Legal Update

16 October 2019

It is that time of the year when we take time out to consider recent and upcoming employment legislation together with the implications of recent Employment Tribunal (ET) decisions. We hope that you find this summary useful and if you wish to attend our 6 monthly FREE employment law breakfast updates, then please register by emailing us at:

Removal of the “Swedish Derogation” option - from April 2020

This will affect employer’s who use Agency Workers supplied by those Recruitment Agencies who make use of this model to avoid paying pay parity with directly employed employees. It is widely recognised that this option has been abused since its introduction and that the rules have not been fully applied to the detriment of the worker. Such Agencies will now be facing an increase in their cost of supply which they will no doubt seek to pass on to their clients. (n.b. Kelburn Recruitment have never used hybrid models such as this and their clients will not therefore be affected by this legislation).

Imminent New Legislation

IR35 Rules extended to the Private Sector - from April 2020

If caught by IR35 a worker will be considered employed for the purpose of calculating NIC and PAYE contributions. The rules were tightened in the Public Sector in 2017 and next year this will also be applied to the Private Sector. This will apply to both workers employed through a third party (such as a Recruitment Agency) and freelancers / self-employed individuals engaged directly. In all cases the decision will be based on whether there is any evidence of Supervision, Direction OR Control, and will be made by the end user. HMRC have published definitions of the test, case studies and a tool to assist with the decision-making process, all of which are likely to be updated prior to next April. This is a complex issue which caused disruption to the Public sector in 2017. If you are likely to be affected by this issue Kelburn Recruitment can provide support and guidance on the practical application.

Calculation of Holiday Pay Rate – from April 2020

Legislation and case law in recent years has established the principle that the rate of holiday pay should be based on average earnings, including such items as shift allowance and overtime, and not just reflecting basic pay rates. Currently, the refence period for calculating average earnings is the 12 weeks prior to the holiday, but from next April the reference period will be increased to the 52 weeks prior to the holiday period.

Termination Payments – from April 2020

Liability for Employer’s NICs on termination payments in excess of £30,000 was due to be introduced from April 2018; then deferred to April 2019; and then subsequently delayed again. The introduction of employer NICs on termination payments above £30,000 will now take effect from 6 April 2020.

Recent Case Law

Harpur Trust v Brazel

The Court of Appeal has held that the holiday entitlement for a permanent employee contracted to work only part of a year, should not be calculated on a pro-rata basis to hours worked, but in fact should represent the annual entitlement of a full-time employee (i.e. a minimum of 5.6 weeks). This surprising judgement, when taken to an extreme, would imply that an employee working for just 1 week a year would still receive a further 5.6 weeks holiday pay.

Forbes v LHR Airport Ltd

The EAT has held that an employer was not liable for harassment when an employee posted a racially sensitive image on social media which offended a work colleague. The key facts taken into consideration were that the posting occurred at home, on a personal computer and was only shared amongst a closed group of friends, most of which were not work colleagues and did not include the worker that took offence to the post. Also, after the post had been brought to the attention of the worker that took offence, and a grievance registered, the defendant took swift action and formally reprimanded the employee that originally made the sensitive post. This case reminds us of the need to maintain an effective and up to date social media policy.

Phoenix House Ltd v Stockman

This highlights the fact that once a recording has been made the ET will normally allow it to be admitted as evidence. In this instance a recording of a disciplinary hearing was made covertly by an employee who was subsequently dismissed and then brought a case for unfair dismissal. Although the employer lost their case, when they discovered the existence of the covert recording, they then argued that the recording, in itself, was an act of gross misconduct that would have led to dismissal. However, the court ruled that there would have been only a 10% chance of dismissal for taking the covert recording and so damages were only reduced by this amount. Best practice would be to establish at the start of a disciplinary (or similar) meeting that the taking of a recording was not permitted (the Employer has a right to decline a request to record a meeting), and then to subsequently share notes later.

Looking Further Ahead

Single Enforcement Body

The government is considering the creation of a sole enforcement body or umbrella organisation, to provide disgruntled workers a single point of contact for raising grievances. Presently, depending upon the nature of the issue, a worker may have to approach any one of several organisations such as HMRC, GLAA, EAS, H&SE or the Equality and Human Rights Commission. It is thought that the establishment of a single branded enforcement body should improve a worker’s ability to enforce their rights effectively.

Confidentiality Clauses

The government has now committed to introduce protection against the use of so called “gagging orders” that would permit disclosure of information covered by a non-disclosure clause in certain circumstances, such as to the police, recognised health bodies and to legal representatives.

Taylor Report / Good Work Plan

The Review into Modern Employment, originally commissioned during Theresa May’s time as Prime Minister and chaired by Matthew Taylor, made 59 specific recommendations. Some of these have already seen legislation introduced, or to be introduced, and have been discussed above. There remain however numerous additional ongoing consultations which are likely to generate further new legislation in coming years, including:

Government Consultation into sexual harassment in the workplace, which considers a new legal duty to prevent harassment; extending the provisions of the Equality Act to cover volunteers and Interns; protection from third party harassment; extending the time limits to 6 months or more for Equality Act cases; and introducing a new Statutory Code of Practice on sexual harassment and harassment at work.

Government Consultation into health at work to encourage employers to provide support to employees with health issues affecting work; to intervene earlier during a period of sickness absence; reforming the Statutory Sick pay rules to make them better enforced, more flexible, and available to the lowest paid employees; improving the provision of Occupational Health; and improving access to good advice and support to both employees and the self-employed, that they may be better enabled to understand and act up to their responsibilities to their employers.

Government Consultation into one-sided flexibility which considers reasonable notice of working hours; guaranteed working hours; and compensation for shifts cancelled without reasonable notice.

Government Consultation into supporting families which considers the overall approach to parental leave; statutory neonatal leave and pay; and improving transparency of employer’s flexible working and parental leave and pay policies.

We will of course keep you informed as and when fresh legislation is proposed following the completion of these consultations.

And finally

The ACAS Annual Report and Accounts for 2018/19 record a 40% increase in tribunal claims compared to the previous year. The impact of this is that there is now insufficient capacity to deal with the volume of cases now coming forward, leading to long delays, and therefore the courts are looking to appoint additional resources to handle with the case load.