practice area articles
By Paul Hastings Professional
Back to International Employment Law
KEY DEVELOPMENTS FOR 2020
Good Work Plan changes taking effect from 6 April 2020
A number of changes set out in the Government's Good Work Plan came into effect on 6 April 2020. These changes are aimed at implementing recommendations set out in the Taylor Review; an independent review of modern working practices conducted by Matthew Taylor in July 2017.
The changes that came into effect on 6 April 2020 include the following:
- An obligation on employers to provide written statements of particulars (also known as a "Section 1 Statement") to both employees and workers on or before the commencement of their employment or engagement, subject to certain exceptions. In addition, the scope of the information that the employer must provide in the Section 1 Statement has expanded to include details such as any applicable probationary period, training and benefits.
- Holiday pay should be calculated by reference to average pay over a 52-week reference period (or the length of the individual's engagement, if shorter).
- Organisations must provide any agency workers with a Key Information document – including details relating to the type of contract, pay and annual leave entitlement – before agreeing to terms under which the work-seeker will undertake work.
- The "Swedish derogation" provisions in the Agency Workers Regulations 2010 – which set out an exception to provide pay parity between agency workers and employees subject to certain criteria – have been removed.
- The threshold to request workplace information and consultation arrangements has decreased from 10% to 2% of employees in the undertaking, subject to a minimum of 15 employees required to make the request.
Further details about this, and the changes to the IR35 Rules (which have been postponed to April 2021), can be found here.
The #MeToo and Black Lives Matter movements have had a sweeping impact in the UK – both in and outside the workplace. Employee activism has generally become more prevalent and the UK workforce is looking for organisations to be more transparent and to be held accountable for any unlawful or unfair employment practices.
To help achieve and encourage greater transparency, the Government indicated that it would review the potential misuse of confidentiality clauses or non-disclosure agreements in the context of workplace harassment or discrimination complaints and legislate to prevent their misuse. It is anticipated that the Government will make the following changes/clarifications to the law in this area:
In addition, the Government has suggested that it may: (i) introduce a mandatory duty on employers to prevent harassment in the workplace; (ii) increase the time limit for individuals to bring a discrimination claim under the Equality Act 2010 (from 3 months to 6 months); and (iii) introduce mandatory pay gap reporting.
It is likely that the Government will shelve these reforms for the time being, whilst it has its hands full tackling the economic impact of the COVID-19 pandemic. However, this topic may pick up traction once again in 2021 when the Government re-focuses its attention to non-COVID-19 related matters.
- Any provision in an employment agreement or settlement agreement preventing an individual from making a disclosure to the police, regulated health and care professionals or legal professionals would be ineffective.
- Limitations to any confidentiality clauses in a settlement agreement must be clearly set out.
- In order for a settlement agreement to be valid, individuals must obtain independent legal advice on the nature and limitations of any confidentiality clauses in a settlement agreement, in addition to advice on the terms and effect of the settlement agreement more generally.
Vicarious liability for data protection breaches
In April 2020, the Supreme Court in the landmark case of WM Morrison Supermarkets plc (Appellant) v Various Claimants (Respondents)  UKSC 12 provided welcome clarification to the extent to which employers are vicariously liable for the unauthorised and unlawful disclosure of personal data by their employees.
The case involved a disgruntled employee of Morrisons who sent sensitive payroll data to three newspapers and uploaded a copy to a publicly accessible file-sharing website. Morrisons was subsequently alerted and took steps to have the data removed from the internet, and reported the issue to the police. The employee was subsequently arrested, prosecuted for a number of offences and was sentenced to eight years' imprisonment. Alongside this, a civil claim was brought against Morrisons by 5,500 claimants, seeking damages for misuse of private information and breach of confidence, and for breach of statutory duty under the Data Protection Act 1998.
Both the judge at first instance and the Court of Appeal concluded that Morrisons was vicariously liable for the actions of the employee, as his wrongful conduct was committed in the course of his employment and that the act of copying the data and posting it online was "a seamless and continuous sequence of events“which was "closely related" to the task that Morrisons had asked him to carry out. The fact the employee's motive was to harm his employer was deemed irrelevant by the Court of Appeal when deciding the question of whether or not vicarious liability should be applied.
However, the Supreme Court overturned the previous decisions, finding that Morrisons was not vicariously liable for the unauthorized and unlawful disclosure of personal data by the employee. The fact that the employee's employment gave him the opportunity to commit the wrongful act was not in itself sufficient to warrant the imposition of vicarious liability.
This landmark decision brings much needed relief to employers and breaks new ground on the issue of vicarious liability in the context where an employee commits an act which, although damaging to third parties, is primarily aimed at harming their employer. Although employers can breathe a sigh of relief in certain respects, it is important to remember that every case turns on its facts and employers should continue to ensure that they comply with applicable data protection laws, particularly with respect to data security.
KEY DEVELOPMENTS FOR 2019
Employment status in the gig economy
Currently around 1.1 million people in the UK are considered gig economy workers. Given the rise in individuals looking to work in more flexible working patterns, employment status issues are likely to continue to dominate in 2019.
Recent cases have shown that the courts are looking beyond the company’s characterisation of their relationship with individuals. The majority of cases so far have ruled in favour of the individuals and classed them as workers. Such decisions have huge financial and legal ramifications for companies as workers have a number of statutory protections and entitlements to basic rights such as holidays and minimum working and rest time. A company has recently been given leave to appeal to the Supreme Court against a decision of the High Court which classified their drivers as workers. A decision on this case from the Supreme Court will be eagerly anticipated in 2019 to further clarify the status of individuals working in the gig economy.
The Government’s “Good Work Plan” has also responded to recommendations on employment status and modern working practice made by the Taylor Review and has proposed there will be legislation to improve the clarity of the employment status tests, a new right to request a stable contract and permitting a break of 4 weeks between contracts for the purposes of continuity of service.
New tax rules for contractors/Personal Services Companies
From 6 April 2020, private sector companies who engage self-employed contractors through a personal service company (“PSC”) will be responsible for determining whether the IR35 tax regime applies to the PSC. If IR35 applies, the company is responsible for deducting the income tax and national insurance contributions (“NICs”) from the fees. This shifts the responsibility and liability of paying the correct income tax and NICs from the PSC to the hiring company.
During 2019, companies would be well advised to start reviewing whether engagement of a PSC is efficient and cost effective and whether the terms of engagement with the PSC have effective indemnification terms regarding any repayment of income tax and NICs liabilities paid by the Company. Companies should also carry out a risk assessment of the contractors and consultants engaged by them and ensure they are properly characterised.
Multinational companies with a presence in Europe or with an EU migrant workforce will be dealing with the impact of Brexit in 2019 and beyond. It is still unclear how Brexit will unfold on 29 March 2019. If the current form of the Withdrawal Agreement applies, there will little change to EU derived employment legislation and EU citizens will continue to have the right to work and live in the UK until 31 December 2020 and can apply for settled status under the EU Settled Status Scheme. In the case of a “no deal” Brexit, the European Union (Withdrawal) Act 2018 sets out complex provisions on how far EU law and decision will continue to apply post Brexit. EU citizens in the UK can protect their position and apply for settled status under the EU Settled Status Scheme from 29 March 2019, provided they were in the UK before Brexit or any applicable transitional period. A reciprocal protection for UK citizens living and working in the EU will apply under the withdrawal agreement but it is unclear what the position is if there is a “no deal” Brexit. Companies should carry out an audit of their EU migrant workforce in the UK and UK citizens working in their EU/EEA offices and support their employees/workers through this process.
The UK government will also need to decide on new immigration rules which are to apply after Brexit or at the end of any applicable transitional period. The current proposal is to have an uncapped highly skilled and intermediate skills based system applicable to EU and Non-EU migrants with a salary threshold of £30,000. There are transitional proposals for low skilled workers.
Brexit will also have an impact on European Works Council (“EWC”) established in the UK and UK law governed EWC agreements. Companies will need to consider whether they continue to meet the threshold to have a EWC, whether the UK company can continue to participate or whether they need to move their EWC to another EU jurisdiction or appoint a representative in an EU country to represent UK employees and senior management. Parliament has now approved the Employment Rights (Amendment) (EU Exit) Regulations 2019 (“Regulations”). These amend the UK’s EWC legislation in the event of a “no-deal” Brexit. The Regulations will:
- end the right of employees to request information on whether their employer falls within the scope of the EWC Directive and, if so, request the establishment of a EWC; and
- end the application of the UK’s EWC legislation to UK-based businesses or non-EU-based businesses that had designated a representative agent in the UK before Brexit.
The ending of the UK’s legal framework for operating EWCs and the UK’s withdrawal from the EU’s legal framework is likely to frustrate current UK law governed EWC agreements.
KEY DEVELOPMENTS FOR 2018
General Data Protection Regulation
The EU’s General Data Protection Regulation will take effect, replacing the current Data Protection Act 1998, on 25 May 2018. The GDPR seeks to introduce a single data protection framework applicable to data subjects across the EU, having extra territorial scope. Key changes, include: less reliance on consent as a means of processing employee data, more stringent rules on notices, greater individual rights, accountability obligations and data breach notification requirements. Potential fines for non-compliance are up to 4% of global annual turnover or EUR 20 million, whichever is greater.
Gender Pay Gap Reporting
All companies with more than 250 employees are required by law to report on their gender pay and bonus gap by 4 April 2018. Affected employers must publish the proportion of men and women across four pay bands, information on the employer’s gender bonus gap and the proportion of men and women who received a bonus. While there are currently no sanctions for non-compliance, companies are expected to be named and shamed where no results are published, and a consultation is underway for an enforcement policy which could include unlimited fines and convictions.
Brexit continues to dominate the headlines, with an anticipated exit date of March 2019. The 3 key separation issues to be agreed upon include i) the ‘divorce’ bill for leaving, ii) rights of EU citizens in the UK and UK citizens in the EU, and iii) arrangements for the Northern Ireland border. With an estimated 3 million EU nationals currently residing in the UK, many employers are likely to be impacted by the changes to the current freedom of movement principles, and will need to closely follow developments relating to the consequential immigration discussions.
Holiday pay continues to be a hot topic, with further developments in case law. The most recent of which was Sash Windows Workshop Ltd v King, which held that where a worker (improperly classified as self-employed) is told they have no right to paid holiday, the employee will be able to carry forward untaken leave, potentially until termination. This case is likely to be of particular concern to those employers who engage (significant numbers of) ‘self-employed’ individuals in the Gig economy where there is an inherent risk of misclassification, and seemingly significant cost implications as a result of this case.
KEY DEVELOPMENTS FOR 2017
UK vote to exit the E.U. (“Brexit”)
On 23 June 2016, the U.K. voted to leave the European Union. The UK Government has now triggered Article 50 of the Treaty on European Union (the article to signify the withdrawal process). Therefore, the two year countdown to Britain’s exit has begun.
Prime Minister Theresa May has, however, confirmed that Brexit should be a ‘hard’ or complete Brexit, potentially meaning a full exit from the single market and the obligation to accept freedom of movement. So as to avoid a wholesale revocation of European law, the Prime Minister has confirmed the government’s intention to introduce the Great Repeal Bill. This would have the impact of repealing the European Communities Act 1972 (which provides legal authority for E.U. law to have effect as national law) and would transfer any E.U. laws in place immediately beforehand directly into U.K. law.
The intention is that this will allow for a ‘calm and orderly’ exit from the E.U. giving Parliament time to review, amend or scrap European derived laws over time and in the usual way, thus reducing uncertainty for businesses operating in the U.K.
Requirement to publish gender pay gap
Gender Pay Gap Regulations will come into force on 6 April 2017, and will require employers with 250 or more employees to collate and publish data on their gender pay gap. Employers will then have until 30 April 2018 to publish their first gender pay report.
Increases costs to employers
- Draft regulations are due to come into force from 6 April 2017 requiring employers with a payroll bill (or expected payroll bill) in excess of £3 million to pay an apprenticeship levy of 0.5% of the employer’s total pay bill. All employers will have an annual allowance of £15,000 which will be set off against the levy. The draft regulations contain certain reporting obligations and rules in relation to connected employers, and the government has confirmed that funding for training will be accessible to all employers in England via the Digital Apprenticeships Service. Government top-ups will be available for those employers who have had to pay the levy.
- In April 2016, the National Living Wage came into force at a rate of £7.20 per hour for those aged 25. This is set to increase to £7.50 per hour from April 2017, and the overall intention is for the National Living Wage to increase to £9 per hour by 2020.
- More SME employers will reach their staging dates for auto enrolment purposes. This will require employers to enrol eligible jobholders into a qualifying pension scheme and make contributions on their behalf.
KEY DEVELOPMENTS FOR 2016
A series of new measures impacting the financial services sector
In January 2016, the new claw back powers came into effect. In March 2016, we saw the introduction of the new Senior Managers Regime with a new criminal offence of ‘reckless misconduct’, increased responsibilities, and personal liabilities for senior managers. This came at the same time as the new whistleblowing rules of the Financial Conduct Authority and the Prudential Regulation Authority which apply to larger financial services and insurance companies with asset of £250 million or more.
Regulation of zero hours contracts
In January 2016, we saw the introduction of regulations which give employees the right to claim unfair dismissal, and workers and employees the right to bring a detriment claim if they are dismissed or subject to a detriment for breaching an exclusivity clause.
New rules making it harder to strike
The Trade Union Bill 2015-16 contains changes to balloting rules to make it harder to strike by, amongst other things, increasing the percentage thresholds that the union must achieve to take industrial action.