corporation, an employer dismissed an employee in reliance on both recent gross misconduct and a prior final written warning which the tribunal found to have been ‘manifestly inappropriate’. The EAT ruled that, in determining whether dismissal was within the range of reasonable responses, the tribunal should not have considered what the position would have been, had the warning been an ordinary warning; instead it should have considered the extent to which the employer relied on the final written warning in deciding dismissal was justified, ie, whether it was given significant weight or simply viewed as background.

The case serves to highlight that, if the recent gross misconduct is ground enough for dismissal, employers should clearly state this in the dismissal letter, in order to avoid the appropriateness of an earlier warning being brought into question.

6. Unfair dismissal: broad investigation may be required where credibility of serious allegations at issue

Where an employer is contemplating dismissal for gross misconduct on the basis of disputed and uncorroborated evidence, fairness may require it to carry out a broad investigation, including into evidence that goes to credibility.

In Tykocki v Royal Bournemouth and Christchurch Hospitals NHS Foundation Trust, the employer dismissed a healthcare assistant based on a patient's account of events, which was disputed by the employee and had not been witnessed. The EAT considered that the employer's failure to obtain general evidence from colleagues about the likely behavior of the employee, and its failure to investigate further allegations made by the patient at the internal appeal (which could have shed light on the patient's credibility), should have been taken into account by the tribunal in considering the overall fairness of the process (even though those failings did not impact on the particular allegation). The case was remitted.

7. Redundancy: suspending employee during consultation could be unfair Employers should consider carefully whether it is necessary to suspend an employee at risk of redundancy and prohibit contact with colleagues or clients from the start of the consultation process. The EAT considered such action to be insensitive and questioned its necessity in the case of Thomas v BNP Paribas concerning the redundancy of a long-standing and valued employee. The EAT also noted that it was hurtful and insensitive for the employer to get the employee's name and the date of termination wrong in its correspondence. The tribunal had criticised this conduct but failed to explain why it had nevertheless found the dismissal to be fair, so the case was remitted to a fresh tribunal.

8. Discrimination: Supreme Court asked to consider ambit of associative discrimination

The Northern Ireland Court of Appeal has ruled that it was direct associative discrimination on the grounds of sexual orientation for a bakery to refuse to supply a cake with a slogan supporting gay marriage. It concluded that, because a heterosexual person requesting such a cake would also have been refused, it could not be direct discrimination on the grounds of the claimant's sexual orientation. However, the Court noted the exact correspondence between those of the particular sexual orientation and those in respect of whom the message supported the right to marry, and concluded that the refusal was due to the claimant's association with the gay and bisexual community at large.  The decision seems to extend the ambit of association claims, which have previously focussed on association with particular individuals having a protected characteristic; it suggests that there may be protection against direct discrimination because of support for causes aligned with a particular 'community' having a protected characteristic. Leave to appeal to the Supreme Court has been sought. (Lee v McArthur and Ashers Baking Company)

9. Breastfeeding at work: employers may need to adjust employee hours

Employers should ensure that employees who are breastfeeding are able to express milk at work sufficiently regularly to avoid medical problems (in accordance with medical advice), in a private, clean environment with the ability to store the milk safely. If this is not possible given the employee's role, suitable alternative work or paid suspension should be offered. It is not appropriate to ask employees when they intend to stop breastfeeding.  The tribunal in McFarlane v EasyJet Airline Company ruled that the airline's refusal to adjust its roster to ensure two breastfeeding crew members worked no longer than 8 hours as recommended by medical advice was indirect sex discrimination and was not justified, given that there was no real evidence that the adjustment would cause any operational difficulty.

10. Autumn Statement: taxation on termination payments and salary sacrifice

Our July-August 2016 ebulletin highlighted HMRC proposals to change the taxation of termination payments from April 2018, and in particular to provide that all payments in respect of unworked notice be treated as earnings subject to income tax and employer and employee NICs (regardless of whether there is a contractual payment in lieu clause). The Autumn Statement confirmed that the government intends to go ahead with this proposal, but has limited the provision related to unworked notice to cover basic pay only (and not bonuses that might have been paid in respect of that period had the employment continued). This is a welcome development for employers, as the inclusion of bonus posed considerable practical problems as well as increasing the overall tax burden. Employer NICs will be payable on termination payments above £30,000 from April 2018. Draft legislation has been published for consultation until 1 February 2017. 

The Autumn Statement also confirmed that restrictions on the tax relief for salary sacrifice schemes will come into force in April 2017. Existing arrangements are protected until April 2018 (or, for cars, accommodation and school fees, April 2021). Employers may wish to review any salary sacrifice schemes offered in light of this change.  Other changes include the alignment of the threshold for employer and employee NICs and the removal of employee shareholder status tax reliefs; the employee shareholder status itself is to be closed in due course. The Government also plans to review the taxation of benefits in kind and expenses. Further details are included in our tax team's briefing available here.  The national minimum wage increases were also confirmed: the hourly rate for those aged 25 or over will be £7.50 from April 2017.  The Department for Work and Pensions has confirmed that, from April 2017, statutory sick pay will increase to £89.35 per week and the flat rate statutory maternity/paternity/shared parental pay rate will be £140.98 per week.

11. Consultations on reform to employment tribunals and corporate governance 

The Department for Business, Energy and Industrial Strategy and the Ministry of Justice have jointly launched a consultation on reforming the employment tribunal system, seeking views on how proposals for reform of the wider court and tribunal system should be applied in the employment tribunals and EAT. The proposals include increasing delegation of some case management functions to caseworkers and online decision-making in certain claims. Because the changes to employment tribunals and the EAT will require amendments to primary legislation (whereas other bodies can be reformed by secondary legislation), they are expected to be among the last to be implemented.  The Department for Business, Energy and Industrial Strategy (BEIS) has published a Green Paper which considers a range of options for the reform of UK corporate governance and seeks views by 17 February 2017. The proposals have been the subject of much media comment and will be of interest both to UK listed companies and to large private companies and LLPs operating in the UK. The potential options for the reform of UK corporate governance are set out under three broad headings: 

  • executive pay 
  • strengthening the employee, customer and wider stakeholder voice in the boardroom 
  • corporate governance in large privately-held businesses.

In relation to strengthening the employee voice, the Green Paper examines a number of possible approaches, including stakeholder advisory panels, designating responsibility to specific non-executives, appointing individual stakeholder representatives to the board and strengthening the reporting of how directors have complied with the s172 Companies Act duty to have regard to stakeholder interests.  The FRC has issued an announcement in response to the Green Paper. It says that it welcomes the BEIS consultation and that it will consult to update the UK Corporate Governance Code and associated guidance in 2017 to address the issue of the responsibilities of companies to a wider range of stakeholders and society. Our corporate governance team have published a briefing on the Green Paper which is available here.

12. 'Gig economy' employers: business model under threat from litigation and legislative review

Companies engaged in the 'gig economy' should be alive to the threat recent employment law developments could pose to their business model. Where the business involves the provision of a technology platform for a fee, allowing service-providers to offer their services at low cost to customers, this may only be commercially attractive if the service-providers are classified as self-employed. The platform owner may not be in a position to absorb the additional costs of workers' rights (eg, paid holiday, minimum wage while available for work) should the individuals be deemed workers, and increasing the cost of the service to customers may not be sustainable.  A recent tribunal ruling has highlighted that, where the business proposition involves brand values controlled and imposed by the platform owner, and payment rates set and administered by the platform owner, this increases the risk that in reality the individuals will be held to be the platform owner's workers. This was the tribunal's conclusion in the recent claims brought by drivers against Uber. Uber had put in place complex contractual arrangements between Uber BV (the Dutch parent company) and the drivers, describing Uber as merely acting as agent for the drivers and the drivers as contracting directly with passengers; the tribunal disregarded these arrangements, finding that they did not reflect the reality. Given the controls exercised by Uber, the drivers were held to be engaged by the UK Uber entity as workers for as long as they were in the territory in which they were authorised to work, they were signed into the Uber app and were ready and willing to accept bookings. (Aslam v Uber)  The decision is likely to be appealed; potential areas for challenge include the lack of analysis in the judgment around the test of mutuality of obligation and the strict rules on implying contracts. Although fact-specific, other employers in the gig economy will want to keep a close watch on developments in this and a number of similar cases pending in the employment tribunal.  In the meantime, there is the possibility of legislative developments in the mid-term. October saw the announcement of two domestic reviews into modern employment practices, one an independent review commissioned by the Prime Minister and the other an inquiry by the Business, Energy and Industrial Strategy Committee seeking online submissions by 19 December 2016. Both will focus on the rapidly changing nature of work, including the development of the 'gig economy' and workers' rights. It will be interesting to see whether they consider the possibility of introducing a new status for this type of individual, to enable businesses to increase the support they give individuals without thereby increasing the likelihood of their being held to be workers or employees. This is one of the suggestions mooted in a recent report prepared by the European Parliament, while the International Labour Organisation has also recently called for governments to develop policies establishing, among others, minimum guaranteed hours for on-call workers and giving workers a say in their work schedules, legislation and enforcement to address employment misclassification, and restrictions on abusive uses of atypical workers.  Not to be left out, the Office of Tax Simplification is looking at the area from a tax perspective, and the Work and Pensions Committee has launched an inquiry to consider whether the UK welfare system adequately supports the growing numbers of self-employed and gig economy workers. Meanwhile, the ECJ has ruled that, for the purposes of EU Directives protecting 'workers', individuals do not need to have a contract with an entity to be their worker, as long as they are in an "employment relationship", the essential feature of which is that a person performs services for, and under the direction of, another person for a certain period of time in return for remuneration (Betriebsrat der Ruhrlandklinik gGmbH v Ruhrlandklinik gGmbH). In contrast, the UK law concept of 'worker' is firmly based in contract.  The issue of employment/worker status and associated rights is likely to remain a hot topic for some time to come.

13. New publications: data protection, regulatory references, marriage/civil partnership discrimination and religion and belief law

  • The General Data Protection Regulation will apply from 25 May 2018 across all EU Member States, including, at least for a period of time, the UK (as recently confirmed by the UK Government). New standards for consent, greater data controller transparency, enhanced information rights for data subjects, and significantly increased sanctions for non-compliance are likely to have a significant impact for employers who deal with employee data. Our briefing here focusses on the implications of the GDPR in the employment sphere and the practical data protection steps that employers should take in relation to recruitment, "business as usual" employment, and on termination of employment.  
  • The FCA and PRA have published new policy statements relating to regulatory references under the new accountability regimes for banks and insurers, which will come into force on 7 March 2017. Our briefing here includes analysis of how this new regime will work in practice.  
  • Acas has published workplace guidance on marriage and civil partnership discrimination.  
  • The Equality and Human Rights Commission has published a report on whether the law on religion and belief is working, generally concluding that it is and so not recommending legislative reform. However, it concluded that the law is often misinterpreted by employers, and has therefore published guidance for employers.