EmpLaw Newsletter October 2023

The content of this newsletter is provided for general information purposes only and it is not intended to be legal or other professional advice. It should not be considered a substitute for taking professional advice in relation to specific circumstances. No responsibility can be accepted by Assicurazioni Generali S.p.A. for any action taken as a result of the information provided.

Retained EU Law Bill becomes law – what now?

The Retained EU Law (Revocation and Reform) Act has now come into force. The Act aims to set-out the road-map for how EU-derived case law and legislation will be used after the supremacy of EU Law in the UK ends on 31 December 2023.

The Act has lost much of its potential explosive impact following the deletion earlier this year of the ‘sunsetting provisions’ which would have removed all EU-derived law from the statute books at the end of this year in the absence of specific retention.

So, what now? We have set-out below some thoughts on what might happen next:

  • Nothing will change until after the 31 December 2023. After this time the supremacy of EU law ends and all directly effective EU rights also end.
  • The government will have the power to reform EU-based laws which have been brought onto our statutory books as statutory instruments (generally Regulations like the Working Time Regulations 1998) but not those that have become acts of parliament (like the Equality Act 2010).
  • The parties in an employment tribunal will be able to request a referral to the Court of Appeal or Supreme Court if the case is affected by retained EU-based case law. The employment tribunal may make a reference where retained EU-based caselaw is relevant to the proceedings and the matter is of general public importance.
  • The Court of Appeal and Supreme Court will then be able to overturn EU-based case law. Examples of hot spots which may be impacted are what counts as working time; how you calculate how many employees are in-scope for collective redundancies; how you treat TUPE transfers where there are multiple transferees and what should be included in the calculation of holiday pay.
  • Some of the above case-law decisions are already being tackled by the government by way of proposed new legislation. A clear example is the proposed new laws in relation to holiday pay. This may well overtake any judicial consideration.

Holiday pay claims no longer restricted by 3-month gaps between deductions

The Supreme Court has recently handed down its judgment in the case of Chief Constable of Police Service of Northern Ireland v Agnew

The Claimants were police officers and civilian staff working for the police in Northern Ireland. They brought claims for underpayment of holiday pay after having historically received basic pay only during periods of annual leave. The parties agreed that there had been an underpayment and that holiday pay should have been calculated to include periods of compulsory overtime. The issue before the Supreme Court was how far back the Claimants were entitled to go with their claim.

In Bear Scotland v Fulton the EAT had previously concluded that deductions could only be linked in a series if there was a gap of three months or less between each deduction.

But the Supreme Court has now held that employees can claim for historic underpayments of holiday pay even if there are gaps of more than three months between deductions. The Court concluded that the period during which a claim can be brought is three months from the date the last payment was made, but that this three-month limit does not restrict or qualify the meaning of a “series” of deductions.

From an employer’s perspective, it’s important to remember that the impact of this judgment is mitigated by the fact that claims for unlawful deductions from wages under the Employment Rights Act 1996 can now only go back two years.

[back to top]

Employment Appeal Tribunal gives guidance on the test for ‘like work’ in Equal Pay cases

When Employment tribunal cases are heard by a full tribunal (an employment judge sitting with two lay members) as is the case in discrimination, whistleblowing and equal pay claims, there is the possibility that a majority judgment can be reached in which the lay members ‘out-vote’ the employment tribunal judge. This happened in the recent case of Miss C L Hampson v CSC Computer Science Limited.

In this case the Claimant brought an equal pay claim against the Respondent alleging that she undertook ‘like work’ with several different comparators. After a lengthy hearing the tribunal concluded (by a majority that did not include the judge) that the Claimant did undertake like work and, further, that her claim should succeed.

This decision was challenged in the Employment Appeal Tribunal and the EAT have allowed the appeal and ordered that the case be remitted to a differently constituted tribunal for a re-hearing. The major issue which the EAT had with the original judgment was that it failed to make ‘clear findings of fact’. The EAT stressed that the role of the tribunal was to make findings of fact from the evidence presented before it and to then apply the law to those findings of fact. In this case, the EAT found that the judgment merely set out a summary of the evidence rather than making clear findings of fact.

The EAT gave some guidance as to the approach that tribunals should take in ‘like work’ cases such as this. They set out the following steps:

  • Findings of fact should be made on the evidence about:
    1. The work the claimant did;
    2. The work done in any relevant period by her comparators;
    3. What differences there were, if any;
    4. The frequency of occurrence of the differences in practice; and
    5. The extent of those differences.
  • Armed with those findings of fact the tribunal could then assess whether the work was the same or broadly similar (Stage 1) and
  • Whether differences established were of practical importance in relation to the terms of the work (Stage 2)

This is a helpful summary of the legal test involved where an employee claims that they are being paid less than a comparator who carries out ‘like work’.

[back to top]

Increase in civil penalties for employers found to have employed illegal workers

The government has announced plans to triple the maximum fine it can impose on employers who are found to have employed a person who does not have the right to work in the UK. Increased penalties are set to commence in early 2024. Fines for employers who employ illegal workers will increase from £15,000 to £45,000 for a first offence and from £20,000 to £60,000 per breach for repeat offenders.

Employers could also face criminal penalties if they knowingly employ someone who does not have the right to work in the UK.

The risk of criminal liability coupled with the substantial increase in the level of fines payable means that employers should be more focused than ever on making sure that their right to work checks are fit for purpose and accord with all legal requirements.

[back to top]

AI to take minor judicial decisions in the future

The recent fast-paced developments in artificial intelligence (spearheaded by ChatGPT) has had workers across a wide variety of sectors looking nervously over their shoulders and considering the long-term impact this technology is likely to have on job security.  In some areas, including administrative tasks and customer service, the impact is already clear to see. In others, it has, seemingly, yet to bite.

The judiciary is one of the areas where, you would think, the impact of AI has yet been felt. However, The Master of the Rolls, Sir Geoffrey Vos, has acknowledged that it may play a role in future judicial rulings. He has said in a speech that he believes machines and Artificial Intelligence “may also, at some stage, be used to take some (at first, very minor) decisions.” He gave examples of commercial and compensation claims, but emphasised AI is never likely to be used in intensely personal disputes, such as child custody arrangements.

This statement is important as it provides yet another indication that AI is going to change ways of working across all sectors in the coming years. Businesses need to be ready for it.

[back to top]

The right to participate in a share incentive plan did transfer under TUPE, Court of Session rules.

Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), whenever there is a relevant transfer (typically either a business transfer or a service provision change (outsourcing or insourcing)) from one business (the transferor) to another (the transferee), the employment of any assigned employees will move across to the transferee. All rights and obligations under or in connection with the contract of employment will also transfer to the transferee. Usually, these rights and obligations are easy to establish and continue – they will be set out in the relevant contracts of employment. However, in the recent case of Ponticelli v Gallagher the Scottish Court of Session was asked to decide whether the right to participate in a share incentive plan (SIP) which a transferring employee had been a member of prior to transfer and which was not referred to in the relevant employment contract, transferred to the transferee following a TUPE transfer.

The Court confirmed that it did. TUPE states “all the transferor's rights, powers, duties and liabilities under or in connection with any …[contract of employment] shall be transferred ….to the transferee” (Regulation 4(2)(a)). The Court confirmed that the right did not need to be contained within the contract of employment itself. Contributions were made by way of deduction from salary and the employer contributed funds for the purchase of matching shares. The scheme was clearly an integral part of the claimant’s overall financial package. The Court looked at the case of Martin v Lancashire County Council where personal injury claims arising out of workplace injury were found to have arisen from or in connection with the contract of employment and therefore transferred under TUPE to support their conclusion.

The transferee could not continue to provide the same scheme as the scheme related to shares in the transferor’s business, something which it did not have any control over. It was therefore required to provide a scheme of ‘substantial equivalence’ in order to meet its TUPE obligations (MITIE v French).

This is an important case because it demonstrates that a right which exists outside of the contract of employment itself can still transfer under TUPE. In the context of share incentive plans in particular it makes it clear that any attempts by employers to avoid rights to participate transferring by including documentation in separate agreements is unlikely to succeed if the right is ultimately rooted in the employment relationship.

[back to top]

Tribunal was wrong to rely on its own ideas of the real reason for dismissal in an unfair dismissal claim

In the recent case of Mullen v Greater Glasgow Health Board the claimant was dismissed from his role as supervisor for gross misconduct after an investigation found that he had threatened a fellow employee. The tribunal held that the respondent had carried out a full investigation and held a reasonable belief that the claimant had committed an act of misconduct but they nevertheless found that the dismissal was unfair. This was on the basis that the tribunal had its own ideas as to what the real reason for dismissal was.

The Employment Appeal Tribunal have now overturned this decision and substituted a finding of fair dismissal. The EAT held that it was not open to the tribunal, having found that the respondent held a genuine belief in the claimant’s misconduct, to base their decision on their own hypothesis as to the ‘real’ reason.

This case serves as a reminder that compliance with the Burchell test will be of key importance when looking to defend unfair dismissal claims in conduct cases. The Burchell test requires the respondent to show that it held a reasonable belief, based on a reasonable investigation, that the employee had committed an act of misconduct. If these stages can be satisfied then it is not then open to a tribunal to look behind this and speculate as to an alternative ‘real reason’ for the dismissal.

[back to top]

NHS Trust was wrong to refuse to make a redundancy payment to HR leaders after they turned-down an alternative job offer

In the recent case of Stevenson and others v Mid and South Essex NHS Foundation Trust the respondent had undertaken a restructure which had resulted in three Head of HR role being made redundant. The three employees occupying the redundant roles were offered alternative employment as HR Leads. When they refused these roles, the respondent refused to pay them a redundancy payment. The respondent alleged that they had unreasonably refused their offer of suitable alternative employment so had forfeited their right to a statutory redundancy payment under section 141 Employment Rights Act 1996.

The legal test in these circumstances has two elements: firstly, had the respondent made an offer of suitable alternative employment? and secondly had the claimant acted unreasonably in refusing it? In this case it was not disputed that the role of HR Lead was suitable alternative employment. What was at issue was the second stage of the test: had the claimants acted unreasonably in refusing it.

The judge in the employment tribunal concluded that they had not acted unreasonably. The reason he gave for this was that, although he could not see that the roles amounted to a reduction in status or autonomy, he accepted that the claimants perceived that they did and this personal perception was enough to mean that their refusal was not unreasonable. This conclusion was challenged by the respondent in the Employment Appeal Tribunal.

The EAT agreed with the tribunal. It held that the question as to whether the employee had sound and justifiable reasons for refusing the offer had to be judged from the employee’s point of view, on the basis of the facts as they appeared, or ought to have appeared, to the employee at the time the offer was refused.

This case highlights the difficulties that employers face when seeking to argue that a redundancy payment is not payable because the employee has unreasonably refused suitable alternative employment. Even if the employer can demonstrate that the alternative role is suitable and even if the claimant’s refusal is based on a perception of the role which is objectively groundless, the employee may not be found to have been acting unreasonably in refusing it. It is the employee’s personal perception of the role based on the facts as they appeared at the time that matters.

[back to top]

Business operations outside of the UK should have been taken into account when deciding when a TUPE transfer took place

Where one business purchases the business and assets of another business (or part of it) then this is likely to amount to a ‘business transfer’ under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). A business transfer under TUPE automatically transfers the contracts of employment of all assigned employees to the new employer. The transfer will be on a single date rather than over a period of time. In some cases, the date on which the transfer occurs will be obvious but in others where there are a number of transactions over an extended period of time it may be more challenging to identify the date.

It is important to fix the time of the transfer, as this determines which employees will transfer and which rights and liabilities transfer over with them. In the case of Rajput v (1) Bank A (2) Bank B (London Branch) the issue was whether when, assessing the date the transfer occurred, those parts of the business that were outside of the UK should be taken into account.

The date of the transfer of Bank A’s EMC division to Bank B (London Branch) was important to Ms Rajput as it would determine who her unfair dismissal claim should be brought against. 

The transfer involved a number of transactions across several different countries. The Employment tribunal held that TUPE applied as the economic entity was based in the UK. The Employment Appeal Tribunal agreed with this but considered that when identifying the date of the transfer and when the new business had accepted responsibility for the undertaking as a whole those parts of the business that were based overseas would have to be taken into account. There was no basis for excluding from consideration a part of the transferred economic entity which was predominantly located outside the UK once the application of TUPE had been established.

The EAT also noted that it should not be taken that there is any presumption that the date of the transfer will be after the final transaction. It could well be that in practice the responsibility for operating the business will transfer before that.

When approaching a business transfer taking place across a number of transactions, employers need to look carefully at the point in time that responsibility for operating the business will, in fact, transfer. Usually the parties will agree a date in commercial documentation and the commercial risk associated with any claims will transfer at that point in time but the actual date of transfer remains a matter of fact which cannot be contractually agreed.

[back to top]

Employment Appeal Tribunal gives guidance on the timing of failures to make reasonable adjustments

In the recent case of Fernandes v DWP the Employment Appeal Tribunal allowed an appeal in a disability discrimination claim of failure to make reasonable adjustments. The key question was how you should ascertain when a ‘failure’ to make a reasonable adjustment occurs. It is important for this to be established because time begins to run for instituting a claim (by commencing ACAS Early Conciliation) from the point that the failure occurs.

In this case the claimant requested an ergonomic assessment with a view to being provided with a chair to help with a back-related disability. The request was made in January 2020 and requests continued to be made for over a year whilst the claimant worked from home during the Coronavirus pandemic. The tribunal held that time would begin to run on the claimant’s claim from the date at which the tribunal concluded that the respondent would have been expected to make the adjustment. The tribunal found that the claim was accordingly out of time. The EAT held that this was the wrong test. They set out the correct approach as follows:

  • The duty to make an adjustment arises as soon as there is a substantial disadvantage to the disabled employee from a provision, criterion or practice (presuming the knowledge requirements are met) and failure to make the adjustment is a breach of the duty once it becomes reasonable for the employer to have to make the adjustment.
  • Where the employer is under a duty to make an adjustment, however, limitation may not begin to run from the date of breach but at a later notional date. As is the case where the employer is under a duty to make an adjustment and omits to do so there will be a notional date where time begins to run whether the same omission continues or not.
  • That notional date will accrue if the employer does an act inconsistent with complying with the duty.
  • If the employer does not act inconsistently with the duty the notional date will accrue at a stage where it would be reasonable for the employee to conclude that the employer will not comply, based on the facts known to the employee. There should be an objective analysis of facts known to the claimant, which is then considered on the basis of what a reasonable person would conclude, from those facts, about the respondent’s intentions to comply with the duty. That will identify the notional date.

[back to top]

Third party harassment provisions removed from Worker Protection Bill by House of Lords

The House of Lords have amended the Worker Protection (Amendment of Equality Act 2010) Bill to remove the proposed third-party harassment provisions. Following a debate in July 2023, the Bill has been republished with the original clause 1 (which dealt with third party harassment) removed in its entirety. Objections in the Lords included the cost to businesses, curtailment of free speech and worries about excessive state intervention in business.

Between 2008 and 2013 there was a limited right to claim against the employer for third party harassment based on a ‘3 strikes’ rule: employees had a right to claim if they suffered a third incident of harassment where the employer already knew of two previous incidents. The removed clause in the Worker Protection Bill had set out a wider proposal: that liability for harassment by third parties would arise without there needing to be a prior incident unless the employer could show they took all reasonable steps to prevent the harassment taking place. The removal of this clause means that the Worker Protection Bill will move back to the House of Commons for consideration of amendments without any express provision in relation to third party harassment.

The proposed positive duty on employers to prevent sexual harassment remains in the Worker Protection Bill, with a slight amendment so that the employer is no longer required to take “all reasonable steps” to prevent sexual harassment, but merely “reasonable steps”. This looks like a watering-down of the duty, something which was acknowledged by the House of Lords in debate.

[back to top]

And finally…

Fintech business Lanistar’s latest bold initiative to boost recruitment has landed them in hot water. Effective recruitment strategies are not just about a business picking the best applicants, they are about attracting the best applicants in the first place. In this way, recruitment comparison websites like Glassdoor, which include company reviews from existing and former employees as part of their job search functions, can have a significant impact on the quality of applicants coming through the door. Financial News reports that Lanistar had a low Glassdoor rating following allegations of sexual harassment and bullying. They aimed to counter this by offering employees up to £2,000 if they left positive reviews on Glassdoor. Unfortunately, their emails urging employees to leave reviews and plugging the financial rewards available if they did were leaked. Glassdoor have confirmed that they will take down any reviews that have been written in return for financial reward. The whole initiative has certainly raised Lanistar’s profile – just not perhaps in the way they had hoped!

[back to top]