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The latest episode of Mayer Brown’s UK Employment Law podcast is now available for streaming and download. To celebrate the success of our long running podcast, we have released the 150th episode with a few changes and availability on a wider variety of platforms such as:

Subscribe now and tune in regularly to hear Nick discuss the latest developments in UK Employment law to help keep you apprised of changes in the law and what they mean for your business.

Episode 150: May 2019
In our 150th episode, Nick reviews a case which considers whether Board directors were employees, to decide where those individuals could be sued. Secondly, we have a case on the test for harassment, and whether the test is an objective one, or a wider test. Finally, we have a key case on the personal liability of directors for breaches of contract by their company.

The High Court has held that directors of the sponsoring employer of two pension schemes did not, as trustees of those schemes, owe any fiduciary duties to the employer.

H and W were directors of a company and were trustees of the company’s main and executive pension schemes (the schemes). After H and W left the company, it issued proceedings against them, arguing that H and W had breached the directors’ duties that they owed the company by, among other things, adopting unduly conservative investment and funding strategies for the schemes. In addition, the company argued that as trustees of the schemes, H and W owed the company a fiduciary duty to act in its interests.

The High Court held that as trustees of the schemes, H and W did not owe any fiduciary duties to the company as sponsoring employer. As trustees, H and W were entitled to take account of the company’s interests, but only where those interests did not conflict with their primary duty to the schemes’ beneficiaries. H and W were not in breach of their directors’ duties to the company by adopting conservative investment and funding strategies for the schemes. While the adoption of these strategies was to the advantage of scheme members, this did not necessarily mean that it was to the disadvantage of the company or that it was contrary to the interests of the company and/or improper.

In the wake of #MeToo and the associated shift in the way allegations of sexual harassment are treated by employers, making the decision to suspend an employee can have far-reaching repercussions for employers and employees alike.

Importantly, in 2007, the Court of Appeal, in Mezey v South West London and St George’s Mental Health NHS Trust, held that suspension, regardless of how it is framed by an employer, is not a “neutral act” as it “inevitably casts a shadow over the employees’ competence” and, in some instances, his or her character. In light of this, employers should be careful not to rush this process and ensure that any action taken is reasonable in all the circumstances.

Here are a few points employers should keep in mind before making the decision to suspend an employee in a potential disciplinary context:

  • Suspension should not be a “knee-jerk” reaction and should only be imposed in circumstances where it is reasonably warranted.
  • Consider whether an alternative is available, such as relocating the employee to a different site or desk, allowing them to work from home or changing their hours.
  • Provide the employee with written confirmation of the suspension and the reason(s) for it prior to any period of suspension. Employers should also make clear that it has not formed any view as to whether wrongdoing had been committed by the employee.
  • Exercise caution in communicating the employee’s absence to others so as to avoid any suggestion that it has pre-judged the outcome of the investigation or disciplinary proceedings.
  • Ensure that the employee is aware of his or her obligations while on suspension, such as remaining contactable and available during work hours as required.
  • Although there is no statutory limit, any period of suspension should be as brief as possible and any investigation should be carried out without delay.
  • Any period of suspension should be paid. Where an employment contract permits an employer to suspend an employee without pay, this should only be done in exceptional circumstances.
  • The employer should consider whether IT/systems access needs to be suspended during suspension, but ensure provision is put in place to enable an employee to access material to respond to the allegations (possibly through supervised access) and to contact the employee if work-related queries arise.

Various pieces of legislation came into force in early April 2019.  The common, and unsurprising, theme among all these legislative changes is that they increase the statutory minimum amounts employers must pay to their staff and increase awards available to the Employment Tribunal.  We have set out below a summary of these key increases all of which are now fully effective.

Statutory sick and family leave pay

Under the Social Security Benefits Up-rating Order 2019, employers must increase minimum weekly payments to eligible employees as follows:

  • as of 6 April 2019, statutory sick pay must now be a weekly payment of £94.25; and
  • as of 7 April 2019, family leave-related pay must now be a weekly payment of £148.68.

Tribunal awards

On 6 April 2019, both the Employment Rights (Increase of Limited) Order 2019 and the Employment Rights (Miscellaneous Amendments) Regulations 2019 came into force, resulting in the below increases to awards and penalties now available to Employment Tribunals:

  • the maximum limit on a week’s pay, including for the purposes of calculating statutory redundancy, has increased to £525;
  • the maximum compensatory award for unfair dismissal claims is now £86,444;
  • the minimum basic award for certain unfair dismissal (including dismissal for reasons of union membership and acting as a staff representative) has risen to £6,408; and
  • the maximum penalty for an aggravated breach of employment law is now £20,000, up from the previous maximum of £5,000.

In addition to the above, an addendum to the Presidential Guidance on bands of damages for injury to feelings (Vento bands) has been issued, which increases the potential damages that the Tribunal can award for claims presented on or after 6 April 2019. The Vento bands are now as follows: a lower band of £900 to £8,800 for cases such as a one-off act; a middle band of £8,800 to £26,300 for more serious one-off acts of harassment or loss of job due to discrimination; and an upper band for the most serious cases of discrimination of £26,300 to £44,000, with the most exceptional cases, such as a sustained course of harassment, capable of exceeding £44,000.

National living and minimum wage

Further to our blog post in early March, under the National Minimum Wage (Amendment) Regulations 2019, the increases to hourly rates took effect from 1 April 2019.

What do employers need to do?

The above increases have already come into force so employers must ensure they have implemented these changes, and from the correct dates. Employers should think about the mechanics of backdating payments to the relevant effective date to ensure employees or workers do not have claims for unpaid wages.  Employers facing a potential claim in the Tribunal should keep in mind the above increases to awards as, no doubt, claimant solicitors will be sure to mention these increases in any pre-claim settlement discussions.

The government has given the green  light to a new form of defined contribution pension scheme.  At least, it is new to the UK.  “Collective defined contribution” (“CDC”) schemes are common in the Netherlands and Denmark but the idea of introducing this type of scheme into the UK has only relatively recently gained traction.  The fact that the Royal Mail wants to put such a scheme in place for its 140,000-strong workforce has provided the impetus for the government to consult on how CDC schemes would operate and be regulated.

Continue Reading Collective defined contribution schemes: a fresh alternative?

The case of Hargreaves v Department for Work and Pensions provides a useful reminder of what employers should keep in mind when managing an employee with a disability, including the following:

  • Discuss suitable reasonable adjustments at the very first opportunity and seek input from the employee’s treating health professional and occupational health as well as the employee.
  • Consider whether the application of a ‘provision, criterion or practice’ within the organisation, such as rigid working hours, could have the effect of placing a disabled employee at a disadvantage.
  • Be attentive to the changing circumstances of an employee with a disability and open to reassessing the reasonableness of the adjustments.
  • Be open to suspending, extending or restarting a reasonable adjustments ‘trial period’ if an employee’s symptoms or condition is likely to change due to, for example, a change in medication.
  • Be mindful that a disability may affect an employee’s ability to follow a standard process, such as calling a line manager to advise if he or she will be late, and consider whether an alternative process could be possible.
  • Be careful not to reject any recommendations made by a disabled employee’s treating health professional or occupational health without first discussing the reasonableness of their suggestions with them and the employee, and clarifying any points of uncertainty.

In this case, the Tribunal held that the employer had failed to make reasonable adjustments when it refused a flexible working pattern requested by a disabled individual. The subsequent dismissal was also held to be discriminatory. If the employer has taken into account the above, this outcome could have been avoided.

Defined benefit (DB) pension schemes promise their members a pension for life. However, while one member may live to age 75, another might live to age 95. When working out how much money a DB scheme needs to fund the benefits it has promised members, trustees (or rather their actuarial advisers) therefore have to make an assumption about how long, on average, members will live – a longevity assumption.

If that longevity assumption proves to be incorrect and the scheme has to pay benefits for longer than expected, the trustees will need to find additional money to fund those benefits. And usually they will look to the scheme’s sponsoring employer for that money.

Finding ways of managing a scheme’s longevity risk is therefore beneficial for both the trustees and the employer. One way of doing this is a transaction called a longevity swap. Between 2009 and 2018, nearly 50 pension schemes entered into longevity swaps, including schemes sponsored by Astra Zeneca, AkzoNobel, BA, BAE Systems, BMW, BT, Heineken, ITV and Rolls-Royce.

Continue Reading Managing pension scheme longevity risk – a good thing for schemes and employers

In a consultation paper issued on 5 March, the second consultation on the IR35 changes, the government confirmed the intention is still to apply the IR35 reforms to the private sector in April 2020. In summary, the intention is for IR35 to apply to any individual who, but for the supply of their services through a personal service company or agency, would otherwise be an employee of the end user client in receipt of the service. The impact of the rules on medium and large businesses is that they, as the end user client, will be responsible for determining the employment status of contractors, whether they supply their services directly, through a personal service company or an agency. Under the current rules, contractors are required to self-declare whether they fall within the IR35 framework.

The Government has committed to reviewing the Check Employment Status for Tax tool (‘CEST’) the digital tool developed by HMRC to help public authorities determine employment status. HMRC is looking at where the CEST tool might be improved to help make employment status decisions. It is worth noting that there is a difference between employment status for tax purposes (and IR35) and employment status for employment rights and protections.

The draft legislation is awaited this summer which should offer some further clarity and certainty on the proposals. The consultation will close for comment on 28 May 2019.

In this post, we take a look at the actions medium and large private sector employers can take now in order to prepare for the changes.

  • Understand your obligations

Whilst it is right there is a degree of uncertainty as to the details, now is the time for business to seek to understand what their obligations will be when the rules apply in April 2020. This will ensure businesses are in the best place possible to make decisions about the status determination of workers.

  • Look at your work force

It is worth businesses carrying out a detailed assessment of their workforce to determine how many contractors they have that potentially fall within the remit of IR35. A starting point would be to check how many contractors are engaged through personal service companies and agencies to provide services to the business. Businesses should make sure they understand the supply chain involved as sometimes these can be complex involving many parties. It would seem that the reform is not intended to be retrospective however, it would not be a wasted task to understand the profile of the workforce and will help businesses to plan going forwards.

  • Consider resources

In order to make employment status determinations, assessments will need to be made on a case by case basis and this is not a straight forward task. Businesses would be wise to consider how they will resource this task and what tools they will use to make the determination. Account will need to be taken of the individual working arrangements and so the larger the number of contractors are engaged, the greater the resources needed will be. This could easily become an administrative challenge.

  • Start the conversation

There is value in business speaking to the agencies and consultancies they contract with now to understand how they too are planning for the implementation of IR35 into the private sector. It will be important that all those in the supply chain understand and deliver under their respective obligations.

It would not be advisable to wait until the outcome of the consultation or the publishing of the draft legislation before business take steps to prepare. If you need any assistance with your planning process, please get in touch.

Recent intervention by the Competition and Markets Authority could lead to increased competition in the market for investment professionals who provide services to pension schemes – which should be a good thing for the employers supporting those schemes.

Many occupational pension schemes use the services of investment consultants and / or fiduciary managers.  Broadly, investment consultants advise pension scheme trustees on how best to invest scheme assets – and fiduciary managers make investment decisions on behalf of pension scheme trustees.

Continue Reading Pension scheme investment – a new era of increased competition?

These two small, but practically important, changes are coming in: one next month and the other next year.

From 6 April 2019, new rules relating to payslips will apply. The key points are:

  • The right to receive a payslip will extend to all workers, not just employees.
  • Employers will be required to itemise payslips (and show the hours worked) where the amount of wages or salary varies by reference to time worked.
  • Where an employer does not comply, workers and employees can apply to an employment tribunal to determine what particulars are required.
  • The changes will apply to wages or salary earned for work performed after 6 April 2019.

Before the changes come into effect, it is important for employers to check that payslips for workers and employees are formatted in a way which will ensure compliance with this new legislation, and ensure that data in relation to time spent performing work which attracts a different rate of pay is accurately recorded and submitted to payroll.

The Government has also published legislation that will come into force on 6 April 2020, giving employees (and workers who commence employment after 6 April 2020) a ‘day one’ right to receive a statement of employment particulars, currently known as a ‘section 1’ statement. Currently, the right only applies to employees who have been employed for more than two months. The amendment will also require employers to identify the days of the week that a worker is not required to work and, to the extent that a worker’s hours are variable, how these hours of work may vary and how this variation is to be determined.