Employment Eye November 2017

Welcome to the November 2017 edition of our employment law report: our monthly round-up of key employment law developments and what they mean for you.

  

Featured Case	Uber-complicated The EAT has ruled on the complex question of the employment status of Uber drivers, with implications for all those utilising an 'on demand' workforce. We also take a look at related developments: the ruling on Deliveroo drivers, a report and draft 'gig working' Bill and the King v Sash Windows ECJ decision which has a significant impact for 'on demand' workers. Julian Hoskins reports. Read more
Briefing	Short term gain; long term pain? Philip Woolham looks at incentivising employees to leave public sector pensions. Read more
News round-up	Our digest of this month's essential employment law news includes: dealing with sexual harassment, the HR aspects of the Budget, TUPE, the Working Time Directive and weekly rest breaks. We also report on two important health sector developments on discrimination and whistleblowing. Alastair Currie provides this month's update. Read more
Events and Training	Employment law update and lunch Our popular annual round-up of the year's key developments in employment law, and preview of forthcoming changes, will take place in London on 14 December, Bristol on 5 December, Leeds on 6 December and Birmingham on 7 December. Please see below for further details and booking arrangements.

 

 

Uber-complicated

The EAT has ruled on the complex question of the employment status of Uber drivers, with implications for all those utilising an 'on demand' workforce. We also take a look at related developments: the ruling on Deliveroo drivers, a report and draft 'gig working' Bill and the King v Sash Windows ECJ decision which has a significant impact for 'on demand' workers.  Julian Hoskins reports.

The background

There are three main categories of staff available to employers. 

• Workers – individuals engaged under contracts personally to do work, but not operating under a business / client relationship (section 230(3) of the Employment Rights Act 1996 'ERA').
• Self-employed contractors: individuals who are not employees and do not fall within the description above.
• Employees - individuals entering into or working under a contract of employment – whether express or implied (section 230(1) of the ERA).

The categories above act as 'gateways' to different types of employment rights, with the 'employee' category attracting the most protection; but limited rights available to workers (mainly, the right to be paid the minimum wage and take paid holiday). Self-employed contractors are entitled to very little legal protection, limited mainly to protection from discrimination.

The question of which category applies to an individual is a matter of looking at the reality of the working relationship.  It is open to an employment tribunal to disregard the 'label' that the parties might have applied to their relationship in the any documentation. This was famously summarised by Lord Templeman in a case called Street v Mountford:

"[t]he manufacturer of a five pronged implement for manual digging results in a fork even if the manufacturer…insists that he intended to make and has made a spade."

The facts

Uber runs a smartphone app for ordering taxis.  Drivers registered on the app are not committed to working any set hours, but they can sign in to the app, and accept a booking as and when they wish. The drivers supply their own vehicles. The driver has to use the route designated by the app, unless the customer requests a different route. Payment is made by the customer to Uber and Uber then pays the driver at the end of the week, having deducted a 'service fee' for use of the app.    

Uber operates a rating system for drivers, which can result in access to the Uber app being withdrawn. Uber takes the risk in some matters including, for example, some instances of fraud by passengers. Uber also deals with any fare complaints, often without requesting any comment from the driver.

Two Uber drivers brought test claims against Uber, arguing that they were workers, entitled to holiday and the national minimum wage.  Uber argued that it was correct to categorise its drivers as self-employed contractors, operating individual small 'businesses' via an online platform, akin to the way in which Ebay connects buyers and sellers.

The employment tribunal found that the drivers were workers while they were working under the app. 

Uber appealed.

The decision

The Employment Appeal Tribunal (EAT) rejected Uber's argument and held that the drivers were workers.

The key question, according to the EAT, is:

“When the drivers are working, who are they working for?"

Having said that, the EAT noted that it is possible that the relationship between the parties could be structured so that drivers could operate as a multitude of separate businesses and, as such, enter into direct contracts with passengers (possibly via a shared agent).

However, on the facts of this particular case, this was not the reality of the situation. The drivers were integrated into Uber's business and operated under Uber's control. Factors that the EAT took into account included

• the scale of Uber's operation (this was not determinative factor, but a relevant factor nonetheless)
• the fact that drivers could not grow their 'businesses' and could not establish business relationships with passengers
• drivers have no freedom to negotiate terms with passengers (beyond being able to agree a lower fare with the passenger); and
• drivers had to accept Uber's terms.

The EAT also noted that Uber had gone beyond the basic regulatory requirements of a conventional taxi operating licence.  For example, Uber operated an interview and onboarding process, and refused to give passenger details to drivers.

The most salient point for the employment tribunal was the question of the period of time for which the drivers were workers: was this limited to just the time the drivers were transporting passengers, or did it also include waiting time (that is, time that the drivers were signed in to the app and waiting for bookings)?

The difficulty was that drivers were able to accept bookings from other sources during waiting time – but if a driver failed to accept bookings, the app generated a warning message that could lead to the driver's access to the app being suspended or blocked. The EAT therefore endorsed the tribunal’s view that the drivers were workers during their 'down time'.

What does this mean for me?

The readiness with which employment tribunals are apparently happy to look behind the contractual documentation and find a worker/employer relationship has been endorsed by the EAT in this case.  It is, therefore, important to ensure that your contractual documentation and working relationships are aligned; and that the whole package achieves what you want it to achieve in respect of the employment status of your staff.  As the EAT noted, it may have been possible for Uber to have structured their relationship with drivers, so that they were engaged as self-employed contractors and not workers; but this would have meant getting the documentation and operation of the working relationship right at the outset.  Please do contact me, or your usual Bevan Brittan contact, if you require a review of the employment status of your workforce and advice on how to achieve the correct categorization of your workforce.

Please note that it has been reported that Uber have applied to appeal the EAT's decision in this case, and the case may be sent straight to the Supreme Court (by-passing the Court of Appeal stage).

Related developments

• The Central Arbitration Committee decided this month that Deliveroo riders were not 'workers' for the purposes of compulsory union recognition: there was an "almost unfettered" right of substitution, which appeared to be genuine, if unused . There was evidence of the right having been exercised on occasions. It did not matter that the right was rarely exercised, and neither did it matter that it had been introduced to defeat worker status arguments.
• A government joint report and draft Bill has been published that aims to deal with some of the issues identified in the Taylor Review, published in July 2017 (please click here for a summary of the Taylor Review). The Bill proposes default worker status, and fines for employers who repeatedly wrongly categorise members of staff. It also proposes that the definition of ‘employee’ is refined so that there is more emphasis on control / supervision. It is unlikely that this Bill will become law, but its publication will put pressure on the government to publish their formal response to the 'Good Work' report (please click here for a summary).
• In a case called King v the Sash Window Workshop, the European Court of Justice (ECJ) has held that employees who are deterred from taking leave because they believe they are not entitled to paid holiday must be given the right to carry over any untaken leave. Furthermore, contrary to previous caselaw, the right to carry over leave cannot be limited in time – so, an employee who has never taken any leave should be able to bring an unlawful deduction from wages claim in respect of the whole period of their employment. This has a significant impact on the value of claims being brought by 'gig workers': if the claimants are found to be workers, entitled to holiday pay, and they have not taken leave because they believed they were not entitled to paid holiday, then they could claim holiday pay, stretching back to the date they started work.

 

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Short term gain; long term pain?

Philip Woolham looks at incentivising employees to leave public sector pensions.

Membership of both public and private sector pension schemes is optional; although an employee may be automatically enrolled, there is nothing to stop them leaving later.  This can give rise to an issue when the significant burden of the cost of decent pension benefits is considered, for both employers and employees.

For the Local Government Pension Scheme ('LGPS'), the risks and costs increase again.  LGPS is a 'funded' scheme, meaning its assets are held in a separate pot, invested and used in time to pay benefits.  If the fund's assets are lower than needed to provide all promised  benefits, the section of LGPS fund is said to be 'in deficit', and this must be funded by the employer.  In a time of ever-tightening budgets, it must be attractive to offer a financial incentive to an employee to leave a scheme.  Even if it costs money up-front, long term savings and risk reduction would surely be worth it?

We're seeing increasing discussion of public bodies and other employers offering workers money or other incentives if they give up pension scheme membership.  Although there is a focus on LGPS, the same is happening in other public sector schemes. Because public sector schemes are governed by central regulations, employers don't have the ability to make small changes or, indeed, bigger ones, such as closing the scheme.  The only real way to make savings is to ask workers to leave the scheme.

However, the generous benefits of public sector pension schemes should not be given up lightly; it's extremely expensive to replicate these benefits through private pension saving.

Workers don't give up the benefits they've already built, only those which they would have received in future.  In the LGPS, employers still have to fund pension promises made before the worker opts out.  But for the employer, the saving is still potentially very valuable.

For younger employees, this could mean decades of lost pensions savings; and members' spouses and partners may also lose out, with no compensation whatsoever to them.

The real question is whether doing so is in the worker's best interests.  Often it may not be, even if an immediate cash payment or other incentive is attractive.

And these schemes can work from an employer's perspective.  There has been at least one case before the Pensions Regulator in which a health authority's offer of alternative benefits in exchange for giving up NHS Pension Scheme benefits was acceptable, and at least one other body has made a similar offer.

In the private sector, such exercises have for several years been governed by the Code of Practice on Incentive Exercises.  While this document does not have the force of law, it is endorsed by, amongst others, the FCA and the Pensions Regulator.  The relevant authorities, including courts, the Pensions Ombudsman and the Financial Ombudsman, are likely to consider it if anyone brings a complaint in relation to a pensions incentive exercise.  This may or may not apply to public bodies, but it may well do so if a private sector employer with exposure to a public sector scheme carried out a similar exercise.

The Code sets out strict requirements in relation to pension incentive exercises, including the banning of cash rewards for giving up rights to a pension.  Permanent pay rises may, however, in some cases be acceptable.

The Code does not prevent incentive exercises, although in most cases it will require the employer to pay for individual independent legal advice for each affected worker, as well as providing clear and balanced information throughout.  Each worker will only be advised to agree if the offer is in some way beneficial to them, although sometimes they will go against that advice.

If an employer has followed the Code, or falls within the Pension Regulator's current approval of a public sector equivalent, then it is unlikely that any future claim by a worker will succeed.  But all parties should take great care in these exercises.

From the employer's perspective, there is another potential pitfall.  A worker who has left a public sector scheme can generally choose at any point to rejoin it.  They may not be able to get the exact same benefits, as that particular section of the scheme may no longer be open to new members.  But they could get the benefit of the offer, and then still build up pension benefits in the same or a similar scheme.  The employer would have to start making contributions again.

Normally any deal would include a commitment by the worker not to rejoin the scheme, and to repay any incentive if they do.  But the employer may have to pursue the worker for repayment, possibly via the courts.  If the worker does not have the money to make the repayment, actions such as bankrupting the worker or making them sell the family house are not likely to attract good publicity.

But the real risk is long term – what happens if a worker realises long after the event that it was the wrong thing to do, and makes a claim then?  The worker will argue that the employer persuaded or pressured them into making a change that was not in their best interests, and did not give them the information they needed to make a sensible decision.  They'll want to be put back in the position they would otherwise have been in – a full pension for all the time they worked with the employer.  And they'll want the employer to pay for it.

So both employers and workers need to carefully balance the short and indeed longer-term gains potentially on offer.  Pensions are a long-term commitment on both sides, and giving them up can have equally long-term consequences.

 

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Employment news round-up, November 2017

Our digest of this month's essential employment law news includes: dealing with sexual harassment, the HR aspects of the Budget, TUPE, the Working Time Directive and weekly rest breaks. We also report on two important health sector developments on discrimination and whistleblowing. Alastair Currie provides this month's update.

Sexual harassment in the workplace

With the recent sexual harassment revelations in the American film industry and in Westminster, now would be a good time to review your dignity at work / equality policies and procedures. In a timely fashion, Acas has published new guidance on sex discrimination (full guidance here).   The guidance looks the basic definition of sexual harassment and suggests how employers should handle complaints.  This would, therefore, be a good starting point when considering if your policies and procedures are up to date and fit for purpose. However, it is likely that you would need a more in-depth review in order to demonstrate that you are not vicariously liable for any sexual harassment undertaken by your employees – this would go further than simply having an up to date policy in place; this must be supported by active implementation of the paper policy, and positive equalities environment, in which employees feel safe to raise complaints. Some employers may wish to consider measures such as appointing an equalities champion, offering an anonymous reporting mechanism and training for managers on recognising and dealing with sexual harassment in the workplace.

November 2017 Budget – what does it mean for HR?

The first November budget did not contain a great deal of note for Human Resources / employment law professions.  The headline announcements were as follows.

The government will increase the national minimum wage from April 2018 to the following rates:

• apprentices: £3.70 an hour
• 16-17 year olds: £4.20 an hour
• 18-20 year olds: £5.90 an hour
• 21-24 year olds: £7.38 an hour.

The national living wage for those aged 25 and over will also increase from £7.50 an hour to £7.83 an hour from April 2018.

The government will publish a discussion paper as part of its response to the Taylor Review (please click here for our summary of the Taylor Review) which will explore the case and options for longer term reform to make the employment status tests for both employment rights and tax clearer.

The tax free personal allowance will increase from £11,500 to £11,850 from April 2018. The higher rate tax threshold will rise to £46,350.

In respect of IR35 reform, the government is looking at extending these reforms from the public sector to the private sector. Research has been commissioned by the government, which is due to report in 2018. It will then open a consultation on its proposals. Please see our article, published here, on IR35 for details of how this reform has affected the public sector and how we can help.

TUPE – equipment but not staff transferred

Is there a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) where a contractor takes over all the equipment necessary to deliver security services, but does not take on any of the employees assigned to undertake that work?

The Court of Justice of the European Union (CJEU) has said that TUPE can apply in these circumstances, in a case called Securitas v ICTS Portugal.  The Court's reasoning was that TUPE could apply because the entity in question was based largely on equipment, rather than manpower, so it did not matter that employees did not transfer; the key question was what happened to the equipment / assets of the transferring entity.

Working time & weekly rest periods

In a case called Maio Marques da Rosa v Varzim Sol – Turismo, Jogo e Animação SA, the European Court of Justice has decided that the 24-hour weekly rest period required under the Working Time Directive can be granted on any day in the seven-day reference period; there is no requirement for the weekly rest period to be granted on the seventh day, following six consecutive working days.

This decision concerned a Portuguese worker, who may now be required to work up to 12 consecutive days, if a weekly rest period is granted on the first day of the first seven-day period and the last day of the following seven-day period.   This position will be slightly different in the UK, where employers have the option to provide a 48-hour rest period (or two 24-hour rest periods) in a 14 day reference period – the practical impact of this is that a worker could work for 24 consecutive days without the employer breaching the Directive.

Health news

• The Supreme Court has reached a decision in Michalak v General Medical Council and held that employment tribunals do have jurisdiction to hear discrimination complaints against qualification bodies, such as the General Medical Council (GMC). The particular facts of this case concerned a doctor who was found to have been unfairly dismissed and who was also referred to be subject to fitness to practice proceedings by the GMC; the doctor in question alleged that the GMC had discriminated against her. The Supreme Court said that an employment tribunal could hear that complaint, because it was not 'in the nature of an appeal' (which would preclude an ET from having jurisdiction, under the Equality Act 2010).
• The British Medical Association (BMA) and training body, Health Education England (HEE), have reached an agreement that will protect junior doctors in England from detriment by HEE when they raise a whistleblowing concern at work. Junior doctors were not previously protected in respect of HEE, unless they were covered by the extended definition of 'worker' under the whistleblowing provisions in the Employment Rights Act 1996. The new agreement will cover Postgraduate Trainees and will apply retrospectively from 3 August 2016.

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Events and training   

Employment law update and lunch

Our popular annual round-up of the year's key developments in employment law, and preview of forthcoming changes, will take place in London on 14 December, Bristol on 5 December, Leeds on 6 December and Birmingham on 7 December.

Registration opens at 9.30am, and the morning's update is followed by a networking lunch at 1.00pm. This is a free event. For full details and booking arrangements please click here.

Key topics will include

• employment status, 'gig working' and the Matthew Taylor review on 'Good Work'
• holiday pay and voluntary overtime
• redundancy and sickness absence
• Brexit
• privacy and employee monitoring – a U-turn from the European Court of Human Rights
• dress codes and equalities – balancing competing rights
• the GDPR / Data Protection Bill
• whistleblowing – shaping the new 'public interest' test
• pensions
• changes on the horizon.

There are still some places available at all locations, so please click here to register.

 

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If you would like to discuss any of these topics, or any other aspect of Employment Law, please contact Head of Employment, Jodie Sinclair.