Employment Eye April 2017

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

 

Featured case

The law of unintended consequences

The Supreme Court has provided a clear and important ruling on indirect discrimination and how it works. Find out more in this report by Julian Hoskins.

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Briefing

Robots for hire? AI and your workforce

A recent report revealed that approximately 30% of UK jobs could be automated within the next 15 years. Anne Palmer asks: what does the growth of AI mean for HR and your workforce?

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News round-up

Alastair Currie rounds-up this month's key employment news, including: help with IR35, Brexit, the election, agile working, the gig economy and the latest on gender pay gap reporting and 'sleep in' payments.

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Events and training

Dates and details of our next series of free training events in Birmingham, Bristol, Leeds and London have now been released. The topic is, 'The future is now: dealing with modern workforce issues'.  

We are also offering workshops on the highly topical issue of immigration law.

Please see below for further details of dates and booking arrangements for each of these events. 

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The law of unintended consequences

The Supreme Court has provided a clear and important ruling on indirect discrimination and how it works. Find out more in this report by Julian Hoskins.

 

The background

The concept of direct discrimination is relatively straightforward: a person is treated less favourably, because of a 'protected characteristic' (age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex; and sexual orientation). A simple example would be where an employer refused to employ women – the link between the less favourable treatment and the protected characteristic is clear.

The concept of indirect discrimination is more complex, and is intended to deal with the more common 'hidden' obstacles which affect those with a protected characteristic. Indirect discrimination covers situations where apparently 'innocent' non-discriminatory rules and practices have a detrimental impact on those with a protected characteristic. For example, a minimum height requirement for employees would indirectly discriminate against women, because most women are shorter than men.  

The definition of indirect discrimination is found in section 19 of the Equality Act 2010. This sets out that an employer indirectly discriminates against an employee where:

  • the employer applies to the employee a 'provision, criterion or practice' (PCP)
  • the employee has a protected characteristic
  • the PCP in question applies across the board, including those who do not share the employee's protected characteristic
  • the PCP puts those with whom the employee shares the protected characteristic at a particular disadvantage compared to others
  • the PCP does actually put the employee to that disadvantage; and
  • the employer cannot justify the PCP, i.e. it cannot show that it is a proportionate means of achieving a legitimate aim.

So, indirect discrimination applies where an apparently neutral PCP has

  • an adverse impact on a group
  • the person in question is actually affected by that PCP; and
  • the employer cannot justify its PCP. 

This apparently clear formulation has, unfortunately, lead to a series of complexities and unanswered questions around issues such as whether a claimant needs to show why the PCP affects them; whether the PCP must affect the whole group to which the claimant belongs and whether there needs to be any causal link between the PCP and the disadvantage suffered by the individual as well as the group. 

In the joined cases of Essop v Home Office and Naeem v Secretary of State for Justice, Lady Hale has provided clarity on these and other complexities.

The facts

Essop

The Home Office required that staff pass a Core Skills Assessment (CSA) in order to be eligible for promotion. For reasons which are unclear, statistical evidence showed that candidates for the CSA who are from black and minority ethnic (BME) backgrounds and aged over 35, are more likely to fail the CSA. The claimants failed the CSA and brought indirect race and age discrimination claims against the Home Office, arguing that the requirement to pass the CSA was a PCP and there was a statistically greater chance that they would fail because of their racial and age profile.

An employment tribunal found that there was no indirect discrimination because the claimants failed to show that there was a link between the reason why they had failed the test and the disadvantage suffered by the group. This decision was overturned by the Employment Appeal Tribunal (EAT), which in turn was overturned by the Court of Appeal.

Mr Essop appealed to the Supreme Court for a final ruling on whether the reason for the group disadvantage had to be the same as the reason why the individual suffered a disadvantage.

Naeem

Mr Naeem's claim related to pay scales for prison chaplains. Under the Prison Service's pay scheme, pay increases are linked to length of service. The Prison Service only began employing Muslim chaplains from 2002, so Christian chaplains were more likely to reach the upper end of the pay scale.

Mr Naeem brought indirect religious and race discrimination claims, arguing that he had been disadvantaged as a Muslim and Asian chaplain by the application of the length-of-service criterion.  An employment tribunal rejected Mr Naeem's claims, finding that although the pay scheme was indirectly discriminatory, it was justified: it was wholly legitimate to seek to retain and reward those who had served as chaplains over time and built up experience and knowledge.  On the question of whether the pay scheme placed Muslim chaplains at a 'particular disadvantage', the tribunal defined the appropriate pool for comparison as all prison chaplains. Mr Naeem appealed to the EAT on the justification point. The Prison Service also appealed, arguing that the tribunal's identification of the disadvantaged group was wrong.

The EAT upheld the Prison Service's appeal: the tribunal was wrong to include Christian chaplains employed before 2002 in the comparison pool; Mr Naeem, who was employed in 2004, had been treated in exactly the same way as any chaplain, of whatever religion or race, appointed at the same time as him. Although it was not necessary to do so, the EAT went on to say that if there had been indirect discrimination, it would not have upheld the tribunal's finding on objective justification, because the pay scheme could have been modified to avoid the disadvantage suffered.

The Court of Appeal dismissed Mr Naeem's appeal, agreeing with the EAT that there was indirect discrimination but applying different reasoning.

Mr Naeem appealed to the Supreme Court.

The decision

The appeal in Essop was allowed and the appeal in Naeem was dismissed. In coming to its conclusions, the Supreme Court made the following key findings on the correct approach to indirect discrimination claims.  

  • There has never been any express requirement for an explanation of the reasons why a particular PCP puts one group at a disadvantage when compared with others. It is enough that it does. The Supreme Court's judgment cites the example of chess grades: there is no generally accepted explanation of why women usually achieve lower grades as chess players than men, but a requirement to hold a high chess grade would put women at a disadvantage.
  • The reason why one group may find it harder to comply with a PCP than others was identified by a new term: a 'context factor'. Context factors can adopt a range of forms. For example, context factors can be genetic (strength or height), or social (the expectation that women will bear greater responsibility for caring for family) or traditional (the division between 'men's jobs' and 'women's jobs').       When a 'context factor' is amalgamated with a PCP, then indirect discrimination will arise.
  • There is no requirement that a PCP must put every member of the group with a particular protected characteristic at a disadvantage. For example, some women will be able to work full-time without difficulty, and others cannot. In the same way, in Essop, it was irrelevant that some BME or older candidates could pass the CSA.
  • The potential issue of 'coat-tailers' was dealt with neatly and succinctly by the Supreme Court. This is the question of whether claimants could 'coat tail' claims if they had been disadvantaged (e.g. failed a test) but for reasons that had nothing to do with the disparate impact – for example, by not preparing for the test or not attending on the day. Lady Hale emphasised that, in those circumstances, the claim would fail because there would be no link between the PCP and the individual disadvantage. If a candidate failed for one of those reasons, there would be a "material difference" between them and a candidate who diligently prepared, arrived on time at the right place and finished the test. There needs to be a causal link between the PCP and disadvantage suffered by the individual, as well as the group.
  • With regard to the correct identification of the pool of comparators, the EHRC Employment Statutory Code of Practice provides that all the workers affected by a PCP should be placed in the pool. As a general rule, "identifying the PCP will also identify the pool for comparison" – on the facts of the Prison Service case, the PCP was the incremental pay scale affecting all chaplains employed by the Prison Service.

What does this mean for me?

In the face of challenging legal complexities, the Supreme Court has provided welcome clarity on how employment tribunals and, by extension, employers should approach the concept of indirect discrimination.

Whilst this decision does lower the hurdle for claimants by removing the need for claimants to show why there is a group disadvantage, the Court has also highlighted (at paragraph 29) that employers should not shy away from showing that a PCP is justified:

"The requirement to justify a PCP should not be seen as placing an unreasonable burden upon respondents. Nor should it be seen as casting some sort of shadow or stigma upon them. There is no shame in it. There may well be very good reasons for the PCP in question."

In summary, in order to consider whether any PCP you have in place, or are considering implementing, may amount to indirect discrimination, you will need to answer the following questions.

  • Is there a PCP?
  • Is there is a 'context factor'?
  • Do the 'context factor' and the PCP combine to create a group disadvantage?
  • Is the group and individual disadvantage caused by the PCP?
  • Is the employer able to objectively justify the PCP in question?

In the light of this judgment, prudent employers will monitor how their policies and practices impact on various groups and, if indirect discrimination is found, consider whether that impact can be either modified or objectively justified.

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Robots for hire? AI and your workforce

A recent report revealed that approximately 30% of UK jobs could be automated within the next 15 years. Anne Palmer asks: what does the growth of AI mean for HR and your workforce?

Whilst artificial intelligence (AI) may conjure up images of a distant futuristic society, it is fast becoming a part of everyday life, both at work and in wider society. The phrase was first coined as far back as the 1950s and encompasses a wide range of technologies, including

  • voice pattern recognition
  • driverless cars
  • process automation
  • 'chat-bots' and
  • virtual assistants, such as Siri, Alexa and Cortana.

The future is closer than you think: Amazon has started testing its new drone delivery service – Amazon Prime Air – which aims to have deliveries on your doorstep within 30 minutes. Various autonomous vehicle trials are already happening in the UK, with the first self-driving cars on a public road being tested on a two mile route in Greenwich in April 2017. And these changes are not restricted to relatively mechanical tasks: software is being developed which can analyse CT scans, with an accuracy rate which outstrips the performance of human radiologists by 50%. And a Japanese insurance company has recently replaced a group of employees with technology which can calculate payments to customers, using a system which possesses cognitive technology that can 'think' like a human (albeit that final payments are checked by a member of staff).  

Although these examples of AI technology are currently at the cutting edge and still far from the norm, they are indicative of a growing trend. According to a study published by Oxford University last year, all sectors will be affected by automation over the next twenty years, with 850,000 public sector jobs potentially lost by 2030. Another study, published by PWC in March 2017, found that around 30% of UK jobs are risk of automation by the early 2030s, with the highest risk of automation in transportation and storage, wholesale and retail, but with lower risk of job losses in health, education and social work. Research suggests that routine, mechanical tasks are at the highest risk from AI; whereas roles that require physical dexterity (such as preparing food) and / or 'human' characteristics such as care giving or critical thinking are at less risk from AI. It is thought that this could result in a 'hollowing out' of the labour market, with highly skilled employees at the top end of the labour market becoming even more valued and highly paid; and at the opposite end of the spectrum, a growth in low skilled, low paid, work which is not easily automatable – with a large gap in between. But how will the increasing presence of AI impact on HR and workforce law?

In terms of the tasks undertaken by HR teams themselves, it is the more administrative HR tasks which are most likely to be undertaken by AI. There does not appear to be any prospect, in the foreseeable future, of more complex, strategic HR decision making tasks becoming automatable. Neither it is likely to have an impact on tasks which require empathy, team working and intuitive thinking, such as conducting grievance investigations, dealing with absences or overseeing large-scale workforce change. However, if a wide range of staff functions are transferred to AI, there will be a corresponding reduction in the requirement for HR to deal with employee relations issues, because AI systems will not, for example, raise grievances or go on sick leave. A positive result of this for HR may be that it frees up time currently spent on routine tasks and employee relations issues, and allows the profession to re-focus time and energy on leadership and strategic work.

One routine HR task which may be transformed by AI is within the recruitment process, as technology is developed to undertake automatic sifts of CVs prior to interview. This particular example may be of benefit in terms of increased efficiency and bias elimination. The legal risks are likely to be low, provided that the CVs being scanned are retained only for that purpose and for a limited period of time. However, at the more sophisticated end of AI assisted recruitment, there may be a corresponding increase in legal risk. For example, technology is developing which will automatically 'scan' the internet for newly published material on candidates and will alert employers of a change that may make a (previously rejected) candidate of interest to their organisation. However, retaining individuals' data for this general purpose may fall foul of the restrictions on lawful processing in the Data Protection Act 1998. Increased use of AI analytics inevitably relies on a parallel increase in the use of stored data and 'big data'; which is diametrically at odds with the increasingly restrictive regulatory environment. This is set to become even more relevant when the General Data Protection Regulation comes into effect on 25 May 2018.

Whilst data protection issues raised by AI are a valid concern, the predominant anxiety around AI is whether it will cause widespread redundancies, as software takes over jobs undertaken by employees. Academic opinion on this question is divided. On the positive side, some point out that automation results in job shifts rather than job losses, for two reasons:

  1. new jobs are created developing and servicing products within and around the AI product itself; and 
  2. increased productivity means that more wealth is created which is then spent on services which are not automatable.

For example, the introduction of motorcars caused a great deal of anxiety around the loss of horse-related jobs; but as these jobs declined, there was a corresponding increase in work around building and servicing cars, the development of motorways, motels and service stations.

On the other hand, some predict that this latest technological revolution is different from anything that has happened in the past, and that new software is reducing the need for workers at a faster rate than new roles are being created. At the moment, it is not clear whether it is the optimists or the pessimists who are right. But, either way, it is likely that employers will need to ensure that they have an agile workforce and flexible business model, in which employees can swiftly re-skill and transition into new roles.   Although AI in the workplace is not be commonplace as yet, it is on its way and HR will need to be ahead of the curve. In order to be prepared for whatever type of change is to come, key workforce issues to consider will be

  • up to date and flexible agile working policies and procedures, which will accommodate job design changes in response to new technology (please click here for our Agile Working Toolkit)
  • facilitating access to training and development to so your workforce can adapt to changing technology and ensure that any skills gaps are filled in respect of tasks which are not currently automatable
  • well drafted and carefully implemented redundancy and reorganisation policies, supported by clear communication policies
  • strategic planning to encompass technological developments, efficiencies and any resulting cultural change.

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Employment news round-up, April 2017

Alastair Currie rounds-up this month's key employment news, including: help with IR35, Brexit, the election, agile working, the gig economy and the latest on gender pay gap reporting and 'sleep in' payments.

Agile Working – making it work for you

Want to know more about how you can utilise agile working as a strategic business tool rather than just an employee benefit? Please see our Agile Working Toolkit, which looks at how employers are utilising agile working to create cost efficiencies, improve productivity and increase workforce engagement.  

The latest on the 'gig economy'

Cycle courier was worker not self-employed

In the latest of a run of cases challenging employment status, an Excel cycle courier has been found to be a 'worker' rather than being a self-employed contractor, in business on his own account – contrary to his written terms of engagement, which purported to engage him as a self-employed contractor. The employment tribunal looked behind the contractual position between the parties, and found that the true nature of the relationship was that of worker and employer, so that Excel was liable for the claimant's unpaid holiday. This case follows hot on the heels of another cycle courier employment status case, Dewhurst v Citysprint UK Limited (see our January 2017 News Round-Up for more details) and applies the reasoning in the recent Court of Appeal decision in Pimlico Plumbers v Smith (please see our Featured Case for February 2017 for more details). The Excel case is, however, of limited significance as it is non-binding and Excel did not attend the hearing to make any representations on their own behalf. Please click here to read the full employment tribunal decision, which has been published on the new online tribunal decisions database.

Deliveroo employment tribunal claims

It has been reported that Deliveroo is the latest 'gig economy' employer which will face tribunal proceedings concerning the employment status of its workforce. Claims are also being brought for age discrimination, following the dismissal of workers aged under 18. The employment status claim will challenge Deliveroo's categorisation of its couriers as self-employed contractors, on the basis that many elements of their working arrangements are contrary to self-employed status – for example, being required to wear branded uniform, having formal appraisals and having to complete tests before being appointed.

Uber granted right of appeal

In other 'gig economy' news, Uber has been granted leave to appeal an employment tribunal's finding that its taxi drivers are workers rather than self-employed contractors. The hearing has been listed to take place over two days, starting on 27 September 2017.

More information

For more information on the Uber case and modern working practices, please click here to read our briefing, 'Manager vs Technology Platform' and please click here to register for our forthcoming free training on 'Dealing with Modern Workforce Issues', which will look at the 'gig economy' cases in more detail, as well as social media misuse and employee covert recordings.

'Sleep-in' payments and the NMW

Employers which require staff to 'sleep-in' overnight as part of their duties should take note of this decision from the Employment Appeal Tribunal (EAT): Royal Mencap Society v Tomlinson-Blake (April 2017).

This case looked at how employment tribunals should approach the question of whether employees who are sleeping for much of their shift are entitled to the National Minimum Wage (NMW) for the full shift; or, whether they are entitled to the NMW only when they are awake and carrying out relevant duties. On the facts of this case, the employee in question was entitled to the NMW for the whole shift: she was required to sleep at a service user's premises and keep a 'listening ear' out during the night, in case she was needed. The employee was not allowed to leave the premises but, when her services were not required, she could spend her time as she wished. Although the EAT noted that these types of case are particularly fact sensitive, in these particular circumstances, the employee was entitled to be paid the NMW for the whole shift. The EAT noted that relevant factors would include:

  • the contractual position between the parties
  • whether the employee is required to be present in order to comply with a regulatory requirement
  • the degree of responsibility and extent of the tasks required – for example, is the employee only required to 'raise the alarm' and fetch someone else if there is an incident in the night, or are they required to provide assistance themselves?

So, a multifactorial evaluation is required.  No single factor will determine the whole question and the relevance and weight of particular factors will vary with, and depend on, the context and circumstances of the particular case.

New IR35 rules for the public sector - how we can help

From 6 April 2017, changes to the IR35 legislation in the public sector means that the responsibility for ensuring people who work via a limited company pay the right level of tax and National Insurance has shifted to public sector end-user or agencies, rather than the individuals themselves.

A lot has been written about describing the changes but not necessarily addressing the practical challenges which public sector organisations are facing as a result these new IR35 rules. 

Our vast range of public sector clients means that we are continually advising on the emerging challenges our clients are facing following the implementation of these complex new rules. For example did you know that as an end user a public sector organisation is required under the legislation to take reasonable care when assessing employment status and that the HMRC online status tool is not legally binding?

We have the knowhow needed to support you with issues such as:

  • How to avoid losing talent, with increasing numbers of contractors leaving or threatening to leave the public sector.
  • How to handle agencies and requests for fee increases or introduction fees.
  • How to navigate the new HMRC on line status tool.
  • How to handle disagreements with contractors about their status. 

The Bevan Brittan team offers the following services.

  • Auditing your organisation's contractor workforce, assessing and providing reports on status.
  • On-site practical training on the new IR35 rules for your managers, Finance and HR teams.
  • Providing policies and easy to understand guidance to issue to managers.
  • Providing flowcharts to assist you in navigating IR35.
  • Preparing self- employed contracts for individual contractors and via their personal service companies.
  • Advising on your contracts with agencies including how to avoid price increases and introduction fees.
  • Advising on handling disagreements with contractors and ensuring workforce continuity.

Bringing together specialist support from Bevan Brittan's Employment, Pensions and Immigration Department as well as our network of external workforce and OD consultants gives you a "one stop shop" service. To arrange a free initial meeting to discuss how we can assist you, please contact Jodie Sinclair, Partner (jodie.sinclair@bevanbrittan.com) or Victoria McMeel, Associate (victoria.mcmeel@bevanbrittan.com) 

Dates for your diary

Don’t forget that several key changes take place this month, including the new immigration skills charge, IR35 changes (see above), plus new statutory rates and personal allowance limit. For more information on other key changes taking effect over the coming weeks, please see our 'Spring Forward' article in last month's Employment Eye.

Gender pay gap reporting – updated guidance & data capture dates

Data capture for gender pay gap reporting must have taken place for the public sector on 31 March 2017, and the private sector on 5 April 2017.

Acas and the Government Equalities Office have now published their updated gender pay gap guidance, 'Managing Gender Pay Gap Reporting'. The guidance is available here and it

  • confirms how group companies should report
  • highlights additional information for public sector bodies, including details of those bodies which do not have to follow the regulations, and provides further information about gender pay reporting requirements under the Public Sector Equality Duty
  • sets out how employers should deal with overseas employees and international jobs (applying the usual legal test for territorial scope, set out in the cases of Lawson v Serco and Ravat v Haliburton Manufacturing) and how to deal with payments in different currencies
  • confirms that employees who receive no pay at all during the relevant pay period should be excluded from the report (but they are included in the headcount for the purpose of whether the reporting requirements arise)
  • deals with the various types of 'pay', including bonuses and backdated pay
  • explains the definition of 'full pay relevant employee'.

The guidance should be required reading for employers who are obliged to provide gender pay gap reports, and answers some of the trickier questions raised by the regulations, such as how to deal with pension contributions made via salary sacrifice. 

Please click here for our briefing on the private sector gender pay gap reporting requirements, and please click here for our summary of the public sector reporting requirements.

Auto-enrolment – updated detailed guidance 

The Pensions Regulator has produced updated versions of its detailed guidance notes relating to the employer pension auto-enrolment duties, reflecting recent legislative changes and forthcoming developments. The guidance is aimed at legal advisers, large employers with in-house pensions advisers and those with a sound working knowledge of pensions. The guidance can be found here.

Brexit news 

Snap general election

Of course, it will be news to absolutely no-one that the Prime Minister has called a snap general election on 8 June 2017, and election campaigning is now well under way. A campaign group has been set up by Gina Miller (who brought the legal challenge to the Prime Minister's intention to use prerogative powers to commence withdrawal from the EU) to encourage tactical voting to prevent a 'hard' Brexit, but early polls are showing that the Conservatives are likely to achieve a significant majority. That said, as we have seen both here and the US in recent months, election polls and pundits' predictions are not necessarily to be relied upon. In terms of the impact of the election on Brexit as it affects HR, if the Conservatives do achieve their anticipated electoral success, it may be that Theresa May will use a larger majority to achieve a more transitioned exit from the EU, perhaps allowing employers more breathing space to adapt to any new immigration restrictions and any changes to EU derived workforce law. 

New information available for European workers

The Home Office has produced a new landing page for European Union nationals living in the UK, following the triggering of Article 50. The page will be updated with the latest information about the status of EU nationals in the UK as the process of our withdrawal from the European Union progresses.UK Visas and Immigration has also updated its form and guidance for EEA or Swiss nationals, and non-EEA or non-Swiss family members of EEA or Swiss nationals, on applications for a document certifying permanent residence, or a permanent residence card, in the UK. The form and guidance can be found here.

No cap on EU migrants

Assuming that the Conservatives are still in power after 8 June, the Brexit Secretary, David Davis, will not seek to place a cap on working EU migrants post-Brexit. This news will be welcomed by employers, particularly those in sectors heavily dependent on EU workers, such as health and social care, construction, agriculture, catering and hospitality. According to a report in the Financial Times on 27 March, 2017 on Brexit Question Time, Mr Davis's intention is that EU migration policy will be set according to national policy.

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Events and training  

The future is now: dealing with modern workforce issues

Our next series of employment law training events will look at dealing with a range of modern workforce issues, including 'gig working' and other atypical working arrangements. The second part of the session will focus on key practical steps to assist with managing employees' misuse of social media and reducing litigation risk. These free events will take place over the course of a morning, followed by lunch.

Please click here for further details of the programme, dates and how to book.

Workforce immigration - law and strategies for 2017

This conference will examine a number of recent changes impacting on the immigration regime, including in relation to EU nationals living and working in the UK. With insights into key practical steps to ensure ongoing compliance, we will look at what employers can do to ensure the right strategies are in place and minimise workforce disruption.

This timely event will be of interest to all employers across the public, private and third sectors, engaging foreign workers in the UK, especially HR directors and managers, recruitment heads, in house counsel, and other operational leads.

The conference will take place on 14 June 2017, 9.30am - 12.30pm and costs £60 per delegate. Please click here for further information and booking details.

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