UK: Employment Newslettter - May 2010

EQUALITY ACT REACHES THE STATUTE BOOK

By Claire Christy and Christina Morton

Having survived a series of arcane Parliamentary processes (such as 'wash-up' and 'ping-pong'), the much heralded statute aimed at consolidating and rationalising discrimination law received Royal Assent on 8 April 2010. Do employers need to take heed or is it business as usual?

The main provisions of the Equality Act 2010 will come into effect on 1 October this year and its impact is likely to be subtle rather than dramatic. It replaces existing discrimination legislation with a single Act that covers discrimination both within and outside the employment field. It covers discrimination on grounds of sex, race, disability, age, sexual orientation and religion or belief (the 'protected characteristics').

Any change in the precise words used in legislation, even if it is not intended to change the substantive law, will have some unintended consequences. These, however, tend to emerge over time, and the impact is rarely felt in the first year after a new law comes into effect. But some of the Act's changes are substantive and potentially problematic for employers and employees.

What Will the Act Do?

Harmonisation

The Act harmonises key concepts and definitions, such as indirect discrimination, justification, occupational requirements and the burden of proof. Technical and historic differences between the definitions in different statutes gave rise to confusion (and, some would say, unnecessary case law).

Perception and Association

Direct discrimination will cover discrimination by association with someone with any protected characteristic (for example, harassing an employee because they care for an elderly relative would be discrimination by association because of age).

The Act will also cover discrimination by perception (for example, treating someone less favourably because you perceive them to be Muslim because of the way they dress). The employee will be protected from discrimination because of religion, even if he or she has no actual religious belief.

Third Party Harassment

The Act extends the protection available to employees who are harassed at work by third parties such as clients or customers. At present, this protection is available in cases of sex-based or sexual harassment, but not in cases involving other protected characteristics. Employers will be liable where they have failed to take reasonably practicable steps to prevent harassment by third parties where the employer knows that this has taken place on at least two occasions.

Restriction on Pre-Employment Questions About Health

The Act restricts the ability of employers to ask questions relating to a job applicant's health record. A question about health may only be put if, for example, the employer needs to establish whether the employee will be able to carry out the functions that are 'intrinsic' to the job, or to establish whether any adjustment needs to be made for a disabled applicant who needs to undergo an assessment for the job. Whilst a person will not be able to complain of discrimination just because a question has been put when it should not have been, that person will be able to bring a claim about the way in which the employer acts on that information and the burden of proof will fall on the employer if the conduct amounts to unfavourable treatment.

Protection for Disabled Employees Strengthened

The Act generally extends the protection available to disabled people, which has been narrowed as a result of recent case law. Disabled people will for the first time be protected from 'discrimination arising from disability', a new concept which covers unjustified unfavourable treatment 'because of something arising in consequence of ...disability'. An example might be a decision not to appoint someone to a job because arthritis made it difficult for them to stand up to make presentations to clients. This new definition is very wide and it is not clear how close the connection between the disability and the 'something' will have to be for an employer to be liable.

Disabled employees will also be protected from indirect disability discrimination for the first time.

Positive Action Rules Extended

Positive discrimination is currently unlawful and will remain so under the Act, except in the very specific circumstances described below. Positive discrimination means giving more favourable treatment to someone because they have a protected characteristic.

Positive action on the other hand is lawful, but is currently restricted to action such as training designed to encourage under represented groups to apply for particular jobs. The Act will allow employers to recruit or promote someone from an under represented group, but only where they have a choice between two or more equally qualified candidates. Arguably this is a form of positive discrimination, although the Act calls it 'Positive action: recruitment and promotion'. The question of what being 'equally qualified' means is not dealt with in the Act.

Protected Discussions About Pay

The Act will protect employees who discuss their pay with one another (or with others such as union representatives) with a view to establishing whether there is a connection between pay and one of the protected characteristics. Clauses in contracts prohibiting these discussions will be unenforceable. It is unclear how much a pay-related discussion must concern the possibility of discrimination for it to attract protection under the Act.

Gender Pay Reporting

The Act also contains proposals for gender pay reporting, aimed at reducing the persistent gender pay gap. However, these provisions will not come into force until 2013 at the earliest.

Five Things to do Prior to 1 October

  • Review the use of pre-employment health questionnaires.
  • Check contracts for pay secrecy clauses and, if necessary, take advice on the circumstances in which they can be retained, if any.
  • Review equality policies in light of the new language of the Act.
  • Review harassment policies for references to harassment by third parties. Ensure measures are in place to discourage and deal with harassment by clients and customers.
  • Consider how you will ensure that line managers are aware of changes that will affect your organisation.

Overseas Employees

The Act apparently reduces the protection available to employees of UK companies who work overseas. At present, those who do at least some of their work in the UK or have sufficient connection with the UK are covered by UK discrimination law. These old rules do not appear in the Act and it will be a matter for tribunals to decide whether the protection of UK law should apply.

Already then it is clear that there are significant areas where the meaning of the law and its effect on individuals is debatable. As always, it will be for the courts to fill the gaps.

EXPECT THE UNEXPECTED

By Lisa Gillis

Recent events, including clouds of volcanic ash, record snowfalls, rail strikes, and a potential swine fl u epidemic, have caused major disruption to UK employers.

To help organisations with contingency planning, we set out below a checklist of some of the employment-related issues that could arise in a contingency planning exercise.

  • Planning
    • Consider whether and how to involve employees with planning.
    • Use any existing consultation mechanisms such as staff councils or trade unions.
  • Illness, Injury and Epidemics
    • Check your absence and sickness policies and payment levels they commit you to.
    • Consider the impact of large numbers of employees being absent unexpectedly.
  • Closed Schools and Sick Dependants
    • Check your policies on time off when care arrangements fall through or dependants fall ill.
    • Remember the statutory rights that employees might rely on: holiday, time off in emergencies or parental leave.
    • Consider whether you could sustain more generous contractual rights in a large-scale emergency.
  • Travel Disruption and Remote Working
    • Draw up reporting rules that will apply to employees who cannot get to work.
    • Draw up a remote working policy or adapt any existing policy for emergencies.
    • Decide which jobs can be done remotely.
    • Make sure there is enough technological support for key employees to work away from the office.
    • Set out absence and payment policies for employees who cannot work remotely.
  • Health, Safety and Security
    • Issue guidelines on health and safety to employees working remotely.
    • Put in place measures to protect confidential information from accidental disclosure or loss.
    • Consider how to protect the safety and security of office equipment away from the office.
  • Business Travellers Should
    • Not be penalised financially for travel disruption.
    • Be helped with accommodation and alternative means of travel, despite the cost.
    • Not be pressurised into taking undue risks in order to get back to work.
  • Temporary Solutions
    • Factor the costs of emergency temporary staff into your planning.
    • Make sure that temporary contracts are drafted flexibly to cover changing business needs.
  • Keeping Up To Date
    • You may need to update contracts, policies or handbooks to cover contingency planning.
    • Check whether your contracts and policies allow for this.
    • Consult with employees, employee representatives or unions as appropriate.
    • Deal fairly with any objections.
    • Consider how to communicate any changes.
  • Keeping Trouble at Bay
    • Check whether changes have a potentially discriminatory effect and whether you could defend them.
    • Put training or briefings in place to make sure that managers make fair, consistent, non-discriminatory decisions in applying changed policies and procedures.
    • Consider whether you need to monitor remote working.
    • Check whether abuse of absence policies is covered in your disciplinary procedure.

PENSIONS REFORM – TIME TO START PLANNING

By Amy Royce-Greensill

The Pensions Act 2008 put in place a framework for the next stage of the government's pensions reforms which takes the form of an 'auto-enrolment' scheme for pensions, with mandatory employer contributions, beginning in October 2012. Regulations setting out the detailed requirements for employers have now been published and will start coming into force in July this year.

What Will Employers Have to Contribute?

The new regulations mean that employers will have a duty to arrange for eligible jobholders to be automatically enrolled into pension schemes. The rules will be introduced in stages, over six years, with larger employers being required to comply with them first. Overall, employers will be required to pay contributions of 1% of a jobholder's qualifying earnings in the first four years, rising to 2% in the fifth year and the full 3% from the sixth year onwards. Employers will need to bear in mind these new obligations and the costs connected with them when assessing their finances and planning budgets.

Auto-Enrolment

The employer will be required to ensure that eligible jobholders are automatically enrolled into an occupational or personal pension scheme. It can use existing schemes, as long as they comply with certain quality standards, or else it can arrange for the jobholder to be enrolled in the government scheme called the National Employment Savings Trust ('NEST').

The regulations contain tests to determine whether the employer's existing pension scheme is of a high enough quality, with different tests applying to defined benefit and defined contribution schemes. If the employer has a high quality existing pension scheme, it will be able to postpone the auto-enrolment of new employees for up to three months.

Eligible Jobholders

Eligible jobholders must earn at least £5,035 a year and be between 22 years old and the state pension age. The definition of 'jobholders' includes not only permanent employees but also temporary employees and agency workers.

Opting Out

Jobholders will have the right to opt out of the scheme but they will be automatically re-enrolled every three years. Employers will not be able to ask potential employees to opt out of enrolment as a condition of a job offer or induce employees to opt out in any other way.

NEST

NEST will be an occupational defined contribution scheme. If an employer chooses to enrol its employees in NEST, it will be required to make contributions of at least 3% on earnings between £5,035 and £33,540 and the jobholder will have to contribute enough to make the overall contribution at least 8% of earnings. The limit on contributions per year will be £3,600. These requirements will not come in straightaway, and will be phased in over a period of five years. At the moment transfers in and out of NEST are not permitted, but this rule will be reconsidered in 2017.

Consequences of Not Complying

Employers who fail to implement the new rules will face fines of up to £10,000 a day (for large employers). Where an employer wilfully fails to comply with its new duties, it could face criminal penalties.

If a worker is subjected to any detriment because his or her employer breaches the regime, they will be able to bring a claim in the employment tribunal. Employers will not be permitted to contract out of or exclude any of their new duties, except when compromising an employment tribunal claim.

What Will Happen to Stakeholder Pensions?

The Act will also remove the statutory duty on employers to designate a stakeholder pension scheme. However, employers which have designated existing stakeholder schemes (whether or not they contribute to them) can continue with these after 2012 if they wish, provided they satisfy the criteria for qualifying schemes and start to make contributions to them, if they do not already do so.

EXTENDED PATERNITY RIGHTS

The law giving partners of mothers and adopters the right to up to 26 weeks' additional paternity leave came into effect on 6 April. It will benefit those whose expected week of childbirth, or adoption match date, falls on or after 6 April 2011. For further details, see the News and Publications section at www.withersworldwide.com. Notably, paternity leave can only be taken once the mother or adopter has returned to work at the end of maternity or adoption leave.

Employers should start reviewing their paternity leave policies as soon as possible as, employees whose partners become pregnant from July 2010 onwards will benefit from the new rules.

Employers will also want to consider whether and to what extent they offer enhanced benefits for employees on extended paternity leave, particularly if they have generous enhanced maternity schemes. There are arguments for and against this approach. Employers will need to consider with care all the implications of enhancing, or not enhancing, benefits. A generous employer-funded scheme is likely to encourage more fathers and partners to take extended leave than where the employer relies on the government scheme alone.

The government scheme only provides for payment at statutory pay rates (£124.88 per week at this year's levels) for a limited number of weeks depending on how much of the statutory maternity or adoption pay period is unexpired when the mother or partner returns to work. This may make it unattractive for employees to take more than a few weeks' leave.

BRIBERY ACT

The Bribery Act 2010 received Royal Assent on 8 April. It introduces several new offences for which employees, directors and commercial organisations can be liable. The offences, which may come into force as early as October 2010, are: promising or offering a bribe; requesting, agreeing to receive or accepting a bribe; and bribing a foreign public official. There is also a corporate offence of "failure to prevent bribery" by persons associated with a business (which includes employees). A business may avoid conviction if it can demonstrate that it has adequate systems in place to prevent bribery.

There will be a maximum penalty of ten years' imprisonment for all new offences except for the corporate offence, which will carry an unlimited fine.

The Government has indicated that it will be publishing guidance on how employers can comply with the Act. Guidance for small and medium-sized enterprises is available from the organisation Transparency International, which publishes Business Principles for Countering Bribery. The Serious Fraud Office has also published guidance on its approach to dealing with overseas corruption.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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