UK: Employment Essentials: October 2016's Top Five

Last Updated: 17 November 2016
Article by Connie Cliff and Jane Fielding

Gowling WLG's employment, labour & equalities experts bring you the latest top five employment law developments that may affect your business - what they are, and what you can do about them.

At number 1: Inquiry into the changing world of work

At number 2: Equal pay claims: corporate structure not the panacea Asda hoped

At number 3: Earning commission on holiday - where are we now?

At number 4: Discrimination of breastfeeding mothers

At number 5: Shared Parental Leave and enhanced contractual pay

And Happy 10th Anniversary to the introduction of anti-age discrimination legislation.

At number 1: Inquiry into the changing world of work

The world of work is changing. The so-called 'gig economy' is changing the face of the employment landscape. Half of the new jobs created since the economic down-turn are 'self-employed'. As more and more of us make our living working 'gigs' rather than full time employment, is this truly out of choice or, in reality, out of a lack of choice? Some argue that the gig economy offers boundless innovation and empowers both workers and entrepreneurs, while others argue that it disenfranchises the workforce and undermines workers' rights.

In broad terms, there are three main categories of employment status: employees, workers, and the self-employed. The rights and obligations in relation to each individual flow from their employment status. In broad terms, being an "employee" provides the most protection, "self-employed" gives the least, and "worker" somewhere in between. The law for determining employment status has been almost entirely developed through a complex body of case law, but has it kept pace with the changing roles and ways of working flowing from advances in technology?

On 26 October, the Business, Energy and Industrial Strategy (BEIS) House of Commons Select Committee launched The future world of work and rights of workers inquiry. The Inquiry, which runs until 19 December, is focusing on the rapidly changing nature of work, and the status and rights of agency workers, the self-employed, and those working in the 'gig economy'. In particular, it will consider:

  1. Is the term 'worker' defined sufficiently clearly in law at present? If not, how should it be defined? What should be the status and rights of agency workers, casual workers, and the self-employed, for the purposes of tax, benefits and employment law?
  2. For those casual and agency workers working in the 'gig economy', is the balance of benefits between worker and employer appropriate?
  3. What specific provision should there be for the protection and support of agency workers and those who are not employees? Who should be responsible for such provision - the Government, the beneficiary of the work, a mutual, the individual themselves?
  4. What differences should there be between levels of Government support for the self-employed and for employees, for example over statutory sick pay, holiday pay, employee pensions and maternity pay?
  5. Is there evidence that businesses are treating agency workers unfairly, compared with employees?
  6. Should there be steps taken to constrain the use by businesses of agency workers?
  7. What are the issues surrounding terms and conditions of employees, including the use of zero-hour contracts, definitions of flexible contracts, the role of the Low Pay Commission and minimum wage enforcement?
  8. What is the role of trade unions in representing the self-employed and those not working in traditional employee roles?

Finding answers to these questions will be no easy task.

STOP PRESS: On 28 October, a timely employment tribunal decision concerning Uber drivers was handed down. The tribunal held that drivers engaged by Uber were not self-employed, but instead were 'workers' legally entitled to national minimum wage, paid annual leave, and whistleblowing protection. The tribunal rejected Uber's arguments that it was not a transport provider, but merely a technology platform providing an app which self-employed drivers could utilise. However, in the tribunal's view, the amount of control Uber exercises means any driver who has the app switched on, is within their authorised territory, and is able and willing to accept assignments, is working for Uber under a 'worker' contract.

Uber has already declared that it will be appealing this decision.

At number 2: Equal pay claims: corporate structure not the panacea Asda hoped

Large-scale equal pay claims have traditionally been the reserve of public-sector workers, but times have changed. Asda is facing claims by 7,000 female shop workers in what Lord Falconer QC, representing Asda describes as:

by far the most important, complex and financially significant equal pay claim ever pursued in the private sector. If successful, it will have an enormous effect not only on Asda and all its 150,000 employees, but also on the retail trade generally...because the ripple effects of the case will be huge, it is probably the case which will have the single largest effect on the economy of the UK in recent years.

This month we have the latest instalment in this long running litigation.

Can employers avoid equal pay claims through corporate structures that physically separate female-dominated and male-dominated workforces?

A group of mainly female employees of Asda, who work in hourly-paid jobs in its retail stores, sought to bring equal pay claims, arguing that they were entitled to equal pay with Asda's distribution depot employees, who are mainly men. They argued that their work had historically been seen as 'women's work' and thought to be worth less than the work done by the men in the depot. At a preliminary hearing, an employment tribunal had to consider whether the claimants could rely on this comparison.

Under what is now S.79 of the Equality Act 2010, an equal pay comparison is only valid between the claimant and a chosen comparator if they are both employed by the same employer and work at the same establishment; or if they are both employed by the same employer and work at different establishments but 'common terms apply at the establishments'.

The Manchester Employment Tribunal has now held that the female in store workers can use male warehouse workers as comparators in their equal pay claims. The tribunal rejected Asda's argument that the division of its corporate structure into Retail and Distribution operations meant that pay-setting powers had been delegated to separate bodies. On the facts of this case, the tribunal was satisfied that Asda's executive board had and exercised budgetary control and oversight over both Retail and Distribution and so had the power to introduce pay equality, regardless of the corporate structure treating them as separate divisions.

Asda had also argued that there were essentially different employment regimes at its stores and depot, such that there were no 'common terms' applicable to employees at different locations. Rejecting this argument, the tribunal accepted that the claimants' terms were broadly similar to those of the depot employees - they were all hourly paid and the structure of the terms in the respective Handbooks was broadly the same. Although there were differences in specific terms, the tribunal did not consider that they were so extensive as to undermine the broad comparison the Equality Act requires.

What now?

The next substantive issue for the tribunal to consider is whether the female store workers are employed to do work of equal value to that carried out by male distribution centre workers. If the answer is yes, the tribunal will then need to consider whether Asda has a 'material factor defence', which means that it can show that the difference in pay is objectively justified for a reason unconnected with gender.

Given the length of time it has taken to get to this stage (the claims were lodged back in 2008) and the potential importance of the litigation to Asda, there are likely to be many more preliminary hearings and appeals. Asda has already sought, unsuccessfully, to have the employment claims struck out (on the basis they were improperly brought on the same claim form) or stayed (on the basis that the High Court was more competent to hear the claims).

While the Court of Appeal has already been involved when it dismissed the application for a stay in June, an appeal on the strike out application is still pending before the Employment Appeal Tribunal and is to be heard on 26 April 2017. Additionally, Asda has also indicated that it is considering an appeal on this latest 'comparators' decision.

At number 3: Earning commission on holiday - where are we now?

In October we had the latest instalment in the long running Lock v British Gas Trading Ltd. In this case, the Court of Justice of the European Union (CJEU) ruled that commission which couldn't be earned due to a worker being on holiday must be taken into account in the subsequent pay period. But how you actually work out what the commission sum would have been where commission fluctuates from month to month is not easy.

Last year, the case returned to the tribunal to consider whether the UK's legislation can (A) be interpreted in line with the CJEU decision and, if so, (B) how much holiday pay Mr Lock was entitled to.

In March 2015, we received the tribunal's decision on question A only. The tribunal found that there is no obstacle to interpreting the Working Time Regulations 1998 (WTR) so as to include commission payments in the calculation of holiday pay under regulation 13 (the first four weeks of annual leave). Earlier this year the Employment Appeal Tribunal (EAT) agreed with the tribunal. And now we have the Court of Appeal's view.

As expected, the Court of Appeal upheld the finding that the Working Time Regulations can be interpreted compatibly with the EU Working Time Directive so as to include results-based commission payments in the calculation of holiday pay for the basic four weeks' annual leave provided by regulation 13.

While the Court of Appeal largely upheld the tribunal's finding, it has made a slight tweak. The Court of Appeal stressed that "nothing in this judgment is intended to answer" whether commission payments must also be taken into account in holiday pay where entitlement to the commission payment is only triggered when a particular turnover, profit or other threshold is reached, which may mean that the worker receives no commission for some months of each year, for example a salaried banker who receives a single, large results-based annual bonus.

Such scenario would need to be the subject of a particular claim before being considered by the courts.

What now?

First, it is important to stress that this case only concerns results-based commission, which is regularly earned. As is the case in the related overtime cases, it is the regular receipt that is key. In the case of Mr Lock, the commission payments he earned regularly made up around 60% of his monthly salary. This is not a case about annual bonuses.

Second, should there be no further appeal on the interpretation point, the case will now go back to the tribunal to determine whether Mr Lock did suffer any loss where the commission rate includes an element of 'rolled-up' holiday pay. The outstanding issues before the tribunal are:

  1. Did the relevant commission scheme operate in such a way that it effectively compensated for the period of annual leave, so that even if such a scheme is unlawful, no further money is due to Mr Lock? In other words, was there no loss as the commission rate payable already took into account holiday periods?
  2. If holiday pay is due, what is the correct reference period for determination in the calculation? What period do you use to determine the commission that would likely to have been earned?
  3. What was Mr Lock's actual loss?

What is, and what is not, included in the calculation of holiday pay has been one of the biggest issues facing employers, individual workers and unions over several years now. The appeal in this case is of particular significance as Mr Lock's case is a lead claim for a large number of results-based commission cases. Currently, there are some 918 claims against British Gas alone, and many thousands of similar claims against other employers awaiting the outcome of this case.

But going forward, what impact will Brexit have? Until such time as Britain actually leaves the EU, UK courts are required to interpret UK legislation in line with European directives and decisions of the CJEU. The interpretation of "normal remuneration" key to this case has flowed from the CJEU's interpretation of the EU Working Time Directive, which requires the UK's Working Time Regulations (WTR) to be read at odds with the actual language of the UK statute.

What will happen on Brexit will be down to Parliament. How the Great Repeal Act will deal with the long list of case law interpretations applied by the UK courts but not actually updated in the wording of the existing UK legislation is difficult to predict. While the Government has stated it does not intend to reduce employment laws, the specific provisions of the WTR are likely to come under intense scrutiny.

At number 4: Discrimination of breastfeeding mothers

As the summer drew to a close, the Women and Equalities Committee published a report on pregnancy and maternity discrimination showing that the number of expectant and new mothers forced to leave their jobs has almost doubled since 2005.

As a timely reminder, this month employers are reminded that their duties to protect the health and safety of pregnant mothers also extends to breastfeeding mothers.

Inflexible rostering amounting to indirect discrimination and breach of health & safety provisions

Two flight attendants have won a claim that their employer's roster practices were indirectly discriminatory towards breastfeeding mothers.

The dispute arose out of the employer's refusal to allow the two employees who were cabin flight crew to have a bespoke roster arrangement or to offer them ground duties for the entirety of the period for which they continued to breastfeed, including expressing milk at work in order to be able to do so.

The airline could demonstrate a legitimate business reason for its rostering policy. However, the way in which the application of the policy impacted on breastfeeding mothers could not be objectively justified. The airline failed to identify any actual examples of where granting bespoke individual rotas had caused the airline any difficulty.

The tribunal also found that the employer had breached provisions contained in the Employment Rights Act 1996. As the employer was unwilling to alter its rostering practices, which posed a health risk to the breastfeeding mothers, it should have offered them suitable alternative work or placed them on full pay maternity suspension.

An interesting aspect of this case is that the employer did, during the course of the dispute, offer both women ground duties for a limited six month period. The employer was unwilling to extend the six month periods as it considered the wish to breastfeed beyond that period was "a choice". The tribunal observed that it was not reasonable for the employer to require the mothers to declare from the outset how long they intended to breastfeed. By placing a time limit on the alternative duties role, the employer was effectively and unreasonably making the decision for them.

What employers need to know

  1. Employers have a duty to provide "suitable facilities for breastfeeding mothers to rest". However, there is no statutory right to time off work for breastfeeding or expressing milk. Nor is there any legislation that requires facilities to be provided specifically for breastfeeding or expressing milk. The HSE guidance advises employers that they 'are legally required to provide somewhere for pregnant and breastfeeding employees to rest. Where necessary, this should include somewhere for them to lie down. It is not suitable for new mothers to use toilets for expressing milk. You may provide a private, healthy and safe environment for employees to express and store milk, although there is no legal requirement for you to do so.'
  2. Employers have a duty of care to undertake risk assessments and remove any hazards for breastfeeding employees. If the risk assessment reveals any risk, the employer must take steps to ensure the breastfeeding employee is not exposed to the risk or damaged by it.
    • Step 1: Take any reasonable measures to avoid the risk.
  3. If that fails
    • Step 2: Alter the employee's working conditions or hours of work
    If that fails or is not feasible
    • Step 3: Offer suitable alternative work
    If that is not feasible
    • Step 4: Suspension on maternity grounds (paid)
  4. The right not to be discriminated against on the grounds of sex, or on the grounds of pregnancy/maternity. This does not just mean treating a woman less favourably because of her sex or because she is pregnant and/or on maternity leave ("direct discrimination") but as this case demonstrates, there is the potential for indirect discrimination to occur when employment policies and practices impact adversely on women due to pregnancy/maternity related reasons.

Please note, employment tribunal decisions are 'non-binding' and as such do not set a precedent that future tribunals must follow. Nevertheless, it may be persuasive and indicate how tribunals are likely to treat such claims.

At number 5: Shared Parental Leave and enhanced contractual pay

April 2015 saw the reshaping of family-friendly leave with the birth of Shared Parental Leave (SPL). 18 months on, as anticipated, the issue now coming before the tribunals is enhanced contractual pay. Can employers offer enhanced contractual pay to mothers/primary adopters but not to fathers/partners?

The Glasgow Employment Tribunal has recently awarded a new father almost £30,000 for sex discrimination as his employer offered enhanced contractual shared parental pay (ShPP) to mothers/primary adopters but not to fathers or mothers'/primary adopters' partners.

It is unsurprising that the tribunal concluded that a policy which offers enhanced contractual ShPP to mothers but not fathers amounted to unlawful sex discrimination. If an employer chooses to offer enhanced contractual ShPP it must offer it to both mothers/primary adopters and fathers/mothers' or primary adopters' partners.

What this case does not address is the much more difficult question of whether it is discriminatory for an employer to offer enhanced pay for mothers on maternity leave but only offer statutory pay to both mothers and fathers on shared parental leave: "enhanced maternity pay v unenhanced ShPP" rather than "enhanced ShPP v unenhanced ShPP"

For the details of the tribunal decision and its implication for employers, see Shared parental leave: the curious case of Mr and Mrs Snell

Please note, employment tribunal decisions are 'non-binding' and as such do not set a precedent that future tribunals must follow. Nevertheless, it may be persuasive and indicate how tribunals are likely to treat such claims.

And Happy 10th Anniversary to the introduction of anti-age discrimination legislation

Following ten years of age discrimination legislation, see our Ten top tips for age aware employers, considering things you may know, things you may not and developing trends to be aware of.

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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