UK: Employment Essentials: November's Top 5

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: 'Worker' status in today's 'gig economy'

At number 2: Failure to allow for rest breaks breaches WTR

At number 3: The Autumn Statement: employment and employee incentives

At number 4: What employers need to know about SMP

At number 5: ICO fines employer over stolen laptop

At number 1: 'Worker' status in today's 'gig economy'

Uber, Deliveroo, CitySprint, eCourier the list goes on...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 badged as 'self-employed', but is that really the case?

The current hot topic is who are 'workers'? Last month we reported on the House of Commons Select Committee's ' The future world of work and rights of workers inquiry'. The inquiry is considering questions such as: "Is the term 'worker' defined sufficiently clearly in law at present? If not, how should it be defined?" The first part is easy - no. As to the second part, to quote Hamlet, "ay, now there's the rub".

Employment protection legislation seeks to distinguish between dependent and independent labour. In broad terms, there are three main categories of employment status: "employees" who have the most protection; the "self-employed" with very little protection; and "workers" somewhere in between. Difficulty arises in identifying the boundaries of these three categories which often appear blurred. It may be clear that someone who is an employee will not be self-employed but the dividing line between an employee and the intermediate category of worker, or a worker and a self-employed person in business on their own account will be much harder to plot on the spectrum.

A series of high profile employment status cases are currently making their way through the tribunals and courts against a backdrop of evolving modern business models. In Spotting employees, workers and the self-employed in today's 'gig economy' we consider the hot topic of employment status.

At number 2: Failure to allow for rest breaks breaches WTR

The Working Time Regulations 1998 (WTR) have been providing hot topics in employment law for decades, with the 48-hour opt out, holiday entitlement and sickness absence, holiday pay calculations and overtime/commission. Now, we are seeing rest breaks fall under the spotlight.

Unless they fall within one of the exemptions, a worker is entitled to a rest break away from the work station of not less than 20 minutes where daily working time is more than six hours. The break may not be taken at the start or the end of the day and the employer can decide whether the break is paid or not.

Workers can 'elect' to forego their rest entitlements under the WTR, provided the employer does not breach the 48-hour average weekly limit or the rules on night working, and provided there is no additional foreseeable risk to health and safety. This is not to suggest that workers can 'opt out' of their right to rest periods in the sense of a legally-binding waiver. They have a right to rest breaks, but they also have the freedom to choose not to exercise that right at any given time.

While employers are not required to ensure workers take their rest break, two important questions arise: to what extent do employers need to encourage the taking of rest breaks? and can working practices discourage the taking of breaks and cross the line into positive prevention of taking breaks?

In Grange v Abellio London Ltd, the Employment Appeal Tribunal (EAT) held that a claim for 'refusal' to permit rest breaks can be brought where the employer fails to make provision for such breaks, even if the worker does not expressly request them. Employers must take active steps to ensure their working arrangements enable workers to take the rest breaks they are entitled to. Workers cannot be forced to take rest breaks but they are to be positively enabled to do so.

This judgment departs from previous EAT judgments which held that a worker can only bring a claim for failure to be allowed rest breaks where the employer refused an explicit request to take their break. If a working pattern/rota did not allow for breaks, until such time as the worker complained and the taking of a break then not allowed, there was no 'refusal' on the part of the employer so no breach of the WTR.

As we now have conflicting EAT level decisions, it will take a decision of the Court of Appeal or Supreme Court on this issue to resolve this conflict. In the meantime, there are compelling reasons given in this judgment as to why this latest judgment is correct. Although this case was about rest breaks, the principles equally apply to the rights to daily rest and weekly rest periods.

Employers should be aware that if they put into place working arrangements that fail to allow the taking of 20 minute rest breaks they will be in breach of the WTR. While employers do not need to go as far as enforcing that workers take their breaks, they do need to take active steps to ensure working arrangements enable workers to take their rest breaks if they wish.

At number 3: The Autumn Statement: employment and employee incentives

The employment and employee incentives measures referred to in the first post-referendum Autumn Statement were already well trailed so the Statement itself provided very little new information. As expected the key measures are:

Simplification of termination payments

The exemption from income tax and National Insurance contributions () for termination payments up to the current threshold of £30,000 will be retained, but employer will be payable on payments above £30,000 from April 2018. However, it appears that the Government has dropped its controversial proposal to tax certain 'post-employment' and 'expected-bonus' payments as earnings, confirming that income tax will only be applied to the equivalent of an employee's basic pay if their notice is not worked.

Salary sacrifice tax advantages to be limited to certain benefits in kind

The Chancellor confirmed plans to limit the benefits in kind that attract tax and advantages when provided as part of a salary sacrifice arrangement. Some notable benefits in kind will retain their favourable current tax treatment as the government wishes to encourage employers to provide these to their employees. As previously announced, these include: employer pension contributions, employer-provided pension advice, employer-supported childcare and provision of workplace nurseries; cycles and cyclist's safety equipment which meet the statutory conditions; and now added to the list, ultra-low emission cars. However, some popular salary sacrifice arrangements including company cars, mileage reimbursement, private healthcare and workplace gym memberships will be affected.

The change will take effect from April 2017. However, arrangements in place before that date will be protected until April 2018 or for cars, accommodation and school fees, until April 2021.

Employee shareholder status tax reliefs to be abolished

Introduced in September 2013, 'employee shareholder' status (ESS) was a new category of employment status, whereby in exchange for a minimum of shares worth £2,000 in the employer's business, the 'employee shareholder' gives up certain employment protections, notably redundancy payments and protection from ordinary unfair dismissal.

Currently, ESS shares qualify for certain income tax and capital gains tax (CGT) reliefs, but the CGT relief was restricted by the 2016 Budget, in relation to agreements entered into after 16 March 2016, to a lifetime allowance of £100,000. The Government now plans to abolish these reliefs for ESS shares acquired in consideration of an ESS agreement made on or after 1 December 2016. For ESS arrangements entered into before 1 December 2016, the tax advantages will continue to apply.

The Government notes that the measures to remove ESS tax advantages are in response to evidence that ESS is simply being used for tax planning by high earners (as widely predicted would be the case by employment law practitioners). The government intends to remove ESS for new users altogether "at the earliest opportunity".

Miscellaneous

Other changes include:

  • From April 2017 employee and employer NIC thresholds will align at £157 per week. The maximum associated cost to business will be £7.18 per employee.
  • will be removed from the Limitation Act 1980 and aligned with other taxes so HMRC will be able to go back 20 years in cases of fraud.
  • Taxation of benefits to be aligned with the tax treatment of cash salaries from April 2017.
  • Taxation of different ways of working to be aligned (self-employed vs employed individuals, those working through agencies, personal service companies, etc.). A consultation is expected in due course. New measures will combat disguised earnings for the self-employed (e.g. avoidance schemes using personal service companies).
  • Money purchase annual allowance for pensions to reduce to £4,000.
  • Raising the tax-free personal allowance for income tax to £11,500 from April 2017. The personal allowance will increase to £12,500 and the higher rate threshold to £50,000 by the end of the current Parliament, thereafter to rise in line with inflation.

At number 4: What employers need to know about SMP

Employees on maternity leave are not exempt from being dismissed or selected for redundancy in a genuine redundancy situation where there is no suitable alternative vacancy.

Once the dismissal takes effect, the maternity leave period automatically comes to an end. However, employers should be aware that the right to receive statutory maternity pay ( SMP) survives termination of the contract. Provided the employee fulfils the conditions for payment of SMP, she will be entitled to receive SMP regardless of her departure for any reason, including resignation, misconduct and redundancy.

Two recent tax tribunal cases highlight why employers need to bear in mind SMP entitlement when negotiating exit packages for pregnant employees and those on maternity leave. In Dismissing an employee & maternity leave: what employers need to know about statutory maternity pay we consider the SMP tricky issues when agreeing exit packages, including 'bonus babies', 'offsetting' and PILONS and settlement agreements.

At number 5: ICO fines employer over stolen laptop

The Information Commissioner's Office ( ICO) reminds employers of the need to have data protection policies and procedures in place around homeworking.

The ICO has fined a historical society after a laptop containing sensitive personal data was stolen while a member of staff was working away from the office. The laptop, which wasn't encrypted, contained the details of people who had donated artefacts to the society. The ICO investigation found the organisation had no policies or procedures around homeworking, encryption and mobile devices, which contribute to this breach of data protection law.

The ICO reminds employers that "organisations are required by law to keep data secure and that includes when working away from the office."

While the fine imposed was only £500, this was based on the historical society's very limited financial resources. The ICO stressed that due to the serious nature of the breach, most organisations should expect to receive a much larger fine.

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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