Employment Law - Looking Ahead to 2018
Following on from our Employment law "Top Ten" of 2017 we now take a look ahead to 2018 and what are likely to be the key employment law developments for employers and HR professionals. It might well be a new year but many of the hot topics are not so new – gender pay, the gig economy, data protection and Employment Tribunal fees for instance. Here is an overview of some of the most significant developments and cases to look out for in 2018.
- Gender pay
- Increase to statutory rates and limits
- Increase to National Minimum Wage
- Increase in auto-enrolment contributions
- Taxation of termination payments
Key cases 2018
- January - Shared parental pay
- February - gig economy and employment status
- March - national minimum wage and sleep-ins
- No date - holiday pay
There are a number of changes effective from 11 January 2018. Tier 2 of the Points based system caters for migrant workers with an offer of a skilled job from a licensed employer. In a welcome move, flexibility is being introduced to allow non PhD students to apply to switch into the Tier 2 category after their studies, as soon as they have completed their course. New exemptions from the resident labour market test are being added for posts to be held by researcher applicants who are recipients of supernumerary Research Awards and Fellowships. Provision is being made to allow nurses to be sponsored under Tier 2 if they are undertaking an approved programme with a view to returning to practice. Tier 2 migrant dependents will now be subject to the same rules relating to absences from the UK as Tier 2 migrants. They will not be permitted to be out of the country for more than 180 days in any 12 months during the qualifying period.
A new electronic entry clearance system is being rolled out. This will be trialled with a pilot group ahead of implementation. Individuals will only need to present their passport at the UK border and their entry clearance will be checked electronically. The number of Tier 1 (Exceptional Talent) available visas will be doubled to 2,000. Exceptional Talent holders may also be eligible to apply for settlement in the UK after three years.
We have written extensively about gender pay reporting in the past and the topic will certainly continue to dominate the headlines in 2018. This is partly because of ongoing high profile stories such as this week's resignation of the BBC's China editor Carrie Gracie who said she could not continue in her role because of "unlawful pay discrimination". Another reason though is the imminent deadline for gender pay reporting.
The Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017 came into force on 31 March 2017. The Regulations require public sector employers (predominantly) in England with 250 or more employees to report and publish details of their gender pay audit and a statement of its accuracy by 30 March 2018 (and annually thereafter). Note that gender pay reporting is already part of the Public Sector Equality Duty in Wales. A recent report published by the Office for National Statistics revealed that little progress has been made in reducing the gender pay gap in the public sector in the past 20 years and it will be interesting to see what public sector employers' audits will reveal over the next few months.
The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 came into force on 6 April 2017 and set out details of how employers in the private and voluntary sector with 250 or more employees are to comply with the requirement to publish information about gender pay. The deadline for reporting in the private and voluntary sector is 4 April 2018. To date, only 559 employers have published the relevant information on the government's website out of a potential 9,000 (this represents around only 6% of employers).
The Regulations are complex and a particular criticism is that there are no clear penalties for non-compliance. The Government expects peer and consumer pressure to encourage employers to put into place measures for year-on-year improvements. However, the Equality and Human Rights Commission (EHRC), the equality regulator responsible for enforcing the Equality Act 2010, recently opened a consultation on enforcement for those who fail to comply with the Regulations and the consultation period ends on 2 February 2018. The EHRC has warned that, as part of its enforcement strategy, organisations failing to comply with gender pay gap reporting obligations could face unlimited fines and convictions. Interestingly, the EHRC has just confirmed that it intends to write to the BBC about the Carrie Gracie matter requiring it to provide information on its pay policy.
With so few organisations having published their gender pay reports to date and with only three months to go before the March and April deadlines, gender pay will certainly be one of the most challenging issues for large organisations in the months ahead.
On 1 April 2018, subject to Parliamentary approval, the prescribed rate of Statutory Maternity, Paternity, Adoption and Shared Parental Pay rises from £140.98 to £145.18.
On 6 April 2018, Statutory Sick Pay rises from £89.35 to £92.05 and the Lower Earnings Limit rises from £113 to £116.
From 1 April 2018, the National Living Wage (for those aged 25 and over) increases from £7.50 to £7.83 per hour.
The other National Minimum Wage rates increase on the same date as follows:
- From £7.05 to £7.38 for 21-24 year olds
- From £5.60 to £5.90 for 18-20 year olds
- From £4.05 to £4.20 for 16-17 year olds
- From £3.50 to £3.70 for apprentices aged under 19 or in the first year of their apprenticeship.
A significant cost for both employers and workers in 2018 is the increase, from 6 April 2018, to the compulsory contributions to workplace pensions under auto-enrolment. The minimum employer contribution increases from the current 1% to 2%, (3% from 6 April 2019), with the employee contribution increasing from the current 1% to 3% (5% from 6 April 2019). A recent survey suggests 62% of workers are unaware of the increases and it could prompt them to opt out. Employers are being encouraged to "sell" the benefits of auto-enrolment (as well as the benefit of the corresponding increase in contribution from the employer) to workers in good time to avoid this happening.
The new provisions for taxation of notice pay in the Finance (No. 2) Act 2017 ("the Act") are widely expected to come into force in April 2018. They provide a mechanism for taxing all notional notice pay, whether worked or not, and regardless of any contractual clauses. Therefore, arguments about whether a PILON was made in breach of contract (allowing it to be payable free of tax) will become irrelevant.
The Act sets out the detail; but in broad terms, basic pay in respect of any period of notice that has not been worked (whether in part or in full) will be subject to tax. However the legislative wording should allow exceptions for e.g. gross misconduct (i.e. no entitlement to notice or PILON). The exact implementation date and transitional provisions are not yet clear.
The Act also includes:
- The power for Parliament to "vary" (rather than Labour's suggestion to "increase") the threshold of the £30,000 tax-free exemption;
- Prohibiting injury to feelings from being classed as "injury" for the purposes of the death, disability or injury unlimited tax exemption;
- A new tax exemption for employer-arranged pensions advice of £500 which appears to have been increased from £150 per year and widens the kind of advice that may be covered;
- Tax reliefs where an employee is given legal advice or indemnity insurance when giving evidence in proceedings which may not be about them in their capacity as employee.
The plan for employers to pay NICs on termination payments above £30,000 has been postponed until April 2019.
The EU General Data Protection Regulation (GDPR) came into force on 24 May 2016 and will apply in all member states from 25 May 2018. Whilst the GDPR is EU law, the Government has confirmed that the UK will continue with rules the same, or very similar to the GDPR after the UK leaves the EU.
Well before 25 May 2018 employers need to be ready, and in particular have in place processes and documentation, which cover their own staff as well as third party providers. They must:
- Conduct a full audit of the information held on staff asking themselves a number of specified questions
- Provide staff and job applicants with Privacy Notices setting out certain specified information
- Under the Data Protection Bill, have an "appropriate policy document" setting out specified information about processing "special categories" (sensitive personal data) in the employment context
- Change/remove consent clauses about sensitive and personal data from contracts or consent forms
- Bring other documentation and policies into line with the new wording and the fact that "consent" in the employment context will rarely be valid
- Make contracts with third party processors GDPR-compliant (payroll, benefits platforms etc)
- Show they are GDPR-compliant for staff as well as other areas of the business with documents publicised to staff (e.g. a data protection policy demonstrating compliance and how staff are expected to handle client/customer/supplier data) and other documents recording compliance behind the scenes.
26 July 2017 was the date of the hugely significant Supreme Court decision that Employment Tribunal fees were unlawful on the basis that they prevented access to justice and were potentially discriminatory. One year on, what are the implications of that decision? There is no need for a crystal ball. A massive increase in the number of claims was anticipated and there is already evidence for this. On 14 December 2017, statistics published by the Ministry of Justice for July to September 2017 showed a 64% increase (compared to the same period in 2016) in single applicant claims. No doubt further quarterly statistics in 2018 will follow a similar trend. As well as new claims, employers may have to defend old claims which were struck out because the claimant did not pay the fee or was deterred from bring their claim because of the fees. It will be decided case by case whether such claims can be brought "out of time".
The Government had previously pledged to reimburse past fees if it was unsuccessful and on 19 October 2017, it confirmed that the estimated cost of Employment Tribunal fees refunds, including interest, is £33 million. The following day, the Government announced the details of its fees Refund Scheme. As well as being refunded their original fee, successful applicants to the Scheme will also be paid interest of 0.5%, calculated from the date of the original payment up until the refund date. The initial pilot Scheme ended on 16 November 2017 and from that date the Scheme was opened to everybody to apply for a refund if they paid fees in respect of an Employment Tribunal claim or EAT appeal.
Key cases 2018
There will be numerous cases to watch out for in 2018 covering a range of issues from equal pay claims in the private sector, discrimination arising from disability and the so-called "gay cake" case where the Supreme Court will sit in Belfast for the very first time. Looking at the early part of the year, we can expect a great deal of media interest in the following cases.
Should shared parental pay (ShPP) be enhanced for fathers on shared parental leave (SPL) if maternity pay is enhanced for mothers on maternity leave? Yes, according to the Employment Tribunal in Ali v Capita Customer Management Ltd where Mr Ali successfully argued that enhanced maternity pay for his female colleagues but no enhanced ShPP for him constituted direct sex discrimination. No, said the Employment Tribunal in Hextall v Chief Constable of Leicestershire Police where it held that the correct comparator was a woman on SPL, not a woman on maternity leave. The EAT heard Mr Ali's appeal in December 2017 and we are still waiting for the judgment. The Hextall appeal is next week, on 16 January 2018.
With conflicting Employment Tribunal decisions, the EAT judgments are eagerly awaited in these cases. If the Ali decision is upheld, employers will need to treat ShPP and maternity pay equally and enhance (or not enhance) both.
The test for deciding an individual's employment status is complex and in February 2017, the Court of Appeal in Pimlico Plumbers Ltd v Smith illustrated the assessment that needs to be carried out.
Mr Smith was engaged as an independent contractor but upholding the decisions of the Employment Tribunal and EAT, the Court of Appeal held that Mr Smith was in fact a "worker". This was on the basis that Mr Smith had to provide his services personally to Pimlico Plumbers, there was no right of "substitution" in the contractual documentation and Mr Smith had to work a minimum number of hours. Further, he was an integral part of Pimlico Plumbers' operations and subordinate to them rather than Pimlico Plumbers being a client of Mr Smith's business. As a result of his "worker" status Mr Smith had the right to the national minimum wage and paid holiday. The Supreme Court will hear Pimlico Plumbers' high profile appeal on 20 and 21 February 2018.
Other "gig economy" cases have followed the same trend. Uber's woes continued when the EAT upheld the Employment Tribunal's 2016 decision that its drivers were "workers" and not self-employed. Uber's request to leapfrog their appeal to the Supreme Court was refused and a Court of Appeal hearing is expected.
It is not always easy to determine how many hours a worker is actually working, particularly in relation to sleep-in shifts. Importantly, if a worker is "working" simply by being present, the whole of their shift will be taken into account when considering whether they have received the national minimum wage (NMW). If the worker is not "working" merely by being present and is provided with sleeping arrangements (or is "at home"), only the time spent performing tasks will be counted. In Focus Care Agency Ltd v Roberts (and two other cases), the EAT identified relevant factors (a multi-factorial evaluation) to determine the issue. The list is not exhaustive and the importance attached to each factor will vary from case to case. The factors to consider are the employer's particular purpose in engaging the worker, the extent to which the worker's activities are restricted by the requirement to be present, the worker's degree of responsibility and the immediacy of the requirement to provide services.
The Court of Appeal is to consider the correct approach in all three cases on 20 March 2018.
In King v The Sash Windows Workshop Ltd the European Court of Justice (ECJ) ruled that Mr King, who had established "worker" status, was entitled to pay for both unpaid holiday he had taken and holiday he did not take because he thought it would be unpaid. Unlike holiday which carries over during sick leave, which can be lost after a certain period, the ECJ found there was no time limit on the untaken leave which had accrued because of the company's failure to provide Mr King with his right to paid holiday as a worker. Mr King could claim untaken leave for his 13 years' engagement. It is for the Court of Appeal to decide whether the ECJ judgment is consistent with UK law and its decision is expected soon.
Finally, we can't end our review without mentioning Brexit. Article 50 was triggered on 29 March 2017 and on 8 December 2017 it was agreed that as sufficient progress had been made on the first phase of the negotiations the UK and EU could proceed to the second phase. The first phase included an agreement in principle on citizens' rights. EU citizens will be able to apply for Settled Status if they have resided in the UK for 5 years and continue to do so. They have to apply even if they already have permanent residence status. Those who arrive before 29 March 2019 (Brexit day) but have not been in the UK for 5 years will be allowed to remain and apply for Settled Status after 5 years, as will family members living in the UK by Brexit day. Close family members will also have this right post -Brexit day if the relationship existed on Brexit day and continues to exist.
The online application process for Settled Status is expected to go live in 2018 and give a 2 year grace period post-Brexit day.
So, with the ongoing Brexit negotiations, the challenges arising out of gender pay, the tricky issue of determining employment status and the significant HR issues arising out of the GDPR there is plenty to keep employers and HR professionals busy in 2018 not forgetting of course the potential for more Employment Tribunal claims.