Work It: Employment Update - July 2017

In this month's round-up of key employment and HR developments, we look at:

27 Jul 2017
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When is a notice of termination treated as received?

In the recent case of Newcastle NHS Foundation Trust v Haywood it was held that, where there is no contractual provision governing when a notice of termination takes effect, the notice is only effective for the purposes of contract law when the employee has personally taken delivery of the notice. (This may be different to the effective date for statutory rights.)

The date was particularly important as Ms Haywood's pension payments depended on her reaching her 50th birthday prior to termination. The Trust issued her with notice to terminate prior to her birthday but, as she was on holiday at the time, she did not receive the notice until her return, after her birthday.

The employment contract provided for termination by the Trust 'subject to [the Trust] giving [Ms Haywood] the minimum statutory period of notice'. It did not go on to state how the notice should be delivered or when deemed receipt would occur. The Trust sent the notice to Ms Haywood by email to her husband's email account, by special delivery and by standard post. The email was not validly delivered as it was to the husband's account, amongst other reasons. The special delivery notice was collected from the sorting office by her father and left at her house whilst she was on holiday and that and the posted letter were only received by her on her return.

The court held that, in the absence of an express provision in the employment contract, the notice was only effective once the employee had personally taken delivery of the notice. Ms Haywood only received the notice when she returned from holiday and opened the letter.

What employers should do now:

  • ensure that their employment contracts are clear as to the deemed delivery provisions and how these relate to the notice provisions
  • if they want certainty that they have properly served notice of termination of employment and that it has actually been received by the recipient, particularly in cases such as this where the termination date is critical to valuable entitlements, seek to personally deliver the notice of termination.

Consultants vs employees: what is the difference?

As the so called 'gig economy' continues to grow in popularity, so does the use of consultants. Many organisations prefer the flexibility of a self-employed worker so that they can provide work only when it is necessary and terminate on notice.

From an employment law perspective, the downside of engaging staff as consultants from the outset is relatively limited: consultants do not enjoy enhanced rights such as the right not to be unfairly dismissed. However they are subject to fewer obligations than employees, who are subject to an implied duty to act in their employer's best interests, and for employees the position with regard to copyright/and intellectual property is more straightforward and there is more scope to make them subject to post-termination restrictions. These are factors to bear in mind when considering the basis on which to engage an individual.

Consultants usually have written agreements in place which reflect their self-employed status. These do need to reflect the reality of the situation and it is important to note that they are not determinative of status. Employment Tribunals and HMRC will look behind the contractual documentation to the substance of the relationship when determining employment status.

Some of the key factors that will be considered are:

  • Reliability of work: is there an obligation on the client to provide work and on the individual to perform it?
  • Supervision: can the individual determine when, where and how he/she works? Can the client require the individual to carry out different tasks?
  • Substitution: does the individual have to provide the services personally, or can they subcontract the work?
  • Exclusivity: can (and does) the individual provide services to other clients?
  • Termination: is the agreement limited to a finite period of time or to a specific task or project?
  • Payment / financial risk: does the individual have a degree of financial risk – for example, if work overruns, or there are mistakes, does the individual need to correct the work in their own time/at their own cost? Conversely, does the individual receive any employment-style benefits?
  • Integration: to what extent is the individual integrated into the client's business? For example, do they have a company email address and how are they described to clients or contacts? Does the individual perform line-management tasks on behalf of the client?
  • Equipment: does the individual need to provide their own equipment and materials in order to perform the services? (This is generally less relevant in an office/professional services environment.)
  • Tax: is the individual (or their service company) responsible for payment of their own income tax and NICs? Are they/their company registered for VAT?

From a tax perspective, generally the risk lies with the consultant or their service company. However, since 6 April 2017 where an individual provides services personally to a public authority, and those services are similar to those of an employee, the public authority (rather than the consultant) must make payroll deductions and account for NIC. It is currently unclear whether this may be extended to the private sector; but it is a possibility and should be considered by companies preparing to engage consultants.

The Taylor Review – unintended consequences?

The Taylor Review, led by Government adviser Matthew Taylor and published on 11 July 2017, reports on modern employment practices in the UK labour market as a whole, but the recommendations are likely to have the greatest impact in the 'gig economy'.

The report acknowledges that there is a need to provide opportunities to those who are not able to work in more conventional ways – the recent increase in those making an informed decision to be self-employed is evidence that individuals are willing to forego certain rights and protections in exchange for greater autonomy and flexibility. And businesses as well as individuals need protection, particularly those who are already acting responsibly but are being undercut by the less scrupulous. The proposals to tackle that exploitation will require further consideration to ensure that they do not have the unintended consequence of reducing flexibility and freedom of choice.

The report states that it has considered how to minimise additional complexity for business, but there are likely to be wider implications as a result of some of the proposals, including additional costs and administration. Some of the key implications are:

Employment status: There is clearly a need for greater clarity on the current employment status framework so that it is easier to determine whether an individual is a worker, employee or genuinely self-employed. However, the suggestion that the term 'worker' is replaced with 'dependent contractor' and that its definition 'should reflect the reality of modern working arrangements' may serve only to further complicate the existing categories.

It is proposed that 'dependent contractors' would no longer have to provide personal service. But is unclear how the definition would be worded so as to prevent a situation where it captures those who would previously have been viewed as self-employed and who wish to retain that flexibility.

National Minimum Wage: The report has recommended that the Government asks the Low Pay Commission to advise on bringing in a higher NMW for hours that are not guaranteed in a contract. Businesses would still be able to offer zero hours contracts, or require an individual to work more hours, but would have to compensate them accordingly. This may well be financially prohibitive to smaller businesses whose work is of an ad-hoc, seasonal or uncertain nature, as well as being detrimental to individuals who value the flexibility zero hours contracts offer.

Work allocated via an app: A business needs to calculate an individual's working time to determine whether it is paying the national minimum wage. The report suggests that legislation is amended to make it clear that individuals in the gig-economy who are allocated work through an app are deemed to be undertaking 'output work' (work paid according to the individual's productivity) and would not have to be paid the NMW for each hour they are logged on when there is no work available. But, calculating working time would not be straightforward.

Output workers are entitled to be paid the NMW for each hour they work, or at least a 'fair piece rate' for each piece produced or task performed, provided certain criteria are met. This proposal could mean that an individual was paid less if they did not complete a set quota of jobs.

Gaps in service: The report looked at assisting individuals who work casually or intermittently in establishing continuity of service. Currently, in the absence of any 'umbrella contract', a gap of one week between assignments is permitted before continuity is broken. The proposal is that this is increased to one month, to allow individuals to accrue service more easily. However, the more unscrupulous businesses would simply increase the gap between assignments which would impact on an individual's access to work.

Larger businesses are more likely to have the resources to meet the recommendations made in the report if they were implemented – and there are many others not covered here, such as reporting requirements on overall workforce structure and changes to agency worker rules. But, at a time of increased political uncertainty, with the UK charting a new route to global markets, the Government must balance the need to protect vulnerable individuals against the need to retain flexibility and encourage entrepreneurship.

Mental health in the workplace: some practical guidance

Prince Harry's recent disclosure about his struggle with bereavement has brought mental health back into the limelight. However, the awareness being raised by the media doesn't appear to be translating into acceptance in the workplace; a survey by the anti-stigma campaign ‘Time to Change’ found that 92% of the British public believe that admitting to having a mental health problem would damage someone’s career.

This comes as advances in technology are blurring the line between home and work life and creating an inability to get away from the pressures at work. Although stress is not a mental illness in itself, it can lead to mental illness such as depression and needs to be tackled to ensure an effective workforce. Mental health charity, and Howard Kennedy's charity of the year, MQ reports that 6 in 10 people say poor mental health impacts their concentration at work and that poor mental health costs the UK economy £105bn each year.

Disregarding mental health issues can also have legal consequences. The Equality Act 2010 provides protection in the workplace from discrimination on the grounds of disability to people with a 'physical or mental impairment… that has a substantial and long-term adverse effect on their ability to carry out normal day-to-day activities'. Potential claims open to disabled individuals, including job applicants and employees, include for direct and indirect discrimination, discrimination because of something arising in consequence of a disability, harassment and victimisation and a failure to make reasonable adjustments.

Whilst for other types of disability discrimination employers can't be liable unless they knew - or ought to have known – about a disability, they do not have to have knowledge of an individual's disability to be liable for claims of indirect discrimination: so should consider whether they have any provision, criterion or practice (a "PCP"), formal or informal, which could have the effect of disadvantaging disabled job applicants or employees.

Employers should aim to be proactive, rather than reactive in the way that they approach mental health issues in the workplace. We set out some practical tips on what organisations should consider at various stages of employment:

Recruitment: Ensuring that the recruitment process does not alienate any suitable applicants is crucial. Practical tips to achieve this may include

  • ensuring that the job description is accurately drafted so that the best applicant can be selected;
  • ensuring the recruitment panel is aware that under the Act it is unlawful to ask an applicant pre-employment health questions, except in limited circumstances where the nature of the role requires it (e.g. a safety-critical role);
  • ensuring that where applicants believe they may have a disability, they have access to a person independent of the recruitment panel to whom they can disclose information about their health so that any reasonable adjustments to the recruitment process can be considered;
  • considering what reasonable adjustments should be made to any interview or application process for any disabled applicant. In a recent case it was held that an employer failed to make a reasonable adjustment when it would not allow an applicant who suffered from Asperger's Syndrome to answer a multiple choice test in alternative format, by providing short written answers; and
  • providing appropriate training to the recruitment panel so that they are aware of the employer's equality policy and can select the applicant whose skills and qualifications best match the role, irrespective of health

Day-to-day: Mental health issues are not always self-evident and so removing the stigma surrounding them is an important step in encouraging employees to disclose and discuss issues with their employer. This can have a positive impact on the business in terms of attendance and productivity.

Where an employer is aware or ought to be aware that someone is disabled, it is under a duty to make reasonable adjustments to premises or working practices to remove any substantial disadvantage experienced. Sometimes quite reasonable adjustments, such as additional support, can enable an employee to attend work regularly, or facilitate a return to work after a period of absence.

All organisations should train their managers to spot mental ill-health early on and to ensure that employees feel able to discuss any issues either with their manager or HR. It may be helpful to have a specific policy that will be followed, or a mental health officer who can seek to assist with an employee's ill health and, if appropriate, recovery.

Dismissal: if mental illness means that an employee is no longer capable of fulfilling their role, and no reasonable adjustments can be made to the role or suitable alternative role found within the company, an employer may need to consider dismissal. The associated risks are high and there are a number of factors that need to be considered before the decision to dismiss is taken. Up-to-date medical evidence is of vital importance, including the need to ask occupational health appropriate questions. Should this situation arise, seek advice to ensure that the correct procedure is followed and you are not left open to liability for an uncapped discrimination claim.

Howard Kennedy employment team news and events

HR roundtable breakfastscreating a network for those responsible for staffing/HR matters in particular sectors to discuss key current workforce issues. The aim is to connect attendees with ideas, knowledge and people who can share and discuss their views on those HR issues. Forthcoming events are:

  • Property and construction - September 2017
  • Media, technology and the creative arts - October 2017
  • Retail, leisure and hotels - November 2017


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