21st October 2024
Employment law intentions of the new government
Prior to the recent election, the Labour Party published a plan in May 2024 which indicated an intention to introduce sweeping changes to the UK employment law landscape. Since winning the July election, they have confirmed that they intend to proceed with those plans subject to some slight modification and have now introduced an Employment Rights Bill. That provides the broad contours of the intended changes and some of the specific detail but much remains to be clarified.
Some of the intended changes are a continuation of the direction of travel taken by the previous Conservative government whereas others are new, and on the face of it radical, reforms such as removing the existing two year qualification period to bring a claim for Unfair Dismissal. Some of the plans could be implemented quickly whereas others will require considerable consultation with stakeholders and a long legislative journey through Parliament. The Unfair Dismissal change is not due to be implemented until the Autumn of 2026.
The key proposals are:
1. Ending fire and re-hire (also known as dismissal and re-engagement).
Like all contracts it is not permissible for one party, in this instance the employer, to unilaterally amend contracts of employment. However, the nature of an employment relationship, being one that evolves over time, does not sit particularly well with the usual law of contract. It is not uncommon for situations to emerge whereby an employer believes that it needs to change what has been agreed for business reasons but if the employees won’t agree to amend their contracts in the way that their employer desires the employer cannot just impose the change without risk of claims including, potentially, employees resigning to pursue constructive dismissal claims.
One approach that employers currently adopt is something known as dismissal and re-engagement which entails the employer serving notice on the employee to bring their existing contract of employment to an end and then offering them a fresh contract (to start on or before notice expires so that continuous service is preserved) which is identical to the previous contract save that it is changed in the manner that the employer was trying to seek the employee’s agreement to. This is not a risk free approach as employees with over two years’ service (as the law currently stands but see more below) can bring Unfair Dismissal claims but generally, if the business reason is sufficiently persuasive and the consultation seeking that the employee(s) agree the change sufficiently thorough prior to notice being served, such dismissals are normally held to be fair.
That is controversial because in effect it does allow employers to impose unilateral alterations and there is a suspicion that they may do so in circumstances where the change is not strictly ‘necessary’ but instead just ‘desirable’ from the employer perspective while ‘undesirable’ from the employee perspective (although as said above such instances could be challenged with Unfair Dismissal claims or other types of claim in the Employment Tribunal).
The Conservative government introduced a code of practice which sought to limit the use of fire and rehire and restrict it to being a measure of last resort. This code of practice only came into force in July 2024 (and some related measures which would have provided it with more enforcement teeth did not get through Parliament before dissolution but could be taken up again now) but the new government have described it as inadequate and intend to legislate so as to limit instances of dismissal and re-engagement to where there is ‘genuinely no alternative’. The Employment Rights Bill outlines an intention to amend the Employment Rights Act 1996 so as to specify that dismissing an employee for refusing to accept changes to their employment contract is an automatically unfair dismissal unless the employer can meet the high hurdle of establishing they genuinely have financial difficulties and had no reasonable alternative but to impose the change.
2. Unfair Dismissal Rights from Day 1
Probably the most headline grabbing aspect of the signposted employment reforms had been the intention to introduce day 1 employment rights for all workers “ending the current arbitrary system that leaves workers waiting up to two years to access basic rights of protection against unfair dismissal, parental leave and sick pay.” So far as Unfair Dismissal goes, that was striking for two reasons being firstly the use of the word ‘workers’ rather than ‘employees’ and secondly that the ability to claim unfair dismissal, ever since that type of claim was first introduced in the early 1970s, has always been subject to some form of continuous service requirement although historically that has been shorter periods than the present two years. The Employment Bill has now clarified that the ability to claim Unfair Dismissal will remain restricted to employees rather than extended to workers (although there is a longer-term thought to reform employment status in such a way that many people who would currently be deemed workers rather than employees will become employees).
The intention is to remove the qualification period for unfair dismissal claims but introduce a statutory concept of a probationary period during which employers would, in situations concerning conduct or capability, have more leeway to dismiss. At present, all employees are on a two year probationary period in a manner of speaking as they can generally be dismissed on notice without legal recourse until they have reached the two year mark. Probationary periods as set out in contracts of employment (typically one month or three months depending on the nature of the role) are simply used to reduce the amount of notice that either party needs provide the other party during that period. Going forwards, it seems that probationary periods will have a much more important role (and contracts of employment will need to be updated to reflect that) but we await the detail of the proposals. There is to be a consultation on the length of the new probationary period concept (the government currently favouring nine months) and what the simplified dismissal process during that period should entail; seemingly at a minimum requiring a meeting to be held (at which the employee could be accompanied by a Trade Union representative or colleague) in which the employer’s concerns about the new employee are discussed. It is also possible that, in circumstances where someone is dismissed during the new probationary period concept and proceeds to win an Unfair Dismissal claim, their compensation will be assessed at lower level than would be the case for an employee in the same circumstances save that they had completed the probationary period prior to dismissal.
3. Discrimination law
The government have stated that they intend to introduce a legal duty on employers to take all reasonable steps to prevent sexual harassment before it happens (a new duty to take reasonable steps is imminent anyway but all reasonable steps is a higher hurdle). It seems that the intention is specifically limited to sexual harassment where the harassment is of a sexual nature (e.g persistent, unwanted advances) rather than harassment related to sex which is a broader concept including for example making sexist comments. At present, employers have a statutory defence to claims for harassment where they can establish that they have taken all reasonable steps (for example regular equality and diversity training) to prevent harassment but one of their employees has nevertheless committed harassment of a colleague; whether this defence would still be available in circumstances where there is a legal duty to take all reasonable steps to prevent sexual harassment remains to be seen.
Additionally, the new government plan to introduce a duty that would require employers to seek to protect their staff from harassment including where that harassment is by a third party such as a customer. Third party harassment was something previously addressed in the Equality Act but that particular section was repealed back in 2013. It is now set to be reintroduced but we await the precise details and timescale for that. The wording of the Employment Rights Bill implies that this may adopt the same ‘all reasonable steps’ standard in relation to all protected characteristics that is to be introduced in relation to sexual harassment and, if so, that would have potentially enormous consequences.
4. Ending one-sided flexibility
One of the pledges is in relation to zero-hours contracts whereby employees are not guaranteed any work by their employer. Such contracts will quite often state that, although the employer is not obliged to offer any hours to the employee, the employee is obliged to accept and work any hours that the employer does provide them with. This has a detrimental impact on the employee’s ability to organise their lives as they are required to be permanently available to work for the employer without any guarantee that work will actually be forthcoming. Furthermore, it arguably constitutes a back door way of circumventing the ban on exclusivity clauses in zero hours contracts as in theory an employee would not be able to accept zero hours contracts from two different employers if each of those contracts asserts that the employee must be always available to work for that particular employer.
In Autumn 2023 the Labour Party announced that they intended to ban zero hours contracts altogether but in May 2024 that was revised to a ban on ‘exploitative’ zero hours contracts. The Employment Rights Bill was expected to seek to define what constituted ‘exploitative’ zero hours contracts but has not done so. Instead it tackles the issue in a different, and potentially rather convoluted manner, whereby employers will be obliged to offer (although the employee will not be obliged to accept) regular guaranteed hours to zero hours workers based on the hours they have been working over a reference period. That reference period is yet to be determined but there is a suggestion of it being twelve weeks. One area that will need careful consideration is in respect of seasonally affected work; for example will employers be obliged to offer year round ‘summer hours’ at the end of a busy summer even though they would otherwise much reduce hours for the winter period?
5. Enforcement of rights
With a couple of exceptions, the usual time limit for pursuing an Employment Tribunal claim is that an ACAS notification (an initial mandatory step) must be made within three months less a day of the event complained of. It has long been noted that this is a short period when compared to the limitation periods in other types of litigation which are typically six years. Increasing the time limit to six months for discrimination claims has been long under consideration but the intention is to go further and increase the time limit to six months for all main types of Tribunal claim. However, this intention did not make it into the Employment Rights Bill and is therefore presently in limbo along with proposals to create a new government body whose remit is to enforce employment rights. The Employment Rights Bill does contain various preparatory measures for creating that enforcement body, expected to be called the Fair Work Agency, but it is not expected to come into being for several years.
6. Equal Pay
This was not addressed in the draft Employment Rights Bill but the prior King’s Speech announced an intention to introduce a draft Race and Equality Bill which will extend equal pay legislation to ethnic minorities and employees who meet the legal definition of disability. The benefit of doing so is questionable given that Equal Pay claims are complex and time-consuming; normally brought on behalf of multiple Claimants asserting that the roles that they have (which are normally disproportionately performed by women such as primary school teaching assistants) are of equal value to another role which is disproportionately undertaken by men and so should receive the same pay and benefits. It is hard to see how similar concepts could be imported into the field of race or disability and in any event there are more straightforward ways within existing discrimination law to litigate alleged underpayment which is either specifically because of race or disability or else indirectly connected to those protected characteristics. In addition, employers of over 250 employees will be obliged to monitor and publish statistics relating to pay for ethnic minority and disabled employees. That requirement already exists for employers of that size in relation to publishing gender based statistics.
7. Enhanced protection for employees on maternity leave and those who have returned to work
One proposal included in the new Employment Bill is a provision (to be introduced via further Regulations) making it unlawful to dismiss a woman who is returning to work following maternity leave for six months after their return except in specified circumstances. This is an extension of rights conferred in April of this year (which did not ban dismissal but did give such women priority when considering whether suitable alternative work exists in a redundancy scenario) and the significance, or otherwise, will largely depend on what specific circumstances are permitted. It is likely that the right will also cover those returning from other forms of family leave beyond just maternity leave.
8. Reform of redundancy consultation
An employer is obliged to collectively consult with employee representatives (in addition to individually consulting with the employees) whenever they propose to dismiss as redundant 20 or more people within 90 days at one establishment. For a long time it was unclear what exactly was meant by ‘one establishment’ but a case arising out of the demise of Woolworths clarified that it generally means at one particular work premises. One of the new government’s intentions included in the Employment Rights Bill is to legislate so as to effectively reverse the position in the Woolworths case such that an employer will be obliged to collectively consult whenever twenty or more redundancies are proposed within a 90 day period across the business (although not across an overall group company structure). This would potentially be a very significant change as, particularly in large employers with thousands of employees, the threshold for collective consultation might be frequently met.
9. Statutory Sick Pay
The Employment Rights Bill confirmed a previously stated intention to remove the lower earnings limit (presently £123 a week) from the eligibility requirement for Statutory Sick Pay such that all employees will be entitled even if their average weekly earnings are below the present lower earnings limit. There is to be a consultation in relation to what level SSP should be where people earn on average less than the lower earnings limit. In addition, SSP is not currently payable until the fourth day of absence but the proposal is to remove this three day waiting period such that it becomes payable from the first day of absence. These changes are likely to be implemented in a much quicker timescale than many of the proposals discussed earlier and potentially will take effect in April 2025.
10. National Minimum Wage
Although not addressed in the Employment Rights Bill, this is to be reformed in two ways being firstly that the remit of the Low Pay Commission will be expanded so as to specifically require considering the actual cost of living when recommending the National Minimum Wage rates and secondly to increase (or potentially remover) the 18-20 age band rate such that all workers over the age of 18 (with the exception of some apprentices although that exception may itself be scrapped in due course) will be entitled to receive the National Living Wage or close to it.
Conclusion
In addition to the prospective changes outlined in this article there are a great many other less significant changes to the employment law landscape that are brought forwards in the Employment Rights Bill. under active consideration or else progressed through Parliament under the previous government but have yet to be implemented while the new government takes stock of the world of work. There are also some far more fundamental changes, in particular with regards to Employment Status, that have been mooted for a long time but may be progressed in the latter stages of the current Parliament.
If you would like to discuss anything in this article (or indeed any employment law topic) please do get in touch.
Phil Sayers, Employment Law for Wilde Law
5th March 2024
Employment law changes effective in April 2024
1. National Minimum Wage. The National Minimum Wage is increased on an annual basis and last Autumn it was announced that the amount will increase to £11.44 for workers aged 21 or over (also known as the National Living Wage). This change will be effective as of 01 April 2024 and the rate for workers aged 18 to 20 will increase to £8.60 an hour at the same time. There are corresponding increases for the lower 16 – 17 age bracket and also the apprenticeship rate. Further into the distance, it is speculated that a single rate for all workers over the age of 18 may be introduced along with the apprenticeship rate being scrapped and apprentices instead receiving the standard national minimum wage applicable to their age bracket.
Until now, there has also been a National Minimum Wage exemption for domestic live in workers. That will cease to apply as of 01 April and such workers will become entitled to the National Minimum Wage applicable to their particular age.
2. Recent changes to holiday entitlement calculation have been introduced starting on 01 January this year with further parts to be implemented as of 01 April this year. One of those changes concerns something known as rolled-up holiday pay. Rolled-up holiday pay is the practice of paying an enhancement above base salary to reflect holiday pay entitlement but not separately paying the worker when they actually take holiday. For many years this has occupied a somewhat strange position in law whereby rolled-up holiday pay has been unlawful but, provided there has been a transparent enhancement to basic pay, workers could not take action. The change as of 1 April 2024 is to expressly permit the practice of paying rolled up holiday pay in particular circumstances; those circumstances being part year workers (for example a seasonal employee or an employee in a nursery setting whose contract only requires term time working) and people who work variable, irregular hours.
Another change applicable to irregular and part-year work that is being introduced is to permit holiday accrual to be calculated at a rate of 12.07% of actual hours worked. This rate had long been used in practice (indeed was endorsed in ACAS guidance) as equating to a pro-rata statutory minimum entitlement of 5.6 weeks’ paid annual leave per year but it did not actually accord with the calculation method contained in the Working Time Regulations. That led to the Supreme Court ruling that the 12.07% method produced the wrong result for certain term time only workers but the right calculation method instead resulted in those term-time workers receiving proportionally more holiday than whole year workers. The government legislation is therefore intended to reverse the effect of the Supreme Court decision.
3. On 06 April the Flexible Working (Amendment) Regulations will come into force. These provide that the right to make a flexible working request will become a ‘Day 1’ right rather than contingent on having 26 weeks length of service, that an employee has a statutory right to make two requests per year rather than one and that the timescale for an employer’s response will be reduced to two months from the current three. Aside from the last change, it is questionable how much difference these amendments will make in many workplaces because, in practice, if a new employee sought to change their hours
or a long-standing employee sought to change their working days on two separate occasions within the same year, it is unlikely that an employer would have point-blank refused to consider the requests simply because they were not mandated by statute to consider the requests.
4. An Increase in the weekly cap for Statutory Redundancy Payments and maximum ordinary Unfair Dismissal awards will take place on 06 April 2024. The new weekly cap will be £700 per week which means that the maximum statutory redundancy payment (applicable where somebody has twenty or more continuous years’ service all over the age of 41) will be £21,000 as a tax free payment. Maximum compensation for ordinary Unfair dismissal claims is also increasing both due to the increase in the weekly cap to £700 having the same effect on Basic Awards for unfair dismissal as it does with statutory redundancy payments and also because the maximum compensatory award is being increased by circa £10,000 to £115,115. Please note that statutory cap will be disapplied in instances of automatically unfair dismissals.
5. A new statutory right to unpaid Carer’s leave will be introduced on 06 April 2024. That right is for an employee who has a dependent with long term care needs. The right will be to take one week off, which can be broken down into either full days or half days, in every rolling twelve-month period. As with the statutory mechanism (which can be varied by contract) for holiday notification contained in the Working Time Regulations, the required notice will be twice as many days as the employee wishes to take; i.e if they wish to take two consecutive days off they will need to give four days’ notice. An employer will be able to postpone the carer’s leave in certain circumstances.
6. An extension to the protected period to encompass the entire period between when a pregnant employee notifies their employer that they are pregnant until eighteen months after returning from maternity leave. One effect of this will be with regards the law of redundancy in that, while all redundancy scenarios should require consideration of whether there may be suitable alternative work for an employee provisionally selected for redundancy, people who are in a protected period have an enhanced right to actually be offered a suitable alternative role even if there may be another employee who is in line to be made redundant but would be better suited themselves to the available alternative role. Statistically, a disproportionate number of employees returning from maternity leave have been made redundant shortly after their return and limiting that is a key reason for the change.
7. Amendments to the right to take paternity leave will come into effect in circumstances where the expected week of childbirth (or adoption) is on or after 06 April 2024. Previously, the right was to take either one or two weeks as paternity leave but that had to be in consecutive blocks and taken within eight weeks of the birth or adoption. Now, it will be possible to take a week, return to work for a bit and then take another week provided that both weeks are taken within the first year after childbirth or adoption.
Phil Sayers, Employment Law for Wilde Law
6th November 2023
Autumn 2023 case law update
Over £100,000 awarded as compensation for gender critical belief discrimination
Forstater v CGD Europe and others ET/2200909/2019
A long-running legal saga appears to have reached its conclusion with the Claimant, Ms Maya Forstater, being awarded over £100,000 in compensation. Ms Forstater had been engaged by a company under a series of fixed-term consultancy agreements. In 2017 and into 2018 she started to make high-profile online comments regarding gender identity and gender fluidity; the general thrust of her comments was that gender is biological and a man does not become a woman or vice versa by identifying as the opposite sex.
In October of 2018 some of the Claimant’s colleagues complained that her comments were “transphobic”; something she denied in correspondence while maintaining that she would continue to state that she had no issue with how people chose to identify but identifying as the opposite sex did not actually make someone the opposite sex. When her contract expired on 31 December 2018 it was not renewed and she (correctly as subsequently found) linked that with the dispute about her comments when issuing proceedings alleging discrimination in relation to her philosophical beliefs.
The primary case law authority as to what constitutes a philosophical belief that is capable of being protected under discrimination law was set out in Grainger PLC v Nicolson [2010] ICR 360. That case specifies that the belief must genuinely held (which often requires the Claimant to demonstrate how they live their life in accordance with the belief) and must be worthy of respect in a democratic society, not be incompatible with human dignity and not conflict with the fundamental rights of others. At the initial Tribunal hearing the Claimant failed to establish the requisite grounds due to those requirements; in other words her belief that gender is something someone is born with and cannot change in a biological sense (even if they have gender reassignment operations) was held to be incompatible with human dignity, in conflict with the fundamental rights of others and not worthy of respect in a democratic society.
Ms Forstater appealed the initial decision to the Employment Appeals Tribunal and was successful in her appeal. The basis on which she was successful was the EAT holding that the original Tribunal had applied too low a threshold and that the sort of philosophical views that should be excluded from protection are limited to those akin to support for Nazism. The EAT were at pains to stress in their judgment that Ms Forstater’s beliefs being protected did not mean that she was therefore free to refuse to use transgender people’s favoured pronouns; doing so could constitute harassment.
The matter was then returned to a freshly constituted Employment Tribunal who upheld the Claimant’s complaints and awarded compensation of over £100,000. Specifically, they awarded £91,500 as compensation and further £15,000 in interest to represent the passage of time since the original discriminatory acts. To be clear the award was only that significant due to the direct financial loss that the Claimant had suffered from the non-renewal of her well remunerated position with the Injury to feelings element being assessed at £25,000. That put it in the middle band of the three bands used to assess injury to feelings although towards the top of the middle band.
There have been several other high-profile recent cases arising out of similar circumstances.
Contractual condition specifying that employee must serve a minimum period of employment is potentially valid but injunction not granted on the particular facts
Hine Solicitors Ltd v Jones and another [2023] EWHC 1708 (KB)
Although the outcome of this case was decided against the employer for other reasons, it did address an interesting point of law regarding the enforceability of an unusual provision in Ms Jones’ employment contract. Her contract specified that she was unable to give notice to her employer for a period of three years after commencement of employment and was therefore under an obligation to serve (subject to possible termination by the employer) a minimum of three years and then a three month notice period. She resigned in breach of that requirement after approximately a year’s service.
Her employer brought proceedings which partially relied on her breach of that contractual term and in response she argued that the provision was unenforceable as it could not be reconciled with the minimum notice periods set out in the Employment Rights Act 1996. Those are that an employee needs to give a minimum of one week regardless of length of service whereas an employer needs to give one week per completed years’ service; up to a maximum of twelve weeks’ notice. Although the Court did not need to decide in this instance whether or not the three-year minimum service clause actually could be relied upon, they did hold that it was plainly arguable that the provision was valid and effective.
Statutory Redundancy Payment entitlement not restored if employee subsequently seeks to accept suitable alternative work having previously rejected it.
Love v M B Farm Produce Ltd ET/2304946/2022
In a redundancy scenario an employee is generally entitled to a Statutory Redundancy Payment calculated based on their length of service, salary (subject to a weekly cap) and age should the redundancy scenario result in their departure. However, there is an exception where the employer offers the employee suitable alternative work and the employee unreasonably rejects that offer of suitable alternative work. Such an alternative role would generally be subject to a trial period and the suitability or otherwise is broadly assessed from the employee’s viewpoint; for example, a job at the same level and with the same pay as the role being made redundant may not be suitable if there is a further hour’s daily commute involved.
Mrs Love was employed at a farm shop but her employer decided to close that farm shop thus leaving her role redundant. The employer offered a similar role at another farm shop and offered to pay her travel expenses along with agreeing an initial trial period. She rejected the offer as she was not a confident driver although her employer had been willing to agree to such things as not requiring that she drive in adverse weather conditions. Her employer argued that she had forfeited her entitlement to a SRP as she had unreasonably rejected an offer of suitable employment and at that point Mrs Love sought to reverse her rejection of the offer and agree to trial the role. Her employer would not permit her to change her mind and she brought proceedings for Unfair Dismissal and failure to pay a Statutory Redundancy Payment (SRP).
The Tribunal upheld her Unfair Dismissal claim noting that it was unreasonable not to permit her to undertake the trial period notwithstanding her prior rejection of the role. However, the Tribunal rejected her claim for a SRP with the |Judge observing that there was nothing in the statutory rules governing entitlement to a redundancy payment or in subsequent case law which addressed the scenario of an employee changing their mind. However, on his reading of Section 141 of the
Employment Rights Act 1996, the logical construction was that once entitlement had been lost it could not subsequently be restored.
Bank found liable for Unfair Dismissal and Disability Discrimination following dismissal of employee who used racially offensive language for illustration purposes during equality training.
Borg-Neal v Lloyds Banking Group ET/2202667/22
Mr Borg-Neal was a manager at Lloyds Bank and was dyslexic. He attended an equality training session with the training undertaken by an external provider. In the course of the session he asked a question about how a line-manager should respond if they heard a member of an ethnic minority using language about that minority that could be considered a racial slur if used by someone who was not a member of that minority. When he did not immediately receive a response he then followed up with an example in which he used the N Word; stating that word in full.
The external training provider reported that to Lloyds after the training session had ended. The bank then conducted an investigation which resulted in disciplinary proceedings. They concluded that he had not intended to be offensive and that the question he had asked was a relevant one but also concluded that he should have known better than to use the full word in a professional setting. Although he had immediately apologised he was dismissed for gross misconduct; in part because the trainer had been off work and unwell for four or five days after the incident.
Mr Borg-Neal brought proceedings for Unfair Dismissal, Disability Discrimination and Race Discrimination. He succeeded in the first two of those claims but not the last. The Tribunal accepted that the language used could be deemed misconduct by a reasonable employer but found that the context was all important in this situation. In the circumstances the employer did not have a reasonable belief that he was guilty of gross misconduct and also found the investigation conducted to be unfair; particularly that the bank had not sought to obtain direct evidence from the trainer.
Furthermore, Mr Borg-Neal succeeded in his claim for disability discrimination as the Tribunal found that his dyslexia had contributed to the situation through affecting how he had expressed himself but Lloyds had not taken this into account when deciding to dismiss. However, he did not succeed in an argument of race discrimination whereby he had alleged that a hypothetical black comparator would not have been dismissed for similar conduct. The Tribunal struggled to construct an appropriate comparator and noted that centuries of intolerance had created a situation where that particular word was uniquely offensive and that no derogatory description of white people had comparable impact.
Phil Sayers, Employment Law for Wilde Law
16th October 2023
Recent Case Law – holiday pay and unlawful deductions from wages
Recent months have seen a few important developments in employment law case law including a Supreme Court ruling that has important implications for the ability of employees to go back in time to claim substantial sums in arrears of wages where the claim arises from an alleged series of unlawful deductions.
Chief Constable of the Police Service of Northern Ireland and another v Agnew and others (Northern Ireland) [2023] UKSC 33
Holiday pay has been a hot topic in employment law during recent years. Cases have held that annual leave should be based on usual remuneration rather than basic salary; therefore the calculation of how much should be paid as holiday pay should factor in things like overtime and commission payments when such sums are a regular feature of the employment relationship.
One effect of those rulings was to create significant historical liabilities for all employers who had previously been paying employees holiday pay calculated on basic salary only but whose employees received a portion of their usual remuneration via additional payments. That is because, while there is a usual three-month time limit for claims based on underpayments, that three months only starts to run from the last deduction where there have been a series of similar deductions. In other words, earlier deductions beyond the three-month time limit for bringing a claim can still be sued for if the final deduction is a series is within the three-month period.
The government passed legislation to limit the effect in Great Britain (but not Northern Ireland) by stating that claims for a series of unlawful deduction of wages can only go back a maximum of two years in time. Please note this does not just affect holiday pay (although holiday pay was the reason for its introduction) and instead affects all claims regarding shortfalls in wages.
The Employment Appeals Tribunal were also conscious that case law decisions made in relation to the correct calculation of holiday pay had potentially opened the door to a very large number of employees bringing valuable claims against their employers based on historical practice (albeit it is only those employers who did not take into account previous rulings about holiday pay needing to consist of usual remuneration rather than just basic pay who are at risk because employers who have been paying properly for at least the last three months would be in a fairly secure position anyway as claims would be out if time).
In the case of Bear Scotland Ltd v Fulton and other cases [2015] IRLR 15 the EAT ruled that a series of deductions would be broken if there were more than a three-month gap between underpayments in the series. Therefore, in Great Britain, claims could only go back a maximum of two years and could not do that if there was a gap of more than three months between underpayments within that two-year period. A technical reason related to the difference between EU derived leave and additional domestic leave further restricted the ability of potential Claimants to litigate underpayments they had historically received. In contrast, in Northern Ireland, there was no two-year limit but it was harder for certain Claimants (in this instance Police Officers) to cite the concept of a series of deductions in the first place due to the way legislation was drafted.
Both a Northern Ireland Employment Tribunal and the Northern Ireland Court of Appeal issued judgments in the present case that did not follow the approach set out in Bear Scotland Ltd v Fulton in that they permitted the recovery of a series of underpayments where there were sometimes gaps of over three months between the individual underpayments and there were also some lawful (i.e at the correct level) payments in between individual underpayments. They focused instead on whether the underpayments said to consist of a series of underpayments were all of a similar nature rather than the precise timings between them. They did deem how frequently or otherwise similar underpayments were made to be a relevant factor in considering whether it could be said that they consisted of a series but it was not deemed determinative in the way that the Employment Appeals Tribunal had decided.
The matter came before the UK Supreme Court who have now issues their judgment. In that they noted that prior to the decision in Bear Scotland Ltd v Fulton (which it must be said was a controversial decision) there had not been a suggestion in previous case law that a gap of over three months between individual underpayments would be fatal to an argument that underpayments formed a series. They also noted that it created practical difficulties including Claimants feeling the need to keep issuing claims of a similar nature so as to be sure they would not be time-barred; something the Claimants could not be faulted for doing given the legal position but was undesirable due to cost and an administrative burden on the already stretched Employment Tribunal system.
The Supreme Court agreed with the approach taken by the Northern Ireland courts and overruled that aspect of the Bear Scotland Ltd v Fulton decision in a way that also sets precedent in the rest of the United Kingdom. Therefore, the decided legal position with regards unlawful deductions of wages claims (all types; not just holiday pay) is that while the frequency and similarity of alleged unlawful deductions are highly relevant in deciding whether it can be said that they form a series; a gap of over three months between the alleged individual unlawful deductions or lawful payments at the correct level being made in between the alleged unlawful deductions are not necessarily fatal to the argument that there has been a series.
It should be noted that in Great Britain there is still an overall bar on such claims going back beyond two years in time although that bar has itself been subject to challenge with more challenges anticipated in the future. Therefore, the impact here will not be as great as in Northern Ireland where the cost of meeting the claims brought in this particular case was estimated at £30 million if they were successful (as now seems likely when they return to the Employment Tribunal system for determination following the Supreme Court ruling).
The Supreme Court also clarified that there was no particular order in which the annual leave from the EU derived right to four weeks and the domestic right to an additional 1.6 weeks has to be taken. That is mixed news for employers as on the one hand it might make it a little easier for potential Claimants to sue in certain scenarios but on the other hand will ease administrative and conceptual complexity that had pervaded the area of holiday entitlement and pay.
Phil Sayers, Employment Law for Wilde Law
21st July 2023
Employment Law Developments in 2023
As with every year, 2023 has already been a busy year for employment law developments with many more to come as summer turns to autumn and then to winter. A public consultation closed in early July which sought views on the Working Time Regulations, holiday pay and TUPE while several other recent consultations have now resulted in proposals for legislation. The current state of play with many developments is that we know the proposed direction of travel but not the intended timings.
The below sub-headings are just a few of many possible or confirmed upcoming developments. Other aspects of employment law that are under review (and have been for a few years now) are such things as looking at employment status in light of difficulties in applying traditional approaches to the gig economy and reform of the Employment Tribunal system.
Phil Sayers, Employment Law for Wilde Law
TUPE consultation requirements
The government is currently considering the responses it has received to the recent public consultation regarding TUPE. Nothing is set in stone and there is a possibility that there will be no changes at all in this area. If changes are made, one possibility that has been touted is to remove the requirement that TUPE consultation on any ‘measures’ (a wide definition that potentially encompasses an incoming employer proposing to alter pretty much any aspect of working conditions) be via employee representatives where there are ten or more people employed in a business and instead permit the consultation to take place directly with the affected employees where there are fewer than fifty in a business or where fewer than ten employees are due to transfer in a business of any size.
Rolled up holiday pay
Various different alterations (for the most part fairly minor in probable impact) are also proposed with regards to working time and holiday pay. However, one change that could be quite significant is a proposal to permit rolled up holiday pay. That is holiday pay which is not paid when the worker actually takes holiday but instead as an addition to their usual wages in the periods they are working. The Courts and Tribunals have held that rolled up holiday pay is unlawful because the purpose of paid annual leave is as a health and safety / wellbeing measure but workers who are not specifically paid for the time they have off are disincentivised to actually take holiday. The current state of the law is rather curious; rolled up holiday pay is unlawful but, if it is paid in a transparent manner as a genuine enhancement to usual salary, workers have no real remedy for only receiving holiday pay on a rolled up basis. The proposal to expressly permit rolled up holiday pay is in recognition that calculating holiday leave entitlement, and the amount to pay the worker during leave taken, is administratively and conceptually difficult where workers are engaged to work irregular hours.
Another proposed change is with regards to how holiday entitlement is calculated and that is potentially being introduced to reverse the outcome of the Supreme Court case Harpur Trust v Brazel. Prior to that decision it had been common (and indeed endorsed by the ACAS website) to think of holiday entitlement for workers who work irregular hours as being 12.07% of the total hours they work but that is not actually what the Working Time Regulations state. The method of calculation contained there, as interpreted by the Supreme Court, has given rise to an anomaly
whereby workers who only work part of the year, for example term time only teaching assistants, arguably receive a proportionately greater holiday entitlement than full time workers which is what the government is seeking to address.
Duration of non-compete clauses – intention to restrict announced in May 2023.
It is very unlikely that this change will actually be implemented in 2023 as there is no specified timescale in which to legislate but back in May the government announced an intention to restrict the maximum duration of non-compete clauses in employment contracts (and ‘worker’ agreements such as those entered into by consultants) to three months from the termination of employment. We await further detail as to whether this will have retrospective effect with regards non-compete covenants that have already been agreed and entered into (which are commonly of six month duration and sometimes twelve months) but what is clear is that this will only affect restraints of trade relating to being in competition at all; there will be no automatic restriction of three months for non-solicitation restrictive covenants although, as is already the case, the onus will be on the business to establish that the covenant is enforceable.
Extending enhanced redundancy protection
As the law currently stands, employees who are on maternity leave have a form of enhanced protection against being made redundant that does not apply to any other employees, including those who have recently returned to the workplace from being on maternity leave. The enhanced protection is that, while in any redundancy situation a key component of fairness is considering whether there may be suitable alternative work, if suitable alternative work exists the employee on maternity leave must be offered it (even if that ensures that another employee for whom the alternative work is even more suitable is instead made redundant). However, as mentioned above, that enhanced protection currently ceases from the moment an employee returns from maternity leave and disproportionate numbers of people are made redundant soon after returning to the workplace. The protection is therefore to be extended for a further six months after the end of maternity leave and the same will also apply with regards returning from adoption leave. The primary legislation to enact this change has already been passed into law but the exact implementation date is still unknown as additional regulations need to be passed to give effect.
Carer’s Leave – more likely for 2024 than 2023
There is already an existing legal provision for emergency unpaid time off to care for dependants which is designed to encompass situations like needing to take a child to a hospital’s Accident and Emergency department. That legislation is specifically in relation to ad hoc emergency events that may arise and alternative scenarios, such as taking the child to hospital for a long-planned operation, would not normally fall within its scope. The government will therefore introduce the right for employees with care responsibilities to take up to one unpaid week per calendar year off to look after those they care for. However, it will only apply where the person who needs care will need care for at least three months or alternatively meets the definition of having a disability as contained within the Equality Act (which generally requires a medical condition that will last at least a year). Therefore, this proposal may nor may not address the scenario mentioned above of taking a child to hospital for a long-planned operation as that would depend on the child’s own characteristics. As with extending redundancy protection, the primary legislation to enact this new right has already been passed but an implementation date for it coming into effect has not yet been announced; indications are that it is more likely to be in 2024 than in 2023.