Tag Archive: employment

Supreme Court ends employment tribunal fees with immediate effect

Employment tribunal fees were introduced for the first time in July 2013, and have been subject to challenge ever since. Over the course of the last 4 years, UNISON has launched two judicial reviews, both of which were unsuccessful in the High Court.  In 2015, UNISON’s appeal to the Court of Appeal failed.   Leave to appeal to the Supreme Court was granted and, following a two day hearing earlier this year,   this long running saga finally ended today when the Supreme Court decided to unanimously uphold UNISON’s appeal.

UNISON had asserted, and the Supreme Court agreed, that the 2013 statutory instrument implementing employment tribunal fees (the Fees Order) is unlawful for three reasons:-

  • First, it restricts the right of individuals to be permitted access to justice. Such a restriction is only lawful if it can be shown to be a proportionate means of achieving a legitimate aim, a test which, the Supreme Court decided that employment tribunal fees do not satisfy.
  • Second, the Order is inconsistent with the primary legislation under which it is implemented and frustrates Parliament’s intention both to provide individuals with substantive employment rights and to provide an accessible and affordable venue in which to enforce those rights.
  • Third, the fees regime discriminates directly against women and there is no objective justification for this discriminatory effect.

Largely the arguments at the Supreme Court centred on whether or not the fees regime could be objectively justified.  That is to say, whether or not the regime pursued one or more legitimate aim and if the regime was a proportionate means of achieving those aims.  The Government’s aims in introducing fees included transferring a portion of the costs of the tribunal service to end users and encouraging people to use alternative services to resolve disputes. Although the Court accepted that these aims were legitimate, it fully upheld UNISON’s contentions that the regime was disproportionate. The Court found that the level of fees under the regime has acted as a deterrent to claims and imposed an unjustifiable intrusion into access to justice. As such, the Court declared the regime unlawful under both UK and EU law.

What happens next?

  • As a result of its decision, the Supreme Court has quashed the Fees Order, which means that, with immediate effect, fees will no longer be chargeable for claims in employment tribunals.   Naturally, this is likely to lead to a rise in the number of disputes between employers and employees which reach the employment tribunal.
  • The Government had previously given an undertaking to repay all fees paid under the regime from its July 2013 implementation date if the fees regime was subsequently found to be unlawful. The Supreme Court confirmed today that this undertaking will now be fulfilled.
  • Although this cannot be predicted with any certainty, it is possible that the Government may, in future, seek to implement a revised fee regime which takes account of the need for proportionality.     Given the outcome of the Supreme Court case, the Government may prefer to implement any new regime via an Act of Parliament, rather than using an Order.  This would, of course, require the regime to be debated and approved by Parliament; a process which would be likely to affect the shape of any new regime.

Update – 9 August 2017

By way of update, on 9 August 2017, the President of the Employment tribunals issued Case Management Orders ordering that all claims or applications brought to the Employment Tribunal in England, Wales and Scotland in reliance upon the decision of the Supreme Court in R (on the application of Unison) v Lord Chancellor  will  be stayed (sisted, in Scotland) to await decisions of the Ministry of Justice (MoJ) and Her Majesty’s Courts and Tribunals Service (HMCTS) in relation to the implications of that decision.  Anyone who wishes to make representations in relation to the further conduct of these claims or applications is ordered to apply to the Regional Employment Judge for the relevant Employment Tribunal region or, in Scotland, to the President of Employment Tribunals (Scotland).

The impact of these Orders appears wide enough to  include applications for refunds of fees and claims that were rejected or dismissed because fees were not paid. It may also cover new claims which had not been brought previously because of fees and in which an extension of time is now sought.  However, the Orders’ Preamble do have regard to rules 11 and 40 of the Employment Tribunals (Constitution and Rules of Procedure)  Regulations 2013 which relate to rejection or dismissal of claims for non-payment of fees (or absence of remission) which suggests that the scope of the Orders may be limited to reinstatement of claims that were previously struck out or dismissed for non-payment of fees.  We must now await the decisions of the MoJ and HMCTS.

 

Permanent link to this article: http://www.dlapiperbeaware.co.uk/supreme-court-ends-employment-tribunal-fees-with-immediate-effect/

Government launches consultation on changes to taxation of termination payments

The Government has launched a consultation process on proposed reforms to the way in which termination payments are taxed.  The proposals would significantly change the tax treatment of any payments made to employees on termination of their employment.

The current position

The current position is that, in general, any elements of a termination package that arise from the contract of employment (eg a contractual payment in lieu of notice) are subject to income tax and National Insurance Contributions (NICs). In contrast, any payments which do not arise from the employment (eg damages) are only liable to income tax on any amounts over £30,000.  Further, employer and employee NICs are not payable on these payments.  There are also various exemptions applying to termination payments which apply, even on elements over £30,000. These include payments made because of the death, disability or injury of an employee, payment under a tax exempt or registered pensions scheme, HM Forces payments and payments in respect of certain legal costs.

The purpose of the reforms

A termination package is typically made up of several different types of payment (eg damages, statutory redundancy payment, payment in lieu of notice). The Office of Tax Simplification has concluded that the tax system applying to these payments is “fraught with confusion and  uncertainty”,  and that it is unfair as it benefits those who are better paid and better advised.  As a result it has recommended that reform is necessary.  The Government agrees and is therefore proposing to create a regime which is intended to be easier for employers to administer and for employees to understand.

The proposals

The Government’s proposals include:

  • A new exemption for individuals who have lost their job through redundancy. An employee would need 2 years’ service to qualify for the exemption but the exemption would then increase proportionately with the number of years’ service an employee has completed, up to a prescribed maximum. The Government is seeking views on whether an individual’s redundancy would need to meet the definition in the Employment Rights Act 1996:
    • the employer ceasing, or intending to cease, to carry on the business for the purposes of which the employee was employed;
    • the employer ceasing or intending to cease to carry on that business in the place the employee was employed;
    • the requirement for the employee to carry out work of a particular kind of work has ceased or diminished or is expected to cease or diminish; or
    • the requirement to carry out work of that particular kind in the place where that employee was employed has ceased or diminished or is expected to cease or diminish.

It proposes, however, that voluntary redundancies would be included.

  • Removing the distinction between contractual and non-contractual termination payments. This would mean that all payments made in connection with termination of employment would be treated as earnings and therefore subject to income tax and employer/employee NICs.
  • No exemption would be available to employees who choose to resign and receive a payment from their employer for doing so. Further, the Government suggests that the exemption would not be available to employees receiving a termination payment at the end of a fixed-term contract, or where the custom/agreements is that the employment will end after a fixed period of time.
  • Any tax-free payment made would become taxable and liable to NICs if the employee is re-engaged to do a similar job for the same company or associated company within a 12 month period.
  • A new exemption for payments paid in connection with compensation for unfair or wrongful dismissal, or payments connected with discrimination awarded by a tribunal
  • The current exemption for payments in respect of injury or disability would be retained, as would HM Forces payments. The Government is seeking views on retention of any of the other existing exemptions.

The Government’s proposals mark a significant shift away from the current regime and potentially reduce the situations in which tax-free payments can be made to an employee on termination of their employment. In circumstances where tax-free payments may still be available eg in redundancy situations, the Government has not yet indicated what new tax-free threshold will apply but it seems likely that this will be much less than the existing £30,000. The fact that employees will need 2 years’ service to even qualify, and that the tax-free threshold will increase depending on years’ service, means that any future tax-free sums are likely to be significantly lower than an employee may currently expect. For employers, this may mean that it becomes more difficult to negotiate attractive termination packages with its employees, resulting  in protracted terminations and increased expense.

The consultation closes on 16 October and the progress of the Government’s proposals will be reported in future alerts.

 

Permanent link to this article: http://www.dlapiperbeaware.co.uk/government-launches-consultation-on-changes-to-taxation-of-termination-payments/

New employment legislation on the horizon

Clare Gregory, a Partner in our Sheffield office, comments: On 27 May 2015 the Queen unveiled the Government’s legislative programme for the new Parliament, the first exclusively Conservative programme for nearly 20 years. This included a number of employment-law reforms, particularly in the fields of industrial action and immigration, none of which come as a surprise having been heavily trailed before and since the election.

The Trade Unions Bill will create more barriers for trade unions wishing to call a strike. First, more than 50% of a union’s eligible members must vote in order for the ballot to be valid. Second, if the strike affects “essential public services” at least 40% of those entitled to vote must be in favour of the strike. The Bill will also lift the ban on the use of agency staff to provide cover when strike action takes place. There is to be a new time limit on the ballot for industrial action and a promise to tackle intimidation of non-striking workers, although it is unclear how this would be done. The Government said the point of the bill was to “ensure that disruption to essential public services has a democratic mandate”. The Bill would also force trade union members to opt in if they want to pay a political levy.

An attempt to fulfil a Conservative manifesto promise to reduce regulation on small businesses, the Enterprise Bill would cap redundancy pay to public sector workers. The new Business Secretary Sajid Javid has said that the Bill also intends to “cut red tape for business by at least £10 billion over the next five years.” It is not clear precisely what red tape will be targeted, but the CBI is calling for further deregulation in the field of employment. Savid Javid has said, however, that he will not be going back to the controversial Beecroft proposals for no fault dismissals.

The Immigration Bill will create a new enforcement agency to tackle the worst cases of exploitation as well as creating an offence of illegal working and enabling wages to be seized as the proceeds of crime. Ministers promise to consult on the introduction of a new visa levy on businesses that recruit overseas labour to fund extra apprenticeships for British and EU workers.

More profound changes may ultimately result from the EU Referendum Bill which will set in law an in-out vote as to whether the UK should remain in the EU before the end of 2017. David Cameron has indicated that he is not necessarily looking for a EU exit, but continued EU membership is dependent on the UK negotiating more acceptable terms including reforms to support business growth and job creation and restrict EU migrants claiming benefits in the UK. An EU exit would provide the Government with more flexibility to make changes to employment laws such as TUPE and the Agency Worker Regulations.

Notably, the Queen’s Speech stopped short of a legislative plan to scrap the Human Rights Act, but it did confirm government plans to present proposals for reform. Human rights as set out in the European Convention have impacted the employment relationship; particularly the right to a private and family life; to freedom of thought, conscience and religion; to freedom of expression; to freedom of assembly and association; and the right not to be discriminated against. At this stage it is unclear how repeal of the Human Rights Act might impact on employment rights.

The day before the Queen’s speech, other employment law changes came into effect with little fanfare: Exclusivity clauses in zero hours contracts became unlawful as from 26 May.  This change, which was a key feature of the employment law reforms contained in the Small Business, Enterprise and Employment Act 2015, came into force 2 months after the Act was passed.

Under the new law, any clause in a zero hours contract which prohibits a worker from “doing work or performing services” under another contract, or prohibits him or her from doing so “without the employer’s consent”, will now be unenforceable by the employer. The new law has, however, been described as toothless by some commentators as a worker cannot currently claim detriment as a result of an employer trying to enforce such a clause. However, there is further scope under the Act for the Government to add this protection for zero hours workers.  Draft rules, which were attached to the coalition government’s response to its public consultation on the exclusivity ban earlier this year, have not yet been brought into force. These included a new right not to suffer any detriment should the workers take a job under other contracts and an extension of the scope of the exclusivity ban to workers on very low weekly pay/working hours. Until these anti-avoidance measures are in place, the ban will not create any meaningful protection for zero hours workers. However, it is likely to be only be a matter of time before this protection is introduced. Employers who operate zero hours contracts may wish to remove any offending clauses from their contracts in anticipation of this.

The government, in its response to the consultation on the new law, pledged to review and improve existing guidance available to employers and workers regarding zero hours contracts. Such guidance would help to correct the confusion which often surrounds the rights of zero hours workers, particularly in relation to working time and holiday pay.

The following employment-related provisions also came into force on 26 May:

  • Increase in the penalty which can be imposed on an employer who pays less than the National Minimum Wage; the maximum penalty is now £20,000 per worker, rather per employer; and
  • Provision giving power for the Secretary of State to make regulations to prevent discrimination by NHS employers against job applicants on the grounds that they appear to be NHS whistleblowers.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/new-employment-legislation-on-the-horizon/

Government action on holiday pay claims

BIS has announced this afternoon that a statutory instrument is being laid before Parliament to limit back pay in holiday pay claims to a maximum of two years. The limit will apply to claims brought on or after 1 July 2015. Click here for a copy of the press release.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/government-action-on-holiday-pay-claims/

What next for employment law post-referendum? And post-election?

Kate Hodgkiss a Partner in our Edinburgh office, comments: The people of Scotland have spoken, and the answer is No. No, at least, to independence; however, the three main Westminster political parties were forced to make substantial concessions regarding further devolution of powers to the Scottish Parliament in order to secure the No vote which raises questions over the potential implications of so-called ‘Devo Max’ in the field of employment.

Employment, benefits, social security and immigration are all matters currently reserved to the UK Parliament but whether this will remain the case when further powers are devolved is up for grabs. Gordon Brown’s speech for the Better Together campaign the week before the referendum, in which he pledged a 12 point plan for devolution,  included employment rights amongst those further powers that he believes should be devolved to Scotland.

A House of Commons debate on the 12-point plan is expected in mid-October and a draft bill will follow in early 2015. However, it is unlikely that amending legislation will be passed until after the General Election in May 2015.

Assuming employment rights does form part of the parcel of powers to be transferred north of the border, the main areas in which the SNP would look to make legislative changes are outlined in a White Paper published in November 2013. These include:

  • Worker representation on company boards;
  • Targets for greater representation of women on company boards;
  • Making the living wage and minimum wage central to their employment policies;
  • Guaranteed work, apprenticeship or training for young people under 24;
  • Restoring 90 days’ consultation in collective redundancy situations affecting 100+ staff; and
  • Abolishing the shares for rights scheme.

What if the SNP do not hold a majority in Scotland? If Scottish Labour were to be returned to power in the next Scottish Parliamentary elections, the leader of the Scottish Labour party has committed that the administration would abolish tribunal fees. This is further than the Labour party have been prepared to go south of the border; in a speech to Labour party conference the Shadow Business Secretary Chuka Umunna pledged to “reform the tribunal system so affordability is not a barrier to justice” which is vague but suggests rather less than complete abolition of fees. Labour have also pledged to abolish “exploitative” zero hours contracts and increase the national minimum wage to £8 by 2020. Also speaking at Labour party conference, Shadow Chancellor Ed Balls also pledged to scrap the ‘shares for rights’ employee-shareholder regime. The Labour party have not made any firm commitment in respect of the other policy areas on the SNP’s list. 

It remains to be seen whether it will be possible to deliver ‘Devo Max’ and what the constitutional landscape will look like once the dust settles. However, if employment law is devolved, depending on the outcome of the 2015 General Election, the result could be very different regimes for Scotland and England in some respects. This could lead to problems for employers operating in both England and Scotland. In particular, if Devo Max results in a situation where tribunal fees are payable in respect of a claim brought in England, but not in Scotland, this would likely lead to employees forum shopping.

Employment rights are unlikely to form the most significant battleground in the bunfight over increased devolution, but there will be implications for UK employers which will need to be closely monitored.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/16746/

Failure to enhance paternity pay not discriminatory

In Shuter v Ford Motor Company, an employment tribunal has held that a male employee was not discriminated against when he received only statutory pay during a period of additional paternity leave (APL) whereas a female employee on maternity leave would have received full pay for up to 52 weeks.   Although only a first instance decision which will not bind other tribunals, this case nonetheless serves as a useful reminder to employers that they need to decide an approach to the incoming system of shared parental leave (SPL) and, in particular, to address the thorny issue of whether the benefits of an enhanced maternity scheme should be mirrored for those on SPL.

Facts

Under Ford’s family leave policies,  employees on maternity leave are entitled to occupational maternity pay at the rate of 100% for the whole leave period and employees on the two weeks of ordinary paternity leave are also entitled to 100%.   APL was a new type of family leave which took effect in relation to children born after 3 April 2011;   where the mother returns to work and ends her maternity leave,  the child’s father or the mother’s spouse/civil partner can then take between two and 26 weeks’ APL.   At the time APL was introduced,  Ford reconsidered how it might structure its pay arrangements for family leave.   Its decision was the retain 100% maternity pay and two weeks’ full pay for ordinary paternity leave but to pay only statutory pay for APL.   Among the reasons for this decision were –

  • The APL regime was likely to be temporary as the Government was already consulting on the introduction of SPL;
  • It was usual practice to initially adopt statutory minimum entitlements and then refine entitlements based on experience;
  • Paying APL at 100% would be costly and disruptive to the business given the make-up of Ford’s workforce;
  • 100% maternity pay had been introduced to enhance Ford’s ability to recruit and retain more female employees and assist its diversity targets.  A downwards equalisation of pay for maternity and APL would demotivate female staff; negatively impact the reasons for implementing 100% maternity pay; and  risk litigation and negative publicity;
  • A recognition that APL and maternity leave are different as maternity leave is connected with the biological condition of pregnancy and childbirth and facilitates the special relationship between mother and child;
  • The Government’s advice was that pay for APL did not need to be enhanced to mirror maternity pay and similar employers were not doing so;
  • Ford did not want to subsidise the less generous maternity benefits of other employers;
  • The current 2% take up of ordinary paternity leave was low; and
  • Other European companies in the Ford group did not offer such generous rights.

Ford was also able to provide statistical evidence to the tribunal which demonstrated the need to increase the number of women in its workforce; that an increase had been achieved; and also statistics on the take up of maternity and paternity leave within its workforce.

ET Claim

Following his wife’s return to work after maternity leave,  between July and December 2013,  Mr Shuter took a period of about five months’ APL from his employment with Ford.   He was paid at the statutory rate.  In October 2013,  Mr Shuter issued employment tribunal proceedings alleging both direct and indirect discrimination based on the difference in treatment by Ford of women on maternity leave and men on APL.   Had Ford’s maternity and APL pay policies been the same,  he would have received around £18,000 during his period of leave.

The employment tribunal decided that Mr Shuter had not been subject to either direct or indirect sex discrimination.   

In terms of direct discrimination,  Mr Shuter had sought to compare himself to a woman on maternity leave but the tribunal held that this was not the correct comparator.  Instead, Mr Shuter should be compared to a woman on APL who would, similarly, have received only statutory pay and, as such, there was no less favourable treatment.

In terms of indirect discrimination,  it was accepted that Ford had applied a practice of “paying women basic pay when on leave beyond 20 weeks after the birth of the child when looking after the child”.  It was also accepted that men were likely to suffer a group disadvantage from this practice given that the largest group eligible for APL are fathers.   However, the tribunal decided that Ford’s practice of paying full pay during maternity leave was justified;  its legitimate aim was to retain and increase the number of women in its workforce and its policy on maternity pay was a proportionate means of achieving that aim.

Implications

This is one of the first cases where a difference in pay for women on maternity leave and men on APL has been considered.   It is helpful for employers that, in a well-reasoned judgment, the tribunal found that there was no discrimination.   However,  businesses should not take this as an opportunity to breath a collective sigh of relief.    The decision is only at employment tribunal level so is not a binding authority and it may yet be subject to appeal.   In addition,  the case related to APL which will soon become a thing of the past when SPL comes into effect (for babies expected on or after 5 April 2015).    There are significant differences between APL and SPL including that, for example,  SPL can be taken from two weeks after the birth, rather than 20 weeks as is the case with APL,  and also that a mother and father can take SPL concurrently,  rather than consecutively as is the case with APL.    As such,  it is possible that the courts may reach a different decision when asked to consider a discrimination claim based on differences between maternity pay and pay for SPL.   

What this case is very helpful in demonstrating is the sort of detailed evidence an employer will have to provide in order to justify a decision to enhance maternity pay but not pay for SPL.  Cost alone is not an adequate reason and some additional justification will be required.   Here, Ford had carefully considered the issue when APL was introduced,  had reviewed various options and had identified sound business reasons for the decision to continue to enhance maternity pay only.     This is an exercise which employers who currently enhance maternity benefits will need to carry out before the SPL regime comes into effect and, in this regard, there is no time like the present!

 

Permanent link to this article: http://www.dlapiperbeaware.co.uk/failure-to-enhance-paternity-pay-not-discriminatory/

Obesity can be a disability: AG gives opinion in ECJ case

As we reported in Be Aware on 1 July, the ECJ was recently asked in the case of Kaltoft v Kommunernes Landsforening to consider whether obesity should be regarded as being a disability for the purposes of disability discrimination.

On 17 July the Advocate General gave his opinion in the case. The AG said that whilst there is no general principle prohibiting employers from discriminating on grounds of obesity in the labour market, severe obesity can be a disability covered by the protection against disability discrimination if it, in interaction with various barriers, hinders full and effective participation of the person concerned in professional life on an equal basis with other workers. By severe obesity the AG was referring to morbid obesity, meaning a BMI of 40 or more (around 21 stone for an average height man).  If an individual is classified as morbidly obese, they may be disabled if the obesity has a real impact on their ability to participate in work. 

This could have implications for both employers and service providers particularly in relation to the duty to make reasonable adjustments, if the ECJ takes the same view. We will be monitoring the case and will report further when the ECJ gives its judgment.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/obesity-can-be-a-disability-ag-gives-opinion-in-ecj-case/

Holiday pay must include commission, ECJ rules

 Kate Hodgkiss, Partner in the Edinburgh office, comments: The European Court of Justice (ECJ) has today handed down judgment in a case which could mean that employers face huge liabilities for claims for holiday pay. The issue arises because of an apparent conflict between UK and European law as to how holiday pay should be calculated and in particular whether elements of remuneration such as overtime and commission must be included.

The Working Time Directive (Directive) entitles workers to 4 weeks’ leave but does not specify how pay should be calculated.  The Directive is implemented in the UK by the Working Time Regulations 1998 (WTR). Under the WTR workers are entitled to 5.6 weeks’ leave and must be paid at the rate of a week’s pay for a week’s leave. The Employment Rights Act 1996 (ERA) sets out how to calculate a week’s pay; the calculation depends on a number of factors including whether or not a worker has normal working hours. The effect of the week’s pay provisions is that many common elements of remuneration, such as overtime, commission and bonus are excluded from statutory holiday pay.

However, in cases interpreting the WTD the ECJ has stressed the need for normal remuneration to be maintained during the period of annual leave.  In a 2011 case (Williams v British Airways) the ECJ ruled that (1) workers on annual leave should receive their normal remuneration and (2) normal remuneration entitled a worker to any payment which is intrinsically linked to the performance of the tasks which he is required to carry out under his contract of employment . The ECJ held that it is then left to the national court to assess the intrinsic link between the various components making up the total remuneration of the worker and the performance of the task he is required to carry out under his contract of employment.

Following Williams it has been argued in several claims in the UK tribunals that the WTR and ERA provisions conflict with EU law and that certain payments, such as commission or overtime payments, should properly be considered normal remuneration and be included in holiday pay calculations. 

The ECJ today handed down judgment in a reference in one such case, Lock v British Gas Trading and others and has restated the principle that holiday pay must correspond to normal remuneration. Lock receives a basic salary plus commission on the sales that he achieves.  The sales commission is paid several weeks or months after a sale is concluded and makes up approximately 60% of his total remuneration. While on annual leave, he was paid his basic salary plus the commission from previous sales that fell due during the period. However, Lock then suffered a reduced income in the months following his return to work because he had not secured sales, and therefore did not generate commission, while he was on annual leave.  Lock brought a claim for unpaid holiday pay and the tribunal asked the ECJ whether commission should be included in holiday pay.

The ECJ said that commission must be included as otherwise the financial disadvantage suffered might deter workers paid on a commission basis from taking leave. Commission will, of course, vary over time; the ECJ said that it was up to the national courts to decide how to calculate how much commission should be paid during any period of annual leave on the basis of a representative reference period.

Implications

This is not good news for UK employers, but is unsurprising given the ECJ’s earlier ruling in Williams. The recent trend in case law strongly suggests that UK employers may have to include in holiday pay calculations any remuneration intrinsically linked to the performance of the contract, including overtime and commission payments – at least so far as the 4 weeks’ WTD holiday is concerned.  Most employers will, at the moment, be calculating holiday pay on the basis of basic remuneration only.  These employers may therefore face significant liabilities for underpaid holiday in the event of claims.  The key question is how these ECJ decisions are applied in a series of appeals due to come before the EAT this summer.  The EAT is due to hear an appeal in the joined cases of Neal v Freightliner Limited and Fulton v Bear Scotland on 30 and 31 July. At least two more cases are now on appeal to the EAT and may also be joined with Neal. All these claims relate to overtime.  If the EAT rules that the UK law can be read to give effect to the ECJ decisions, while individual underpayments may be relatively small, they may accumulate to a significant liability when multiplied across a large workforce.  Failure to make the correct holiday payment is an unauthorised deduction from wages and claims may be brought at any time within 3 months of the last in a series of deductions.  This means that workers can potentially bring claims in respect of holiday pay going back many years (potentially back to 1998 if the underpayment has gone on that long although there are arguments for a limitation of 6 years), provided they bring the claim within 3 months of the last incorrect holiday payment. Alternatively, the EAT may decide that UK law is simply incompatible with the WTD in which case private sector workers would have claims against the Government rather than their employer, but public sector workers would be able to rely directly on the WTD to bring tribunal claims.

Employers may have some options to reduce their potential exposure to claims, or limit their liability in the future, but these will depend on the profile of the workforce, the elements of remuneration and the nature of the employer’s business. For the majority, the most sensible option may be to wait and see how the EAT deals with the appeals. Employers will face a tense wait for the EAT’s decision.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/holiday-pay-must-include-commission-ecj-rules/

Early conciliation: what does it mean for employers?

Gurpreet Duhra, partner in our Sheffield office comments: Early conciliation (EC) has been available to claimants since 6 April 2014 but will be mandatory in respect of claims presented on or after 6 May 2014. Whilst employers could be forgiven for assuming that EC will have limited impact, particularly given the significant decline in claims since the introduction of fees, it is important that managers are prepared for the initial call from Acas to avoid prejudicing the employer’s position in any subsequent negotiations or litigation.

The mandatory EC procedure involves four steps:

Step 1: A prospective claimant who wants to institute relevant proceedings must provide prescribed information to Acas either by completing the EC form online or by telephoning Acas.

Step 2: An early conciliation support officer (ECSO) will make initial contact with the prospective claimant. The ECSO will explain the EC process, take some details from the prospective claimant and check that they wish to proceed with conciliation. As long as they do, the prospective claimant’s information will be sent to a Concilation Officer (CO).

Step 3: The CO will then contact the prospective respondent and enquire whether the prospective respondent is willing to participate in EC. If so, the CO must try to promote a settlement between the parties within the EC period of one calendar month from the date on which the prospective claimant made initial contact with Acas. The EC period may be extended once, by up to 14 days, if the CO believes settlement may be imminent.

An EC certificate must be issued where:

  • It is not possible to contact the parties;
  • The parties do not wish to participate in EC;
  • Settlement is not achieved within the prescribed period; or
  • The CO considers that settlement is not possible.  

The EC certificate will give the prospective claimant a unique reference number which they will have to include on their ET1 should they go on to present a claim. Without that reference number, the tribunal will reject the claim (except in the minority of cases where EC is not required).

What is the impact on employers?

There is no requirement on either party to engage with conciliation. If either the claimant or the respondent does not want to enter into discussions, the CO will simply issue the EC certificate. In many cases employers may consider that there is little incentive to enter into settlement negotiations until the employee has paid a fee to institute tribunal proceedings. However, there are potential benefits of settling a claim early, particularly where the claimant is unrepresented.

Employers should bear in mind the following considerations:

Do managers need training? A line manager may be the first contact that Acas makes with the employer. It is vital that anyone within the organisation who is contacted by Acas about an employment dispute understands the importance of dealing with the initial contact properly. The informal approach from Acas should be treated as seriously as employers would take a formal legal communication regarding a potential claim. Ensure that any managers who may be the initial recipient of the Acas call are aware of their responsibilities.  The initial recipient of the call should also be reminded to keep the issue confidential and not to discuss the details of the dispute with anyone else;

Give managers clear guidance on who will deal with EC. It is important that the individual who receives first contact from Acas about EC passes the details of the dispute on to whoever has responsibility for managing any subsequent tribunal claim. Individuals without appropriate authority and training should not attempt to resolve the issue themselves. Acas is allowing some larger organisations to register a national contact for the purposes of EC. For more information contact ECcontactsList@acas.org.uk;

Do not discount the option of settlement without first considering the merits. An unreasonable rejection of the possibility of settlement discussions could potentially lead to cost implications in the future. Relevant factors when assessing the merits of conciliation include: the likely strength and value of the claim; the potential legal costs and management time of defending a claim; the ease with which the issue could be resolved informally; and any damage to the organisation’s reputation that could result from lengthy and public tribunal proceedings;

Obtain as much information on the allegations from Acas as possible to make an informed assessment of whether the claim has any merits. Early investigation of the background to the allegations will also assist the organisation to respond comprehensively and accurately if the claimant does put in an ET1; 

Do not feel that you have to respond to all allegations immediately. Take time to consider your position before responding on allegations made and if necessary take legal advice on next steps including:

  • How to obtain further information on the allegations to allow you to determine the merits of any potential case;
  • The timing of any settlement and whether settlement is appropriate before a claim has been issued. As a result of the new fee regime, claimants are likely to want to explore settlement before issuing a claim whereas respondents are more likely to favour a ‘wait and see’ approach in order to see if a claimant is serious enough about their case to ‘put their money where their mouth is’. However, early settlements can be cheaper for employers and positions may become more entrenched once the fee has been paid;
  • The terms and nature of any settlement package offered.

Mark any internal correspondence regarding potential settlement as “without prejudice” to try and avoid it being disclosable in any future tribunal proceedings. Anything communicated to an Acas officer in connection with the performance of their functions is not admissible in evidence in tribunal proceedings unless the person who communicated it to the officer gives their consent.

Ensure that no one in the organisation reacts to contact from Acas by taking negative action against the worker(s) or employee(s) concerned eg refusing to give a reference. Depending on the type of allegations raised, this could lead to further claims (e.g. victimisation or whistleblowing).

Calculate the time limit: the EC regime includes a complicated process for recalculating the time limit for presenting the claim. The time limit is extended by the period between ‘Day A’ when the claimant contacts Acas, and ‘Day B’ when the EC certificate is deemed to have been issued, but may be extended further if this results in there being less than a month between Day B and the time limit expiring. There is significant potential for error and if the claimant fails to present the claim in time, the employer may be able to challenge its acceptance by the tribunal.

Ultimately in many cases employers may consider that there is little value in engaging in early conciliation. However, following the guidelines outlined above may prevent that decision from backfiring and creating increased legal risk for the employer.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/early-conciliation-what-does-it-mean-for-employers/

Hearing date set for important holiday pay calculation cases

Kate Hodgkiss, Partner in our Edinburgh office, comments: The EAT has now listed the cases of Bear Scotland Ltd v Fulton and Neal v Freightliner Ltd to be heard on 30 and 31 July 2014. The EAT’s findings will determine whether payments in respect of non-guaranteed overtime have to be included in the calculation of holiday pay.  This issue is deemed to be of such importance to employers that BIS has been granted leave to intervene in the proceedings.

Until recently, the legal position seemed to be clear. In 2004, a Court of Appeal case, Bamsey v Albon Engineering & Manufacturing PLC, held that only guaranteed (ie obligatory) overtime needed to be included in holiday pay calculations.  However, in  2011, the ECJ indicated in British Airways Plc v Williams, that all payments which are intrinsically linked to the performance of the contract must be included in holiday pay calculations.  This led the employment tribunals in Fulton and Neal to find that regular overtime should be included in the respective employers’ holiday pay calculations, even if that overtime was not obligatory.

The outcome of these cases has potentially significant ramifications for employers who are currently only including basic remuneration in their holiday pay calculations. Employees may seek to claim any holiday pay underpayments, potentially going back a number of years, and this could result in significant costs liabilities for employers.  Employers therefore need to make an important decision now as to whether to sit tight and await the outcome of the EAT’s decision or to take steps at this stage to minimise any potential liabilities. We will continue to report any future developments in Be Aware.

Permanent link to this article: http://www.dlapiperbeaware.co.uk/hearing-date-set-for-important-holiday-pay-calculation-cases/

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