Why holiday pay has to include overtime

Posted on November 5, 2014 by Darren Newman

What has struck me most about some of the commentary on the EAT decision in Bear Scotland Ltd v Fulton (and other cases) on overtime and holiday pay has been the way in which it is assumed that the exclusion of overtime from holiday pay is perfectly natural and logical and its inclusion is a surprising and strange requirement imposed by Europe. Take this comment from Adam Marshall of the British Chambers of Commerce, as quoted in the Telegraph:

“This expanded definition of ‘pay’ is so ludicrous that the government itself has argued against it. No business should have to pay more than base salary during holiday periods, unless they elect to do so,”

Or look at what the Independent quotes John Cridland of the CBI as saying:

“This is a real blow to UK businesses now facing the prospect of punitive costs possibly running into billions of pounds – not all will survive, which could mean significant job losses.”

Punitive? As in ‘inflicted or intended as punishment’? Really?

The truth is that it is the exclusion of overtime that is difficult to justify rather than its inclusion. The problem has been caused by the way in which the Working Time Regulations adopted a definition of a ‘week’s pay’ that was never designed to be used in this context.

Government lawyers do not like reinventing the wheel. So when faced with having to include a right to paid annual leave in the Working Time Regulations 1998 they were happy to use the existing definition of a week’s pay set out in the Employment Rights Act 1996.  For those who haven’t already had to – have a go at actually reading those provisions. The meaning doesn’t exactly leap out at you does it? The drafting is hardly a model of simplicity and clarity.

‘Week’s pay’ – a potted history

This definition has been through the mill a few times. The current version is derived from the Employment Protection (Consolidation) Act 1978, which in turn took it from the Employment Protection Act 1975 (schedule 4 for the enthusiasts amongst you). However it has its origins in the Contracts of Employment Act 1963, which first introduced a right to a minimum period of notice. Schedule 2 of the Act provided that an employee was entitled to be paid during the notice period if he or she was off sick, not provided with work or absent on contractual leave.

The schedule divided employees up into those with and those without ‘normal working hours’. Those without were entitled to be paid based on a 12 week average and those with normal working hours were paid the amount they would have received had they worked those hours (with another averaging provision for piece workers). That is pretty much the same method of calculation we find in the Employment Rights Act today

Paragraph 1 of the schedule  specified that those who earned overtime pay when employed for more than a fixed number of hours in a week were to be treated as having normal working hours. It then provided that those normal hours should be taken as excluding hours of overtime unless they were actually part of the minimum number of hours the employee was required to work. The effect of that was to ensure that an employee who had been dismissed or had resigned  – and was in his or her period of minimum statutory notice – would only be paid basic pay, excluding overtime, in any week when he or she was not offered work, was absent, or was taking contractual leave.

Paragraph 1 is now to be found, with only minor amendments, in s.234 of the Employment Rights Act 1996. When the Government used the existing definition of a week’s pay when implementing the Working Time Regulations, therefore, it also incorporated this provision, designed to be used only as the employment relationship was ending.

The exclusion of overtime when calculating holiday pay is therefore based on an archaic definition of a week’s pay which was intended to apply to a completely different set of circumstances more than half a century ago. While it makes perfect sense to limit the pay of an employee who has already been given notice and is not working, it makes very little sense to apply the same limitation to holiday pay while the relationship is alive and ongoing.

No point acting all surprised about it

But even if you don’t accept that, it is the Government’s job to implement directives properly and the need to amend the law has been apparent since the Williams v British Airways decision in 2011. In fact we can probably say that the need to reexamine the definition of a week’s pay was made clear by the ECJ in the Robinson Steele case back in 2006 where the court said:

49. The holiday pay required by Article 7(1) of the directive is intended to enable the worker actually to take the leave to which he is entitled.

50 The term ‘paid annual leave’ in that provision means that, for the duration of annual leave within the meaning of the directive, remuneration must be maintained. In other words, workers must receive their normal remuneration for that period of rest.

By any sensible definition, if an employee normally receives basic pay plus overtime then his or her normal remuneration  must include overtime.  As Mr Justice Langstaff says in the Bear Scotland case:

44. Despite the subtlety of many of the arguments, the essential points seem relatively simple to me. “Normal Pay” is that which is normally received.

Quite.

So there is nothing ludicrous in the EAT deciding that overtime needs to be included in the calculation of holiday pay. Employers should instead be grateful that the EAT found such a creative way to prevent employees who have been underpaid in terms of holiday pay for the past 16 years from claiming back pay (that’s a whole other article). What would be ludicrous however would be to leave the current definition of a week’s pay in place and just expect employers to read up on the case law.

Vince Cable, it seems, has set up a task force to look at how to limit the impact of the decision. There isn’t much that can be done to be honest. I know hardly anyone who thinks that the EAT was actually wrong in the way in which it interpreted the directive and an appeal on that point is highly unlikely to succeed. Short of renouncing the Working Time Directive and leaving the EU altogether (that’s an issue for next year) we are stuck with including overtime in holiday pay. What the task force can usefully do, however, is look at a new definition of a week’s pay that can be clearly understood and which complies with the directive. How hard can that be?

 

 

Posted in EU law, Working Time and Annual leave | Tagged , , , , , , , , | 11 Comments

ACAS early conciliation – first results

Posted on September 3, 2014 by Darren Newman

Acas has published its first figures on the operation of the early conciliation scheme that came into effect in April this year. The figures they have released cover the period of 6th April 2014 – 30 June 2014 and show that Acas received 17,145 notifications in that period, all but 540 of those coming from the employee rather than the employer.

Acas says that the notifications came in at about 1,000 a week during the run in month of April and that this figure went up to 1,600 once notification became mandatory in May. This is. says Acas ‘in line with the numbers of notificatons we expected to receive’.

The test, of course, is not how many people contact Acas, but whether that contact results in settlements that avoid the need to go to Tribunal. Acas is encouraged that only 7 per cent of employees (1,122) and just 9 per cent of employers (1,483) rejected the offer of conciliation. But of course most parties will want to hear what offer the other side will make before deciding what to do. What matters is how many settlements are reached.

These are still early days, as Acas recognises, but these first figures show that in the period covered, 11,355 cases reached the end of their early conciliation period (usually one month). Of those 1,873 cases ended with a settlement – that is 16.5 per cent.

The next question to answer is a difficult one. Is that a big number? Acas gives no indication of whether a settlement of 16.5 per cent is regarded as encouraging or disappointing. There is obviously still a long way to go before we understand exactly what the impact of early conciliation has been. At this stage, I would make a couple of observations.

Firstly, we have no information about the level of the settlements or how many of the employees had legal advice. There is a concern that potential claimants have not had proper advice about the strength of their claim or the amount that they are likely to receive if successful. Reaching a settlement is good – but not if employees are being rushed into doing a bad deal.  If an employer proposes a settlement agreement that needs to be signed off by the employee’s legal adviser – but there is no such protection in relation to early conciliation and Acas obviously can’t advise the parties on whether a proposed settlement is a good one or not.

Secondly we need to remember that conciliation is not a new service. Acas has always conciliated in individual employment disputes and a high proportion of cases have always been settled in this way. It is not clear what savings – if any – are made by the parties who have settled at the early conciliation stage. Would they have settled anyway, and, if so at what point? Early conciliation is fine if it suits the parties. The controversy in the scheme is that the employee must contact Acas before bringing an ET claim.

I am hugely supportive of the Acas conciliation service as a whole – but remain deeply sceptical about the value of this compulsory early conciliation scheme.  What we have not seen yet are  cases where a dispute arises about time limits or whether an employee’s notification to Acas properly related to the claim that is subsequently brought. When those cases start coming through – and they will – then I think the rule on contacting Acas before bringing an ET claim will be seen as an overly complicated and unnecessary requirement.

 

Posted in Early conciliation | Tagged , | 5 Comments

Why did Haringey pay Sharon Shoesmith so much?

Posted on July 24, 2014 by Darren Newman

It is being widely reported that the accounts published by Haringey Council reveal the amount that was paid to Sharon Shoesmith to settle her legal challenge to the decision to sack her back in December 2008 (note to the press: it was not an unfair dismissal claim; it was a judicial review).

I wrote about the case here when the fact of the settlement was first announced. At that time I had no idea what the level of the settlement would be. I thought it might be more than she would have got for an unfair dismissal claim but I completely took it for granted that it was a much lower figure than the £600,000 that had been suggested. Wrong again.

Because surely, that £600,000 was right at the top end of what the court could award? It represented full back pay for the years that had passed since her dismissal. When you settle a case you do so because there is a reasonable chance that the settlement might turn out to be a better deal for you than if you let it go all the way. But I really don’t see how that can be the case here.

Shoesmith’s argument would be that the circumstances of her dismissal rendered her practically unemployable. She lost a six figure salary and cannot recoup her loss by getting another job. She  relied on the case McLaughlin v Governor of the Cayman Islands – a case from the Judicial Committee of the Privy Council (broadly equivalent to a Supreme Court decision, but not technically binding)  in which Lord Bingham said:

“It is a settled principle of law that if a public authority purports to dismiss the holder of a public office in excess of its powers, or in breach of natural justice, or unlawfully (categories which overlap), the dismissal is, as between the public authority and the office-holder, null, void and without legal effect, at any rate once a court of competent jurisdiction so declares or orders. Thus the office-holder remains in office, entitled to the remuneration attaching to such office, so long as he remains ready, willing and able to render the service required of him, until his tenure of office is lawfully brought to an end by resignation or lawful dismissal.”

That approach would indeed suggest full back-pay for Shoesmith, running from her purported dismissal in 2008.  But Haringey had an argument too.  They could have argued that whatever procedure had been followed, the fact was that Shoesmith was unlikely to have remained in post for much longer. The sheer scale of the public outcry would have made her continued employment untenable and on that basis paying her full back-pay would be excessive. The Court of Appeal in giving its judgement accepted that the issue of compensation was not a straightforward. Two of the judges seemed to think that Haringey could have protected its position simply by giving Shoesmith contractual notice. Maurice Kay LJ said:

I am satisfied that the relief to which Ms Shoesmith is entitled should include a formulation which extends to compensation… It seems to me that the outer limits are, at the low end of the scale, a sum equivalent to three months’ salary and pension contributions (reflecting the contractual notice period) and, at the high end of the scale, a McLaughlin-type order. In the last resort, I would remit the case to the Administrative Court for this remaining issue to be resolved.

So this was not a case where the writing was on the wall and it was just a question of Haringey biting the bullet and paying up. There was a genuine issue to try – and the outcome was not a foregone conclusion. Haringey must have thought so too, for a while, because the Court of Appeal decision was given in May 2011 and the deal was not reached until October 2013 – just before the hearing on remedy was due to start. By that time most of the preparation would have been done. Why would Haringey settle at the very top end of the scale just before the hearing?

My assumption was that Shoesmith indicated before the hearing that she would accept far less than a McCloughlin-style order for full back pay and that was why Haringey was prepared to risk the bad press it would receive for reaching a settlement. However, if the press reports about the amount are correct then it seems that it was Haringey that bottled it.

I simply don’t get it.  Having come so far, surely the better option would have been to take a chance on the remedy hearing. It couldn’t have resulted in an award much higher than the amount paid in secret and Haringey would at least have been able to day that they were only paying out the amount ordered by the Court. What’s more, there would have been a reasonable chance that the amount awarded would be considerably less than full back pay.

If I were a resident of Haringey I would want someone to explain to me exactly why they spent two years preparing for a remedies hearing before simply surrendering before kick-off. It does seem like somebody somewhere has blundered.

Posted in Compensation and Remedies | Tagged , , , | 2 Comments

Is obesity a disability?

Posted on July 21, 2014 by Darren Newman

It probably is – sometimes. It depends, really.

In America it is well established that being obese counts as a disability (actually my only source for this is an episode of the Simpsons, but Matt Groening wouldn’t lie would he?). Here in Europe, however, the jury is still out. The Advocate General has just given his opinion in a case brought by a Mr Kaltoft who claims that he was dismissed from his childminding job because of his obesity. The employer, it should be said, denies this and says it was simply a redundancy, but the Danish court has asked the European Court of Justice to rule on whether obesity is a disability within the meaning of the Equal Treatment Directive.

The AG’s opinion – not binding on the Court – is that obesity can be a disability, but he says:

In my opinion, most probably only WHO class III obesity, that is severe, extreme or morbid obesity, will create limitations, such as problems in mobility, endurance and mood, that amount to a ‘disability’ for the purposes of Directive 2000/78

The opinion has led to a predictable kerfuffle in the press but I actually think the AG opinion is rather conservative. The AG’s suggestion that protection should be limited to class III obesity seems completely arbitrary.  I would go much further. Not only is obesity (of any class) capable of being a disability, but almost any other condition is too.

Defining Disability

The definition of disability in the Equality Act and associated regulations is both technical and prescriptive. Luckily the Government has published this handy 60 page guidance document explaining it. Feel free to browse through it – but I think it is mostly irrelevant now.

Our Equality Act has to be interpreted in a way which complies with the Directive. On this issue we also have to take account of the United Nations Convention on the Rights of Persons with a Disability because that Convention was ratified by the EU in 2010. The Court of Justice explained in a case I will simply call Ring that the Convention is now to be regarded as ‘an integral part of the European Union legal order’. In that case the Court went relied on the Convention in finding that an employee with lumbar pain and another with whiplash could be disabled within the meaning of the Directive.

The Court referred to the Convention because while the Directive does not try to define disability, the Convention does. Article 1 says:

Persons with disabilities include those who have long-term physical, mental, intellectual or sensory impairments which in interaction with various barriers may hinder their full and effective participation in society on an equal basis with others.

This is a much wider definition than we have in the Equality Act. There is no exclusion for addictions, kleptomania or voyeurism (if you’ve missed that part of the UK definition look here). Nor, crucially, is there any need to measure the effect of the condition on ‘day-to-day’ activities which, hitherto, has been central to the UK definition.

Medical v Social Model

Basically, the difference between the Equality Act and the Convention is that our law uses the medical model of disability, which regards the disability as being intrinsic to the individual, whereas the Convention is much closer to the social model of disability which regards disability as arising from the interaction between the individual and society.

The Equality Act essentially asks whether an individual’s condition is serious enough to warrant protection. The Convention asks whether the individual with a particular condition is treated in a way which leads to inequality.

Let’s look at obesity – and assume that we are dealing with someone whose weight can be described as a ‘condition’. Using the traditional UK approach we would ask whether the individual’s ability to carry out normal day to day activities is adversely affected. Can he or she climb the stairs, walk down the street, drive a car, cook a meal? Only if the effect is great enough do we then move on to consider whether there has been any discrimination.

But I think the Convention requires a different approach.   The issue should be whether that person has been prevented from participating in working life (in an employment case) on an equal basis with others. Does the design of the office make it hard for them to get around? Is the pace of work too quick for them to keep up? Are they treated with a lack of respect in the workplace that hinders their participation? The question is no longer just about their condition – it is about they way in which they are treated.

We simply don’t need to divide the population into those who are disabled and those who are not. For those with a given condition, what makes them disabled is the discrimination they suffer. Any condition, on this logic, can be a disability.

This view is already coming through in the UK. In the EAT case of Sobhi v Metropolitan Police an employee with dissociative amnesia (the only symptom of which was that she forgot she had received a police caution for theft) was held to be disabled. The EAT used the Convention to take a staggeringly wide view of what constituted a normal day-to-day activity.

What is a reasonable adjustment?

When I talk about that case to HR managers the response tends to be despairing – “if that was a disability then so is everything”. Well perhaps. But what we should be focusing on is not whether an individual is protected but what that protection means. Most cases are concerned with discrimination ‘arising out of’ disability or with the duty to make reasonable adjustments. In both cases the employer has a chance to explain why it was necessary to do as it did. Just because someone happens to qualify for protection does not mean the employer has to go to ludicrous lengths to continue employing someone who is not capable of doing the job.  The Convention defines a reasonable accommodation as one not imposing ‘a disproportionate or undue burden’ (Art 2) and Recital 17 of the Directive says:

  (17) This Directive does not require the recruitment, promotion, maintenance in employment or training of an individual who is not competent, capable and available to perform the essential functions of the post concerned or to undergo the relevant training, without prejudice to the obligation to provide reasonable accommodation for people with disabilities.

We should be focusing on how employers can help employees do their jobs well and removing unnecessary barriers that get in the way. Doing that should not be dependent on an individual meeting some medical test of whether they are or are not disabled. But nor should an employer put up with a job being done badly.  This is a civil rights issue – it’s not about being nice to someone because they are disabled. .

Judging the limits of reasonableness in a reasonable adjustment will continue to be a difficult issue. But I think it is clear that the Equality Act definition of disability simply doesn’t stand up anymore. We need to scrap it and replace it with something much more in line with the social model used by the UN. If the Government doesn’t act on this, then case law will simply leave the statute behind.

 

Posted in Disability Discrimination | Tagged | Leave a comment

Exclusivity in zero-hours contracts

Posted on June 25, 2014 by Darren Newman

There is a general political consensus that something must be done about zero hours contracts. So with some fanfare, the Small Business, Enterprise and Employment Bill published today contains a provision which ‘bans’ the use of exclusivity clauses. In other words an employer engaging workers under a zero-hours contract will not be able to prevent them from doing work for other employers.

At least that’s the theory. In reality there are a number of reasons why the new law will make little, if any, difference.

Defining zero-hours contracts

Firstly, it’s incredibly difficult to define a zero-hours contract. Here is how the proposed new S.27A of the Employment Rights Act tries to do it:

(1)In this section “zero hours contract” means 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.

Well that won’t work will it? What on earth does ‘there is no certainty’ mean? A bit philosophical for the Employment Tribunals, I reckon. And note the lack of any sort of timescale. If I guarantee at least 12 hours a year, but in any given week you might get nothing, is that a zero-hours contract? What if it is certain that some work will be offered at some stage but the probability is that in most weeks there will be no certainty at all?

To be fair I think that BIS realises that you can – to use a hackneyed lawyer’s phrase – ‘drive coach and horses’ through this definition. A new S.27B will give the Secretary of State power to make Regulations effectively plugging the gaps and making provision for a range of other zero-hour type arrangements that don’t quite fall into this definition to be covered.

There really is too much of this in modern employment law. The Government needs to legislate but hasn’t the time or energy to work out the details and so it creates an order-making power.  Essentially the Government is saying ‘We know this definition won’t really work, but we’ll fix it later’.

What does a ‘ban’ amount to?

Another thing they will have to fix later is the actual ban on exclusivity clauses, because as it currently stands the provision is effectively meaningless. Here it is:

(3) Any provision of a zero hours contract which—

(a) prohibits the worker from doing work or performing services under another contract or under any other arrangement, or

(b) prohibits the worker from doing so without the employer’s consent,

is unenforceable against the worker.

What this means (I suppose) is that an employer will not be able to sue a zero-hours worker who has – out of some selfish determination to earn a living – gone off and done some work for somebody else. I’m sure I won’t be the first to point out that they won’t need to.  The clause might be legally unenforceable, but that will hardly matter if a worker can be denied any further work as a result of breaching it and there is nothing in the Bill, so far, which creates a right for a worker not to suffer a detriment for breaching an exclusivity clause.

It is worth noting that the order making power allows the Secretary of State to

make provision for the purpose of securing that zero hours workers, or any description of zero hours workers, are not restricted by any provision or purported provision of their contracts or arrangements with their employers from 
doing any work otherwise than under those contracts or arrangements.

That seems wide enough to allow the unfair dismissal and unlawful detriment rights that any sensible reform will have to include – but why are these not on the face of the Bill?

BIS has published a memorandum on the delegated powers contained in the Bill which says:

439. For example, where evidence shows that employers are seeking to avoid the effect of the primary provisions, by varying zero hours contracts to provide one hour of guaranteed work under a contract, regulations to add such a category of contract would enable this to be addressed. If evidence showed that employers sought to penalise workers as a consequence of taking work for other employers, these powers would allow regulations to confer rights on workers who had suffered detriment in these circumstances.

440. Given that the content of secondary legislation under these powers will depend on further evidence, it is necessary for this power to be delegated in order to allow the Government to respond to that evidence. In particular, the Government is committed to consulting on the use of these delegated powers during the passage of the Bill and will consider carefully the evidence received from stakeholders and interested parties in determining how to exercise these powers

I can’t think of any other area of employment law where the ‘right’ was introduced, but the standard protection for those exercising the right was held back pending actual evidence of abuse.  It simply makes no sense to me.

What Exclusivity Clauses?

Overall, then, I don’t think this new law solves the problem. But then again, I’m not entirely sure that there is a problem to being with. Where are these exclusivity clauses which this Bill seeks to clamp down on? The Department estimates that 125,000 people are restricted by these clauses , but the evidence for that is pretty weak. It is drawn from a CIPD research paper which said:

Six in ten zero-hours workers report they are allowed to work for another employer when their primary employer has no work available. A further 15% say they are able to sometimes. Just 9% say they are never able to work for another employer and a sizeable 17% don’t know.

It is far from clear to me that the respondents to this survey were talking about actual exclusivity clauses, as opposed to an unspoken rule. Also, the the sample size on that issue was under 500 employees. Even if the figures are right, however, it hardly points to exclusivity being the biggest problem  with zero-hours contracts – the one issue that is crying out for Government action.

In reality this provision will be inserted into employment law with little practical effect. It will gather some headlines but do next to nothing to improve the lives of those who are trapped in precarious and low-paid employment. You might argue that it is hardly worth the effort. But here is the politician’s syllogism at work: something has to be done; this is something – therefore we must do it.

Posted in Zero Hours COntracts | Tagged , , , | 4 Comments

Early conciliation: what will success look like?

Posted on May 6, 2014 by Darren Newman

I should say at the outset that I am a big fan of Acas in general and its conciliation service in particular. In the hundreds of cases that I have been involved in – representing both employers and employees – a large majority resulted in a settlement assisted by an Acas conciliator. My experience is typical. For the whole of my career the statistics have consistently shown that most Tribunal claims result in a conciliated settlement.

Acas conciliation has been a crucial part of the employment law landscape for the whole history of modern employment law. However to read some of the comments made about the new early conciliation scheme you would think that a conciliated settlement is a recent innovation. We should remember that it isn’t. Nor is my scepticism about the prospects for the early conciliation scheme any comment on the vital role that Acas conciliation plays in promoting the settlement of employment disputes.

My issue is with the requirement that from 6 May all claimants must contact Acas before bringing a tribunal claim. I think that this introduces a needless complication into a system that already worked perfectly well. It complicates the issue of time limits and I think it has the potential to lead to complicated satellite litigation about whether a claim has been properly brought. Other people disagree with me of course, so we shall just have to wait and see. Perhaps early conciliation really will work.

But how will we know?

This week Acas announced that the initial reaction to the early conciliation scheme has been ‘encouraging’. This may seem premature considering that the scheme only came into force today, but for the last month they have been operating the scheme on a voluntary basis. Employees have not been obliged to contact Acas, but they have been able to use the early conciliation process if they want to.

In the course of that month Acas were contacted by 1,000 employees a week and a massive 98 per cent of them were willing to ‘give conciliation a go’.

Well, yes. Of course the employees who contact Acas when they don’t have to are willing to give it a go. In fact, what on Earth were the 2 per cent of unwilling claimants thinking of? Perhaps they just misunderstood the commencement date.

But even when employees are obliged to contact Acas I would still expect the vast majority of them to be willing to engage in the process. Why wouldn’t they? I would also expect the vast majority of the employers to contacted to be willing to engage in an attempt at conciliation.

The issue is how likely it is that the conciliation will succeed. If the employee is willing to engage in conciliation but thinks that the case is worth £100,000 and the employer is also willing to conciliate but thinks that it is only worth a nuisance settlement then how encouraging is it that both sides are willing to give conciliation a go?

The real measure of success is the number of settlements reached at this early stage. I’d be interested to know if Acas has a particular target in mind. My feeling is that employers will prove unwilling to settle cases for anything other than a nuisance amount if they don’t have clear idea of the strength of the employee’s case – and it is difficult to make a judgement about that before the claim is actually brought. I also think that employees will be unwilling to compromise on what they think the case is worth without a clear idea of how well the employer can defend the claim – and it is difficult to judge that before the employer has submitted a formal response to the claim.

We’ll wait and see. I just hope that Acas will be as open about the outcomes of early conciliation as they have been about the number of people who have initiated the process.

Posted in Early conciliation, Employment Tribunals, Enterprise and Regulatory Reform Bill | Tagged , , | 2 Comments

Advising on Zero-Hour Contracts: RBS Mentor and the Independent

Posted on April 8, 2014 by Darren Newman

I’ve written before about zero-hours contracts and how difficult it might be to solve some of the problems associated with them. Whatever view you take of that debate, however, the fact remains that as the law stands they are perfectly legal. Furthermore, many people on zero-hours contracts are quite happy in their work and are treated well while many people with guaranteed hours are exploited by their employers and treated badly. What should matter is how well you are treated at work and whether your working pattern fits in with what you want from your job. I get very frustrated when people refer to zero-hours contracts as though they are the epitome of all that is wicked in the world of employment.

So imagine my delight when I saw the Independent carrying  this headline: 

RBS in zero hours storm: State-owned bank helping businesses draw up controversial contracts to make jobs less secure

The general thrust of the article is that

The Royal Bank of Scotland is helping hundreds of businesses across Britain draw up “zero hours” contracts for their employees, potentially making thousands of people’s jobs less secure, The Independent has learned.

I have an interest to declare here. I used to work for the RBS Mentor Service mentioned in the article. I was there in the early days when the London office had just two people (including me) and I left more than a decade ago. But I made lots of friends I still keep in touch with and regularly bump into the “Mentor Crowd” who, I can assure you, are a bunch of really nice people.

The whole premise of the Independent’s story is nonsense. But to understand that you have to understand how a service like Mentor (others are available) works. When you sign up with one of these consultancies you pay a monthly fee and get a range of services in return including a 24 hour helpline, insurance cover, Tribunal representation and a tailored suite of contractual documentation –  including a detailed staff handbook and a series of contracts of employment to issue to staff.

So a consultant is sent out to interview the new client about how it operates and prepare the appropriate documentation. The purpose of that is not to come up with new and innovative ways of exploiting the current employees or reducing their terms and conditions. The point is to get the employer onto a solid legal footing when it comes to its HR systems.

Read this paragraph from the Independent report:

According to one contract drawn up by RBS and seen by The Independent, an hourly rate of pay is stated but no annual salary. It also gives the company the right to instigate a “period of temporary layoff without pay… where there is a shortage of work”.

Where to start? Lots of contracts have no annual salary but are based on an hourly rate of pay. That does not make them zero-hours contracts. The implication of the paragraph is that a contract of this sort is a fiendish device dreamt up by a wicked banker in order to exploit people. It isn’t; its a normal “hourly-rate” contract. Such contracts often have regular normal working hours set out in them – I’ve written hundreds in my time. The contract referred to might be a zero hours contract or it might not. We don’t know, because we’re reading the wrong bit.

Nor is there anything sinister in a clause allowing a temporary lay-off without pay. In a range of industries this is, and always has been, a standard clause. Clauses like this don’t exist in a vacuum, however. if an employee is laid off there is a right to a guarantee payment and if a lay off persists the employee can claim a redundancy payment. The very existence of these provisions show that a lay-off clause is an accepted and normal part of the landscape.

Now the reality of the clients that services like Mentor have (and I’m talking generally now, not about Mentor in particular) is that many of them are small firms run by owner-managers or operating in traditionally low paid sectors like the ‘”Three Cs” of care, cleaning and catering.  Many of the employees they employ are on terms and conditions very close to the legal minimum in terms of pay and holiday entitlement, and some are on the legal maximum in terms of hours of work. Most of these businesses  have no dedicated HR function and few of them aspire to be nominated for a Personnel Today award. As an employment-law consultant your job is to help your clients comply with employment law, not turn them into Mr Fezziwig. Nevertheless, the truth of the matter is that – in the majority of cases – employees whose employer signs up for an employment law service will be treated better as a result.

And of course Mentor will issue zero-hours contracts to clients if that is what they want. So will any other law firm or consultancy.  There is nothing wrong with that, because zero hours contracts are not illegal.

It appears that in the case quoted in the Independent, a contract issued to employees was inaccurate and had to be corrected. Well that happens – but it is hardly evidence that Mentor is ‘pushing’ clients onto zero hours contracts. In fact the suggestion is absurd.  Why would they? If an employer currently has employees with guaranteed hours, any move to zero-hours contracts would involve changing terms and conditions and be likely to be met with hostility (as illustrated in the example quoted). Unless that is a change that the employer feels it needs to make, it seems pretty unlikely that a consultant would try to persuade the employer to go down that route. It would simply create more work – and the client’s fees are fixed. There is no evidence in the article that Mentor is actually doing this of course, just a vague innuendo. I think Mentor are entitled to be cross.

Another undercurrent of the article is that since RBS is publicly owned, there is something shameful about it providing a service that is aimed at the needs of small businesses. That makes no sense to me at all. Just because there is an element in public ownership in RBS does not mean that Mentor has to act like Acas. It is not there to promote the interests of both employer and employee, it is there to advise and help employers. This is a legal activity and I don’t see anything remotely objectionable about it.

 

Posted in Zero Hours COntracts | Tagged , , | 1 Comment

If it weren’t for the EU…

Posted on April 2, 2014 by Darren Newman

What would UK employment law look like if Britain had not joined the EU?

The question occurred to me when I saw a Tweet from Hugo Rifkind during last night’s ‘in or out’ debate between Nigel Farage and Nick Clegg. Here’s our exchange:

 


 

 

Well there’s a thought. How much of the UK’s employment law that is based in some way on an EU Directive would have happened anyway? How much of a difference does it really make?

There is a fair point here. The Equality Act 2010 is ‘based’ on the Equal Treatment and Race directives but there is no doubt that the UK would have developed its own discrimination  laws even if the EU were not a factor. The Equal pay Act 1970 and the Sex Discrimination Act 1975 were not passed primarily to comply with European law (discuss!) and of course the Race Relations Act 1976 and the Disability Discrimination Act 1995 extended discrimination law to those areas with no EU underpinning at all. Sexual orientation, age and religion were certainly added as a result of a Directive, but surely the Government of the day would have legislated in those areas even if we had not been EU members?

Without the EU we would still have had extensive health and safety laws and Harold Wilson would certainly have introduced consultation rights for trade unions without the Collective Redundancies Directive. The Contracts of Employment Act 1963 introduced a right to a written statement of terms long before the Proof of Employment Relationship Directive (that’s  a fun one) and of course we had maternity leave (of a sort) before the Pregnant Workers Directive came along.

TUPE, on the other hand, would almost certainly not have happened at all. The Acquired Rights Directive was agreed by a Labour Government but it fell to a new Conservative Government to implement it – and they only did so through clenched teeth. In 1998 Labour was quite comfortable with the Working Time Directive, but surely needed the cover of a directive to implement it while keeping the CBI onside. As for the other social chapter directives implemented once Labour opted us back in to social Europe I very much doubt any of them would have made it into UK law without a legal obligation to implement them. The fact is that European works councils, part-time work, fixed-term contracts and parental leave just wouldn’t have been on any Government’s list of priorities.

We can also say for certain that the Agency Workers Regulations would not have been adopted without a Directive and nor would the Information and Consultation of Employees Regulations (though no-one cares about them). In both cases the Government opposed the relevant directives for years and only gave in when a deal was struck.

There are probably examples that I have missed. But listing laws like this misses the point. You can’t weigh up the influence of Europe by counting the number of laws. Farage and Clegg got into a completely futile argument about ‘what percentage’ of our laws originate from the EU. Who cares? What matters is what proportion of our activities are regulated in a different way because of Europe.

Any UK employment lawyer knows that our law is different because of our membership of the European Union. A crucial part of this is the case law of the European Court of Justice. Even in areas where UK legislation would have happened anyway, our law is different because of the decisions of the ECJ.  Without the ECJ:

  • there would be a cap on compensation in discrimination claims
  • TUPE would not apply to contracting out exercises
  • only recognised trade unions would be consulted over collective redundancies
  • employers would be entitled to treat pregnant employees the same as those who were off sick

A full list of examples could fill a text book. In fact, several are available.

The inescapable fact is that a decision to leave the EU would have a massive impact on employment law. For some, of course, that is very much the point. UKIP is now painting itself as the friend of ordinary working people. But if UKIP had it’s way, how many of the EU derived rights that are now an integral part of our employment-law system would remain?

Posted in EU law | Tagged , , , , , | 6 Comments

Will the new Health and Work Service help or hinder business?

Posted on February 9, 2014 by Darren Newman

The idea behind the new Health and Work Service is that it will save employers money by helping sick employees get back to work. The truth, as ever, is rather more complicated than that.

The new service is reported by the BBC as providing free Occupational Health assessments ‘starting from April’. However that is not right. This April is the expected date for awarding the contract to provide the service. Roll out should begin towards the end of this year, but full implementation is scheduled for April 2015. A good overview of how the new service is going to be structured was given by a webinar for potential suppliers last October. You can read the script here – and its very interesting!

The Service is being paid for by the abolition of the last remaining subsidy for Statutory Sick Pay. The Percentage Threshold Scheme kicks in when an employer’s liability for SSP in a particular month is more than 13% of that month’s National Insurance Contributions. However the scheme will be abolished in April this year  leaving employers wholly responsible for funding the sick pay paid to absent employees.

When the Government announced this change just over a year ago it said that the scheme currently costs the exchequer some £50 million per year – mostly in the reimbursement of small amounts. I can quite see why the Government would want to stop spending this money but I find their stated reasoning for the change – that it created a perverse incentive for employers not to manage attendance effectively – pretty unconvincing. I doubt many small or medium sized companies would be relaxed about their overall sick pay bill being high enough to qualify for relief.

However the move presents a bit of a presentational problem. The Government has made great play of how it is reducing the regulatory burden on employers and yet here it is increasing that burden to the tune of £50 million a year.

Luckily they have a plan. Scrapping the Percentage Threshold Scheme ‘frees up funds’ to set up the new Health and Work Service. This will provide free Occupational Health Assessments for employees who are off sick for 4 weeks or more. It will also provide a website and  a helpline giving information and advice to anyone who wants it. The Government is talking up its likely impact. The BBC quotes ‘ministers’ as saying that it could save employers ‘up to £70m a year in reduced sickness pay and related costs’. Sky has the same figure. The idea appears to be that this new service will result in sick employees coming back to work earlier than they otherwise would. 

I’m sceptical.

Occupational Health can be a valuable service. But if it isn’t done right it can be a waste of time and effort. I regularly talk to employers who are frustrated that the OH assessments they receive simply regurgitate what the employee has told them and offer little in the way of independent or useful advice on how to get the employee back to work.  The key is to ask OH the right questions and work closely with them to come up with a return-to-work plan.

I just don’t think that the Health and Work Service will be in a position to do that. The service will provide a largely telephone-based assessment, mainly through GP referrals. The Government expects a minimum of 350,000 employees to be referred in the course of a year (out of a total of 850,000 who will qualify) and the total budget for the service is £38.5 million per year. That covers not only the costs of the assessments but also the setting up of  the website and helpline, all the capital costs, and of course a reasonable profit margin for the private sector providers who will be running the service. Ignoring all of those additional costs – and assuming minimum take up – that’s about £110 per case. I suspect that that is a whole lot less than the current cost of an average OH referral. How much does the Government realistically expect to get in the way of a personalised, case managed approach to getting the long-term sick back to work?

The truth is that they probably aren’t thinking that far ahead. By claiming that the service could save £70 million, the Government is able to argue that instead of increasing costs to business by £50 million it is actually saving business £20 million. The fact that this is unrealistic nonsense is just a technicality that can safely be ignored. The true impact will be next to impossible to measure and won’t be know until well after the next election.

A new standard in unfair dismissal cases?

If I were in the OH business, I’m not sure I would welcome the Government ploughing £38 million a year into setting up a rival that provides its services for free. As an employment lawyer, however, I have a different concern.  Once there is a free OH service available, it would seem reasonable to expect even very small employers to take advantage of that service before dismissing for ill-health. This could provide an extra hoop for employers to jump through before they can safely dismiss. An employer who did not follow the recommendations of the Government funded OH service may well be found to have unfairly dismissed an employee – or failed in its duty to make reasonable adjustments.

But whose side will the OH service be on? Its no good saying that everyone shares an interest in getting sick people back to work. When it comes to the detail of how the service will be provided the inclination of the individual OH professionals providing the assessments will make a big difference. Will they essentially operate as an advocate for the employee? How often will they tell an employer ‘this person is unlikely to return to work’? How responsive will they be to points raised by the employer? Perhaps most importantly, how long will the process take? Will employers be forced to delay tackling a problem because they are waiting for someone from the Health and Work Service to get back to them?

At this stage – a year before the service begins – the Government will no doubt discount such fears. But to me, this scheme has the makings of a significant blunder which could wrap businesses up in a whole new layer of bureaucracy. Ironically, a Government scheme intended to benefit employers may actually end up costing them more.

Posted in Sick pay, Unfair Dismissal | Tagged , , , , | 4 Comments

How would Lord Rennard fare as an employee?

Posted on January 20, 2014 by Darren Newman

Lord Rennard is not an employee – and that is something he should be relieved about.

He has been investigated under the Liberal Democrats membership rules, which allow a member to be expelled for conduct which brings the Party into disrepute. The Disciplinary procedure allows (but does not require) an independent investigator to be appointed to gather evidence prior to a disciplinary hearing they chose to appoint a leading criminal fraud QC – Alistair Webster.

Under the rules his role is to look at written evidence and compile a charge sheet – or to indicate that ‘there is insufficient evidence to proceed’. This is what he has done and you can read his conclusions here.

He has concluded that there is less than a 50 per cent chance that a charge against Lord Rennard could be proved to the requisite standard. The Disciplinary Procedure makes it clear that the issue is whether the charge has been proved ‘beyond reasonable doubt’. His conclusions state:

‘it is unlikely that it could be established beyond reasonable doubt that Lord Rennard had intended to act in an indecent or sexually inappropriate way. Without proof of such an intention, I do not consider that such a charge would be tenable.’

Really? I am no expert on the constitution of the Liberal Democrats, but all I can see in their rules is talk of conduct which is likely to being the party into disrepute. I can see nothing that suggests that such conduct needs to be deliberate. Surely sexually inappropriate behaviour could bring a party into disrepute whether it was deliberate or not?

The investigation makes no findings of fact, it has merely gathered evidence. So I don’t know what was actually said or done by Lord Rennard. However if credible allegations have been made that he behaved in a way which ‘violated the personal space and autonomy’ of the complainants then it seems surprising that an investigator can conclude that there is insufficient evidence to proceed because it can’t be proved that Lord Rennard was doing that deliberately.

The standards being applied to Lord Rennard are certainly very different to those that would be applied to an employee in a similar situation. First of all, in determining disciplinary issues, we steer well clear of slippery concepts such as ‘beyond reasonable doubt’. That is the standard to be used in a criminal prosecution. In employment law we worry about whether the employer has an ‘honest belief’ in the guilt of the employee and whether that is based on ‘reasonable grounds’.

If Lord Rennard was being sued for sexual harassment – and I don’t know if that is even a possibility in this case – we can certainly say that the case would not turn on whether he intended to act in an indecent or sexually inappropriate way. His intention would not actually be relevant. The question would be whether he engaged in unwanted conduct, related to sex, which violated someone’s dignity or created an ‘intimidating, hostile, degrading, humiliating or offensive environment’ – see S.26 of the Equality Act 2010.

If we limited sexual harassment cases to those where we could show that the perpetrator intended to act in that way then nothing would ever be proved. In the modern workplace you have a duty to make sure that you behave in an appropriate way and that your conduct does not amount to harassment. If you aren’t able to see how your conduct may be perceived by others then you are a tribunal claim waiting to happen. Employers are entitled to dismiss employees who behave in a way that exposes them to this sort of liability, and they do not need to prove any intention on the employee’s part to behave indecently.

The problem the LibDems now have is that having appointed an independent investigator, they are rather stuck with his conclusions-  even if they mean that no proper hearing is ever held into what he described as ‘broadly credible’ allegations. I’m sure that Alistair Webster is a brilliant lawyer and advocate, but it does not seem that his main area of expertise is in the realm of workplace harassment. It may be that had the Lib Dems appointed an employment lawyer to carry out the investigation, the conclusion would have been different.

And probably cheaper.

UPDATE 20 January, 17.20

This afternoon the Lib Dems announced that they were suspending Lord Rennard pending disciplinary proceedings based on his failure to apologise. It’s not clear whether there is going to be a whole new investigation or whether the matter will go straight to a disciplinary meeting.

It’s difficult to avoid the feeling that’s this is all getting a bit messy. The danger for the Lib Dems is that it will look like a case of ‘well we can’t get him on X but perhaps we can get him on Y’. I’ve seen employers do that in relation to disciplinary matters and it rarely ends well. The question has to be why you want to take disciplinary action, not what grounds you can find to support the disciplinary action you want to take. In Lord Rennard’s case the hearing will have to focus on his refusal to apologise for incidents that have not themselves been the subject of disciplinary proceedings. Surely in order to take a view on his refusal to apologise you have to take a view on the truth or otherwise of the allegations that are prompting the calls for an apology?

The Lib Dem ministers in BIS are very keen on alternative dispute resolution. This case seems to be a good candidate for a dose of that. Unless somebody gets a grip on this it will simply drag on for months and end in the courts. No-one is emerging well from what is starting to look like a debacle.

Posted in Equality Act, Harassment | Tagged , , , | 1 Comment