Unsafe Harbour

avatar Posted on October 7th, 2015 by Richard Kenyon

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:

  1. Safe Harbor can no longer be relied upon as an adequate means to transfer data from the EU to the US.
  2. 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).
  3. 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.
  4. 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.
  5. 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.
  6. 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.


Caste, modern slavery and 11p an hour

avatar Posted on September 23rd, 2015 by Richard Kenyon

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.


Clarity is the name of the game

avatar Posted on September 11th, 2015 by Margaret Davis

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.


Government takes action to ensure fair pay for all

avatar Posted on September 2nd, 2015 by Joanne White

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.


Third time unlucky – Unison’s challenge to ET fees fails at the Court of Appeal

avatar Posted on August 27th, 2015 by Neil Johnston

You may recall that the High Court rejected Union’s two applications to overturn the Employment Tribunal (ET) fee system in Autumn 2013 and Autumn 2014. Unison appealed those decisions supported by the Equality and Human Rights Commission. Yesterday the Court of Appeal (CA) rejected their appeal.

The CA held that the ET fee system was not indirectly discriminatory to women, its introduction did not breach any of the Government’s obligations under the public sector equality duty and that it did not breach the European principles of effectiveness and equivalence.

The CA acknowledged that a proper balance needs to be struck between the right to charge a fee and the right to bring a claim and that the balance would not be struck if the fee was disproportionate. The CA also acknowledged that the “dramatic” fall in ET claims was unlikely to be attributable just to people who “won’t pay” a fee and must also include those who “can’t pay”. However, it was the lack of specific evidence, in particular real examples of individuals who “can’t pay” the fees due, that meant that Unison failed to demonstrate a breach of the principle of effectiveness.

Lord Justice Underhill did however comment on the Lord Chancellor’s forthcoming review of the ET fee system stating that “the decline in the number of claims in the Tribunals following the introduction of the Fees Order is sufficiently startling to merit a very full and careful analysis of its causes; and if there are good grounds for concluding that part of it is accounted for by claimants being realistically unable to afford to bring proceedings the level of fees and / or the remission criteria will need to be revisited.”

We await the Lord Chancellor’s review with interest.


Going underground

avatar Posted on August 14th, 2015 by David Carmichael

The announcement on 11 August by 3 trade unions representing tube workers that they will strike on Tuesday 25 and Thursday 27 August – staging 24 hour walkouts starting at 18.30 on each day, is no surprise. Equally predictably this continuing and disruptive industrial action helps to sustain the political momentum behind and support for the government’s Trade Union Bill.

The Bill, published on 15 July and currently the subject of consultation (open until 9 September 2015), proposes a number of changes to the law affecting trade unions including:

  • Ballot thresholds of 50% of all those entitled to vote, and an overall 40% of those eligible required to be in favour for workers engaged in “important public services”;
  • More detail required on the ballot paper about the matters in dispute and the periods when industrial action is likely to take place;
  • More information about the ballot result has to be given by the trade union;
  • Notice of industrial action to increase from 7 to 14 days;
  • Industrial action must be validated by a vote that is no more than 4 months old, otherwise a further ballot is required;
  • Where trade unions hold a picket they must appoint (in writing) a supervisor.

It’s interesting to note that one of the sticking points in the London Tube dispute is the unwillingness of trade unions to put certain offers made by London Underground to their members. This unwillingness clearly causes frustration for London Underground, given that resolution of the dispute may be delayed or even not achieved because of, in its view, over-reaching or overly political stances taken by the unions. Such frustration may be met in part by the proposal that re-balloting of members must take place if further industrial action is to be called more than 4 months after the last ballot. This is in part an attempt to ensure that the stance of union representatives remains reflective of the employees’ actual position, but it is also about focusing minds within the suggested time frame. Having said that, in the Tube dispute the train drivers union ASLEF voted in mid-June in favour of strike action. Even with the Bill’s 4 month proposed shelf life for industrial action after a ballot, further action could be taken up until the middle of October before any re-ballot would be necessary.

What is more, while the re-balloting requirement may increase union costs in long-running disputes, there is a real risk of a potentially counter-productive outcome. Employers may, in fact, delay tabling their best offer for settlement of a dispute until close to the end of the 4 month period, in the hope that the imminent cost and risk attached to running a further ballot will make the offer that much more persuasive. It may also be a slightly less generous offer than it might otherwise have been, increasing the risk that the industrial action will continue.

With the Bill likely to be enacted before the end of 2015, as in the run up to the Miners’ strike in the 1980s, it might seem that the government is taking the opportunity to improve its position and those of public sector employers, as it hunkers down for industrial action – connected to George Osborne’s continuing austerity measures and planned further spending cuts for government departments. However, leaving aside the issue of whether such preventative action is a legitimate aim, it is certainly an open question as to whether or not the proposals in the Bill will advance the government’s position. Even under the new threshold proposals the London Underground strike action would still be taking place. If enacted the Bill will not be an end to public sector disruption, and as with any one-sided initiative, there is a real prospect that it will harden positions on both.


Overseas criminal record certificates for Tier 1 (Investors) and Tier 1 (Entrepreneurs)

avatar Posted on July 31st, 2015 by Lynn McCloghry

Last week the Minister for Immigration, James Brokenshire, announced that from 1st September 2015, migrants who are applying for entry clearance as Tier 1 (Investors) or Tier 1 (Entrepreneurs) must provide a criminal record certificate from any country in which they have resided in continuously for 12 months or more in the ten years prior to the date of application. Adult dependants (over 18 years old) of the main applicant in these Tier 1 categories must also provide a criminal record certificate.

You must provide the following specified documents:

  • The original certificate, for each country (excluding the UK) where you have resided continuously for 12 months or more in the last ten years, since aged 18 years old, issued by the overseas authority; and
  • If the original is not in English, then you must provide a translated copy of the certificate, in line with UK Visas and Immigration requirements.

Certificates will only be considered valid if they have been issued within six months of the entry clearance application. If a migrant fails to provide any certificates or an acceptable explanation as to why a certificate was not obtained, then the application will be refused.

We suspect the Government will roll this requirement out for other visa categories in due course. This additional requirement is another example of a visa application becoming more complex, time consuming and costly. Any future Tier 1 (Investor) or Tier 1 (Entrepreneur) application should consider factoring in extra time to obtain the relevant certificate.

Should you require further information, please contact Lynn McCloghry.


Summer holiday reading: how about a HMRC consultation – or two?

avatar Posted on July 30th, 2015 by Nicholas Thorpe

Summer holidays are when we traditionally reach for something undemanding to read: easy reads that require little brainwork as we lounge in the sun. But for those of you who fancy reading something more challenging this Summer, the HMRC has kindly obliged with the publication of two consultation papers; the first on the tax and National Insurance (NI) treatment of termination payments; and the second on possible changes to IR35 – the rules governing the tax and NI treatment for individuals engaged through a personal services company instead of as a direct hire employee.

The first consultation paper on termination payments follows the work untaken by the Office of Tax Simplification on benefits and expenses in 2014 (reported in earlier blogs). The HMRC has put forward various proposals to simplify the current arrangements. It has also sought suggestions on alternative ways in which the current arrangements could be structured.

Key proposals include:

  • Removing the current distinction between contractual and non-contractual termination payments, in particular in relation to the different tax and NI treatment of different types of PILON. The suggestion is that contractual PILONs might also benefit from some form of tax relief although the current £30,000 tax exemption which currently applies to non-contractual payments only is likely to be reduced.
  • Aligning the tax and NI treatment of termination payments, the likely result being that employee and employer NICs would be payable in respect of termination payments that are subject to income tax.
  • Replacing the current £30,000 tax exemption. This is the proposal that is likely to attract most interest. The current proposal is to link the availability of the exemption to length of service and only employees with two years’ service or more would qualify. The exemption is also likely to start at a lower rate than the current £30,000, but would then increase at a set rate with each year of service completed up to a maximum amount. Of particular note is that the Government is also considering limiting the exemption to termination payments that have been made in connection with a redundancy, on the basis that the relief would then be targeted at those who are most at need.

Views are being sought on these proposals as well as the appropriate level at which the threshold for the tax and NI exemption should be set over the Summer, with consultation closing on 16 October 2015. Further announcements are then expected in the Autumn Budget.

And, if all that is not enough for you, HMRC is also consulting on possible changes to IR35. Options include placing greater onus on the ‘engager’ (the end client) to ensure the correct amount of tax is paid and a limitation in the scope of what falls within IR35, with the possible adoption of the deemed employment criteria set out in the intermediaries legislation, reported in earlier blogs.

We will be submitting a response to the consultations – so do let us know your thoughts on the current proprosals. We will then compile the responses and send everyone that replied a summary, so we can all benefit. We look forward to hearing your thoughts.


Modern Slavery Act 2015

avatar Posted on July 29th, 2015 by Richard Kenyon

The Government has today published its response to its consultation on the transparency in supply chain provisions of the Modern Slavery Act 2015. The Act, which was passed earlier this year, includes a provision requiring large companies to publish an annual statement regarding their efforts to combat modern slavery within their own organisations and within their supply chains.

The size of companies affected will now be set at the lowest threshold upon which the Government consulted – £36 million. According to the consultation, the intention for the Regulations, which are due in October, is that the turnover threshold will be measured on global group turnover regardless of the size of the organisation’s operation in the UK.

The annual statement must be signed off at board level and published on an organisation’s website with a link from the home page. The statement should cover the entirety of the organisation’s operations – which seems to mean the holding company and all subsidiaries globally along with all of their supply chains.

What are you doing to combat modern slavery? We will be hosting a seminar from 16.00 to 21.00 on 15 September 2015 to address the Act and the issues it raises – hold the date.  We have also formed our own team combining lawyers and social compliance consultants to assist clients to comply.


Beyond the headlines: proposed employment law changes

avatar Posted on July 15th, 2015 by Nicholas Thorpe

In the last 10 days we have seen a number of proposed employment law changes hit the headlines.

First, we had news of the Government’s proposal to relax the Sunday trading laws, with a consultation to be launched over the summer on plans to devolve the powers regarding when stores larger than 3,000 square feet can open to local authorities. This was then followed by the Summer Budget and the announcement of a new National Living Wage (which is, in all but name, an enhanced statutory minimum wage). The new living wage will start at £7.20 per hour next year and rise to £9 per hour by 2020.

News of these proposals has prompted a mixed reaction, particularly in Retail, one of the sectors most likely to be impacted by these changes. The proposed changes are likely to prompt many retailers to review their resourcing and pay models, including Sunday premiums and overtime arrangements. Many large retailers have, however, sought to allay Market concerns in recent days by suggesting that the new National Living Wage is unlikely to have a significant impact on their ‘bottom line’, as it will only apply to employees aged 25 or over. But an initial 11% hike in the current minimum wage for the over 25’s next year (with further staged increases over the following 4 years) is likely to force all retailers (as well as employers in other sectors) to consider potential changes to their current pay and staffing levels.

These proposals were then followed yesterday by the Prime Minister’s vow to tackle gender inequality in the workplace, and in particular the gender pay gap, so that his daughters (currently aged 4 and 11) can experience complete gender equality when they start their careers.

The gender pay gap has been a hard nut to crack and the latest proposal (introduced by the Coalition Government in its dying days, but first proposed as part of the Labour Government reforms in the Equality Act 2010) is for companies employing 250 employees or more to publish the average earnings for men and women in their company. Beyond the headlines, the Government has launched a gender pay gap consultation, entitled “Closing the Gender Pay Gap”, seeking views on the level of gender pay information to be required and the frequency of publication. The consultation also seeks views on wider action that can be taken to inspire girls and women, modernise workplaces and support older working women. The consultation closes on 6 September 2015.

And finally, as if all that was not enough, the Government announced today tougher union laws to limit strikes and pickets with the proposal to introduce a Trade Union Bill. Amongst other things, the Bill will introduce a 50% turnout threshold for a valid ballot on industrial action (with additional hurdles imposed for key public services), and it will limit the period during which a ballot is valid to authorise industrial action for 4 months. The Bill has yet to be published but the Government’s proposals have, predictably, attracted an immediate and furious reaction from trade unions. Detailed consultation papers are due to be published shortly and consultation will be open until September 2015.

So, what does this all mean for you and your business?

While the recent flurry of headlines on the proposed employment law changes may soon be forgotten, the proposals present significant change and all employers (large and small) are likely to be impacted to some degree by them. For a greater understanding of what is being proposed and likely impact it may have on your business, please do not hesitate to contact any member of the team.