Work It: Employment Update - October 2017

Employment Tribunal fees: latest developments

In July, we reported on the Supreme Court ruling that the Employment Tribunal fee regime was unlawful and highlighted the anticipated rise in claims by employees as a result. Since then, there have been a number of important developments:

• Claims made after the ordinary time limit: an Employment Tribunal has allowed a claimant to pursue a claim which she lodged after the deadline for bringing it had expired, after a previous claim was rejected for her failure to pay the fee.
  
  The claimant brought her first claim of disability and age discrimination before the relevant deadline had expired. But this claim was rejected because she failed to pay the fee (after her application for help with the fee due to her low income was rejected). She brought a second claim after the deadline had expired and, following the Supreme Court decision, argued that because her first claim had been rejected due to her failure to pay unlawful Tribunal fees, the deadline for her second claim should be extended on the basis that it was just and equitable to do so.
  
  The Tribunal agreed to extend the deadline and so allowed her to pursue her second claim. In reaching this decision, the Tribunal took into account the claimant's personal circumstances and knowledge at the time she brought the claims, and also the fact that the unlawful fees regime had denied her the opportunity to pursue her first claim, which she had brought in time.
  
  This decision does not bind other Employment Tribunals (and may be appealed) but other claimants are likely to raise similar arguments and may well get sympathetic treatment.
   
• Refund of fees: the Employment Tribunals service has announced that claimants who paid fees to bring their claims between 2013 and 2017 will need to apply for refunds of their fees. Further details of the scheme are expected to be announced shortly.
   
• Stayed claims: all claims which depended on the outcome of the Supreme Court case had been stayed, meaning that no action could be taken in relation to those claims. That stay has now been lifted, meaning that the claims can proceed. We can therefore expect more decisions dealing with extensions of time for claimants previously deterred from bringing claims or whose claims were rejected for failure to pay the relevant fee.

Businesses should not assume, if three months has passed since a disgruntled employee left, or since a particular decision was implemented, that they are now safe from claims. A business which receives an out-of-time claim will need to evaluate the legal position and commercial considerations carefully in order to respond effectively.

Increase to injury to feelings awards

The Equality Act 2010 provides that compensation for discrimination (which is uncapped) may include, or consist entirely of, compensation for injured feelings. Injury to feelings awards are separate from an award of compensation for financial loss.

The Presidents of the Employment Tribunals have revised the three bands of compensation for injury to feelings awards to take account of inflation. For successful discrimination claims presented on or after 11 September 2017, the new bands are:

• Lower band (less serious cases): £800 to £8,400
• Middle band (cases that do not merit an award in the top band): £8,400 to £25,200
• Top band (most serious cases): £25,200 to £42,000.

Most awards injury to feelings in discrimination claims are relatively low, and fall within the lower band. Nevertheless employers should continue to regularly review their equality policies and ensure their managers receive training to properly implement and uphold those policies.

Tax evasion: amending contracts and policies to reflect offences

On 30 September 2017 a new corporate offence of failing to prevent tax evasion came into force. Under the Criminal Finances Act 2017, an employer may commit an offence if it fails to prevent an employee, agent or any other person who is performing services for the organisation from criminally facilitating the evasion of tax, whether or not the tax is owed in the UK (there is a supplementary offence that covers the facilitation of foreign tax evasion). There is a duty on organisations to self-report to HMRC when discovering a person associated with it has facilitated tax evasion.

Employers will have a defence if they can show that, when the offence was committed, they had in place such prevention procedures as it was reasonable in all the circumstances to expect it to have in place that were designed to prevent an associated person from committing such an offence, or that it was not reasonable in the circumstances to expect the employer to have prevention procedures in place. There is some useful guidance on the government website at gov.uk.

In practical terms, employers should look to introduce an anti-facilitation of tax evasion policy setting out what is required of staff, to include an obligation to report any wrongdoing (and confirming the protection of those who 'whistleblow'). Alternatively, existing anti-corruption policies should be updated. Contracts of employment, service agreements and consultancy agreements should be reviewed and a clause included which makes it a specific contractual requirement that the individual does not engage in facilitating tax evasion and that they are also required to comply with any related policy. The policy itself should be regularly reviewed, monitored and enforced.

Modern slavery: going beyond a compliance-only approach

Since the Modern Slavery Act (MSA) became law in 2015, slavery and trafficking has become increasingly high profile, with successful prosecutions and civil claims against perpetrators receiving widespread press coverage and NGOs working actively to expose businesses which are complicit in or turn a blind eye to slavery and trafficking in their supply chains.

At the same time, both consumers and investors are more likely to base decisions on a business' actual or perceived ethics, human rights stance and environmental impact. It is increasingly important for businesses of all sizes to do more than merely complying with the letter of the law in this area to protect their reputation and customer base.

Reporting: getting it right

The MSA imposes a requirement on larger businesses (those with an annual turnover of £36m or more) operating in the UK to report formally each year on steps taken by the business to eliminate slavery and trafficking in its supply chains. Although the legal requirements for such reports are minimal (in summary, they must be on the company's UK website, approved by the board and signed by a director), an analysis by the Business and Human Rights Resource Centre of over 2,000 such reports uploaded to its online registry revealed that less than 15% were legally compliant. A failure to get those basics right turns the risks of criticism by NGOs and public embarrassment. However, businesses seeking to establish or protect a reputation for high ethical standards will need to do more than merely comply. The BHRRC has commented that current standards of reporting are generally low (with some notable exceptions), so high quality reporting could enable a business to distinguish itself from its competitors.

Smaller businesses not caught by the MSA reporting requirements should not assume this is not relevant to them if they supply larger businesses, they may well be faced with supplier questionnaires focusing on these areas or standard contract clauses requiring compliance with reporting and other procedures.

The MSA suggests six key areas which businesses may wish to report on and Government guidance gives examples of the type of information which could be included in the report. We set out some examples of good practice in each area which could be included in MSA reports. Businesses should bear in mind that they are not expected to have resolved all potential risks immediately but to show year-on-year improvement in their annual reports.

Effective reporting in this area may require a culture shift. Businesses may be reluctant to admit failings, but some of the most high-quality MSA reports acknowledge the difficulties of policing global supply chains and, rather than deny (unrealistically) that they face these issues, instead identify concrete areas for improvement. However, given the potential for criminal liability and civil claims, businesses may wish to seek legal advice when conducting due diligence exercises or preparing such reports.

Holiday pay update: voluntary overtime counts towards holiday pay if sufficiently regular

The Employment Appeal Tribunal has found in Dudley Metropolitan Borough Council v. Willetts & ors that employees' holiday pay should include voluntary overtime, out of hours' standby pay, callout payments and mileage allowances (where these exceeded HMRC's approved rate), as these elements were paid in such a manner, and with such sufficient regularity, to be considered normal remuneration.

Referring to the Judgment in BA v. Williams & ors, the EAT found that it was wrong to focus solely on whether there is an "intrinsic link" between the payment and the performance of tasks under the contract. Whilst such a link would establish decisively that pay should be counted as "normal", it was not a necessary criterion.

Some uncertainty still remains, however. The judgment suggests that where a payment passes the "intrinsic link" test it would automatically be deemed as "normal", but it is not clear whether this would include rare instances of overtime. Whilst the EAT confirmed that a payment is "normally" made if paid over a sufficient time on a regular basis, even if only one week per month or one week in five, this remains a question of fact for the Tribunal and employers will therefore need to take a view on how they treat borderline cases and exercise caution until further clarification is given.

On the horizon

Brexit: The UK Government has published a series of position papers relating to the UK's exit from the European Union. Of particular interest from an employment law perspective is the Government's apparent acknowledgement that the UK will continue to take into account rulings of the European Court of Justice, even those made after March 2019. This would mean that European law would continue to be a major source of UK employment law.

Uber drivers and employment status: Uber's appeal against an employment tribunal decision that its drivers were workers was heard on 28 September 2017, with judgment reserved.

Howard Kennedy employment team news and events

In the news:

• Sam Murray-Hinde on ' Tribunal fee ruling: The impact for operators' (Route One)
• Sam Murray-Hinde on 'Now that tribunal fees are unlawful, it's time to evaluate risk' (Property Week)
• Lydia Christie quoted in 'Final toll for Bell Pottinger sounds governance warning' (Governance and Compliance)
• Last month took senior associate Susie Al-Qassab took part in a Policy UK panel event on the rise of dependent contractors.

Events:

• HR Directors' Forum: our next breakfast roundtable for HR Directors and Heads of HR will be looking at managing racial and religious conflicts in the workplace – 21 November 2017.
• Recruiting and retaining talent in the retail, leisure and hospitality sector: 7 November 2017 – click here to find out more.