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

Our blog Employment Notes has recently been updated with a new design and also now offers the opportunity to choose what jurisdictions you want to receive alerts for. If you would like to subscribe and/or choose which alerts you receive, please click here.

1. Gender pay gap: reporting deadline passes, new guidance published, and tribunal ruling highlights risks in taking positive action

2. Non-disclosure agreements: Government consultation on regulation of confidentiality clauses in settlement agreements and employment contracts

3. Increases to statutory rates and new workers' right to payslips from April 2019; April 2020 legislative changes confirmed 

4. IR35: HMRC consultation on the extension of reforms to the private sector from April 2020

5. Discipline: 'reasonable and proper cause' needed to justify suspension pending investigation

6. Direct belief discrimination: unlawful only where treatment based on the victim's belief and not the belief of the discriminator

7. Disability discrimination: relevance of employer policy to reasonable adjustments; requirement for causal link between disability and unfavourable treatment not satisfied by mistaken belief

8. Round-up of other cases: working time rest breaks, hirer liability for agency worker rights, communicating with employees on maternity leave, TUPE dismissals, bad leaver provisions, re-engagement orders

9. Brexit extension of exit day: further government guidance for employers; enforcement of judgments

10. New resources: mental health, disability passport, holiday pay, neurodiversity, mass redundancy guide, FSR Insights

1. Gender pay gap: reporting deadline passes, new guidance published, and tribunal ruling highlights risks in taking positive action

The deadline for the second year's gender pay gap reports has now passed, with roughly the same number of employers as last year's total meeting the deadline (and almost half of them doing so in the last week). Just over half of private companies have reported gaps that are higher or no lower than last year's, which is unsurprising given that, even if employers have taken measures to narrow the gap, these are likely to take time to show results. However, commentators have used the lack of progress to urge the Government to make mandatory the publication of action plans to narrow the gap.

There is plenty of guidance available for employers looking for ways to try and improve their figures for next year. In addition to recommendations from the EHRC and a parliamentary select committee, the Government Equalities Office also recently published two sets of guidance, Eight ways to understand your gender pay gap and Four steps to developing a gender pay gap action plan (see here for further details) along with an action note and infographic summarising the evidence based actions employers can take to support women to progress, to help to close the gender pay gap and increase gender equality in the workplace. The Women and Work All Party Parliamentary Group has launched How to recruit women for the 21st Century, a new toolkit which suggests the introduction of name-blind and context-blind applications, avoiding asking applicants about their current salary, and adopting a flexible working culture to improve the pipeline. It also calls on the Government to commission or publish new guidance for employers on positive action.  The caution needed when considering positive action is highlighted by a recent tribunal judgment, Furlong v Chief Constable of Cheshire Police¸ the first reported case on the relevant Equality Act provisions. These permit an employer to prefer a job candidate from an under-represented protected minority where the favoured candidate is of equal merit to the other candidate (ie, a 'tie-breaker' situation) and the more favourable treatment is proportionate.

In this case the employer lowered the 'pass' threshold for assessments so that 127 candidates passed and were then deemed to be of 'equal merit', enabling the employer to give priority to those from under-represented groups. The tribunal held that there were clearly differences between the assessed merits of the 127 candidates and upheld a discrimination claim from a claimant who had scored more highly than some of those appointed. The tribunal also considered that the treatment was not proportionate to the employer's aim of improving diversity, as it should have waited longer to establish the impact of recent diversity and inclusion programmes; a blanket approach of this scale was disproportionate. For further details, see here.

Employers are not currently required to report on the ethnicity pay gap; a Government consultation on introducing such a duty closed at the end of January 2019 and its response is awaited. In the meantime, a number of large employers have signed up to a pledge to report voluntarily, organised by Involve, which has published a Framework for Ethnicity Pay Gap Reporting to assist employers - available here.

2. Non-disclosure agreements: Government consultation on regulation of confidentiality clauses in settlement agreements and employment contracts

 

Further to its response to the Women and Equalities Select Committee report last December (see here), the Government is consulting until 29 April 2019 on proposals to regulate confidentiality clauses (commonly referred to as "NDAs" or non-disclosure agreements) in employment contracts and settlement agreements.  The Government has rejected calls to ban the use of such clauses in harassment and discrimination cases, but instead proposes:

  • clarifying in law that no provision in an employment contract or settlement agreement can prevent someone making "any kind of disclosure to the police … whatever the issue or disclosure, regardless of whether it meets any legislative whistleblowing tests".  The consultation asks whether this should be extended to disclosures to any other persons, and whether any other limitations should be imposed.
  • requiring a clear, written description of rights to be given to the employee before anything is signed, to be included in confidentiality clauses in employment contracts or within a settlement agreement.  The Government does not feel that a prescribed form of wording is helpful, as it could quickly become out of date, but suggests legislation that requires confidentiality clauses to make clear that they cannot prevent whistleblowing disclosures, reporting of criminal offences, discussing any matter with the police, or highlighting other relevant statutory obligations such as disclosing information to a court.  In relation to employment contracts, the confidentiality provisions and limitations on them should be summarised in the written statement of particulars (and would be subject to the current enforcement provisions allowing tribunals to increase compensation awards by 2 to 4 weeks' pay if other claims are brought successfully).  A confidentiality clause in a settlement agreement that does not meet the new wording requirement would be void in its entirety.
  • in relation to settlement agreements, extending the requirement for the employee to receive independent advice so that, for the settlement agreement to be valid, the advice must cover the nature and limits of any confidentiality clauses in the settlement agreement and the disclosures a worker is still able to make.

The Government is not suggesting making it a criminal offence to propose a confidentiality clause designed to prevent whistleblowing or reporting of a criminal offence given the difficulties of enforcement.  Equally, there is no mention of any proposal to require businesses to notify the use of settlement agreements with non-disclosure provisions to some form of regulator.  The consultation document is here

The proposals go slightly further than the SRA warning notice and Law Society guidance issued earlier this year, in particular in suggesting that any confidentiality clause should expressly permit discussing any issue with the police and requiring independent advice on a settlement agreement specifically to cover the scope of the confidentiality clause.  Pending the outcome of the consultation, it would be prudent to update existing template settlement agreements to comply with current best practice as set out in the SRA/Law Society guidance, in particular to make clear what types of disclosure remain permitted notwithstanding the confidentiality agreement. Having an express carve-out for permitted disclosures will become critical should the proposals be adopted, as a failure to do so would prevent an employer from enforcing the confidentiality provision in its entirety.   Employers would also need to consider revisions to confidentiality clauses in employment contracts and written statements of particulars.  The consultation does not address to what extent it will be necessary to amend these for the existing workforce or whether the obligation will only arise if an existing employee requests a new statement or is issued with a new statement due to some other change in terms.  Employers could also face demands for a higher contribution to an employee's legal fees on a negotiated settlement given the greater extent of the required independent advice.

The importance of enforceable of confidentiality obligations was highlighted by the recent case of Linklaters LLP v Mellishwhere the employer was granted a temporary injunction to restrain the defendant from disclosing certain confidential information about three specific incidents relevant to the culture in respect of women in the workplace. In weighing up whether public interest considerations overrode the contractual duty of confidence, the rights of the third parties involved (in particular, employees and ex-employees who had raised grievances with an expectation of confidentiality) bolstered the case in favour of granting an injunction.  See here for further details.

3. Increases to statutory rates and new workers' right to payslips from April 2019; April 2020 legislative changes confirmed

  • From 6 April 2019, the cap on the unfair dismissal compensatory award increased from £83,682 to £86,444 and the cap on weekly pay (used to calculate the unfair dismissal basic award and statutory redundancy pay) increased from £508 to £525. This gives a maximum unfair dismissal award of £102,194 (subject to the additional cap on the compensatory award of 12 months’ pay). The Vento guidelines for injury to feelings awards have also been updated: with effect from 6 April 2019 the bands will be £900- £8,800 for less serious cases, £8,800 to £26,300 for middle band cases, and £26,300 to £44,000 for the most serious cases.  
  • From 6 April 2019 the weekly rate of statutory sick pay increased to £94.25 per week (from £92.05) and from 7 April 2019 the weekly flat rate of statutory maternity, paternity, adoption and shared parental pay increased to £148.68 per week (from £145.18).  
  • The national minimum wage rates increased from 1 April 2019. Workers of 25 years and older will be entitled to be paid a minimum national living wage of £8.21 per hour (increased from £7.83), the rate for workers aged 21-24 will be £7.70 per hour and the rate for those aged 18-20 will be £6.15 per hour.  
  • From 6 April 2019, itemised payslips have to be given to ‘workers’ as well as employees, and include hours details for the hourly paid. BEIS has published guidance here.  
  • Final regulations were approved on 28th March increasing the penalty for aggravated breaches of employment rights from £5,000 to £20,000, with effect from 6 April 2019. These regulations also provide for two other changes announced as part of the Government's 'Good Work Plan' to come into force from 6 April 2020: the extension of the right to a written statement to ‘workers’, and the reduction in the threshold for requesting an information and consultation procedure to 2% of total employees. The Good Work Plan's  proposed removal of the Swedish derogation for agency workers (meaning that all agency workers will have a right to pay parity after 12 weeks) and the requirement for agencies to give agency workers a key information document will also come into force on 6 April 2020, under a second set of regulations now approved by parliament.

4. IR35: HMRC consultation on the extension of reforms to the private sector from April 2020

As previously announced, the rules introduced in April 2017 in relation to off-payroll workers in the public sector will be rolled out to off-payroll workers of large and medium-sized private sector businesses from next year.

HMRC’s most recent consultation document proposes significant additional compliance obligations for businesses that engage these services (the clients or “end users”), in particular:

  • even if the end user is not responsible for accounting to HMRC for income tax and NICs if the rules are engaged, it will have a secondary liability: HMRC will have a right to recover unpaid tax and NICs from the end user even if it is not the primary obligor;
  • the end user will be required to provide the individual worker with its conclusion on whether the rules apply (a “status determination”) and, if requested, the reasons for that conclusion; and
  • the end user will be required to establish and operate an internal process for workers to challenge status determinations (a new forum for attempting to resolve complaints raised by workers who are unhappy with the end user’s status determinations).

The consultation closes on 28 May 2019 and confirms that, after considering responses, HMRC will publish draft legislation in the summer. For further details see our ebulletin here.

5. Discipline: 'reasonable and proper cause' needed to justify suspension pending investigation

The Court of Appeal has ruled that suspension pending a disciplinary investigation does not breach an employer's implied duty of trust and confidence, provided the employer has 'reasonable and proper cause'. An employer does not need to establish that it is 'necessary' to suspend and it will not be determinative whether the act of suspension has been described as a neutral act (indeed the Court considered it was neither helpful nor relevant to consider the question of whether or not suspension can be described as a neutral act). Whether there is reasonable and proper cause will be highly-fact specific; it may be easier to establish this where the employee works with young or vulnerable individuals and there is a serious allegation supported by witness evidence to investigate (as in this case). The wider context beyond the fact and manner of suspension, including the events preceding the suspension and the extent to which a suspension is a 'knee-jerk' reaction, will be relevant. (London Borough of Lambeth v Agoreyo)

The case highlights the importance of considering whether there is sufficient justification for suspension; relevant factors will include the seriousness of the alleged misconduct and whether the investigation might be prejudiced (eg by interference with witnesses or destruction of documents) if the employee remains at work. An employer should also consider whether other options, such as working from home, would be feasible and appropriate, and document this consideration. Suspension should be for as short a period as possible, the decision to suspend should be reviewed regularly, and suspension should be paid unless there is an express contractual right to suspend without pay. Although not determinative of whether suspension is justified on the facts, it is also prudent to make clear to the employee that suspension is 'neutral' and not considered a disciplinary action. Care should also be taken when communicating with staff and clients about the reason for the employee's absence, including to ensure this does not betray any assumption of guilt prior to conclusion of the disciplinary process.

6. Direct belief discrimination: unlawful only where treatment based on the victim's belief and not the belief of the discriminator

It is unlawful direct discrimination on grounds of religious belief only if the unfavourable treatment of an employee is because of the employee's belief or lack of belief, and not where the treatment is because of the discriminator's belief (for example, that certain behaviour by any person is 'wrong'), according to the EAT in Gan Menachem Hendon Ltd v De Groen. A Jewish nursery teacher was dismissed by an orthodox Jewish nursery because it became known that she cohabited with her partner and she refused to lie about this in order to allow the nursery to reassure parents. On the facts the tribunal had found that this treatment was not due to her lack of belief, but rather due to the employer's belief; it therefore could not be unlawful direct discrimination. 

Employers should nevertheless exercise caution if considering taking disciplinary action based on their own beliefs, as in a particular case a tribunal may consider that those beliefs and the victim's lack of those beliefs are inextricably linked such that the latter can be seen as the reason for the treatment. Some commentators have also suggested that there may be scope to challenge the ruling on the basis that it does not properly implement EU law. See here for further details.

7. Disability discrimination: relevance of employer policy to reasonable adjustments; requirement for causal link between disability and unfavourable treatment not satisfied by mistaken belief

  • A reference to an adjustment for disabled employees in an employer's own policy will be relevant in determining whether there is a duty to make that adjustment, notwithstanding that the policy may be expressed to be discretionary. In Linsley v Commissioners for HMRC, the EAT held that an adjustment that is recommended in the employer's own policy is one that is likely, at least as a starting point, to be a reasonable adjustment to make. While there may be good reasons for departing from the policy, in such cases the employer ought to be able to provide a cogent reason for doing so. The employment tribunal had erred in not properly taking into account the existence of the employer's policy (of giving priority over dedicated parking spaces to disabled employees) when deciding that there was no breach of the duty to make reasonable adjustments. The employee needed urgent access to toilet facilities but, instead of a dedicated parking space near the office building, was offered alternative, less satisfactory options should she fail to get a space near the building on a first come, first served basis. The tribunal should also have taken into account the stress she suffered as a result of having to find a space, an issue which had been raised at an earlier point; the absence of an express reference to it in later reports did not mean that the employer was unaware of it. Where there is a long history of medical evidence and correspondence about a medical issue, an employer should review matters comprehensively and not base its approach on the most recent evidence only. The case was remitted to consider the issue of reasonableness.  
  • In iForce Ltd v Wood, the EAT has clarified that there is no claim for unfavourable treatment arising from disability where an employee is disciplined because they refuse to obey an instruction which they wrongly believe will exacerbate their disability, unless the disability itself causes the employee to form that mistaken belief (eg, because of pain or stress). An employee mistakenly believed that moving to a different workstation would expose her to colder and damper working conditions which would exacerbate her osteoarthritis and so refused to do so; in fact the temperature and humidity levels were not materially different. She was unable to show that the warning she was given for refusing to move was less favourable treatment because of "something arising from her disability". Although the causal link between the "something" and the underlying disability may be a loose one and may involve several links, there must be an actual connection, not just a perceived connection on the part of the employee.

8. Round-up of other cases: working time rest breaks, hirer liability for agency worker rights, communicating with employees on maternity leave, TUPE dismissals, bad leaver provisions, re-engagement orders

  • Employers could be liable for a significant compensation award if their refusal to allow a worker to take rest breaks causes personal injury. The EAT has ruled that compensation can be awarded for personal injury suffered as a result of being denied rest breaks as required by the Working Time Regulations, where the denial caused an employee with an underlying medical condition to suffer physical distress and discomfort. This was not prohibited by an earlier Court of Appeal ruling that no injury to feelings award is available for such breaches. On the facts, an award of £750 for a refusal to allow rest breaks over 14 working days was not excessive and, given the low value of the case, could be awarded in the absence of medical evidence. (Grange v Abellio London Ltd)  
  • Where an employee is a 'special case' worker (such as certain rail transport workers) entitled to equivalent compensatory rest rather than the core right to a 20 minute break after 6 hours, that rest need not be an uninterrupted 20 minute break provided it has the same value in terms of contributing to wellbeing. In Network Rail Infrastructure Ltd v Crawford, the Court of Appeal held that it was sufficient that a railway signalman working an eight hour shift was able to take a number of short breaks totalling substantially more than 20 minutes while technically 'on call'. The fact that the employer could have organised cover to provide a single 20 minute break did not mean it was obliged to do so.  
  • Hirers of agency workers should consider carefully up front whether and how the Agency Worker Regulations apply and seek to ensure the agency complies, given that a hirer can be held liable for breach and ordered to pay just and equitable compensation even if the agency is also at fault. In London Underground Ltd v Amissah, LUL initially accepted the agency's assertion that the 'Swedish derogation' applied to workers it supplied, disentitling them from equal pay rights under the Regulations. LUL later changed its view and started paying the agency on the basis that the workers were covered by the Regulations, plus an amount covering the previous underpayment. The agency increased the pay rates to the workers, but failed to hand over the underpayment for the earlier period and subsequently went into liquidation. The tribunal had found LUL to be 50% responsible for the breach as it had acted too slowly in ensuring the agency rectified the error, and the Court of Appeal has now confirmed that it was appropriate to apportion the compensation to be paid on the same basis, ie 50% to be paid by LUL, notwithstanding that in effect this would mean LUL was paying twice having already given the funds to the agency. Given that it was LUL's choice to deal with the agency, it (rather than the workers) should bear the burden of the agency's dishonesty. It would only be in exceptional cases that just and equitable compensation would be less than the amount for which a respondent  had been held responsible.  
  • Employers should ensure they agree in advance how and how often they will communicate with an employee while on maternity leave (or indeed other periods of longer family-related leave), particularly if the employee will be at risk of redundancy during that period. In South West Yorkshire Partnership NHS Foundation Trust v Jackson, the EAT ruled that sending an email about redeployment opportunities to the employee's work email address which she was unable to access, meaning she only became aware several days later, was unfavourable treatment on grounds of maternity leave for which she was awarded £5,000 compensation. It might also be discrimination on grounds of maternity, but that would depend on the reason for using the work email address and would not be so if the reason was simply administrative error.  
  • Employers should resist the temptation to use the occasion of a TUPE transfer to dismiss employees (with two years' service and so eligible to claim unfair dismissal) with whom there is an ongoing performance or misconduct issue, as this is likely to be automatically unfair. The Court of Appeal has confirmed that an employee may be automatically unfairly dismissed by reason of a TUPE transfer even if the employer has some other, personal reason to dismiss but has chosen to act on it because of the transfer. In Hare Wines v Kaur, the claimant had for some time had a poor working relationship with a colleague who was set to become a director of the transferee following a TUPE transfer, but no action had been taken to address that prior to the transfer. She was dismissed on the day of the transfer and it was the transfer that made the continuance of her employment and the poor working relationship intolerable. In these circumstances the tribunal had been entitled to rule that the transfer was the reason for dismissal.  
  • The Employment Appeal Tribunal has ruled that 'Bad Leaver' provisions in Articles of Association requiring forfeiture of shares were not subject to the law on penalty clauses where triggered by an employee voluntarily resigning on notice, as repayment did not arise on a breach of contract. The fact that the employee had separately contracted not to become a 'Bad Leaver' did not bring the penalty rule into play, as the respondent was seeking to enforce the Articles and not relying on the breach of that separate contract. See here for further details. (Nosworthy v Instinctif Partners Ltd)  
  • The recent tribunal case of Fotheringhame v Barclays Services Ltd highlights the risk of an employee obtaining a re-engagement order following a successful unfair dismissal claim, even where there has been some contributory fault on the part of the employee. It also serves as a reminder that, where a re-engagement order is made, the financial compensation ordered could greatly exceed the usual cap on unfair dismissal compensation, as it will require payment of the original remuneration package from dismissal until the date of ordered re-engagement.  Click here for further details.

9. Brexit extension of exit day: further government guidance for employers; enforcement of judgments

  • The Government's web pages on the EU Settlement Scheme here confirm that, with the extension of the Article 50 notice to 12 April, in the event of a no-deal Brexit on that date EU/EEA/Swiss citizens living in the UK by 12 April (rather than 29 March) will be eligible to apply under the Scheme, with applications to be made by 31 December 2020.
  • HMRC have issued a Brexit Employer Bulletin available here, covering action points on social security.
  • The Home Office has published new guidance consisting of information for employers on right to work checks and the immigration status of EU, EEA and Swiss citizens and their family members working in the UK after Brexit. The guidance states that employers should conduct these checks in the same way they do now until 1 January 2021.
  • The Council of the European Union has adopted on 9 April 2019 a regulation that allows UK nationals to enter and remain in the EU for tourism and business trips without a visa for up to 90 days in any 180-day period. The visa-free travel would apply even if the UK leaves the EU without a deal. The exemption is conditional on the UK continuing to offer reciprocal regime for EU nationals travelling to the UK (as recently committed to). The proposed regulation is yet to be passed by the European Parliament and the Council of the European Union and published in the EU Official Journal to become effective.
  • Acas has published brief guidance for employers on Brexit, here.
  • The UK’s accession to the Hague Convention on Choice of Court Agreements has been suspended until 13 April or 23 May 2019, depending on the date of the UK’s exit from the EU. The intention is that the accession should take place the day after the UK’s exit from the EU, to achieve continuity in the Convention’s application to the UK following Brexit (when the UK will cease to be a party to Hague by virtue of its EU membership). For further information, see this post on our Brexit blog, where you will also find our decision tree aimed at helping to determine which rules will apply to enforcement of English judgments in the EU27 post-Brexit.

10. New resources

  • Mental Health First Aid England has published guidance for employers introducing mental health first aiders into the workplace. This highlights the importance of senior leadership engagement and makes recommendations on reviewing current working practices and support, creating clear documentation setting out the expectations and limits of the role, confidential logging of support conversations (anonymised), and training and support for those undertaking the role. There is also a guide for those undertaking the role;  both are available here.
  • The GMB and TUC have launched a model disability passport setting out a disabled employee's required reasonable adjustments, to make it easier for disabled employees when changing role, line manager or employer. See here for further details.
  • The Government has launched an advertising campaign, new holiday pay guidanceand an online calculator on how to calculate holiday pay for workers whose hours or pay are not fixed, following a survey revealing an 'alarming' lack of awareness of holiday pay rights.
  • Acas has published new guidance on neurodiversity in the workplace.