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Working Relations February 2017

A review of legal and general developments during October, November, December 2016 and January 2017 affecting working relations in England and Wales.

01 February 2017

Publication

Highlights

  • Gender pay transparency: final Regulations have been laid before Parliament and (subject to Parliamentary approval) should come into force in April 2017. ACAS and the Government Equalities Office have also issued guidance on the draft Regulations.

Action points

  • Employers who have already taken a snapshot of data for the purposes of gender pay transparency will need to revisit these figures to ensure that they comply with the final version of the Regulations.
  • Employers who have not already taken a snapshot of data should start preparing for that exercise.
  • Ensure that any contracts that refer to “close of business” define what, exactly, that means

Upcoming events

Calls and seminars in the upcoming months which might be of interest include:

Other events which may be of interest:

UK

International

Details of breakfast briefings, conferences and telephone conference calls covering developments in employment law are available here.

General developments

Regulatory references - the final rules

The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) have issued new rules on regulatory references which come into effect in March 2017.

The rules require all authorised firms to revisit their policies and practices in relation to references. Firms which are covered by the Senior Managers & Certification Regime or Senior Insurance Managers Regime will need to consider their policies for giving references as well as the implications for conduct of disciplinary and quasi-disciplinary situations. The new rules are unlikely to satisfy the firms which are concerned about the risk of “rolling bad apples”. Equally, some ambiguity around what firms are required to provide will give rise to uncertainty until industry practice takes shape.

The key points from the rules are available here.

A recording of our call setting out the key issues is available here.

FCA - no guidance on UCITS Remuneration Code

The FCA’s webpage on the UCITS Remuneration Code (SYSC 19E) makes it clear that the FCA does not intend to issue guidance for firms on how to apply the Code.

The main employment related tax items from the Autumn Statement delivered on 23 November 2016 of interest to the business community cover:

  • national minimum and living wage increases from 01 April 2017 (further details available here)

  • changes to the taxation of termination payments: Following consultation, tax will only be applied to the equivalent of an employee’s basic pay if their notice is not worked, making it simpler to apply the new rules. The Government will monitor this change and address any further manipulation. The first £30,000 of a termination payment will remain exempt from income tax and National Insurance. However, as previously announced, from April 2018 termination payments over £30,000, which are subject to income tax, will also be subject to employer NICs. (Autumn Statement paragraph 4.10 (paragraph 5.2 of the hyperlinked version).

  • changes to salary sacrifice benefits, and

  • removal of tax relief associated with employee shareholder status.

A detailed analysis is available on elexica here.

HMRC guidance on bonus clawback arrangements

HMRC has released guidance clarifying its views on the treatment of the clawback of bonuses and other payments made to employees. The guidance confirms that repayments of bonuses will generally trigger “negative earnings” for an employee to be set against positive earnings or to claim repayment of PAYE deducted and loss relief where there is an excess. With the use of such arrangements increasingly commonplace, confirmation of the tax treatment of repayments is very welcome.

Further details are available on elexica here.

Ethnic diversity on boards

The Parker Review Committee has published a report (as a consultation version) into the ethnic diversity of UK boards. The report sets out findings of its review and includes recommendations for improving the ethnic diversity of boards. Comments are requested by 28 February 2017 with a final report following thereafter.

Further detail is available here.

Tribunal reform

The Department for Business, Energy and Industrial Strategy and the Ministry of Justice have jointly launched a consultation on reforming the employment tribunal system. Key aspects of the consultation relate to:

  • delegation of judicial functions, and
  • digitisation of the tribunal system.

Further detail is available here.

Inquiries

Inquiry into the Rights of Workers in the 'Gig' Economy - Business, Energy and Industrial Strategy Committee inquiry into the future world of work (further details are available here). Written submissions were requested by 19 December 2016 with evidence sessions underway.

Taylor Review of Employment Practices in the Modern Economy - this is due to report by June 2016. Further details are available here.

Brexit implications for equality issues - The House of Commons' Women and Equalities Committee inquiry. Deadline for evidence was Wednesday 09 November 2016.

Publications

Statutory Developments

Gender pay gap reporting - first snapshot of data by 05 April 2017

The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (available here) have been laid before Parliament. Subject to Parliamentary approval, the Regulations are due to come into force on 06 April 2017. Similar Regulations applying to the public sector have also been laid before Parliament and will come into force on 31 March 2017.

ACAS and the Government Equalities Office have also issued guidance on the draft Regulations.

In relation to the private sector, changes made to the last draft of regulations issued for consultation include movements on:

  • pay
  • definition of employee (now based on the Equality Act 2010)
  • bonuses: both the difference between the mean and median bonus payments must be published
  • calculations are based on “relevant employees” which specifically excludes members of LLPs
  • employees who are being paid at a reduced rate or nil because they are on leave are excluded from calculations of mean and median hourly rates of pay, and
  • quartiles.

Trade union ballots - important public service

A revised DRAFT Code of Practice on Picketing and revised Code of Practice on Industrial Action Ballots and Notice to Employers were laid in the Houses of Parliament on 05 December 2016.

Five sets of draft regulations defining an "important public service" in health, fire, transport, education and border security, for the purposes of the 40% ballot threshold and non-statutory guidance on the regulations have also been published.

Recent cases

Holiday pay - commission still included

British Gas v Lock - Court of Appeal

The Court of Appeal has dismissed British Gas’s appeal in the case considering whether commission should be included in the calculation of holiday pay. It is being reported that British Gas has applied for permission to appeal to the Supreme Court.

This means that the position remains that, for the four weeks’ Regulation 13 holiday entitlement (which stem from the European Directive), calculation of holiday pay should include commission.

Further details are available here.

Rest breaks - no need for active request and refusal

Grange v Abellio London Ltd - Employment Appeal Tribunal

An employer has a duty to afford workers the entitlement to take a rest break. That entitlement will be “refused” by the employer if it puts into place working arrangements that fail to allow the taking of rest breaks. If, however, an employer has taken active steps to ensure working arrangements that enable the worker to take the requisite break, it will have met its obligation - workers cannot be forced to take the rest breaks but they are to be positively enabled to do so.

A refusal does not require that a worker has made an explicit request which has been refused.

Disability discrimination - individual’s treatment not procedure must be justified

Buchanan v Commissioner of Police of the Metropolis - Employment Appeal Tribunal

In a disability discrimination case, an individual was found by the tribunal to have been subjected to various instances of less favourable treatment in the application of an absence management process, but the tribunal found that the procedure was justified. The EAT held that this was wrong. In disability discrimination cases, it is not enough to ask whether the underlying procedure was justified. The tribunal must consider whether the treatment was justified.

In particular, in this case, the policy allowed for individual assessment in each case at each stage. The steps which the tribunal had found to amount to unfavourable treatment were not mandated by the procedure or by any policy of the Respondent.

Disability discrimination – knowledge that action arose from disability

City of York Council v Grosset - Employment Appeal Tribunal

Mr Grosset, a teacher, suffers from cystic fibrosis and, as such, is a disabled person (as his employer was aware). He was dismissed for showing an 18-rated film to a class of 15 and 16-year olds. The employer had (reasonably as the tribunal found) concluded that there was nothing to make a link between the misconduct and the disability.

However, on evidence not available to the employer but available by the time of the tribunal hearing, the tribunal held that that the misconduct arose as a consequence of Mr Grosset’s disability and that, therefore, his dismissal was an unfavourable act, he had been treated unfavourably because of something arising in consequence of his disability. The EAT upheld this finding.

Disability discrimination - type 2 diabetes

Taylor v Ladbrokes Betting and Gaming Ltd - Employment Appeal Tribunal

Type 2 diabetes can potentially amount to a disability. In the case before the EAT, the tribunal had not considered whether the individual was suffering from a progressive condition - the medical evidence concentrated on what had happened in the past.

Inappropriate final written warning – fairness of dismissal

Bandara v British Broadcasting Corporation - Employment Appeal Tribunal

Where an employment tribunal has found that an employer has dismissed an employee for misconduct following a final written warning that the tribunal considers to be manifestly inappropriate, the tribunal’s approach should be to examine the reasoning of the employer and see whether, given the employer’s reasoning, the decision to dismiss was or was not reasonable.

It must examine whether the employer relied on the final written warning. Much will depend on whether the employer attached significant weight to the manifestly inappropriate final warning:

  • if the employer did not attach significant weight to the warning - for example if it treated the warning as no more than background or as indicative of the standard to be expected of an employee, and if in reality it dismissed for the misconduct alleged in the new disciplinary proceedings, a tribunal may be entitled to find that the dismissal was fair
  • if the employer attached significant weight to the warning, for example starting from the proposition that the employee was to be dismissed for any significant misconduct because he or she was already subject to a final written warning, then it would be difficult to see how the employer’s decision could have been reasonable.

In the actual case before the EAT, the tribunal had taken the wrong approach. Instead of asking how the disciplinary officer took account of the final written warning and assessing his actions in accordance with the statutory test, it asked: suppose the Claimant had been given a written warning; would the decision to dismiss have been fair? That was a significantly different question which did not start, as it should, from the employer’s reasoning. The tribunal had therefore been wrong in its approach.

Validity of earlier final warning - must be put in issue

Perrys Motor Sales Ltd v Edwards - Employment Appeal Tribunal

In this case, the EAT held that a tribunal was wrong, when considering fairness of a dismissal, to take into account the validity of an earlier outstanding final written warning as this had not been put in issue by the individual.

Expired warning can be taken into account

Stratford v Auto Trail VR Ltd - Employment Appeal Tribunal

A reminder that an expired warning can be taken into account as part of the overall circumstances under section 98(4) Employment Rights Act 1996 when a tribunal is considering whether a dismissal was fair or unfair. The facts of the previous misconduct, a warning was given and the fact that it had expired, are all relevant matters.

Serious misconduct - procedural failings - impact on broad picture

Tykocki v Royal Bournemouth and Christchurch Hospitals NHS Foundation Trust - Employment Appeal Tribunal

When attempting to remedy procedural defects on appeal, an employer should consider not only the impact on the specific allegations made but also on the broader picture (including eg on the general credibility of witnesses).

Ms Tykocki was a long-serving Healthcare Assistant. A patient claimed that, on a particular night-shift, Ms Tykocki and at least one of the nurses on duty had acted in an uncaring and cruel way and had, individually, been abusive and had effectively assaulted the patient. She was dismissed summarily for gross misconduct after a disciplinary and appeal process. A tribunal held that her dismissal was fair as various procedural failings in the disciplinary process had been made good at the appeal stage.

Overturning the tribunal’s decision, the EAT held that, given the seriousness of the allegations for the individual, it was accepted this was a case where - applying the band of reasonable responses test - more would be required of the employer’s investigation and process.

Although the tribunal had considered various failings by the employer - in particular, to obtain/provide statements from the nurses on duty and to investigate new allegations made by the patient at the appeal stage - it had done so in a way limited to the question of individual allegation of abuse made against the individual. What it had not done was to consider whether those failings impacted upon the fairness of the investigation and process in terms of credibility more broadly (those matters might, in turn, have impacted upon whether the employer had reasonably accepted the truth of the more specific allegation made against the individual alone).

Employment status

We have seen a number of cases in the last few months testing the boundaries of employment and worker status:

  • Uber drivers are workers under the Employment Rights Act 1996 and so eg entitled to paid holiday and whistleblowing protection (the case did not consider whether they were employees) (Aslam & Farrar and ors v Uber - Employment Tribunal)
  • A Citysprint cycle courier was also a worker not self-employed (Dewhurst v CitySprint UK Ltd - Employment Tribunal), and
  • Haulage drivers were employees (RS Dhillon and GP Dhillon Partnership v HMRC - First Tier Tax Tribunal).

Redundancy and mobility clauses

Kellogg Brown & Root (UK) Ltd v Fitton & Ewer - Employment appeal Tribunal

Two individuals were dismissed after their employer took the decision to close down the workplace in which they were both employed and sought to invoke a contractual mobility clause. The individuals refused to relocate in accordance with the employer’s instruction and the employer dismissed them.

The EAT held that:

  • The dismissals were not by reason of redundancy. The reason in the employer’s mind related to the refusal to obey the instruction to relocate. The employer had been entitled to rely on that reason notwithstanding the background of the workplace closure. The individuals were not, therefore, entitled to a statutory redundancy payment.
  • The dismissals were (as the tribunal had found), unfair. The mobility clause was too wide and uncertain, had been unreasonably invoked by the employer and that the individuals (both faced with an additional 20-30 hours' commute each week, and given that Mr Fitton had brought a property near to his former workplace and did not have a car, and that Mr Ewer had worked near to his home town for the employer/its predecessor for 25 years, would soon be 64 and due to retire a year later) had reasonably refused to comply with the instruction.

Internal investigations, employee interviews and privilege: big challenges ahead

The RBS Rights Issue Litigation - High Court

Hildyard J has handed down a very important decision on the unavailability of legal advice privilege in relation to the conduct of interviews in the course of an internal investigation. The decision confirms that Three Rivers (No 5) (TR5) remains binding and that only communications made between those authorised by the corporate to seek legal advice on its behalf and its lawyers fell within the scope of the privilege. All communications within the corporate, even where geared to generating information needed by the lawyers to provide the advice being sought fell outside the privilege and could only be protected if falling within the wider litigation privilege (which was not available in TR5).

A comprehensive analysis of the decision in the RBS case is available on elexica here.

A conference call with Colin Passmore and Andrea Finn examining the consequences of this decision is available here.

A further analysis considering “who is the “client”?” is available here.

Tribunal entitled to order third party disclosure

Birmingham City Council v Bagshaw & ors - Employment Appeal Tribunal

A tribunal had been entitled to order disclosure by a third party of Judgments and interlocutory Orders relating to cases of a similar type to those being litigated by the Claimants. The Judge had correctly applied the test of relevance and necessity.

The case involved individuals bringing equal pay claims who had been the subject of a TUPE transfer from the Council (the third party) to a new employer. The individuals did not have the necessary information to particularise their claims, information which was likely to be held by the Council.

The circumstances, unusually, justified the Order for disclosure at an early stage in the proceedings, the Claimants having been unable to comply fully with an Order for particularisation without it. In the absence of confidentiality objections, it had been competent and appropriate for the Judge to order disclosure without first examining the documents for reasons adequately explained by him. Any distinction between Judgments and interlocutory Orders, only the former being strictly in the public domain, had been dealt with by redaction and limitation of the type of Judgments covered by the Order. The Judge’s focus on the overriding objective in exercising his power to order disclosure of documents was in the circumstances entirely appropriate and the outcome a fair one.

Data protection - disclosure of third party data

Dr DB v General Medical Council - High Court

Where a subject access request requests information that includes personal data in relation to a third party, the data controller must conduct a balancing exercise. When conducting that exercise:

  • it is essential to keep in mind that the exercise involves a balance between the respective privacy rights of data subjects
  • in the absence of consent, the rebuttable presumption or starting point is against disclosure. Furthermore, the express refusal of consent is a specific factor to be taken into account, and
  • if it appears that the sole or dominant purpose is to obtain a document for the purpose of a claim against the other data subject, that is a weighty factor in favour of refusal (in High Court proceedings on the basis that the more appropriate forum is the Court procedure under CPR 31).

Workplace privacy - damages

_Brown v Commissioner of Police for the Metropolis_ - London County Court

The County Court “entirely rejected” a suggestion that, based on Gulati (the phone hacking cases), in this class of case assessment of damages essentially started at a minimum level threshold of £10,000.

Gulati was concerned with carefully organised and frequently repeated hacking of highly personal and sensitive information for gain. It unsurprisingly produced “the largest awards of damages yet made by our courts for breach of a person's privacy”.

That is light years away from the misuse of private information in the factual context of pursuit of an employer's disciplinary procedure (which ultimately resulted in the complaint against the employee being upheld). The material was not sought for gain, was not widely disseminated and was not of the sensitive nature of being concerned with medical matters, financial matters or personal relationships.

However, the Court did hold that in this case, the award made must be substantial.

As part of a disciplinary process, the employer (a police force) had obtained information from another police force which showed that the individual had been on flights to Barbados with her daughter when absent from work due to sickness, without having told her manager. Both entities admitted the breach of data protection and human rights.

The personal information disclosed was not of the highest order of sensitivity but it was wrongly sought, obtained and disclosed by the state authorities by accessing data initially obtained and held for quite different and limited purposes, and by their purported use of statutory powers to secure information. The Claimant did 'lose control' over the privacy of her personal information even if she would have been prepared to volunteer much of it to her line managers had she been asked.

But, as this was not repeated misuse or abuse of personal data, nor the disclosure of highly personal material for gain, wide distribution or with the intent to injure or embarrass, it does not reach the order of magnitude of the abuse justifying the £10,000 ‘starting point’ in Gulati.

She was awarded £9,000.

Vicarious liability - assault at spontaneous drinks following Christmas party

Bellman v Northampton Recruitment Ltd - High Court

A company was not vicariously liable for brain injuries caused by the managing director at spontaneous drinks following a work Christmas party.

Following a Christmas party, a number of employees staying at hotel, went back to the hotel and continued drinking until 3.00am. The managing director (a director and shareholder of the company), punched an employee causing him brain damage.

The Court held that the company was not vicariously liable. What was taking place at 3.00am at the hotel was a drunken discussion that arose after a personal choice to have yet further alcohol, long after the work event had ended. Given the time, place and topic of the conversation, (a significant time spent discussing social or sporting topics), no objective observer would have seen any connection at all with the employees’ jobs. The fact that it then veered into a discussion about work could not provide a sufficient connection to support a finding of vicarious liability against the company. It was, or without any doubt became, an entirely independent, voluntary, and discreet early hours drinking session of a very different nature to the Christmas party and unconnected with the employer's business.

Employees as witnesses

James-Bowen & ors v Commissioner for Police of the Metropolis - Court of Appeal

Police officers who were material witnesses in a claim against the Commissioner of Police for the Metropolis subsequently brought claims against the Commissioner (as a quasi-employer) and legal advisors to the Commissioner in relation to the way in which the claim had been handled and the damage that it had caused to their individual reputations.

In a strike out application, the Court of Appeal held that:

  • There was no implied retainer between the lawyers acting on behalf of the Commissioner and the police officers. Where the parties have chosen not to enter into an express retainer, the court will be slow to find that they have entered into one by conduct.
  • A claim for economic and reputational harm based on a breach of duty of care at common law should be allowed to go to trial.

Gay cake - refusal was discrimination

Lee v McArthur and Ashers Baking Company Limited - Court of Appeal

It amounted to direct discrimination on the grounds of sexual orientation for a bakery to cancel an order for a cake with the slogan “Support Gay Marriage” because it conflicted with their religious belief that gay marriage is sinful.

The benefit from the slogan could only accrue to gay or bisexual people. The bakers would not have objected to decorating a cake saying 'Support Heterosexual Marriage' or “Support Marriage”. The 'reason why' the order was cancelled was that the bakers would not provide a cake with a message supporting a right to marry for those of a particular sexual orientation.

The bakers’ right to free speech was not infringed – the fact that a baker provides a cake for a particular team or portrays witches on a Halloween cake does not indicate any support of either.

Definition of "close of business"

Lehman Brothers International (Europe) (In administration) v Exxonmobil Financial Services BV - High Court

In this case, the dispute concerned the interpretation of the expression “close of business” in a contract. The Court rejected an argument by Lehman Bros that is should be interpreted as 5.00 pm and accepted (on the facts and in the absence of evidence from Lehman) that it should be 7.00 pm.

The take home from the case is more practical - ensure that contractual clauses that refer to close of business define what time that means precisely.

Other cases

  • A tribunal can set aside settlement agreement where one of the signatories lacked capacity to enter into it (Glasgow City Council v Dahhan - Employment Appeal Tribunal)
  • A personal injury award can be made even if there is no medical evidence, although it is advisable for claimants to obtain medical evidence (especially in cases involving psychiatric injury) and failure to produce medical evidence risks a lower award than might otherwise be made ([Hampshire County Council v Wyatt_](http://www.bailii.org/uk/cases/UKEAT/2016/0013_16_1310.html) - Employment Appeal Tribunal_)
  • Upper age limit of 35 years for applicants to a police force was lawful under the Equal Treatment Framework Directive. It was appropriate to the objective of ensuring the operational capacity and proper functioning of the police service concerned and did not go beyond what was necessary for the attainment of that objective (Gorka Salaberria Sorondo v Academia Vasca de Policía y Emergencias - European Court of Justice).

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.

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