Introduction

Brexit continued to dominate the headlines in 2018, leaving employment law reform (along with many other areas) far down the government's agenda.

Despite this, there have been some significant court decisions particularly on the issue of employment status which continues to be a hot topic. The fallout from various high-profile allegations of sexual harassment and the resulting #MeToo movement has continued, with the use of non-disclosure agreements in harassment cases provoking debate. There are also various reforms planned following the government's response to the Taylor review.

What happened?

Employment status

The eagerly awaited Supreme Court judgment in Pimlico Plumbers confirms that a self-employed plumber should have been classed as a worker. Although the outcome turned on the facts of how the working relationship between the parties operated in practice, the decision provides some guidance on the legal tests, with a focus on the obligation of personal service and the high levels of control which the company had over the individual (for further details please see "Supreme Court confirms Pimlico Plumbers are workers").

In separate judgments, the Employment Appeal Tribunal (EAT) has confirmed that cycle couriers and drivers working for Addison Lee are workers rather than self-employed (for further details please see "Appeal judgment confirms Addison Lee cycle couriers are workers").

In December 2018 the latest gig economy appeal saw the Court of Appeal upholding by a majority the finding that drivers engaged by Uber are workers rather than self-employed whenever they are signed into the relevant app and ready to work (for further details please see "Court of Appeal rejects Uber's worker status appeal").

Deliveroo, however, successfully defended a challenge to the Central Arbitration Committee's decision that its riders were not workers for the purposes of an application for collective bargaining rights (for further details please see "Trade union's Deliveroo judicial review challenge fails").

Employment tribunals

The abolition of fees in 2017 has resulted in a large increase in employment tribunal claims. The latest statistics (for April to June 2018) show that the number of single claims increased by 165% when compared to the same period the previous year. Unfortunately, this has led to an overload of the employment tribunal system; therefore, parties are now facing a significant wait to have their cases heard.

In November 2018 the Ministry of Justice announced that employment tribunal fees might be reintroduced, although there were no firm plans to do so at that point. Meanwhile, the Courts and Tribunals Service published a progress report on its reform programme, including details of a new service which will enable some cases to be resolved online and by video. In addition, the Law Commission launched a consultation about the relationship between employment tribunals and the civil courts.

Family benefits

The EAT delivered judgment in two cases on shared parental pay. In Capita Customer Management v Ali the EAT ruled that failure to pay a father his full salary during shared parental leave (SPL) does not constitute direct sex discrimination in circumstances where a mother taking maternity leave during the same period would have received full pay (for further details please see "Failure to pay father full pay for shared parental leave is not sex discrimination"). However, in Hextall v Chief Constable of Leicestershire Police, the EAT indicated that enhancing maternity pay only may give rise to indirect sex discrimination claims by fathers (for further details please see "Failing to enhance pay for shared parental leave may be indirect sex discrimination").

The government also introduced a new right to parental bereavement leave. The Parental Bereavement (Leave and Pay) Act 2018 entitles parents two weeks' paid leave if they lose a child under the age of 18. The regulations which will provide the detail on how the right will work in practice are expected to be introduced in 2020. There has been no news on the 2016 proposal to extend SPL and pay to working grandparents (for further details please see "Parental bereavement bill receives royal assent").

GDPR and data protection

The EU General Data Protection Regulation (GDPR) came into force in May 2016, taking effect across all EU member states and imposing more severe fines for non-compliance. This is relevant for employers that process personal data about their staff; employers in the United Kingdom must continue to follow the new GDPR rules, irrespective of the outcome of Brexit.

Meanwhile, some employers have been in data protection trouble due to their employees' actions:

Holiday pay

Cases about the correct calculation of holiday pay continued to appear in courts throughout 2018. In July 2018 the EAT ruled that both non-guaranteed and voluntary overtime should be included in the calculation of holiday pay under the NHS Terms and Conditions of Service. Although this was particularly significant for the NHS, the EAT also confirmed that voluntary overtime should be included in the calculation of holiday pay if it is regular and settled.

Minimum wage

In July 2018 the Court of Appeal decided that care workers carrying out 'sleep-in' shifts are not entitled to the national minimum wage for the whole shift, but rather only when they are required to be awake and working. In so ruling, the court has overturned various earlier decisions and contradictory guidance from Her Majesty's Revenue and Customs, which would have potentially exposed the care sector to claims for arrears of pay worth hundreds of millions of pounds (for further details please see "Care workers are not entitled to minimum wage for 'sleep-in' shifts").

Pay reporting

The new gender pay gap reporting rules resulted in all 10,000 or so employers that were within scope of the new law reporting their pay gap within their first year of operation. With the next reports due in April 2019, the Advisory, Conciliation and Arbitration Service published guidance encouraging employers to implement an action plan aimed at reducing the gender pay gap in their workplace, and the Government Equalities Office and the Women's Business Council also published toolkits providing organisations with practical advice on how to close the gender pay gap. Further, the Equality and Human Rights Commission published a report urging employers to provide narratives alongside their gender pay gap statistics.

In a related move, the government has introduced CEO pay reporting legislation which requires the directors of all UK-listed companies with more than 250 employees in the United Kingdom to report annually on the difference in pay between their CEO and their average UK worker (for further details please see "CEO pay ratio reporting coming soon"). The first reports are due in 2020. In addition, the government launched a consultation on ethnicity pay reporting, looking in particular at the information that employers should be required to publish.

Sexual harassment and non-disclosure agreements

The extent of sexual harassment at work and whether it is acceptable for employers to sweep it under the carpet using non-disclosure agreements (NDAs) was debated in 2018. There were two inquiries:

  • The Equality and Human Rights Commission (EHRC) solicited evidence on sexual harassment in the workplace; the results were set out in their report which was published in March 2018. It made various recommendations for improving the situation.
  • In July 2018 the government's Women and Equalities Committee published a report on sexual harassment in the workplace, which supported many of the EHRC's recommendations. It also condemned the use of NDAs in sexual harassment cases where the effect is to prevent the victim from being able to talk about the issue (for further details please see "Workplace sexual harassment – Women and Equalities Committee urges radical reform").

The Solicitors Regulation Authority has also issued a warning notice about the use of NDAs. Towards the end of 2018, NDAs came under renewed scrutiny when the Court of Appeal granted an injunction which prevented the Daily Telegraph from publishing details about discreditable conduct by an unnamed executive.

Taxation of termination payments

The tax treatment of termination payments changed in April 2018. All payments in lieu of notice are now subject to income tax and national insurance contributions (NICs) in full, whether or not the payment is a contractual entitlement. The requirement for employers to pay employer NICs on any part of an ex gratia termination payment that exceeds the £30,000 tax-exempt threshold has been put on hold until April 2020 (for further details please see "Employer NICs on termination payments delayed again").

What's next?

The most significant reforms and cases in the pipeline for 2019 are outlined below.

Employment status

Uber was given permission to appeal the Court of Appeal ruling discussed above to the Supreme Court (for further details please see "Court of Appeal rejects Uber's worker status appeal"). In the meantime, the government has responded to recommendations on employment status made in the Taylor Review in its Good Work Plan. It promises to "bring forward detailed proposals" on how the employment status frameworks for the purposes of employment rights and tax should be aligned and there will also be legislation to "improve the clarity of the employment status tests"although no further information has been provided about what this will involve. The government has also commissioned further independent research on those with an uncertain employment status to help inform its approach.

New IR35 rules

The chancellor has confirmed that with effect from 6 April 2020, businesses in the private-sector which engage contractors (ie, individuals who supply their services via their own personal service company or partnership (the intermediary)) will be responsible for determining whether the IR35 rules apply. If the business considers that IR35 applies, the person paying the intermediary will be responsible for operating pay-as-you-earn and NICs on the fees it pays to the intermediary.

Small businesses will be exempt from the new rules, although no information has been released yet on which businesses will qualify as 'small' for these purposes (for further details please see "Private sector must operate new IR35 rules for contractors from April 2020").

Discrimination and equal pay

The Court of Appeal is due to decide several important cases in the discrimination and equal pay area.

The Court of Appeal's ruling in the appeal against the EAT's decision that workers in Asda's retail stores (who were lower paid and mostly women) can compare themselves with distribution centre workers (who were higher paid and mostly men) is pending (for further details please see "Retail workers comparable to distribution centre workers for equal pay claim"). Decisions in various joined cases (including the Asda case) on whether multiple equal pay claims can be included on one claim form if they involve different jobs, which is of great practical significance in large equal pay cases, are also pending.

In February 2019 the Court of Appeal is due to consider whether it is unlawful to discriminate against an employee because of a perceived disability, the EAT having ruled at the end of 2017 that this was unlawful even where the employee is not actually disabled under the legal test (for further details please see "Discrimination based on perceived disability confirmed unlawful").

Good Work Plan

The government has made several proposals for employment law reform in its Good Work Plan in response to the Taylor review, which are primarily designed to help those with non-standard or variable contracts. There will be a new right to request a more predictable and stable contract and a break in service for the purpose of continuous employment rights will increase from one to four weeks. The Swedish Derogation, a loophole which allows agencies to avoid matching pay for agency workers, will be removed from 6 April 2020. Also coming into effect on this date is the extension of the right to a statement of employment particulars for all workers from day one, and an increase in the reference period for calculating holiday pay from 12 weeks to 52 weeks. To help with the enforcement of employment rights, the government is planning to introduce a 'name and shame' scheme for employers that fail to pay employment tribunal awards, linked to the current penalty scheme. From 6 April 2019 the limit on financial penalties for aggravated breaches by employers will be increased from £5,000 to £20,000 and there are plans for new penalties in respect of repeated breaches by the same employer.

Brexit

In 2017 it was hoped that the future of EU employment rights would become clearer throughout 2018. However, with less than three months to go until the projected date for the United Kingdom's departure, it is impossible to predict how Brexit will unfold.

If the current version of the withdrawal agreement is approved, the United Kingdom will begin a relatively straightforward transition period until 31 December 2020, during which the status quo would broadly be maintained and all EU employment laws would continue to apply.

If not, the EU (Withdrawal) Act 2018 ensures that the United Kingdom will leave the European Union at 11:00pm on 29 March 2019. The act sets out a series of complex provisions on how far EU law and decisions of the European Court of Justice will continue to apply after the United Kingdom's exit day – all of which will be relevant to EU-derived employment law (eg, the Transfer of Undertakings (Protection of Employment) and the Working Time Regulations). There is also a chance that Brexit may be postponed or even revoked altogether, which would involve amending or repealing this act.

However, adding to the complications, the Irish Backstop Protocol contains broad and strong commitments from the United Kingdom on employment law matters, which mean that the United Kingdom would be prevented from introducing changes to any EU-derived employment laws until the backstop is dissolved.

In short, it looks unlikely that there will be any imminent or major changes to employment law, irrespective of the type of Brexit (if any) that happens in March 2019.

The materials contained on this website are for general information purposes only and are subject to the disclaimer.

ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.