“All that glisters…” (in the gig economy)

WynLewis

 

… “is not [necessarily] gold”,

is something that employers, contractors and self-employed people will need to remember since it was decided recently that Pimlico Plumbers’ staff and Hermes’ couriers were all workers (not self-employed contractors) entitled to worker benefits.

“But what’s this all about?” you may be asking.

It’s to do with the situation when individuals who provide personal services, who have previously been excluded from employee status by being called “consultant” or “freelance”, are having their worker entitlements “upgraded” from few (or none) to better (or full) protection.

The winners are (1) oppressed individuals whose lot has been limited; and (2) HMRC, which will get more cash via PAYE.

The losers are (1) employers, for whom engaging staff will cost more; and (2) end-users, for whom services will cost more.

So if you thought Pimlico Plumbers were already expensive, don’t be surprised if they’ll be even more so in future.

Two case reported in June 2018 have again turned the spotlight on this issue:

Pimlico Plumbers’ operatives were treated as self-employed. This was because they could provide substitutes, could choose not to accept work and could offer themselves for assignments. So Pimlico was an operative’s client, not their employer.  This was even though they drove Pimlico vans, wore Pimlico clothing, were tracked, had Pimlico ID cards, were bound by post-termination restrictions, had fixed rates and were tightly controlled by HQ.  Then one operative claimed unfair dismissal, wrongful dismissal and compensation for discrimination.  The issue was this:  whether the control by Pimlico, as well as the extent to which its operatives provided personal services (as opposed independent services via the Pimlico brand) tipped the balance away from self-employed in favour of worker (but not employee) status.  The answer was:  it did.

Hermes’ courier operatives were treated similarly. An employment tribunal held that they had little autonomy, were controlled by Hermes, had an obligation to provide their services personally and couldn’t engage in a way that let them look after their own interests (Hermes’ interests came first) such as negotiating their rates.  The judgment will affect around 14,000 Hermes couriers and Hermes has decided not to appeal the decision.  So if you use couriers a lot, don’t be surprised if they get more expensive to fund Hermes’ increased worker costs.

One effect of these decisions may be that workers may eventually get holiday pay, sick pay, minimum wage, time-off and family-friendly rights, insured benefits, quasi-unfair dismissal rights and other termination (including redundancy pay) entitlements.  Many people will say:  “And why not?”.

The story continues, because (1) the 2017 Taylor Review, since subject to Government consultation, may result in a major re-think of employee, worker and self-employed status; and (2) the confusion and expense caused by worker status may increase if there is a shortage of personnel post-Brexit, where people will be more assertive about their status in a market where employers must vie more for the attentions of a smaller workforce.

BREXIT, strikes and industrial action ballots

WynLewis

 

Leaving the EU will be easier than going on strike…

From 1 March 2017 the Trade Union Act 2016 will impose new minimum voting requirements if a ballot in favour of a strike or other industrial action is to be lawful.

The background is that – despite the UK having signed up to several international conventions that protect the rights of employees to join unions and participate in industrial action – there is no right to strike or engage in industrial action.

Instead the mechanism is that, if industrial action ballot requirements are met, acts that would result in claims for damages against a union for inducing breach of an employment contract, or the lawful dismissal of employees for breach of contract in refusing to work, are protected.

The new minimum ballot requirements will be that:

  1. at least 50% of union members who are eligible to vote in a ballot must vote; and
  2. there need be no more than a simple majority of those who actually vote in a ballot for strike or industrial action to be lawful; but
  3. if a ballot for strike or other industrial action is in a sector that comprises “important public services” – the health service, teaching under-17s, the fire service, transport services, the nuclear industry and border security – then at least 40% of those eligible to vote in a ballot must also vote in favour of industrial action.

The “important public services” principle was in the 2015 Conservative Party manifesto’s aim to end “disruptive and undemocratic strike action” by introducing tougher thresholds when voting in a ballot for industrial action.

Applying the new post – 1 March 2017 industrial action voting rules for important public services to the (presumably?) important Brexit vote, in order for the Leave vote to have won:

–   under condition 1 above:  at least 50% of the 46,500,001 then eligible voters – so at least 23,250,001 – must have voted.  In the referendum, because 33,551,983 people voted, this threshold was passed easily;

–   under condition 2 above:  at least 50% of those who voted – at least 16,775,991 – must have voted Leave.  In the referendum, because 17,410,7423 people voted Leave, this threshold was also passed easily; but

–   under condition 3 above:  because of the (presumed) importance to the public of Brexit, at least 40% of those entitled to vote – so at least 18,600,001 – would have had to vote Leave.  In the referendum, only 17,410,742 voted for Leave, so the Leave vote would have failed.

So if the Trade Union Act 2017 principles had been applied to Brexit, the UK would not now be about to trigger legislation that will result in it leaving the EU.

The ironies are that the Brexit referendum methodology offered no proportionality of the type that characterises the new ballot requirements;  a strike ballot has a “use by” date, but the Brexit referendum doesn’t even have a “best before” date;  and whereas a failure to observe the new rules about voting for strike and other industrial action would render the trade union liable for damages and would make dismissals fair, there are no sanctions for the consequences to the UK electorate or to EU citizens settled in the UK, of leaving the EU.

What else does the Trade Union Act 2017 do?  It amends the Trade Union and Labour Relations (Consolidation) Act 1992 by increasing ballot thresholds; by introducing new information and timing requirements in relation to an industrial action ballot; by imposing requirements on unions for supervising picketing; and by anticipating (but introducing) regulations to abolish check-off of union subscriptions in the public sector.

Consequently it will be easier to leave the EU (affecting 64 million people) than it is to go on strike (affecting a much smaller cohort).

If you’re interested in more information then take this short cut to another blog about this in the Cube updates of  Cubism Law, of which Golden Leaver is now a part.

Got a Gender Pay Gap?

WynLewis

 

At last – something that’s NOT about Brexit:  the Gender Pay Gap Regulations

It’s time to stop ignoring what private sector organisations with 250 or more staff must do after the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 come into force on 6th April 2017.

Although the fact of a gender pay gap may not be rocket science, what’s interesting is that the gender pay gap isn’t a one-way gap.  Apparently it falls to about 9% for full time employees; it reverses to minus 6% for part time workers (where women tend to earn about 6% more than men); and it falls to quite a small % when men and women in their 20s and 30s are compared.  But remember that a gender pay gap isn’t an equal pay gap (which is unlawful if men and women are doing the same job).  Instead it’s an analysis of different rates of pay between men and women.

Three pieces of data have to be collected.  These are (1) the employer’s gender pay gap % as at 5th April in a particular year; (2) the organisation’s gender pay bonus gap over the last 12 months; and (3) the proportion of male and female staff who received a bonus in the same 12 month period.  This data then has to be available on the employer website for 3 years and on a government website.  Explanations for the reasons for any gap or of work being done to close the gap are encouraged.

Pay includes the gross monthly (if paid per month) or weekly (if paid per week) amount of basic pay, bonuses, allowances, holiday pay and shift premiums, but excludes overtime, expenses, benefits in kind, the value of salary sacrifices and payments made on termination of employment.

There are no sanctions (not yet) for not complying with the reporting obligations.  But there will probably be some effect on employers who routinely tender for public sector work and need to comply with procurement requirements that may favour tenderers with a smaller gender pay gap.  There may also be forum shopping by employees who choose to work for “employers of choice” that make a virtue of equal pay and of diminishing any gender pay gap: the name and shame game.

Some people think that, for the time being, the benefits of these regulations will be felt more by statisticians and accountants than the individuals who are at the lower end of any gender pay gap.

If you’re interested in more information then take this short cut to another blog about this in the Cube updates of  Cubism Law, of which Golden Leaver is now a part.

 

BREXIT = Bregulatory Meltdown?

WynLewis

 

We’re in a post-BREXIT employment law New World Order…

For some time now, the Government has been operating what’s known as the “one in, two out” regime when introducing new regulations.  People often think this means that for every new regulation to become law, two regulations must be abolished.

It’s not as simple as that.

In practice it means that, where there’s a need for a new regulation, and where there’s a cost to business of complying with that new regulation, the Government has to remove or modify existing regulation(s) to the value of £2 of savings for every £1 of cost imposed.

The regime came about as a result of businesses complaining about the time and cost of complying with the complexity and number of new regulations.  But, whilst the regime could mean the introduction of more (less costly) regulations, it’s resulted in fewer regulations overall.

So imagine the joy that businesses and Government might experience when EU-derived legislation and associated regulations melt away post-BREXIT!

Or not.

This is the thing:  much of the UK’s legislation, though deriving from EU directives, works well and matches current social trends and is likely to remain in place and/or influence our home-grown laws for some time to come.  So getting rid of this “good stuff” would be a retrograde step from the perspective of having a better society.  There’s also a certain amount of EU legislation that was already law in the UK before it became subsumed into EU law at a later date.  So we would probably want to retain that anyway.

In reality the range of EU-derived employment legislation is broad and includes agency regulations, collective consultation, discrimination, diversity and equality rights, family leave, TUPE and working time (including minimum holiday entitlements – the UK’s entitlement is actually more generous than required by EU law).  And although many aspects of these laws are unpopular, some of them have brought certainty (the service provision changes under TUPE) and a better deal socially (note that shared parental leave is a local, not an EU provision).

But what if, post-BREXIT, the Government imposed (even more of) a shock on business of having to deal with a sudden, fundamental change in the law by repealing everything EU-related…?  It would be too much.  Also we all (probably) recognise that, in order to access a free(ish) market, there will be a need to preserve certain minimum employment protection regimes.

So instead, the Government will take a drip-feed approach.  For that reason, the quantity of employment law likely to vanish is small; but our labour laws may approach Canada, Australia and New Zealand – independent trading nations we will now have to model ourselves on.

What are the candidates for being kicked out or changed?  Here are some that might be considered:

–       the right to accrue holiday when off sick?  Kick out entirely.

–       the whole of the agency worker regulations?  Kick out entirely.

–       the ban on capping bonuses in the financial sector?  Kick out or modify.

–       no cap on discrimination compensation?  Kick out and mirror the unfair dismissal cap.

–       no cap on whistle blowing compensation?  Kick out and mirror the unfair dismissal cap.

–       the right to carry over unused holiday entitlement for 18 months?  Kick out or modify.

–       ban harmonising terms and conditions after a TUPE transfer?  Modify to allow this.

Whatever happens, it won’t be immediate.  The two-year post-Article 50 negotiation period is probably only the beginning of the period before laws and regulations start to be changed – and even then the new BREXIT regime is likely to look pretty similar to the current regime.

So keep calm and carry on…

…but remember as well the effect on employment rights of not having free movement of people to do your work – have a look at my earlier BREXIT blog on this here.

 

Bothered by BREXIT

WynLewis

BREXIT – more about the labourers than the law?

Like it or not, we have to think about what employment law changes might occur over the next 2 years if UK voters decide, on 23 June 2016,  to “leave” rather than “remain”, when answering the question:  “Should the UK remain a member of the European Union or leave the European Union?”.

However just saying:  “The following laws don’t apply any more” isn’t a practical option.

The reasons are that unpicking 40+ years of jointly developed EU and UK legislation would be much more difficult than the development of UK legislation since joining the EU in 1973.

Why would it be difficult?

–  the 100s of EU-influenced primary UK legislation (e.g. the Equality Act 2010) could remain in place and could just be interpreted differently;

–  but  the 1000s of EU-required secondary regulations (e.g. the Transfer of Undertakings (Protection of Employment) Regulations 2006) were created by the European Communities Act 1972 to apply EU law locally – so repealing that Act would result in a vacuum with no UK legislation at all – the hook on which the regulations hang wouldn’t exist any more.

Preserving the existing legislation (but just interpreting it differently so as to sit more comfortably within a UK domestic business environment) seems the likely option.

However the fact that the Supreme Court:

–  would have to get out of the habit of referring things to the European Court of Justice if a decision were on the “difficult” side; and

–  would no longer have to make UK legislation conform with the spirit and intention of EU legislation or EU cases (but would still have to conform to international business partner requirements – see the recent data protection Safe Harbour problems for how even the employment-law “lite” US has to do that),

there would still be a recipe for chaos.

In that context, any changes might be minimal in practice, given that:

–  most of the EU laws we engage with have become workplace norms that seem to work in practice (possibly excluding shared parental leave and the question of agency workers…);

–  many UK entitlements already exceed EU minima, and

–  social conventions and expectations have changed immeasurably since EU employment law began its influence.

There are also two other factors:

–  first, from the moment a decision is taken to leave the EU, the answer “EU law requires it” will cease to be an acceptable response to queries about why something is or isn’t being done – so there will be a need for government to develop more cogent policy positions;

–  secondly, because the UK will still want to be a competitive and desirable place to live and work and will not want to be left behind by EU developments, there will still need to be a UK-specific (but EU sympathetic) approach to employment law and HR issues.  Otherwise (despite the UK potentially developing a less restrictive employment regime) EU multinationals might choose to headquarter or develop their businesses elsewhere; and UK multinationals might not be welcome in other host countries.

So – back to the original question – what (if anything) might change in employment law?

My prediction is:  initially, not much at all; later on, perhaps a gradual re-evaluation.  Even then, it’s sensible not to expect much change, because the UK’s habit of gold plating EU regulations was driven by the UK’s innate appetite for over-regulation, and if we look further afield to Australia (which is not beholden to Brussels, but is dependant on business standards), we find that much of its legislation is aligned with European concepts anyway.

But forget about the laws:  what about the labourers?   It’s possible that the much more relevant problem would be the effect of a BREXIT on the free movement of workers within the EU:  if the UK imposes barriers to this, many UK employers will find themselves having no, or a much reduced staff and will have to move into the sponsored work-permit regime (with the complexities that involves).

 

Zero Hours, Zero Tolerance?

Anna Moyle

Zero Hours, Zero Tolerance?

There has been unease for some time over the use by employers of a “zero hours contract”.

Now, for the first time, employees and workers working under these contracts have some proper redress against employers who try to enforce provisions aimed at prohibiting their zero hour employees or workers from working for other people.

The term “zero hours contract” is used to cover various types of flexible or informal working arrangements.  Typically however it refers to a contract where the employer is under no obligation to provide the employee or worker with work.

Contractual provisions that try and prevent zero hours workers from working for others are known as “exclusivity clauses” and, although often included in zero hours contracts, they have been void since 26 May 2015.

Penalising this practice is what the government is now clamping down on:  following its consultation exercise in 2015:

–          From 11 January 2016 any dismissal of a zero hours employee will be automatically unfair if the principal reason is that he/she breached a clause in their contract prohibiting them from working for another employer.  There is no qualifying period of continuous employment required before such a claim can be brought.

–          Likewise, it is also unlawful to submit a zero hours’ worker (so not just an employee) to a detriment if they breach an exclusivity clause and work for another employer.

Click here for a link to The Exclusivity Terms in Zero Hour Contracts (Redress) Regulations 2015.

The new regulations are consistent with the government’s stated positon that zero hours contracts in themselves are not an issue, as they can serve a very useful and proper purpose in allowing flexibility where it is needed for both employers and individuals.

However, “they should not be considered as an alternative to proper business planning and should not be used as a permanent arrangement if it is not justifiable“.

Employers who use zero hours contracts should check their contracts and remove any exclusivity provisions in order to avoid the suggestion that any termination of employment or treatment of workers that could be might be viewed as detrimental is in some way connected to an attempt to enforce an exclusivity clause.

 

George Michael, Faith and Final Warnings

JonathanGolden

Have faith – final warnings are useful.

They are easily given, difficult to appeal and can be relied on.  A tribunal can’t generally look behind a final warning and if an employee with a final warning steps out of line again, even in a relatively minor way, they can legitimately be dismissed for misconduct.

But what happens if the final warning was given in bad faith?  Surely, the process is unfair?

The answer is:  yes, it is.

However it took two appeals and for the matter to come before the Court of Appeal in Way v Spectrum Property Care Ltd  for this principle to be applied.

The facts are not particularly interesting.  All we need to know is that a final written warning had been given by a lone manager looking to hide his own misdemeanour, where the final warning was, on its face, valid and Mr Way had not appealed it.  This is what happened afterwards:

–     When Mr Way was later dismissed for another case of misconduct, which on its own would not have justified his dismissal, the employer refused to accept that the earlier final warning decision was unfair.

–     The Tribunal itself also chose not to investigate the issue, because Mr Way had not appealed the decision at the time and had accepted, in his second disciplinary hearing when he was dismissed, that the employer had genuinely believed that there had been no bad faith in relation to the earlier final warning.

–     The EAT too agreed that the employer could rely on the final warning.  They said that even if the Tribunal had considered evidence which had demonstrated that the final warning was given in bad faith, the decision would have been the same because, given the particular circumstances of the case, the employer could rely on a final written warning.

There are good reasons why both tribunals did not want to look behind the final warning:  deciding whether an employer’s decision to dismiss is fair is already time consuming, but having to consider the fairness of earlier warnings adds another level of complexity and time, which the tribunal system would prefer to avoid.

But the Court of Appeal disagreed with taking shortcuts.  It said that if the final warning was needed in order to justify the dismissal, then the tribunals needed to be satisfied that the final warning was given in good faith.  If there is any doubt, then it is for the Tribunal to investigate this and make a determination.  It made no difference whether the employer, when it reviewed the decision later, thought the final warning was made in good faith.   So the case has been sent back to the Tribunal, to review both the original final warning and the later dismissal decision.

The practical (rather than legal) mistakes in this case were that Mr Way’s representative did not press the bad faith point sufficiently with the Tribunal when it first heard the case and, because the employer had no interest in pressing this point, the Tribunal did not pursue it either.  So the lessons are:

–    If you as an employer want to rely on a final warning, then make sure that you are satisfied it was given in good faith.  Don’t bury any concerns.  Deal with it.

–    If the employee challenges the final warning in tribunal but does not follow through, don’t bury the allegation.  Still deal with it.

The temptation is not to look for trouble, and ignoring things does work some of the time, but if you have a determined employee (especially if they are supported by a union), cutting corners is a false economy.

Or, as George Michael put it in his 1980s lyrics:  “Well it takes a strong man baby, But I’m showing you the door, ‘Cause I gotta have faith, faith, faith”.

Can a court rewrite a non-compete restriction in favour of an employer?

JonathanGolden

The answer should be ‘No’, but in the case of Prophet v Huggett, the court did exactly that.

This is a case where the enforceability of a non-competition restriction was challenged because of a mistake in the drafting.  The employer produced its own bespoke software and the restriction stopped the employee from working with a competitor “in connection with any products in, or on, which he/she was involved whilst employed”.   As no competitor could sell the employer’s own software, the non-compete clause made no sense, and the employee argued, was unenforceable.

Normally the case would fail at that point, because of two well known principles:

  • a court cannot rewrite a covenant to make it enforceable because it is too broad, and
  • if there are two alternative readings of a clause, the court should use the reading of the clause which would be more enforceable.

In this case the court agreed that the clause made no sense, but felt it would do if it added the words “or similar thereto” to the restriction.  The judge argued that the court is able to read a clause with “business common sense” in preference to a strict or literal interpretation.  In his view, it was clear on the face of the contract what had been intended, and it was a simple drafting error which could be remedied.  This was not a rewriting of a clause which was too broad or had a different possible reading, it was just wrong.

There are a number of other features of this case, including bad behaviour on both sides, which remarkably the court was prepared to forgive when granting an injunction on the reworded clause.  The normal principle is that a party (here the employer), looking for an injunction should “come to equity with clean hands”.  In other words the court would not normally step in to assist a party who has not behaved well.  However, the employee had behaved far worse, and the court had no sympathy for him.

The case highlights that courts are increasingly prepared to enforce a restriction which stops an employee joining a competitor at all when it believes that confidential information and client contacts cannot be adequately protected by non-solicitation and non-dealing clauses.

This is a case decided by a Deputy High Court Judge which might have been appealed and is fact- sensitive, and should not be relied upon by employers who behave badly toward an employee and don’t have effective restrictions in their contracts. That said, it demonstrates two things:

  • If a genuine and obvious drafting mistake is made, a court can step in and give the clause commercial sense by adding words, as long as the other rules of interpretation are still adhered to.  This is rare.
  • Courts recognise that often the only way in which a company can protect itself is by keeping departing employees out of its markets altogether through a non-compete restriction for up to a year.

Prophet PLC v Huggett (11 March 2014) – http://www.bailii.org/ew/cases/EWHC/Ch/2014/615.html

For further background information on this topic, see our briefing note on Restrictive Covenants and Garden Leave – http://goldenleaver.co.uk/wp-content/uploads/Restrictive-Covenants-and-Garden-Leave-Briefing.pdf

Guest Briefing Note – Rm2 on Share Schemes: Back To Basics

Guest Author

We are delighted that Rm2 have contributed a Briefing Note this month. Rm2 has been helping companies set up and run employee share plans since 1998. Their service and expertise covers everything from the overall initial design strategy through to the legal, tax and regulatory details of share schemes.

Rm2 have prepared a briefing note on their specialist subject share schemes exploring the fundamental benefits, potential pitfalls, and overall reasoning behind establishing an employment share scheme.

The note sets out what makes share schemes attractive to employers and staff, exploring ideas of reward structures, sustainable growth and employee retention.

A must-read for any business considering putting in place a share scheme to incentivise and reward staff.