Employment Law Developments: Looking Ahead to 2019
Looking ahead to 2019 what are likely to be the significant employment law developments for employers and HR professionals? One date has, and will continue to dominate the headlines, 29 March 2019 when the UK is scheduled to leave the EU.
As Donald Rumsfeld might have put it, Brexit is the "known unknown" and at this stage it is difficult to predict what might happen. Unlike 2018, we don't have significant new legal developments such as gender pay reporting or the General Data Protection Regulation but with Brexit and other key issues from 2018 still highly relevant, 2019 will be another busy year in employment law, particularly in April when many changes take effect.
- Increases to Statutory Rates
- Itemised Pay Statement
- Gender Pay Reporting
- Flexible Working Task Force
- Aggravated Breach Penalties
Other developments to look out for
On 11 October 2018, the Government announced a consultation exercise on mandatory ethnicity pay reporting to consider what ethnicity pay information should be reported by employers and who should be expected to report. The consultation period ends on 11 January 2019.
For a range of reasons, there are wide variations in earnings between ethnic groups but generally speaking, people from ethnic minorities progress less and earn less than white employees. For instance, only 6% of top management positions are held by people from ethnic minorities.
It is the Government's view that reporting ethnicity pay information will enable employers to identify and tackle the barriers to creating a diverse workforce. It will also give employers the opportunity measure their progress.
In the consultation paper there is a specific question about the size of organisation that should be required to report and the options range from all employers, employers with 50, 250 or 500 or more employees or some other threshold. If introduced, it is possible that mandatory ethnicity pay reporting will apply to employers with 250 or more employees (the same threshold as for gender pay reporting).
It is estimated that only 11% of employers currently collect ethnicity pay gap data. Ethnicity pay reporting is likely to be very complex as there are many different ethnic groups, many employers do not have details of their staff's ethnicity and staff may be unwilling to disclose their ethnicity.
There is no indication if, or when, ethnicity pay reporting might be introduced but it is likely to remain a high profile topic especially when the Government response to the consultation paper is published.
The UK is scheduled to leave the EU on 29 March 2019. The Withdrawal Agreement and political declaration about future relations were approved by the EU on 25 November 2018 but, at the last minute, the meaningful vote by MPs that was supposed to take place on 11 December 2018 was called off by Theresa May. The re-arranged debate on the Agreement has just started, with a vote expected on 15 January 2019 but it still seems that there is little chance that the Agreement will be approved by MPs. In those circumstances, the options appear to be to re-negotiate the terms of the Agreement, leave the EU with no deal, a general election or a second referendum.
The Government has prepared a series of technical notices on what will happen in the event of a "no deal" scenario and the purpose of these is to enable businesses and citizens make informed plans and preparations. In August 2018, it published "Workplace rights if there's no Brexit deal". In this, the Government states it "firmly believes in the importance of strong labour protections". UK workers will continue to be entitled to the rights they have under UK law which derive from EU law, for example, paid annual leave and family leave entitlements. That commitment appears clear enough but the gloomy economic forecasts, problems with recruitment and loss of EU workers in key sectors such as health may result in some employers facing challenging issues in the months ahead.
In August 2018, the Home Office announced the terms of reference for an independent review of the Modern Slavery Act 2015. Particular issues to consider include the effectiveness of the Act, areas for improvement and recommendations. It is expected that the review will report to the Home Secretary by the end of March.
From 1 April 2019 the hourly rate of the National Living Wage and National Minimum Wage increases:
- For workers aged 25 and over from £7.83 to £8.21
- For workers aged 21-24 from £7.38 to £7.70
- For workers aged 18- 20 from £5.90 to £6.15
- For workers aged 16- 17 from £4.20 to £4.35
- Apprenticeship rate from £3.70 to £3.90
From 6 April 2019:
- The weekly rate of Statutory Sick Pay increases from £92.05 to £94.25
From 7 April 2019:
- Statutory maternity, adoption, paternity and shared parental leave pay increases from £145.18 a week to £148.68
From 6 April 2019 there will be a requirement for payslips to state the hours worked where pay varies.
This is as a result of the Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) Orders 2018 which provide that:
- Where an employee's pay varies by reference to time worked, employers must include the number of hours for which the employee is being paid on the itemised pay statement. The number of hours must be given either as a single aggregate figure or as separate figures for different types of work or rates of pay. This will make it easier for hourly paid staff to ensure that they are being paid correctly.
- Workers, for the first time, will have the same right as employees to an itemised pay statement with information on the number of hours being paid where pay varies by reference to time worked.
These changes do not apply to salaries paid for work done before 6 April 2019.
Employers will need to ensure that their payroll systems are able to comply with these new provisions.
Gender pay was one of the hot topics for 2018 and 2019 will probably be no different.
Public sector employers, predominantly in England, with 250 or more employees had to report and publish details of their gender pay audit by 30 March 2018 (gender pay reporting was already part of the public sector equality duty in Wales). The deadline for the private and voluntary sector was 4 April 2018. Reports must be prepared annually and we are now approaching the 2019 deadline.
In the last twelve months many employers have taken steps to tackle gender pay inequality. Some of these will not have a noticeable impact until the longer term, for instance, mentoring and promoting women to more senior roles. Even so, the 2019 reports will be read with interest.
According to a report published by the Office for National Statistics (ONS) on 25 October 2018, the gender pay gap fell to 8.6% among full-time employees which is a decrease from 9.1% the previous year. It is also the lowest level since records began in 1997 (when the pay gap was 17.4%) but there is concern that the gap is narrowing slowly.
On 1 August 2018, the Government Equalities Office published a report "Reducing the gender pay gap and improving gender equality in organisations". This report made a number of recommendations which could improve the recruitment and progression of women to reduce the gender pay gap:
- Include multiple women in shortlists for recruitment promotions
- Use skill-based assessment tasks in recruitment
- Use structured interviews for recruitment and promotions
- Encouraging salary negotiation by showing salary ranges
- Introduce transparency to promotion, pay and reward processes
- Appoint diversity managers and/or diversity task forces
According to the 2018 Modern Families index, a survey of over 2,750 working parents with children under 13, revealed that 34% of parents disapproved of their employer’s approach to work-life balance and 36% were willing to take a pay cut or move roles to prevent being burnt out.
The Department for Business, Energy & Industrial Strategy has set up a Flexible Working Task Force to promote wider understanding of flexible working. The Task Force is co-chaired by the CIPD and is made up of policy makers, employer groups, trade unions and professional bodies. It will evaluate the effectiveness of the current flexible working Regulations in April 2019 and any changes will be implemented in 2020/21.
The Good Work Plan was announced by the Government on 17 December 2018 and hailed by the Government as the "largest upgrade in workers' rights in over a generation". The Good Work Plan builds on the Government's response in February 2018 to the Taylor Review and it is taking forward almost all the recommendations of the Review. So, was it one of the best Christmas presents ever or as disappointing as another pair of socks? Only time will tell as many of the changes are not due to take effect until 2020.
Surprisingly quickly after the announcement of the Good Work Plan the draft Employment Rights (Miscellaneous Amendment) Regulations 2019 were published and they increase the maximum penalty for an "aggravated" breach of employment law from £5,000 to £20,000. This measure comes into force on 6 April 2019. Whether there is any increase in the use of such penalties, which have not been used widely by Employment Tribunals since they were introduced, remains to be seen.
One measure which was introduced with very little publicity and which was effective from 18 December 2018 was the "naming and shaming scheme" where the names of employers who fail to pay Employment Tribunal awards will be published. The scheme is similar to the one which publicises the details of employers who fail to pay the National Minimum Wage. The naming of employers applies to judgments registered with the scheme on or after 18 December 2018. The employers' names and amount of the outstanding Employment Tribunal award will be published in a press release on a quarterly basis on the gov.uk website.
For more details of the Good Work Plan proposals and how significant they might be please see our article.
Other developments to look out for
The Women and Equalities Committee published a report on "Sexual Harassment in the Workplace" in July 2018. This report identified reasons why the current legislation is not sufficient and why the Government needs to take action. The recommendations to the Government included placing sexual harassment at the top of the agenda, requiring regulators to take a more active role, making the enforcement process work better for employees and cleaning up the use of non-disclosure agreements (NDAs).
On 18 December 2018, in response to the report the Government announced 12 proposals/consultations on tackling sexual harassment at work and the Government will:
- Introduce a new statutory Code of Practice on sexual harassment, which will be developed by the Equality and Human Rights Commission (EHRC) under its Equality Act 2006 powers
- Run awareness raising work with ACAS, EHRC and employers
- Commission a survey to gather regular data on the prevalence of sexual harassment
- Consult on non-disclosure agreements
- Consult on the evidence base for a new legal duty on employers to prevent sexual harassment in the workplace
- Consult on strengthening and clarifying the laws on third party harassment in the workplace
- Consult on whether further legal protections are required for interns and volunteers
- Consult to explore the evidence for extending Employment Tribunal time limits for Equality Act 2010 cases
- Ensure the public sector takes action to tackle and prevent sexual harassment
- Work with regulators for whom sexual harassment is particularly relevant to ensure they are taking appropriate action
- Consider whether further learnings can be taken from the criminal justice system to use in the Employment Tribunal system, to ensure vulnerable claimants have appropriate protection
- Check that the list of organisations who can receive "whistleblowing" information includes the right bodies
The proposals have been criticised by many, including the Committee, for not going far enough and there is no information at all about timescales. However with high profile allegations of sexual harassment in all types of organisations and sectors continuing, it will undoubtedly still be a topical issue in 2019.
The implementation of the General Data Protection Regulation (GDPR) and Data Protection Act 2018 (DPA) in May 2018 was probably the most significant development in 2018. Most employers are probably now GDPR-compliant and have prepared, for example, the appropriate Privacy Notices for existing employees, new starters and job applicants and updated their employment contracts and data protection policy.
The increased penalties for breaches of the GDPR have been well-publicised. Fines for non-compliance were previously up to £500,000 but, last May, were increased to €20 million or 4% of total worldwide annual turnover, whichever is greater. Failing to notify the Information Commissioner's Office (ICO) of a breach when required could result in an administrative fine of up to €10 million or 2% of total worldwide annual turnover. It will be interesting in 2019 to see the approach taken by the ICO when the first fines for non -compliance may be issued.
The "gig economy" was another high profile issue in 2018 with considerable litigation about employment status. After almost 7 years, the case of Pimlico Plumbers Ltd v Smith reached the Supreme Court which upheld earlier decisions that Mr Smith was a "worker" and not "self-employed". As a result, Mr. Smith was entitled to the National Minimum Wage and paid holiday. Following this, claimants at Hermes and Addison Lee were also found to be "workers" in their respective roles. Just before Christmas, in the case Uber B.V. and ors v Aslam the Court of Appeal, by a majority, upheld the decisions of the Employment Tribunal and EAT that Uber drivers were "workers". Uber have been given permission to appeal to the Supreme Court so we can expect more newsworthy litigation in 2019.
But that's not all. The gig economy was one of the issues considered in the Taylor Review and one of the most significant proposals announced in the Good Work Plan is the intention to align the employment and tax status frameworks. The Government says it will produce legislation to improve clarity of employment status tests and improve guidance and online tools. It agrees with Matthew Taylor's point that the emphasis should be on control rather than, typically, the right to send a substitute thereby allowing businesses to avoid responsibilities towards those who would otherwise be workers rather than self-employed. However, the Government has given no indication of how this could be achieved, only that it has commissioned independent research to assist with this task.
The statistics are overwhelming. Poor mental health costs the UK economy up to £94 billion a year and 15.4 million working days were lost to work-related stress, anxiety and depression in 2017-2018. A survey conducted by Mind published in September 2018 found that 48% of UK employees have experienced mental health problems in their current job and only half of these have discussed their health with their employer.
2018 saw many initiatives and campaigns for tackling poor mental health. In July 2018, ACAS produced a Framework for positive mental health at work. This sets out a range of recommendations for employers, individuals and managers. Recommendations for employers include leading and embedding a wellbeing strategy, supporting and training managers and reducing stigma. For individuals, using positive coping strategies, identifying personal stress triggers and engaging with line managers. The recommendations for managers include supporting work-life balance, building rapport with staff and planning work with "people" in mind.
In September 2018, the CIPD and Mind published comprehensive guidance: People Managers' Guide to Mental Health. This includes a Wellness Action Plan (WAP) template for employers and employees to use to identify what keeps us well at work and what causes us to become unwell. The WAP is not legally binding but is intended as an agreement between the employer and the employee to promote their wellbeing or address any existing mental health needs.
In November 2018, the Chairman of Mental Health First Aid (MHFA) England, alongside the CEO of Bauer Media Group wrote an open letter to the Prime Minister calling for a change in the legislation relating to health and safety at work to encompass prioritising the safety of mental health and not just physical health. The letter was endorsed by approximately 55 of the UK's biggest employers. The reason for this was the concern that workplace mental health issues are costing the UK economy more and more each year alongside the detrimental effects on the individual.
With no signs of any reduction in poor mental health this will remain a key issue for employers, staff and Government in 2019.
There has been a consistent, significant increase in the number of Employment Tribunal claims since the abolition of Employment Tribunal fees in July 2017. The quarterly Employment Tribunal statistics report published on 13 September 2018, covering the period 1 April to 30 June 2018, showed that compared to the same quarter in 2017, single Employment Tribunal claim receipts increased by 165%. The most recent quarterly report published on 13 December 2018, for the period 1 July to 30 September 2018 revealed that during this period, receipts, disposals and outstanding caseloads all increased by 13%, 57% and 77% respectively compared to the same quarter in 2017. By 30 September 2018, refunds paid under the Employment Tribunal fee refund scheme totalled £15,825,000 from 20,000 refund payment applications.
The increase in claims is also reflected in increased work for ACAS which published its 2017/18 Annual Report in July 2018. Since the abolition of Employment Tribunal fees, early conciliation notifications have increased from 1,700 a week to 2,200.
Can we expect any changes in the future?
Possibly. On 6 November 2018, the Ministry of Justice stated that Employment Tribunal fees may be re-introduced as part of a "proportionate and progressive system". When answering questions from the House of Commons Justice Committee Richard Heaton, permanent secretary at the Ministry of Justice said, "I think a fee scheme will be available, but we have not finalised it yet and there are no immediate plans to introduce one. I can see a scheme working that is both progressive and allows people out of paying fees where they can’t afford them.”
With relatively little publicity, pay ratio reporting requirements came into force on 1 January 2019 (as part of the Companies (Miscellaneous Reporting) Regulations 2018 which were made in July 2018). The pay ratio requirements apply to large UK listed companies with over 250 employees in the relevant financial year. The purpose is to improve transparency on executive pay. There will be a statutory requirement to disclose annually the ratio of the CEO’s pay to the median, lower quartile and upper quartile pay of the company's UK employees. The first statutory disclosures will not have to be provided until the start of 2020 however but they cover CEO and employee pay awarded in 2019.
Whilst Brexit will naturally dominate the news and Parliamentary time in 2019, as can be seen, there will be plenty of other issues for employers and HR professionals to deal with in the months ahead.