Employment law Top 10 of 2016
How will employers and HR Professionals remember 2016? Brexit, Brexit, Brexit! While the Government, the Supreme Court and Parliament continue to thrash out whether Brexit means Brexit, whether it will be a Soft Brexit, a Hard Brexit, or a half-baked Brexit, we turn back to some of the other Employment law developments of 2016. Here are our top ten most important cases and legislation from 2016, this time in the form of album titles; inspired of course by the Rolling Stones' release of cover songs album Blue and Lonesome after an 11 year gap.
A momentary lapse of reason
If the Government thought that a few tweaks to immigration laws would answer the nation's concerns on the topic, it must have realised its mistake on 24 June. Nevertheless, the Immigration Act 2016 at number ten introduced important changes to illegal working laws. As well as civil penalties, there is a criminal offence of 'knowingly' employing an illegal worker. However, this was hard to prove and there were few prosecutions. Now the test is whether the employer (or a person with responsibility) knew or had 'reasonable cause to believe' that the employee did not have the right to work (i.e. turned a blind eye). Conviction could result in an unlimited fine, or if committed with the consent or connivance of a director/manager, a prison sentence of up to 5 years (rather than 2). There is also a new offence of being an illegal worker (with potential for earnings to be seized); increased powers of search and seizure; and the power to shut down a business temporarily for continued failure to comply.
The first known case on Shared Parental Leave (SPL) is at number nine, albeit only an Employment Tribunal (ET) decision. It was simply a matter of time, despite latest statistics suggesting that only 5% of fathers and 8% of mothers have taken up SPL. But, like an England football team manager when it comes to the World Cup, this claim was on a hiding to nothing. If you offer the same type of leave (SPL) for both women and men but only enhance pay for women, could that be discriminatory against men? Answer: of course. There are a number of really tricky issues surrounding SPL, but this isn’t one of them. The employer initially argued that all 'partners' on SPL – including female same-sex partners – did not receive enhanced pay therefore it was not discriminatory. It later conceded indirect sex discrimination and the employee was awarded £28,321.03, a significant proportion resulting from blunders and delays in handling the grievance. The employee won the battle but lost the war: the employer no longer enhances pay during SPL for women or men.
A hard day's night
Number eight is a case that didn’t receive a large amount of publicity but makes an important point. Following a change in working hours, Mr Grange submitted a claim that for 2½ years he had been forced to work for 8 hours without taking a break. Initially, the ET held that there had been no 'refusal' of his right to take a break; that would have to be a denial of a request Mr Grange had made, and he had not made a request. But the Employment Appeal Tribunal (EAT) thought differently. Although there are conflicting UK cases on this point, the EAT ruled that EU Working Time Directive case law showed workers' entitlement to rest breaks was to be proactively respected by employers. 'Refusal' included making working arrangements that didn’t allow for breaks to be taken, whether or not the worker specifically made a request. The judge referred to a 'real world' protection of rights rather than a notional one – will this take the place of EU case law in interpreting such rights post-Brexit?
A case involving maintaining the pay of a disabled employee who had been moved to a less skilled role is this year's number seven. Mr Powell worked as a maintenance engineer for G4S, but following ongoing back problems he was unable to do heavy lifting or work in confined spaces. After some sickness absence he was moved to a recently created role involving driving materials to engineers for the same pay, although it required less skill and training. A year later, G4S decided to reduce his pay by 10% to reflect the role's level of skill, but Mr Powell refused to accept it and was dismissed on medical grounds. The EAT ruled that maintaining the same level of pay indefinitely (at an annual cost of £2,480) could be a 'reasonable adjustment' for an employer the size of G4S, although it will not be an 'everyday event'. It is a reminder, if one was needed, that what is 'reasonable' should always be considered on a case by case basis.
Right place right time
If the predicament of Top Gear and The Great British Bake Off wasn't enough to highlight the strength of personalities over product, number six provides a salutary warning about agreeing the right restrictive covenants at the right time. Mr Thornton began work for his employer in 1997 as a trainee agronomist with no experience and no customer contacts. His contract included a restrictive covenant which purported to prevent him supplying 'similar' goods or services to all the employer's customers or a competitor for 6 months. By the time he resigned in 2015 he had developed relationships with certain customers, and the employer tried to enforce the restrictive covenant when he joined a competitor. The High Court ruled that the covenant Mr Thornton signed as a trainee was badly drafted, went much further than was reasonably necessary to protect the employer's legitimate business interests (applying to all customers, not just ones Mr Thornton had advised), and was manifestly inappropriate for his level at the time. It was therefore unenforceable, and did not become enforceable when his experience and contacts changed over time. Note to self: tailor restrictive covenants to each employee and review enforceability periodically, especially prior to promotions.
Sign o' the Times
Number five is the 'gig economy' case of the moment, where Uber drivers successfully claimed that they were 'workers' for the purposes of the national minimum wage, working time, paid holiday and whistleblower protection. The outcome may not affect all employers but as scrutiny of the gig economy ramps up with inquiries by two Parliamentary committees, cases like this will continue to be in the spotlight. It's also an entertaining read next time you sit down to enjoy 40 pages of an ET judgment, with quotes from Shakespeare and Milton and scathing, thinly-veiled criticisms of Uber's myriad of documents and lawyers. Uber was not, said the ET, simply a technology company providing a software platform. Nor were the drivers contracting directly with each passenger independently of Uber. How could they be, when the drivers did not know who the passenger was, where they were going, drove routes prescribed by Uber, for fees negotiated by and paid to Uber? It was 'pure fiction'. The twist in the tale is that, according to the ET, Uber could have devised a business model not employing the drivers – it was just that this model failed. It has been reported that Uber intend to appeal to the EAT.
2016's Top Ten wouldn’t be complete without at least one holiday pay case (and it's Christmas, so we have two). Ever since the groundbreaking case of Bear Scotland v Fulton which held that non-guaranteed overtime had to be included in the calculation of holiday pay, employers have been wondering whether voluntary overtime should be included too. Last year the Northern Ireland Court of Appeal's 'persuasive' ruling was that it should. At number four this year several non-binding ET cases have followed suit. 56 employees of Dudley Metropolitan Borough Council claimed their holiday pay should include voluntary overtime, voluntary standby allowances and voluntary callout payments. The ET followed Bear's elegantly simple test that 'normal pay' for holiday pay purposes is what is normally received. Where overtime was regularly worked, although voluntary, it should be included for the European-derived 4 weeks' holiday (not the additional 1.6 weeks' additional leave in the UK). Only voluntary overtime which was very rare was excluded. Many employers are still waiting for a binding decision from a higher court, but the chances of a different result are not looking good. Maybe an FBI announcement or a campaign led by Boris Johnson could turn things around…
Talk that Talk
Number three highlights the sometimes confusing differences between s111A 'protected conversations' to end employment, and 'without prejudice' discussions. For protected conversations you don't need an existing 'dispute', for without prejudice you do. Protected conversations cannot be referred to in an ET claim for unfair dismissal, but could be in claims for discrimination, automatically unfair dismissal, or breach of contract. Without prejudice discussions cannot be referred to in such claims, except in limited circumstances. Clear so far? In Mrs Bailey's case, both potentially applied to termination discussions with her employer, and the employer wanted the discussions excluded from evidence. The EAT came to two important conclusions. Firstly, you can't 'waive' the confidentiality of protected conversations even if you want to. Compare this to without prejudice discussions, where confidentiality can be waived not only expressly, but also impliedly – as this employer found out to its cost. Secondly, the fact of a protected conversation is excluded from evidence, as well as its content. The without prejudice discussions were ruled admissible because the employer hadn't sufficiently objected to Mrs Bailey referring to them. The ET's job was then to consider the discussions for one type of claim (discrimination) and completely disregard them for the other (unfair dismissal). It’s all in a day's work for an ET.
Wish you were here
At number two is of course Mr Lock and his claim against British Gas for notional commission during the Christmas holidays. The European Court of Justice ruled in 2014 that it should be included in holiday pay calculations, and the case has rumbled on ever since. This year we had judgments both from the EAT and Court of Appeal. British Gas was even arguing that the 2014 overtime rulings of Bear Scotland v Fulton were wrongly decided. The EAT took us no further forward, but the Court of Appeal held that despite UK legislation on calculating holiday pay apparently excluding results/success-based commission where there are normal working hours, Parliament had intended to implement the Working Time Directive fully. When the legislation was drafted, it was not known that holiday pay must relate to 'normal remuneration'; but now that was clear. So, notional commission must be included for Mr Lock, but no principles were given for annual bonuses, other commission structures, or the reference period over which to calculate it (12 weeks was agreed on for Mr Lock). Those looking for way out through Brexit are unlikely to find it as the Government supported Mr Lock's case.
And so to our Christmas number one – have you guessed it? It's the National Living Wage (NLW), a legal development which should receive first prize for noble intentions, booby prize for unintended consequences, and be disqualified for plagiarism all at the same time. Another of George Osborne's rabbits from his hat, the reality of the NLW introduced on 1 April for those aged 25 and over was that employers complied with the law but inevitably had to make savings elsewhere. Many staff had hours cut, overtime or premium shift rates reduced, and perks abolished. Journalists and lawyers repeatedly had to explain that the Living Wage (www.livingwage.org.uk) and the National Living Wage (www.livingwage.gov.uk) were not the same thing, and the Living Wage Foundation was understandably miffed at having its name stolen without the NLW being based on the key concept of living costs. Perhaps now we like Philip Hammond with his lack of rabbits. Although, after this year, what could possibly surprise us in 2017?