Employment Law Alert UK - November 2023

Employee relations

Long-awaited Supreme Court decision finds series of deductions in holiday pay claim not broken by three month gap in deductions. The Respondents in the claim were police officers and civilian staff of the Northern Ireland Police Service, who claimed that they had historically been underpaid their holiday pay - this had been calculated on the basis of their basic pay only, rather than their "normal" pay which included overtime. The Supreme Court found that the police officers could claim for a series of deductions. The Supreme Court clarified that although an unlawful deductions claim must be brought within three months of the date of the last payment made, it was not right (as had previously been understood from Bear Scotland v Fulton) that a gap of three months within a series of deductions would break the chain in the series. Instead a series is determined by a "common fault or unifying or central vice", even if the gap between unlawful deductions is more than three months. Employers who have not already adjusted their calculation of holiday pay to include overtime and certain allowances would be advised to do so, bearing in mind that in light of this decision an employer's potential exposure to historic holiday pay claims is increased. (Chief Constable of the Police Service of Northern Ireland v Agnew)

Supreme Court finds that administrator could not be guilty of failure to notify Secretary of State of redundancies. The Supreme Court has found that an administrator was not an "officer" of the company for the purposes of section 194(3) of the Trade Union and Labour Relations (Consolidation) Act 1992 ("TULRCA") and therefore could not be prosecuted pursuant to section 194(1) TULRCA for failure to give notice of proposed collective redundancies. On 13 January 2015, "P" was appointed as one of three administrators of WCC Ltd. P made 84 employees redundant, with immediate effect and did not submit an HR1 form until 4 February 2015.  In July 2015 criminal proceedings were commenced against P. P sought to argue that an offence had not been committed because as an administrator he was not an "officer" of the company. The Supreme Court agreed, finding that the Insolvency Act does not give any indication that an administrator is intended to become an officer of the relevant company. The case serves as an important reminder that the consequences of failing to submit an HR1 form in connection with collective redundancies is serious. It also highlights that currently there is arguably a loophole in the intended protection of s194 TULRCA given that collective redundancies are particularly likely in circumstances where a company has gone into administration, but it may be difficult to identify someone with accountability for notification in those circumstances. (R (on the application of Palmer) v Northern Derbyshire Magistrates' Court and anor)

Employee who breached expenses policy was fairly dismissed. The Employment Tribunal has dismissed claims of unfair and wrongful dismissal brought by an employee who breached the firm's expenses policy and was dishonest about his expenses when questioned. The Claimant travelled to Amsterdam on a business trip. His wife accompanied him. When he submitted expenses claims in relation to his trip (which included a receipt for two sandwiches and two coffees) he was questioned about whether food and drink claimed for had been consumed solely by him. He maintained that they had during the course of an investigation. At the conclusion of this investigation the Claimant was found to have breached the internal expense management policy and had also lied during the investigation. Following a disciplinary process he was dismissed for gross misconduct. The ET found that the dismissal did fall within the band of reasonable responses and that the dismissal was substantively and procedurally fair. Interestingly the ET also went on to comment that a dismissal based on the Claimant's misrepresentations alone (when questioned about the expenses) would also have fallen within the band of reasonable responses, highlighting how significant an employee's conduct during any investigation may be to the outcome. (Mr S Fekete v Citibank NA)

Employee's resignation in the heat of the moment was not really intended. The EAT has held that an Employment Tribunal should not have concluded that an employee's resignation in the heat of the moment was really intended. On 19 February 2020 the Claimant had an altercation with his line manager, during which he resigned. At a meeting later the same day the Claimant indicated that he wished to continue in employment, and subsequently refused to confirm his resignation in writing. The Respondent refused to accept the retraction of the Claimant's resignation and treated his employment as terminating on one month's notice. The Claimant brought claims of unfair and wrongful dismissal. The EAT held that the ET had not properly made findings of fact to enable it to determine whether it would have appeared reasonable to the employer that the Claimant "really intended" to resign. (Omar v Epping Forest District Citizens Advice)

Updated fit note guidance. On 6 October 2023 the DWP published updated guidance on fit notes for employers and employees. This includes the publication of a checklist for employers to support discussions between employer and employee where the employee has been issued with a fit note and a series of case studies for reference.

ACAS advocates mental health policy. On 25 October 2023 ACAS updated its guidance on supporting mental health at work by including a new section on "Having a policy". This section of the guidance states that it is a good idea for organisations to have a policy which covers mental health which makes clear the best way for employees to raise any concerns that they have about their mental health and how managers should respond and support them. The guidance also specifies what a mental health policy should cover including what mental health training is given to managers and individuals and what support is available. Although there is already far more openness and awareness of mental health in the workplace generally, organisations would be advised to consider formalising their approach in a written policy in light of this guidance.

ACAS launches consultation on flexible working Code of Practice. On 25 October 2023 ACAS launched a consultation on a draft Code of Practice on handling flexible working requests, which is intended to sit alongside the Workers (Predictable Terms and Conditions) Act 2023 (the "Act"). The consultation seeks to explore how requests should be handled where they are made by an employee/worker to their employer and also where they are made by an agency worker to their agency or hirer. The draft Code also includes good practice principles, including allowing workers to be accompanied at meetings to discuss requests, requiring organisations to be transparent about the reasoning underpinning any decisions and allowing an appeal where a request has been rejected. ACAS has also launched a "Flex at Work" toolkit  which includes guidance, resources and training to support the implementation of the Act. 

Regulatory

SMCR forms to be amended to include references to compliance with Consumer Duty Conduct Rules. On 11 October 2023 the PRA published an occasional consultation paper on proposed changes to SMCR forms following from the FCA's new consumer duty rules. Specifically the proposals are to add a reference to the new Consumer Duty Conduct Rule to Forms C and D. The consultation closes on 13 November 2023 and the PRA proposes implementing the changes in December 2023.

FCA publishes Dear Remuneration Chair letter. On 31 October 2023 the FCA published its Dear Remuneration Chair letter which outlines key considerations for the SMF 12 of Level 1 banks, building societies and PRA designated investment firms to consider, including: the recent policy cap policy statement (see below); ensuring there is a clear evidenced link between behaviours and remuneration outcomes; the D&I consultation papers and sustainable finance. SMF 12s need to consider this letter and the FCA welcome their response on how they will be adopting the principles outlined above.

PRA publishes policy statement removing bonus cap. The PRA has published its long-awaited policy statement removing the limit on the variable remuneration paid to material risk takers (MRTs) in banks to two times salary. The policy change takes effect from 31 October 2023, after which time banks can choose to set their own maximum ratios of variable to fixed remuneration. Banks now need to decide whether and when to implement the policy change. This decision will not be straightforward and will require careful consideration of the feasibility of changing current remuneration arrangements, bearing in mind both the employment law considerations and the potential diversity and equity issues.

Restrictive covenants

Bonus clawback provisions not found to be restraint of trade. The High Court has held that bonus clawback provisions in an employment contract did not constitute a restraint of trade. The Claimant was employed by the Respondent under an employment contract dated 13 July 2015. Under the terms of this employment contract the Claimant was eligible for consideration for a discretionary bonus. The bonus was conditional on the Claimant remaining in employment for three months from the date of payment of the bonus, and not having received or given notice to terminate his employment. In January 2022 the Claimant was paid a bonus of £187,500. One month later the Claimant gave notice of termination of employment. The Respondent sought repayment of the bonus and when the Claimant refused served a statutory demand for the sum. The High Court found that although the bonus clawback provision might inevitably disincentivise an employee from resigning, that did not turn the provision into a restraint of trade, nor would the fact that the contract also contained restrictive covenants. (Steel v Spencer Road LLP)

Diversity, Equity & Inclusion / ESG

ET did not correctly identify appropriate comparators for race discrimination claim. The EAT has held that the ET erred in its analysis of appropriate comparators for the Claimant's claim such that the burden of proof had not shifted to the Respondent to disprove discrimination in relation to the Claimant's direct race discrimination claims. The EAT upheld the findings of the ET in relation to the Claimant's whistleblowing and perversity claims. The Claimant worked in one of the Respondent's fitness clubs until he was summarily dismissed following a series of grievances and investigations. Allegations raised included that the Claimant had said to a colleague: "We had better watch out in the office, you're Iranian aren't you?" and that a different colleague had said to the Claimant: "You are only doing this to me as I am old, black and fat". The EAT confirmed that where a claimant compares his treatment to another, the ET must consider whether there are material differences between the claimant and the person with whom the claimant compares his treatment. It is important to be clear whether you are dealing with actual comparators or just providing evidence from which an inference could be drawn. On the facts the EAT found that a comment made about another's race was materially different to a comment made about an individual's own race (even where that comment might assume a degree of prejudice). The race claim was remitted for re-hearing. (Virgin Active Ltd v Hughes)

Claimant's belief against 'wokism' in relation to race found to be protected under the Equality Act 2010. The Claimant brought claims of discrimination on the grounds of religion and belief against the Respondent. A Preliminary Hearing was listed to determine whether the Claimant's beliefs were protected under the Equality Act 2010. The Claimant alleged that his belief was a challenge to critical theory in relation to race. Specifically the Claimant believes that structural racism is divisive and instead eliminating racism would be better advanced by judging people by their character rather than skin colour (a position advocated by Martin Luther King). The Claimant also believes that it is unhelpful to view social problems through feminist eyes. The Respondent sought to contend that the Claimant's beliefs were views or opinions without the necessary level of cogency and cohesiveness. The Employment Tribunal found that the Claimant's beliefs with respect to race were the result of careful thought over many years - the ET noted that the Claimant is married to a black woman and his children are black- and were genuinely held. In contrast his views on sex and feminism appeared to be a response to a single article. The ET went on to find that the Claimant's beliefs with respect to race had a consistent internal logic and structure, were coherent and worthy of respect in a democratic society (which was noted to be a low hurdle to overcome following the Forstater decision). (S Corby v Advisory, Conciliation and Arbitration Service)

Worker Protection (Amendment of Equality Act 2010) Bill receives royal assent. On 26 October 2023 the Worker Protection (Amendment of Equality Act 2010) Act was passed. The Act will come into force in October 2024. Significantly the Act introduces a new duty on employers to take reasonable steps to prevent harassment of their employees. The Act will also introduce the right for Employment Tribunals to increase compensation by up to 25% where employers have breached this duty. Although the Act does not go as far as the first draft of the Bill (which proposed that employers take "all" reasonable steps) it is hoped that the Act 'will still send a strong signal to employers that they need to take action to prioritise prevention of sexual harassment and ultimately improve workplace practices and cultures'.

Whistleblowing

Protect launches new Environmental Whistleblowing Toolkit. Whistleblowing charity Protect has launched a new Environmental Whistleblowing Toolkit which is described as a practical and legal guide to raising environmental concerns at work. The toolkit aims to support individuals to speak up: "If we are to prevent further environmental damage, we need to use every tool in the box. Speaking up - or whistleblowing - is one of these tools." Set against a backdrop of increased employee engagement and activism in this area, recently illustrated by the open letter published by two Shell employees to their CEO on their renewable energy strategy, the publication of this toolkit serves as a reminder that environmental issues are likely to increasingly take centre-stage.

Other

Economic Crime and Corporate Transparency Bill receives royal assent. The Economic Crime and Corporate Transparency Act 2023 widens the scope of corporate criminal liability by introducing a new offence of failure to prevent fraud committed by employees or agents, among other measures. It is expected that the changes will be implemented through amendments to the Companies Act 2006 made through secondary legislation. We may start to see some changes come into force in early 2024. Further Insight on this Act is available here.