Weekly top five for employers: what you need to know and do - 17 June

1. Enhancing shared parental pay: Where are we now?

The Court of Appeal (CA) has held that it is not discriminatory to pay women on maternity leave enhanced maternity pay but pay men on shared parental leave only statutory shared parental pay.

The CA considered arguments that to pay different rates of pay was direct sex discrimination, indirect sex discrimination and breach of equal pay legislation (in one case the employer's policies were contractual). However, the CA was clear that all claims failed on the basis that the circumstances of a mother on maternity leave are materially different to those of a male employee on shared parental leave. Indeed, 'the entire period of maternity leave following childbirth, and not just the two weeks of compulsory maternity leave, is for more than just facilitating childcare'. Maternity leave is also designed to assist new mothers with their recovery from the physical and psychological effects of pregnancy and giving birth. The special treatment afforded to women in connection with pregnancy and childbirth is fundamental to the preservation and promotion of the protection under EU law for female workers having a child. There could not therefore be any direct sex discrimination or inequality of pay as the EU provides special protection for women in such circumstances and even if a male employee could point to disadvantage caused by the employer's pay policy, such difference in treatment would be justified.

Whilst the decision is helpful for employers who do operate different pay policies for men and women on shared parental leave and maternity leave, be aware that both claimants have confirmed that they will appeal to the Supreme Court. With diversity high on agendas, employers may in any event want to use the opportunity to consider their current policies and whether or not these still meet the needs of the business in recruiting and retaining their workforce and in light of other market practice.

Ali v Capita Customer Management Ltd; Chief Constable of Leicestershire Police v Hextall (2019)

2. Holiday pay: Court of Appeal rules that voluntary overtime must be included

Holiday pay remains a difficult area for employers with ongoing uncertainty over how it should be calculated. However, in its most recent decision, the CA has reinforced the existing position that voluntary overtime should be included in holiday pay calculations where it is sufficiently regular and settled.

Here, a group of ambulance workers argued that both their non-guaranteed overtime and voluntary overtime should be taken into account in holiday pay calculations. In fact the CA held that, despite the absence of an express reference to overtime in the relevant terms and conditions, reading the relevant clause in their terms and conditions as a whole, the natural interpretation was that overtime was contractually part of their pay.

Whilst it was not necessary therefore 'in the strict sense' for the CA to do so, it went onto consider what the Working Time Directive requires in respect of holiday pay. Reviewing the case law, the CA found that the European Court of Justice (ECJ) has established clearly that the question in each case is whether or not the pattern of work is sufficiently regular and settled for payments made in respect of it to amount to normal remuneration. The CA rejected the obiter comment made in an earlier ECJ decision that only contractual overtime should be included, concluding that the ECJ had not intended 'to perform a handbrake turn' and contradict so much of what had previously been said.

Whilst each case will turn on its own facts, the position remains that employers that offer voluntary overtime will need to consider if they offer their employees a pattern of voluntary overtime that is sufficiently regular and settled to form part of the calculation of holiday pay. Where overtime is widely worked, it may be more economical to operate on the basis that overtime is worked. In the meantime, employers should be aware that from 6 April 2020 the reference period for calculating holiday pay will increase from 12 weeks to 52 weeks.

East of England Ambulance Trust v Flowers and others (2019)

3. NDAs back in the spotlight

Whilst we await the outcome of the government consultation on the use of non-disclosure agreements (NDAs) in employment contracts and settlement arrangements, the Women and Equalities Select Committee has published a report on the use of NDAs in discrimination and harassment cases.

The report highlights concerns over the routine use of confidentiality and non-disparagement provisions in settlement agreements, which can be 'at best murky' and particularly where they are used as a 'convenient vehicle for covering up unlawful activity with legally sanctioned secrecy'. It also highlights the use of NDAs to prevent individuals from making a protected disclosure under whistleblowing legislation, or where individuals are prevented from disclosing to a new employer why their employment terminated, or from reporting the matter to the police. Indeed, it notes that the 'substantial imbalance of power' between employers and employees and a number of disincentives to seeking redress through the employment tribunal system, can often lead to individuals concluding that they have no option but to enter into a settlement arrangement with an onerous NDA term.

Recommendations made include:

• new legislation ensuring that NDAs cannot prevent 'legitimate discussion' of allegations among employees, which would allow staff to gather evidence to support claims of harassment or discrimination
• the use of standard, plain English and non-derogatory language in confidentiality clauses, if they are used in settlement agreements. Such clauses should also specify what information can and cannot be shared and with whom
• strengthening corporate governance requirements to make sure employers meet their responsibilities to protect staff from discrimination and harassment
• requiring employers to investigate all discrimination and harassment claims even if a settlement is reached
• organisations naming a senior manager at board level to oversee anti-discrimination and harassment policies and procedures and the use of NDAs
• increasing compensation for victims, to encourage organisations to tackle harassment
• increasing the time limit for bringing a claim to an employment tribunal from three months to six months, and
• requiring employers to pay the costs employees encounter when seeking legal advice.

Pending the outcome of the government's current consultation employers should still take steps to address some of the concerns raised (and in light of the guidance issued by the Solicitors Regulation Authority with which solicitors will need to comply), employers should review how discrimination and harassment complaints are dealt with and their use of NDAs now. In particular, employers should ensure employees are aware of procedures for raising grievances or concerns around discrimination and harassment in the workplace, highlight relevant guidance and support and look to investigate allegations of discrimination or harassment, even if they are settled, to ensure that there are no further repercussions for the wider workforce. Employers should also ensure that they review any NDA provisions in the settlement arrangements to make sure that they can be easily understood and do not prevent the employee from raising matters with the police, regulator or other appropriate body.

4. Recruitment and positive action

A recent Employment Tribunal (ET) case has highlighted the difficulties for employers seeking to create a more diverse workforce but against the backdrop of our equality legislation.

S159 Equality Act permits an employer to treat a candidate with a protected characteristic more favourably in connection with recruitment or promotion than another person if it reasonably thinks that:

• persons who share a protected characteristic suffer a disadvantage connected to that characteristic; or
• participation in that activity by persons who share a protected characteristic is disproportionately low.

However, the candidate with the protected characteristics must be 'as qualified' as non-protected candidates and the employer must show that it does not have a policy of treating people with protected characteristics more favourably. The employer's actions must also be proportionate.

Here, the employer operated a three stage recruitment process: an application form, a 'sift stage' involving a competency interview and other exercises and then a final interview. It was at this final stage that the employer applied 'positive action' by appointing candidates with protected characteristics first. A candidate rejected at this stage claimed direct discrimination on the grounds of sexual orientation, race and sex. The ET rejected the employers argument that all candidates at the final sift stage were genuinely as qualified as each other (there were 127 candidates at this stage in total) finding that the evaluation forms completed by the interviewers demonstrated clearly that some candidates were stronger than others. Instead the ET found that the employer had applied a blanket policy of prioritising candidates with protected characteristics and which was unlawful. The ET also found that the employer already had an extensive equality and diversity programme which was 'bearing fruit' . Its approach to recruitment was therefore a disproportionate means of encouraging increased participation by those with protected characteristics.

Given the drive towards greater workplace diversity, the decision is a helpful reminder that organisations must ensure any initiatives do comply with their legal obligations to all candidates under the Equality Act.

Furlong v Chief Constable of Cheshire Police

5. New EU rules on transparent and predictable working conditions

The European Council has adopted a new EU directive on 'transparent and predictable' working conditions, which introduces at EU level new minimum rights for workers, as well as new rules on information to be provided to workers about their working conditions. Its main aim is to respond to the labour market challenges triggered by new ways of working, such as the gig economy. The directive applies to all individuals working more than 3 hours per week over four weeks and will require employers to inform workers of the essential aspects of the employment relationship such as: the identities of the parties to the relationship and the place and the nature of work; the initial basic amount of remuneration and the amount of paid leave; and the duration of the standard working day or week when the work pattern is predictable. The directive also provides for specific information to be provided were an individual's work pattern is entirely or largely unpredictable.

The directive also provides for a number of further minimum rights for workers, including the right:

• to take up a job in parallel with another employer
• to limit the probationary period to a maximum of 6 months, with longer periods allowed only in cases where this is in the interest of the worker or is justified by the nature of the work
• to request, after at least six months service with the same employer, employment with more predictable and secure working conditions
• to receive training cost-free, when such training is required by a union or national legislation.

The directive must now be implemented by EU Member States within the next three years. Whilst the nature and timing of Brexit will determine whether the directive is required to be implemented in the UK as a matter of law, the UK government seems likely to implement this or something very similar given the various announcements about protecting vulnerable workers as part of the response to the Taylor Review, and the stated intention that Brexit should not lead to UK worker rights being relatively worse than elsewhere. For further information, please see our insight and contact Kevin Barrow or Frances Lewis in our specialist contingent workforce team.