Changes to Taxation of Termination Payments, Effective on April 6, 2018

New Legislation Enacted

A new tax treatment will apply to any termination payments to which an employee becomes entitled, effective April 6, 2018. This means that non-contractual payments made in lieu of notice will be subject to income tax and class 1 National Insurance Contributions (NICs). Previously these payments had been treated as damages for breach of contract and could be paid without deductions for tax (up to the first £30,000). Contractual payments made in lieu of notice are already subject to tax and NICs, and there is no change to their tax treatment. The changes to non-contractual payments are expected to factor into settlement discussions and may result in a general increase in settlement packages where there is no contractual right to pay in lieu of notice.

Expectation for Employee to Work Long Hours Resulted in Disability Discrimination

Precedential Decision by Judiciary or Regulatory Agency

In a highly consequential decision for industries where long hours are the norm, the Court of Appeal recently held that an expectation of long hours resulted in disability discrimination arising from a failure to make reasonable adjustments. Here, the employee worked 12 to 14-hour days as an analyst for an independent brokerage and research firm. Due to injuries from an accident, he was unable to continue working such hours and resigned, citing, among other issues, that the employer expected him to work long hours. Upholding the employee’s claim, the Court of Appeal agreed that the employer’s expectation amounted to a “provision, criterion or practice” that required the employer make reasonable adjustments for disability.

Court of Appeal Finds Ignorance of Minimum Wage Entitlement Does Not Prevent Constructive Dismissal Claim

Precedential Decision by Judiciary or Regulatory Agency

To show constructive dismissal, an employee must show, inter alia, that they resigned in response to their employer’s repudiatory breach of contract. Here, the employee was an illiterate woman from Tanzania who spoke no English, was employed as a domestic worker and paid as little as £0.33 (USD $0.47) per day. Although she did not give reason for her resignation, the Court of Appeal found that in some circumstances where the contract is so egregiously performed, it would be obvious that the resignation was linked to that egregious performance. Here, the low pay was an obvious reason for the resignation, and ignorance of legal rights as to minimum pay entitlements should not be a barrier to resignation in response to low pay. While the facts of this case are extreme, it may result in further litigation probing the meaning of “egregious” performance.

Court of Appeal Clarifies When Employer Will Have Constructive Knowledge of Employee’s Disability

Precedential Decision by Judiciary or Regulatory Agency

On February 8, 2018, the Court of Appeal clarified that the proper test to determine whether an employer has constructive knowledge of an employee’s disability is whether the employer could reasonably be expected to know that the employee was disabled at the relevant time, not whether it could have done more to ascertain if the employee was in fact disabled. After an occupational health service assessment and employer enquiries, the employee was found not disabled and was dismissed for persistent short-term absences from work. The Court of Appeal found that the employer did not have knowledge, actual or constructive, of disability and therefore was not under a duty to make reasonable adjustments. This case highlights the importance of employers reaching their own conclusion on disability and not taking expert reports at face value, particularly if that report does not address all issues raised by the employer.

Claim for Post-Termination Losses Arising From Pre-Termination Whistleblowing Detriment May Be Allowed

Precedential Decision by Judiciary or Regulatory Agency

On January 26, 2018, the Court of Appeal held that no legal principle prohibits a whistleblower from claiming post-termination losses which were attributable to a pre-termination detriment. Here, the respondent was a partner at the appellant law firm who alleged he had made a whistleblowing disclosure, resulting in his removal as managing partner. The Court found that any such claim would need to be determined by an Employment Tribunal on the facts (this appeal was made only to determine the legal question of whether such a claim was possible). The Court of Appeal will consider this issue again in June 2018 in Int’l Petroleum Ltd v. Osipov, which may provide further guidance in the area.