Welcome to this month's briefing for HR teams and in-house employment counsel. This month we look at what to expect in employment law in the coming year.
Legislative changes to watch
There are a number of significant changes already in the pipeline, most of which take effect in April.
- Reference period for holiday pay: The current position is that holiday pay calculations for many irregular patterns of work require a worker’s average pay over the 12 weeks immediately before the holiday to be worked out. This can be difficult if a worker is paid on a monthly basis, and lead to bizarre results if pay fluctuates over the year (for instance because of seasonal variations in overtime). In an effort to address these issues, the 12-week reference period is being significantly amended, so that the average will be taken over the 52 weeks prior to each holiday period.
- Written statement of terms for workers: Employees are entitled to receive a written statement of their key terms and conditions of employment (a so-called "section 1 statement"). Two changes are coming into effect: (i) the right is being extended to all workers; and (ii) some of the mandatory content is being amended. Employers are advised to ensure their systems and procedures are updated well in advance of the changes.
- Swedish derogation abolished: Agency workers are entitled to a number of rights, the most important of which is parity of terms after a qualifying period. Those rights are abrogated if the agency worker has a permanent contract with the agency in question – the so-called "Swedish derogation". This measure has been heavily criticised, including in Matthew Taylor’s Good Work report, as it diminishes the level of protection for a relatively vulnerable class of worker. It is being abolished.
- NICs on termination payments: At present, termination payments benefit for generous tax and national insurance exemptions. The tax benefit entitles the first £30,000 of a termination payment that is not otherwise taxable to be paid tax free. The entirety of the payment is currently free from national insurance. This is being changed so that the tax and NICs positions are aligned. The change will effectively see termination payments become more expensive for employers.
The Queen’s Speech contained plans for a new employment bill, which will make interesting reading when it is published. The bill will include:
- extending redundancy protection after maternity leave: Women on maternity leave benefit from a right to preferential treatment in any redundancy exercise, as they are required to be offered any suitable alternative vacancy if their post is made redundant. The government plans to extend that right until six months after the end of maternity leave; and
- flexible working as default: The government intends to make flexible working the default position unless an employer has a good reason.
There are also some important measures which are planned, but where the implementation remains uncertain.
- IR35: We have covered the proposed changes to off-payroll working in previous bulletins. There has been no formal announcement of any change of policy, so employers who use contractors or consultants should continue to prepare as previously advised. But some uncertainty has been caused by remarks by the Chancellor, Sajid Javid, during the election campaign, to the effect that he planned to look again at the planned changed. This uncertainty is unwelcome, and we will update you as soon as the position becomes clearer.
- NDAs: We are waiting for confirmation of the government’s plans to control or limit the use of confidentiality clauses and NDAs in employment contracts and settlement agreements. It seems likely the government will adopt a minimalist approach, rather than the more widespread reform argued for by the Women and Equalities Select Committee, amongst others.
And then there is, inevitably, Brexit. Despite the government’s commitments to maintain the existing legislative framework for employment law, some commentators believe that a shift to a deregulatory stance is likely in the medium term. The most recent version of the Withdrawal Bill does not include the commitments to retain EU-derived measures that had been a feature of previous drafts. The government has stated this is simply to ease passage of the Bill, and that the commitments will be included in other legislation. Whether there is appetite in government for what would politically challenging moves to reform, for instance, TUPE or the Working Time Regulations, remains to be seen.
Supreme court cases to look out for
- Vicarious liability: The Supreme Court has heard the appeals in two important cases on vicarious liability. In the first, Morrisons was held liable for a deliberate mass data breach committed by a malignant employee. In the second, Barclays was found liable for numerous acts of sexual harassment committed by a doctor undertaking pre-employment checks, but as a self-employed contractor. Both judgments are keenly awaited.
- Shared parental leave: Leave to appeal has been granted in two cases on shared parental leave, looking at whether employers can legitimately pay more to women on maternity leave than they do to men (and women) on SPL. No date for the hearings has yet been announced.
- Equal pay: Permission to appeal has also been given in the long-running, and increasingly bitter, mass litigation against Asda. Claims have been brought by a large number of female shop assistants, arguing that the predominantly male staff at Asda’s delivery depots and warehouses were better paid. Many large private sector employers are watching this litigation closely, as equal pay claims have traditionally been mainly confined to the public sector.
- Uber: The Supreme Court will hear an appeal in July by Uber against the decisions in the courts below that its drivers are workers, rather than self-employed contractors. The Court of Appeal was split on the issue, with a powerful dissenting judgment from Underhill LJ, widely regarded as one of the foremost employment law judges. His dissent means the Supreme Court’s views will be even more interesting.
As many of us embark on Veganuary, an Employment Tribunal’s decision that ethical veganism merits protection as a religion or belief under the Equality Act will be of interest. It comes after a different Tribunal surprised many commentators by ruling that vegetarianism was not protected. This continues to be an evolving, and controversial, area of the law.