UK: Employment Update

Last Updated: 18 August 2010
Article by David Green

DAVID'S OPINION PIECE

The Equality Act - a missed opportunity?

The survey we conducted on legislation highlighted a trait of human nature. It appears that once we get used to a piece of legislation then we become comfortable with it, whereas more recent legislation or forthcoming legislation creates a fear of the unknown or a dread of having to change policies and educate line managers on how to deal with new legislation. This is an understandable human reaction but is that trait preventing real change?

The Equality Act is arguably an example of missed opportunity. It is a consolidating statute but it could have been so much more. Its upside is it brings consistency to discrimination legislation. It allows managers to build on known principles and policies – it was the safe and easy option. However, if you step back from the tried and tested and take people outside their comfort zone, then, in my view, there was an opportunity to take a radical change of approach.

The cynics amongst you will say any radical change will bring with it chaos where only the lawyers benefit, but I think we need to move away from the formulaic and create an environment where the discriminated against are protected, but where the realities and practicalities of real life can be dealt with in an open, honest debate.

Discrimination legislation has brought about worthwhile change. Legislation was needed to bring about a change in attitudes, but we now have such a rigid system that it often prevents an open and honest discussion. Many employers will say rigidity and certainty are preferable to flexibility that will bring about chaos, but as the economic climate has shown, flexibility can be key to growth.

Legislation overload?

The aim our of updates is to keep you informed of the all too frequent changes in employment legislation. However, perhaps this won't be necessary in the future following the Coalition Government's recent Your Freedom initiative on what legislation the public would like to see restricted or removed altogether.

In the spirit of that exercise we surveyed our clients and contacts to see what employment legislation they would like to see gone for good, as well as what they strongly supported. The results revealed that the most unpopular legislation was that which has yet to be implemented. 50% of respondents wanted to get rid of the agency regulations due to come into effect in October 2011; and 31% wanted to get rid of the new provisions for shared leave and pay, which do not take effect until April 2011. We could also see signs of equality legislation taking time to align with public views, as long-standing legislation on sex, race and disability discrimination were all strongly supported, whereas religious discrimination and age discrimination, which have been introduced more recently, were supported slightly less so.

It is worth remembering though that much of our employment legislation is now derived from EU legislation, and so, even if there is strong support for change, as in the case of agency worker legislation, there is little the UK government can do about this. It remains to be seen what steps the Government will take but in the meantime we will continue to keep you updated of relevant changes.

News

Retirement age to be scrapped

The Government's consultation on the proposal to remove the default retirement age by 1 October 2011 has received a lot of press attention. What the proposals would mean in practice is that:

  • no new notices of intended retirement could be issued under the current retirement procedure after 6 April 2011;
  • transitional arrangements would apply to retirements notified before 6 April 2011 to take effect before 1 October 2011; and
  • any retirements notified before 6 April 2011 but intended to take effect after 1 October 2011 would not be valid - unless objectively justified.

This would not mean that employers will not be able to retire employees, but any retirement dismissal after 1 October 2011 will need to be objectively justified.

The consultation exercise closes on 21 October 2010 but change to the fundamentals of the proposal (as we highlight above) is not expected. Employers therefore need to start thinking now about how to plan for this change. The most important decision will be whether to have a retirement age at all and if so, whether it can be objectively justified. Issues to consider include performance management, appraisals, career development and succession planning.

Increase in Tribunal claims

The Tribunals Service recently published its annual statistics for the year to end March 2010 which showed a large increase in the number of claims submitted of 56%. This is partly down to a rise in multiple claims (for example large scale equal pay disputes), which are up by 90%. The report also shows that Employment Tribunals are struggling to keep up with the increase in caseload, leading to a greater backlog than in previous years.

Vetting and barring – the brakes are put on

The Government has announced an immediate halt to the proposed vetting and barring scheme, which is to be remodelled, although in what form is not yet clear.

Greasy palms

The Government has announced that the implementation of the Bribery Act 2010 has been delayed and is now due to come into force in April another person and being bribed. It also introduces a new corporate offence where a person associated with the organisation bribes another person intending to obtain a business advantage. There will be a defence for the organisation if it has "adequate procedures" in place to prevent bribery, but there is currently no guidance on what these are. The delay in implementation is to allow full consultation on this defence.

The end of the right to request time off to train?

This right, which was only introduced in April this year, is now the subject of consultation. In line with their aim of reducing regulation, the Government are seeking views on whether the regulations should be repealed or retained. Anyone wishing to give their views should do so by 15 September 2010.

Age: objective justification: Age discrimination legislation is nearly 4 years old and with the likely removal of the default retirement age next year, the defence of objective justification will be key. Two recent decisions help demonstrate what the tribunals are looking for.

In Seldon v Clarkson, Wright & Jakes, the Court of Appeal held that the compulsory retirement of partners aged 65 from a firm of solicitors was a proportionate means of achieving the legitimate aim of workforce planning. Significantly, it held that the Heyday ruling did not mean that legitimate aims for private employers had to be of a social policy or public interest nature, making it easier for employers to satisfy the test. The Court considered the choice of 65 was a "fair and proportionate cut-off point" supported by the default retirement age of 65 for employees (rather than partners). However, once this is removed, employers will need to look carefully at the reasons for choosing a particular retirement age.

In Kraft Foods UK Ltd v Hastie the EAT held that capping a generous contractual redundancy scheme, which had the effect of preventing an employee who was approaching retirement from receiving a "windfall", was a legitimate aim. In this case the purpose of the cap was to prevent the employee receiving more than he would have earned had he stayed in employment until retirement. This builds on the earlier EAT decision Loxley v BAE Land Systems which suggested that tapering schemes for the same reason were potentially justifiable.

Disability: The Disability Discrimination Act throws up much confusion for employers. It is not as straightforward as other strands of discrimination as, for example, there is the legal question of whether the individual has a disability and what might be a reasonable adjustment. The following cases highlight the difficulties employers often face.

In Chief Constable of South Yorkshire Police v Jelic the EAT found that swapping the role of a disabled police officer with that of a non-disabled police officer, would have been a reasonable adjustment. This would appear to extend the duty on employers to include a consideration of occupied posts as well as vacant posts when considering reasonable adjustments. However, a key factor in this case was the fact that the nature of the police force was one of a disciplined service with a duty to obey lawful orders which extended to changing roles as directed. Whilst it will always depend on the nature of the business as to whether such an adjustment would be "reasonable", this decision may mark the start of a more general development in this regard.

"Depression" is always a difficult issue for employers. Stress, anxiety and depression can often seem to be used interchangeably by employees and GPs. In J v DLA Piper UK LLP the EAT gave some guidance on how the issue of whether someone has a disability in this context should be approached. Rather than get stuck in detailed medical issues, the Tribunal should look at the effect of the condition on the individual. If it finds that the condition has a substantial adverse affect, then it will, in most cases follow that the claimant is suffering from a condition that has caused that effect. It will then be unnecessary for the tribunal to address the precise medical issues giving rise to that effect.

Holiday: The issue of holiday entitlement for those on long-term sick leave has been a major headache for employers since the Stringer ruling last year. However, the recent tribunal decision in Khan v Martin McColl suggests that employers may be able to prevent a successful claim for unlawful deduction from wages in respect of accrued untaken holiday for previous holiday years, where they have made a payment for holiday in the current holiday year – in this case on termination. The tribunal found that this broke the series of deductions and Mr Khan's claim was out of time. The tribunal also found that as Mr Khan had not requested holiday he had not been "denied" it. Although this is only a tribunal decision, and therefore not binding, it is nevertheless a very useful ruling.

Pension focus: Autoenrolment 2012

Charles Russell recently hosted the City HR Group and their guest speaker Iain Duncan-Smith, for a question and answer session on his proposals for pension reform in the UK. While most of the press coverage has concentrated on the headline grabbing matter of raising the retirement age, there has been little mention of the intention to review auto-enrolment and NEST - the National Employee Savings Trust. The Government wants to conduct a short review to see whether the auto-enrolment plans are still effective and appropriate in light of the financial down-turn and the increase in retirement age.

THE DIGESTED READ

From 2012 employers will be required to automatically enrol all of their employees into either their own pension scheme or the NEST scheme. Employer contributions will be required and currently the plan is for 3%. Employees may choose to opt-out once they have been autoenrolled, but the employer cannot encourage its employees to opt-out.

These proposals, however, are currently under review and we are in the dark about the future until the review has been concluded at the end of September.

Can employers expect auto-enrolment to be scrapped?

No, it will happen in some form. Pension provision is becoming increasingly expensive and it has to come from one of three sources – the State, employers or individuals.

So if some form of auto-enrolment is likely to stay, what is the review going to look at?

It seems that the Government is not convinced that the current proposals achieve what they want (whatever that is) and will be looking at:

  • What age should people start being automatically enrolled?
  • What earnings threshold should apply before employers have to auto-enrol?
  • What size of employer should have to auto-enrol?
  • Should auto-enrolment start on day one of someone's employment?
  • Whether NEST is the right vehicle for the purpose?

What should employers be doing now?

It would probably be sensible to wait for the conclusions of the review due by 30 September 2010. However some form of auto-enrolment is likely to be introduced and you should probably be prepared for:

  • Employer contributions – it is highly unlikely employers will be let completely off the hook following the review. If you currently don't provide any employer contributions or if you do, but most employees don't take up the option, then you could be looking at significant payroll hit as auto-enrolment is phased in. Salary increases over the next few years should probably be made with this in mind.
  • Admin systems – the current format has a complicated structure and there was industry concern that this would prove problematic for employers, especially smaller ones. So hopefully 30 September 2010 will bring good news for HR and payroll departments.

KEY POINTS TO TAKE AWAY

  • Start planning now for the removal of the default retirement age.
  • Where employees are off on long-term sick leave, a payment of holiday for the current holiday year may prevent a successful claim for unlawful deductions from wages relating to accrued untaken holiday for previous years.
  • A reasonable adjustment can, in certain circumstances, include swapping roles.
  • Ensure you are prepared for the changes coming into effect under the Equality Act and new statutory code on 1 October 2010 by attending our seminar.
  • "Watch this space" for developments pending including vetting and barring, the Bribery Act and auto-enrolment.

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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