Employment legal update #62 | January 2023

Our Employment & HR team brings January's review of new legislation, guidance and case law.

News: 

The Government has announced the commencement of consultation into the calculation of holiday pay for part time/part year workers, following the Supreme Court decision in the case of Harpur Trust v Brazel, which held that those who work part-time are still entitled to the minimum 5.6 weeks annual leave entitlement because there is nothing in the legislation that says differently.

The net effect of this is that in some cases, those who work part-time may have more holiday entitlement compared to the number of hours they work, than those who work full-time. The Government has announced a consultation to try and correct anomalies in the calculation of holiday pay for part time/year workers which the legislation may have Inadvertently brought about which have been highlighted by this judgment. Until this judgment, those who worked part-time had their holiday entitlement prorated by reference to the number of hours or days that they worked. Following the judgment, this is now no longer the case.

The judgment has thrown many in the education and health and social care sectors into confusion because a great deal of these organisations have part-time and zero hours contract workers  and they are now in limbo as to how to calculate, and apply, holiday entitlement.

The government consultation will last 8 weeks and responses must be received by 9 March 2023.

What is proposed

The proposal put forward by the Department for Business, Energy, and  Industrial Strategy is to bring in a holiday entitlement reference period for part-year and irregular hours workers, so that their holiday pay and entitlement is directly proportionate to the time they spend working.

They anticipate this will work by calculating the hours worked in the previous 52 weeks and multiplying them by 12.07% to give a part-year worker annual statutory entitlement in hours. Interestingly, it was this very percentage which was outlawed by the Supreme Court judgment.

The important point to note is that the reference period proposed is 52 calendar weeks, including any weeks in which no work was performed. This differs to the calculation for pay for holiday (as opposed to the entitlement itself), which requires employers to average the amount of pay over a 52 week period discounting any weeks in which no work was done so no pay was earned; and allows employers to go back up to 104 weeks to find an average using weeks where work was performed.

Part of the consultation is to enable BEIS to understand how holiday entitlement is calculated for agency workers and how the consultation proposal might be implemented.

Comment

The fact that the consultation process is only 8 weeks indicates that the Government sees this as a high priority to have resolved because of the issues it is creating for a huge number of employers and for their staff. However, further changes may well cause even more headaches for those in HR grappling with the issues of staff on zero hours contracts and variable hours.

The Update will report back as soon as the outcome of the consultation is known but if anybody wishes to participate, full details are available here.

The Exclusivity Terms for Zero Hours Workers (Unenforceability and Redress) Regulations 2022 are now in force. They apply in England, Scotland and Wales and extend the protection given to employees and workers who are on contracts with net average weekly wages of less than the lower earnings limit, regarding unenforceability of exclusivity terms in zero hours contracts.

Exclusivity terms are defined as any contractual term which prevents a worker from doing work or performing services under another contract or arrangement, or which prevents a worker from doing so without their employer's consent. The regulations specify how net average weekly wages are to be calculated. Key terms are:

• It is automatically unfair to dismiss an employee if the reason or principal reason for the dismissal is that the employee breached an exclusivity term. No qualifying period of employment is needed.
• Protection from detriment if they breach an exclusivity term in their contract.
• Where a worker has suffered a detriment, a tribunal may make a declaration and award compensation up to an amount equal to the unfair dismissal basic and compensatory award.

The regulations follow a government consultation on extending the ban on exclusivity clauses to other low earners.

The government has provided an update (of sorts) on the timeframe for publishing the draft statutory code of practice on dismissal and re-engagement. It has said that this will happen in the “near future”; there has been something of a delay in this publication. There is still controversy about this whole practice; the government is reluctant to impose an outright ban because in some instances it may be the only way to save businesses.

There is yet another delay to the Employment Bill, which will now be brought forward "when parliamentary time allows". There are several government supported Private Members' Bills, including the Neonatal Care (Leave and Pay) Bill, Employment (Allocation of Tips) Bill, Protection from Redundancy (Pregnancy and Family Leave) Bill and the Carer's Leave Bill progressing through Parliament which may be one of the alternatives to implementing the Employment Bill.

It has recently been reported that the Bill of Rights Bill 2022-23 will resume its passage through Parliament "within weeks”. The Liz Truss government dropped it but, it is now understood to have been reinstated under the current government. The Bill will repeal the Human Rights Act 1998 and reframe the UK's legal relationship with the ECHR, to which the UK will remain a signatory.

Change in name  - Sage has undertaken a survey which has established that the term "human resources" is seen as outdated by many HR professionals and senior executives. Approximately 75% of HR leaders and 85% of C-suite executives in small to medium sized businesses agreed that the term "human resources" no longer represents the true nature of the role and that the use of the term "People and Culture" would more accurately reflect the responsibilities of HR teams. Almost all respondents agreed that the scope of HR roles has changed significantly over the past five years and a third believe it will need to evolve further over the next five years. The term Chief People Officer rather than director of HR is becoming increasingly common, certainly in the not-for-profit sector.

Following a survey of 70 companies which took part in a 6 month pilot scheme of the four-day week, 100 UK companies have now signed up to a permanent four-day working week. The companies have 2,600 staff between them, all of whom will work fewer hours without losing any pay. The survey revealed that 88% of companies found that the four-day working week worked well for them and 95% of companies reported that productivity had either stayed the same or improved since the trial began. The CIPD has published a report in October 2022 which found that a third of employers believe a four-day working week will be attainable within a decade.

HMRC has reported a 70% increase in whistleblowing reports in the past two years, mainly down to reports of abuse of the furlough scheme. In the 12 months leading up to 1 April 2022, HMRC received 15,000 reports from whistleblowers, compared to 8,900 reports received the year before the pandemic. 38% were sufficiently serious for HMRC to take further action.

The government has issued a response to its consultation, launched in September, regarding changes to the right to request flexible working. Crucially, it is proposing to introduce secondary legislation amending this right to commence from the first day of employment, without any continuous period before someone is entitled to apply. However, there is no timeframe indicated for this. Primary legislation will be needed to implement the following recommended changes:

• Requiring an employer to consult with the employee if it is considering rejecting a request.
• Permitting employees to make two requests in a 12-month period instead of one.
• Reducing the period in which an employer must respond to a request from three months to two months.
• Removing the requirement for employees to specify how the employer might deal with the effects of the flexible working request on the job they do, other employees, and the business.

There is currently a Private Members  Bill entitled the Employment Relations (Flexible Working) Bill which is making its way through Parliament and which contains these provisions, supported by the government.

Increases to take effect from 10 April 2023 in statutory payments have been announced as follows (up by just over 10%):

• The weekly rate of statutory sick pay (SSP) goes up to £109.40 (from £99.35).
• The weekly rate of statutory maternity pay (SMP) and maternity allowance goes up to £172.48 (from £156.66).
• The weekly rate of statutory paternity pay (SPP) goes up to £172.48 (from £156.66).
• The weekly rate of statutory shared parental pay (ShPP) goes up to £172.48 (from £156.66).
• The weekly rate of statutory adoption pay (SAP) will be £172.48 (up from £156.66).
• The weekly rate of statutory parental bereavement pay (SPBP) will be £172.48 (up from £156.66).

The previous update highlighted that regulations allowing agency workers to fill in for striking workers during strike action are now in force. However, the High Court has granted permission for a judicial review of the regulations. Three sets of legal proceedings were launched in September 2022 in response to the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2022 which came into force in July 2022. Challenges have been brought by the Trades Union Congress (TUC), Unison and NASUWT and have all been granted permission to proceed. The grounds being argued are a failure to consult the unions on the bringing into force of these regulations, and that they violate fundamental trade union rights which are protected under Article 11 of the European Convention on Human Rights.

HM Treasury has published a statement by the Chancellor of the Exchequer, on a wide-ranging set of reforms to the financial services sector. A review of the senior managers and certification regime (SM&CR) will take place in the first quarter of 2023. The government will launch a call for evidence to look at the current legislative framework and canvass views on the regime's effectiveness, scope and proportionality, as well as possible improvements. The FCA and the PRA will also review the regulatory framework.

The Office of Tax Simplification (OTS) has published its report on the tax implications of hybrid and distance working. Key findings include:

• The large-scale move to UK-based hybrid working provides an opportunity / requirement for tax policy changes to the benefits and expenses rules (i.e. home to office travel) and updated guidance.
• Short-term cross-border remote working is increasingly common. All the large businesses canvassed by the OTS have introduced policies for short-term (c.10-30 days per year) cross-border remote working notwithstanding the administration of these arrangements being a considerable burden. However, the take-up is low so far, with only between 2-5% of eligible employees opting to work overseas.
• Compliance issues include employee tax residence (and withholding implications), employee presence for social security purposes and the risk of creating an overseas permanent establishment.
• Permanent cross-border working arrangements (but not expatriate assignments) are less common as many UK-based employees do not wish to permanently relocate, and these arrangements can require additional infrastructure.
• As well as tax issues, these arrangements require considering who should employ the worker (possibly "employer of record" arrangements), transfer pricing and the UK's short term business visitor rules.
• Even though currently comparatively few employees have adopted cross-border remote working, there is an anticipation that these arrangements will be offered for the foreseeable future.
• HMRC has agreed that a UK employer can apply for a certificate of continuing UK NICs liability where an employee has chosen to work abroad (as opposed to being posted abroad).

Commentary:

Reinstatement causes dismissal to vanish

In Marangakis v Iceland Food Ltd, the EAT has held that where an individual is dismissed for gross misconduct but successfully appeals that decision, they are automatically reinstated and the dismissal disappears, even though the employee had indicated that they did not wish to be reinstated when their appeal was successful.

The claimant was dismissed for gross misconduct but appealed and indicated that she wished to be reinstated to her position. The appeal hearing was adjourned pending further investigations which dragged on, as a consequence of which she changed her mind and said she did not wish to be reinstated after all because she felt that mutual trust and confidence had broken down. The appeal hearing was reconvened, at which her appeal was successful and she was reinstated with a substituted final written warning. She was informed that she would be paid her back pay and that she should immediately return to work. She continued to insist that she did not wish to be reinstated, and did not return to work; as a result of which she was dismissed for failure to attend.

She brought a claim of unfair dismissal which the employer resisted on the basis that the successful appeal and reinstatement caused the dismissal to vanish, and the employment tribunal agreed. Following accepted case law, the tribunal said that the only way in which the employee could avoid this is if she had withdrawn her appeal; but the successful appeal and her reinstatement caused the dismissal to vanish. The EAT upheld the tribunal decision.

No discrimination where unfavourable treatment was not because of disability

In Hilaire v Luton Borough Council the EAT has held that there was no duty to make reasonable adjustments where a disabled employee, who was in consultation through being at risk of redundancy, refused to participate in an interview process for reasons which were not connected to his disability.

The employer accepted that the claimant was disabled with depression and arthritis. He was off sick when the employer announced a consultation regarding a restructure, and was placed at risk of redundancy. Part of the process required him to apply and interview for a role in the new structure. He requested, and was given, additional time and assistance to complete the application but he declined to attend an interview, producing a sicknote. He was given additional time to attend but 13 candidates had already been interviewed and the employer wanted to make a decision, so it eventually imposed a deadline on him to attend. However, he continued being too unwell and eventually was dismissed for redundancy. He then issued proceedings for a failure to make reasonable adjustments and other claims. His argument was that the requirement to attend an interview was a provision, criterion, or practice which put him as a disabled person at a substantial disadvantage and that he should have been slotted into a role without an interview.

This argument was rejected by the tribunal which took the view that there was no substantial disadvantage, and he could have attended an interview if he wanted to. He appealed. The EAT found that the tribunal had been wrong not to consider how his disability might affect his ability to participate in an interview, not just to attend it. The key, however, was that the real reason for his non-participation was not connected to his disability and there was evidence endorsing this. The real reason he refused to attend was because he believed that his employer wanted to manage him out because of his disability and was doing so under the guise of redundancy. His reasonable adjustments claim therefore failed.

The EAT commented that giving him a role without being interviewed would have alleviated any disadvantage, but it would have affected other potentially redundant employees. It commented that a reasonable adjustment is not "a vehicle for giving an advantage over and above removing the particular disadvantage". Consequently, the tribunal decision was upheld because there was no adjustment that could reasonably have been made.

Redundancy compensation reduced to nil overturned

In Teixeira v Zaika Restaurant Ltd and anor the EAT overturned a tribunal decision which held that the compensation for unfair dismissal as a result of a redundancy situation should be reduced to nil because of the likelihood that the individual would have been dismissed on the same even had a process been followed. The tribunal decision took no account of the fact that consultation would, and should, have taken place, even if the individual had been placed in a pool of one. As a result, that consultation would have extended the individual's period of time in employment whilst it took place even if, at the end of it, he was dismissed.

The claimant was a chef and the only non-speciality chef amongst 10 others. Because of the downturn in work as a result of the pandemic he was singled out for redundancy and none of the other chefs were placed at risk. He was given one months' notice on the telephone of dismissal for redundancy with no consultation. It was the view of the tribunal that his redundancy was inevitable and that even though the dismissal was unfair, as no process had been followed his compensation was reduced to nil (because, had a process been followed, he would still have been dismissed redundancy).

However, as the EAT found, the tribunal failed to take account of the fact that some form of consultation should have taken place, even if he would have been dismissed as being in a pool of one anyway. The EAT remitted the matter back to the tribunal to consider compensation based on the length of time proper consultation would have taken even if he was in a pool of one (which was accepted as he was the only non-speciality chef). So the tribunal now has to consider how long consultation with someone in a pool of one would have taken and award compensation based on the amount of time he would have remained in employment while it was carried out.

Grievance was existing dispute so engaged without prejudice protection

In Garrod v Riverstone Management Ltd, the EAT has upheld an employment judge’s decision that evidence of a settlement offer made at a meeting regarding a grievance about bullying, harassment and maternity discrimination could not be relied on in tribunal proceedings because the grievance was an existing dispute which merited the without prejudice protection. The EAT also upheld the judge’s decision that the “unambiguous impropriety” exception to the without prejudice rule was not engaged when the employee alleged that the proposal was made with a discriminatory motive.

The claimant lodged a grievance alleging pregnancy and maternity discrimination, bullying and harassment. At a meeting at which the company’s external HR and employment law adviser were present, the key aspects of her grievance were discussed. The adviser stated that he wanted a without prejudice conversation, assuming the claimant understood what this meant as she did not enquire. The discussion was put forward as an initial exploratory one, and an offer of £80,000 to terminate her employment was made but rejected.

The claimant issued proceedings for maternity related discrimination and constructive dismissal. In her pleading she referred to the meeting at which the offer was made; the respondent argued that this should be excluded on the basis of without prejudice privilege. A preliminary hearing was convened by the tribunal to look at whether or not this meeting attracted without prejudice status.

The employment judge found that the settlement offer did attract without prejudice privilege because there was an existing dispute at the time of the meeting and there was reasonable contemplation by the parties that litigation could ensue, failing settlement. The claimant’s argument about the “unambiguous impropriety” exception was rejected on the basis that the adviser had been polite and professional and had not behaved in an untoward fashion towards the claimant.

However, she appealed to EAT, relying on the decision in another EAT case, that the raising of the grievance does not of itself prove the existence of a dispute. She also argued that the employment judge was wrong to find there was no unambiguous impropriety and that the respondent had tried to use the without prejudice rule to push her out of a job for discriminatory reasons and told her that she had no future at the company.

The appeal was dismissed. While the EAT acknowledged that the facts in the other EAT case were similar, the EAT had reached its decision there because the tribunal had made conclusions which it was open to make based on the evidence in front of it (in that case the issue which arose was not what was said, but was the way in which the meeting in question was carried out which was of itself discriminatory).. That case was not authority for the fact that just because those facts exist, there was no dispute. The claimant had not relied on the meeting in question as of itself providing a head of claim and the EAT found that the tribunal was entitled to conclude that, at the time of the meeting, there was a dispute in existence between the parties so that the without prejudice privilege kicked in.

When considering the ‘unambiguous impropriety’ exception, the authorities in the other EAT case were clear that the ‘without prejudice’ rule will only be disapplied in very clear-cut cases or exceptional circumstances; neither of which, on the facts, were found to exist in this case.  In the other case the unlawful conduct which triggered the tribunal case was found to have occurred at the meeting which was alleged to be privileged. The current case was different in that the claimant was trying to interpret a consensual termination proposal as discriminatory. Given there was no adverse finding about the way in which the meeting was conducted the employer could not validly be accused of unambiguous impropriety.

Court of Appeal decision on pandemic absence

In Rodgers v Leeds Laser Cutting Ltd the Court of Appeal has upheld a tribunal decision that an employee who went home and refused to return to work because he was afraid of contracting covid 19 during the pandemic was not automatically unfairly dismissed for leaving or refusing to return to the workplace amid circumstances of danger under section 100 (d) of the Employment Rights Act. The Court of Appeal held that the employment judge was right to conclude that there were no circumstances of serious and imminent danger which justified the employee taking this stance.

The employer’s business remained open during lockdown with all proper health and safety provisions in place and followed. However, the employee left home one evening and refused to return to work on the basis that he had a vulnerable child (sickle-cell anaemia) and a 7-month-old baby and he could not risk them contracting the virus. He obtained a self-isolating certificate but following its expiry the claimant contacted someone in the company saying that he had been sacked for self-isolating. He was then told to collect his P45 which he did - and promptly issued proceedings for automatic unfair dismissal under section 100 (d), which provides ‘in circumstances of danger which the employee reasonably believed to be serious and imminent and which he could not reasonably have been expected to avert, he left (or proposed to leave) or (while the danger persisted) refused to return to his place of work or any dangerous part of his place of work’.

The Court of Appeal concluded that both the tribunal and the EAT had been right to take the view that the individual was not in sufficiently serious or imminent danger to justify him refusing to return to work and as such his claim for automatic unfair dismissal for assessing a health and safety right failed.