In addition to considering a range of legislative changes taking place throughout 2016, the team also looked at some recent cases which impact both employers and employees.
The development of the law on holiday pay remains a very significant and topical issue. However, other recent changes which employers should be aware of include the coming-into-force of the Modern Slavery Act, the introduction of the statutory National Living Wage, the introduction of financial penalties for non-payment of awards ordered by the Employment Tribunals, changes to Employment Tribunal procedure regarding postponement requests and changes to Employment Tribunal award limits.
The team also spoke about the reforms to the law on strike action anticipated as a result of the Trade Union Act 2016, the requirements of the new gender pay gap reporting regulations and the government's consultation on Grandparental leave. Key cases discussed included ones dealing with the role of HR in disciplinary matters, absence management of those with disabilities, and the extent of employers' discretion in the payment of bonuses. Finally, no employment law update would have been complete without mention of Employment Tribunal fees.
RECENT AND EXPECTED DEVELOPMENTS
Statutory Living Wage
The new top minimum wage band, titled the 'National Living Wage', came into effect on 1 April 2016 and applies to workers aged 25 and over. It is currently set at £7.20 per hour.
Reform to Strike Law
The Trade Union Bill received royal assent and became the Trade Union Act 2016 on 4 May 2016, but it is not yet known when it will be brought into force. Under the Act, employees providing essential public services will only be able to take lawful industrial action if the vote has the backing of at least 40% of eligible Trade Union members, as opposed to just 50% of those who vote. The Act also includes requirements for clearer descriptions of the trade union dispute and the planned industrial action on the ballet paper, and doubles the required notice of industrial action from 7 to 14 days (unless the employer consents to a shorter period). The controversial proposal to repeal the ban on employers using agency staff to cover for striking employees, however, has not been included in the Act.
Gender Pay Gap Reporting
The draft Equality Act (Gender Pay Gap Information) Regulations 2016 were published in February of this year, and were open for consultation until 11 March. It is intended that they will come into force on 1 October 2016. The draft regulations set an annual date of 30 April for employers to take a “snapshot” of what employees are being paid, beginning in 2017, with full reports requiring to be published from April 2018. There is also the prospect of 'naming and shaming' by the government in a similar manner to the current regime of naming of employers who fail to pay minimum wage. Although the regulations will only apply directly to private and voluntary sector organisations with 250 or more employees, the requirement to report is likely to flow down as transparent reporting and substantive moves towards equality of pay become factors in attracting new talent and winning tenders for government contracts or funds.
The public sector has of course had to deal with gender pay gap reporting for some time. 150 listed public authorities with 150 or more employees currently report, and the Scottish Government has indicated an intention to extend the number of authorities subject to reporting requirements by dropping the threshold to 20 employees.
Employment Tribunal Fees
The public sector union UNISON applied for Judicial Review of the decision to introduce fees in the Employment Tribunal and Employment Appeal Tribunal by way of statutory instrument in July 2013. The application was dismissed by the High Court, and UNISON appealed. In a judgment dated 26 August 2015, the Court of Appeal dismissed UNISON’s appeals due to the lack of “evidence of the actual affordability of the fees in the financial circumstances of (typical) individuals". On 26 February 2016, it was announced that Unison has been granted permission to appeal to the Supreme Court. The hearing is set for 7 and 8 December 2016.
A parallel Scottish application for Judicial Review remains stayed pending the outcome, and the Scottish government has made clear its intention to abolish Employment Tribunal fees in Scotland if given the opportunity to do so.
On 11 June 2015, the government announced the start of the Employment Tribunal Fees Post Implementation Review, the purpose of which was to consider how effective the introduction of fees (and fee remission scheme) has been in meeting the original objectives while maintaining access to justice, and make recommendations to reform the system if necessary. The review was initially expected to conclude in late 2015, but is now set to be published 'in due course'.
The House of Commons Select Committee's separate but parallel inquiry into court and tribunal fees has now concluded taking evidence and is preparing its report.
Some time ago, the government committed to extend the still quite new Shared Parental Leave and Pay scheme to working grandparents by 2018 and, in the March 2016 budget, it announced the launch of a consultation in May 2016 on how to implement that commitment. However, no consultation was forthcoming and BIS have since indicated that it will not now be published until after the EU referendum.
Modern Slavery Act
With effect from 31 March 2016 Section 54 of the Modern Slavery Act requires commercial organisations with a minimum annual total turnover of £36 million to prepare a slavery and human trafficking statement for each financial year. The statement must set out the steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains or in its own business; or state that the organisation has taken no such steps. The Government has published guidance for businesses affected by the requirement.
Senior Management Regime/Certification Regime in Banking Sector
From 7 March 2016, the senior managers regime (SMR) and the certification regime (CR) together have constituted the new framework (replacing the Approved Persons Regime) that applies to individuals working for UK banks, building societies, credit unions and designated investment firms, as well as branches of foreign banks operating in the UK.
The SMR applies to those performing one of the designated senior manager functions, including board and executive committee members, and requires firms to get approval for the appointment of each senor manager. The CR applies to all staff employed in positions where they could pose a risk of significant harm to a relevant firm or its customers. Firms do not require external approval for appointments, but must assess such individuals and issue them with a certificate in respect of each certification function they perform. In addition to this, there are conduct rules which provide a set of high-level principles. These currently apply only to SMR or CR staff, but from 7th March 2017 these will apply to all employees of relevant firms other than "ancillary" staff such as receptionists and cleaners.
Changes are also being made to whistleblowing requirements for deposit-takers, investment firms and insurers. The requirement to appoint a 'whistleblowing champion', has applied since 7 March 2016, while all other requirements are expected to come into force on 7 September 2016. New rules have also been proposed in relation to references for candidates applying for positions under the SMR and CR.
Penalties for failing to pay ET awards
The Small Business Enterprise and Employment Act 2015 introduced financial penalties for employers who fail to pay awards ordered by employment tribunals. These came into force on 6 April 2016, as did provisions limiting the number of postponement requests that can be made by parties to an employment tribunal claim. Parties are now limited to two requests unless there are exceptional circumstances, and any requests made within 7 days of the hearing, or at the hearing, will only be granted in exceptional circumstances.
Public Sector Exit Payments (cap / repayment)
The Repayment of Public Sector Exit Payments Regulations 2016 were due to come into force on 1 April 2016. At the time of the Morton Fraser conference, however, the Regulations had yet to be laid before Parliament. The Regulations are intended to prevent public sector employees receiving large payouts on leaving their jobs only to return to a public sector role a short time later. The Regulations will apply to employees with annual salaries of £80,000 or more and require them to repay some or all of their exit payment if they return to public sector employment within 12 months.
A complete account of the current law on holiday pay and its development over the past year could fill an entire article by itself, but it is worthwhile including here a brief overview of the key cases and points.
Williams and others v British Airways plc began the recent run of holiday pay cases, with a finding by the European Court of Justice that holiday pay should correspond to 'normal remuneration' rather than simply basic pay. This meat that the pilots in question were entitled to remuneration linked to the performance of tasks where were required to perform, or to their personal or professional status (such as length or service or qualifications). Although decided under the Aviation Directive rather than Working Time Directive, the Court held that the same principles applied.
In Lock v British Gas Trading Limited and others, commission payments were explicitly considered and it was held that such payments should be taken into account for holiday pay. Similarly, Bear Scotland v Fulton considered the matter of overtime and travel allowances. It held that overtime which need not be offered, but which must be worked if offered ('non-guaranteed overtime') must be taken into account, as must travel allowances where they go beyond simply reimbursing costs incurred by the employee. White and others v Dudley Metropolitan Borough Council went even further, including voluntary overtime (which is neither guaranteed not required to be worked if offered) as well as voluntary stand-by and call-out payments where the working pattern they related to was consistent enough to make the payments 'normal' for the individuals involved.
The limits of proper HR involvement in disciplinary processes have been helpfully explored by the Employment Appeal Tribunal in Ramphal v Department for Transport.
Concerns were raised internally about Mr Ramphal's expenses following an audit. The manager who was appointed to act as both investigating and disciplinary officer had not previously acted in such a role and so sought guidance from the HR team. A draft report was sent by him to HR following the disciplinary hearing, recommending a final written warning for misconduct. After around 6 months of communications and drafts being sent internally between the manager and HR, the outcome became a finding of gross misconduct and summary dismissal.
What is important to take from the EAT's decision in this case is the reminder that employees are entitled to put their case to the decision-maker, without that decision being influenced from 'behind the scenes'. Where the decision-maker is not a member of HR, therefore, HR staff should limit their involvement to advising the decision-maker on questions of law, procedure and process. Comment or involvement on issues of culpability should generally be avoided, though the EAT expressly indicated that such discussions would be appropriate where they relate to questions of achieving consistency in treatment. Following this decision it may, particularly where a manager is inexperienced, become more common to have a member of HR sit openly on the disciplinary decision-making panel, so they can safely have a greater degree of input throughout the process.
The question of whether employers have to make reasonable adjustments to absence management procedures has recently been addressed by the Court of Appeal in Griffiths v Secretary of State for Work and Pensions.
Ms Griffiths was diagnosed with post viral fatigue and fibromyalgia and it was accepted that she was disabled. Following one period of absence running to 66 consecutive days she received a warning, having triggered part of her employer's attendance management policy. She had sought reasonable adjustments in the form of the discounting by her employer of most of that absence (and withdrawal of the warning), and the adjustment of the trigger points for future warnings/sanctions so they would be more lenient than those for employees not subject to disability-related illnesses. Her employer refused, and the case made its way through the Tribunal system.
The Court held that the absence management policy did put disabled employees, who would be more likely to be absent than their colleagues, at a disadvantage. As a result, contrary to the decision by the Employment Appeal Tribunal, the duty to make reasonable adjustments arose. However, the Court held that Ms Griffiths' proposed adjustments were not steps which the employer could reasonably be expected to take.
The recent case of Patural v DB Services (UK) Limited has touched upon the degree of discretion an employer can exercise when considering bonus payments - in particular, where one individual gets a smaller bonus than their peers.
In this case, Mr Patural's bonus was stated in his contract to be absolutely discretionary, though the handbook provided a list of factors which would be taken into account. Mr Patural claimed that his bonus of 1% was less than he reasonably expected to receive (between 5% and 10%), and was in breach of the implied contractual duties of his employer to act in good faith an not in a manner which was perverse or irrational.
Reassuringly for employers, the High Court held that a very high threshold must be met for such claims to be successful: an employee will have to show not simply that there was a reasonable expectation of a particular amount, but that no rational employer would pay a bonus of that amount. In this case, the Court were not convinced that this was the case.
This can be contrasted with the earlier case of Braganza v BP Shipping Ltd, in which the Supreme Court held that an employer's failure to make a death in service payment, as a result of its belief that the employee had committed suicide, was unreasonable. Although the High Court in Patural was referred to Braganza, it declined to apply its principles to the facts before it. As a result of the apparent tension between these decisions, it is likely that there will be more litigation to come on this point.
In April of last year, the EAT held in Chesterton Global Ltd (t/a Chestertons) and another v Nurmohamed, that it is not necessary to show that a disclosure was of interest to the public as a whole, as it is inevitable that only a section of the public will be directly affected by any given disclosure. A relatively small group may be sufficient to satisfy the public interest test. In any event, a worker need only demonstrate that they reasonably believed that the disclosure was in the public interest. The employer appealed, and the Court of Appeal is currently due to hear the case around 11 October 2016.
You can read more about some of these changes, and others which took place earlier in the year, in our employment law reform time line which is available here.