Click here for our dual experts’ view on the latest news about the class action against Morrisons, following its data leak. Thousands of its employees are suing the UK supermarket retailer for breaching privacy and data protection laws in London’s High Courts. Our Employment and Pensions and Privacy, Security and Information teams have worked together to provide you with the key employment and privacy lessons to learn from this mass data breach claim and how to protect your business from similar harm.
The Government has given the go-ahead to its proposed £95,000 public sector exit payments cap in its consultation response. Last week, it published the draft Public Sector Exit Payment Regulations 2016, making the cap a more tangible reality. The cap, which will limit the total aggregate value of exit payments made to (most) public sector workers, will be part of the forthcoming Enterprise Bill 2015-16.
The cap (initially set at £95k but subject to change) will include payments for: loss of employment generally, voluntary or compulsory redundancy, payments in lieu of notice (PILONs) and unreduced pension access on early retirement, amongst others. Including PILONs will mean that the cap is not evaded by excessively long notice periods, paid in addition to exit payments. It remains to be seen how this legislation will interact with the Civil Service Compensation Scheme, though it is likely that payments under this scheme will fall within the cap.
The draft Regulations do contain exceptions. Payments made in respect of employee death or serious injury from accident, injury or illness, accrued but untaken holiday pay, bonuses due, damages from court litigation and protective payments under TUPE are not subject to the cap. And the Regulations do contain powers for restrictions to be relaxed in exceptional circumstances.
Most public bodies in Great Britain will fall under the cap, though not publicly owned financial bodies and public broadcasters, such as the BBC. Even then, the Government expects those bodies to put in place their own equivalent caps to coincide with the statutory one.
The Regulations are still in draft form and subject to debate in Parliament so could change yet. But this news, along with other Government proposals to recover exit payments from public sector high earners leaving a public sector body and rejoining another within 12 months, does not bode well for those expecting a hefty pat on the back for their public sector work. And it raises a question: will private sector shareholders follow suit in pushing for capped exit payments?
If you would like to discuss how best to structure your organisation’s severance packages with us, please do not hesitate to contact a member of our Employment and Pensions team.
On Wednesday Mr Beavis lost his claim in the Supreme Court that an £85 parking ticket he received for overstaying a two hour period of free parking at a retail park in Chelmsford was unenforceable as a penalty clause. While the decision has come as a disappointment to many it has significant legal implications changing 100 year old case law and creating new law on penalties that impacts on all areas of law including the employment relationship.
Mr Beavis’ case was joined with another case in which a share sale agreement between a Mr Makdessi and Cavendish Square Holdings BV provided that Mr Makdessi could be deprived of some deferred consideration and be required to transfer his remaining shares to Cavendish at a price that excluded goodwill if he breached non-compete restrictions in the share sale agreement. Mr Makdessi’s argument that such a clause was penal also failed.
The traditional test of whether a clause should be held to be unenforceable as a penalty was whether the clause that took effect on a breach of contract was a genuine pre-estimate of loss and therefore compensatory or whether it was aimed at deterring the breach of contract and therefore penal. The Supreme Court held that the true test is whether the provision imposes a detriment which is out of all proportion to any legitimate interest of the innocent party in the enforcement of the other party’s obligation. This shifts the focus from an analysis of whether the clause is aimed at compensation or deterrence to one of proportionality. The new test is therefore firstly to consider what legitimate business interest is served and protected by the clause and secondly whether the effect of the clause is extravagant, exorbitant or unconscionable.
On a practical level a clause in a settlement agreement that seeks to recover monies in the event of a breach no longer has to be a genuine pre-estimate of loss. Carefully drafted commercially justifiable claw back provisions in settlement agreements will not be penalty clauses. The decision also makes it harder to argue that a substantial golden parachute clause, carefully drafted claw back arrangements in bonus schemes or deferred bonuses linked to compliance with post termination restrictions are unenforceable penalty clauses.
If you would like to discuss this decision and its impact on your business please do not hesitate to contact me or another member of the team.
Various Sunday papers yesterday reported on the Government’s announcement to require large employers (i.e. those employing 250 or more employees) to publish information about their bonuses for men and women as part of their gender pay gap reporting. This follows consultation over the Summer when views were sought on the Government’s manifesto commitment to require large employers to publish gender pay information.
The Government hopes that through increased transparency around gender pay differences, employers will be forced to address any workplace inequalities identified and “will be encouraged to establish an effective talent pipeline that helps women to fulfil their earning potential“.
While the overall gender pay gap may have narrowed in recent years (and be at its lowest since records began in 1997), the overall gap for all employees remains at 19.1%. This means men are paid more than their female equivalents on average. Of course, there are many potential causes for this gender pay gap, but one of the biggest drivers of gender pay discrepancy is thought to be bonus pay, which remains among the least transparent forms of pay. It is perhaps of no surprise that in a drive for greater transparency around gender pay differences, bonus arrangements should therefore come under the spot light.
However, while the Government’s press release attracted a lot of coverage yesterday, the Government has yet to publish a formal response to its consultation and yesterday’s press release offered very little detail beyond the reported headlines. In the consultation document, the Government hinted at employers having to show the difference in average earnings of men and women by grade or job type, but there was no mention of having to report separately on different elements of pay.
The level of granularity that will be required by the new regulations when presenting gender pay gap information has yet to be confirmed. But it would seem that after blocking the original proposal for gender pay gap reporting, the Government is now fully behind it and intends it to be more than just a box-ticking exercise. Employers should therefore start thinking now about how they might take constructive steps to meet their future obligations and tackle any workplace inequalities identified.
For us, gender pay gap reporting is part of a wider agenda to encourage greater transparency and ethical leadership. In November we will be hosting the first of our ethical leadership events focusing on the new Modern Slavery Act and it is our intention to run further events on ethical leadership in the new year, including on pay. In the meantime, we would be very happy to visit your organisation to help you understand what needs to be done to address the new gender pay gap reporting obligations and then work with you to develop practical solutions. To arrange a meeting, please do not hesitate to contact either me or Richard Kenyon or any other member of the team.
In April 2015 we reported on a landmark case setting out what the courts consider to be “in the public interest” in whistleblowing cases (Chesterton Global Ltd and anor v Nurmohamed).
We can now report on a further case that supports that decision. In the case of Underwood v Wincanton plc, the Employment Appeals Tribunal (“EAT”) held that an employee can still be protected under the whistleblowing legislation if they raise a contractual matter specific to their terms of employment, regardless of whether or not it is in the public interest.
The whistleblowing provisions under the Employment Rights Act limit protection to employees who make a disclosure in the reasonable belief that the disclosure is in the public interest.
In this most recent case, Mr Underwood worked as a driver for Wincanton plc until his dismissal in June 2014. He issued claims for automatic unfair dismissal and whistleblowing. In terms of his whistleblowing claim, the disclosure he relied upon was a letter to his employer on behalf of himself and three colleagues about unfair allocation of overtime (this is similar to the earlier case of Chesterton v Nurmohamed where Mr Nurmohamed raised concerns about a commission structure that affected him and 100 other managers).
Mr Underwood’s letter suggested that overtime was being withheld from drivers who were seen by the employer to be awkward in their approach to vehicle safety and roadworthiness. Mr Underwood believed this to be a disclosure that attracted the protection of the whistleblowing legislation. The employer’s defence was that this was not in the public interest – it was simply a grievance about an internal contractual matter.
The Employment Tribunal (“ET”) agreed with the employer and dismissed Mr Underwood’s claim on the basis that it had no reasonable prospect of success. The Judge ruled that the disclosure was not something that the public would be affected by and therefore it was not reasonable for Mr Underwood to believe that it was in the public interest and consequently Mr Underwood was not protected by the whistleblowing legislation.
Mr Underwood appealed the EAT. The Judge referred to the decision in the earlier case of Chesterton v Nurmohamed which emphasised that what is important, is not whether the disclosure is actually in the public interest, but whether the employee making the disclosure has a reasonable belief that it is in the public interest.
The EAT ruled that the ET in Mr Underwood’s case did not take a consistent approach with the ruling in the Chesterton case. It was held that the ET took too narrow a view of the term “public” failing to recognise that it can refer to a sub-set of the general public, even one composed solely of employees of a particular employer. It was further held that the ET erred in finding that disputes about terms and conditions of employment could not constitute matters of public interest.
For all those reasons, the EAT held that the claim would therefore be allowed to proceed in the ET. We will keep you updated as to progress in this case.
In accordance with our earlier report in April 2015, this is a further important decision on whistleblower protection and further supports the view that the courts seem determined to keep the bar low in terms of the hurdles workers have to get over in order to be protected by the whistleblower legislation.
The financial regulators, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), recently announced new rules on whistleblowing designed to standardise good practice already found in parts of the financial services sector and to encourage a culture in which individuals feel comfortable raising concerns and challenging poor behaviour. The new rules have been in the pipeline for some time and are broadly supported across the financial services sector.
The rules will apply to deposit-takers (banks, building societies, credit unions) with over £250m in assets, as well as PRA designated investment firms (large investment banks) and insurers subject to the Solvency II directive. The rules are non-binding guidance for all other firms under FCA supervision.
Firms will be required to:
1. appoint preferably a non-executive director as its whistleblowers’ champion with responsibility for overseeing the integrity, independence and effectiveness of the firm’s whistleblowing policies and procedures;
2. establish appropriate and effective internal whistleblowing procedures and inform staff about these arrangements;
3. provide training for managers responsible for operating the whistleblowing procedures;
4. inform their staff about the whistleblowing services of the PRA and FCA;
5. inform the FCA if they lose an Employment Tribunal claim with a whistleblower;
6. present a report to the board on at least an annual basis;
7. adopt wording in settlement agreements that does not deter staff from whistleblowing; and
8. ensure that nothing in any employment contract or settlement agreement discourages whistleblowing.
The new rules will come into force on 7 September 2016 with the exception of the requirement to appoint a senior manager as a whistleblowers’ champion which will apply from 7 March 2016.
As I commented to Personnel Today, the new rules combined with the changes to whistleblowing legislation in 2013 should hopefully lead to increased exposure of and discourage corporate malpractice.
The new rules also set a standard to which others are likely to follow, and so if your business is serious about encouraging an open and transparent culture (through greater management governance and ownership), you may also want to look at adopting some of these measures. Many businesses are now moving to align the different and developing strands of CSR under the banner of ethical leadership programmes to include: whistleblowing; modern slavery and human rights; data privacy; equality and inclusion; health and safety; bribery and corruption and environmental issues.
If you would like to discuss the new rules and how they impact your firm please do not hesitate to contact me or one of the team.
HR professionals and employment lawyers need to have a broad understanding of a number of people related issues, one of which is data privacy. We try not to bombard you with information about data privacy unless something really important happens. And it just has. The Court of Justice of the European Union has declared “Safe Harbor” to be invalid (for the uninitiated, this the mechanism relied upon by many organisations to transfer personal data from the EU to the US).
At Fieldfisher we have one of the country’s best data privacy legal teams. If you or your colleagues have any questions at all on this development we would be happy to put you in touch with that team. Please just ask one of the employment lawyers known to you. In the meantime here are a few immediate thoughts to give you a flavour of the issues to come:
- Safe Harbor can no longer be relied upon as an adequate means to transfer data from the EU to the US.
- The judgement essentially reduces the number of EU-US data export options from 3 (Safe Harbor, Model Clauses, BCR) to just 2 (EU Model Clauses and BCR).
- Safe Harbor 2.0 negotiations continue in the background, and will no doubt be under intense political pressure to conclude soon, but we have no current visibility as to their likely timescale for conclusion. We understand that points of disagreement remain around national security.
- The impact of Safe Harbor invalidity will be felt both by companies that are data controllers of their own data and data processors (i.e. vendors / service providers) of their customers’ data.
- On the data controller side, EU-based controllers will come under pressure, e.g. from EU Data Protection Authorities, to move to an alternative solution for their ‘ internal’ data, such as consumer, CRM, HR and vendor data. Although we don’t expect DPAs to rush to enforcement immediately (see e.g. https://ico.org.uk/about-the-ico/news-and-events/news-and-blogs/2015/10/ico-response-to-ecj-ruling-on-personal-data-to-us-safe-harbor/) nor, in an intra-group transfer context, will group companies start suing one another, Safe Harbor certified data controllers / EU data controllers who rely on Safe Harbor certified US-based processors will need to transition to a new data export solution.
- On the US vendor/data processor side, the impact will be more immediate and potentially even more significant. US-based vendors who rely on Safe Harbor should anticipate that both new and legacy customers will put them under intense pressure to execute model clauses asap – we are already seeing immediate transition to model clauses by service providers and demands by compliance driven customers for their vendors to immediately transition to alternative solutions. The question then becomes whether the vendor should sign the Model Clauses. Put simply, there is no real alternative unless either (1) the vendor has (or shortly will have) BCR in place, (2) the vendor is willing to carry commercial risk and see if Safe Harbor 2.0 concludes very imminently, or (3) the vendor is prepared to lose EU business.
So if your organisation is currently relying upon Safe Harbor (and wants to remain compliant) it will need to put an alternative measure in place, namely (1) EU Commission Model Clauses; or (2) BCR. See Phil Lee’s recent privacy law blog What will you actually have to do if safe harbor falls? which sets out our initial thoughts on the practical steps you will need to take.
It is not yet clear what enforcement approach EU data protection authorities will take in respect of organisations that fail to put an alternative measure in place. However, the Article 29 Working Party (the EU advisory party to the European Commission with membership comprising representatives from all national Data Protection Authorities) is meeting shortly to discuss this and national Data Protection Authorities are deliberating on the issue, so hopefully we will soon have some clarity on whether there will be a grace period before EU Data Protection Authorities start taking enforcement action against those organisations who do not put an alternative solution in place.
Transfers of personal data from the EU to the USA will not stop tomorrow, but at the same time regulators will expect organisations who relied on Safe Harbor to put an alternative solution in place as soon as possible, and this pressure will flow (and will intensify) down the data processing chain. So our initial recommendation is keep calm and carry on with transitioning to Model Clauses in the first instance with an eye on more strategic solutions such as BCR in the medium to longer term.
The case of Tirkey v Chandok and another ET/3400174/2013 provides a fascinating and tragic case study concerning a range of topical issues including religious and caste discrimination, austerity, modern slavery and attempts to protect employers from large claims for unpaid holiday entitlement.
The Tribunal found that Mr and Mrs Chandhok went to India to recruit someone to look after their children and carry out domestic chores. They recruited Ms Tirkey, because “they wanted someone who would be not merely of service but servile”. They didn’t seek to recruit someone resident in the UK “because no such person would have accepted the intended conditions of work.” Ms Tirkey was born in Bihar, the poorest of the Indian states. She is of the Adivasi class, which falls at the bottom of India’s hierarchical caste system. She could not speak English and is a Christian.
The Tribunal found that in working for Mr and Mrs Chandhok Ms Tirkey:
- worked 7 days per week 18 hours per day for 4.5 years
- was on call 24 hours a day
- was paid 11p an hour
- slept on the floor
- was prevented from bringing her Bible to the UK and from attending Church
- was not allowed to contact her family
Mr and Mrs Chandhok also set up a bank account in Ms Tirkey’s name which they controlled and used for their own benefit. The conditions and environment in which she was held were said by the Tribunal to be “a clear violation of her dignity”.
The government has expressed a commitment to tackle modern slavery. However, the Legal Aid Agency refused to fund Ms Tirkey’s representation for 17 months. They suggested that Ms Tirkey’s case was not of “sufficient importance or seriousness” and that it was “only a claim for money”. They said that she could represent herself. A charity, the Anti-Trafficking and Labour Exploitation Unit, stepped in where the state refused to assist.
In the course of the litigation Ms Tirkey was able to establish that even though the powers in the Equality Act 2010 to outlaw caste discrimination have not yet been brought into force by the Government, caste discrimination was already caught by the existing legislation on race discrimination. The EAT found last year in this case that “since “ethnic origins” was a wide and flexible phrase, and covered questions of descent, caste could fall within it.”
It has been reported today on the BBC News Website that Ms Tirkey has now been awarded almost £184,000 in unpaid wages. Again, notwithstanding a Government commitment to tackle modern slavery, such claims will be limited for other victims of modern slavery and human trafficking by the Deduction from Wages (Limitation) Regulations 2014. These Regulations cap retrospective unlawful deduction claims at two years, to limit the impact on businesses of the EAT’s decision in Bear Scotland Ltd and others v Fulton and others UKEAT/0047/13 regarding holiday pay. An example of quick fixes and unexpected consequences.
For a more detailed analysis of modern slavery we hope you will join us for our seminar on 26th November.
The decision of the ECJ in the Spanish case of Federacion de Servicios Privados del sindicato Comisiones Obreras v Tyco Integrated Security SL and another (c-266/14) which has grabbed much media attention will not have come as a surprise to many of our readers who may have been following our reports. Rarely has the court not followed the opinion of the Advocate General. Much of the media attention has focussed on care workers and the additional costs employer face if they do not pay them for travel between appointments. However, the case is not about care workers but about workers who do not have a fixed or habitual place of work and who as part of their work travel each day between their homes and the premises customers. The majority of employers treat such travel time as non-working time regardless of whether the employee is home or office based. However, the ECJ has now clarified the position by finding that for workers who do not have a fixed or habitual place of work the time spent travelling each day between their homes and the premises of the first and last customers designated by their employer is “working time” for the purposes of the Working Time Directive. This means that not only are such employees entitled to be paid for this time, it must be taken into account when calculating the average number of hours an employee may work in a reference period.
Another area where clarity is key is unfair dismissal. It is not unusual for an investigating or disciplinary officer to seek guidance from the HR department as to how they should conduct an investigation into an employee’s conduct or advice on the presentation of their report or the sanctions open to them under a disciplinary procedure. However, in the case of Ramphal v Department for Transport reported this week it was clear that HR went further than providing impartial support and had in fact heavily influenced the decision that the employee should be summarily dismissed for gross misconduct. Mr Goodchild who was both the investigating officer and the disciplinary officer sent his draft report to HR. This draft contained a number of favourable findings in relation to Mr Ramphal. Mr Goodchild found that Mr Ramphal’s conduct was not deliberate and found the explanations given to be “consistent” and “plausible” and that Mr Ramphal had made a persuasive argument that he had not acted wrongly and recommended a finding of misconduct and a sanction of a written warning. There then followed six months of communications between HR and Mr Goodchild with various drafts and suggested amendments by HR which resulted in favourable comments being removed and replaced with critical comments. The final report found the employee to have committed gross misconduct, and recommended immediate dismissal.
The EAT allowed the appeal against a decision of an employment judge that the employee had been fairly dismissed finding that the employment judge had failed to follow the guidelines given in the case of Chhabra v West London mental Health NHS Trust which was decided by the Supreme Court in 2013. In the Chhabra case Lord Hodge expressed the view that while it was not illegitimate for an employer to seek advice on questions of procedure, or the presentation of a report “to ensure that all necessary matters have been addressed and achieve clarity” where alterations had been made to an investigatory report that went beyond clarification, the result was that the report was no longer truly the product of the investigating officer. The EAT found that Mr Goodchild had been heavily influenced to change his decision by HR and set aside the decision of unfair dismissal. The case was remitted back to the employment tribunal to consider the matter again in the light of the Chhabra case.
These decisions do not mean that HR cannot advise on the sanctions open to the decision maker under a disciplinary procedure or to advise whether further investigations need to be undertaken if, for example, the investigating officer or decision maker is unsure about a particular event or matter. Neither does it mean they cannot suggest amendments to a report or outcome letter to ensure everything has been covered or to give greater clarity and understanding. However, unless there is an issue of consistency that needs to be pointed out to the decision maker, HR should not stray into the area of culpability, this is for the person who has conducted the investigation or who is responsible making the decision on the appropriate sanction.
While we do not know the evidence that was given by Mr Goodchild, it is more than likely he was cross examined on his findings in the report and why he came to the conclusion he did having regard to the explanations given by Mr Ramphal. At this point everything would have started to unravel and it became clear it was not Mr Goodchild’s decision as to the appropriate sanction but HR’s. We would be surprised if the Employment Tribunal did not reverse its decision and find the dismissal was in fact unfair.
As part of the Government’s commitment to ensure that all workers are paid fairly, Business Secretary Sajid Javid has launched an investigation into the abuse of tipping.
Concerns about the treatment of tips within the hospitality sector (particularly in relation to the percentage of tips that goes directly to the employer) are nothing new. However, with recent media reports suggesting that some major restaurant chains continue to withhold a proportion of tips left for staff to cover “administration” costs, the Business Secretary has announced that he will take a serious look at the practice. A call for evidence has been launched, during which the Business Secretary is seeking the views of employees, the public and the industry, on whether Government intervention is required to ensure greater transparency in this area. The call for evidence is due to close on 10 November 2015.
Under current legislation, cash tips given directly to staff by customers, belong to the staff, not the employer. However, there is no requirement for employers to pass on tips, gratuities, cover or service charges to their staff, where they are paid directly to the employer (for example by credit card, as part of the overall bill). Whether employers pass this money on to staff is a matter for them and is governed by the contractual arrangement between them. Where staff are contractually entitled to receive tips, withholding this money would be an unlawful deduction from wages under the Employment Rights Act 1996. In addition, if an employer tells its customers the money will be distributed to staff when it will not be, then that is likely to be a breach of the Consumer Protection from Unfair Trading Regulations 2008.
One suggestion put forward to address this issue is to cap the percentage of tips that can be kept by employers to cover “administration costs”. However, critics argue that imposing a cap will simply legitimise the underhand practice of restaurants taking a proportion of staff tips and would be impossible to enforce.
In addition to the legislative framework, a Code of Practice was developed in 2009 following research suggesting that one in five restaurants did not pass tips on to their staff. Although the Code is overseen by the industry body (the British Hospitality Association), it is currently voluntary and so there is no obligation on employers to comply with its four principles of transparency.
As well as a crackdown on lawful tipping practices, the Government has announced a package of additional measures to ensure workers receive the pay they are entitled to. These measures include a crackdown on employers who deliberately fail to comply with the legislation governing the National Minimum Wage (NMW) and the new National Living Wage (NLW) which comes into force in April 2016.
Tips, gratuities, cover and service charges do not count for NMW pay purposes. Workers must be paid at least the NMW for every hour worked before tips, gratuities, cover and service charges. In relation to enforcement, David Cameron has said that the new NLW would only work if it was “properly enforced” and has confirmed that the Government will be funding a new unit at HMRC to crack down on firms thought to be flouting the law. Under his proposals employers face increased fines (double the current fine for a breach of the NMW legislation) if they deliberately fail to pay staff correctly. In addition, anyone found guilty of non-compliance will be considered for disqualification as a company director for 15 years.
The new proposals are intended to send a message to unscrupulous employers that they will pay the price if they underpay their staff and underpin the Government’s pledge to ensure hardworking people receive the pay they are entitled to.