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Turning points: employment law into 2017

12 December 16

At the end of a momentous year, the authors highlight some of the key developments affecting or about to affect employment law, including some that illustrate the widening scope of the subject

by Laura Morrison, Claire McKee

The non-employment lawyers amongst you would be forgiven for thinking that your colleagues or university peers who chose employment law spend their days busily signing settlement agreements or advising on what to do with naughty employees or unscrupulous employers. You might be right, but only to a certain extent, as you will gather from our roundup of the year and projections for 2017, which feature very little in the way of what may be seen as traditional employment law issues.

Modern Slavery Act 2015

Sadly, in the United Kingdom in 2016, employment lawyers advise on this area more than you may imagine.

Theresa May announced on 12 October that the UK must take a more radical approach to the subject. One requirement introduced by the Act was publication of a slavery and human trafficking statement by organisations with a £36 million-plus turnover each financial year (within six months of the financial year end is advisable). Given that modern slavery seems to be moving higher up the policy ladder, it is likely that these statements will be closely monitored.

In addition to the Act’s anniversary in October, and the potentially looming deadline for modern slavery statements to be published, earlier this year we saw judgments being handed down in two breakthrough modern slavery cases.

In the first, DJ Houghton Chicken Catching Services Ltd was ordered by the High Court to pay compensation to six Lithuanian workers who had been trafficked to the UK and severely exploited. The workers had been working back-to-back eight hour shifts with no sleep or toilet breaks, and were housed in accommodation which was unsafe and infested with fleas.

The court ruled that the workers were owed compensation for the company’s failure to pay the agricultural minimum wage and for the charging of prohibited work-finding fees amongst other things. This was the first time that a British company had been found liable in a civil action by victims of modern slavery, and the case marks a significant breakthrough in attempts to obtain justice for victims of practices like these.

In the second, a groundbreaking criminal prosecution, four men were imprisoned for modern slavery, assault and kidnap offences. This case marked some of the first convictions achieved under the Act. Both cases underline the importance of the statements required by the Act, and indeed of ensuring that more than lip service is paid to the need to make these annual reports.

Immigration: increasing relevance

Last month saw a rare decision by the Court of Session under tier 2 of the points-based system, an interesting one for the increasing number of employment lawyers adding immigration advice as another string to their bow.

In Experience India Ltd v Secretary of State for the Home Department [2016] CSOH 161 (11 November 2016), Lord Malcolm refused to overturn the Home Secretary’s decision to revoke a restaurant group’s sponsor licence. The court confirmed previous authorities that described the grant of sponsor status as a “fragile gift”, noting the high degree of trust placed by the Home Secretary in licence holders, the significant responsibilities a licence brings and that the Home Secretary is entitled to maintain a fairly high index of suspicion and a “light trigger” in deciding when and with what level of firmness she should act.

There were seven grounds for deciding to revoke the licence in this case. One of the key issues was failure to meet the “genuine vacancy” test, with the Home Office concluding that the minimum skill requirements were not met and the role carried out did not match the job description provided for the certificate of sponsorship (CoS). There were also concerns that a number of workers were paid less than the rates specified in their CoS, failures in reporting duties and a failure to act honestly (by making redundant, with immediate effect, seven of the eight workers a compliance officer wished to interview).

The court held that dishonesty or bad faith was not required for a licence to be revoked; it is sufficient that the Home Office is satisfied that there has been a breach by the licence holder which is listed as a mandatory ground for licence revocation: a clear reminder to licensed sponsors, if it were needed, of the vigilance with which they must comply with their sponsor duties.

Awaited: gender pay gap reporting

Probably the most significant employment law development on the short-term horizon is gender pay gap reporting. The Government was expected to publish its response to the consultation on the draft regulations, released earlier this year, during the summer along with the final regulations. The regulations were initially due to come into force on 1 October 2016.

We are still waiting for the consultation response and final regulations, but on current information, the obligations will still kick in from April 2017. There is expected to be a change in the key dates so that businesses will need to take their first snapshot of gender pay gap data on 5 April 2017 (instead of 30 April), and publish their report by 5 April 2018.

Set: apprenticeship levy

Also from April 2017, all UK employers with a total annual salary bill of more than £3 million will pay an apprenticeship levy. The levy will be charged at a rate of 0.5% of an employer's annual pay bill. While it applies to all UK employers, each employer will have a levy allowance of £15,000 per year to offset against the levy.

The UK Government estimates that 2% of employers will be eligible to pay the levy. This would raise up to £3 billion a year by 2019-20.

Apprenticeship policy is a fully devolved matter, so it will be up to the Scottish Government to decide how best to use the funds raised through the levy. A public consultation has been launched.

Taxation of termination payments

In the slightly longer term we are going to see changes to the taxation of termination payments. Surely this is one for the tax lawyers? Sometimes, but this has long been an issue with which employment lawyers have had to grapple. It causes issues in many a settlement agreement negotiation.

Changes will be made from 2018, including that all payments in lieu of notice (PILON), whether contractual or not, will be taxable. This will remove the source of much debate, and payments for injury to feelings will be subject to tax unless relating to a psychiatric injury or another recognised medical condition. There has been conflicting authority on the proper tax treatment of injury to feelings payments, so a clear statutory answer on this is helpful.

Remix: the “gig economy”

In a recent case of which you will no doubt all be aware, following claims by some of its drivers that they are in fact workers rather than self-employed contractors, Uber claimed that it was a technology company and not a supplier of transportation services. However, the tribunal thought little of Uber’s argument that drivers were self-employed, saying that “the notion that Uber in London is a mosaic of 30,000 small business linked by a common ‘platform’ is to our minds faintly ridiculous”.

A number of key factors influenced the tribunal’s decision that Uber drivers meet the statutory definition of workers, including that drivers do not – indeed cannot – negotiate with passengers (except to agree a reduction of the fare set by Uber); drivers are offered and accept “trips” strictly on Uber’s terms; and Uber controls the key information, including the passenger’s destination, which is not known by the driver until he has picked the passenger up.

The treatment of workers, in the loosest sense, in the gig economy was attracting attention before this decision, but we can expect the scrutiny to become ever more intense in the coming months.

Watch this space… Brexit

And yes, of course Brexit affects employment law as much as any other area, so we couldn’t conclude the article without acknowledging Brexit and the surrounding uncertainty.

If the Supreme Court affirms the judgment of the High Court that the UK Government has no power to give notice to quit the European Union under the now-famous “article 50” until it first gets the permission of Parliament, a decision expected in January, the Government will have to introduce a bill for the lodging of the article 50 notice. Although the normal legislative process may be expedited, both MPs and members of the House of Lords will have the opportunity to scrutinise the Government’s proposals for what replaces EU membership. While the High Court judgment is unlikely to affect the referendum outcome, it may give time and thinking room for a soft Brexit to be negotiated or even for a General Election to intervene.

For the moment, until at least 2019, it will be business as usual and all EU law – both existing and new – continues to apply. The Government has now clarified that there will be a “Repeal Bill” which will repeal the legislation which initially took us into Europe. However, the same bill will transfer existing EU law into British law.

What happens after that is still anyone’s guess to a large extent, but much will depend on the terms of any exit deal and our ongoing relationship with the EU. There is unlikely to be much, if any, political appetite, far less parliamentary time, for widespread repeal of employment provisions which are now a settled part of UK law. In the fullness of time, we expect there may be some changes around the edges, such as the Agency Worker Regulations, which were not particularly well received and would be fairly easy to repeal, elements of the Working Time Regulations, and perhaps the introduction of a cap on discrimination awards.

Laura Morrison is an associate, and Claire McKee a senior solicitor, in the Employment & Pensions team at Maclay Murray & Spens LLP 

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