Plexus Law - Employment Writes - Jan 14

Employment WritesJanuary Edition

The Law Firm of The Futurewww.plexuslaw.co.uk

A new year, a new legislative regime, and it’s going to be busy! In this edition of Employment Writes we take a glance at the year ahead and some of the employment changes we can expect.

We examine in more detail the TUPE changes which are due to come into effect

at the end of the month. We also take a look at zero hours contracts following

the launch in December of the Government’s consultation and then round up

with a brief look at some recent cases of interest.

1 September 2013 Employee shareholder status introduced

1 October 2013Repeal of the “3 strikes” third party harassment provisions

31 January 2014 Changes to TUPE 2006 are planned to come into force (see below for more

information)

6 April 2014Discrimination questionnaires to be abolished and to be replaced with an

informal approach to be set out in ACAS guidance

Mandatory pre-claim ACAS conciliation will be introduced under ERRA 2013

Introduction


Financial penalties for losing employers where there are “aggravating features”

to be imposed by tribunals (50% of any financial award, a minimum of £100 and

a maximum of £5,000)

The right to request flexible working is extended to all employees (with at least

26 weeks’ continuous employment) and will be brought in under the Children

and Families Bill 2012-13

Spring 2014New Health and Work Advisory and Assessment Service to be introduced

providing state funded occupational health assessments for employees who

are off sick for more than four weeks

October 2014Regulations giving tribunals the power to order an employer to carry out an

equal pay audit where the employer is found guilty of sex discrimination

Expected 2014The Government’s response to the annual leave aspects of the Modern

Workplaces consultation is expected. This aims to bring the UK annual leave

provisions in line with Europe

Autumn 2015A new tax-free childcare scheme to be introduced. Families will be able to

claim up to 20% of childcare costs for children under 12

Draft legislation to outlaw caste discrimination (as an aspect of racial

discrimination) is expected

Expected 2015The introduction of a new system of shared parental leave which will allow

parents to share leave and to take leave concurrently. New rights for surrogate

and adoptive parents


Zero hours contracts under the spotlightThe Government has launched its consultation on zero hours contracts

https://www.gov.uk/government/consultations/zero-hours-employment-contracts

The Government’s aim is to “maximise the opportunities of zero hours contracts

while minimising abuse and setting out core standards that protect individuals.”

It is estimated that more than one million UK workers are currently engaged on

zero hours contracts. The use of such contracts is particularly prevalent within

health and social care, further and higher education and also the leisure and

tourism sectors. The Government has been concerned about the abuse of such

contracts, which as their name suggests, do not guarantee work. The main

concerns include:

• The requirement for exclusivity – this is where someone agrees to a contract

that prevents them from working for another employer

• Transparency – there is no clear or legal definition of a zero hours contract

and it can cover a number of working relationships. This can lead to

confusion and lack of understanding


• Uncertainty of earnings – the amount of money a person with a zero hours

contract can expect to earn is variable which makes financial planning

difficult

• Balance of power – because of the imbalance of power in the working

relationship, employees on zero hours contracts are concerned that if

they do not take the hours of work offered, they will be penalised and not

offered further regular work

A recent report published by the CIPD in November 2013 http://www.cipd.

co.uk/hr-resources/research/zero-hours-contracts-myth-reality.aspx?utm_

medium=email&utm_campaign=pr&utm_content=generic made a number

of findings which on the whole suggest that zero hours contracts have been

unfairly demonised. The findings include the fact that zero hours workers,

when compared to the average UK employee, were just as satisfied with their

jobs, happy with their work-life balance and less likely to think they are treated

unfairly by their organisation. The majority of respondents confirmed that they

had never been penalised for not being available for work.

In respect of pay, around one in five zero hours workers believed their pay was

lower than comparable permanent staff, but interestingly a similar percentage

reported that hourly rates for zero hours staff are in fact higher than permanent

employees.

Zero hours contracts present other complex challenges for employers.

Employment statusWhat is the employment status of an individual engaged under the zero

hours contract? The answer to this can have a significant impact upon the

way in which that individual is treated. For example, employees have rights to

maternity leave and pay, notice and they have a statutory protection against

unfair dismissal. The essential elements to determine whether an employment

contract exists are as follows:

• mutuality of obligation between the parties

• a sufficient degree of control over the worker, and

• an obligation to provide work personally

“...zero hours contracts have been unfairly demonised.”


“Zero hours employees and workers are entitled to paid annual leave...”

While many zero hours contracts will expressly state that the employer is

under no obligation to provide work and the worker is under no obligation to

accept work (suggesting perhaps no mutuality of obligation), the recent case of

Pulse Healthcare v Carewatch Care Services Limited & Others [2012] UK EAT

0123/12 adds a twist to this.

In Pulse the EAT was required to determine whether the claimants, who were

employed under zero hours contracts, were employees. Whilst the parties were

not obliged to accept and provide work, once the employer had prepared the

rota the claimants were required to work it and the employer was required

to provide that work. On those facts, the EAT found that there was sufficient

mutuality of obligation for the claimants to be employees. The claimants were

also subject to the control and discipline of the employer and they had to

provide personal service.

This suggests that a number of zero hours workers are misclassified and may

fall within the category of employee.

Holiday rightsAnother challenging area for employers is the administration of holiday rights.

Zero hours employees and workers are entitled to paid annual leave in the

same way as any other worker. However, there are some practical problems in

calculating holiday entitlement for individuals working irregular hours.

‘Rolled up holiday pay’ was often used to address this issue. Under that system

the hourly rate of pay was stated to include an element of holiday pay. However,

the worker would receive no

pay whilst they were actually

on leave. This has been ruled

to be unlawful and contrary to

the Working Time Regulations.

Where there was sufficient

transparency around the element

of holiday pay, this amount could


be offset against a claim for unpaid holiday pay. So, whilst technically unlawful,

a worker in receipt of ‘rolled up holiday pay’ would have no effective remedy.

In circumstances where an individual is employed on individual assignments,

holiday will not accrue between assignments and any holiday that has been

accrued should be paid in lieu at the end of the assignment. During the first year

of employment under the Working Time Regulations, leave accrues at the rate

of 1/12 of a full year’s entitlement at the beginning of each month. As it is not

known how long the worker will be engaged for and they do not have regular

working hours, for simplicity many zero hours contracts work on the basis that

holiday accrues at the rate of 12.07% of the hours worked. This is calculated by

dividing 5.6 weeks by 46.4 weeks (which is 52 weeks less 5.6 weeks).

However, be aware that where there is an overarching contract of employment,

which continues even where an individual is not working, the worker’s holiday

is deemed to continue to accrue in between assignments.

In terms of actually calculating holiday pay, a week’s pay for a worker without

normal working hours will be calculated by taking an average of all their earnings

over the previous 12 working weeks. This will include bonuses, commission and

overtime payments. Any week where the worker received no pay is not included

within the 12-week calculation. This means that a zero hours worker who

experiences seasonal peaks and troughs in their earnings may be significantly

better off financially by taking holiday just after a peak earnings period.

Discrimination A further issue with zero hours contracts is the potential for a discrimination

claim. This arises because many employers do not extend access to benefits

such as private healthcare, gym membership or generous pension schemes

to their zero hours workforce. Such workers are likely to fall within a statutory

definition of a ‘part time worker’ under the Part-Time Workers (Prevention of

Less Favourable Treatment) Regulations 2000. The statistics also show that the

majority of zero hours workers are women. This means that any less favourable

treatment or working practices may need to be justified in order to avoid a claim

of indirect sex discrimination and less favourable treatment on the ground of

being a part-time worker.


National Minimum WageWorkers are entitled to be paid at least the national hourly rate for the times

when they are actually working, not including rest breaks. If workers are required

to be available for work at or near their place of work, they must also be paid

the National Minimum Wage during that time. It does not matter if the work is

actually provided or not. That means that workers who are called into work only

to be told that they are not needed, are entitled to receive the National Minimum

Wage at least for the time they are required to attend at the workplace waiting

to be given work. This does not apply if the worker is on standby or on call at

home.

It is likely that the outcome of the forthcoming Government consultation will

bring greater certainty, as well as introducing regulation of the use of zero hours

contracts. The consultation closes on 13 March 2014. Please get in touch with

us to let us know your views.


TUPE reform, and it’s good news!The new TUPE regulations have been published in the form of the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 (or CRTUPEAR for short).

They are due to come into force on 31 January 2014. Whilst there are inevitably

questions about the interpretation of certain aspects of CRTUPEAR, on the

whole the regulations bring some welcome, positive changes for business. The

main changes are:

Service provision change

The rules on service provision change will remain, but the legislation will clarify

that for there to be a TUPE service provision change, the activities carried on

after the change in service provision must be “fundamentally or essentially the

same” as those carried on before it. Currently, this is not a requirement.

Employee liability information

The requirement to provide employee liability information will be retained, but

from 1 May 2014 the information will have to be given 28 days before the

transfer, rather than the current 14 days.

Effect of collective agreements

There will be a static approach to the transfer of terms derived from collective

agreements. This follows the position of Parkwood Leisure Ltd v Alemo-Herron

[2013] IRLR 744 and means that where a provision of a collective agreement

comes into force after the date of the transfer and the transferee is not a party

or participant in the collective bargaining process, the change will not bind

the transferee. Further, transferees will be able to change terms derived from

collective agreements one year after the transfer, provided that the overall

change is no less favourable to the employee.


‘ETO reason’

Changes in the location of the workforce following a transfer will be expressly

included within the scope of an economic, technical or organisational reason

entailing changes in the workforce (ETO reason), thereby preventing genuine

place of work redundancies from being automatically unfair. It remains to be

seen how this provision will interact with the TUPE provisions surrounding

claims based on substantial changes to the employee’s working conditions to

the employee’s material detriment, pursuant to regulation 4(9).

Changes to terms and conditions and protection from dismissal

Regulation 4 (restriction on changes to terms) and regulation 7 (protection

against dismissal) will more closely reflect the wording of the ARD and ECJ

case law. Under CRTUPEAR if the reason for the action is the transfer itself,

then the changes are void or dismissal automatically unfair. The ‘in connection

with’ element of the TUPE 2006 wording has been removed narrowing the test

and providing more flexibility for employers.

Redundancy collective consultation

A significant change to the collective consultation rules allows consultation to

begin before the transfer with the representatives of affected transferring staff

by the transferee. The transferee must notify the transferor in writing and the

transferor must agree to this pre-transfer consultation.

Dispensing of elected reps for micro-businesses

From 31 July 2014, micro-businesses (less than 10 employees) will be allowed

to inform and consult affected employees directly when there is no recognised

independent union, nor any existing appropriate representatives.

Guidance

The existing Government guidance on TUPE will be improved and updated.


Case review Can an employer rely on advice from an occupational health adviser without question? No, says the Court of Appeal in Gallop v Newport City Council [2013] EWCA 1583

The Court of Appeal has sent a warning out to employers that they cannot

blindly follow the advice and opinion provided by occupational health about

whether an employee was classified as being disabled.

Mr Gallop (G) complained of workplace stress. Over a period of more than two

years, G was intermittently absent from work. Newport’s occupational health

(OH) advisers repeatedly assessed G as suffering from a stress-related illness

but said he was not disabled for the purposes of the Disability Discrimination

Act 1995 (which was the relevant legislation at the time, but which has now

been superseded by the Equality Act 2010). In their opinion G was not suffering

from a depressive illness and the disability discrimination legislation was not

applicable to him. No further explanation was provided to support this negative

assessment.

Eventually G returned to work, where he was promptly suspended pending

investigations into allegations of bullying. After due process, Newport dismissed

him.

Supported by the Equality and Human Rights Commission, G brought claims of

unfair dismissal and disability discrimination. He was awarded over £60,000 for

the unfair dismissal but his discrimination claims were rejected. The Employment

Appeal Tribunal (EAT) also rejected his discrimination claims on appeal. The EAT

held that Newport had been entitled to rely on the advice provided by OH that

G was not disabled within the meaning of the Act.

The Court of Appeal unanimously upheld G’s appeal. The CA held that Newport

had abdicated its responsibility by rubber-stamping the decision of the OH

adviser without applying any thought itself to the question of whether G was

disabled. Newport was criticised for not looking carefully at the nature of G’s

impairments and deciding for itself whether it considered him disabled or not.


“...focus the questions on the exact circumstances of the employee’s illness and absence from work.”

This case provides a number of lessons for employers. Foremost, it demonstrates

how important it is for an employer to properly instruct their OH advisers and

to ask sufficient questions which will enable them to form an opinion about

whether an employee is disabled or not. If the response provided is too brief or

does not answer those questions, further supplementary questions should be

asked. Here Newport was criticised for receiving expert evidence which was

extremely brief (‘No, he is not disabled’) and immediately accepting its outcome,

without any consideration of its own nor asking for supporting comments from

the adviser before making a decision. A responsible employer will still make the

final factual judgement and should not merely rubber-stamp the OH adviser’s

response.

The Court went on to say that employers should think carefully about what

questions they ask OH advisers to consider. The questions should not ask

simply whether the employee is disabled. It is far better to focus the questions

on the exact circumstances of the employee’s illness and absence from work.

This case will now be remitted to the tribunal to decide whether Newport knew,

or should have known, that G met the legal definition of disability and whether he

was eligible to argue that Newport should have made reasonable adjustments

on account of his alleged disability.

Should holiday pay also include commission earned in addition to basic

pay? Yes, says the Advocate General in an opinion provided on Z.J.R.

Lock v British Gas Trading Ltd and Others AG C 539/12

The Advocate General (AG) has opined that subject to satisfying three criteria, commission must form part of holiday pay.

Mr Lock (L) was employed by British Gas in a sales role. His pay was two-fold; a

basic salary which did not change in amount and commission which was variable

depending on the sales secured. The sales commission was paid several weeks

or months after a sale was concluded and made up approximately 60% of

his total remuneration. L claimed that his holiday pay should also include an

amount in respect of commission that he would have earned during this period.


“While on statutory annual leave, workers covered by the WTR are entitled to be paid at the rate of a week’s pay for each week of leave”

Article 7 of the Working Time Directive (WTD) gives workers the right to paid

annual leave but does not specify how holiday pay should be calculated; that is

left to national legislation or practice. In the UK, the Working Time Regulations

(WTR) implement the WTD. While on statutory annual leave, workers covered

by the WTR are entitled to be paid at the rate of a week’s pay for each week of

leave, calculated in accordance with sections 221 to 224 of the Employment

Rights Act 1996.

The employment tribunal referred the matter to the Court of Justice for an

opinion on three questions, including the following key question:

Does Article 7 require that member states take measures to ensure that a worker

is paid in respect of periods of annual leave by reference to the commission

payments he would have earned during that period, had he not taken leave, as

well as his basic pay?

The AG gave the opinion that holiday pay must include commission in addition

to basic salary. The mechanism for determining the amount of commission was

left as a matter for the national courts.

According to the AG, three criteria must be satisfied before commission

becomes payable as holiday pay. Firstly, the commission must be directly linked

to the work carried out by the employee under their contract of employment. Put

another way, the commission must relate to work carried out by the employee

personally and that such work forms part of their normal duties. Secondly, the

commission must be permanent enough for it to be regarded as forming part

of the employee’s normal pay. Thirdly, there must be a real risk that employees


may be deterred from taking annual leave as a result of commission not being

paid as part of annual leave.

This case potentially sees a move away from the decision in Evans v Malley

Organisation Ltd [2002] EWCA Civ 1834 whereby the Court of Appeal, in a

similar claim, had held that an employee was entitled to be paid holiday pay

comprising of his basic pay only.

Whilst on the face of it, this case clarifies matters and effectively overrules the

decision in Evans, it is still questionable as to precisely in what circumstances

commission must be taken into account and whether Evans is still relevant if the

criteria set out by the AG do not apply. It is not difficult to envisage situations

which do not fall neatly into one situation or the other, and employers have to

effectively make a call as to whether to include this additional payment. For

instance, what if commission reflects the performance of a team as opposed

to an individual? Or, if the payment of commission is paid quarterly as opposed

to monthly? Would this be considered permanent enough as to constitute part

of an employee’s normal pay? How would an employer assess whether an

employee may be deterred from taking annual leave?

The reality seems to be one in which employers may well still find themselves

in situations where they are unaware what they should be paying to their

employees for periods of annual leave.

Does an employer have to conclude an outstanding appeal against a

previous final written warning before being able to dismiss fairly for a new

act of misconduct?

No, says the EAT in the case of Rooney v Dundee City Council

UKEATS/0020/13.

Mrs Rooney (R) was a cashier supervisor who had worked at the council since

1985. A customer had wished to pay £10,000 by debit card to the council in

respect of another person. Whilst her manager informed her not to serve this

customer on account of money laundering issues, R disobeyed this instruction

and processed the payment. Following this act of misconduct R was issued

with a final written warning which was to stay on her record for a 15-month

period.


“...the council was unreasonable in dismissing her where there was an outstanding internal appeal which had not been resolved.”

R subsequently issued an appeal against this decision. However the appeal

hearing did not take place.

Some 14 months later R was then unfortunately involved in another incident

when she again failed to follow a management instruction. This incident of

misconduct, combined with the final written warning issued earlier, resulted in

R’s dismissal. The disciplining officer was aware of the previous final written

warning and that there was an outstanding appeal against this decision. He also

indicated that had R not had the final written warning on her record then she

would not have been dismissed.

The ET judgement found the dismissal was not unfair and accorded with the

guidance set down in British Home Stores Ltd v Burchell.

R submitted an appeal to the EAT on the basis that the council was unreasonable

in dismissing her where there was an outstanding internal appeal which had not

been resolved. She argued that if the original appeal was heard, the final written

warning may have been overturned, and it was unlikely that the second incident

would have led to her dismissal.

Regardless of the above, the EAT held that the employment judge had properly

considered all the evidence before him and came to the decision he was entitled

to.

The council appears to have had a lucky escape. At first instance the employment

judge made it clear that he would have heard the outstanding appeal from the

first incident before making any decision on the second. However, he concluded

on balance that although the dismissal was in the circumstances harsh, it was

not so unreasonable so as to take it outside that permissible range of responses.

This is a helpful case for employers and demonstrates that whilst the correct

procedures should be followed without undue delay, where a decision is made

to dismiss in circumstances where an employer has acted fairly based upon the

information before it, that a court will not go behind that decision.

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Contact UsFor more information or advice, please contact:

Charlotte Cooper

Plexus Law

T: 0844 245 5161

E: [email protected]

Date for the diaryBreakfast Seminar - 9.30 - 11.00 amWednesday 19th March“The new ACAS Pre-Claim Conciliation Rules - what every employer

needs to know”

Venue: The Vale Golf Club, Worcestershire, W R10 2LZ

Price: £20 plus VAT - Refreshments provided

How to book: please email [email protected] to reserve

your place

Key to abbreviations

AG: Attorney General

ARD: Acquired Rights Directive

CA: Court of Appeal

CRTUPEAR: Collective Redundancies and Transfer of Undertakings

(Protection of Employment) (Amendment) Regulations 2014

EAT: Employment Appeal Tribunal

ECJ: European Court of Justice

ERRA: Enterprise and Regulatory Reform Act 2013

OH: Occupational Health

TUPE: Transfer of Undertakings (Protection of Employment)

Regulations 2006

WTD: Working Time Directive

WTR: Working Time Regulations 1998

Documents

Plexus Law - Employment Writes - Jan 14