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The year in employment law

08 January 2018

The UK’s political landscape continues to be dominated by the shock 2016 referendum vote to leave the European Union. Following a surprise General Election in June 2017, Prime Minister Theresa May unexpectedly lost her parliamentary majority amid deep divisions about how the UK should “Brexit”. Against that backdrop, the Brexit negotiations between the UK and EU began in 2017 and will continue into 2018. This has meant that, as with many other areas, employment policy reform has taken something of a backseat. Nevertheless, employment law continues to change at pace.

What happened?

Employment status. Various individuals made high-profile claims arguing they were actually workers or employees, not independent contractors, and therefore entitled to enhanced employment rights, such as minimum wage and holiday pay. The issue was particularly contentious in the so-called ‘gig economy’, with Uber, Deliveroo, Addison Lee and CitySprint being caught in the crossfire. Courts and tribunals tended to find against the companies on the grounds that the control exercised by them and a requirement of personal service pointed against the individuals being self-employed for the employment law purposes. One exception was Deliveroo, whose drivers were found not to be workers by the Central Arbitration Committee because they could appoint substitutes. Many of these cases are being appealed and this issue is likely to continue to dominate headlines during 2018.

Employment tribunal fees. The Supreme Court sent a shockwave through the employment law world by abolishing fees for bringing employment tribunal claims, finding that the fee system was unlawful and unconstitutional. The government must now refund claimants who paid fees to bring their claims. That rebate could cost the government around £31 million. Since the judgment, there has been a notably steep increase in the number of tribunal claims being issued.

Holiday pay. In the long-running Bear Scotland v Fulton case on overtime and holiday pay, the Employment Appeal Tribunal confirmed that a gap of three months between non-payments or underpayments will break the series of deductions for the purpose of bringing an unlawful deduction from wages claim. That decision has been put in question, however, by the recent European Court of Justice case of King v Sash Window Workshop. The decision has huge implications for workers wrongly classified as self-employed. It held that workers who are wrongly told that they cannot take paid holiday may carry over their holiday rights into subsequent holiday years for the whole period of employment (or until they are allowed to take it).

Data protection. 2017 saw some significant data protection rulings in the UK and Europe. In Bărbulescu v Romania, the European Court of Human Rights ruled that monitoring an employee’s personal correspondence at work was a breach of his human rights. In the UK’s first data leak class action, the High Court ordered that the supermarket Morrisons pay compensation to staff whose personal details were posted online following a criminal leak by an internal auditor. And in the joined cases of Ittihadieh v 5-11 Cheyne Gardens RTM Co and Deer v Oxford University, the Court of Appeal refused to exercise its discretion to order data controllers to take further steps in subject access compliance.

Gender pay reporting. New rules came into force in April 2017 requiring employers with over 250 employees to calculate and report on the gender pay gap within their organisation. Employers must publish the mean and median hourly pay gap between men and women, based on the pay period in which the ‘snapshot date’ falls. By September, only 80 of the 7,000 employers had uploaded their reports to the government website. The rest have until April 2018 to do so.

Apprenticeship levy. The new apprenticeship levy was introduced in April 2017. All employers with annual wage bills of more than £3 million have to pay the levy of 0.5% of their wage bill. That money goes into a fund for employers to pay for the apprenticeship training they want. In late 2017 it was reported that the levy had caused a more than 50% drop in the number of workers starting apprenticeships. This drop has been attributed to the complexity of the scheme and some additional costs that employers training apprentices will incur.

What’s next?

Looking forward to the year ahead, the most significant reforms and cases in the pipeline are outlined below.

Employment status. The slew of employment status cases, particularly in the ‘gig economy’ (see above), will continue into 2018. In February, the Supreme Court will hear an appeal by Pimlico Plumbers to decide whether a plumber was a worker or a contractor. Uber will take their case to the Court of Appeal, arguing against the finding that Uber drivers are workers. Deliveroo will defend claims in an employment tribunal, having recently been successful in a separate worker status case in a trade union context. Meanwhile, the government is set to respond to the Taylor Report. The report made proposals regarding the statutory definitions of employment status, which were reflected in select committees’ recommendations. The Chancellor also announced that 2018 will see a consultation to tackle non-compliance with IR35 rules.

Data protection. The EU General Data Protection Regulation (“GDPR”) comes into force in May 2018. The GDPR will have effect across all EU member states (including the UK). In September 2017, the government published the Data Protection Bill, which will repeal the Data Protection Act 1998 and implement the GDPR. The new regime imposes more severe fines for non-compliance. It should also necessitate a shift in thinking for employers that have previously relied on employees signing up to blanket consent policies – these are unlikely to be compliant under the new regime.

Equal pay. The long-running private sector equal pay case brought by thousands of Asda employees will continue into 2018. The Court of Appeal will hear argument on whether workers in Asda’s retail stores (who were lower paid and mostly women) can compare themselves with distribution centre workers (who were higher paid and mostly men). The Employment Appeal Tribunal said that they can, but granted Asda permission to appeal on that point. It is possible that the publication of gender pay reports (see above) will prompt more employees to bring equal pay claims against their employers.

Taxation of termination payments. The tax treatment of termination payments will change in April 2018. The new measure aligns the rules for tax and secondary National Insurance contributions (employer NICs) by making an employer liable to pay NICs on termination payments they make to employees. Employers will be required to pay NICs on any part of an ex gratia termination payment that exceeds the £30,000 tax-exempt threshold. Additionally, all payments in lieu of notice will be subject to income tax and NICs in full.

Caste discrimination. The government is expected to respond to a consultation on caste discrimination that closed in September 2017. The consultation asked whether legislation should be introduced to cover caste as an aspect of race discrimination, or whether the case law in this area should be allowed to develop naturally. It is doubtful whether the government has any real appetite to propose legislation on this issue.

Family benefits. There are set to be developments regarding certain family-related benefits for employees:

  • Shared parental pay. The Employment Appeal Tribunal is expected to deliver judgment in two cases appealing conflicting tribunal decisions on shared parental pay. In Capita Customer Management v Ali, a tribunal found that a male employee was discriminated against when his employer refused to allow him any shared parental leave at full pay (when a woman on maternity leave would have received full pay). Whereas in Hextall v Chief Constable of Leicestershire Police, a tribunal held that a policy of full pay for mothers on maternity leave, but only statutory shared parental pay for partners, was not discriminatory.
  • Bereavement leave. The government is supporting a bill to give employed parents two weeks’ paid leave if they lose a child under 18. The Parental Bereavement (Leave and Pay) Bill is currently progressing through Parliament. Regulations are expected to be introduced in 2020.
  • Grandparental leave. In 2016, the government proposed to extend shared parental leave and pay to working grandparents by 2018. However, it did not publish any further announcements on this topic. It is unclear if or when the government intends to take this forward.

Minimum wage. In March 2018, the Court of Appeal will hear the joined cases of Focus Care Agency v Roberts, Frudd v Partington Group and Royal Mencap Society v Tomlinson-Blake. The question concerns employees who sleep-in to carry out duties if required – whether those employees engage in "time work" for the duration of the night shift, or whether they are only entitled to the national minimum wage when they are awake and carrying out duties.

Corporate governance. The government intends to legislate in the first half of 2018 on a number of proposals for corporate governance reform. These include making large companies publish the ratio between CEO’s and workers’ pay, strengthening the voices of employees, customers and suppliers, and corporate governance in large private companies.

Sunday working. The Enterprise Act 2016 places new obligations on retailers in relation to Sunday working. There will be extra protection for shop workers who do not wish to work on Sundays and a new right to object to working additional hours on Sundays. The provisions are not yet in force, but once they are implemented retail employers will have a two-month period in which to act.

And finally… Brexit. The UK notified the EU of its desire to leave the bloc in March 2017, which began a two-year countdown until “Brexit” day in March 2019. Until then, the UK remains bound by EU law, including employment laws. The 2018 Brexit negotiations will focus on the future relationship between the UK and EU, as well as the terms of a transitional period (set to last around two years). The Prime Minister has repeatedly said that she does not want to water down EU-derived employment rights. However, in late 2017 she failed to specifically deny rumours that the Conservative Party would seek to depart from European working time rules post-Brexit. Throughout 2018, the future of such EU employment rights may become clearer.

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The General Data Protection Regulation (GDPR) came into force on 25 May 2018.

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