In-house lawyers and HR professionals have never been so busy, as employment law developments continue unabated. Over the last 12 months, we have grappled with the impact of Brexit, the reversal of tribunal fees, gig worker status cases, the introduction of the Apprenticeship Levy, the introduction of gender pay gap reporting, the immigration skills charge, and Matthew Taylor’s report on modern working practices. Just listing the developments can make your head spin.
So in these challenging times, what should take priority on the in-house lawyer’s ‘to do’ list?
The General Data Protection Regulation
The General Data Protection Regulation (GDPR) will apply from 25 May 2018 to all businesses in the UK, and requires employers to undertake a complete review of how they obtain and process personal data. Legal will need to work closely with other stakeholders, including HR, to ensure compliance. Key things to consider from an employment point of view are:
- what personal data you obtain, how you currently process it and how long you retain it;
- the changes you will need to make in light of the GDPR, particularly where there has been a reliance on consent; and
- the record-keeping and employment documentation, including privacy notices and policies and procedures, which will be needed, together with the necessary training regime to ensure on-going compliance.
With new penalties for non-compliance including fines of up to Euro 20 million or 4% of global turnover, getting to grips with the GDPR is a definite priority. A careful watch must also be kept on the Data Protection Bill which is currently passing through the UK Parliament. Whilst it largely replicates the GDPR, it does contain some specific derogations which employers will need to factor in.
Gender pay gap reporting
Employers with 250 or more employees are required to publish gender pay gap data by 4 April 2018. For the first time, information relating to pay and bonus pay, as well as the number of men and women in different pay bands, must be made available for all to read.
Indeed, the spotlight is firmly on gender pay – few can have missed the media storm that erupted when the salaries of some high profile TV personalities were recently published. Whilst the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 do not require employers to publish the actual salaries of particular employees, employers are understandably concerned that the publication of their own gender pay data may now come under increasing scrutiny from within their own workforce; as well as having the potential to impact negatively on their wider reputation.
So what should you be thinking about? With no exceptions to reporting on gender pay for those businesses falling within the regulations, the critical issues to be thinking about now are:
- The right time to publish your data – early publication seems to have attracted goodwill and positive commentary, whereas late publication gives any initiatives more time to gain traction, but cannot of course change the ‘snapshot’ taken on 5 April 2017.
- What you will include in your voluntary narrative – you could explain the impact of:
- overtime on your pay data;
- any bonus schemes paying out in April;
- family leave/new joiners on your figures (as there is no mechanism for annualising bonus pay for those whose bonuses are reduced to take account of leave);
- part-time working – again, bonus pay is not assessed on a full-time equivalent basis for part-time employees; and
- red-circling of any salaries after a TUPE transfer.
You should also use the voluntary narrative to explain what action you are taking to narrow your pay gap; remember, recruiting more women may initially widen your pay gap as you wait for promotion initiatives to take effect.
As gender pay gap information must remain online for three years, it will be easy for a company’s gender pay gap and its progress towards closing it, to be monitored. You must be prepared to be challenged on the success of any initiatives implemented, and to report on their progress year on year.
Future proof your business: Matthew Taylor’s review of Modern Working Practices
Matthew Taylor’s review of Modern Working Practices was published on 11 July 2017 and made wide-ranging recommendations encompassing many aspects of the working relationship (see our summary here). If put into practice, the changes will herald the most ambitious overhaul of working conditions in recent times; it is now for the government to decide how to take forward the myriad recommendations.
Many of the proposals were anticipated; notably, better clarification of employment status and greater protection for gig economy workers and others finding themselves ill catered for by legislation conceived before current engagement models were anticipated. Other recommendations go further than expected, including those calling for significant reforms to the employment tribunal process. The journey to providing ‘good work for all’ will be long and complex, and whilst the aim of the recommendations is not to over-regulate or place an unreasonable burden on employers, it is difficult to see how the recommended changes can be brought into effect without employers grappling with considerable new regulation and guidelines.
Employer are well advised to take steps now to future proof their businesses by looking at:
- their engagement models for staff;
- diversity make-up;
- readiness for technical innovations; and
- their ability to attract to talent from the Generation Z – who are looking for a career that fits with their personal lifestyles and work-life balance.
Watch our webinar on ‘the changing world of work – key employment law implications’ here.
Some case law developments also require your attention:
Review holiday pay arrangements
Holiday pay case law has been evolving endlessly over the last six years; most of us are tired of reading and thinking about it. Frustratingly, calculating holiday pay remains a vexed issue; however some guiding principles can be distilled from evolving case law:
- compulsory overtime, and most commissions forming part of normal remuneration, must be included in calculating holiday pay;
- other payments, such as voluntary overtime, must also form part of holiday pay calculations if they can be classified as normal remuneration; each case must be determined on its own facts. The best practical approach employers can take as we await clarification around precise calculations, is to look at what, in reality, employees are getting paid when they are at work and to make sure that is mirrored when they are on holiday. With the recent employment appeal tribunal decision in Dudley Metropolitan Borough Council v Willetts and others it is now more pressing for employers to review their voluntary overtime arrangements (see our summary here).
The position regarding bonuses based on personal performance and less regular commission payments remains unclear. Time will tell what approach must be taken to these categories of payments, and most employers are taking a ‘wait and see’ approach to whether these payments should be included in holiday pay calculations.
With the evolving case law on gig economy workers classifying those employed in the sector as workers rather than self-employed, it is now the case that many gig economy workers are entitled to holiday pay; we are therefore likely to see a sharp rise in the number of holiday pay claims brought to the employment tribunals by these workers.
The abolition of Employment Tribunal fees
On 26 July 2017, the Supreme Court handed down a landmark decision in R (on the application of Unison) v Lord Chancellor, ruling that Employment Tribunal (ET) fees are unlawful (see our summary here). The immediate effect of the judgment was that fees are no longer payable for claims being brought in the ET and appeals to the Employment Appeal Tribunal (EAT), and all fees paid since their introduction in 2013 will have to be repaid; an estimated bill of 32 million. Any applications to reimburse fees or reinstate cases will be dealt with in accordance with administrative arrangements yet to be announced (but which are expected shortly), suggesting that the reimbursement of fees and reinstatement of claims will be dealt with administratively, without the need for judicial intervention or decision.
With a sharp rise in claims now expected, employers should review their approach to using settlement agreements on termination of employment – do you need to issue any amended guidance on when their use is appropriate? Looking at your claims history, is it more likely that employees will bring claims against the company now that ET fees have been abolished? The government has commented that it is looking to reinforce the role of Acas as a means of sifting out unmeritorious claims – it is of the view that conciliation has a strong impact on reducing the number of cases that need to go to court or a tribunal; this remains to be seen.
In Chersterton Global Ltd (t/a Chestertons) and another v Nurmohamed, the Court of Appeal has ruled that allegations about accounting malpractices that affected the bonuses and commission of 100 senior managers were made in the reasonable belief that they were in the public interest. This has provided some welcome guidance on what the words ‘in the public interest’ mean; the words were added into whistleblowing legislation in 2013 in an attempt to prevent workers using the whistleblowing legislation to make complaints purely about their own employment contracts.
This case has confirmed that where a disclosure relates to the breach of a worker’s own contract, there may still be factors which make the disclosure ‘in the public interest’. Whilst what amounts to a disclosure ‘in the public interest’ remains fact sensitive, employers must be alert to grievances and complaints that impact on other employees, as the threshold for establishing public interest now appears to be relatively low.
Also of note is the EAT decision in International Petroleum Ltd and others v Osipov and others that two non-executive directors (NEDs) could be held personally liable for their part in dismissing a whistleblower. The EAT found that the NEDs could be personally liable for post-dismissal losses on a joint and several basis with the employer (who the tribunal found had unfairly dismissed the claimant by reason of whistleblowing).
There are a number of other changes to keep step with, including: the apprenticeship levy; case law on monitoring employees’ use of social media; and reasonable adjustments needed to recruitment procedures – to name but a few. We cover the implications of key developments on our Insights page, or you can contact your usual OC contact for further information on any issues of interest to your business.