The Supreme Court has this week declined to hear the appeal in what had been the highly anticipated case of Hextall v Chief Constable of Leicestershire Police.  Mr Hextall had sought permission to appeal a decision of the Court of Appeal from last year, which found that it was not sex discrimination for his employer to provide only the statutory rate of Shared Parental Leave (“SPL”) pay to men, while providing enhanced maternity pay to women.  

 In May 2019, the Court of Appeal had heard Hextall and a similar case (Ali v Capita Customer Management Ltd).  In Ali, the argument was that the operation of these different rates of pay was direct discrimination and, in Hextall, that it was indirect discrimination.  The Court of Appeal rejected both claims.  On direct discrimination, the court held that the correct comparison was between a man and woman taking SPL, not between a man taking SPL and a woman taking maternity leave.  On indirect discrimination, they said that the claim should properly be brought as an equal pay claim and, as such, it was bound to fail due to the rule that more favourable treatment terms are permitted in connection with pregnancy or childbirth.  Even if it could be brought as an indirect discrimination claim, the correct pool for comparison purposes was a pool of people (men and women) taking SPL and excluding women taking maternity leave as, in the court’s view, women taking maternity leave are in a materially different position from men and women taking SPL. Based on that pool, where men and women would be paid the same rate of SPL pay, there was no disadvantage to men.

As a result of the Supreme Court’s refusal to hear the Hextall appeal, and since the Ali case was not appealed, the Court of Appeal’s decision stands as the law.  Employers should therefore not be liable to a sex discrimination (or equal pay) claim if they operate an enhanced maternity pay policy and a statutory rate SPL pay policy.

This post will be of interest to employers who have a defined benefit pension scheme.

Background

Defined benefit (DB) pension schemes were once the pension arrangement of choice for paternalistic employers seeking to provide competitive benefit packages for their employees.

In more recent times, however, difficult investment environments, increasing life expectancy, low gilt yields and in many cases shrinking company size, have left companies with expanding DB pension schemes burning a hole in their balance sheet. Sound familiar? It is unlikely you would have missed the press coverage surrounding BHS and Tata Steel, and the issues that those companies faced.

Continue Reading Buy-ins vs buy-outs – what employers should know

As discussed in our previous posts in April 2019 and January 2020, the government intends to apply the IR35/off payroll reforms to the private sector in April 2020.  By way of reminder, the IR35 reforms are intended to apply to any individual who, but for the supply of their services through an intermediary, would otherwise be an employee of the end-user client receiving the service. These rules will impact medium and large businesses in their role as the end-user client. From 6 April 2020, these organisations will become responsible for determining the employment status of contractors, regardless of whether they supply their services through a personal service company directly to the end-user or via an agency. The new rules will effectively see a shift in current responsibility on status determination, from the contractor to the end-user client.

By way of update, in early February 2020, HMRC provided some clarification about the new off payroll rules.  In order to allow businesses more time to prepare for the changes, it has confirmed that the new regulations will only apply in respect of services provided on or after 6 April 2020, rather than any payments for services made on or after that date.  Therefore, if any payments are made post-5 April 2020 for services that were provided pre-6 April 2020, they will not be caught by the changes.  This is helpful clarification for end user clients who currently engage individuals via personal service companies – it means that there is an additional period in which businesses have time to prepare for the implementation of the new rules.

The formal publication of the review that has been conducted into the implementation of changes to the off payroll rules is due to conclude in February 2020, and it is hoped that it will bring some additional welcome clarification on the new rules for private sector contractors and end-user clients alike.

Consultation on RPI/CPI changes delayed

Judged to be to be a “poor measure of inflation” by the UK Statistics Authority (UKSA), its view is that before the Retail Prices Index (RPI) is scrapped, it should be aligned with a variant of the Consumer Prices Index which includes owner-occupier’s housing costs (CPIH).

Although the Government rejected the proposal to remove RPI, it agreed to consult on whether to align CPIH with RPI and the timing of this.   It confirmed that no change will be implemented for five years (before February 2025).   The Government also confirmed that its objective is for CPIH to become its headline measure over time but was silent on whether it might start to issue CPI-linked gilts.

Continue Reading RPI to CPIH

As the number of reported cases of the Novel Coronavirus (2019-nCoV) continues to rise and authorities ramp up preparations to handle possible contagion, so too must employers.

Click here for helpful guidance from our Hong Kong team on what employers in Hong Kong are required to do when dealing with a Novel Coronavirus outbreak.

As we flagged in our post in April 2019 (https://www.mayerbrown.com/en/perspectives-events/blogs/2019/04/ir35-reform-what-employers-can-be-doing-now-to-prepare), the government intends to apply the IR35 reforms to the private sector in April 2020. As a reminder, the IR35 reforms are intended to apply to any individual who, but for the supply of their services through an intermediary, would otherwise be an employee of the end-user client receiving the service. These rules will impact medium and large businesses in their role as the end-user client. From 6 April 2020, these organisations will become responsible for determining the employment status of contractors, regardless of whether they supply their services through a personal service company directly to the end-user or via an agency. The new rules will effectively see a shift in current responsibility on status determination, from the contractor to the end-user client.

2020 update

On 7 January 2020, the government confirmed the launch of a review, to run until mid-February 2020, to consider concerns from affected individuals and businesses about the implementation of the private sector reforms in April 2020. There has been no suggestion that this review will change the decision to implement the IR35 reforms from 6 April 2020. However, it is hoped that the review will bring some welcome clarification on the new rules for private sector contractors and end-user clients alike.

The government has also published a research briefing paper, in addition to launching the review referenced above, which details the history of the IR35 legislation from 2010 onwards, and sets out some interim responses to certain concerns raised, namely that (see link to Factsheet): i) the new rules will not be retrospective – HMRC will focus on whether businesses are complying with the reform for new engagements post-6 April 2020 rather than concentrating on past engagements; ii) organisations’ decisions on whether individuals fall into the new rules will not automatically trigger an enquiry into earlier decisions in previous tax years; iii) the reforms will not prevent individuals from working through a personal service company or an equivalent; iv) organisations will receive support and guidance throughout the implementation period to ensure that the reforms are applied correctly via initiatives such as workshops and detailed legislative guidance; v) HMRC will continue to improve the CEST tool (a digital tool which has been designed by HMRC to assist public authorities (and now private sector companies) to assess whether a worker falls inside or outside the scope of the IR35 rules) with input from stakeholders; and vi) the status decision of a worker made by an organisation will be able to be challenged in real time through a client-led status disagreement process which is outlined under the proposed legislation.

It would not be advisable to wait until the outcome of the government review before businesses take steps to prepare for the reform. Should you need any assistance with your planning process, please get in touch.

The Supreme Court is set to be busy with employment law cases in 2020. Below, we take a look at some of the most important cases coming up this year and why they are significant.

Various claimants v Wm Morrisons Supermarket

In this case, which is the first group litigation to be brought in the UK following a data breach, the Supreme Court will decide whether the Data Protection Act 1998 (“DPA”) excludes an employer from being vicariously liable for a data breach committed by an employee. It will also consider whether the employee’s actions in this case occurred in the course of his employment (and, therefore, whether Morrisons are vicariously liable). The employee in question copied the personal data of nearly 100,000 employees on to a USB stick which he then published online. The Court of Appeal found that Morrisons were vicariously liable even though the employee had acted in a deliberate attempt to damage Morrisons, and even though Morrisons were themselves compliant with the data protection legislation. While this case involves the law as it stood before the GDPR, given the increase in the rights of data subjects under the GDPR, employers should be wary that a Supreme Court finding against Morrisons could well lead to an increase in data breach class actions. This case was heard in November 2019. Judgment is awaited.

Asda v Brierley

This is an equal pay claim brought by around 35,000 Asda employees. The Supreme Court will consider the issue of whether female employees working at retail stores are able to compare themselves to a group of predominantly male distribution depot workers for the purposes of an equal pay claim. While this decision will only determine whether the workers are able to bring the claim (and not, at this stage, whether Asda are actually in breach of equal pay legislation), the outcome will be significant for other supermarkets who are also currently facing similar claims, worth very significant sums, and for employers who have both warehouse and retail operations. The Supreme Court is likely to hear the case in the second half of 2020.

Ali v Capita Customer Management Ltd; Hextall v Chief Constable of Leicestershire Police

The Supreme Court is set to consider whether it is sex discrimination for an employer to operate a Shared Parental Leave (“SPL”) policy which provides only the statutory rate of SPL pay while having a maternity policy offering enhanced maternity pay. The Court of Appeal ruled that such a policy is neither directly nor indirectly discriminatory. Had this case gone the other way, employers would have been faced with the choice of either increasing SPL payments to match their maternity pay schemes, or reducing maternity pay so that it could not be relied on to improve SPL pay. The Supreme Court hearing on this case is therefore eagerly awaited. A date for the hearing is yet to be confirmed.

Uber BV and others v Aslam and others

The long-running case on whether Uber drivers are workers or self-employed is set to come to a conclusion this year. The Supreme Court will hear the case in July. In 2018, the Court of Appeal held (by majority) that Uber drivers are workers, rather than self-employed, despite the fact that their contractual documentation says differently. Uber were given hope, however, as Underhill LJ disagreed with the majority of the Court of Appeal, arguing that the relationship between Uber and the drivers (as described in the contractual documentation) was neither artificial nor unrealistic. This case will have wide-ranging implications for the gig economy in general and is keenly awaited.

In Phoenix House Ltd v Stockman, the EAT were asked to determine whether Mrs Stockman’s behaviour in covertly recording a meeting with HR amounted to misconduct and, if so, whether the compensation awarded by the ET should be reduced as a result.

In May 2013, Mrs Stockman, a financial accountant, covertly recorded a meeting with HR following an incident that had taken place earlier that day. A lengthy disciplinary process followed. In November, it was decided that the employment relationship had broken down beyond repair and Mrs Stockman was dismissed. The fact of this recording was only disclosed during Mrs Stockman’s successful unfair dismissal claim in the ET. On appeal, Phoenix argued that any award of compensation should be reduced to Nil as it would have dismissed Mrs Stockman for gross misconduct if it had been aware of the covert recording at the time it was made.

The EAT dismissed the appeal. It considered the variations in expected behaviour between employers; one employer may attach particular importance to a standard of conduct while another might condone it or treat it leniently. Because of this, part of the assessment is the attitude of the employer in question towards the particular behaviour. The tribunal had (rightly, according to the EAT) placed reliance on the fact that Phoenix had not listed covert recordings in its disciplinary policy as amounting to gross misconduct, and the policy was not amended in light of these proceedings.

The purpose of the covert recording was also relevant. Mrs Stockman’s evidence was that she had been flustered and uncertain if the device would even record. The EAT recognised that most people now carry devices capable of recording conversations that only take a moment to switch on. This fact, it thought, reduced the likelihood that a covert recording could be part of a calculated plan to entrap an employer or gain a dishonest advantage. This was aided by the fact that Mrs Stockman had only recorded a single meeting, had not relied on it at any point during the internal proceedings, and there was no suggestion that she had intended to entrap Phoenix.

Where an employer has a strong view that covert recordings constitute misconduct, the Phoenix decision will make it necessary for this attitude to be clearly conveyed to employees in some way. It is also good practice, as suggested by the EAT in obiter, for employees or employers to say if there is an intention to record a meeting and, if so, how.

A case was decided this week in the London Central Employment Tribunal (Dewhurst v Revisecatch) which has dramatic ramifications for employers. The Tribunal’s decision is that, where there is a transfer covered by the Transfer Regulations, individuals who are properly classified as “workers” are covered by the Transfer Regulations.

The Transfer Regulations apply to anyone working as an “employee”. This is defined in the Regulations as someone who “works for another person, whether under a contract of service or apprenticeship or otherwise (emphasis added), but does not include anyone who provides services under a contract for services, and references to a person’s employer shall be construed accordingly”. In other words, someone who is clearly an employee is covered by TUPE because they work under a contract of service. However, what do the underlined words “or otherwise” mean? There is a clear exclusion if you are genuinely self-employed (i.e. engaged in business on your own account), then you are not covered by TUPE. What happens if you are neither working under a contract of service, nor are you working under a contract for services? In other words, what happens if you are somewhere between those two extremes?

In this case, individuals who were cycle couriers claimed that they were “workers” and they should be treated as working under a contract of employment for the purposes of TUPE. Their argument was that clearly TUPE applied to contracts of employment plus a further category (“or otherwise”).

Under English law, there are, in essence, three categories of individual: employee, worker and the genuinely self-employed. The worker category is an intermediary category which, broadly speaking, means that an individual is contracted directly to the end user/employer, and they are not genuinely in business on their own account.

The Tribunal decided, after a careful review of the authorities, that workers were intended to be covered by the Transfer Regulations. This arose in the context of a claim for a failure to consult with those workers’ representatives ahead of the TUPE transfer. Furthermore, there was a claim for holiday pay which was dependant on the individual’s prior holiday pay rights transferring across from a former employer, under the Regulations.

If correct, this case extends the ambit of TUPE significantly. Employers will have to treat workers as if they were employees for the purpose of TUPE protection. This would clearly apply in relation to collective consultation rights, and the transfer of historic contractual rights and claims over to the new employer. Transferees will need to negotiate appropriate warranties and indemnities to cover workers as well as employees. This case does not give workers the right to claim automatic unfair dismissal, because that part of TUPE regulations refers back to the definition of “employee” in the Employment Rights Act 1996, which excludes workers. However, it is probably only a matter of time before someone argues that it is necessary to interpret the UK legislation to give workers dismissed following a TUPE transfer the right to claim automatic unfair dismissal.

Please remember that this is an Employment Tribunal decision. As such, it does not create a binding precedent. This case will be appealed, or one of the cases coming along in its wake will be appealed. However, for now, it is necessary for employers to think about how they are going to handle collective consultation and the allocation of risk in any TUPE transfer. For those interested, we will discuss this case further in our next employment podcast.

 

The Supreme Court has today released its decision in the whistleblowing case of Royal Mail Group v Jhuti.  The case concerns the unfair dismissal protection for whistleblowers, which provides that a dismissal will be unfair if the reason for it (or the main reason) is that the employee has made a whistleblowing disclosure.  The question in the Jhuti case was whether, in identifying the reason for a dismissal, it is only the motivation of the ultimate decision-maker that matters.

The facts were that Ms Jhuti had made a whistleblowing disclosure to her line manager which was not well received by him.  He set about creating a false picture of poor performance by Ms Jhuti which ended up in her dismissal, but it was not the line manager who made the decision to dismiss.  For the disciplinary process, the company had appointed a different manager, who knew nothing of Ms Jhuti’s whistleblowing disclosure and had no reason to doubt the truthfulness of the poor performance evidence which was found to be sufficient to justify dismissal.

The Court of Appeal had previously decided that, on these facts, the reason for the dismissal could not have been the disclosure made to the line manager as it was only the “mental processes” of the dismissal decision-maker that mattered and that person had based their decision on poor performance.  The Supreme Court disagreed and overturned the Court of Appeal’s decision.  They said that, when identifying the reason for the dismissal as required by the legislation, it is necessary to identify the “real reason”.  Normally, the real reason will be the reason given by the decision-maker but where, as in this case, the real reason has been hidden, the court must “penetrate through the invention”.  The real reason for Ms Jhuti’s dismissal was that she had made a whistleblowing disclosure to her line manager.

The facts of the Jhuti case are extreme; cases involving fabricated dismissal grounds will be rare.  Employers are, however, often faced with employees who have made whistleblowing disclosures and who are also (for unrelated reasons) the subject of an internal HR process, whether that is a disciplinary, performance or redundancy process.  Notwithstanding the decision in Jhuti, the recommended course in such circumstances will normally be to separate out the whistleblowing disclosure, and any associated investigation into it, from any other HR process, with different decision-makers being appointed for each.  That will normally reduce the risk of the employee arguing that the outcome of the HR process was motivated by their whistleblowing disclosure.