Employment law review of the year 2016

Legal implications

In an advisory referendum held on 23 June 2016, the United Kingdom narrowly voted to leave the European Union. The Government is expected to start the formal 2-year exit negotiation process by the end of March 2017. The future relationship between the UK and the EU is, at the time of writing, unknown. Addleshaw Goddard has considered some of the possible models and their implications for employment law, business immigration and other areas of law. We also consider here the status of EU nationals in a post-referendum UK.

Triggering of Article 50 negotiations

In November the High Court handed down its decision on whether the Government was entitled to trigger the formal EU exit negotiation process by way of Royal Prerogative powers. The High Court decided that the Government could not do so and required Parliamentary approval. The Government's appeal was heard by the Supreme Court in December and the decision is expected in January 2017.

Territorial scope of the Equality Act 2010

In the case of R (Hottak and another) v The Secretary of State for Foreign and Commonwealth Affairs and another the Court of Appeal handed down an important decision which confirmed that the territorial scope of the Equality Act 2010 is the same as that for claims under the Employment Rights Act 1996 (ERA). The Court dismissed the claimants' appeal that a more lenient approach should be applied by the courts towards claimants in discrimination cases. The decision means that the territorial scope of the Equality Act 2010 should be considered through the case law of the ERA i.e. the categories outlined in the case of Lawson v Serco.

Job applicants motivated by compensation not protected by EU discrimination law

In, Kratzer v R+V Allgemeine Versicherung AG the ECJ ruled that a job applicant was not entitled to discrimination protection under EU law where the motivation behind the application was to bring a claim and obtain compensation, rather than a genuine desire to secure employment. This is a helpful ruling from the ECJ and is in line with previous EAT case law which had said job applicants who would not be interested in accepting the role if it were offered could not claim discrimination if their application was unsuccessful. Of course, the pertinent question for employers is how can they know at the outset that an applicant is "gaming the system" and does not genuinely want the post? The simple answer is that they cannot know an applicant's motives. Therefore, employers must take care to ensure that their recruitment processes are free from discrimination.

Disabled employees and absence management

Many employers have policies imposing upper limits of sickness absence before disciplinary action is triggered. Such policies raise the difficult issue of how to treat disabled employees who have extensive sickness absence. Should they be treated in the same way as non-disabled employees or should the policy be adjusted for them? In the case of Griffiths v Secretary of State for Work and Pensions the Court of Appeal concluded that such policies are subject to the duty to make reasonable adjustments. However, the question of whether the requested adjustment is reasonable will turn on the facts of each case. Generally, in cases of lengthy absence, it will not usually be reasonable to expect the employer to discount all disability-related absence and/or extend the trigger point for sanctions. Whilst this is a welcome decision for employers, it is worth remembering that the Court sounded a note of caution when it said that even if an adjustment is not reasonable, this does not give the employer carte blanche to issue a disciplinary sanction or dismiss. It would still be possible for such actions to amount to discrimination arising out of a disability under section 15 of the Equality Act 2010.

Disabled employees and an expectation of working long hours

In Carreras v United First Partners Research the EAT confirmed that an expectation that an employee would work long hours could amount to a provision, criterion or practice (PCP) which puts a disabled person at a substantial disadvantage compared to a non-disabled person. The decision illustrates that employers must be careful that unspoken rules and other aspects of the workplace culture do not put employees with protected characteristics at a disadvantage. This case concerned a disabled employee but the same complaint might arise in relation to employees who require flexibility in their working hours to accommodate caring responsibilities or periods of religious observance.

Refusal of flexible working request for breastfeeding employees was indirectly discriminatory

In the case of Macfarlane and another v easyJet Airline Company Ltd an Employment Tribunal held that a requirement for staff to work unrestricted hours, and more than 8 continuous hours each day, indirectly discriminated against two female employees who had returned from maternity leave but were still breastfeeding their babies. The Tribunal found that the requirement for crew members to fly the long flying patterns that they were rostered put women at a particular disadvantage, and put the claimants at a disadvantage. The employer failed to objectively justify the discriminatory PCP primarily because no real life examples of individual adjustments to the roster causing difficulties had been shown. The decision highlights the material risk that flows from rejecting a flexible working request is a complaint of indirect sex discrimination, for which compensation is uncapped.

Equal pay

Female retail workers entitled to compare themselves to male depot workers: in Brierley and others v Asda Stores Ltd the Employment Tribunal held that a group of female retail store employees were entitled to compare themselves to a group of male distribution depot employees for the purposes of their equal pay claims. This is the first major private sector equal pay claim of its kind, following the numerous claims which have been brought (mostly successfully) in the public sector. Claimant lawyers have been threatening to pursue claims in the private sector for some time. If the claimants are ultimately successful this could have a significant impact on the private sector – with employers in the retail sector at the forefront, given the similarities and relevance to them. Affected employers may wish to consider conducting (i) a high level audit pay of structures and terms and conditions; and (ii) an equal pay evaluation, to establish the level of risk within their business.

Disciplinary investigations and involvement of HR

In the case of Dronsfield v University of Reading the EAT overturned a decision that a dismissal was fair despite the fact that the employer's HR and legal department had deleted conclusions which were favourable to the employee from an investigation report into the alleged misconduct. The EAT concluded that the Tribunal had failed to probe the reason behind the deletions and whether, if they had simply been excised by HR, it was reasonable to dismiss. The EAT also endorsed the conclusion of EAT in Ramphal v Department of Transport that HR's advice should be limited essentially to matters of law and procedure, as opposed to questions of culpability, which should be reserved for the investigating officer.

Inappropriate disciplinary warnings

In Bandara v British Broadcasting Corporation the EAT held that a Tribunal had erred in finding it was reasonable to summarily dismiss an employee in circumstances where a "manifestly inappropriate" final written warning had been taken into account. The Tribunal had failed to address the weight given to the final written warning in reaching the later decision to dismiss. Instead, it had speculated on what would have happened if the initial warning had been at an appropriate level. This was not the right approach. The Tribunal's finding that the dismissal was fair was overturned and the case was remitted. The decision reminds us that employers must take care to ensure that the level of warning is appropriate to the misconduct taking account of all the circumstances. This will include a consideration of matters such as the categorisation of misconduct offences in the employer's own disciplinary rules, as well as mitigating factors such as the employee's disciplinary record and whether they have shown remorse. If an unwarranted warning is relied upon, this may undermine the employer's ability to dismiss fairly for subsequent offences.

Voluntary overtime payments and holiday pay

In the case of Brettle & Others v Dudley Metropolitan Borough Council an Employment Tribunal decided that voluntary overtime payments should be reflected in holiday pay, provided such payments amount to "normal remuneration". The Tribunal also ruled that voluntary standby and voluntary call out payments should be reflected in holiday pay. In light of this decision, some employers may be considering adjusting the calculation of holiday pay to include relevant voluntary payments. However, it should be remembered that this is a first instance Tribunal decision and it is not binding on other Tribunals. Further, as pointed out in this case, and in Bear Scotland, cases regarding what should be included in holiday pay will turn on their own facts. Therefore, it is dangerous to seek to apply the principle emerging from this case, without conducting a careful analysis of the particular situation in question. Perhaps most significantly, the outcome of any Supreme Court appeal in the Lock v British Gas litigation will be of relevance to the inclusion of overtime payments and other payments / allowances in holiday pay.

Working Time Regulations 1998 can be interpreted to include commission in holiday pay

In the case of Lock v British Gas Trading Limited the ECJ ruled that the Working Time Directive requires that during annual leave workers must receive their "normal remuneration" and where pay is made up of different components (such as commission), and a component is "intrinsically linked" to the worker's contractual duties, then holiday pay should be calculated to include such payments. The case returned to the UK to decide whether the domestic Working Time Regulations 1998 could be interpreted to give effect to the requirements of the Directive. The Court of Appeal decided that when faced with the question of whether a conforming interpretation can be adopted, the Courts should not confine themselves to the literal meaning of the legislation. Instead, they must consider whether a conforming interpretation is in line with the "grain" of the law. The Court of Appeal decided it was able to interpret the Regulations to include commission in holiday pay. British Gas has applied to the Supreme Court for permission to appeal. Employers considering adjusting holiday pay to include commission payments should await the outcome of any further appeal.

Introduction of the National Living Wage

On 1 April 2016 the National Living Wage (NLW) came into force. This introduced a new higher rate minimum wage of £7.20 per hour for employees aged 25 and over. Perhaps unsurprisingly, many employers, primarily those operating in the retail sector, took steps to offset the cost of raising the wage floor. Earlier in the year there were press reports of employers introducing various offsetting measures such as: reduction in working hours; withdrawal or reduction of enhanced overtime pay rates; withdrawal or reduction of enhanced Sunday pay rates; withdrawal or reduction of paid breaks; and withdrawal of free food / closure of staff canteens. In November 2016, the Chancellor confirmed that there will be a 30 pence rise in the NLW rate from £7.20 to £7.50 per hour from April 2017.

Bonus discretion

In Hills v Niksun Inc the Court of Appeal considered the impact of the Supreme Court's decision in Braganza v BP Shipping Ltd on a claimant's discretionary entitlement to a commission payment. When the claimant received a commission award that he considered to be unfairly low, he brought a claim in the County Court. In the light of the contractual provisions, the nature of the deal in question and the evidence, the County Court concluded that the commission award should be increased. The Court of Appeal upheld that finding. It held that once the claimant had shown there were grounds for concluding that the employer's decision was not reasonable, the burden shifted to the employer to prove that it was reasonable. The employer had failed to produce evidence about how its decision had been reached. The Court of Appeal said the absence of any evidence as to the way the decision was taken was problematic. The case shows the way in which the Supreme Court's decision in Braganza adds another layer to the analysis of an employer's exercise of their discretion. Claimants can argue that where an employer's decision-making creates an unexpected outcome, that decision must be supported by convincing evidence. The process that the employer has adopted to reach their decision as well as the decision itself will be scrutinised.

Meaning of the public interest test

In Underwood v Wincanton plc the EAT held that an Employment Tribunal had erred in deciding that a dispute between four employees and their employer could never be said to be in the public interest. This was too narrow a definition of "public". Further, the Tribunal had also misdirected itself when it had said disputes relating to terms and conditions of employment could not constitute matters in the public interest. The decision aligns with the EAT's decision last year in the case of Chesterton Global Ltd v Nurmohamed. An appeal in that case is due to be heard by the Court of Appeal in June 2017.

In Morgan v Royal MENCAP Society the EAT considered an appeal against a decision to strike out a claimant's claim on the basis that her disclosures could not be matters of public interest in the claimant's reasonable belief. The claimant had expressed concerns about cramped working conditions and a culture of bullying. The Employment Tribunal struck out the claim on the grounds that the claimant had no reasonable prospect of success in demonstrating that her disclosures were matters of public interest in her reasonable belief. The EAT acknowledged that the threshold for striking out a claim was high and should be exercised with particular caution in complaints of whistle-blowing to avoid injustice. On whether the claimant had a reasonable belief that her disclosures were in the public interest, the EAT said that a further hearing was required to examine whether the claimant had such a belief, having regard to the nature of her belief, the way in which other workstations were organised and how other employees might be affected. 

Disclosure of information

In Kilraine v London Borough of Wandsworth the EAT considered the requirement for the claimant to make a disclosure of information, having regard to the key case on this subject, Cavendish Munro v Geduld. In Cavendish, a distinction was drawn between conveying information and making an allegation: "Communicating "information" would be :"the wards have not been cleaned for the past two weeks. Yesterday, sharps were left lying around". Contrasted with that would be the statement that: "you are not complying with health and safety requirements". The EAT noted that this dichotomy between an information and allegation was not contained within the statute itself. The EAT's decision confirmed that as long as the disclosure conveys information the fact that it also makes an allegation does not matter.

Vicarious liability for violent acts of an employee

In Mohamud v Morrison Supermarkets plc the Supreme Court found that an employer was liable for an unprovoked violent attack carried out by one of its employees on a customer. Overturning the Court of Appeal, the Supreme Court decided that when determining whether vicarious liability should be imposed, it is necessary to consider the nature of the employee's job and whether there was a sufficient connection between the employee's role and the wrongful conduct. Applying that test, they found that the employer was liable for the unprovoked assault on the customer. The employee was in a customer-facing role, the employer had entrusted him with that position and it was just that they should be responsible for their employee's abuse of that position. The decision highlights the need for employers to guard against the risks associated with an employee's abuse of their position through careful recruitment, proper training and supervision.

Zero-hours contracts – redress for workers

The Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015 came into force 11 January 2016. These introduced: (i) a right for zero hours workers not to be unfairly dismissed if the reason, or principal reason, is that they have failed to comply with an exclusivity clause (no qualifying period of employment is needed to bring such a claim); (ii) a right for zero hours workers not to be subjected to any detriment because they have failed to comply with an exclusivity clause; (iii) where an employer breaches these rights, the worker may issue a claim in the Employment Tribunal and seek a declaration and/or compensation.

Employment Tribunals – enforcement of Tribunal awards and Acas settlements

On 6 April 2016 a new system came into force which gave Enforcement Officers the power to impose a financial penalty on employers who, following a warning notice, fail to pay Employment Tribunal awards or Acas settlements by a specified date. This was introduced to address the fact that approximately only half of claimants who are successful at Tribunal actually receive their awards. Enforcement Officers are now able to issue a penalty notice requiring the offending employer to pay the Secretary of State a financial penalty of 50% of the unpaid amount (subject to a minimum of £100 and a maximum of £5,000). If, within 14 days of the penalty notice, the employer pays both the unpaid relevant sum and the penalty, the amount of the penalty will be reduced by 50%. The penalty is payable directly to the Secretary of State and not the claimant.

Employment Tribunals and postponements

On 6 April 2016, a limitation on the number of applications for postponements a party can make in Employment Tribunal proceedings came into force. Now, each party is limited to two applications for postponement of a hearing. A further application will only be granted in limited, specified circumstances. The new rules also provide that applications made less than 7 days before the relevant hearing will only be granted in limited circumstances. Where an application that is made less than 7 days before the hearing is granted, then the Tribunal must consider making a costs order against the applying party.

Call for Evidence on non-compete clauses

In May 2016, the Government published a Call for Evidence seeking views on whether non-compete clauses stifle innovation and unfairly hinder workers from moving freely between employers. If the evidence gathered suggests that such clauses are acting as a barrier to flexibility, the Government may introduce legislation to limit the use of such restrictions. There is no suggestion that the Government plans to introduce a complete ban. Rather, the desire is to ensure that when such clauses are used they are: "justified, well-constructed, targeted and reasonable" and fairly balance employer and worker interests. The Call for Evidence closed on 19 July 2016. The Government has yet to publish its response.

Trade Union Act 2016

On 4 May 2016 the Trade Union Act 2016 received Royal Assent., however, some of the of provisions of the Act require further legislation in the form of regulations which need to be made before they can be implemented. The Act makes significant changes to the law on industrial action. The key changes in the Act are:

• All strike ballots: strike ballots must currently have the support of a simple majority of those voting. The Act introduces a new minimum voter turnout i.e. that at least 50% of those entitled to vote do so.
• Strike ballots in "important public services": there will be an additional minimum support threshold will apply i.e. that at least 40% of those entitled to vote must vote ‘yes’. Important public services include parts of the fire, health, education, transport, border control and nuclear services and include some private sector workers). The 40% threshold does not cover "ancillary workers" as was initially proposed.
• Electronic balloting: the Act required the Secretary of State to commission an independent review on the delivery of secure methods of electronic balloting within six months of the Act being passed. This review was launched in November 2016 and will be concluded by December 2017.
• Ballot information: the ballot voting paper must include more information, such as a summary of the matters in dispute and the periods within which the action is expected to take place.
• Notice of industrial action to the employer: this will increase from 7 days to 14 days (unless the employer agrees to 7 days’ notice).
• Life of ballot mandate: currently, industrial action must take place within 4 to 8 weeks of the ballot and action can be taken indefinitely, provided the dispute remains live. The Act provides that a ballot mandate expires after 6 months, or up to 9 months if both sides agree.
• The Act also has provisions affecting picketing, facility time, check-off and the role of the Certification Office.