Our latest blog post reviews two important developments in the calculation of holiday pay. First, the Government announced late last year that it will extend the reference period for calculating holiday pay. Second, the recent decision in Flowers v East of England Ambulance Trust clarifies the uncertainty surrounding whether voluntary overtime should be included in the calculation of holiday pay.

New reference period

From 6 April 2020, holiday pay will be calculated on the basis of average weekly pay over 52 weeks, replacing the current reference period of 12 weeks. The amendment will give effect to one of the key recommendations of the Taylor review of modern working practices, published in July 2017, which was to resolve the concern that a 12-week reference period did not take into account the seasonal nature of casual and zero-hours work arrangements. In December 2018, the Government published the Good Work Plan, where it committed to enacting the legislation that will now come into effect next April, extending the reference period.

Overtime

The calculation of statutory holiday pay is governed by the UK Working Time Regulations (the “WTR”), which provides that, during statutory annual leave, workers are entitled to be paid at a rate of a week’s pay for each week of leave. A week’s pay has been interpreted as being ‘normal remuneration’. Various cases have considered the extent to which overtime should be included in this calculation. It was established fairly early on that compulsory non-guaranteed overtime should be included in the calculation, however, uncertainty remained over voluntary overtime.

The position has now been resolved by the Court of Appeal in Flowers v East of England Ambulance Trust, which decided that voluntary overtime payments should be included as long as they are sufficiently regular and paid over a sufficient period. The Court rejected comments made by the ECJ, in an earlier case, where it was suggested that overtime pay could only be included to the extent that it was provided for in the worker’s contract. Although Flowers was a case under the Working Time Directive (the “WTD”) rather than the WTR, UK courts and tribunals will interpret the WTR to conform with the WTD, and so the case is likely to apply equally to private employers. The question then becomes: when will overtime be “sufficiently regular”, and that will remain something that will turn on the facts of each situation.

Recent determinations of the Pensions Ombudsman¹ have considered the extent to which employers should provide information on pension rights to employees who have notified them of a terminal illness.

The law

There is no general duty on employers to advise employees about their pension rights, or to safeguard employees’ economic well-being. Indeed, the law prohibits anyone other than a person authorised by the Financial Conduct Authority from advising on pension rights.

However, a distinction should be drawn between “advising” and “providing information”. In some situations the law imposes specific duties on employers to provide information about pension rights to employees. When the law is silent, however, getting things right can be tricky.

Continue Reading Providing information about pensions to terminally ill employees – how far should employers go?

Mayer Brown’s UK Pensions Group has launched a monthly video series providing a snapshot of recent developments and issues of current importance in the UK pensions industry. In the first episode, available on our YouTube channel, partner Richard Goldstein looks at the issue of DB superfunds and, in particular, the UK government’s recent consultation on an authorisation and supervision framework for DB superfunds. This series will also be available as podcasts, available for streaming and download from iTunes, Google and Yahoo!. Viewers/listeners can also subscribe to our YouTube, iTunes, Google and Yahoo! channels.

Whistleblowing has been a hot topic for employers in recent years. In our latest blog post, we set out a reminder of the key points and highlight some recent developments.

What is whistleblowing?

  • Since 1999 the Public Interest Disclosure Act 1998 (PIDA), which introduced sections 43A to 43L and 103A to the Employment Rights Act 1996 (ERA), has afforded whistleblower protection to employees and workers against victimisation and dismissal following a disclosure of employer wrongdoing.
  • A disclosure may take place after employment has ended. In Onyango v Adrian Berkeley T/A Berkeley Solicitors the appellant, a solicitor, sought to rely upon disclosures he had made after the termination of his employment, which resulted in him being investigated by the Solicitors Regulation Authority. Since detriment may arise post-termination, the EAT saw no reason to limit a disclosure to the duration of the employment.
  • There is no minimum period of service before a claimant can bring a whistleblowing claim, and there is no financial cap on compensation that can be awarded. If the claimant is an employee and the detriment is dismissal, the claimant will need to comply with the usual unfair dismissal time limits. A detriment claim must be brought within three months of the act or failure relied upon, subject to any extension as a result of the ACAS pre-claim conciliation process.
  • A whistleblower will qualify for protection if they have made a qualifying disclosure that is also a protected disclosure.

What is a qualifying disclosure?

  • The disclosure must involve information that ‘conveys facts’, rather than simply raising a concern or allegation. This can occur orally or in writing, but a written disclosure is obviously less likely to be contested.
  • The information must relate to one of six types of wrongdoing by the employer: criminal offence, breach of any legal obligation, miscarriage of justice, danger to health and safety of any individual, damage to the environment, and the deliberate concealment of information about any of these.
  • The employee or worker must hold a ‘reasonable belief’ that the information tends to show that the wrongdoing has occurred, and that the disclosure is in the public interest. Importantly, a belief of wrongdoing can be reasonable even if it is mistaken. Up until 25 June 2013, a qualifying disclosure had to be made ‘in good faith’. This requirement was removed but good faith is still relevant to the question of compensation.

What is a protected disclosure?

  • A qualifying disclosure will be a ‘protected disclosure’ when it is made to the employee or worker’s employer. Disclosures made to third parties will only be protected in certain, more limited, circumstances, and may be subject to additional requirements. For example, disclosures made to ‘prescribed persons’ such as the Financial Conduct Authority or Prudential Regulation Authority will only be protected if the worker ‘reasonably believes’ that the information disclosed is ‘substantially true’.

Recent developments:

  • In Chesterton Global Ltd (t/a Chestertons) and another v Nurmohamed, the EAT found that a disclosure could be in the ‘public interest’ without necessarily relating to people outside of the employer. Here, there was an allegation of accounting irregularities affecting 100 branch managers.
  • In Timis and Sage v Osipov the Court of Appeal decided that two non-executive directors, instrumental in the dismissal of the company’s CEO, could be held personally liable for losses flowing from the dismissal (in addition to the employer).
  • In Royal Mail Ltd v Jhuti a protected disclosure was made to the Claimant’s line manager but was unknown to the individual who made the decision to dismiss the Claimant. The Court of Appeal decided that the employer should only be attributed with the knowledge or state of mind of the decision-maker and so the claim failed. It has been appealed to the Supreme Court, where it will be heard later this year.
  • In Foreign and Commonwealth Office and others v Bamieh it was determined that a whistleblowing detriment claim brought by a British national against an overseas co-worker, could not be brought in a British employment tribunal as the relationship between the relevant co-workers did not have a sufficient British connection.

We recently advised a pension scheme on a buy-out of its defined benefit (DB) liabilities with an insurer. In the run up to the transaction, the employer and the trustees looked very carefully at whether the scheme had enough assets to make the transaction possible. It was touch and go, but in the end the assets were just enough.

This made me think about how important taking benefit de-risking action as part of the journey to full funding can be. On its own, each benefit de-risking step does not have a transformative effect on funding. But, as part of a wider programme of funding and investment action, benefit de-risking can make the difference between getting to 100% funding on a buy-out basis and not.

Continue Reading Benefit de-risking – steps towards full funding

Guaranteed minimum pension (GMP) conversion offers the opportunity for defined benefit schemes to simplify their benefits, potentially saving costs and making schemes more attractive to be bought out with an insurer.

Age-old question

One of the great unanswered questions of pensions law has finally being answered. In October last year, the High Court in the Lloyds Bank case determined that pension schemes have to equalise for the effect of GMPs. As part of the judgment, the Court confirmed the effectiveness of the GMP conversion legislation issued by the Department of Work and Pensions (DWP).

Also, in a follow-up judgment, the Court confirmed that GMP conversion, known as the “D2 method”, can be used as a route to achieve equalisation. This effectively allows a scheme to pay the higher of two amounts, based on the value of the member’s GMP and an opposite sex comparator’s GMP, rather than run on dual records for service between May 1990 and April 1997.

Continue Reading GMP conversion – an opportunity to simplify benefits

Since July 2017 when the Supreme Court abolished the requirement to pay a fee to issue a claim in the Employment Tribunal, there has been a steady increase in the number of claims issued in the Employment Tribunal, although the numbers are yet to reach the levels we saw before the fees regime was introduced.

The most recent figures published by the Ministry of Justice (“MOJ”) for the period for October to December 2018 show that there were 9,811 single claims issued in the Employment Tribunal, which has increased by 23% when compared to the same period in 2017.  Typically the most common employment tribunal claims are for unfair dismissal, unauthorised deduction of wages and equal pay.  The MOJ statistics confirm that unauthorised deduction from wages remains one of the most common claims, although the most common complaint disposed of in Q4 2018 was  unfair dismissal.   Discrimination and whistleblowing claims also increased, although those claims were never as dramatically impacted by the fee regime.  The most common discrimination claim remains age discrimination, followed by sex discrimination and then disability discrimination. 

The rise in claims continues despite the introduction of pre-claim ACAS conciliation in May 2014.  ACAS has released its latest statistics which show that only 24% of Early Conciliation cases that were closed in April to December 2018 proceeded to a Tribunal claim and, of those, 29% were settled by ACAS later or withdrawn. So although the number of claims is not back to the pre-fees level, the current numbers would no doubt be higher were it not for the introduction of ACAS early conciliation.

In response to the rise in numbers, the Government is currently recruiting more fee-paid judges and is due to introduce modernisation reforms to the Employment Tribunal over the next two years.  This is welcome news as it is clear that an increase in resources is much needed.  The MOJ figures reveal that the outstanding caseload for single claims has increased by 53%, and it is something we notice regularly when dealing with the Tribunals. We have been experiencing lengthy delays in the Employment Tribunal in processing both ET1s and ET3s, and recently had a main hearing cancelled on the day before, due to the unavailability of judges.  

Five years ago the pensions world was rocked by George Osborne’s Budget announcement:  DC members would no longer be forced to buy annuities.

Under his “freedom and choice” initiative, tax rules were changed so that DC pots could be used to provide lump sums or drawdown.  At the same time, Pension Wise was introduced – free guidance for DC members about their benefit options.  Later changes to tax law mean that, subject to certain conditions, members can use their DC savings to pay for financial advice.

Continue Reading Freedom and choice – not just for DC?

On Friday (24 May) the Court of Appeal delivered its decision in the cases of Capita v Ali and Hextall v Chief Constable of Leicestershire.  In both cases, male employees claimed sex discrimination on the basis that their employer’s shared parental leave (SPL) policies provided the statutory rate of SPL pay to employees taking SPL, while their maternity leave policies provided for enhanced maternity pay.  The Court of Appeal has ruled that this is neither direct nor indirect discrimination.

For direct discrimination, the correct comparison is between a man and a woman taking SPL – not between a man taking SPL and a woman taking maternity leave.  As such, there is no discrimination because they would both receive the same rate of SPL pay.  This is generally viewed as a correct analysis and is not surprising. What is more interesting perhaps is the ruling on indirect discrimination.  There, the claimants’ argument was that paying the statutory rate of pay for all employees who take SPL causes a particular disadvantage to men when compared to women.  The Court of Appeal rejected this argument too.  They said that the pool for comparison purposes is a pool of employees whose circumstances are the same as each other (or not materially different).  So women taking maternity leave had to be excluded because they are in a materially different position from men and women taking SPL.  That left a pool comprised of men and women taking SPL (as opposed to maternity leave).   Based on that pool, where the men and women would be paid the same flat rate of SPL pay, there was no particular disadvantage to the men.  In any event, the Court also found that, if there were any disadvantage to men, the employers would have been able to justify it as a proportionate means of achieving a legitimate aim, namely the special treatment of mothers in connection with pregnancy or childbirth.

Both Claimants have asked for permission to appeal to the Supreme Court but, for now at least, the legal position is clear.  Employers will not be liable to a sex discrimination claim if they operate an enhanced maternity pay policy and a statutory rate SPL pay policy.

What’s New?

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.