Newsletter June/July 2017


As I go to press we are digesting the outcome of the Taylor Report on the status and rights of UK workers. The Report is wide ranging but, as you would expect, I will focus on those elements which suggest potential changes to the law.

Some of those seem sensible to me, yet by no means game changing. The Report proposes to put into legislation the key principles for determining employment status. It also advocates the adoption of a new term: ‘dependent contractor’. This would be used to describe someone who is a ‘worker’ but not an ‘employee’ (bearing in mind that a ‘worker’ has a wider meaning than ‘employee’, so ‘employees’ are a subset of the wider ‘worker’ category).

Mr Taylor does not propose to merge the ‘employee’ and ‘worker’ categories into one for employment rights purposes, as some were advocating. Hence, the two-tiers of employment protections would remain with only employees being able to claim unfair dismissal and family-friendly.

So far, then, no real change.

Of greater significance could be the suggestion that the definition of a ‘worker’ is changed so that there is no requirement for personal service. This is aimed at stopping substitution provisions in contracts from defeating claims for worker status. Instead, more emphasis should be placed on the degree of control exercised by the user. Mr Taylor does not want to destroy genuinely flexible arrangements which work to the mutual benefit of both sides. This all sounds sensible, although of course the Uber drivers and other ‘gig’ economy staff are winning their claims for worker status anyway. In addition, one of the things the news reports on these issues demonstrates is that one person’s happily flexible working arrangement is another’s low-paid nightmare (especially if they become sick or injured).

It is very hard to assess whether these suggestions can actually be turned into greater legal clarity, or whether the same sorts of arguments – and opportunities for some employers to minimise employment rights – will remain.

There are some proposals on enforcement which are quite concrete, such as that a person should not be required to pay a tribunal fee in order to bring a claim to establish their status.

Other eye-catching suggestions are that:

  • National minimum wage for people working through an online platform should be determined according to work actually done (an ‘output work’ approach) so that a worker cannot expect to be paid simply by logging on to an app (which may give rise to problems if the worker is also expected to be at a certain location when logged on and unable just to sit at home watching TV)
  • Consideration be given to a higher NMW being payable for non-guaranteed working hours (aimed at having users of zero-hours contracts pay a premium for the privilege of the flexibility)
  • Workers being allowed to opt for ‘rolled-up’ holiday pay, i.e. to be paid a rate which includes an allowance for days off, which then would not be paid (this would likely have to wait until we have left the EU)
  • Zero-hours workers should be entitled to insist on a contract with a minimum number of hours (how many?) after 12 months

There are also many elements of the report which seem to be more about encouraging better practice amongst employers, which might be open to attack as a bit of a cop out.

Of all the proposals, the one I think could be most significant is the possibility of bringing all workers into the category of ‘employees’ for tax and national insurance purposes. That would have a big impact on the scope of people falling within PAYE and would result in HMRC, not just individuals, having an interest in contesting worker status. Would Uber and the like have treated staff as fully self-employed if they ran the risk of HMRC contesting that and demanding back taxes, national insurance and related interest and penalties? If that change were made we could very well find that many employers would just accept almost all staff as employees anyway.

How the (minority) Government moves on all of this will be fascinating.

Darryl Evans
T: +44 (0)7771 725341

Duty to disclose plans to compete

Whether an employee is under a duty to disclose his or her intention to compete is a question I find coming up more and more often.

In MPT Group Limited v Peel (2017 EWHC 1222), two moderately senior employees, Mr Peel and Mr Birtwistle, planned to set up a new company in competition with MPT once their restrictive covenants expired. MPT quizzed them after they had handed in their resignations and they lied about their intentions. MPT sought an injunction based on misuse of confidential information and breach of the duty to answer questions truthfully.

The judge held that whilst there was a general duty to answer questions truthfully, he was "reluctant to hold" that a departing employee is under a contractual obligation to explain his own confidential plans to set up in lawful competition.

The court might have reached a different conclusion if the employees were sufficiently senior to owe fiduciary duties to their employer or if their contracts had specifically required disclosure.

Reasonableness of non-compete clause assessed when entered into

The High Court has upheld a six-month non-compete restriction. No great drama in that, but the interesting point is that, although the employee was very senior when her employment ended, the restrictive covenant being relied on was the one she agreed to on her initial hiring into a more junior role.

The basic legal principle is that the reasonableness of a restriction is determined at the time it was agreed. A restriction which was unreasonable then does not become reasonable because the employee is promoted (although new restrictions can of course be agreed on promotion).

Ms Tillman, however, had been recruited with high hopes for her future potential and with the expectation on both sides of swift promotion. That potential promotion, said the Court, could form part of the assessment of reasonableness. That may include looking at whether the employer in fact gave her a level of engagement with clients and confidential information which was greater than might otherwise have been expected of someone at her entry level.

It is also worth noting that there was no express territorial restriction to the covenant, but the Court found an in-built limitation in that the non-compete restriction was limited to businesses in competition with any businesses of the employer's group with which Ms Tillman had been materially concerned. This is further evidence that, in an increasingly global business environment, the traditional need for geographic limitation to a non-compete clauses is becoming less relevant. (Egon Zehnder Ltd v Mary Caroline Tillman (2017) EWHC.)

Enhanced shared parental pay – discrimination issues

Eventually cases were going to come through on this knotty issue.

The employment tribunal in Ali v Capita Customer Management Ltd (ET/1800990/16) has upheld a male employee's claim that his employer's failure to pay enhanced shared parental pay, alongside a policy of paying enhanced maternity pay, amounted to direct sex discrimination.

The tribunal decided that a comparison between a man on shared parental leave and a woman on maternity leave was not prohibited by the Equality Act 2010. Paying enhanced maternity pay (beyond the two week compulsory maternity leave period) did not amount to special treatment afforded to women in connection with pregnancy or childbirth, said the tribunal. It distinguished pregnancy or childbirth from caring for a new-born. Men, it said, are encouraged to share responsibility for caring for a new-born.

This decision contrasts with an earlier employment tribunal decision (Hextall v Chief Constable of Leicestershire Police ET/2601223/15). I understand that both decisions have been appealed to the Employment Appeals Tribunal (EAT). Please note that tribunal decisions are not binding and the specific facts of the case may be relevant, but employers who enhance maternity pay and not shared parental pay should take note.

Redundancy identified during sickness absence

Mr Charlesworth was made redundant by his employer, Dransfields Engineering Services (DES), after a period of disability-related sickness absence (he underwent treatment for cancer). It had become apparent to DES during the absence that it could manage without his post.

This was not, agreed the tribunal and the EAT, discrimination arising from disability. Although there was some link between the absence and the decision to make Mr Charlesworth redundant, this was not the same thing as finding that he was dismissed because of his absence. The fact that his job was no longer needed could have been identified in some other way, had he in fact been at work. (Charlesworth v Dransfields Engineering Services Ltd UKEAT/0197/16.)

Dealing with Asperger’s

The decision in The Government Legal Service v Brookes (UKEAT/0302/16) is unsurprising but a useful reminder. A job applicant who suffered from Asperger's was considered to have experienced indirect disability discrimination when her prospective employer required her to undergo a multiple choice test and refused to adjust the format of the test. She was put at a particular disadvantage and which could not be justified. The employer had also failed to make reasonable adjustments by not allowing her to submit answers in a different format.

Reasonable adjustments – reducing work load

Ms Kuranchie, an Assistant Director at the Home Office, was disabled by reason of dyspraxia and dyslexia. She complained that she had to work long hours to complete her duties owing to a lack of adjustments to accommodate her disability. The Home Office agreed to compress her hours (36 hours worked over 4 days rather than 5 days) so that she would have greater opportunity to complete her work and could schedule hospital appointments on her non-working day. They also agreed to provide assistive software when she moved locations.

She did not request further adjustments but in the course of her claim for disability discrimination she alleged that the Home Office should have reduced her workload so that she would not be required to work longer hours than her colleagues in order to complete her tasks. Her dyslexia report did not mention this but in the proceedings it emerged as a solution to remove the disadvantage. The tribunal found a breach of duty to make reasonable adjustments.

The Home Office appealed on the grounds that the tribunal not placed sufficient emphasis on the adjustments that had been made (compressed hours and assistive software) and instead relied on changes that the employee had not actually requested. The EAT rejected the appeal. The question was whether reasonable steps were taken. The fact that this solution had not been suggested by the employee was irrelevant.

The case shows that the onus is on employers to consider what adjustments could be made, not just rely on those which are asked for. (Home Office (UK Visas & Immigration) v Kuranchie UKEAT/0202/16).

A day’s pay

In Hartley and others v King Edward VI College (2017 UKSC 39) the dispute was over how much pay an employee should lose for a day spent on strike. Was it 1/260th of annual salary, so a working day’s pay, or more simply 1/365th?

The employer opted for the former, a larger deduction. Wrong, said the Supreme Court. The employees were employed on annual contracts. It was accepted that the employees, who were teachers, regularly worked outside of their contracted hours, including weekends and holidays. Therefore, with no express provision in their contracts to the contrary, the statutory apportionment principle of treating each day as 1/365th of annual salary was the right one.

The nature of the employment contracts was important and the fact that they were annual ones was critical. Had they not been, the position would have been "very different".

Employer's belief that disclosure not protected

In whistleblowing situations it is not necessary for there to be an actual breach of law or regulation, as long as the worker making the disclosure reasonably believes there to have been a breach. Beatt v Croydon Health Services NHS Trust (2017 EWCA Civ 401) establishes that it does not matter either if the employer genuinely believes that the employee's disclosure was not protected.

It remains possible to dismiss an employee for making disclosures. However, an employer must not only think the employee is not protected (for example, because it thinks it would not be reasonable for the employee to believe there has been a breach) but be confident that the employment tribunal will agree.

Impact on UK employment protection where contract governed by UK law

I know my readers will be disappointed if I do not regularly report cases about the application of UK protections for foreign workers. Here is another.

The EAT has confirmed that whether an employee based abroad can bring a claim for unfair dismissal requires the employment tribunal objectively to assess whether the employee has a strong connection to Great Britain. Here, the employee lived in the Lebanon and commuted to work in Saudi Arabia. The tribunal had found that he did not have a strong enough link to GB despite having an employment contract governed by English law. It accepted the employer's explanation that it had used its standard British contract for this overseas employee for "convenience".

The EAT said that this explanation was not enough. It said that the tribunal placed too much emphasis on that and more generally on what the employee did and not enough on who he worked for. All the circumstances needed to be considered and one of those was the contract that had been agreed by both parties. The case was sent back to the tribunal to be reconsidered.

This is not saying the law of the contract is the key factor. Indeed, in this case there were other links to UK – he was paid in sterling, registered with HMRC, had restrictions in the contract concerning activities in UK and could be required to work in UK. But the choice of governing law is one factor, so if the intention is to ensure that UK statutory protection should not apply, choosing an overseas law to govern the contract would be helpful (although it could increase the potential for the laws of that country to apply of course). (Green v Sig Trading Limited UKEAT/0282/16.)

Must an employee be culpable?

Mr Ktorza worked on the foreign exchange desk at JP Morgan. He was dismissed for 'short-filling' around trades, which the Bank maintained he had been instructed not to do. He said he had been unaware of that instruction.

The employment tribunal found the dismissal unfair, taking the view that Mr Ktorza’s conduct was not culpable.

This was the wrong approach, said the EAT. The tribunal needed to look at the matter from the employer's point of view. The Bank did not need to show that the conduct in question was actually culpable. The question was whether it acted reasonably in treating the conduct as sufficient reason for dismissal. (JP Morgan Securities PLC v Ktorza UKEAT/0311/16.)

The information and any commentary contained in this newsletter are for general information purposes only and do not constitute legal or any other type of professional advice. Darryl Evans and Evans Employment Law Limited do not accept any and, to the extent permitted by law, exclude all, liability to any person for any loss which may arise from relying upon or otherwise using the information contained in this newsletter. If you have a particular query or issue you are strongly advised to obtain specific, personal advice and not to rely on the information or comments in this newsletter.

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