Welcome to the February 2018 edition of our employment law report: our monthly round-up of key employment law developments and what they mean for you.


Featured case

"Constructive" knowledge of disability

Jodie Sinclair reports on a decision which provides helpful clarity on constructive knowledge of disability for a reasonable adjustments claim.

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The government response to the Taylor review

The government has responded in full to the Taylor Review. Julian Hoskins explains what it means for employers.

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News round-up

Sarah Lamont rounds-up this month's employment law news in brief, covering this year's statutory payment increases and limits, new payslip rules, 'on-call' working time and a £4billion equal pay claim against Tesco. We also provide an update on the Pensions Regulator exercising its powers – and a GDPR reminder. Are you ready?

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"Constructive" knowledge of disability

Jodie Sinclair reports on a decision which provides helpful clarity on constructive knowledge of disability for a reasonable adjustments claim.


The background

There is a specific legal definition of 'disability', contained in section 6(1) of the Equality Act 2010 (EqA 2010) and meeting this definition is the gateway to an employee's entitlement to 'reasonable adjustments' at work.

An employee will meet the legal test of being 'disabled' if they have a physical or mental impairment which has a substantial and long-term adverse effect on their ability to carry out normal day-to-day activities.

The duty to make reasonable adjustments will arise where a

  • provision, criterion or practice
  • applied by the employer
  • puts a disabled person at a substantial disadvantage in comparison with those who are not disabled.

This duty will arise not only where an employer has actual knowledge of an employee's disability, but also where the employer could reasonably have been expected to know that an employee was disabled. The shorthand for this is 'constructive knowledge'.

In Donelien v Liberata UK Limited, the Court of Appeal provided helpful guidance for employers on what having 'constructive knowledge' of an employee's disability means. This case was decided under the (now repealed) Disability Discrimination Act, but the same general principles would apply to the EqA 2010.

The facts

Ms Donelien was employed by Liberata UK Limited (Liberata) and claimed to suffer from a variety of medical conditions, including hypertension and 'work-related stress'. In the last year of her employment, Ms Donelien was absent for a total of 128 days. The reasons given for her absence were various and numerous, including: hypertension and generalised stress and anxiety, viral infections, dizziness, difficulty breathing, reaction to medication, colds, wrist pain and stomach upsets.

Liberata referred Ms Donelien to an occupational health service which issued a report in July 2009. In its view, Ms Donelien was not disabled – but not all Liberata's questions were answered.

A second report was, therefore, commissioned from a different doctor, but this also contained insufficiently detailed information.

There was no further follow up from Liberata, but it did offer 'return to work' meetings with Ms Donelien and offered to consider information from Ms Donelien's GP.

A disciplinary hearing was held in September 2009 and Ms Donelien was dismissed for unsatisfactory attendance, failure to comply with Liberata's absence notification procedures and failure to work her contractual hours.

Ms Donelien issued proceedings against Liberata, including a claim for failure to make reasonable adjustments.

It was undisputed that

  • Ms Donelien was disabled (under the EqA 2010 definition) by the time she was dismissed; and
  • Liberata had no actual knowledge of her disability.

The key question was whether Liberata could reasonably have been expected to have known that Ms Donelien was disabled, i.e. whether it had constructive knowledge of her disability.

The decision

The Court of Appeal (CA) decided that Liberata did not have constructive knowledge of Ms Donelien's disability: it was reasonable for the employer to conclude that Ms Donelien was not disabled, based on the medical reports and its own investigations.

The CA noted that the test is whether the employer could reasonably be expected to know that their employee was disabled at the relevant time, not whether it could have done more.

In making its decision, the CA took into account

  • the inconsistent information from the GP
  • the wide range of symptoms and conditions cited
  • the occupational health opinion that Ms Donelien was not disabled and that her problems were 'managerial' rather than 'medical'
  • Ms Donelien's refusal to allow the occupational health consultants to liaise with her GP.

It was also significant that Liberata went back and asked further questions of the occupational health doctor, following up on areas that were not addressed in the initial report.

Following all these enquiries, the CA felt that Liberata had done enough and, based on that, it could not reasonably have been expected to know Ms Donelien was disabled at that time.

What does this mean for me?

Employers will welcome this decision. It helpfully refines the correct approach to take when identifying whether an employee is disabled for the purposes of the EqA 2010: whilst occupational health reports should be afforded a high regard, the views expressed in them should not be taken uncritically. If a full picture is not provided, further enquiries may be necessary. However, the test is not a counsel of perfection; it is one of reasonableness.

The ruling in this case does not require specific amendment of written policies or procedures. However, the CA's analysis of the correct approach should be cascaded down to managers who are dealing with disciplinary or capability procedures where disability may be in question.

If these steps are followed, and it appears that the test for disability under the EqA 2010 is not met, then employers may be reassured that they are unlikely to be fixed with constructive knowledge of disability – even if it transpires, at a later date, that the employee was or is, in fact, disabled.

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The Government Response to the Taylor Review

The government has responded in full to the Taylor Review. Julian Hoskins explains what it means for employers.


In November 2016 the government launched a wide ranging review (referred to as the Taylor Review) of modern employment practices. The key driver was to review new models of working such as zero hours contracts, the 'gig' economy and the freedoms and obligations of employers, employees and workers in the modern workplace.

The detailed report, Good Work – the Taylor Review of Modern Working Practices (available here) was published in July 2017, with a number of recommendations designed to improve workers' rights and the enforcement of existing rights. The government's response has proved to be somewhat underwhelming, with most replies indicating the need for further consultation, or the implementation of less radical approaches. The widely anticipated shake-up of employment models has not materialised, at least for now.

We set out below the government’s response to the key recommendations of the Taylor Review.

Proposed new rights

The government has stated its commitment to further consider the issue of increased workplace flexibility. It will legislate to increase agency worker pay transparency and has committed to go further than the recommendations and introduce a right for all workers to request a more predictable work contract.

One of the clearer responses from the government has been to decline to equalise National Insurance Contributions and benefits for employees and the self-employed, and neither will it extend pensions auto-enrolment to the self-employed.

The government agrees with the need for all workers to receive itemised payslips, as employees already do, and, further, that hourly paid workers should receive payslips that state the number of hours  their pay is  based on. To this end, draft orders have been put before Parliament and it is anticipated that the new rights will come in to force in April 2019.

The government also agrees that workers should receive a written statement of the terms of engagement, similar to the right currently enjoyed by employees. Unlike the introduction of itemised payslips, further consultation will be sought prior to any implementation.

Currently, continuity of employment for a casual worker's contract is preserved if there is a break of less than a week between contracts. The recommendation to increase casual workers' continuity of employment to one month has been accepted by the government but implementation will await further consultation. It has also committed to increase the holiday pay calculation period for atypical workers from twelve to fifty-two weeks.

The recommendation to extend statutory sick pay to all workers has received lukewarm support from the government, with only a pledge to consider the proposal further.

Employment status

The report recommended that workers should be provided with greater clarity and certainty as to their employment status. To this end, it was recommended that those with worker status should be renamed 'dependent contractors' and the focus of the definition of 'worker' should shift to encompass greater reference to control between the parties, rather than personal service. This proposal has been softly rejected by the government, which has instead opted to initiate further consultation on how to best achieve greater clarity for workers and employers.

The government has confirmed its support for the creation of an online tool for employees and workers to check their employment status. However, it has indicated that due to the complexity of definitions, this new tool will await potential legislative changes in this area of the law.

Enforcement of existing rights

One of the more radical recommendations by the Taylor Review was the suggestion that employment status hearings should be expedited by employment tribunals, prior to full liability hearings. It also suggested a reversal of the burden of proof, so that employers would be required to prove employment rights are not applicable. The government has rejected these proposals on the basis that it must await legislative updates on employment status before it alters tribunal proceedings.

Perhaps as an 'easy win' the government has confirmed that it will proceed to 'name and shame' employers that fail to pay tribunal awards. It will also increase the maximum financial penalty for employers performing the most serious and deliberate breaches of employment rights from £5,000 to £20,000. Although a radical increase in the penalty amount, in reality, tribunals rarely apply this form of penalty, so this change is likely to be of limited impact.

Instead of consolidating existing maternity protection legislation and rights as recommended by the report, the government has opted to work with Acas and the Equality and Human Rights Commission to rationalise existing guidance.

National Minimum Wage / National Living Wage

Recommendations to extend National Minimum Wage / National Living Wage entitlement to piece rates for platform work (undertaken through online 'apps'), increase the hourly rates for zero hour contracts and provide greater protection for intern workers were met by government commitments to engage in further consultation.

What happens next?

In summary, many of the Taylor Review recommendations received positive responses of support from the government. However, in reality, very few recommendations will be progressed in the short to medium term whilst the outcome of further consultations are awaited.

Further information

The government has published four new consultations in response to the proposals outlined in the Taylor Review.

Please click here for the consultation documentation on employment status.

Please click here for the consultation documentation on agency workers.

Please click here for the consultation documentation on enforcement of employment rights.

Please click here for the consultation documentation on measures to increase transparency in the UK labour market.

For our summary of the findings of the Taylor Review, please click here.

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Employment news round-up, February 2018

Sarah Lamont rounds-up this month's employment law news in brief, covering this year's statutory payment increases and limits, new payslip rules, 'on-call' working time and a £4billion equal pay claim against Tesco. We also provide an update on the Pensions Regulator exercising its powers – and a GDPR reminder. Are you ready?


Statutory payment rate increases

From 1 April 2018 statutory maternity, paternity, adoption pay and shared parental pay will be £145.18 per week (up from £140.98)

Also from 1 April 2018, the minimum wage and national living wage rates will increase at the following rates for each age band

  • 25+ - £7.83 (previously £7.50)
  • 21-24 - £7.38 (previously £7.05)
  • 18-20 - £5.90 (previously £5.60)
  • <18 - £4.20 (previously £4.05)

The accommodation offset will be £7.00 per day (previously £6.40).

From 6 April 2018

  • the weekly rate of statutory sick pay will be £92.05 (up from £89.35)
  • the statutory limit on a 'week's pay' (for the purpose of calculating redundancy pay and the basic award for unfair dismissal) increases to £508 (up from £489)
  • the maximum compensatory award for unfair dismissal will increase to £83,682 (up from £80,541).

On 9 April 2018, maternity allowance will increase to £145.18 per week (up from £140.98).

Payslips – new requirements from April 2019

From 6 April 2019, if an employee's wages vary according to the number of hours worked, employers will be required to provide a payslip stating the number of hours worked for which the worker is being paid.

The legislation implementing this change can be viewed here.

This reform follows on from the 'Good Work' report published by Matthew Taylor last Summer. For more information on the Good Work report, please click here and please see our Briefing (above) for details of the government's full response to the report.

GDPR – the final countdown

The implementation date for the new General Data Protection Regulation (GDPR) is now fast approaching. All employers will need to be compliant by 25 May 2018, when the existing Data Protection Act 1998 will be repealed and replaced. If you have not done so already, you will need to re-consider your approach to 'consent' for processing data (this will become harder post-GDPR), you may need to appoint a Data Protection Officer and your procedures for dealing with personal data will need to be tightened up. For a summary of the key GDPR points for HR, please click here.

Working time and 'on-call' time at home

The European Court of Justice has decided that 'working time', for the purposes of the Working Time Directive, includes time when a worker is 'on-call' and is required to be within eight minutes travel time to work – even if the worker is at home. The Court noted that a restriction on a worker's geographical location, whilst remaining contactable by their employer, means that the worker is significantly constrained from pursuing his or her own interests and activities. The Court decided that this is contrary to the health and safety objective of the Working Time Directive, which is intended to allow workers adequate rest periods and breaks. However, if a worker is only required to be contactable by an employer during 'on-call' time, then this is unlikely to count as 'working time' because the worker can manage their time with fewer constraints, so only the time spent actually working would be 'working time' (Ville de Nivelles v Matzak, February 2018).

Private sector equal pay gaining momentum

It has been reported in the press that, like Asda and Sainsbury's, Tesco has now also had proceedings launched against it for large-scale equal pay claims. The litigation is based on an alleged discrepancy between payments made to (largely female) store-based staff and (largely male) distribution centre workers, undertaking work which the claimants' allege is of equal value. According to press reports, the potential liability for Tesco, if the claims are successful, is in the region of £4billion.

The cases against Asda and Sainsbury's supermarkets currently remain at a preliminary stage. The supermarkets' appeals against the decision that its retail store employees can be compared with distribution depot workers will be heard by the Court of Appeal on 23 October 2018, with the decision likely to be published some months later. No substantive hearing is expected in the foreseeable future.

Gender pay gap reporting – deadline reminder

The deadline for the first gender pay gap reports from public sector bodies is fast approaching - employers which have not already complied must ensure that their gender pay gap reports are published by 30 March 2018.

Goodbye 'Fit for Work'

In an announcement that does not appear to have gained much attention, the government has confirmed that the new Fit for Work service will be ending on 31 March 2018. The government has said that this because of low referral rates.  

Pensions news – the Pensions Regulator gets tougher

The Pensions Regulator is more and more ready to use the significant powers at its disposal. We seem to be writing a lot about the first time it's used an existing power at the moment.

Stotts Tours (Oldham) Limited - update

You may recall that before Christmas we wrote about the first criminal conviction the Pensions Regulator had secured against a company and a director who had failed to automatically enrol workers into a pension scheme, the Stotts Tours (Oldham) Limited case (please click here for our report). Both have now been heavily fined, as well as still being obliged to put right the pension breaches that landed them in court in the first place.

In total, fines and restitution will cost them over £60,000.

That was a £27,000 fine for the company, along with £7,400 costs and a £140 victim surcharge. Mr Stott was personally fined £4,455 along with a £120 victim surcharge. These were of course also criminal convictions. It is possible for individuals to be imprisoned in these cases, although we would normally expect the punishment to be a fine.

They also have to pay the previously imposed civil fines of £14,400 for failing to comply with their auto-enrolment duties.

The bulk of the rest of the costs cover restitution. They will need to pay not only their employer contributions, backdated from when they should have offered a pension scheme, but also their employee's backdated contributions. This requirement is built into the auto-enrolment legislation – even if the failure is a genuine mistake, if it goes on too long, the employer must pay employees' backdated contributions too.

Friendly pensions – restitution orders

This month, the Regulator has used its ability to demand repayment of scammed pension savings from the scheme trustees responsible. It has secured a restitution order in the High Court that various individuals connected with Friendly Pensions Limited should repay £13.7m to the pension savers they took from them.

Pension savers were cold-called. Some also saw the offer via websites. They were promised better returns and an immediate tax free cash reward if they transferred their savings to Friendly's pension schemes, often called 'commission rebate'.

Such an offer can appear attractive, especially if people need money urgently. But, as ever, if it seems too good to be true, it is. In total, £13.7m was transferred.

The 'commission rebates' were generally paid, often apparently from the pension funds rather than, as often promised, from other sources. However, only £3.2 million was invested. This was often in unusual assets, including truffle farms and speculative overseas property developments (rather than the HMRC-approved investments that were promised). The rest seems to have been paid in commission fees (including to the cold callers), and transferred to some of the trustees' own businesses and bank accounts.

The new trustee of the pension schemes, appointed by the Regulator, can now seek confiscation of the parties' own assets to compensate their victims. It remains to be seen how much of the funds will be recovered, but it is clear that the Pension Regulator is aiming to use its powers to protect pension savers.

By the way, the cold calling itself was not illegal, although the Government has announced that it will legislate in this area. We still don't have a date for any changes, however.

Please contact Philip Woolham, Senior Associate and Pensions specialist, if you require advice regarding pensions issues.

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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.

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