UK: UK Employment Update

Last Updated: 10 April 2008
Article by Chris Hubbard and Diane E. Mills


"Spot checks" in the workplace?

According to reports in the Telegraph earlier this month, the Equality and Human Rights Commission (EHRC) is seeking the introduction of random workplace "spot checks" by its inspectors to ensure employers obey discrimination laws. EHRC's controversial proposals, which have been discussed with ministers, include imposing an obligation upon larger employing companies and public sector bodies to produce annual "equality audits" of the number of staff they employ from disadvantaged groups. The results would be published by EHRC in a league table that would effectively "name and shame" those at the bottom of the list. According to the Telegraph, such proposals could be included in the Single Equality Bill to be unveiled by the government later this year, which aims to harmonise existing antidiscrimination and equality legislation. The proposals are unlikely to prove popular amongst many business leaders who consider employers already overburdened by regulation in a number of key areas.

Simple monetary claims may be fast-tracked

The government has announced that it is looking at developing a fast-track system for the Employment Tribunal to deal with five types of simple monetary claims involving unlawful deductions from wages, breach of contract, redundancy pay, holiday pay and the national minimum wage. In response to a written parliamentary question, Employment Relations Minister Pat McFadden said last month that the new system would enable such claims to be determined by an Employment Judge sitting alone, without the need for a Tribunal hearing, and that this would speed up simple cases without the need for lay members. Claims falling within the above jurisdictions that are combined with other jurisdictions not included within the list would not be eligible to be fast-tracked.

Changes to VAT rules for temporary staff could be costly

Experts have warned that changes to VAT rules announced in the 2008 budget governing the supply of temporary staff by employment businesses may significantly raise costs for some companies and could force a rethink of employment strategies. Briefly, the government hopes to raise £150m in 2009 and £125m in 2010 by withdrawing a VAT concession on staff hire with effect from April 2009.

Currently, employment agencies are allowed to exclude the wages element from staff they supply and to account for VAT solely on their margin. However, from April 2009 onward, employment agencies will no longer be able to deduct the wages element from their charges when calculating VAT. Instead, they will have to add 17.5 percent to the costs of temporary staff. This will have a knock-on effect to employment agency customers who are not able to fully recover the VAT charged to them including, for example, businesses in the banking, insurance, health, charities and education sectors. Experts predict that if such businesses have to pay VAT on temps' pay as well as on the recruiters' margin, the cost of using temps will rise significantly and could prompt many companies to employ fewer seasonal staff in future.


Employer liable for employee's suicide

In Corr v IBC Vehicles Limited, Mr Corr was badly injured in an accident at work in 1996. He suffered significant physical injuries, post-traumatic stress syndrome and depression. In 2002, while suffering from a particularly severe bout of depression, he killed himself. His widow claimed damages from his employer. To succeed, she needed to show that the type of harm her husband suffered was reasonably foreseeable as of the date of the accident. The High Court held that psychological trauma and depression were foreseeable consequences of the accident, but suicide was not. The Court of Appeal overturned the High Court's decision. The employer appealed to the House of Lords (HL). The HL held that severe depression was a foreseeable consequence of the accident. It was not necessary to show that suicide itself was a foreseeable consequence (even if it were, the HL held it was reasonably foreseeable in this case). Once the occurrence of some damage was reasonably foreseeable, it was not necessary to show that the precise form of damage was foreseeable. Mrs Corr was, as a result, entitled to damages from the employer under Section 1 of the Fatal Accidents Act 1976.

No automatic adverse inference for failing to complete discrimination questionnaires

In D'Silva v NATFHE & Others, Mr D'Silva, a university lecturer and member of the National Association of Teachers in Further and Higher Education (NATFHE) union, claimed the union had discriminated against him on grounds of race in the way it handled his applications for legal assistance in bringing discrimination claims against Manchester Metropolitan University. His complaints were dismissed by the Employment Tribunal. He appealed to the Employment Appeal Tribunal (EAT). His appeal included a claim that the Tribunal had refused to draw adverse inferences of discrimination from the alleged failure of the union to fully answer a Race Discrimination Act 1976 questionnaire. The EAT dismissed Mr D'Silva's appeal. It held that failure to answer a questionnaire, or indeed to provide other information or documents, does not automatically raise an inference of discrimination. While these are matters from which an inference can be drawn, it held that the drawing of inferences from such failures is not a "tick-box exercise". It is necessary in each case to consider whether, on the facts, the failure in question is capable of constituting evidence supporting the inference that the respondent acted discriminatorily in the manner alleged and, if so, whether, in the light of any explanation supplied, it does in fact justify that inference. The EAT suggested that if a claimant pursues this point in circumstances where it is obvious that the failings have no bearing on the question of discrimination, he or she runs the risk of being penalised.


Increased rights during additional maternity leave

The long awaited Sex Discrimination Act 1975 (Amendment) Regulations 2008 have been published and are effective from 6 April 2008. The regulations widen the definition of sexual harassment and make employers liable in certain circumstances for the harassment of an employee by a third party. They also remove the need for a formal comparator of any kind for claimants alleging discrimination on grounds of pregnancy or maternity. The regulations are expected to make it harder for employers to defend pregnancy and maternity leave-related discrimination. Perhaps more significantly, for pregnant employees whose expected week of childbirth starts on or after 5 October 2008, rights accruing during ordinary maternity leave (e.g., to bonus or other benefits) will continue to accrue during additional maternity leave.

New corporate manslaughter offence

The Corporate Manslaughter and Corporate Homicide Act 2007 comes into force on 6 April 2008. The Act creates a new criminal offence of corporate manslaughter, replacing the common law offence of manslaughter by gross negligence for companies and other organisations. Employers will be guilty of the new offence if the way in which their activities are managed or organised (by their senior management) (i) cause a person's death and (ii) amount to a gross breach of the relevant duty of care owed by the organisation to the deceased. Those found guilty of the offence face unlimited fines. Employers are advised in future to ensure they adopt a stringent policy in relation to the application and enforcement of health and safety disciplinary procedures. A similar approach should be adopted in connection with grievance and whistleblowing procedures concerning health and safety matters. Those that have polices and procedures in place but do not apply them may find this will negatively influence the Court's view as to the way in which they have managed or organised their activities.

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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