‘Last Chance Saloon’ for gender pay gap reporting?

Posted on March 27, 2018 by

With just days to go before the deadline for large employers to submit their gender pay gap information (30 March for the public sector, 4 April for the private and third sectors) the press is full of concern that many employers (no-one really knows how many) have not yet published their figures on the Government website.

Why?

There’s no requirement to hand anything in yet. Nobody is late with anything. In fact more than 4,000 employers have published information ahead of the deadline. They are like those people who did their homework on a Friday night so that they would have the weekend free. Personally I never did my homework until Songs of Praise came on and to this day I feel a small knot of anxiety in my stomach when I hear the theme tune.

I expect there will be a late flurry of employers submitting their data, but no doubt there will be many who then miss the deadline. What happens then? Well yesterday the Equality Commission published its strategy (complete with flowcharts) for enforcing the Regulations.

In a press release, the Commission’s Chief Executive said:

Employers with 250 or more staff still have time to report their gender pay gap. The clock is ticking and with just 10 days to go, those who haven’t reported really are entering the last chance saloon. This is not optional; it is the law and we will be fully enforcing against all companies that do not report.

Tough talk from the Sheriff there – but what does the Commission think ‘fully enforcing’ looks like?

In the public sector the procedure is based on the Commission’s as yet unused powers to enforce the public sector duty to promote equality (which is the mechanism by which the duty on public sector employers to report gender pay gap data was imposed). I don’t think we need to worry about public sector employers, though. They are bound to publish their figures, even if some of them may clearly have got them wrong (I’m looking at you Bolsover District Council).

When it comes to the private and third sectors, an employer who fails to publish its gender pay gap will – the Commission claims – face a series of steps:

  • Step 1: The Commission will write to the employer requiring them to publish their data within 28 days
  • Step 2: If the employer does not comply, the Commission will instigate a formal investigation. Terms of reference will be prepared and the employer will be able to make representations on those terms of reference before the investigation begins.
  • Step 3: If the investigation reveals that the employer has not complied with the Regulations,  the Commission will issue an unlawful act notice giving the employer 14 days to prepare a draft action plan setting out how it intends to comply with its duty.
  • Step 4: Within six weeks of receiving the draft action plan the Commission will either approve it or issue a further notice stating that the plan is inadequate. In that case, the employer will have to provide a revised draft within 21 days
  • Step 5: If the employer does not comply with its own action plan the Commission will apply for a court order requiring it to do so.
  • Step 6: If the employer fails (without reasonable excuse) to comply with that order then it will be guilty of an offence and may be fined.

Now you would be forgiven for thinking that this procedure for enforcing a requirement to publish specific data is rather unwieldy. Is there really a need, for example, for employers to submit draft action plans for review by the Commission? Since we all know what is being investigated, do we really need draft terms of reference for each investigation to be submitted to the employer for comment? Why doesn’t the Commission simply say ‘publish your data by the end of the month or we’ll take you to court’?

The answer is that the Commission has no choice. The procedure set out in the strategy is the procedure that the Commission is required to follow when it believes that an employer is committing an ‘unlawful act’ as defined by the Equality Act 2006. The Act sets out the Commission’s enforcement powers and they are quite specific. The Commission cannot just take someone to court or impose a fine. It has to conduct a formal investigation first. Only then can it issue an unlawful act notice (although as far as I can tell, no case has ever actually got to this stage). Even an unlawful act notice can’t just instruct the employer to comply with the law – it has to require the employer to come up with a plan setting out how it will stop acting unlawfully. It is only if the employer then fails to comply with the plan that the Commission can get a court order seeking to enforce it – and it is only if the employer breaches that court order that a fine can be imposed.

Hitherto, even getting to the formal investigation stage has been a big step for the Commission to take. The 2006 Act clearly envisages that a formal investigation will be a drawn out and complicated investigation of allegedly discriminatory practices, which is why it is so prescriptive about the procedure for conducting one. To see what’s involved, have a look at the 2016 investigation into the Metropolitan Police.  It’s over a hundred pages long and was obviously a major piece of work (I’m pretty sure, by the way, that this is the only formal investigation that the Commission has ever conducted).

It is manifestly absurd to apply the formal investigation process to a simple failure to publish data. But that is the logical consequence of the Commission insisting that its general powers can be used to enforce the gender pay gap regulations. My view is that they can’t. Failure to comply with the regulations is not an unlawful act within the meaning of the Equality Act 2006 and so the Commission’s general enforcement powers don’t apply.  I explained why I think this back in January 2017 and in the year since then I haven’t seem anything to change my view. If anything, the hopelessly overblown enforcement procedure the Commission finds itself proposing reinforces the point.

Large employers should of course publish the data that is required. The overwhelming majority will do so because they will want to comply with their legal obligations. Besides which, missing the deadline may cause  embarrassment and lead to some awkward correspondence. I expect that the Commission will indeed write to a number of employers warning them to publish their data and I doubt that any will want to test my theory that the Commission doesn’t actually have the power to take things further.

Things might get more interesting, however, if the Commission wants to challenge the accuracy of an employer’s figures. An employer might well want to resist an investigation that involves the Commission poring over its payroll information, checking its maths. Perhaps it will be at that stage that the courts will be asked to rule on how far the Commission’s powers go.

 

Posted in gender pay gap, Uncategorized | Tagged , , | 8 Comments

Government responds to the Taylor Review

Posted on February 7, 2018 by

I imagine that Matthew Taylor is pleased with the response the Government has given to his “Good Work’ review of Modern Employment Practices. A (mainly) positive response to all but one of his recommendations (the Government seem determined not to try and mess about with self-employed National Insurance Contributions) is probably better than he was hoping for.

Despite the positive noises coming from No 10, however, the Government has not actually committed itself to much. Most of the proposals, even if they are welcomed in the Government’s formal response, are then sent out for consultation.

Four consultation documents have been published:

employment status: this looks at the proposals on the definition of an employee and a worker – as well as the proposals made by the Taylor review on the calculation of working time for those using ‘gig-economy’ platforms like Uber and Deliveroo.

agency work – this covers in particular the proposal to abolish the Swedish Derogation. This is a much abused exception in the Agency Workers Regs that allows agencies who directly employ the workers they supply to avoid having to match the pay of the end user if they offer sufficient pay between assignments.

transparency in the labour market – covering the Review’s proposals on written statements of terms and conditions, holiday pay, continuity of employment, the right to request flexible working and the Information and Consultation of Employees Regulations.

enforcement of employment rights – looking at the problem of unpaid tribunal awards and repeat offenders.

Sometimes when a Government issues a consultation it has a very clear proposal that it is putting forward and is seeking detailed views on. That is not the case here. The employment status consultation essentially just asks what we think of the Review’s proposals – and the other consultations are more like a call for evidence, asking employers to give their experience of how the rules currently work and what they think the impact of changes would be. Of course it’s good to be open-minded – but this does rather smack of kicking the can down the road.

The Government could for instance, have developed the Review’s recommendations into some concrete proposals and consulted on those. On employment status in particular, Government has been looking the issue for years and we still haven’t seen anything concrete.

I am of course a bit of a sceptic when it comes to redefining employment status. I think it’s very easy to say ‘we should come up with a new, clear and unambiguous definition’, but rather more difficult to actually come up with one. The fact that the consultation  seems to concentrate on the benefits or otherwise of codifying the existing case law – essentially taking the principles set out in the cases and writing them into the statute – rather makes my point. I cannot for the life of me see the point of that approach, but I suppose we will be having this argument for some time to come.

So what happens now?

Well the consultations run until various dates in May – or 1st June in the case of employment status. I would be astonished if we saw a Government  response before the end of the year. Once the Government has decided what it actually wants to do it can then look at coming up with an Employment Bill (most of these changes will require primary legislation) and possibly some further consultation on specific proposals. Perhaps – if the Government was really determined – we could see something being put forward in the Spring of 2019, with a view to the changes coming in during late autumn or (more likely) early 2020.

How likely do we think that is? Does the Government really have the bandwidth to carry out a major reform of employment law? Or could it be that other priorities will crowd out a re-think of employment status and the rules on continuity of employment? How confident are we that Theresa May will stay in position over that time to drive these changes through? Would Jacob Rees Mogg or Boris Johnson share her enthusiasm for improving workers’ rights?

Fundamentally I just don’t see any of this actually happening. Perhaps some of the minor changes that don’t need detailed legislation will make some progress, but I won’t be holding my breath for any of the big ticket items.

Of course, it will be fun over the next couple of years to speculate about how the definition of employee and worker could be improved, but I suspect that much greater progress will be made in the courts than in Parliament. The Supreme Court hears the Pimlico Plumbers case this month. In the end, I think that case will have a bigger influence on employment status than anything the Government has published today.

 

To see more of what I do, go to darrennewman.org

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Posted in Employment status, Taylor Report | Tagged , | 1 Comment

Iceland, equal pay and enforcing the gender pay gap regulations

Posted on January 5, 2018 by

So the internet informs me that Iceland has become the first country in the world to make it illegal to pay men more than women.

Screenshot 2018-01-05 00.05.55

Iceland has not, of course, passed a law saying that it is illegal for an employer to pay any man more than any woman. How would that even work? Obviously we are talking here about paying men more than women who are doing equal work – and lots of countries (including the whole of the EU and Iceland) have had laws about that in place for decades.

What has come into force in Iceland on 1 January this year is a requirement that employers with 25 or more employees should implement a previously voluntary Equal Pay Standard in their pay systems. As far as I can tell this is basically a requirement for larger Icelandic firms to adopt a transparent pay system so that it can be demonstrated that men and women are getting equal pay for work of equal value. It’s explained properly in this article from the Icelandic Women’s Rights Association.

I’m sure that’s great for them. And I can see why people might argue that a similar rule should be adopted for the UK. But it won’t be. We are a million miles from subjecting employers to that level of control.

Employment law is a very culturally specific thing and different countries have entirely different ideas about the extent to which employment is regulated – and who does the regulating. To look at just one point of difference –  in Iceland, just over 85 per cent of the workforce is a member of a trade union, compared with less than 25 per cent union membership in the UK. It is inevitable that employment law is going to work differently in Iceland and we can’t expect to copy it.

Gender Pay Gap Reporting

Nevertheless Iceland’s law is in marked contrast to the UK’s almost entirely pointless requirement for large employers to report their gender pay gap. This requires absolutely no meaningful transparency about who gets paid what or how employers reward employees.  Instead we get some very selective statistics, shorn of all context and telling us next to nothing of any use (comments below please).

And that is assuming that the figures being reported are even accurate. The FT has done some really good work picking apart some of the more suspiciously improbable  entries on the Government website. Just wait until there are more than 9000 entries – how on earth will you be able to tell whose figures are accurate and whose aren’t?

Personally I don’t think employers have much incentive to get their figures right. I’ve written before about why I don’t think the Equality Commission can do much to enforce the gender pay gap in the private sector. My point is that the Commission can only act where the employer is acting in breach of the Equality Act 2010 – and the Equality Act does not require employers  to report their gender pay gap. I stand by that analysis.

So I almost admire the chutzpah of the Commission publishing a draft strategy for enforcing  the Regulations accompanied by a press release saying:

Businesses failing to comply with gender pay gap reporting regulations could face unlimited fines and convictions, the Equality and Human Rights Commission has warned as it published its enforcement strategy.

As the regulatory body responsible for ensuring that all employers with over 250 employees report their gender pay gap statistics, the Commission has set out its enforcement policy for consultation.

Although it will take steps to encourage compliance and engage informally with employers who are in breach of the regulations as a first port of call, it will ultimately enforce against all employers who do not publish their gender pay gap information.

This is nonsense.

One caveat is that public sector employers are in a more vulnerable position because their obligation to publish is part of their statutory duty to promote equality – and the Commission has much clearer powers to intervene where a public body is not complying with its duties.

But even if the Equality Commission has the power to do something about gender pay gap reporting – that isn’t a power that it is actually going to use in real life. You only have to read their proposed approach to see the absurdity of it. The Commission says that it will focus its efforts on those employers who do not comply with the duty to report their gender pay gap at all. If the Commission finds an employer that has not reported, this is how it says it will approach the issue of enforcement:

  • It will write to the employer pointing out their obligation to report and giving them 42 days to comply.
  • If the employer still does nothing the Commission will then initiate a formal investigation – giving the employer 14 days to make representations on draft terms of reference and writing a draft report within 28 days of the receipt of the evidence that is requested.
  • The employer will then have the opportunity of reaching an agreement with the Commission to provide the appropriate gender pay gap information within a specified period.
  • If the employer refuses to enter into such an agreement or breaches its terms then the Commission will issue an ‘unlawful act notice’. That would require the employer to come up with a draft action plan explaining how they will remedy their continuing breach.
  • Within six weeks of the receipt of that plan the Commission will respond saying whether or not they accept it. If they do, then it will come into force six weeks later. If they do not approve the draft action plan they will issue a notice requiring a revised draft to be produced within 21 days.
  • If the employer fails to comply with the action plan the Commission will apply for a court order requiring the employer to comply.
  • If the employer does not comply with the order then it commits an offence and may then face an unlimited fine.

Does this seem like a sensible way chivying along some employers who have not got round to entering a few (largely meaningless) figures on a Government website?  The Commission’s enforcement powers are designed for employers whose ongoing practices amount to a serious breach of equality law. They really don’t have any sensible application to the reporting of gender pay gaps. Whatever the legal position, it is inconceivable that any employer will ever be taken through the whole process to the point where it is actually fined. Telling employers that they face an unlimited fine if they don’t comply with gender pay gap reporting is just silly.

The fact is that the Commission’s role in enforcing the Equality Act is largely theoretical. They publish guidance and information; they commission research and sometimes intervene and make submissions in important legal cases. But as for using their formal enforcement powers? Not really. We can debate the potential scope of unlawful act notices, but as far as I can tell, the Commission has never actually got as far as issuing one. You can count the number of formal investigations it has undertaken on the fingers of one hand. The idea that employers up and down the country who have not reported their gender pay gap will end up being taken to court by the Commission is for the birds.

So forgive me if I treat the Commission’s consultation on a ‘strategy’ for enforcing gender pay gap reporting with a certain amount of scepticism. Also – it’s one of those annoying consultations that asks a lot of  closed questions to make it really easy to plot the responses on a graph. I won’t be answering those questions, but I will be asking one: what resources will the Commission be allocating specifically to enforcing the gender pay gap regulations? When we know the answer to that question, we’ll have a much clearer idea of what their strategy actually is.

 

Posted in Equal pay, Equality Act, gender pay gap, Uncategorized | Tagged , | 2 Comments

The Classic Employment Law Songbook

Posted on December 15, 2017 by

Over the past year I’ve been recording a series of podcasts looking at classic employment law cases and seeing what relevance they have today. I try to put each into its historical and legal perspective and one part of that is to check out whatever was the number 1 hit single at the time the case was decided.

Since it’s Christmas, and as the equivalent of bringing a game in on the last day of term, here are the 14 cases I’ve covered so far this year – with their associated No 1 hit. There are some real clunkers in there (James v Eastleigh) but some that are real masterpieces (Abernathy v Mott).

You can subscribe to the podcast here and if you are a Spotify person I’ve done a playlist here

Enjoy – and have a happy Christmas.

1 British Home Stores v Burchell

Still the leading case on conduct dismissals – with a three point test that can be adapted to all sorts of situations.

1978 You’re the One that I Want, John Travolta & Olivia Newton John

2 Polkey v AE Dayton Services Ltd

The end of the ‘no difference rule’ in deciding on liability for unfair dismissal – but the introduction of the ‘Polkey deduction’ means that an unfair dismissal win is often a hollow victory for claimants.

1987 China in your Hand, T’Pau

3 King v Great Britain China Centre

Before we had the reverse burden of proof in the Equality Act we had this case which allowed Tribunals to look to an employer for an explanation when the effects seemed to point to discrimination. Frankly, I think this made much more sense than the current position.

1991 Sleeping Satellite, Tasmin Archer

4 James v Eastleigh Borough Council

Never has a man’s quest to avoid paying 75p to use a municipal swimming pool had such profound consequences. We are still working out what this case has to say on the meaning of direct discrimination

World in Motion, New Order

5 Western Excavating v Sharp

The defining case on the nature of constructive dismissal – and a decision from Lord Denning into the bargain!

 Name of the Game, Abba

6 Delabole Slate Ltd v Berriman

There’s more to an ETO reason than E, T and O! Also a neat case on the reason for a constructive dismissal.

1985 – Move Closer, Phyllis Nelson

7 Carmichael & anor v National Power

There’s nothing new about employment status cases. This one looks at the alleged employment status of two casual workers who gave tours of their local power station.

1999 – She’s the One, Robbie Williams

 8 Iceland Frozen Foods Ltd v Jones

This is case is probably quoted more often in employment law than any other case. Use it to argue that the Tribunal has adopted a ‘substitution  mindset’ when deciding the fairness of a dismissal.

 1982 Fame, Irene Cara

9 James v Waltham Holy Cross

Employment law doesn’t always move as quickly as we sometimes claim. This case from 1973 still gives a good outline of the principles involved in dismissing fairly for poor performance.

1973 – Can the Can, Suzi Quattro

10 Griggs v Duke Power

We cross the Atlantic in this episode to look at the origin story of indirect discrimination.

1971 – One Bad Apple, The Osmonds (US No 1)

11 Williams v Compair Maxam

We still quote this case when looking at the principles of fair selection for redundancy – but did the EAT ever think they were laying down general guidelines?

1982 – Land of Make Believe, Bucks Fizz

12 Abernathy v Mott, Hay and Henderson

This case doesn’t get as much attention as it should. Being clear about the reason for dismissal is key to understanding whether a dismissal is fair or not.

1974 – Tiger Feet, Mud

13 East Lindsay District Council v Daubney

This case established the importance of discovering the ‘true medical position’ and consulting with the employee before dismissing for long-term sickness absence. But how much has the development of disability discrimination law changed the approach that employers must take?

1977 – Knowing Me Knowing You, Abba

14. WM Brooks & Son v Skinner

And we end with a Christmas special. An employee sacked for skipping the nightshift after over-indulging at the Christmas party. But when you hear what was number 1 at the time of the party (back in 1982) you won’t blame him for having drink.

1984 – Two Tribes, Frankie Goes to Hollywood

Posted in Uncategorized | Leave a comment

What is the point of Unfair Dismissal?

Posted on November 7, 2017 by

On Monday I read a story that utterly depressed me. The BBC reported the case of Rachel Burns who was dismissed by Surrey County Council from her job in a care home for posting pictures on Facebook that included a vulnerable resident. This is not one of those posts where I pull apart the media reporting. It seems to me that the BBC account is pretty accurate – and is confirmed by the Tribunal decision.

When you read what Ms Burns did wrong I very much doubt that your reaction will be ‘well thank goodness that person can no longer work with vulnerable adults’. She shared a photo on Facebook of a happy occasion – a musical evening that she led at the care home where she worked.  No-one was harmed. No resident objected. In fact, by the time of the Tribunal hearing the resident in question had made it clear that he was quite happy for the picture to appear.

But Ms Burns had clearly acted in breach of the social media policy which did not allow the posting of text, video or photos that breached the confidentiality of residents. She accepted that fact and took the post down immediately. She was then suspended (why?) and taken through the disciplinary process. The employer concluded that such a breach of the policy would normally lead to dismissal but that they would on this occasion offer her redeployment to a much more junior post – at a much lower rate of pay. She took too long to make up her mind about that, however, and so she was dismissed with notice.

She had worked at this care home for more than 20 years and her career was over because she inadvisedly published pictures on Facebook of an event that showed residents of the care home enjoying a social event. Nobody thinks that she poses a danger to anyone. There is no reason to think that she will ever do this again. Nobody has actually suffered any harm or even anxiety except the employee herself. Why then must she lose her job? How can such a devastating – life ruining – penalty be appropriate or reasonable?

Now there are two sides to every story and the Council would no doubt argue about the fundamental importance of safeguarding vulnerable adults from breaches of their privacy or dignity. But what I find most enraging about this case is that in the whole of the ET judgment – it’s 18 pages long – you won’t find any discussion of that issue. The nearest you get is one line in paragraph 93 where the Tribunal says that proposing to demote her ‘was within the band of reasonable responses to the admitted misconduct’. There is no explanation of the basis of that finding and no discussion or consideration of whether the breach of policy was really so serious as to warrant dismissal.

Instead we get procedure; pages and pages of procedure. The Tribunal discusses the various hearings and adjournments and the conduct of the appeal hearing. It then concludes that on one very narrow issue the dismissal was unfair: the employer should have given her longer to think about accepting a more junior position.

The next step will be to decide remedy – and here Ms Burns is likely to be seriously disappointed. Instead of being compensated for everything she has lost in the past year and will continue to lose in the future, she is likely to be awarded only a token amount. There will be a deduction made for contributory fault – and since the Tribunal seems to think that demotion or dismissal was within the range of reasonable responses that is likely to be significant. Compensation will also reflect the Tribunal’s finding that there was ‘only a slim chance’ that she would’ve accepted the lower paid position.

Frankly, If I were the employer in this case I’d chalk it up as a technical defeat, but a practical win.  I might also regret the fact that a single and inadvertent breach of policy led to the loss of an experienced and valued employee. As it happens, however, the care home was already scheduled for closure by the time Ms Burns was dismissed and so her dismissal actually allowed the employer to save on its redundancy costs (although I should carefully record that the Tribunal rejected any suggestion that this fact lay behind the employer’s decision to take such a strict view of the employee’s misconduct).

Now of course Ms Burns could appeal against a major reduction in compensation – and I would think that her chances would be good. The range of reasonable responses test certainly skews unfair dismissal law in favour of employers – but it does not mean that Tribunals can ignore questions of substantive fairness altogether. Employers cannot simply rely on the fact that there has been a technical breach of a policy to justify dismissal. For a recent example see Arnold Clark Automobiles Ltd v Spoor in which the EAT upheld a finding of unfair dismissal even though the employee was guilty of gross misconduct. That fact did not mean that the employer was entitled to disregard the employee’s long service and the surrounding circumstances of the case.

But what would winning the appeal actually achieve? The most likely outcome would be that the case would be sent back for re-hearing. Ms Burns would have to go through the whole process again – and still would not be guaranteed a substantive win. By then it would be over two years since her dismissal. Frankly I’d probably advise her not to bother – it just isn’t worth the extra grief.

Even accepting that this decision is flawed, it strikes me as a good example of what is wrong with unfair dismissal law. The law has become fixated with policies and procedures to the point where it is essentially a bureaucratic right – looking at how the employer has gone about the process rather than asking fundamentally whether it was right for the employee to be dismissed. This is bad for employers and employees. It is bad for employers because it can tie them up in red tape even where the case for dismissing an employee is compelling – and it is bad for employees because an employer who drafts clear policies and is good at following procedures has a pretty free hand in deciding whether or not to dismiss someone. Even winning the case is often a hollow victory because the remedies are so limited.

I’m increasingly of the view that the right not to be unfairly dismissed is not really worth the volumes of case law and legal commentary devoted to it. If I had my way I’d scrap the whole thing and start again.

 

 

 

Posted in Unfair Dismissal | Tagged , , | 6 Comments

How Uber could win in the Employment Appeal Tribunal

Posted on September 28, 2017 by

I spent yesterday sitting in the public gallery of the Employment Appeal Tribunal (if you can call five rows of seats the back of a big room a ‘gallery’) listening to Dinah Rose QC argue that the Employment Tribunal was wrong to find that Uber drivers were ‘workers’ for the purposes of the Working Time Regulations and the National Minimum Wage. It was a great day out!

Back in October I wrote a post headed ‘Why Uber lost’. After listening to Dinah Rose I need to talk about why Uber might win. I should be careful here. I only attended day one of the hearing. The need to earn a living means I can’t watch day two when Jason Galbraith-Marten QC will argue in favour of the drivers. It also has to be said that Dinah Rose has that quality you always want in your barrister – she just sounds like she is obviously right. She picked apart the Employment Tribunal decision in a way that made me very glad that she has never edited an article I have written. Having heard only her (very impressive) arguments, I may well have come away with a skewed idea of how strong Uber’s case is.

The argument was long and detailed, but I think it boils down to this. Minicab drivers have always been accepted as being neither employees nor workers because they do not perform work ‘for’ the minicab firm that ’employs’ them. Instead the firm is the ‘agent’ of the driver, booking work on the driver’s behalf and charging the driver a fee or commission. There was a lot of detail about the law of agent and principal which also drew on the VAT treatment of minicab firms – I don’t envy the EAT Judge (HH Judge Eady QC) the task of picking through that issue when she comes to writing her judgment. The central point, however, was that the disruptive technology used by Uber that allowed this process to be operated on a massive scale did not alter the basic facts of the relationship between the driver and Uber, which is just a glorified minicab firm.

This is a smart argument because instead of presenting Uber as a new form of business that needs a fresh approach when analysing the rights of the drivers who engage with it, it essentially says ‘look, there is nothing new here; this is a minicab firm and the status of minicab drivers is well established’. Time and time again Dinah Rose emphasised that Uber was simply operating the same tried and tested business model adopted by any old minicab company. I’m not entirely sure that Uber would want to see themselves that way, but that’s another issue.

The other main plank of the appeal was the extent to which the Employment Tribunal Judge was prepared to look behind the detailed contractual documents setting out the relationship and consider the ‘commercial reality of the situation’. In Dinah Rose’s argument this was a sloppy approach where pejorative language about clever lawyers and business jargon hid an ignorance of the law of agents and a lack of rigour in analysing the contractual obligations of the parties. This did rather strike home with me. We all enjoyed reading the Employment Tribunal decision which had some colourful language about Uber and some good literary references (I always appreciate a judge who quotes Hamlet) – but on reflection there was perhaps too much colour and not enough precision about exactly what the contractual obligations were.

There is an ongoing debate about the relevance of ‘mutuality of obligation’ when it comes to defining workers. How important is it that a worker is not obliged to accept work from the ’employer’? Under the statutory definition there must be a contract under which the worker agrees to perform work personally for the employer. However someone can be recruited as an Uber driver and choose never to turn their app on and never accept a customer – have they agreed to perform work? The Tribunal held that drivers became workers when they made themselves available for work, but Dinah Rose emphasised that even then they were not obliged to accept a booking and could turn the app off at any time. Where, then, was the contractual obligation to work?

Was the employment judge too ready to ‘step back’ from the specific contractual obligations and look at the ‘reality of the situation’? Perhaps. Even if we get past the agent and principal point (and I hope we do, it’s an area I don’t know much about)  this could become an important authority on the scope of the mutual obligations that are needed to form a worker’s contract.

We can probably expect a decision from the EAT by Christmas (I’m completely guessing here) but I’d be astonished if the case finished there. The losing side will surely take it to the Court of Appeal and I wouldn’t be surprised if a point emerged worth taking to the Supreme Court. We are far from coming to the end of this particular journey.

Posted in Employment status, Uncategorized | Tagged , , | 6 Comments

How much does it cost to defend an ET claim?

Posted on August 31, 2017 by

Mark Littlewood is the Director General of the Institute of Economic Affairs and yesterday he wrote an article in the Times attacking the HR profession for creating a ‘risk-averse, unimaginative and insipid working environment’. I’ll leave it to others to defend the profession as a whole – but one paragraph in particular caught my attention. When it comes to the cost of dealing with ET complaints, Mark says this:

Individual cases may not be conclusive,  but they can be illustrative. In one recent instance, a worker was seeking to secure £15,000 in compensation. Their claim failed, but the successful employer incurred unrecoverable legal fees of £50,000.

Mark uses this not as an example of ridiculous over-billing by a law firm, but as an illustration of how broken our employment law system is. His point, I think, is that even unjustified complaints can force an employer to spend tens of thousands of pounds defending itself. This creates an incentive for employees to bring spurious claims in the expectation that the employer will throw money at them to persuade them to go away.

This is an old debate and we could go round in circles on it. For what it’s worth I think Mark oversimplifies what leads someone to bring a tribunal claim. My experience, such as it is, is that relatively few people bring a claim as a purely cynical exercise in obtaining a settlement. Most feel genuinely aggrieved at how they have been treated.

What I want to focus on, however, is the specifics of the case. A claiming brought a claim seeking £15,000 in damages and the employer spent £50,000 successfully defending the claim. Frankly, that does seem like a lot of money to spend and I was keen to know more. On Twitter, Mark was kind enough to explain that he had received the details of this case directly from the lawyers concerned and could not therefore give any details – although they are likely to be ‘public soon’.

Fair enough. So let’s think about why a claim that was only worth £15,000 could cost £50,000 to defend.

The first, rather obvious point, is that it doesn’t need to. Legal costs are not compulsory in the Tribunal system; an employer is perfectly free to defend the case without hiring lawyers. However, although I think there are cases when an employer should be able to defend the case on its own, I certainly accept that most employers in most cases will need to take professional advice and will be at a serious disadvantage if they don’t.

But £50,000? That seems rather a lot.

Asking how much a lawyer costs is a bit like asking how much a car costs. If I need a car to do the shopping I can easily spend £50,000 on one, but you might think that was a bit extravagant. Some law firms charge more than others and while, to an extent, you get what you pay for, the expensive city firm you use for your corporate work is not always the best firm to use to defend a run of the mill tribunal claim. Hiring a barrister can be extremely expensive, but can also be an absolute bargain. There is no point in hiring a top QC in a straightforward case and there are many talented advocates who can do a great job for a modest fee.

I’m going to assume in this case that the employer took a deliberate decision to spend £50,000 defending the claim. Surely no reputable firm would simply spring a bill like that on a client without discussing how the preparation was going and what the likely costs were going to be? Because in any tribunal claim there is a decision to be made about how much preparation is appropriate – how many witnesses are needed, what documents should be included in the bundle etc. It may also be important to decide who in the firm will be dealing with the case – how much of the work will be done by a partner and how much by an assistant solicitor? Another decision is whether to challenge the claimant’s right to bring a claim. Should you seek a preliminary hearing to determine whether the individual was an employee or a worker? If the Tribunal rules against you, should you appeal, or concentrate on dealing with the merits of the case?

There is a balance to be struck (depending on the importance of the case as well as the risk and likely cost of losing) between ensuring success and spending so much that a victory feels like a defeat. I would generally argue that if a case is only worth £15,000 if it succeeds, then the resources allocated to defending it should be proportionate to that. If the Bill comes to £50,000 then something has gone wrong. Either the employer has not been paying attention to the costs as they build up, or the lawyers have been taking the employer for a ride.

There may be reasons, of course, why an employer would deliberately decide to spend so much. The case might have implications for the business as a whole. Deliveroo and Uber are in the process of spending (i would imagine) quite a lot of money defending a number of modest claims for holiday pay and the minimum wage. Pimlico Plumbers is taking a disability discrimination claim brought by a plumber to the Supreme Court on the issue of whether or not he is ‘in employment’ rather than simply arguing in the Tribunal that they haven’t discriminated against him.  These cases are not about the value of the individual claims but about the legitimacy of the employer’s whole business model. Of course it makes sense to make a serious investment in fighting those claims.

A number of people on Twitter suggested to me that an employer might choose to spend much more than the value of a claim in order to defend its reputation. That’s a fair point, but I think it is sometimes overblown. Most tribunal claims don’t really have as much of an impact on an employer’s reputation as the employer often thinks. Where the case really does carry that risk, then a good media strategy might be a more cost effective way of dealing with it than throwing money at the case itself.

I’d also accept that an employer sometimes needs to show that it is prepared to fight a case, rather than just agree a settlement, to send a clear message that it is not an easy touch. But again, there is no need to spend an exorbitant amount to do that. I’m not arguing that in Mark’s example the employer should have settled the case rather than spend £50,000 defending it, I’m querying whether defending the claim really needed to be so expensive.

I know that lots of practicing lawyers read this blog, so I would love to hear their views on managing Tribunal costs. Perhaps I am wrong and £50,000 is simply the going rate for defending an unfair dismissal claim these days. If you are an employer with experience of balancing legal costs against the value of claim then please share your experience in the comments section. If you are in private practice, please leave a comment and tell me how much it costs to defend an ET claim and what employers can do to keep the costs at a reasonable level. Feel free to plug your firm!

Perhaps we can get a sense of how useful an illustration Mark Littlewood’s story of a £50,000 legal bill is.

 

 

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