Employment law Top Ten of 2017

Posted by Joanne Davies on
How will employers and HR professionals remember 2017? We thought we’d seen enough Brexit turmoil in 2016 but it paled into insignificance compared with the legal and political wranglings this year. Brexit aside: at the end of the year, we take a moment to look back at some of the most important Employment law cases and legislation from 2017. Love them or hate them, our countdown this year is inspired by West End musicals…

'Chitty Chitty Bang Bang'

At number ten, the so-called “gig economy” continued to dominate headlines following last year's ruling that Uber drivers were “workers”, not “self-employed”. The EAT agreed [1] , and Uber were not allowed to “leapfrog” their appeal to the Supreme Court. The Court of Appeal [2] also found Pimlico Plumbers were “workers”: their integration into the business and the level of control over them was inconsistent with self-employment (Supreme Court appeal next February). Add to this, the couriers deemed "workers" at CitySprint [3], Excel [4] and Addison Lee [5], with more in the pipeline. The tide is now firmly against businesses side-stepping holiday pay, the National Minimum Wage, Auto-enrolment and Working Time limits. It cuts both ways, of course: many individuals prefer to be taxed as self-employed. Is the answer to all these problems the Matthew Taylor Report into Modern Working Practices, published in July? Its heart was in the right place with good suggestions; but a surprising election result and other Government priorities put its future in doubt. However, DWP and BEIS select committees are seeking to take it forward. In a draft Bill, they recommend proposals such as “worker by default”, requiring self-employment to be proven, and emphasising a test of control and supervision rather than the right to send a substitute. They also follow Taylor’s recommendation to increase the gap which breaks continuous service from one week to one month. Whether the political will and time exists to push this forward remains to be seen.

'Matilda'

Number nine is a practical case demonstrating the very fine balance between considering all the latest medical evidence before dismissing an employee who has been off sick long-term, and the principle that employers cannot be expected to wait forever. Ms O’Brien had been attacked by a pupil in 2011. Her injuries were not particularly serious, and she was off work only a short time, but she was concerned about the school’s inaction in dealing with aggressive pupils, and felt unsafe. After other incidents she went off sick with stress and was diagnosed with anxiety, depression and PTSD. After more than a year off work, and nothing to indicate her return was likely in the near term, she was dismissed. However, at the internal appeal, Ms O’Brien produced a Fit Note from her GP saying her return to work was imminent. When her appeal failed, she claimed unfair dismissal and disability discrimination. Ms O’Brien succeeded in the Court of Appeal [6] which ruled that, whilst an employer cannot wait indefinitely for an employee to recover from an illness and the impact on the business must be evidenced, this employer should have investigated further on receipt of that Fit Note. The Court did acknowledge it was “near the borderline” – not much comfort for the employer which had been faced with evasiveness from Ms O’Brien, seemingly until the moment of her final appeal.

'Singin' in the rain'

This year’s number eight was a significant change for public authorities (and some agencies supplying workers), that saw many contractors threatening to hike fees or jump ship to the private sector. Private sector employers take note: last month’s Budget confirmed this could be heading your way too. The new rules on “off-payroll working” currently require public authorities to make the decision as to whether an individual supplying services to them through an intermediary, such as a Personal Service Company, is subject to the IR35 tax rules or not. This will be where, but for the existence of the intermediary, the relationship would be one of employer/employee (or, following our musical theme, the real voice of Kathy Selden not hidden behind the façade of Lina). Note that it doesn’t include agency workers or managed service companies. The “fee payer”, who pays the intermediary, is then responsible for deducting PAYE and NIC if the rules apply. Just like Hollywood adapting to the demise of silent movies in this classic musical, there are reports of chaos in the system, public authorities adopting a “play it safe” blanket approach, and the Government’s own online status tool being inconsistent with previous case law on status. When considering this for the private sector, the Government has promised to learn from these mistakes and consult “carefully” before implementation.

'Ain't Misbehavin''

Can whistleblowing be “in the public interest” only if it affects those outside the workplace? Number seven is the long-awaited appeal in Chesterton [7], which put the words “in the public interest” to the test following their introduction to whistleblowing legislation in 2013. The new wording was to prevent complaints about breaches of workers’ own contracts being “whistleblowing”. Mr Nurmohamed worked for a large firm of estate agents in London. He raised discrepancies in the accounts which appeared to show profitability of the Mayfair Office being artificially supressed, reducing his commission. He made similar allegations about the company’s accounts, affecting around 100 senior managers’ commission. He was dismissed. The Court of Appeal ruled that a disclosure about an individual’s contract could also be in the public interest depending on the circumstances, and that Parliament had left it for Employment Tribunals to decide. In this case, the number of individuals involved, the nature of the wrongdoing, how deliberate it was, and the identity of the alleged wrongdoer (e.g. size and prominence) were all relevant. Deliberate misstatements of £2-3m in the accounts of a very substantial prominent business could make it “in the public interest” as well as the number of individuals affected.

'Mamma Mia!'

Bearing in mind the take-up of Shared Parental Leave (SPL) last year was estimated at just 1%, with a quarter of fathers not even knowing about it, you could be forgiven for wondering why two Employment Tribunal cases are included at number six. However, they both relate to quite a significant question – if you enhance maternity pay, should you also enhance Shared Parental Pay (ShPP) for fathers? We have now had two conflicting decisions on that issue, and they are both being appealed. Since its introduction in 2015, the Government’s position has been that employers do not need to enhance ShPP. However Mr Ali [8] recently succeeded in arguing that paying his female colleagues enhanced maternity pay whilst not paying him enhanced ShPP was direct sex discrimination. Conversely, Mr Hextall [9] lost his claim for direct sex discrimination. The comparator for a man on SPL was a woman on SPL not a woman on maternity leave. However, from European cases there are potential arguments that after a certain period of time, maternity leave is about the care of the child, rather than just recovery from pregnancy and maternal bonding. In addition, indirect sex discrimination could be argued. We await with interest the appeals, which could impact both employers' current enhanced maternity offerings and SPL take-up.

'Wicked?'

Big businesses including some SMEs have had more than their fair share of burdens this year with the introduction, at number five of the Apprenticeship Levy. The Levy is 0.5% of annual wage bill (or combined wage bill for connected companies) with a £15,000 allowance, meaning businesses with a wage bill of less than £3m do not have to pay. But many SMEs are caught, and the difficulties are that it can only be spent on year-long apprenticeships, using only registered providers, with 20% of time spent on off-the-job training. It cannot be used for other types of training and for some employers it has simply demolished their training budget. A recent statistic suggested that just 58% of levy-paying employers have signed up for a digital account in England, begging the question as to whether the remaining 42% will just write the Levy off as a tax. In addition, new apprenticeship starts have fallen by 59% year on year. For the devolved nations, there is no “digital account” and only certain regions or industries are likely to see any return on the Levy. Some employers are getting clever with how it can be used, converting graduate schemes and management-level training into apprenticeships to make use of the funds. However, it’s fair to say it wasn’t the most popular measure of 2017.

'The King and I'

You knew it just wouldn’t be our Employment Law Top Ten if we didn’t have a case about holiday pay, and sure enough 2017 didn’t disappoint. Our first one at number four ties back to the gig economy above, namely Mr King, the “self-employed” salesman who, according to the European Court of Justice (ECJ), is able to claim holiday pay going back 13 years. When Mr King was dismissed, it was accepted that he was a “worker” rather than self-employed, even though he had refused the offer of an employment contract in 2008. He brought a claim for holiday he had taken but not been paid for, and for holiday he had not taken because he believed he would not be paid for it. Following an Advocate-General Opinion in June, the ECJ ruled [10] in November that he could carry over (EU-derived 4 weeks’) untaken holiday indefinitely until his contract ended. Unlike holiday which carries over during sick leave, it was not lost after a certain length of time. Furthermore, the UK’s 2-year backstop on unlawful deduction of wages claims (introduced in 2015) would not apply, since the untaken holiday carries over from year to year and only becomes payable on termination. By contrast, holiday which had been taken but not properly paid for might be subject to the 2-year backstop and the 3-month gap rule which, according to the EAT, applies to a series of deductions. Confused? These UK limiting rules may come under scrutiny in the future (bringing an ominous sense of déjà vu), even after Brexit, since pre-Brexit ECJ case law will have the status of Supreme Court decisions under the European Union (Withdrawal) Bill. “Brexit means Brexit” doesn’t sound quite as decisive as it once did...

'Guys and Dolls'

A very significant development this year in at number three is the introduction, in March/April 2017, of the gender pay gap reporting regulations for both the private and public sector. Employers with 250+ employees have had a year’s grace and the deadline for reporting is 4 April 2018 for the private sector and 30 March 2018 for the public sector in England (gender pay reporting is already part of the Public Sector Equality Duty in Wales). Reporting is on “relevant employees” which could include “workers” and staff based overseas although there are some potential exceptions. To date only around 350 employers have published information out of a potential 9000. The regulations are relatively complex and have been criticised because there are no clear penalties for non-compliance. The Government expects peer and consumer pressure to drive publication and encourage employers to put into place measures for year-on-year improvements. Although it is likely that many more than 350 will have already carried out the exercise internally, some employers may be waiting for competitors or clients to publish their data first, or considering whether to publish a narrative if the bare figures require explanation.

'Anything goes?'

‘Tis the season to be generous with holiday pay cases, so we have a second one at number two, namely the binding authority now at EAT level [11] that voluntary overtime must be included in holiday pay for those with normal working hours (it should be already for those without normal working hours). So, guaranteed, non-guaranteed, and voluntary overtime should all be included in holiday pay – but crucially, for voluntary overtime, the question will be whether “the pattern of work, though voluntary, extends for such a sufficient period of time on a regular and/or recurring basis to justify the description 'normal'”. Once again employers are left with an “it depends” answer. What is "regular"? In this case, voluntary overtime once every 4-5 weeks was enough to be regular. Like most other holiday pay conundrums, this ruling applies only to the minimum 4 weeks’ leave guaranteed under EU law, not the UK’s additional 1.6 weeks or any other contractual holiday, again leaving employers to decide whether to separate out the different types of holiday entitlements and consider the Pandora’s box of potentially backdated claims.

'Carousel'

And so to our Christmas number one of 2017. Without a doubt it has to be the Supreme Court’s decision [12] to abolish ET fees, which shocked us all, including, apparently, most of the Employment Tribunal judiciary. Following the undeniable crash in the number of ET claims since 2013, the Supreme Court ruled that the Order which brought ET and EAT fees into force prevented access to justice; was potentially discriminatory; and was “void ab initio”, meaning it was as if it had never been made. One prominent Employment Tribunal Judge compared claims which had been dismissed for non-payment of fees to claims which had been “lost in a cabinet” at the ET. The Government’s scheme for reimbursement is now fully open to those who paid a fee and did not recover it through an ET award. This now leaves employers waiting to see which claims they will have to defend and which other claims may come out of the woodwork as “deterred” claims (i.e. from those who were put off making a claim because of the fee). More than 3 months has now passed since the ruling but a severe backlog in the ET system means few employers can rest on their laurels. Is this the end to the long-running saga since 2013? Perhaps not - there have been hints that a reintroduction of fees at a fairer level could be on the cards. But with Brexit firmly taking centre stage for the foreseeable future, and the prospect of a Corbyn premiership becoming less improbable by the day, that may be pie in the sky.

Cases

[1] Uber BV & Others v Aslam & others, EAT, November 2017

[2] Pimlico Plumbers Ltd v Smith, Court of Appeal, February 2017

[3] Dewhurst v CitySprint UK Ltd, ET, January 2017

[4] Boxer v Excel Group Services Ltd, ET, March 2017

[5] Gascoigne v Addison Lee Ltd, ET, August 2017

[6] O’Brien v Bolton St Catherine’s Academy, Court of Appeal, March 2017

[7] Chesterton Global Limited v Nurmohamed, Court of Appeal, July 2017

[8] Ali v Capita Customer Management Ltd, ET, June 2017

[9] Hextall v Chief Constable of Leicestershire Police, ET, August 2016

[10] King v The Sash Windows Workshop Ltd & another, European Court of Justice, November 2017

[11] Dudley Metropolitan Borough Council v Willets & Others, EAT, August 2017

[12] R (on the application of Unison) v Lord Chancellor, UK Supreme Court, July 2017

About the Author

Joanne is the head of the firm's Employment, Pensions and Immigration group.

Joanne Davies
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