General Election 2015: The outcome and a look at what this means for UK employment law

With the Conservatives securing a majority win in the general election last month what does this mean for UK businesses in 2015/2016 and UK employment law in the next five years.

In this article Dionne Dury, from our Bristol office, summarises some of the key pledges made by the Conservative party and steps already taken by the new Government to deliver on its promises.

The key pledges:

Equality

The Conservative manifesto made a bold statement stating it would transform, “policy, practice and public attitudes to get disabled people into employment”. Unfortunately, the manifesto was not clear on how it intended to achieve this so watch this space!

What was clear from the manifesto was an intention to address the gender pay gap and support greater female representation on boards.

The party has already made steps towards achieving this goal with legislation requiring larger employers (of 250 employees or more) to disclose information on gender pay gaps. This legislation was laid before Parliament before it was dissolved for the election and must be implemented by April 2016.

National Minimum Wage (NMW)

The party also pledged to support an above-inflation rise in the NMW to £6.70 per hour by autumn this year (compared to the current rate of £6.31) and to achieve an increase to £8.00 per hour by 2020.

It has also been proposed that the tax-free allowance will be increased to £12,500 so that by the end of 2020, “people who work for 30 hours a week on the increased National Minimum Wage will no longer pay any Income Tax at all”.

Zero hour contracts / provisions under the Small Business, Enterprise and Employment Act (SBEEA)

A pledge was made to prohibit exclusivity in zero hour contracts and the party has kept to its promise.

On 26 May 2015 a number of provisions, including the prohibition of exclusivity in zero hour contracts, were implemented under the SBEEA.

As well as providing a useful definition of zero-hours contracts, as being a contract under which a worker offers to undertake work on behalf of the employer on request, there being no guarantee of work, the Act confirmed that any provision in such a contract purporting to prevent the worker from undertaking work for a different employer or requiring the employer’s consent to do so, is unenforceable.

It remains to be seen whether a ban on exclusivity will address the perceived unfairness of these types of contracts.

The Act also introduced new penalties for employers who fail to pay Tribunal awards or settlement sums and fines for non-payment of National Minimum Wage. The National Minimum Wage Act 1998 has been amended so that the maximum £20,000 penalty for non-payment applies in respect of each worker who is underpaid NMW. Previously, the maximum penalty applied per under-payment notice to the employer, so this rise represents a potentially large increase.

The SBEEA has also provided clearer definition on the meaning of “small businesses” being, a headcount of fewer than 50 and a specified threshold for turnover and balance sheet and “micro businesses” being, a headcount of fewer than 10 and a specified threshold for turnover and balance sheet.

Tribunal reform

Despite the opposition parties calling for Tribunal reform or a reduction in the current Tribunal fee levels, the Conservative party made no such pledges in their manifesto and supported the retention of Tribunal fees.

However, this month saw the long awaited Government review of the Tribunal fee and remission scheme. The review is expected to continue for several months.

Statistics published by the Ministry of Justice at the beginning of this month showed a sustained reduction in the number of Tribunal claims lodged since the introduction of the scheme in 2013. The reduction suggests that the ACAS Early Conciliation process is encouraging parties to resolve their disputes. However, it is also possible that the reason for the reduction in the number of claims being issued is the fees themselves and this begs the question of whether employees are being given the appropriate access to justice?

UNISON’s appeal against the High Court’s rejection of their judicial review proceedings challenging the fees regime was heard on 16 and 17 June. The outcome of that appeal is unlikely to be known until the autumn but it will clearly impact on the outcome of the Government’s review. Even if the appeal is unsuccessful it is still possible that the Government decides in a reduction in fees.

Today (30 June 2015) Andy Burnham, the front runner in the Labour leadership race said that all upfront Employment Tribunal fees should be scrapped.

EU Referendum

The promise of a referendum on the UK’s continued membership of the European Union has significant implications for employment law. Some commentators believe that we are “governed by Brussels” with 90% of our laws coming from the continent. Whether or not this is the case, it is clear that a large proportion of employment law has an EU connection and a vote in favour of leaving would clearly have huge implications for UK employment law.

Keep watching this space for updates and changes as they occur.

For further information or advice on these or other employment related matters you can contact Dionne Dury on 01173305980, 07766562730 or dionned@foxwhitfield.com

Acas guidance on calculating holiday pay

The following is the text of new guidance from ACAS on calculating holiday pay. It relates specifically to overtime, commission, work-related travel and sick leave issues.

Employers and employees should take specific legal advice on this as ACAS says “”there is no definitive answer about how holiday pay calculations must be made”. The final point in their guidance is: “Until further clarification is available, employers may wish to seek legal advice based on their individual circumstances.”

The full guidance is: –

Calculating holiday pay

In addition to current legislation, a number of recent court judgments should be considered when calculating holiday pay.

This means that the rules employers and workers follow to calculate holiday pay may need to be updated.

Key points:

  • Guaranteed and normal non-guaranteed overtime should be considered when calculating a worker’s statutory holiday pay entitlement but there is currently no definitive case law that suggests voluntary overtime needs to be taken into account.
  • Commission should be factored into statutory holiday pay calculations.
  • Work-related travel may need to be factored into statutory holiday pay calculations.
  • A worker’s entitlement to holiday pay will continue to accrue during sick leave.
  • There are different rules for calculating holiday pay depending on the working patterns involved.
  • Workers must take their statutory paid annual leave allowance and can only be ‘paid in lieu‘ for this when their employment ends.

Guaranteed overtime

Guaranteed overtime is where the employer is obliged by the contract to offer and pay for agreed overtime. Following a judgment in 2004, guaranteed overtime must be included within the calculation of holiday pay.

Non-guaranteed overtime

Non-guaranteed overtime is where there is no obligation by the employer to offer overtime but if they do then the worker is obliged by the contract to work overtime. On 4th November 2014 the Employment Appeal Tribunal made a ruling in the case of Bear Scotland v Fulton which covers how holiday pay should be calculated when non-guaranteed overtime is worked.

The judgment has clarified that:

  • Workers should have their normal non-guaranteed overtime taken into account when they are being paid annual leave.
  • Anybody making a claim must have had an underpayment for holiday pay that has taken place within three months of lodging an employment tribunal claim.
  • If a claim involves a series of underpayments, any claims for the earlier underpayments will fail if there has been a break of more than three months between those underpayments.
  • Only the 4 weeks’ annual leave entitlement under the original Working Time Directive are covered by this judgment, rather than the full 5.6 weeks’ leave provided by the Regulations as they operate in Great Britain.

This judgment may have an impact in situations where non-guaranteed overtime is carried out by workers on a regular or consistent basis.

It is unlikely to have an impact in situations where non-guaranteed overtime is either already factored into holiday pay, or possibly where this overtime is only used on genuinely one-off occasions.

Employers, workers and trade unions are encouraged to discuss any concerns arising from this judgment with a view to seeking agreement on any measures or policy changes they feel may be necessary. Acas may be able to help parties find solutions and employers or workforce representatives may find it helpful to discuss the issue with an Acas Collective Conciliator.

Limit on a claim for an underpayment

On Thursday 18 December 2014 the Government announced a planned change to the Employment Rights Act 1996 in relation to claims for deduction of wages. The change will mean that when making claims for a series of backdated deductions from wages, including any shortfall in holiday pay, the period that the claim can cover will be limited to a maximum of 2 years.

It is expected that the effect of this change will be to limit the scope for a claim for deductions from pay going back more than 2 years for any claim presented on or after 1 July 2015.

Voluntary Overtime

Voluntary overtime is where the employer asks the worker to work overtime and the worker is free to turn down the request as there is no contractual obligation on either side to offer or refuse overtime. The question of voluntary overtime has not been directly considered by any recent judgments, so there is currently no definitive case law to suggest that voluntary overtime needs to be taken into account when calculating holiday pay.

Commission

Commission is usually an amount of money a worker receives as a result of making sales and can make up some or all of their earnings.

Commission must be factored into holiday payments for the 4 weeks of statutory annual leave required under European law. There is no requirement to do this for the additional 1.6 weeks of statutory annual leave provided under UK law, or for any additional contractual annual leave allowance. This was confirmed on 22 May 2014 when the European Court of Justice heard the case of Lock v British Gas Trading Ltd.

At present, there is no definitive legal answer about how such holiday pay calculations must be made, or how/if claims can be backdated.

The Lock v British Gas Trading Ltd case has been referred back to the UK to consider how commission is calculated into holiday pay for that particular case. While part of the case was heard at the Employment Tribunal on 5 February 2015, the final judgment has not yet been made. When the judgment is made, it is important to note that an Employment Tribunal judgment is not binding on any other case – it would need to be appealed to the Employment Appeal Tribunal to have such an effect.

Work-related travel

Work-related travel can have a number of different meanings but for most employment matters, this will usually mean any travel that is made for work purposes that is not a part of a workers commute to their usual place of work. On 4 November 2014 the Employment Appeal Tribunal issued a judgment in a case joined to Bear Scotland v Fulton which covers how holiday pay should be calculated in relation to work-related travel.

Where payments are made for time spent travelling to and from work as part of a worker’s normal pay, these may need to be considered when calculating holiday pay.

Holiday pay and sickness

When a worker takes paid or unpaid sick leave, their annual leave will continue to accrue. If a worker is unable to take their annual leave in their current leave year because of sickness, they should be allowed to carry that annual leave over until they are able to take it, or they may choose to specify a period where they are sick but still wish to be paid annual leave at their usual annual leave rate.

Calculating holiday pay for different working patterns

No matter the working pattern, a worker should still receive holiday pay based on a ‘week’s normal remuneration’. This usually means their weekly wage but may include allowances or similar payments. Some of these payments might include the situations described earlier on this page, such as commission.

  • For workers with fixed working hours – If a worker’s working hours do not vary, holiday pay would be a week’s normal remuneration.
  • For workers with no normal working hours – If a worker has no normal working hours then their holiday pay would still be a week’s normal remuneration but the week’s pay is usually calculated by working out the average pay received over the previous 12 weeks in which they were paid.
  • For shift workers – If a worker works shifts then a week’s holiday pay is usually calculated by working out the average number of hours worked in the previous 12 weeks at their average hourly rate.

Payment in lieu of holidays

While workers are in employment, 5.6 weeks of their annual leave (this is the amount all UK workers are statutorily entitled to) must be taken and cannot be ‘paid off’. Anything above the statutory allowance may be paid in lieu but this would depend on the terms of the contract.

When a worker’s employment is terminated, all outstanding holiday pay that has been accrued but not taken (including the statutory allowance) must be paid.

Further Information

Until further clarification is available, employers may wish to seek legal advice based on their individual circumstances.

http://t.co/79FgHY91xd

The Impact of Employment Tribunal Fees

Just prior to losing his seat as an MP and his position as Business Secretary, Vince Cable, announced the findings of a review that he commissioned into the impact of employment tribunal fees. In summary: –

  • The total number of employment tribunal dropped by almost 70%.  (From 340,000 in the first quarter of 2013-2014, to just over 110,000 in the third quarter of 2014-2015).
  • Sex discrimination claims were down by 82%.
  • Equal pay cases were down by 72%.

In an interview with the Independent he said “here is enough evidence to suggest that this was a very bad move and should be reversed,” he said. “It is highly suggestive that the fees are discouraging people – particularly low paid women—from pursuing their rights.”

http://www.independent.co.uk/news/uk/politics/generalelection/vince-cable-interview-charging-fees-for-employment-tribunals-was-a-very-bad-move-10213703.html

Given the results of the General Election. The fees will be staying and will not be reversed for at least the next five years.

Mr Cable also warned that a right-wing government – perhaps a Tory-led one backed by Ukip—would revive proposals like “fire at will” within months. “They have an unfinished agenda,” he said.

www.foxwhitfield.com

Employment Law Solicitors – Head Office based in Manchester with offices located throughout the United Kingdom.

Holiday Pay Should Include Commission

Update 14/05/2015:

This case has now been referred back to the Employment Tribunal and British Gas has now appealed that again. It is unlikely to be before the end of 2015 when that appeal is heard. The Employment Tribunal it did not consider reference periods and how to quantify a claim for the commission element of holiday pay. The principle that commission must be included in holiday pay is established law now, the still open questions is how to quantify it.

Our best advise at the moment is that in cases where a worker has no normal working hours, or has normal working hours but their pay varies according to amount of work done or the time of work employers should use an average of the last 12 working weeks to calculate how much holiday pay should be paid. If your ways of working mean that 12 weeks would not be representative, such an a system where all commission is paid annually, then 12 weeks may not be the appropriate reference period. In any case we advise all employers to take legal advice on this as soon as possible. Fox Whitfield are already dealing with multiple claims where employers have not changed their policies and are facing claims.

Paul can be contacted on 0161 2831276 or paulw@foxwhitfild.com

www.foxwhitfield.com

Employment Law Solicitors – Head Office based in Manchester with offices located throughout the United Kingdom.

In a new twist on the law relating to holiday rights the European Court of Justice (ECJ) has held that holiday pay should take into account commission payments.

Currently the UK law, the Working Time Regulations, make it clear that employees are entitled to holiday pay based on their basic salary alone. This case suggests that is now incorrect as it is not compatible with European Law.

In this example an employee’s remuneration was made up of basic salary and commission. The commission was about 60% of the total remuneration. The ECJ said that the commission payments were directly linked to the performance of his work under his contract of employment. Therefore, the commission should be taken into account in the calculation of his statutory holiday pay.

This case is now being referred back to the Employment Tribunal which will need to consider how to interpret the Working Time Regulations following this decision. It is likely that they will do so in a way that will have far reaching implications for many businesses and their employees.

One possibility is that the Tribunal will say that statutory holiday pay should be based upon 12 month average normal pay. That would ensure that any commission payments paid over a year would be included. Another possibility is that they will use a shorter reference period of 12 weeks. This could mean sales forces trying to take their holidays immediately after busy periods to maximise their holiday pay. We shall have to wait and see how the details of this develop.

There are two other cases being heard in the EAT during the summer of 2014 looking at the extent to which overtime payments should also be included in the calculation of statutory holiday pay.

So what should employers do now?

1) Do nothing. Wait and see how these cases develop the law as they take their time going though the Tribunal and appeal systems. It may be that the UK courts limit the effect of the ECJ  decision.

2) Assume the UK law is going to have to change to comply with the European decisions.  Take the business decision to look at changing your holiday pay and commission rules and policies now. The risk of this is that we have yet to see how the UK courts will apply the law and you could end up having to change your rules twice.

So far, most employers seem to be waiting to see what happens next before making any changes.

We will update you as things become clearer, or more muddy.

 

Paul can be contacted on 0161 2831276 or paulw@foxwhitfild.com

www.foxwhitfield.com

Employment Law Solicitors – Head Office based in Manchester with offices located throughout the United Kingdom.

Changes to Zero Hour Contracts

“Government crackdown on zero hours contract abusers”

Vince Cable announced on 25 June 2014 that the government was cracking down on the abuse of zero hours contracts. The key measure they plan to take is to ban exclusivity clauses. These clauses mean that an employee on a zero hours contract is prevented from working for another employer even if their current employer is not providing them with any work.

As BIS put it: “The use of exclusivity clauses in zero hours contracts undermines choice and flexibility for the individuals concerned.” They claim this will help about 125,000 employees.

However, as a zero hours contract gives the employer the right not to provide the employee with any work employers will be free to refuse to provide work to employees who do find other work elsewhere. It will be difficult for an employee to prove they stopped being given work for this reason, so this ban may well have zero impact.

This action follows a government consultation into zero hours contracts which received over 36,000 responses. 83% were in favour of banning exclusivity clauses in zero hours contacts.

The Business Secretary also announced that the government will:

  • consult further on how to prevent rogue employers evading the exclusivity ban, for example through offering 1 hour fixed contracts
  • work with business representatives and unions to develop a code of practice on the fair use of zero hours contracts by the end of the year (2014)
  • work with stakeholders to review existing guidance and improve information available to employees and employers on using these contracts

Tim Thomas, Head of Employment Policy at EEF, the manufacturers’ organisation, said:

Zero hours contracts occupy an important space in the labour market where, properly used, they provide flexible employment in job roles where open-ended contracts are unsuitable.

For manufacturers where skills are in scarce supply, zero hours contracts can help employers to tap into specialist skills when they are needed, such as drawing on the experience of older workers.

The way forward set out in the Small Business, Enterprise and Employment Bill treads a fine line between supporting the majority of workers who want to continue to work on their zero hours contracts and limiting their use where they are neither necessary nor appropriate.

The ban will be part of the Small Business, Enterprise and Employment Bill, which is being introduced to Parliament today (25 June 2014)

Paul Whitfield can be contacted on 0161 2831276 or paulw@foxwhitfild.com

www.foxwhitfield.com

Employment Law Solicitors – Head Office based in Manchester with offices located throughout the United Kingdom.