Welcome to the July 2017 edition of our employment law report: our monthly round-up of key employment law developments and what they mean for you.
Supreme Court rules employment tribunal fees illegal
The Supreme Court has today ruled that employment tribunal fees, and employment appeal tribunal fees, are illegal and must be quashed.
Testing beliefs: whistleblowing and 'public interest'
Julian Hoskins on defining a whistleblower's belief that their disclosure is in the 'public interest'. How 'public' does the 'interest' need to be?Read more
'Good Work' – the Taylor Review of Modern Working Practices
Sarah Maddock looks at what the Good Work report means for the employment law landscape.Read more
This month's news round-up focuses on two significant new pensions developments, and also looks at gender pay (the DWP's figures are out!), Acas guidance on working in hot conditions and a round-up of the latest Brexit news.Read more
Supreme Court rules employment tribunal fees illegal
The Supreme Court has today handed down its most significant employment law decision in decades, and ruled that employment tribunal and employment appeal tribunal fees are illegal. Since 2013, the fee payable for most claimants to take a claim to full tribunal hearing has been up to £1200 and up to £1600 for an employment appeal tribunal hearing. The Supreme Court has held that this prevents access to justice and is indirectly discriminatory against women and is, therefore, illegal.
The immediate practical impact of this is that, as from today, fees are no longer payable in the employment tribunal or employment appeal tribunal, and fees paid in the past must be reimbursed, including those paid by respondents. It is not clear at the moment how the Employment Tribunal Service will deal with claims currently going through the tribunal system.
It is also possible that historic, out of time, claims will be resurrected, with claimants arguing that it would be just and equitable to extend time if they were deterred from bringing a claim due to an unlawful fee regime (i.e. discrimination claims); or that it was not reasonably practicable for them to bring their claim in time because of the cost (i.e. unfair dismissal claims).
The Government has not yet published its response to today's judgment, but it is highly likely that they will issue a consultation on introducing a new fee regime, with a lower level of cost for claimants or a shared cost between claimants and respondents. Until a new fees regime is introduced, we expect to see an immediate spike in claims, with a levelling off once a new regime is in force.
The full judgment is available here and the press summary is available here.
Please contact Julian Hoskins, or your usual Bevan Brittan contact, for more information.
Testing beliefs: whistleblowing and 'public interest'
Julian Hoskins on defining a whistleblower's belief that their disclosure is in the 'public interest'. How 'public' does the 'interest' need to be?
In order to qualify as a 'protected disclosure' (or 'whistleblowing disclosure') a disclosure must comply with the statutory definition: it must be a disclosure of information which
- in the reasonable belief of the worker making it
- is made in the public interest; and
- identifies one or more of six specified types of wrongdoing (criminal offences, breach of any legal obligation, miscarriages of justice, danger to the health and safety of any individual, damage to the environment or the deliberate concealing of information about any of the preceding matters).
Although whistleblowing protection derives from the Public Interest Disclosure Act 1998 [our emphasis], the original legislation contained no requirement for a whistleblowing disclosure to have any 'public interest' element. This was viewed as something of a loophole for claimants, who often sought to make use of whistleblowing protections in relation to allegations or complaints about their own contracts of employment – which was thought to run contrary to the original intention of the legislation.
In order to close down this practice, in 2013 a 'public interest' element was introduced to the definition of a protected disclosure. However, the legislation did not go as far as specifically excluding concerns about workers' own contracts of employment; and neither did it explain what was meant by 'public interest'.
This left the door open to two possibilities:
- that employment tribunals might adopt a wide construction of the phrase 'in the public interest'; and
- that individuals might still bring whistleblowing claims in respect of their own contracts of employment, if they could demonstrate that they reasonably believed that a wider public interest was engaged.
Workers who are found to have made a statutory protected disclosure benefit from a range of additional protections
- the right to claim automatically unfair dismissal
- protection from detriment
- uncapped compensation if successful at employment tribunal.
There are, therefore, significant incentives for employees and workers to identify themselves as 'whistleblowers'.
Mr Nurmohamed, a senior manager at a branch of estate agents, Chesterton, alleged that the company was deliberately supplying inaccurate figures to its accountant, which resulted in lower profit-based commission payments for him and around 100 senior managers.
Mr Nurmohamed was dismissed and brought a whistleblowing claim against Chesterton, arguing that it was his reasonable belief that his disclosures were in the public interest. Although he acknowledged that his primary concern was his own losses under his contract, he argued that the fact that his concerns related to a large group of managers meant that the disclosures were also in the public interest.
An employment tribunal agreed with Mr Nurmohamed and found that his dismissal was automatically unfair for making a 'whistleblowing' protected disclosure. Chesterton appealed to the Employment Appeal Tribunal, which dismissed the appeal, finding that the 'public interest' test was satisfied, notwithstanding that Mr Nurmohamed was motivated mainly by concern about his own income.
Chesterton appealed to the Court of Appeal.
In Chesterton v Nurmohamed, the Court of Appeal (CA) dismissed Chesterton's arguments and allowed a wide interpretation of the public interest test.
The CA noted that the key questions are
- whether the worker subjectively believed, at the time, that the disclosure was in the public interest; and
- if so, whether that belief was objectively reasonable.
The emphasis is, therefore, on what the worker believed when making the disclosure, subject to an objective assessment of reasonableness by the employment tribunal.
The CA declined to provide any "bright line rule" setting out that anything which engages the interest of anyone other than the worker would pass the 'public interest' test. In doing so, the CA commented that the question "does not lend itself to absolute rules" – especially because the elusive question is not what is in fact in the public interest, but what could reasonably be believed to be.
That said, the CA's view was that tribunals should not rush towards finding that the disclosure of a breach of a worker's contract is in the public interest, and counselled employment tribunals to be cautious about reaching such a conclusion.
What does this mean for me?
Where does this leave employers attempting to apply this complex test? Helpfully, in its decision, the CA suggested four factors as a 'useful tool' to weigh up the reasonableness of a worker's belief that disclosure was in the public interest.
- The numbers in the group whose interests the disclosure served.
- The nature of the interests affected and the extent to which they are affected by the wrongdoing disclosed: the more important the interest and the greater numbers of people affected, the greater the likelihood of the disclosure falling within the public interest.
- The nature of the wrongdoing disclosed. Disclosure of deliberate wrongdoing is more likely to be in the public interest than the disclosure of inadvertent wrongdoing affecting the same number of people.
- The identity of the alleged wrongdoer. The larger or more prominent the wrongdoer, the more likely it is that disclosure about its activities will engage the public interest.
In other words, the test is not simply a matter of numbers; this will be one of a range of factors that should be considered by tribunals and, by extension, employers. Furthermore, it is important to remember that it is not a question of whether the disclosure itself is actually in the public interest, but whether the individual (subjectively) believed it to be and was (objectively) reasonable in doing so.
Whilst this decision sheds welcome light on the definition of the new public interest test for whistleblowing claims, there is no direct impact on employer policies or procedures. Employers will, however, need to be mindful of the test set out above when considering whether a disclosure made by a worker brings them within the remit of the extended protections afforded to whistleblowers.
'Good Work' – the Taylor Review of Modern Working Practices
Sarah Maddock looks at what the Good Work report means for the employment law landscape.
It was with baited breath that the employment law world awaited final publication of the Taylor Review into modern working practices, now commonly referred to as the 'Good Work Report' ('the Report'). On 11 July 2017, the final report was presented to the public and press, alongside the Prime Minister, having been billed as a detailed review of new models of working, including those used in the gig / sharing economy.
The full report "Good work: the Taylor Review of Modern Working Practices" can be found here.
It is a detailed analysis: the Review heard evidence from many participants across the full spectrum of the workforce and runs to over 100 pages. But what does it mean in terms of the employment law landscape for the coming months and years?
First off, it is important to underline that the report does not present the radical overhaul of employment law or employment practices that had been rumoured before publication and reported in the press. Neither does it suggest a new staffing category of 'dependent contractor'; it simply suggests that the existing term 'worker' should be replaced with the term 'dependent contractor', as the report believes that this is clearer.
The report suggests seven key policy approaches (summarised in our initial bulletin here) to support what the report calls 'good work': the notion that work should not only be remunerative but also 'fair and decent' in terms of the quality of work undertaken, worker well-being, engagement and self-development.
In terms of more specific employment law related reform, the report makes the following key findings.
The future of the 'on demand' workforce
Employment through online platforms / apps should not be disregarded and is likely to continue its rapid expansion. But individuals engaged through such platforms need better protection.
Employment status in the modern economy
Dependent contractors (see above) should be entitled to additional protections and there should be stronger incentives for employers to treat them fairly. In determining employment status, there should be less emphasis on personal service, and more emphasis on control in the relationship between an employer and a dependent contractor. Provided the Government approves this proposal, we can expect new legislation around this reform: the report finds employment legislation needs to work harder to improve clarity, and believes that less should be left to the courts to determine (because this creates a body of caselaw which is difficult to navigate).
In another measure to improve clarity, the report suggests that the meaning of self-employed should be the same for both employment rights and tax purposes.
The report notes that the introduction of tribunal fees has led to a dramatic decline in claims being brought against employers. It also notes the difficulty faced by parties where a claim rests on employment status, but that question may not be determined until a full hearing, after fees have been paid. In order to resolve this, the report recommends that
- there should be no hearing fee for preliminary hearings on employment status
- hearings for determining employment status should be brought forward, so they are dealt with at the start of proceedings
- the burden of proof on employment status should be reversed so that the employer has to prove that the individual is not entitled to the relevant employment rights.
New online 'employment status' tool
The government should make available a new free online tool for determining employment status, similar to HMRC's employment status indicator. It is suggested that this tool could also provide advice and information on entitlement to rights, how to qualify for them, and signpost other relevant information.
Zero-hours and other flexible contracts
The report does not recommend that zero-hours contracts (ZHC) should be banned; it notes that this model can work well for both parties. However, the report suggests that the way in which these contracts operate should afford more protection to workers by
- offering a higher rate of National Minimum Wage for hours not guaranteed by a contract
- introducing a right for those who have worked under a ZHC for a year or more to request a contract that guarantees hours which reflect the actual hours worked (and an obligation for employers to publish how many requests they have received and agreed)
- continuity should be preserved for casual workers where there is a month's gap between assignments (rather than the current limit of week's gap).
Agency workers and the Swedish derogation
This is an area which has attracted significant interest and comment. The 'Swedish derogation' allows the UK to provide an exemption from agency workers' right to equal treatment with regard to pay (including holiday pay) where a temporary workers agency provides a worker with a permanent contract of employment and pays them a minimum amount between assignments. The report recommends that the Swedish derogation is repealed completely.
Similarly to the proposal on ZHC, the report also recommends that long-term agency staff should be given the right to request a direct contract of employment with the hirer, with the number of requests being publicised.
Another controversial topic tackled by the report is the use of 'umbrella companies' or intermediaries, used for paying wages and making deductions. The review found that some agency workers at the lower paid, lower skilled end of the workforce were being forced to use an umbrella company as a condition of getting a job. Umbrella companies normally charge between £15 and £35 per week in administration and 'handling' fees, which would be unlawful if made by the agency itself.
To tackle this, the review recommends amending legislation to improve the transparency of information provided to agency workers in terms of rates of pay, and who will be responsible for paying them.
Conclusions and next steps
Whilst there are some innovative proposals in the Good Work report, most employers will be relieved that it does not contain any radical 'reset' of employment rights or propose any dramatic shift in employment relations. The overall approach acknowledges that some aspects of workforce legislation are not working as well as they could be in response to modern working practices, but it a case of tweaking the existing framework rather than starting afresh.
That said, the recommendations are very broad brush, so it will be a case of 'watch this space' as the detailed is fleshed out through the public consultations which will be required prior to the drafting of any new legislation.
There is, of course, the perennial question of Brexit to consider: to what extent will the government have a free hand to make these changes, given that some of the areas of reform are derived from EU law and / or decisions of the European Court of Justice? How that will play out is, at the moment, anyone's guess.
Commentators have suggested that government consultations on some of the report's proposals will be published towards the end of 2017 – we will publish details of these when they become available. In the meantime, prudent employers will be reading through the detail of the report and will be
- considering whether to take up some of the non-legislative proposals, such as those around improving employee engagement and well-being; and
- taking the report's proposals into consideration when horizon scanning and considering the impact of longer term workforce trends.
Employment news round-up, July 2017
This month's news round-up focuses on two significant new pensions developments, and also looks at gender pay (the DWP's figures are out!), Acas guidance on working in hot conditions and a round-up of the latest Brexit news.
Increased state pension age
Just before we published this edition of Employment Eye, the government announced that the planned increase in State Pension Age from 67 to 68 would be brought forward to 2039, to be phased in between 2037 and 2039, instead of the previously planned date of 2046. Anyone currently aged between 39 and 47 will be affected. There are more details in this BBC article. This development was expected - a report in March this year commissioned by the Government had recommended a change along these lines.
We will include a more detailed look at the employment and related pension issues that this change will bring about in our next issue. But as time passes, it's clear that the retirement planning process for employers and employees, and target or actual retirement ages for occupational pension schemes, will need to be examined once more. In an era where there is no compulsory retirement age for most jobs, the addition of another year before employees can draw state pension benefits may well have impacts on the whole employment and benefits relationship.
Supreme Court confirms same-sex spouses have equal rights to pension benefits
Overturning a Court of Appeal ruling, the Supreme Court has held that a same-sex wife or husband is entitled to the same pension benefits on the death of their spouse as one of the opposite sex.
Mr Walker took his former employer Innospec to court after they told him his husband would not receive a full spouse's pension should Mr Walker die first. Mr Walker's service with Innospec, and his pension rights from that service, was before civil partnerships and same-sex marriages were recognised in law. They were also before the Equality Act 2010 (and previous anti-discrimination legislation) prevented discrimination on the grounds of sexual orientation in employment. The Act included a provision stating that the Act did not have retrospective effect.
Innospec, and later the Department for Work and Pensions (DWP), who became involved in the case as it affected public policy, argued that the Act's anti-discrimination provisions, reflecting EU law, were not intended to be retrospective, as the EU directive did not state that they should be. Instead, equal treatment should only be applied from late 2003 when the measures came into effect. As Mr Walker's service ended before that date, he could not benefit from the changes.
In Walker v Innospec, the Supreme Court ruled that Mr Walker's husband should be treated, under the pension scheme's rules and under wider UK law, in the same way as a wife would be. If Mr Walker had married a woman at any stage, before or after the law changed and whether or not he had still been in service at the time, she would have been entitled to a full pension. This was therefore discriminatory, and the opt-out in the Equality Act could not have had the effect Innospec and the DWP argued.
Benefits are assessed when they became payable, i.e. if Mr Walker dies before his husband. If at that point they were still married, and a woman in the same position would receive a full spouse's pension, so should a husband. The Court of Appeal had ruled that the point for calculating benefits was when the pension was earned, not when it came into payment, so the retrospective effect problem arose. The Supreme Court ruled that as the potential calculation point was in the future, the benefits were not subject to this restriction.
Because Mr Walker left employment and pensionable service before the law changed, the difference here was stark. His husband would only have been entitled to a pension of about £1,000 per year, derived from part of Mr Walker's pension that replaced his State Second Pension. A wife would have received about £45,000 per year.
Many pension arrangements already treat same-sex marriages and civil partnerships in the same way as heterosexual marriages, even if UK law may not have required it. This decision will not affect them. However, schemes that have applied the Equality Act opt-out will need to assess whether benefits already in payment, as well as future benefits, need to be revised. This will be the case for both public and private pension schemes. In many cases, the difference may not individually be very great, although if there are a large number of changes to be made, the total cost could for some schemes be substantial. It is always important to ensure that a scheme is paying benefits, and funding for them, according to their rules and current law.
Please contact Philip Woolham, Senior Associate and Pensions Specialist, for more information on this or any other pensions issue.
Feeling the heat?
As we go into the height of the Summer, it would be timely to take a look at the Acas guidance on workplace temperatures, dress codes and more.
First government department gender pay gap report published
Following on from the launch of the gender pay gap portal, on which employers with over 250 employees are required to publish their gender pay gap reports, the Department for Education has become the first government department to publish its report. According to the figures, the Department for Education has a 5.3% mean pay gap (the difference between the average salaries for men and women) and a 5.9% median pay gap. The figures are substantially lower than the UK national gender pay gap of 18.1%.
- The Great Repeal Bill, now re-named the European Union (Withdrawal) Bill has been introduced into the House of Commons and received its 1st Reading. Please click here for a copy of the Bill and a summary of its progress. The Bill repeals the European Communities Act 1972 on the day that the United Kingdom leaves the European Union. It ends the supremacy of EU law in UK law and converts EU law as it stands at the moment of exit into domestic law. It also creates temporary powers to make secondary legislation to enable corrections to be made to the laws that would otherwise no longer operate appropriately once the UK has left. The Department for Exiting the EU has published a series of factsheets on its effects, including a factsheet on workers' rights following Brexit – available here.
- Staffing issues are likely to continue to cause a headache for employers as the Brexit process beds in, with a report from Deloitte finding that 36% of non-British workers are considering leaving the country by 2022. Higher skilled foreign workers were most at risk, with 47% considering leaving the country in the next five years.
- The House of Commons Library has updated its paper on Brexit: trade aspects to include a new chapter on trade with non-EU countries. The new chapter looks at:
- the countries with which the UK has a trade agreement as a member of the EU
- whether the UK will continue to benefit from the EU trade agreements after Brexit
- whether the UK can negotiate new trade agreements while still in the EU
- trade agreements and developing countries.
If you would like to discuss any of these topics, or any other aspect of Employment Law, please contact Head of Employment, Jodie Sinclair.