UK: UK Redraws The Boundaries Of Employment

Last Updated: 19 April 2018
Article by John McFarlane

The government responds to fears the law has fallen behind modern work, while the courts clarify collective bargaining, garden leave and public interest whistleblowing

Last June, Matthew Taylor, a former policy advisor for prime minister Tony Blair, published his government-commissioned review, taking a detailed look at working practices in the UK and recommending some changes to the ways in which employment and worker rights should be protected.

The government has now responded with a paper called 'Good Work' and four far-reaching consultation papers. The government accepts that new ways of working have resulted in the boundaries between 'employees', 'workers' and the 'self-employed' becoming more blurred.

Further, the digitalisation of work allocation, for example through smartphone apps, has created new problems. The government accepts this has made it easier for unscrupulous employers to miscategorise 'workers' as 'self-employed' – denying them key employment rights – and agrees the law should be clearer.

The most significant day-to-day change proposed is the requirement for employers to issue a statement of employment particulars on the first day of work, rather than within the first two months, as is currently the case.

All workers, including contractors, would be provided with this statement. Currently only employees must receive this document.

"The government is looking at making it harder for employers to argue that a worker has been engaged on seperate assignments"

The consultation on employment status asks whether the three existing categories of 'employee', 'worker' and 'self-employed' should be maintained and explores the development of a new, single test for employment status – perhaps drawing on some measures used in other countries.

Other issues include the potential alignment of tax and employment law; the right for zero-hours workers to request more stable contracts; and changes to the timeframes for calculating holiday pay.

The government is also looking at reforming rules on employment continuity, making it harder for employers to argue that a worker has been engaged on a series of short, separate assignments.

The CBI business lobby's managing director for people and infrastructure Neil Carberry said the decision by government to consult on the most important and complex proposals made by Taylor was the right approach, adding that the business community looked forward to working with the government in the areas it identified for further consideration.

Employment Tribunal strain

The Ministry of Justice recently published provisional Employment Tribunal statistics for October to December 2017. They show the number of single tribunal claims received has increased by 90%, with the backlog of single claims increasing by 66%.

This follows last July's decision by the Supreme Court to declare the government's tribunal fees regime unlawful, leading to fees being immediately stopped.

The double whammy of increasing numbers of claims and insufficient resources has led many employment lawyers to complain that the Employment Tribunal system is creaking.

Frequently cases are delayed, with hearings being listed over a year after claims were presented. Hearings are often subject to last minute postponements due to lack of judges, with parties incurring costs that they cannot recover.

It is understood that the president of Employment Tribunals, Brian Doyle, has asked government for increased resources. Richard Fox from the Employment Lawyers Association said: 'Employment tribunals are now facing real resourcing problems and these may get worse before they get better.'

Garden leave guidance

High-level service agreements usually include a garden leave clause. In recent years these clauses have become common in many standard employment contracts.

They can be an important protection when a valued employee wishes to leave and work for a rival. But can they always be relied upon?

In Faieta v ICAP Management Services Ltd, the claimant was engaged on a five-year fixed-term contract. This included a guaranteed minimum bonus, which became unsustainable as revenue declined over the first years of the contract.

As a result the employer gave him a choice: accept a change to the contract without the guaranteed bonus or be dismissed. When he refused the change, he was given notice and initially placed on garden leave.

Garden leave was an attractive option for the organisation as the contract said that the bonus was not payable during any period of garden leave.

"A decision to put an employee on garden leave must be thought through with care"

The High Court rejected Adrian Faieta's argument that placing him on garden leave and withholding his bonus was a fundamental breach of contract.

It held that his employer's decision to place him on garden leave was rational and enforceable, and that the bonus did not have to be paid during garden leave, due to the clear contract term to that effect.

A decision to put an employee on garden leave must be thought through with care, with clear reasons provided. There is an implied term in an employment contract that an employer will not exercise its discretion to place an employee on garden leave irrationally or perversely.

It is far more likely that the contract will be fundamentally breached if there is no express garden leave provision.

Collective bargaining

The Employment Appeal Tribunal has considered for the first time whether an employer can make an offer directly to staff if there is a recognised trade union in the workplace and employees terms are usually agreed by collective bargaining.

In Kostal UK Ltd v Dunkley and others the appeals tribunal held that this was generally banned.

Industrial relations law stops an employer offering 'inducements' to employees, which if accepted would result in them giving up any or all of their collective bargaining rights. Where such an offer has been made the tribunal must make an award of £3,830 for each affected employee.

The employer had offered a 2% increase in basic pay and a lump sum Christmas bonus in return for reduced sick pay for new starters and reduced Sunday overtime, among other things. The union felt it could not recommend the offer and gave its members a 'free vote'.

Some 80% voted to reject the proposal. The employer then sent two separate letters to every employee offering the same terms and threatening dismissal if they spurned them.

The appeals tribunal held that these offers were unlawful, as the employer was trying to side-step the requirement to agree these terms collectively with the union.

It did not matter that the offers involved only a selection of the employees' terms, or that the employer was trying to strike a one-off direct agreement, rather than refusing to negotiate with the union in future.

Additionally, the appeals tribunal awarded £3,830 per employee in respect of each offer (a total £7,660 per employee), making clear that mistakes in this sensitive area can be costly.

Yet, as an aside, the tribunal said that when collective bargaining had broken down an employer is permitted to make offers directly to its workers, as an exception.

Public interest whistleblowing

For a whistleblowing employee's allegation or statement to qualify as a 'protected disclosure' it must in some way be 'in the public interest'.

In the recent case of Parsons v Airplus International Ltd, the Employment Appeal Tribunal held that, if a disclosure was purely in the employee's self-interest, it was unprotected and could not be relied on to further a claim.

The relevant claimant was employed as the company's legal and compliance officer. She held this position for around six weeks before she was dismissed. According to the company, this was because she was rude and disrespectful to colleagues.

"There was no 'public interest' element to her disclosures, therefore they were not protected by whistleblowing law"

However, Parsons argued that it was because she had made various allegations of regulatory non-compliance by her employer. She alleged that the business did not have a consumer credit licence, it had not appointed a money laundering reporting officer and that minutes had not been kept in relation to key decisions.

Importantly, her main concern was that she would get the blame for these failings. However, her employer pointed out that she could give no cogent reason why the licence was required or why appointing a money laundering reporting officer was needed.

The Employment Tribunal accepted the employer's explanation for the dismissal and found that the issues raised by the claimant were not 'qualifying disclosures'.

There was no 'public interest' element to her disclosures; they were purely made out of self-interest. Therefore they were not protected by whistleblowing law.

This is perhaps at the extreme end of the 'self-interest' spectrum. It is inevitable that a whistleblowing claim will have an element of self-interest. It is the level and degree of self-interest involved in the disclosure which will be crucial.

Paul McFarlane partner in employment, pensions and immigration Weightmans LLP

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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