Neal v Freightliner may have settled, but EAT to consider remaining holiday pay claims this week

avatar Posted on July 28th, 2014 by Nicholas Thorpe

So, it appears the rumours are true. Neal v. Freightliner Limited (the voluntary overtime holiday pay case) would appear to have settled as it does not appear in this week’s Employment Appeal Tribunal (EAT) cause list. However, the Employment Appeal Tribunal will still be hearing the co-joined appeals of Bear Scotland Limited v. Fulton & Baxter, Hertel (UK) Limited v. Wood & Others and Amec Group v. Law & Others.

The co-joined appeals are listed for a 3 day hearing before the EAT President, the Honourable Mr Justice Langstaff, commencing this Wednesday, 30 July.

In Bear Scotland v Futon, the Tribunal went further than the decision in Neal v. Freightliner by deciding that voluntary overtime must be included in the calculation of holiday pay for the entire 5.6 weeks of holiday provided under the Working Time Regulations 1998, and not the four weeks required by the Directive. In Hertel (UK) Limited and Amec Group, the Tribunal also decided that voluntary overtime should be included but limited its decision to the four weeks required by the Directive.

Both decisions were reached by the Tribunals treating the employees as having no normal working hours. This potentially creates knock-on issues beyond the calculation of holiday pay and in Hertel (UK) Limited and Amec Group required the Tribunal to read in additional wording to avoid the inclusion of unintended amounts being included in the calculation of holiday pay. In so doing, it created added complexity to an already overly complicated point.

While the arguments raised this week in the EAT are likely to be highly technical, the outcome of these appeals is important as it could have significant implications on a large number of employers who offer but do not guarantee overtime. Given the current uncertainties created by the Tribunal decisions mentioned above, it is only hoped that the Honourable Mr Justice Langstaff will give employers much needed guidance on this issue, particularly for those employers who are still adopting a “wait and see” approach.


“Morbid” obesity may amount to a disability, says Advocate General

avatar Posted on July 17th, 2014 by Nicholas Thorpe

Advocate General Jääskinen has today confirmed, in the case of Karsten Kaltoft v. Municipality of Billund, that morbid obesity may amount to a disability for the purposes of the Equal Treatment in Employment Directive.

The Directive sets the framework for equal treatment in employment across Europe and is implemented in the UK by way of the Equality Act 2010. This case (which concerns a Danish childminder who claims his employment was terminated due to his obesity) is therefore relevant to all UK employers.

The Advocate General accepted that there may be cases of extreme, severe or morbid obesity, where an individual has a BMI of over 40, which could create serious limitations on that individual’s ability to participate in the workplace, such as problems with mobility, endurance and mood, which could amount to a “disability” for the purposes of the Directive. However, the Advocate General rejected any suggestion that there is a general, stand-alone prohibition on discrimination on the grounds of obesity in EU law. The matter will now go before the European Court of Justice (ECJ) to consider, with judgment to be given at a later date.

In his written opinion, the Advocate General did not consider “mere” obesity (i.e. individuals with a BMI count of less than 40) was likely to amount to a disability. However, if the individual’s obesity has reached such a degree that it hinders their full and effective participation in the workplace, then he accepted that it could be a disability.

The Advocate General also added that the question of disability does not depend on whether it is “self-inflicted”. The cause of an individual’s obesity is irrelevant; it may be due to excessive eating, a psychological or metabolic problem, or as a side-effect of medication. The key question is whether their obesity (whatever its cause) hinders their full participation in the workplace – or, using the language of the Equality Act 2010, from carrying out normal day to day activities.

The Advocate General’s opinion is consistent with the approach currently adopted in the UK under the Equality Act, which protects individuals who suffer from physical and mental conditions that result from obesity, to the extent that they meet specified criteria in terms of their nature, effect and duration. If today’s opinion is followed by the ECJ, then this case is unlikely to change the approach taken by Employment Tribunals; but it does serve as a useful reminder of the considerations that an employer must give when dealing with individuals with severe weight problems, particularly if the Equality Act is engaged.


Launch of Enhanced Code of Conduct for Executive Search Firms

avatar Posted on July 9th, 2014 by Joanne White

In September 2013, we reported that due to a lack of female representation at Board level in FTSE companies, Business Secretary Vince Cable was planning to review the efficacy of the Standard Voluntary Code of Conduct (“SVCC”) originally launched in 2011. The SVCC was developed following the Davies Review, which recommended that executive search firms addressed gender diversity on corporate boards and best practice for the related search processes. Over 70 firms signed up to the original SVCC.

A review of the SVCC and a further independent review in February 2014, has resulted in the development of an Enhanced Voluntary Code of Conduct (“EVCC”), created by executive search firms themselves, in order to raise the standards of professionalism and conduct in the recruitment of women to the boards of FTSE 350 companies. The new EVCC gives recognition to those firms who have been most successful in appointing women to FTSE boards.

Although voluntary, it is hoped that executive search firms will show their commitment to gender diversity by embracing the more rigid requirements of the EVCC. To encourage this, firms can gain accreditation under the EVCC by demonstrating to the Davies Steering Group (who has responsibility for determining which firms are deemed to have met the criteria) that they have, amongst other things:-

  • supported the appointment of at least 4 women to the boards of FTSE 350 companies over the last year;
  • achieved a proportion of at least 33% female appointments in their FTSE 350 board work (across both Executive and Non-Executive Director roles);
  • a proven record of helping women to achieve their first FTSE 350 board appointment;
  • visibly signalled their commitment to supporting gender diversity clearly on their websites, in marketing literature and in discussions with clients and candidates;
  • published relevant summary data on their track record and case studies on their website as appropriate.
  • provided internal training and awareness programmes to share and embed best practices within their firms and to ensure that full adherence to the Code is effectively monitored.

The accreditation criteria is re-assessed annually.

The launch of the EVCC is the latest milestone in a bid to meet the target of 25% women on FTSE 100 boards by 2015. Whilst it is widely considered to be a step in the right direction in terms of achieving gender equality in boardrooms, it is unlikely that the EVCC is the final chapter in this story with an update expected from the Davis Steering Group in September 2014.

We will keep you updated.


Zero hour contracts – the Government’s response

avatar Posted on June 26th, 2014 by Nicholas Thorpe

Yesterday, the Government announced its long awaited response to its consultation on the use of zero hour contracts. Draft legislation was also put before Parliament setting out the proposed new rules.

The Government has confirmed that it will ban the use of exclusivity terms, preventing zero hour workers working for another employer even when no work is guaranteed. In its brief statement on the consultation’s outcome, the Government also indicated that it was committed to increasing the availability of information for employees on zero hour contracts and would work with unions and businesses to develop a best practice code of conduct aimed at employers who wish to use zero-hour contracts.

The draft legislation for the first time provides a statutory definition for the term “zero hour contract”.

A “zero hour contract” is defined as:

“… a contract of employment or other worker’s contract under which:

(a)     the undertaking to do or perform work or services is an undertaking to do so conditionally on the employer making work or services available to the worker, and

(b)     there is no certainty that any such work or services will be made available to the worker.”   

The definition would appear to exclude workers who are guaranteed a certain number of hours work, no matter how few; for example, a one hour fixed contract, with a commitment to work such additional hours as and when required, would appear to fall outside the definition. This has prompted some to say that the proposed ban on exclusivity terms could, on the face of it, be easily circumvented. However, the Government has indicated that it will issue a further consultation on how to prevent ‘rogue employers’ evading the exclusivity ban.

The Government’s response stops short of some of the proposals put forward by Ed Miliband in April (see earlier blog). However, the draft legislation includes reserved powers for the Secretary of State to introduce additional legislation to modify zero hour contracts, impose financial penalties on employers, require employers to pay compensation to zero hour workers, and confer additional rights on zero hour workers. Further restrictions may therefore be proposed following further consultation and the development of a code of practice on the fair use of zero-hour contracts, which is due by the end of 2014.   


Criminal record checks and the right to private and family life

avatar Posted on June 18th, 2014 by Angharad Schell

The Supreme Court has today determined that the UK’s current process for criminal records checks is incompatible with the right to respect for their private and family life.  This confirms the Court of Appeal’s earlier decision, reported in our blog.

Disclosing convictions, cautions, warnings and reprimands

Other than in the case of extremely serious criminal offences, most convictions are ‘spent’ after a specified period of time (in the case of cautions, warnings and reprimands, they are spent immediately after being given). Spent convictions do not need to be disclosed to employers and, where an employer is aware of a spent conviction, they are not entitled to make any decisions (such as to deny employment) on the basis of a spent conviction or a failure to disclose.

However, in cases where the individual is seeking to work with children or other at risk groups, then employers are entitled to take account of spent convictions and there is also a disclosure obligation on the individual.

Convention Rights

The European Convention for the Protection of Human Rights guarantees the right to private and family life. This is a limited right and can only be infringed where the interference is: (1) in accordance with the law; (2) necessary in a democratic society for certain prescribed reasons, including public safety and the prevention of crime.

The current case

In the case before the Supreme Court, T had received a warning when he was 11 in connection with the theft of a bicycle. This warning was disclosed twice as part of a CRB (now DBS) check: first when T was 17 and again when he was 19. In each case the spent warning was disclosed on the basis that the activity might bring T into contact with children.

JB was issued with a caution (as an adult) in connection with the theft of a pack of fake nails (which was claimed to be accidental). Eight years later, JB completed a training course intended to later find her placement within the care sector but, when the spent caution was disclosed, was denied the opportunity to be put forward for work in the care sector.

T and JB claimed that the disclosure of the spent warnings and cautions breached their Convention rights.

The Supreme Court agreed.  Interference with Convention rights had to be in accordance with the law. As UK law required all spent convictions to be disclosed indiscriminately, the interference with the right to private life was not in accordance with the law and was disproportionate. Further, the interference with the right was not necessary in a democratic society. The Court particularly focused on the fact that the legislation was not rational in the means it was choosing to meet its ends: for example, requiring T to disclose a childhood misdemeanour could not sensibly achieve the required end, to protect children. The impact on requiring JB to disclose an incident showing minor dishonesty years later also had a disproportionate impact on JB compared to the intended aim of protecting those in need of care.

As such, the declaration of incompatibility put into place by the Court of Appeal was maintained by the Supreme Court. The criminal record check regime was reviewed following the Court of Appeal Judgment and more limited rules were introduced in June 2013 regarding the disclosure of spent convictions. The Supreme Court noted the change in law but refrained from commenting on whether they considered the revised legislation to also now be compatible with Convention rights.


Members of Limited Liability Partnerships protected by whistleblower legislation

avatar Posted on May 27th, 2014 by Neil Johnston

In Clyde & Co. LLP v Bates van Winklehof the Supreme Court held that members of limited liability partnerships (LLP) are workers and hence entitled to protection under whistleblowing legislation.

Ms Bates van Winklehof, a former fixed share partner of Clyde & Co., brought a claim of sex discrimination and detriment on grounds of whistleblowing following her expulsion from the LLP. She claims that prior to her expulsion she made protected disclosures that the managing partner of a Tanzanian law firm with which Clyde & Co. entered into a joint venture had admitted paying bribes to secure work and the outcome of cases.  Clyde & Co. sought to have the whistleblowing claim struck out at a Preliminary Hearing on the basis that the whistleblowing legislation did not cover members of an LLP.

The Supreme Court’s finding that LLP members do have protection under the whistleblowing legislation is consistent with the underlying spirit and intention of the whistleblowing legislation but does have significant implications, particularly for those in the financial, accountancy and legal sectors. LLP members do not have the statutory protection from unfair dismissal. However, compensation for detrimental treatment under the whistleblowing legislation is uncapped and we are likely to see an increasing use of allegations of detrimental treatment on grounds of whistleblowing from disgruntled LLP members on exit from the partnership.

LLP members will also now benefit from statutory protections for part time workers, from unlawful deductions from wages, payment of the national minimum wage, rights under the Working Time Regulations and rights in respect of pension auto enrolment. Auto enrolment is a particular concern because it creates a positive duty on the employer to act, enrolling partners in the scheme and paying employer contributions. Our Head of Pensions, David Gallagher, says that he would expect the Pensions Regulator to produce some guidance on whether partnerships will now have a period of grace to implement the result of the judgment and whether contribution arrears might be necessary for the period back to the employer’s staging date. If you would like to discuss this or any of the wider implications of the Supreme Court’s decision please do not hesitate to contact me or a member of the team.


Lock, Stock and Commission – Part 2

avatar Posted on May 22nd, 2014 by Nicholas Thorpe

The European Court of Justice (ECJ) has today confirmed that commission should be included as a component in the calculation of a worker’s holiday pay (in its judgment in Z.J.R. Lock v. British Gas Trading Limited).

As you may recall from our earlier blog, Mr Lock was a sales person for British Gas and, like many people in sales, his remuneration consisted of two main components: basic salary and commission.   His commission was paid in arrears on a monthly basis, based on sales achieved.

Mr Lock’s holiday pay was calculated on his basic salary only.   While Mr Lock received commission payments during annual leave for sales made during previous weeks, during periods of annual leave when he did not undertake work, he would not generate any commission. Therefore, his pay would potentially be lower in the weeks following his return from leave than it would be if he had not taken any leave.

The ECJ was concerned that this might deter workers, like Mr Lock, from actually taking leave, particularly if commission represented a sizeable proportion of their total remuneration. The ECJ concluded that, as commission was intrinsically linked to the tasks Mr Lock was required to carry out, it should therefore be factored into the holiday pay calculation.

As regards how to calculate the amount of commission payable during annual leave, the ECJ left this question for the national courts to decide.

In its judgment, the ECJ makes reference to calculating the amount of commission on an “averaging” basis. However, the ECJ said it was for the national courts or tribunals to assess whether using an average calculated over a particular reference period as a method to calculate the commission payable to a worker in respect of their annual leave achieved the objectives of the Working Time Directive.   In other words, an employment tribunal would need to satisfy itself that the method used by an employer to calculate the commission payable during annual leave does not leave the worker financially worse off and potentially deter the worker from taking leave.

As the law currently stands in the UK, the reference period to calculate “average” pay is a 12 week period. However, as the Advocate General noted in his earlier opinion, using a longer reference period may be more appropriate when it comes to calculating an “average” in relation to commission payments.   Determining the appropriate reference period and amount which is representative of the commission that a worker would otherwise have earned (and which will not leave the worker financially worse off if he takes leave) will depend on a number of factors, including the nature of the work, how the commission is earned and the regularity of the payments.

If you have any queries regarding the potential impact that this case might have on your current commission and holiday pay arrangements, please do not hesitate to speak to any member of the team.


Motion for greater protection for interns fails

avatar Posted on May 19th, 2014 by Margaret Davis

Last week saw the introduction of a motion into the House of Commons by Tory MP Alec Sherbrooke to restrict the use of unpaid internships. Although the motion had cross party support, given its timing, there was no prospect whatsoever of this getting on to the Parliamentary agenda with a view to becoming law, as proved to be the case when just a couple of days after, it was thrown out. This is a shame because internships create even more uncertainties than zero hour contracts, which have been the focus of late for politicians. Many young people view internships as their only hope of a job – “if I do a good job they may keep me on” or “I have no experience of the industry so my only hope is an internship”.

The cynics among us may see all of this as no more than the rhetoric we often see in the run up to elections, particularly given the disillusionment of many young voters after the last election when the promises made by politicians regarding student fees were not met. It would be a shame if this is the case because, in the case of internships, many young people are exploited and lured into working for little or nothing in the hope of a job as a reward for their efforts, when the reality is they are simply there because of a drive to keep headcount costs down.

While there is no doubt some employers view internships as a means of obtaining cheap or free labour, this is not the case for all. Many employers offer internships because they present an opportunity to showcase their workplace, allowing them to attract the best people and become an employer of choice. Internships also allow employers to test capabilities in a way that is not possible in the recruitment and selection process. Whatever the reason for interns, they are not completely unregulated and it is surprising how few organisations do not appreciate that because an intern is likely to come within the definition of a “worker” under the National Minimum Wage Regulations, they should by be paid at least the National Minimum Wage (NMW) as well as having other statutory entitlements such as paid holiday. In the light of case of Secretary of State for Business, Innovation and Skills v Knight reported last week there could also be a chink in the armour which prevents interns being classified as employees.

In the Knight case the Employment Tribunal had to consider whether a majority shareholder who had not received pay for two years could be an employee. Mrs Knight’s claim related to her entitlement to a payment from the National Insurance Fund because her company which was also her ‘employer’ had become insolvent. There has been considerable case law over the years as to the existence of an employment relationship since 1968 when the High Court in the case of Ready-Mixed Concrete (South East) Ltd v the Minister of Pensions and National Insurance laid down three keys tests for the determining the existence of an employment contract namely that:

1.  an agreement exists to provide the servant’s own work or skill in the performance of service for the master (personal service) in return for a wage or remuneration;

2.  there is control of the servant by the master; and

3.  the other provisions are consistent with a contract of service.

Since the Ready Mixed decision there have been numerous cases where the factors for determining whether an employment relationship has come into existence and the principle of the “irreducible minimum” has evolved. This means that if any one of the 3 rules listed above may not be established then generally there is no contract of employment. However, it appears from the Knight judgment it is not an incontrovertible rule that the lack of any payment of salary is fatal to the existence of an employment relationship. In that case the EAT dismissed the appeal against an Employment Tribunal’s ruling that Mrs Knight was in fact an employee despite the fact she had received no pay for the last two years of her employment. The EAT explored all the key factors and decided there was in fact an employment contract in existence being of the view that notional, rather than received pay was sufficient to satisfy the test outlined above in 1.

In the case of internships many organisations do pay interns at least the NMW. Given the decision of the Employment Tribunal in the Knight case, one wonders whether it will only be a matter of time before a court will conclude that an employment relationship exists between an organisation and an intern despite the wording of any agreement between them. In such an event the intern may well have employment protection and other statutory rights given to employees including an equal pay claim if other employees are paid more than the NMW for the same or similar work.


Employees’ home computers may be subject to inspection

avatar Posted on May 12th, 2014 by Neil Johnston

In the recent case of Warm Zones v Sophie Thurley (1) and Alex Buckley (2) the High Court granted an Order compelling former employees to allow the viewing and copying of information on their personal home computers.

Warm Zones (WZ) is a not for profit company whose objective is to deliver energy efficient measures and welfare benefit and energy advice to domestic households throughout the UK. WZ had a database about householders which it argued had been built up over a number of years at substantial cost and effort and which contained confidential information. Ms Thurley’s (T) and Ms Buckley’s (B) employment contracts contained express confidentiality provisions prohibiting them from using or disclosing any confidential information about the business and affairs of WZ during and after employment, but no post termination restrictions.

T and B left WZ and started to work for a competitor of WZ, UK SS Renewal Energy Services Limited (RES). T brought an unfair dismissal claim against WZ and as a result of those proceedings WZ discovered e-mails which suggested that T and B had disclosed, or were prepared to disclose, WZ’s database information to RES while they were still employed by WZ. T and B offered to make sworn affidavits and deliver up hard and soft copies of relevant documents. This was not enough for WZ which sought an Order for the imaging of T and B’s computers and inspection of those computers by an independent solicitor at WZ’s expense.

Mrs Justice Simler found WZ’s evidence to be cogent, was sceptical of T and B’s evidence and granted the Order notwithstanding T and B’s contention that it was designed to seek privileged information and harass T during her unfair dismissal proceedings against WZ.

This case is a useful illustration of the steps that an employer may take, in appropriate circumstances, to protect its databases and confidential information, where there is evidence that it has been disclosed outside of its systems. If you have concerns about the disclosure of information outside of your systems by past or present employees, please do contact any member of the team for advice on how you might seek the return of that information. We can also advise on the possible steps that can be taken to protect your business from the further disclosure, misuse and exploitation of that information.


Zero hour contracts – the latest

avatar Posted on May 6th, 2014 by Nicholas Thorpe

For those of you who are following developments regarding zero hour contracts:

  • The Office of National Statistics (ONS) has published its latest analysis of employee contracts that do not guarantee a minimum number of hours, which includes zero hour contracts. The ONS estimates that there are around 1.4 million employee contracts that do not guarantee a minimum number of hours. The ONS analysis provides some interesting industry analysis, as well as detail around the types of people employed on zero hour contracts (including a statistical breakdown by age and gender).
  • It has been reported that one of the measures to be included in the Queen’s Speech on 4 June 2014 is legislation concerning the use of zero hour contracts. If these reports are correct, then the Government’s response to its consultation on the use of zero hour contracts should be published shortly.
  • Finally, it is being reported today that job seekers may risk losing temporarily Jobseekers’ Allowance if they refuse an offer of work under certain zero hour contracts. It is understood that job seekers would not be required to accept an “exclusive” contract, which prevents a zero hour worker working for another employer – but would be required to accept other types of zero hour contracts. This measure has been criticised by those advocating a crackdown on the use of zero hour contracts, but is perhaps an indication of the Government’s current thinking on the future use of such contracts under any proposed, future legislation.