HR Law Live offers you regular updates and commentary on the latest legal and policy decisions affecting employers and anyone working in a human resources role. The blog posts are written by our team of specialist employment lawyers at top 50 UK law firm, Mills & Reeve LLP.
Last month there were some significant new developments in relation to equal pay and the connected but separate gender pay reporting requirements.
The rules about equal pay comparators have been simplified
Equal pay claims can’t get off the ground unless the claimant can find a comparator who is paid more. That issue has a long and tortuous history, particularly where the claimants and their potential comparators are based in different locations. Subject to any appeal to the Supreme Court, the latest decision from the Court of Appeal in the Asda equal pay litigation should make it easier for claimants to identify viable comparators.
The Court of Appeal has now confirmed that predominantly female retail workers can compare their pay with predominantly male distribution workers, because Asda’s terms for both sets of workers applied wherever they worked. That ruling cuts through a lot of the complicated legal arguments about equal pay comparators. As the Lord Justice Underhill said: “it would in truth be no credit to the law if the kind of elaborate and confusing exercise which the Judge was encouraged to undertake were required in order to establish whether comparison were permitted.”
Not all equal pay claims against same employer can share same form
Asda and a number of other employers have been involved in another procedural dispute which also reached the Court of Appeal last month. This time it was about the correct procedure for bringing employment tribunal claims, and in particular the extent to which different claimants could be included on the same claim form.
The Court of Appeal has now ruled that in effect claimants can only be grouped together if they all do similar jobs and they have identified the same comparators. However employment judges have a discretion to waive any irregularity in the paperwork where this would be in the interests of justice. This issue is unlikely to be so prominent in the future, since fees are no longer payable to commence proceedings in the employment tribunal. However employers will no doubt wish to scrutinise group equal pay claims submitted on the same tribunal application form to ensure that they are indeed “based on the same set of facts”.
No changes to gender pay reporting planned
The deadline for the second round of gender pay reporting expires on 4 April (30 March for public sector employers). In its response to last year’s House of Commons Select Committee report, the Government has confirmed that no changes will be introduced before the end of the current reporting cycle.
Looking further ahead, it seems that there are no plans to make any significant changes to the reporting gender pay reporting regime. In particular, the Government appears unenthusiastic about making an explanatory statement compulsory, or extending the ambit of the requirements to smaller employers. It has confirmed that any changes (both to guidance and substantive reporting obligations) would be notified to employers in advance of the beginning of the reporting cycle in which they would take effect.
The Government is consulting on plans to extend the redundancy rights currently enjoyed by women on maternity leave to pregnant women and women returning to work after maternity leave. There is also a possibility of giving similar rights to parents returning to work from adoption or parental leave.
The fact that women on maternity leave are better protected against being made redundant than pregnant women or new mothers who have recently returned to work is an unexplained anomaly in UK employment law. As well as the broad protection against sex and pregnancy related discrimination which all women enjoy, mothers on maternity leave have an additional right to be considered for suitable alternative vacancies in a redundancy situation, in preference to anyone else under threat of redundancy.
The Government is now planning to create a consistent regime to protect pregnant women and new mothers by extending these special redundancy rights. The proposal is that these additional rights would apply to all mothers from the point they tell their employer they are pregnant to the end of a defined period after they return to work from maternity leave. That is likely to be six months, though the Government is consulting about the exact period.
The Government is also consider according similar rights to parents returning from other types of leave including adoption leave, parental leave and shared parental leave. Some of the issues around timing and eligibility are quite complicated for these additional types of leave. As well as seeking views through the consultation process, the Government plans to refine its thinking by using a specialist task force.
The consultation closes on 5 April 2019, but no implementation timetable has yet been published.
The vote last night in the House of Commons to reject the Withdrawal Agreement may result in additional concern for EU staff and their employers.
Based on our experience of providing support to clients in this area, including running briefing sessions for EU nationals, we think there are four key messages to get across in this context:
Reassurance – the Government has confirmed that it will run the Settlement Scheme (the Scheme that will effectively protect the rights of EU nationals currently residing in the UK) for EU nationals and their family members who are residing in the UK on or before 29 March 2019 (ie, Brexit date), even in a no deal scenario. So irrespective of the outcome of the Brexit negotiations, the rights of EU nationals and their family members currently in the UK should be preserved.
Recruitment – it may be that the vote last night has increased the risk of a no-deal Brexit. It is not clear what immigration system the Government will operate for EU nationals who wish to come into the UK from 30 March 2019 in a no deal scenario. The transition period that would run until 31 December 2020 which has been agreed as part of the Withdrawal Agreement would not apply. Employers who have identified a specific EU national for a role, or who have recruitment processes involving EU nationals underway, should where practicable plan to ensure that EU nationals are appointed and resident in the UK by 29 March 2019, in case of a no-deal Brexit.
Workforce planning – it is sensible for organisations to identify the areas where they tend to recruit a significant number of EU nationals, the potential risks associated with additional recruitment barriers and costs (which may come into play from 30 March 2019 in a no deal scenario) and actions that can be taken to mitigate these risks.
Sponsor licence applicationsand compliance – based on the recent Immigration White Paper, it seems likely that the future immigration system (including in respect of recruiting EU nationals) will involve an extension in some form of the current points based system which applies to non EU nationals. This would mean that all employers who wish to recruit EU nationals would need to register as sponsors. Getting ahead of the curve and applying now for a sponsor licence may be a prudent step – although there is no guarantee this will be required. Furthermore, the consequences for existing sponsors of having their licence revoked as a result of compliance failures may be prove to be more serious in the post-Brexit world. So ensuring a high level of compliance may be more important than ever.
The Mills & Reeve immigration team can help in advising on Brexit-related immigration issues, providing support for EU staff, and assisting with sponsor licence issues. Please get in touch with Alex Russell if your organisation requires any advice in this area.
To mark the start of 2019, we have put together our review of the past year. We have selected the topics that we think have most engaged employment lawyers and human resources practitioners over the past 12 months and will continue to be significant in the year ahead.
The review starts with an explanation of the new immigration arrangements that are likely to apply post-Brexit, though many details are still unclear. Other topics covered include #MeToo, the gig economy and the implications of the latest case law on the interpretation of employment contracts.
The White Paper on the UK’s future immigration system was published on 19 December 2018 and heralds the most significant changes to the UK immigration system for around 40 years. Assuming the Brexit Withdrawal Agreement is ratified, there will be an implementation period until the end of 2020 (during which the current rules will continue to apply), with freedom of movement ending on 31 December 2020 and new immigration rules expected to come into force on 1 January 2021. It is currently unclear what arrangements will apply to EU nationals wishing to come to the UK to work between 30 March 2019 and the end of 2020 if there is a ‘no-deal’ Brexit.
The key proposal is that the UK immigration system will apply consistent rules to EU and non-EU nationals alike with a focus on skills. This message is, however, somewhat confused by a number of references to exemptions and privileges that will apply to nationals of ‘low risk’ countries, in line with trade deals or reciprocal arrangements that the UK may agree. As such, the more complex picture presented of the post-Brexit landscape suggests that while the ostensible aim will be to attract the “brightest and best”, in reality a significant premium will be placed on migrants with access to significant capital, high earners, and parallel rules linked to bilateral trade or other international arrangements.
The White Paper is something of a mixed bag in relation to the recruitment of workers. In summary, potential workers will be required to obtain immigration permission under a revised points based system, with the key features as follows:
The resident labour market test, which is one of the main compliance hurdles for employers, will be scrapped. The 20,700 annual cap on visas for entry clearance applications will also be removed. This is likely to reduce the administrative burden and risks faced by employers and speed-up the process for obtaining work visas.
There will be a skilled route to include workers with intermediate skills levels as well and graduate and post-graduate roles. Interestingly, the Migration Advisory Committee’s recommendation of retaining the minimum salary threshold at £30,000 will be the subject of further consultation and the shortage occupation list (SOL) will be reviewed. It seems likely that various exceptions will be made, including possibly retaining a lower ‘new entrant’ rate for recent graduates and younger workers, using the SOL to fill key roles which typically attract a lower salary, and to account for variations across the different nations of the UK.
Employers who have typically used EU nationals to fill lower skilled and lower paid roles will be concerned about the lack of a route specifically for low skilled workers and the decision not to operate sectoral labour schemes. While there is provision, as a transitional measure until 2025, to institute a time-limited route for temporary short-term workers for a maximum of 12 months, it seems likely that this will be limited to certain sectors such as construction and social care. Furthermore, the route will be open only to nationals of specified countries, will not carry entitlement to access public funds or to bring dependants, and will not lead to permanent settlement. As such, it is likely to be of limited attraction to many lower skilled workers.
Of more significant concern is the apparent aim to adapt the current sponsor licence / points based system to cover EU nationals. Tier 2 would effectively become the main immigration route which employers would be required to use to recruit EU (as well as non-EU) nationals. The sponsor licence system is recognised as a significant administrative burden for many employers, particularly those with limited HR functions.
While some current compliance hurdles may be removed, it appears that a financial ‘stick’ may be used to indirectly reduce reliance by employers on workers who require visas. The White Paper refers to the immigration system being self-funding and that increasing the amount of the Immigration Skills Charge (currently set at £1,000 per annum per worker), may regulate the number of immigration applications.
There will be provision for EU nationals to visit the UK to undertake limited activities (eg, attend meetings and conferences, discuss matters relating to their overseas employment, and holiday) without having to obtain a visa in advance. EU nationals will welcome the proposal to continue to use e-gates to facilitate swift entry.
The White Paper will be the subject of consultation throughout 2019.
The Supreme Court has dismissed Andrew Williams’ disability-related challenge to the way his early retirement pension had been calculated by Swansea University’s pension scheme.
Mr Williams complained that the enhanced element of his ill-health early retirement pension had been calculated based on his part-time salary. He argued that it should have been based on his full time salary, because it was only because of his disability that he was not able to work full-time immediately prior to his retirement at the age of 38 on health grounds. This, he said, was a case of unfavourable treatment because of “something arising in consequence of his disability”.
His argument convinced the employment tribunal, but the Employment Appeal Tribunal allowed the employer’s appeal. Mr Williams' further appeal to the Court of Appeal was dismissed, and the Supreme Court has now endorsed the Court of Appeal’s approach.
The argument that won out was based on the fact that the award of an early retirement pension on grounds of ill-health could not be described as unfavourable treatment towards a disabled person: a person who was not disabled would not be eligible for such a pension. It followed that it could not become unfavourable treatment because of the way it was calculated. In other words the fact that a full time worker who had become disabled because of a sudden illness like a heart attack would have been granted a better ill-health pension was beside the point: it was not sufficient to make what would otherwise be described as favourable treatment unfavourable.
This decision will come as a relief to pension fund trustees and employers, but it does illustrate the importance of context in interpreting the wording of the Equality Act. In these particular circumstances our higher courts clearly thought it a bridge too far to complain that what was by all accounts a generous ill-health pension could have been even better. But it does not necessarily read across into other contentious areas of disability discrimination – for example the issue of whether disabled people should be given more generous sick pay than non-disabled people, or people with different disabilities.
Where there is uncertainty, it is probably better to assume that the relevant provisions of the Equality Act are engaged, and be prepared to justify any treatment that could be regarded as unfavourable. As other recent cases have demonstrated, assuming that the Equality Act is not engaged at all when making a decision that affects a disabled worker can be a high-risk approach.
Following the Government’s response to the recommendations of the Taylor Review in early 2018, steps have now been taken to start implementation of the recommended changes.
This week, the Government have published its Good Work Plan - a summary of those changes and how they will continue to strengthen workers’ rights in the UK (whether or not the UK leaves the EU). It has also laid before Parliament three sets of proposed legislation that will implement many of these changes with effect from 6 April 2020.
What does the Plan confirm will change for employment law by 2020?
the reference period for calculating holiday pay, where an individual has variable remuneration, is increased from 12 weeks to 52 weeks. If the individual has not yet worked for 52 weeks, the reference period is the number of weeks worked;
all workers, rather than just employees, will be entitled to a contract (or written statement of particulars of employment) setting out their employment rights;
this must be provided on appointment rather than within the existing period of two months from appointment. (The employer can choose to provide particulars in instalments over a two month period, provided that the majority are given when the individual begins work);
the maximum penalty for an employer aggravated breach of employment rights will increase from £5,000 to £20,000;
the percentage required for a valid employee request for the employer to negotiate an agreement on informing and consulting its employees will lower from 10% to 2%; and
the Swedish Derogation will be repealed. (Agency Workers can currently exchange their right to be paid equally to their permanent counterparts in return for a contract guaranteeing pay between assignments, known as Swedish Derogation).
What else can we expect to see?
While there has been no published draft legislation at present and therefore no specific timeframes for implementation, the Plan also confirms that the following changes are now likely to be made:
there will be more clarity on employment status, with a new test to reflect the “reality of modern working relationships”. It will focus more on the element of control and not on the individual’s right to provide a substitute;
there will be a ban on deductions from staff tips, all of which will now have to be given to staff;
casual workers (whether zero hour or other variable pattern) will be able to request a more fixed pattern of work, when having worked for 26 weeks continuously; and
the gap in employment with the same employer that will break continuity of service will increase from one week to four weeks.
The majority of the Court of Appeal has dismissed Uber’s second appeal against the employment tribunal’s ruling that the drivers using its platform were workers, not self-employed. However, Lord Justice Underhill’s dissenting judgment will have given Uber some hope when it takes its case to the Supreme Court, probably towards the end of next year.
The majority largely endorsed the decision of Judge Eady in the Employment Appeal Tribunal last year. They said that employment tribunal had been correct to find that there was in reality no contract between the driver and each passenger they picked up. They were entitled to be “realistic and worldly wise” and to disregard the features of the written documentation which did not reflect the “real terms of the bargain between the parties”.
Lord Justice Underhill disagreed. In his view the facts as found by the tribunal did not demonstrate that it was “unrealistic” to treat Uber drivers as performing their services under a contract with their passengers rather than for Uber. He pointed out that old fashioned mini-cab companies often adopted the same basic legal structure, though with less sophisticated technology. Although he was not suggesting that the facts in the earlier cases about the employment status of mini-cab drivers were necessarily analogous to the present case, they demonstrated that “one well-recognised means of operating a private hire business is for the operator to act as a booking agent for a group of self-employed drivers who contract with passengers as principals”.
What is surprising about this decision is not that Uber lost, but that Lord Justice Underhill (a former president of the Employment Appeal Tribunal) came out so strongly in support of Uber’s case. It was not that he was unsympathetic to the wider case for better protection for those engaged in the gig economy, but he thought that was a matter for Parliament, not the Courts.
It will be interesting to see how the Supreme Court deals with the opposing arguments next year. The fourth round of this legal battle, like the previous three, will involve a detailed analysis of the complex legal arrangements that Uber has put in place for drivers using its app. It follows that whatever the final outcome, this case is likely to offer limited assistance when considering the status of individuals engaged by other gig economy businesses, unless of course the precise arrangements adopted are broadly similar.
The European Court of Justice has given some important clarification about the steps employers must take if they are to enforce a “use it or lose it” rule for holidays at the end of the leave year. In a number of separate references from Germany, heard together last month, it has said that national legislation is not compatible with the Working Time Directive if it stipulates that the four weeks' leave guaranteed by the Directive is automatically lost if not taken by the end of the relevant reference period.
The most widely relevant reference involves a private sector worker engaged on a series of fixed term contracts, who had accumulated 51 days of untaken annual leave by the time the final contract in the series expired. He sued his employers for a payment in lieu of this entitlement. They sought to rely on a provision of German Federal Law implementing the Directive, which prevents carrying forward of leave unless justified on “compelling operational grounds or for reasons personal to the employee”.
The ECJ has said that in these circumstances the burden of proof is on the employer to demonstrate that the worker deliberately refrained from taking the leave “in full knowledge of the consequences”. Whether the employer in this case has satisfied this requirement will be for the national court to assess, but the ECJ has given some guidance about what will be sufficient. In particular, the employer must ensure “specifically and transparently” that the workers are in a position to take the annual leave they are entitled to, by encouraging them to do so “formally if need be”. They must also warn them in good time that untaken leave will be lost at the end of the reference period or authorised carry-over period.
In the UK the use it or lose it principle is set out (more baldly than its German counterpart) in regulation 13 Working Time Regulations, which says that leave “may only be taken in the leave year in respect of which it is due”. This principle has already been significantly qualified by subsequent case law in the event of long-term sickness and maternity leave, or if entitlement has been positively denied by the employer. This latest ruling from the ECJ potentially extends these exceptions to cases where the employers have not done enough to encourage workers to take their leave, though it is reassuring to note that it does not expect them to “force their workers to actually exercise their right to paid annual leave”.
Ahead of the parliamentary vote on the UK / EU Withdrawal Agreement scheduled for 11 December 2018, many EU nationals remain concerned about their future status in the UK, particularly in the event of a no-deal Brexit. So what do we know at this stage?
The EU Settlement Scheme is now operating on an extended pilot basis. Staff at Universities, NHS Trusts and some other healthcare organisations are able to make applications for settled status and pre-settled status in the period up to 21 December 2018. The Government’s target is for applications to be processed with a one to two week period and we are aware of a number of applications which have been processed within a few hours. The streamlined online application process - with the only criteria being proof of identity, a residence requirement, and a criminality check – appears to be working well. The Settlement Scheme is due to be fully open by 30 March 2019, although it remains to be seen whether the online portal technology will be compatible with Apple as well as Android devices.
On 6 December 2018, the Government published a policy paper on the rights of EU citizens in the UK in the event of a no-deal Brexit. EU citizens resident in the UK by 29 March 2019 (ie, the date the UK is due to leave the EU) will be eligible to make applications under the Settlement Scheme, with the deadline for applications being 31 December 2020. Family reunion rights will be more restrictive than are set out in the Withdrawal Agreement. Importantly, there will be no agreed transition period, so the position in respect of EU nationals wishing to enter the UK from 30 March 2019 is unclear. In the event of a no-deal Brexit, the Government may decide that a transition period (even if only for a few months) is necessary in order to minimise the risk of a cliff edge for businesses and individuals – but at this stage this does not appear to be the intention.
We continue to await the publishing of the Government’s White Paper on a post-Brexit immigration system to take effect from 1 January 2021 (or potentially earlier in a no-deal scenario), following the report of the Migration Advisory Committee in September 2018. The MAC report contained a number of interesting recommendations, including abolishing the resident labour market test, abolishing the Tier 2 (General) visa cap, and extension of the Immigration Skills Charge to cover EEA nationals. The White Paper is likely to mark the most significant shake up to UK immigration system for several decades and present significant recruitment challenges across many sectors. The Home Secretary has indicated that the White Paper is likely to be published this December, but not until after the parliamentary votes on the Withdrawal Agreement.
So what actions can employers be taking now?
Support for EU staff – many EU nationals remain concerned about their status and unclear about how applications the EU Settlement Scheme will work. Support in the form of briefing sessions, advice surgeries and the provision of FAQ style documents is key.
Workforce planning – employers should identify the areas where they tend to recruit a significant number of EU nationals, the potential risks associated with additional recruitment barriers and costs, and actions that can be taken to mitigate these risks.
Recruitment – employers who have identified a specific EU national for a role, or who have recruitment processes involving EU nationals underway, should plan to ensure that EU nationals are appointed and resident in the UK by 29 March 2019, in case of a no-deal Brexit.
Sponsor licence applications – although the future immigration landscape remains unclear, one possibility is that the existing points-based system, which currently applies to non-EEA nationals, will be extended (perhaps in a modified form) to EU nationals. This would mean that all employers who wish to recruit EU nationals would need to register as sponsors. Getting ahead of the curve and applying now for a sponsor licence may be a prudent step. Furthermore, the consequences for existing sponsors of having their licence revoked as a result of compliance failures may be prove to be more serious in the post-Brexit world.
Our Immigration Team is continuing to support many employers in providing advice to EU staff, preparing sponsor licence applications, and managing immigration compliance obligations. Please contact Alex Russell for further details.