Sacked for your beliefs? A balancing act for Tribunals.

Posted on October 11, 2023 by Darren Newman

One of the issues I talk about a lot with clients is the extent to which employees with beliefs that might conflict with the values of the employer need to be accommodated – and how employers should deal with potential tensions arising from differing belief systems among employees. 

On social media I try to stay away from these debates, particularly in relation to transgender rights. I stay away not because the issue is unimportant but because the debate on social media is so polarising and, frankly, exhausting. It is easy to get locked into interminable discussions that seem to turn on rather obscure points of terminology that arouse intense feelings on both sides. Use the wrong phrase and it feels like you get shouted at by strangers for days on end. 

But over the weekend I found myself in an interesting Twitter discussion about an employment law question to do with the rights of someone who is ‘gender critical’ (I’m not falling into the trap of trying to define that – google it if you like) and whether they could be compelled by their employer to refer to a colleague as a woman when they believed that colleague to be a man. I asked for a specific scenario and promised to give a proper legal analysis of how I thought such a case would go. 

Here is the scenario I was given: 

“A person is told they *must* refer to a male colleague as “she/her” and they say no. They say they will use names where possible. They are dismissed and are suing for belief discrimination. They haven’t said anything else to the colleague and haven’t “misgendered” them. They have simply refused to submit to compelled speech.”

In this post I’m going to pick apart the legal issues and look at how discrimination law would currently approach such a case.

Protected beliefs 

I am going to assume that the employee’s refusal stems from beliefs that can be called ‘gender-critical’ and that following the case of Forstater v CGD Europe, those beliefs would count as philosophical beliefs under the Equality Act. It is worth bearing in mind, however, that it is quite possible for someone to refuse to comply with this sort of instruction in the absence of any clear philosophical beliefs. They may refuse out of spite or prejudice in which case their actions would certainly not be protected. 

I am also going to assume that this person has less than two years’ service and cannot claim unfair dismissal. So the question is not whether the employer has behaved reasonably in dismissing the employee. The only question is whether the dismissal amounts to discrimination.

Direct Discrimination

In a direct discrimination case (I’m leaving indirect discrimination out of the equation here) what must be shown is that the dismissal amounts to less favourable treatment “because of a protected characteristic” – the protected characteristic in this case being the employee’s belief. 

So the question is we ask is: why has the employee been dismissed? If the dismissal is because of the protected characteristic, then discrimination is established. If there is some other reason (good or bad) and the protected characteristic plays no part in the decision then there is no direct discrimination. 

The employer might start off by arguing that the employee has not been dismissed because of their beliefs at all. It is the employee’s conduct that they are concerned with. The reason for the dismissal is the employee’s refusal to obey their instructions to refer to a colleague using their preferred pronouns. Anybody who behaved that way would be treated just the same irrespective of whether their behaviour was prompted by their beliefs or simply a lack of consideration. 

I have some sympathy with this approach but it seems that this is not the right analysis. This is because the Equality Act has to be interpreted in order to give effect to the rights guaranteed by the European Convention on Human Rights. Article 9 of the Convention guarantees freedom of religion and belief and specifically says that everyone has the right to “manifest” their belief in “in worship, teaching practice and observance”

Manifesting a belief 

To understand the next step in the argument we need to look at what it means to ‘manifest’ a belief. The case that tells us what manifesting means is Eweida v UK – the case of the British Airways employee who claimed the right to wear a visible silver cross in breach of the employer’s dress code. When looking at the question of what manifesting meant, the Court said this:

In order to count as a “manifestation” within the meaning of Article 9, the act in question must be intimately linked to the religion or belief. An example would be an act of worship or devotion which forms part of the practice of a religion or belief in a generally recognised form. However, the manifestation of religion or belief is not limited to such acts; the existence of a sufficiently close and direct nexus between the act and the underlying belief must be determined on the facts of each case. In particular, there is no requirement on the applicant to establish that he or she acted in fulfilment of a duty mandated by the religion in question

para 82

This means that for our employee’s behaviour to amount to a manifestation of their beliefs it does not have to be an obligation imposed by those beliefs, but it does have to have an intimate link with them. There must be a ‘sufficient close and direct’ link between the conduct in question and the underlying belief. 

This is a question of fact for the Tribunal to decide, but I would think that an employee refusing to act in a way that is inconsistent with their beliefs is almost certainly a manifestation of those beliefs. 

Objectionable manifestations

The reason we need to decide this point is that to decide whether our example amounts to direct discrimination we have to ask whether the employer could reasonably object to the way in which the employee manifested their belief. 

We get this from the Court of Appeal decision in Page v NHS Trust Development Authority which concerned a Trust Director who repeatedly gave interviews about his views – derived from his Christian beliefs – about same sex relationships.  Lord Justice Underhill said

In the context of the protected characteristic of religion or belief the EAT case-law has recognised a distinction between (1) the case where the reason is the fact that the claimant holds and/or manifests the protected belief, and (2) the case where the reason is that the claimant had manifested that belief in some particular way to which objection could justifiably be taken. In the latter case it is the objectionable manifestation of the belief, and not the belief itself, which is treated as the reason for the act complained of. Of course, if the consequences are not such as to justify the act complained of, they cannot sensibly be treated as separate from an objection to the belief itself. 

para 68

I think the law has taken a wrong turn here. Concepts of reasonableness and justification belong in the realm of indirect rather than direct discrimination. I think the Court of Appeal in Page was overstating the strength of the case law from the EAT (the key cases to look at are Wasteney v East London NHS and Grace v Places for Children) But we are where we are. 

Following Page then, the question to be asked is whether our employee’s conduct was a manifestation of their belief “to which objection could justifiably be taken”. If it is then the dismissal was because of the conduct and not the belief. If objection could not justifiably be taken to the employee’s behaviour then the dismissal was because of the belief and the dismissal will amount to direct discrimination. 

So can the employer reasonably object to an employee refusing to use the preferred pronouns of a trans colleague?

Which side are you on?

At this point I suspect my readership divides. Those who instinctively support the employee will say that no objection could justifiably be taken to them referring to a colleague by reference to their biological sex. Those on the other side will say that of course an employer can object to an employee refusing to obey an instruction designed to be inclusive towards trans colleagues. 

But how will a Tribunal approach this, given that they cannot take sides in that debate? (anyone whose instinctive response is “it’s not a debate!” go back three places and miss a turn)

Article 9(2)

A recent case that attempts to answer the question is Higgs v Farmor’s School. The EAT was considering the case of an employee dismissed from a school because of Facebook posts – based on her Christian beliefs – criticising education on issues such as same sex relationships and trans rights.  Having found that the Tribunal had taken the wrong approach, the EAT sent the case back with guidance about how the issue needed to be tackled. 

The EAT relied on Article 9(2) of the Convention. Having set out the freedom to manifest beliefs in Art 9(1), Article 9(2) says that:

Freedom to manifest one’s religion or beliefs shall be subject only to such limitations as are prescribed by law and are necessary in a democratic society in the interests of public safety, for the protection of public order, health or morals, or for the protection of the rights and freedoms of others.

So Article 9 does envisage some limitation on the right to manifest a belief – but only if it is “prescribed by law” and “necessary in a democratic society” to protect the rights and freedoms of others (to pick the grounds most relevant to the case we are considering case)

In Higgs the EAT said  “there can be nothing objectionable about a manifestation of a belief… that would not justify its limitation or restriction under [Article 9(2)]”. (Decision para 82). In other words, you can only object to the manifestation of a belief if it would be permissible to restrict it under Article 9(2).

A Balancing Act

This is important – and rather smart. The EAT has given some objective basis to the otherwise subjective question as to whether objection can reasonably be taken to something. In doing so they have set the bar quite high. It is not good enough that some people would object to what the individual is doing – it is not even good enough if most people would strongly object. What we have to ask is whether restricting the employee’s manifestation of their belief was ‘prescribed by law’ and “necessary” to protect the rights and freedoms of others.

The immediate issue that might occur to you is whether you can say that what the employer has done is ‘prescribed by law’. There is certainly no law that requires employers to dismiss people who refuse to use the pronouns that the employer thinks they should use. But as the EAT points out the phrase is wider than that:

It is well established that “law” in this sense has an extended meaning, requiring that the impugned measure should have some basis in domestic law and be accessible to the person concerned, who must be able to foresee its consequences, and compatible with the rule of law.

para 51

I would take from this that if the employer gave a clear instruction to the employee and was acting in accordance with its own policies on equality and diversity, that would probably be enough. Let’s take that box as being ticked as I think a Tribunal would be keen to gloss over this question and move to the next one.

The next question is whether the instruction given by the employer is necessary in a democratic society to protect the rights of others. The EAT in Higgs made it clear that this required a balancing exercise between the interference with the fundamental rights of the employee and the rights and freedoms of others. It seems that here it is the employer’s actions we must look at rather than what the employee was being asked to do. We have to look at the employer’s decision to dismiss the employee and weigh up its reasons for acting that way.

So why is the employer insisting on employees using the preferred pronouns of trans colleagues to the extent that it dismisses those who don’t comply? The argument, presumably would be that gender reassignment is a protected characteristic and that the employer is obliged to ensure that trans employees are accepted and treated with respect. There is no question that it is upsetting for a trans woman to be referred to using male pronouns and the employer is seeking to protect them from the distress that the employee’s behaviour is likely to cause. 

That is, I think, a reasonable objective for an employer to have. The question is whether it is a sufficient reason to justify dismissal.

My view is that it is not – and that the dismissal of the employee in the circumstances given would amount to direct discrimination. 

The first reason is that the EAT in Higgs emphasised that the starting point needed to be a recognition of the ‘essential nature’ of the right of freedom of belief (para 83). We have to accept that the expression of a belief may be protected even if that causes offence to others – and that any attempt to restrict the manifestation of a belief will only be justified in limited circumstances. In the example given, the employee’s behaviour is not overt. There is no abuse directed at a fellow employee and the employee is attempting to refer to the colleague without resorting to pronouns at all when possible. While some might find this conduct offensive, the extent to which it intrudes on the rights of others is limited and the price imposed on the employee – dismissal – is high. 

Different circumstances might lead to a different conclusion. I am given a scenario where an employee, in conversations with colleagues, seeks to avoid using the preferred pronouns of another colleague. The answer might be different if, for example, that employee was speaking to a client and constantly referred to a trans colleague as ‘he’. It would certainly be different if the employee refused to refer to customers or service users using their preferred pronouns (see Mackereth v DWP). 

It all just depends…

One of the problems with this issue is that many people approach it with a passionate intensity where the right answer just appears to them to be glaringly obvious. You may feel that – obviously – an employee should be free to refer to a trans woman as a man because that reflects the biological reality. You may feel that – obviously – a refusal to respect the gender of a trans woman equates to a denial of their whole identity and is necessarily a form of unlawful harassment. But when we are looking at discrimination case we have to accept that the law may protect people we fundamentally disagree with. A Tribunal cannot (or at least should not) just pick a side, it must strike a balance between competing rights. 

There is of course an artificiality in scenarios as straightforward as the one I have been looking at. In any real case the Tribunal would have actual incidents to look at and a whole context of the detail and tone of what was said and done. As the EAT said in Higgs, these cases are very ‘fact-sensitive’. Different scenarios would have different outcomes. In employment law that is often the most we can say.

Posted in philosophical belief, Uncategorized | Tagged , , , , | 4 Comments

Qualifying for Unfair Dismissal

Posted on September 5, 2023 by Darren Newman

The right not to be unfairly dismissed is absolutely central to UK employment law – and the question of who qualifies for that right is something of a political football. Put simply, how long should an employee have to work for an employer before the employer should be required to act reasonably in choosing to dismiss? At the moment, that period is two full years. 

It is worth being clear about what this means – because this is often glossed over. An employee who has been continuously employed for less than two years can be dismissed – provided the employer gives notice – on a whim and for no good reason at all.  The employee can claim discrimination if the reason for dismissal is a protected characteristic (race, sex, religion etc) or because of something arising from a disability. There are also some grounds for dismissal which will always be regarded as unfair and which do not require a qualifying period (whistleblowing, trade union membership, asserting a statutory right and more). But those exceptional cases aside, the employer does not have to justify a decision to dismiss an employee with less than two years’ service. The employer might suspect the employee of misconduct without any evidence, or wrongly blame the employee for a mistake. Frankly the employer just might not like the way the employee sips their coffee. Inside two years, the employee has no right to complain no matter how unfair the decision to dismiss is. The qualifying period for unfair dismissal is a licence for an employer to act wholly unreasonably. 

Two years does seem quite a long time for an employee to have to wait for the right to be treated fairly – and the qualifying period has not always been so long. While it was 104 weeks when the right not to be unfairly dismissed was introduced in the Industrial Relations Act 1971, the incoming Labour Government reduced it to 26 weeks when it came to power in 1974. The Conservatives returned in 1979 and increased the qualifying period to one year in 1980 and then to two years in 1985. It remained that way until the New Labour Government of 1997 reduced the period to one year. Then, when the Conservative led coalition began in 2010, the qualifying period was put back up to two years.

Spot any patterns here? Conservatives go for a longer qualifying period and Labour favours a shorter one – and that has been the pattern for half a century. 

But with a general election due in the next year, and Labour currently looking likely to form the next Government, the question is whether – this time – they might abolish the qualifying period altogether. That is certainly current Labour Party Policy. The policy paper “A New Deal for Working People” says that Labour will ‘end this arbitrary system and scrap qualifying time for basic rights such as unfair dismissal’. Whether that policy will make it into the manifesto remains to be seen and there is some suggestion that Labour might be rowing back slightly from this position. Back in August, the Financial Times reported that Labour would still allow employees to be dismissed during a proper probationary period. 

Unfair Dismissal was first proposed as a right by the Royal Commission on Trade Unions and Employers Associations 1965-1968 (The Donovan Commission). They considered whether there was a need for a qualifying period of two years as there was for the recently introduced right to a redundancy payment. They concluded:

“We see no justification however for limiting protection form unfair dismissal to those with at least two years’ service, since the fact that he has been dismissed after a short period of employment could in some circumstances have a serious effect on an employee’s future prospects. When the terms under which an employee was engaged provide for a probationary period of service this is a factor of which due account must be taken”

Donovan Commission, para 555, page 149

I think that is rather well put and stands the test of time. If your CV shows that you worked for an employer for just a few months before moving on, then that will not generally look good. You may also have left secure employment on the promise of the new job and to have it unreasonably taken away from you is no less upsetting or unjust simply because you have been in the role for less than two years. And if we did abolish the qualifying period, then Tribunals would develop case law that set out a fair way to deal with employees who fail their probationary period. 

But while that case law developed there would be considerable uncertainty about what employers were expected to do. The Government could set out a fair way to manage probation in legislation, but in reality that would just lead to uncertainty about how the new rules would be interpreted. It is also a change that would require primary legislation – an Act of Parliament – taking up precious parliamentary time. 

I suspect that what will happen in the end is that the Government will set a six-month qualifying period. That change only requires a Statutory Instrument and can be done quickly and with little fuss. Indeed, one of the reasons that a change in the qualifying period takes place so predictably when there is a change in Government is that the change is quick and easy to make. Since most probationary periods are six months long anyway, I suspect a new Government would rather make the simple change quickly rather than take longer to do something more complicated. 

Posted in Uncategorized, Unfair Dismissal | Tagged , , , , | 2 Comments

The Strikes (Minimum Service Levels) Bill

Posted on January 11, 2023 by Darren Newman

Last autumn the Government introduced the Transport Strikes (Minimum Service Levels) Bill. That Bill never even made it as far as its first debate in the Commons because yesterday it was replaced by the Strikes (Minimum Service Levels) Bill. Can you spot the difference?

The first Bill applied to ‘specified transport services’ (without actually specifying them), but the new Bill is much wider. As well as transport, it also applies to health services, fire and rescue, education, the decommissioning of nuclear installations (and management of radioactive waste and spent fuel) and border security.

What does the Bill do? It gives the Secretary of State at BEIS the power to issue regulations specifying minimum service levels that will apply in the event of a strike taking place in any one of those sectors. An employer facing a strike covered by those regulations can then give a ‘work notice’ to the union identifying the employees that it needs in order to meet the service levels required. When a work notice is given the union must then take all reasonable steps to ‘ensure that all members of the union who are identified in the work notice comply with the notice’. If it fails to do so, then the strike is unlawful.

This Bill is less complex than the Transport Strikes Bill it is replacing. The Transport Strikes Bill had provisions allowing employers and unions to agree minimum service levels – with the Central Arbitration Committee required to step in and make a determination if no agreement was reached. The Secretary of State could issue regulations, but these would not apply if there was an agreement or a CAC determination.

In the new Bill, all that has gone. The Secretary of State has to consult before issuing Regulations and the implication is that he may not feel the need to do so in relation to services where an agreement is in place – but the power to make the Regulations is not limited.

The Secretary of State can issue Regulations relating to minimum levels of service but there are no criteria or guiding principles setting out how that minimum level of service is to be determined.  The Bill refers to minimum – as opposed to minimal – service levels. There is nothing whatsoever in the Bill that indicates what a minimum service level will be.

While the Government has been emphasising the need for minimum safety levels to be in place when there are strikes affecting key public services, there is no mention of safety anywhere in the Bill. I suspect that there would be some public sympathy for a rule that some level of emergency service should still be maintained when ambulance workers or firefighters go on strike. I’m not sure how volatile industrial relations in the world of decommissioning nuclear power plants is, but I can get behind the idea that a strike that led to an actual meltdown would be undesirable. Nothing in the Bill itself, however, limits the restriction on the right to strike to these emergency situations. The fact that the Bill also covers education makes it clear that the Government is thinking about more than public safety when it comes to limiting industrial action.

So regulations could be made in relation to teachers’ strikes aimed at making sure that schools retain a skeleton staff so that vulnerable children are taken care of. But they could also go much further than that – for example, preventing any interference with GCSE assessments or even the cancellation of classes. Similarly there is nothing to stop the Secretary of State from preventing any transport strikes that interfere with rush hour or result in any hospital appointments being cancelled.

This is bad lawmaking. The Government is granting itself sweeping powers while claiming that it only intends to use them for a limited purpose. This allows it to sidestep any debate about how the tension between the right to strike and impact that strikes have on public services should be navigated. The Bill has yet to be debated and there are many opportunities to amend it as it progresses through its Parliamentary stages. Surely a key issue that needs to be addressed is the criteria that will be used when setting out minimum service levels. The Bill currently gives a blank cheque to the Secretary of State and I don’t see how that can be sustainable.

Posted in Industrial action, trade unions | Tagged , , , | 1 Comment

The problem with P&O – when ignoring employment law is ‘worth it’

Posted on March 23, 2022 by Darren Newman

I think most employment lawyers would have had the same reaction as me when they saw the news about P&O sacking 800 ferry workers without notice or consultation. First you see it as an outrageous breach of even the basic requirements of employment law. Then you think ‘Oh hang on, isn’t there something in the legislation excluding people who work on ships? Is it next to that bit about share fishermen?”

As it turns out I think that the ferry workers are going to be covered by UK employment law. The exclusion of mariners applies only to British registered ships where the employees do not have a close connection with the UK. If crew members essentially work out of Dover or Hull I think it is pretty clear that UK employment rights apply to them. There might be more room for them to argue that the duty to inform the Secretary of State of the redundancies does not apply if the employees’ work on ships registered to other countries, but that is a matter between P&O and the Government – it doesn’t affect the position of the employees who have lost their jobs.

The truth is that P&O has chosen not to even try to comply with UK employment law. Mass dismissals for redundancy without notice or consultation will mean that individuals with more than two years’ service will have been unfairly dismissed. There will also have been a breach of the obligation in S.188 of the Trade Union and Labour Relations (Consolidation) Act 1992 to consult with employee representatives at least 45 days in advance of any dismissals taking effect. Of course in some cases an employer can argue that the urgency of its position means that such consultation cannot take place and that the dismissals are fair. But there is no serious suggestion of that being the case here. The fact that P&O had begun lining up replacement crew before announcing the redundancies is basically enough on its own to scotch that defence.

P&O know this. They knew when they took the decision to behave in this way that they would have to pay out compensation to employees. Clearly they have decided that the amount they save as a result of this exercise will outweigh by some margin the amount of compensation they will have to pay. I am sure that settlement agreements will already be in the pipeline.

A lot of the commentary I have seen is that this case emphasises the need to ‘ban’ the practice of fire and rehire – a much more catchy phrase than “dismissal and reengagement” which is what I was brought up calling it. In particular many have referred to the private members Bill proposed by MP Barry Gardiner – the Employment and Trade union Rights (Dismissal and Reengagement) Bill. This shared the fate of almost all private members bills in that it was “talked out” in Parliament and failed to get a second reading in the Commons.

But that Bill would not really have changed the calculus for P&O in this case. Remember that what P&O did was already illegal under out current law – and they did it anyway. Barry Gardiner’s Bill was focussed on employers seeking a variation of contract backed up by the threat of dismissal. P&O missed that stage out and went straight to the dismissal itself. They aren’t even, as I understand it, offering reengagement.

The P&O situation highlights a feature of UK employment law that is often under appreciated, but is striking for many who come to the UK from some other jurisdictions. UK employment law seeks to punish employers who act in breach of it – but does not stop them from doing so. If an employer makes the calculation that the financial consequences of ignoring the law are outweighed by the business benefits of doing so then it is free to go ahead.

Sometimes of course an employee can get an injunction preventing the employer from acting in breach of a contract of employment. We sometimes see cases from NHS consultants who are enforcing particularly tightly drafted disciplinary or conduct procedures, but this is not really an option available to ‘normal’ employees. More recently we have seen an injunction obtained by the Trade Union USDAW preventing Tesco from dismissing a number of employees and offering them new contracts on less favourable terms. I can’t stress enough however how unusual the facts of that case were. In a previous deal Tesco had awarded those workers an additional payment as an incentive to agree to a restructuring programme and had given them assurances that this would be a permanent entitlement – a benefit ‘for life’. When Tesco sought to terminate the contracts of those workers and offer them new contracts without that payment, the High Court granted an injunction preventing the dismissals. Tesco’s guarantee that the payments would be ‘for life’ created an implied term that the contracts would not be terminated in order to get around that obligation. I don’t think we can really use the USDAW case as a spring board for injunctions preventing employees from being dismissed in breach of their statutory rights.

The problem of employers calculating that they can afford to disregard employment protections is not a new one and is not confined to the UK. In 1997 the closure of a Renault factory in Belgium caused major controversy. It was announced by the French Chief Executive in a press conference at the same time as the Works Council were informed – making it clear that there was no room for negotiation. The fact that there was no mechanism for preventing the closure led to a proposed EU directive on informing and consulting employees which had at its heart a provision which rendered business decisions null and void if they were implemented in breach of the obligation to consult. This met fierce resistance from the employer’s lobby (I’m speaking from memory here, as I was part of that lobby at the time). A blocking minority was marshalled against the directive – led by the UK under a labour government. Deadlock was only broken when the provisions on remedy were dropped. As a result we now have the Information and Consultation of Employees Directive 2002 which only requires ‘adequate sanctions’. That is implemented in the UK by the Information and Consultation of Employees Regulations 2004 which are so weak that they are largely ignored. They don’t even attempt to implement the basic requirements of the Directive and it was always a puzzle to me that they were never legally challenged. I’m sure the trade union movement had its reasons.

Anyway, the result is that UK employment law concentrates on providing some compensation to employees whose rights have been ignored, rather than ensuring that employers comply with the law in the first place. The only real way of preventing employers from occasionally choosing to ‘do a P&O’ is either to provide punitive remedies that are linked to the amount the employer hopes to save by the exercise, or to require major job losses to be cleared in advance by, for example, the Central Arbitration Committee – with any dismissals being deemed to be ineffective until that clearance is given. The current Government is obviously going to do nothing in that direction.

In the meantime, the best we can do is bear in mind, when making our travel arrangements, that other ferry services are available. Maybe we can show that P&O’s calculations were flawed after all.

Posted in Compensation and Remedies, Redundancy Consultation, trade unions, Uncategorized | Tagged , , , | 3 Comments

End of the Road for Uber?

Posted on February 21, 2021 by Darren Newman

One of the things I like about the Supreme Court is its lack of grandeur. People often associate the English legal system with all manner of flummery – wigs, gowns, archaic language, soaring rhetoric  and elaborate ceremony. You get none of that in the Supreme Court. Even when it is sitting in its building on Parliament Square it takes a refreshingly down-to-earth approach. In lockdown, with  arguments being conducted from the various homes and offices of the participants, it is even more low key. You get clever people debating the law in a respectful and civilised manner – followed by a carefully reasoned decision. It’s lovely.

Take the announcement of the Uber decision on Friday. No fanfare, just Lord Leggatt sitting in front of what appear to be his dining room curtains saying ‘welcome to the Supreme Court’ – it makes you proud.

Despite the low production values, Friday’s decision in the Uber case was a real blockbuster. There is often a risk with much anticipated Supreme Court decisions that they will shy away from the big questions we are all interested in and focus on something that is specific to the case in front of them. My worry in this case was that it would end up turning on some aspect of agency law. But no. this is the new leading case on how you determine worker status. It gives the new starting point for that assessment and will now be quoted every time a Tribunal has to look at the issue.

The headline point is that when you are deciding whether a particular individual is a worker or not, you do not start with the contract and see whether that is the sort of contract a worker would have. Instead you start with the statutory provision – for example the right to the minimum wage – and see whether they fall into the statutory definition of a worker ‘irrespective of what had been contractually agreed’. Whether or not an individual is a worker is primarily a question of statutory interpretation not contractual interpretation.

Lord Leggatt points out that the modern approach to statutory interpretation is to look at the purpose of a particular provision and to interpret it, so far as possible, in the way which best gives effect to that purpose. In this case the purpose of the legislation being considered was to

‘protect vulnerable workers from being paid too little for the work they do, required to work excessive hours or subjected to other forms of unfair treatment (such as being victimised for whistleblowing).’

It is the vulnerability that is key. Some contractors are in a position to negotiate their own terms with their clients. Others are in a more subordinate position – dependent on the client for whatever work is offered to them. Given the statutory need to protect these individuals, it is clear that you cannot take the written contract as the starting point in determining whether they fall within the definition of “worker”. It is the very fact that the employer is in a position to dictate the terms of the contract that means that a statutory right to a minimum wage, a limit on working time or a right to paid annual leave is needed. Here’s a good bit from Lord Leggatt’s decision:

‘The efficacy of such protection would be seriously undermined if the putative employer could by the way in which the relationship is characterised in the written contract determine, even prima facie, whether or not the other party is to be classified as a worker. Laws such as the National Minimum Wage Act were manifestly enacted to protect those whom Parliament considers to be in need of protection and not just those who are designated by their employer as qualifying for it.’

I don’t know how you work, but If I’d written that paragraph I’d have taken a break and had a biscuit afterwards to reward myself.

The key overarching issue in determining whether or not the drivers were workers was whether they were in a position of subordination and dependence in relation to Uber. Lord Leggatt emphasised that the ‘touchstone’ of that subordination and dependence was the degree of control exercised by Uber over the work and service of the drivers – the greater the control, the stronger the case for classifying the drivers as workers.

Lord Leggatt then set out the factors that indicated that the extent of the control exercised by Uber did indeed create the subordination and dependence that justified that the Tribunal’s conclusion that the drivers were workers. I won’t go through them. But it strikes me that what was going on here was that Uber was trying to have its cake and eat it too. On the one hand it needed to ensure that those who took a ride with them enjoyed a good experience, that the price was appropriate, the driver behaved well, the car was of a certain standard and the route taken was efficient. On the other hand it wanted to pretend that it wasn’t providing this service at all – it was just acting as an intermediary giving individuals running a driving business the opportunity to find customers. Trying to hold these two contradictory approaches together led to some extraordinary contortions in the documentation it produced. And of course occasionally – particularly when it wanted to boast to regulators about how many ‘jobs’ it was creating – the mask slipped and the true nature of the relationship between Uber and its drivers became clear.

Throughout this case we have seen that the various contractual documents drafted by Uber have done them no favours at all. They were just too clever by half. Intricate and impenetrable, they set out a relationship between the parties that bore no relationship to reality. Asking the Supreme Court to give primacy to such documents was always a losing strategy (easy to say that now of course, but still, it’s true).

The result was that Uber drivers were workers. They were entitled to paid annual leave and – most importantly – to be paid the national minimum wage. Lord Leggatt’s judgment is now the first place to go when considering worker status. Could the same approach also apply when considering whether someone is an employee rather than just a worker? Maybe – though a contract of employment was a recognised ‘thing’ before statutory employment rights were created. Rights given to employees might still need to start with an analysis of whether the individuals relying on them were employed under that sort of contract – but that is an issue for a future case.

Working Time and the sheer scale of Uber’s arrears

Back to Uber. Crucially the Supreme Court, as well as finding that the drivers were workers, also upheld the Tribunal’s finding that a driver who logged on to the app was working even before a job was allocated. Uber had claimed that having the app switched on implied absolutely no obligation on the driver’s part to accept work – but were not helped by the fact that their Welcome Pack for drivers referred to logging on as ‘going on duty’. It was clear that Uber regarded drivers who had the app switched on as under some sort of obligation to accept trips – even if they could decline individual requests.

The finding on working time is, surely a killer blow. It means that every time one of Uber’s 40,000 or so drivers has had the app switched on, they have been entitled to be paid the minimum wage for however long they remained logged on. The potential for back-pay claims must be enormous.

Uber’s reaction so far has been almost nonchalant. The Guardian quotes Janie Heywood of Uber as saying:

“We respect the court’s decision which focused on a small number of drivers who used the Uber app in 2016. Since then we have made some significant changes to our business, guided by drivers every step of the way. These include giving even more control over how they earn and providing new protections like free insurance in case of sickness or injury.”

The idea that this case was all about a small number of drivers on an old set of terms and conditions just won’t wash. Uber did not lose this case on some technicality about their 2016 documentation. The Courts have found that Uber’s business model means that its drivers are workers. That position isn’t going to change by tweaking the wording of their policies. And quite what difference a free insurance policy is supposed to make is beyond me. Are they really going to brazen this out? Pretend that they can carry on as normal and see how many drivers actually have the nerve – and the resources – to take them on?

Surely HMRC must step in. Now that we know for sure that Uber drivers are workers, compliance officers can set about the task of assessing whether or not Uber has complied with their obligations (shouldn’t be tricky – they clearly haven’t) in respect of the minimum wage and set about calculating the amount of arrears that are due. They should then issue what might be their biggest ever Notice of Underpayment – plus a penalty of up to £20,000 per worker. There should be no excuses. This is a massive breach of the minimum wage law. If HMRC doesn’t act, then how will it explain its decision to pursue smaller employers making genuine mistakes about how the minimum wage is calculated?

One argument that must not be allowed to gain traction is that Uber’s liability has arisen as a result of some unexpected legal quirk – that they are victims of a complex or unclear law. Uber lost this case in 2016 and it is only their repeated appeals that have kept the process going this long. The complexity of the case arises from their own practice of shrouding a straightforward worker relationship in a mesh of overcomplicated legal verbiage bearing no relation to the facts on the ground – and clearly intended to dodge the obligations that other employers have to bear.  Their legal arguments have reached the end of the road.

Time to pay up.

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Is the Government about to rip up workers’ rights?

Posted on January 15, 2021 by Darren Newman

Last night the Financial Times reported that the Government is planning a post-Brexit overhaul of the labour market that would involve ‘ripping up’ workers’ rights ‘enshrined in EU law’. Specifically:

The main areas of focus are on ending the 48-hour working week, tweaking the rules around rest breaks at work and not including overtime pay when calculating some holiday pay entitlements, said people familiar with the plans.

Before we get carried away, we should remember what stage these proposals are at. We are overdue an Employment Bill and officials in BEIS are clearly working out some proposals to put to Ministers. It seems that they have been trying to gauge reaction in the business community to some of the possible changes – presumably that is where the FT is getting its information. There is no formal government proposal as yet.

However I have written before about the particular significance that some Tory MPs attach to the Working Time Regulations. Essentially they feel that the EU duped them by pretending that the Working Time Directive was a health and safety measure when in reality it was about (the horror!) improving employment rights. We don’t need to revisit that debate, except to acknowledge that if the next Employment Bill did include a measure ‘ending the 48 hour week’ there would be lots of Conservative MPs who would be enthusiastic about that.

But is such a change even possible? Didn’t the Government, in its deal with the EU, sign up to ‘level playing field provisions’ preventing them from reducing employment rights in this way?

Well, up to a point.

In fact, when it comes to employment law the EU-UK Trade Agreement is not very prescriptive. It specifically acknowledges that both parties are free to set their own policies and priorities when it comes to employment law. Then, at Article 6.2, it says this:

3. A Party shall not weaken or reduce, in a manner affecting trade or investment between the parties, its labour and social levels of protection below the levels in place at the end of the transition period, including by failing to effectively enforce its law and standards.

So a change in employment law is only prohibited if affects ‘trade or investment’. A change that doesn’t clear that bar is perfectly fine – even if it would not have been possible while we were actually bound by EU law.

Even if you take the view that a particular reform would affect trade, this doesn’t affect the legality of the measure in the way that we were used to when the UK was subject to EU law. To cause an issue, the change would have to be serious enough that the EU Member States thought it was worthwhile to invoke the dispute resolution mechanisms set out in the Treaty. What is more, when it comes to labour rights, that mechanism is limited to consultations involving an independent panel of experts (see Article 6.4) There is no recourse to the arbitration tribunal.

As it happens, I think the wholesale repeal of the Working Time Regulations probably would be a big enough step to cause difficulties with the EU. I don’t think that is a realistic option. But excluding overtime from the calculation of holiday pay strikes me as just the sort of change we can expect. And I really don’t see the EU kicking up a fuss if the record-keeping requirements in the Working Time Regulations are dispensed with. As far as I can tell, they are largely ignored anyway.

The Government has been swift to deny that it is planning to undermine workers’ rights. Business Minister Kwasi Kwartang Tweeted in response to the FT article denying any intention of rowing back on workers’ rights.

Well, of course, he would say that. When Labour was in power it always insisted that any improvements to workers’ rights were not a burden on businesses but were designed to help them be more competitive. I’m sure any change introduced by the Conservatives will employ the same sort of sleight of hand. Overall, the reforms will be pitched as improving the freedom for both sides to organise work in the way that suits them best. And it might well be that any rowing back of EU employment rights will be set off against improvements elsewhere. The Conservative manifesto promised more leave for carers and redundancy protection for new parents. It’s perfectly possible that the Employment Bill, when it comes, will be seen as a net improvement in workers’ rights.

But we have to acknowledge that we are in a different system now. Changes to employment law can no longer be legally challenged on the basis that they are not consistent with a Directive. This gives the Government quite a lot of scope to make important changes to employment law that will be significant for us here in the UK, but not dramatic enough to trigger a dispute with the EU. What we will see when the Employment Bill is eventually published is how far the Government is willing to test the boundaries of the trade deal.

Buckle up.

(Oh and as it happens, I am holding a webinar on 21 January looking at the prospects for employment law in 2021. I’ll be looking at the impact of Brexit, the Government’s outstanding employment law commitments and some of the key cases coming before the Supreme Court – you can buy tickets here)

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Early Retirement and the Exit Pay Cap

Posted on October 30, 2020 by Darren Newman

Well this might seem a bit niche. But if you’re in the public sector – especially local government – there is one major issue that you will be concerned with. That is the introduction of a £95,000 cap on public sector exit payments.

It isn’t something that strikes most people as controversial – who cares after all if senior executives are no longer given overly generous redundancy payments?  The maximum statutory redundancy payment is around £16K so anyone getting just under six figures is still doing pretty well.

The crucial point however is that included in the cap is what is known as a ‘pension strain’ payment. This is a payment made by an employer to a pension fund to cover the additional costs of an employee who qualifies for enhanced benefits when taking early retirement.

For example, in the Local Government Pension Scheme (LGPS), an employee who is made redundant over the age of 55 is entitled to an unreduced pension – they essentially get the pension they would have been due if they were at retirement age. The cost of that benefit is not covered by normal pension contributions. Instead the pension fund charges the employer an extra sum to cover the cost. This is the ‘pension strain’ payment and it is this payment that is caught up in the £95,000 cap.

And that is a problem because pension strain payments are very expensive. It is not unusual for them to be well in excess of £100,000 – even for middle ranking employees. If you put the payment alongside statutory and contractual redundancy payments, the cap presents a serious problem for any local authority looking to make redundancies affecting employees who are 55 or over.

So if the cap is to be brought in, it is obvious that the LGPS needs to be changed first. Essentially the pension entitlement of those being made redundant over the age of 55 needs to be reduced. You won’t find that fact highlighted in the news coverage of this issue, but for local government at least this is far and away the most important result of capping exit payments.

Quite rightly, therefore, the Ministry for Housing, Communities and Local Government is consulting on changes to the pension scheme. It proposes that the pension strain cost should be capped at a level that allows the employer to comply with the £95K limit. As a result the employee’s pension will be adjusted in line with the amount the employer is paying. The scheme will be made more flexible so that the employee can make their own payment into the fund to secure additional pension. I think the government may be overestimating how many tens of thousands of pounds employees will have available for this purpose, but that’s a separate issue.

Now it should be obvious – absolutely obvious! – that the cap on exit payments should not be brought into force before the necessary changes to the pension scheme have been made. It would be grossly irresponsible to do otherwise. The MHCLG consultation runs until November the 9th and – rather oddly – consultation on the already published draft Regulations amending the scheme in line with that consultation runs to December 18th. Even assuming a level of speed and efficiency rare in government circles, that suggests that any change to pension entitlement is unlikely to take effect before the end of the year.

Nevertheless, the Government has brought the Restriction on Public Sector Exit Payments Regulations 2020 into force with effect from 4th November. This is a baffling decision and I think the government will come to regret it.

There is no transition period. From 4th November it will be unlawful for a local authority to make an exit payment in excess of the cap. That will be so even if an employee was given notice of dismissal three months earlier.

So what happens to pensions in this limbo period between the cap coming into force and pension scheme being changed? My view is that this is not the employee’s problem. The entitlement of a redundant employee aged 55 or older is set out in Reg 30(7) of the Local Government Pension Scheme Regulations 2013. That provides that such an employee ‘is entitled to, and must take’ an immediate pension ‘without reduction’.

The pension strain payment is dealt with by Reg 68(2) of the LGPS Regs. That says that the ‘administering authority’ – the local authority operating one of the LGPS pension funds – may require the employer to make additional payments to the fund as a result of the employee’s retirement benefits becoming ‘immediately payable’.  

Here is the key point. The employee’s benefits are not dependent on the pension strain payment actually being made. That, after all, is why the government is having to consult over their proposed changes to the pension scheme. The fund is required to charge the employer for the additional costs caused by the employee’s enhanced entitlement, but that entitlement comes first.

So with the cap in place – and before the rules of the pension scheme are changed – the employer is in something of a quandry. It is faced with a request from the pension fund made under Reg 68(2) which is likely to be for a sum that it is legally prevented from paying under the Exit Payments Regulations. My reading, for what it is worth, is that the employer simply has to say to the fund ‘sorry, but we are only legally allowed to pay you this much’. The fund will then have to worry about the shortfall in the funding of the pension that this causes. Not a satisfactory position of course – but not the employee’s problem.

The trouble is, the Government does not seem to see it that way.  The Minister for Local Government has written an extraordinary letter to the chief executives of administering authorities telling them that they will have to limit the pensions paid to employees being made redundant. There is no getting around the need to quote the key paragraph in full:

“In the meantime, the recommended course of action for an administering authority to act consistently with its legal duties is that the provisions of Regulation 30(7) are subject to the cap and so the provisions of Regulation 8 of the 2020 Regulations and Regulation 30(5) of the LGPS 2013 Regulations should be engaged. The Government’s view is that LGPS members in that position should be able to elect to receive an immediate but fully reduced pension or, if they do not so elect, a deferred pension plus a lump sum equal to the capped strain cost.”

The fundamental error in this paragraph is the assertion that the provisions of Reg 30(7) (the entitlement of a redundant employee over the age of 55 to an unreduced pension) are ‘subject to the cap’.

They are not.

The cap is a cap on payments made by an employer to an employee in respect of their leaving employment. The payments included in the cap are listed in Regulation 5. That list does not include payment of pension – whether enhanced or otherwise – from the pension fund to one of its members. Indeed how could it? By no means every local authority operates its own pension fund. Typically the largest local authority in a particular region administers a fund and the surrounding local authorities are ‘participating employers’. So in most cases pension payments are not made by the employer at all. Even where the employer is the administering authority it is clear that the pension payment is not being made in its capacity as employer.

More fundamentally however, the actual pension payments to the employee are modest and spread over time. The employer’s pension strain payment may over £95,000 but it will usually be some years before the actual pension paid to the employee will add up to that amount.

So on what possible basis can the government claim that payments made under Regulation 30(7) are subject to the cap? It is nonsense!

The Minister then says that Regulation 8 (of the Exit Payment Regs) ‘should be engaged’. We need to look at what that says, but I suggest you have a cup of tea first.

I’ll wait….

Right. We need to set out Regulation 8 in full because I have no idea how to summarise it. Here it is:

8.—(1) Where these Regulations prevent a relevant authority from making an exit payment of the type described in regulation 5(2)(b) which exceeds the exit payment cap in respect of a person, the relevant authority must, as an alternative, make to that person or in respect of that person to another person, a payment of an amount not exceeding the amount of that exit payment.

(2) This regulation is subject to regulation 3(a).

Soak it up. Let the words flow over you.

If you are left thinking ‘what does that mean’? then join the club.

The reference to Reg 5(2)(b) is a reference to the pension strain payment that we have been discussing. The Regulation seems to say that if an employer is prevented from making a payment because it exceeds the cap then it must ‘as an alternative’ pay an equivalent sum either directly to the employee or to someone else – presumably the pension fund – ‘in respect of that person’.

But that equivalent payment is in itself subject to the cap (that’s what the reference to Regulation 3(a) means) so this doesn’t solve the problem. It merely seems to allow the same total amount of money to be shuffled around so that some is given directly to the employee rather than the pension fund. But I fail to see what that would achieve.

What the Government seems to think this means – judging from the Minister’s letter – is that the employee has a choice. They can either take a reduced pension provided for by Regulation 30(5) LGPS (which is aimed at former employees who happen to reach the age of 55 and want to take their pension early) or they can defer their pension and receive a lump sum from the employer equivalent to the capped strain cost that the employer would otherwise be required to pay into the pension fund.

This is nonsense. Regulation 8 does not amend the LGPS Regs and those Regulations give the employee no such choice. We have seen that Reg.30(7) says that the employee ‘is entitled to, and must take’ an unreduced pension. They cannot choose to defer it.

They may well have that choice once the LGPS Regs are amended, but to suggest that it is already the position fundamentally misunderstands how laws work. It seems strange to have to point out that just because you intend to introduce a law in the future does not mean that everyone has to behave as though that law is already in force.

I could scream.

My worry is that it is difficult for those administering a pension fund to just dismiss a letter from the relevant minister telling them that they can no longer pay the unreduced pension provided for in the rules of the pension scheme. But if they follow the course of action set out by the Minister in his letter then they seem certain to face legal action from employees who are not given the pension that they are clearly entitled to receive. If the employer has paid the employee a lump sum then they may well choose to put that towards their legal expenses.

I think the Minister needs to withdraw the letter and acknowledge that pension rights cannot be taken away by such indirect means as the Exit Payment Regulations. Treasury Ministers should then make it clear (as they have the power to do) that local authorities can waive the application of the cap when it comes to making pension strain payments until such time as the Local Government Pension Scheme is properly amended.

If this doesn’t happen then it seems inevitable that this will end up in the courts – and I don’t think that would end well for the Government.

To see more of what I do visit Darrennewman.org

For a more detailed explanation of how the exit pay cap works then you might like to watch this webinar that I recorded before the implementation date was known.

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Should we ban ‘firing and re-hiring’?

Posted on September 15, 2020 by Darren Newman

Keir Starmer addresses the TUC today and – such is the nature of these events – we already know what he is ‘expected to say’. Starmer will condemn employers (recent examples include British Gas and British Airways) that have fired staff only to re-hire them on less favourable terms and conditions. According to the Guardian he will say that such practices are:

‘not just wrong but against British values’

and that:

‘These tactics punish good employers, hit working people hard and harm our economy. After a decade of pay restraint – that’s the last thing working people need, and in the middle of a deep recession – it’s the last thing our economy needs.’

Now we are some four years away from a Labour Party manifesto that might actually propose a change of the law in this area, so I don’t criticise Starmer for being vague about what is actually being proposed here. What we are getting is not so much a new policy as a ‘policy flavour’ (Copyright: ‘The Thick of It’). But it is worth looking at what the law actually is on this topic before deciding whether it needs changing and what a change might look like.

The practice of dismissing employees and then reengaging them on different terms and conditions is not one confined to bad employers. It is the nuclear option in the negotiation of contractual changes, but it is one that has been used by employers of all types in both the public and private sector. The reason it is a ‘thing’ is that contracts of employment cannot just be varied unilaterally. A contract is an agreement and so any changes to it also have to be agreed by both sides. Sometimes that agreement is given in advance – where the contract includes a variation clause – but the extent to which an employer can rely on those to make major changes is not entirely clear. Normally new terms have to be negotiated – either with a recognised trade union or individual employees. If negotiations break down for any reason, the original terms continue in place.

But while an employer cannot change the contract unilaterally, it can bring it to an end. By giving notice of termination the employer can end the contract that it doesn’t like and then propose a new one that the employee is free to accept or decline. Since declining the offer will leave employees out of a job we might query the extent to which they have a free choice in the matter, but that is at least the legal position.

It is easy to find examples of employers resorting to this tactic in a way that would strike most people as unfair. A successful company imposing a pay cut or reducing entitlements just because it can will not attract much sympathy. But you can equally easily give examples of employers who were just doing their best to protect as many jobs as possible. Perhaps the change is the only way that the employer can avoid widespread redundancies. Perhaps most of the workforce is willing to agree to the new arrangement and it is just being blocked by a few employees who are unwilling (or unable) to make the change.

It is not that the practice of ‘firing and re-hiring’ is in itself unfair. Rather, it is the substance of the changes being made and the wider circumstances faced by the employer that make the difference between a reasonable reorganisation and an unreasonable abuse of the employer’s power.

And employment law is already involved. An employee who is dismissed and then reengaged has still been dismissed. A dismissal is the termination of a contract of employment by the employer – it does not go away if the employee accepts a new contract. Employees with two years’ service can claim unfair dismissal even if they accept the new contract and continue working for the employer. An employer who dismisses hundreds of staff just to impose new terms and conditions on them is risking hundreds of individual tribunal claims.

Where the process affects more than 20 employees there is also (it seems) an obligation to consult employee representatives exactly as though this were a mass redundancy exercise. This is because that is what it is. Redundancy for these purposes has a wider meaning than when we are considering the fairness of a redundancy dismissal or an employee’s entitlement to a redundancy payment. When it comes to collective consultation the test is whether the employer is proposing to dismiss employees for a reason ‘not related to the individual concerned’ (S.195 Trade Union and Labour Relations (Consolidation) Act 1992). It is widely accepted that an exercise that involves dismissing employees who don’t agree to new terms and conditions falls under this category. Personally I’ve always thought that the employer could argue that each dismissal was based on the individual employee’s refusal to accept the change, but that is a debate for another day. And of course, while the employer must consult ‘with a view to reaching an agreement’ with the representatives, the reality is that an employer is not obliged to change course as a result of the consultation. The duty to consult imposes a time constraint (30 or 45 days depending on the number of employees affected) and requires the employer to jump through some procedural hoops – but it doesn’t provide any mechanism for judging the fairness of what is being proposed.

In reality, nor does the law of unfair dismissal. The ‘range of reasonable responses test’ means that tribunals have limited scope for inquiring into the fairness of the change that the employer is making. They can ask whether the employer had a legitimate business reason for the change being proposed, but can’t delve too deeply into whether or not the employer could have solved its problems some other way. Instead they tend to concentrate on the way in which the change was made – whether the employer genuinely tried to reach an agreement with the employees first and what consultation took place when dismissals were planned as an alternative.

This is a problem that goes way beyond ‘firing and re-hiring’. The need for a tribunal to avoid ‘substituting its own view for that of a reasonable employer’ has turned unfair dismissal into a largely procedural right with the case law concentrating on how the employer has gone about dismissing employees and not looking too closely at the strength of its reasons for doing so. If I were in charge of employment law I would want to do something to fix that – and Britain would be a better place.

All the same, an employer who is ‘firing and re-hiring’ (I can’t believe I’ve always referred to ‘dismissal and re-engagement’ when there is an alternative version that actually rhymes!) is not doing so in a legal vacuum. It has to weigh its need to make the change with the risk it faces of unfair dismissal claims and its obligations to consult employee representatives. It is not something to be done casually or on a management whim. When manifestos come to be written, I doubt that a total ban on the practice will make the cut.

This is, by the way, exactly the sort of topic that I will be running webinars on this autumn. The first dates are about to be announced – sign up here to be the first to hear about them.

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New Starters and the Coronavirus Job Retention Scheme

Posted on April 6, 2020 by Darren Newman

UPDATE: Wednesday 15 April 2020

In a major change to the Job Retention Scheme the Treasury has announced that the cut off date of 28 February has been moved to 19 March.

The guidance now says this:

Employees you can claim for
You can only claim for furloughed employees that were on your PAYE payroll on or before 19 March 2020 and which were notified to HMRC on an RTI submission on or before 19 March 2020.This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020. Employees that were employed as of 28 February 2020 and on payroll (i.e. notified to HMRC on an RTI submission on or before 28 February) and were made redundant or stopped working for the employer after that and prior to 19 March 2020, can also qualify for the scheme if the employer re-employs them and puts them on furlough.

If you want to read the full Treasury Direction setting up the scheme you can now read that here – but be warned, it’s a bit complicated!

As a result of this major U-turn, the remainder of this post is of historical interest only!

——————————————————————

The Coronavirus Job Retention Scheme is the unprecedented – in the UK at any rate – government scheme that will award grants to employers who have ‘furloughed’ employees, potentially funding up to 80 per cent of their wage costs to a maximum of £2,500 per month.

The scheme is not yet up and running and we are reliant on Government guidance as to how it will work – which is being updated almost in real time, it seems, as the details are being thrashed out.

At first, it is fair to say, everybody was simply impressed – and taken aback – at the sheer scale of what the Chancellor was proposing. Since then, however, some of the shortcomings of the scheme have become more apparent.

One of these is that employees are only eligible to be furloughed by the employer whose PAYE system they were on as at the 28 February. Anyone who has started a new job in March – and that must cover thousands of individuals – will not be covered by the scheme.

The reason for this is simply that HMRC does not want to face fraudulent claims from companies entering into bogus employment arrangements purely to take advantage of the scheme. An employer should obviously not be allowed to start hiring people with the object of placing them on immediate furlough and claiming £2,500 a month for them. But the furlough scheme was only announced on 20 March. Why should someone who had been in a new post for two weeks by that time be excluded from it?

The Government’s view is that the only evidence of employment that works for them is the PAYE system. The scheme is being run and administered by HMRC and the PAYE records are something that HMRC can easily check. An employee starting in March will have all sorts of documentation showing that the appointment is a genuine one, but the system will not allow for HMRC sifting through letters of appointment and signed contracts of employment – it is PAYE that counts.

Last week the Chancellor ran an #AskSushi event on his Twitter feed. Rather predictably he was swamped with questions which allowed him to carefully select the half-dozen of so that he felt comfortable answering. In fairness however, he did address the issue of new starters. Watch this:

 

I am no expert on running a PAYE system (in fact that is a massive understatement), but it seems that keeping the cut off date at 28 February is the only way of ensuring that employees were not entered onto the system after the furlough scheme was announced. That at any rate appears to be the Government’s position. Any accountant or payroll professional will know better than me whether that stands up to scrutiny.

The best that the Government can offer those who are no longer employed by the employer they were with on 28th February is that the old employer can take them back and then put them on furlough. The Guidance updated on 4 April makes it clear that this applies whatever the reason for the employee leaving. It is not confined to cases where the employee was made redundant as a result of the lockdown.

But it is hopelessly unrealistic to expect that employers are going to reemploy people who have resigned or been dismissed purely so that they can be placed on furlough. To be blunt, what is in it for the employer? They incur the cost of administering the employee’s furlough pay and face potential legal difficulties when the furlough period ends.

This is an odd feature of the furlough scheme. It is designed to protect the income of employees but it is the employer that receives the funds from government. Employers are placed under no obligation to even consider furlough and there is no mechanism for employees to claim furlough as any sort of right.  With the scheme itself not due to be in place until the end of April – and that is in itself an ambitious target – it is understandable that many employers remain reluctant to commit themselves to retaining employees that they simply cannot afford to pay.

When all this is over (this too shall pass) there will be a flood of Tribunal cases picking over how employers reacted to the coronavirus outbreak. There will be claims for unlawful deductions from wages, discrimination claims arising from who was offered furlough and who was not, and unfair dismissal claims where the Tribunal will have to decide whether having the option of furlough made it unfair to dismiss an employee for redundancy.

But those cases will not be heard until next year at the earliest. Right now the priority is to cushion businesses and employees against the massive shock that has hit the economy. Widening the scheme to cover employees covered by the March payroll may increase the risk of fraud – but an employer would have to be pretty quick off the mark to invent bogus employees and set them up on the system in the 10 days following the Chancellor’s first announcement.   It is surely a risk that is worth taking.

 

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Darren Newman

https://darrennewman.org/

 

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Sleepover shifts and the minimum wage

Posted on February 6, 2020 by Darren Newman

Next week the Supreme Court will hear argument in two cases involving care workers. At issue is whether a care worker who ‘sleeps over’ in the care home should be regarded as working for that whole shift so that each hour counts towards their entitlement to the National Minimum Wage or whether they should only be regarded as working when they are woken during the night to perform an actual task. In this post I want to explain what the issues are, and how the law developed to this point.

The two cases

At the time of writing there are two cases scheduled to be argued over the course of a two-day hearing. It is not certain that both will make it that far. In Royal Mencap Society v Tomlinson Blake the employee provided care for vulnerable adults in their home. This involved working in the afternoon and evening and then the following morning. Between these two regular shifts she was also required to work a ‘sleep-in shift’ between 10pm and 7 am.  She had no specific duties during that shift but she was required to remain in the house, be alert to any requests from help from the service users and to respond to any incident that might arise. In the course of 16 months, the Tribunal found, she was required to intervene on six occasions. She was provided with her own bedroom with a shared bathroom and was generally expected to get a good night’s sleep on the occasions when she wasn’t needed to respond to an incident.

She was paid just £29 per nine-hour sleep-in shift. The question is whether each hour in that shift should count towards her minimum wage entitlement.

The other case due to be argued is Shannon v Rampersad. As I write the claimant in this case is seeking to crowdfund his appeal and is some way short of his target, so it is not entirely clear that he will be able to take part. In any event, the facts of his case are somewhat more unusual than the normal ‘sleeping in’ case.

According to the facts found by the Tribunal, Mr Shannon was a family friend of the owner of a care home called Clifton House. At the top of the care home there was a staff flat known as ‘the Studio’ and from 1993 Mr Shannon employed as an ‘on-call night care assistant’ and given the flat to live in. He was required to be in the flat from 10pm until 7 am every night and to respond to any request for assistance from the night care worker on duty in the home.  In practice this rarely happened and he so he would normally sleep through the night undisturbed. He worked elsewhere as a driver during the day.

His wages were nominal. He was given £50 per week at first, eventually rising to £90 per week. The main benefit of the job was that he was provided with free accomodation – including all utilities. In 2013 the care home was sold and in anticipation of that sale the owner asked him to sign a contract of employment setting out a wider range of duties than he had actually carried out. He also signed a tenancy agreement under which he agreed to pay rent of £120 per week. His pay was then increased to £210 per week to cover this.

When Mr Shannon was dismissed by the new owners he brought a claim alleging that he was entitled to be paid at the rate of the minimum wage between 10pm and 7am every night. He claimed backpay going back to the introduction of the minimum wage in 1998. Although his arrangement had been nothing to do with the new owners, they would certainly be liable for any backpay due as a result of the Transfer of Undertakings Regulations 2006 (TUPE). Since the claim in total amounts to some £239,000 they can perhaps be forgiven for feeling hard done by if the claim succeeds.

To understand the issues raised by these cases we have to go all the way back to the creation of the National Minimum Wage more than 20 years ago.

The First Low Pay Commission Report

The minimum wage was introduced by the new Labour Government in the National Minimum Wage Act 1998. Now that the Conservatives are so much in favour of the minimum wage that they have effectively renamed it the National Living Wage in an attempt to share in some of the credit, it is easy to forget how controversial it was at the time. But I remember very well the suspicion if not outright hostility there was to the idea – particularly from the business  community. The Government was keen to implement the law in such a way as to build consensus around the idea of a minimum wage and to make sure it was set at a level that business could live with. It set up an independent body called the Low Pay Commission to advise on the introduction of the minimum wage and the level at which it should be set – a function that it still fulfils today. The Commission was (and still is) made up of experts from both sides of industry and academia and the National Minimum Wage Act 1998 required the Government to consult it before introducing the Regulations that would contain the detailed provisions about how the minimum wage would operate (see S.5 of the Act). Specifically the Government had to consult them about what method should be used in calculating the hourly rate at which a worker was actually being paid in order to determine whether or not they were receiving the minimum wage.

Still with me? Stick with it, this will be important later.

The first report of the Low Pay Commission was published in June 1998 and the Government confirmed that it proposed to follow its recommendations. Had they decided to depart from them they would have had to make a specific report to Parliament to that effect.

This is what the Report said about sleep-over shifts:

‘4.34 Certain workers, such as those who are required to be on-call and sleep on their employer’s premises (eg in residential homes or youth hostels), need special treatment. For hours when workers are paid to sleep on the premises, we recommend that workers and employers should agree their allowance, as they do now. But workers should be entitled to the National Minimum Wage for all times when they are awake and required to be available for work’

In the two cases that we are now concerned with the Court of Appeal placed some importance on this recommendation when interpreting the legislation. It strikes me, however, that this passage bears the hallmarks of a compromise within the Commission itself. The reference to the need for employers and employees to ‘agree their allowance’ suggests a process of negotiation. This was written at a time when the Government was also introducing a statutory right to union recognition and ‘social partnership’ was very much in vogue. The Commissioners might have thought that unions would be in a position to fill in gaps in protection left by the Minimum Wage Regulations and ensure that workers were treated fairly. The full report is almost 300 pages long. This one paragraph is the most detailed reference to sleepover shifts that it makes. I think the Court has placed more weight on this recommendation than it can reasonably be expected to bear – but we will come back to this point later.

The Minimum Wage Regulations

The Commission’s recommendation certainly seems at first to have made its way into the Regulations. It is a complicated story because the details of the Regulations have changed over the years. I don’t think there is much to be gained from comparing the various different forms of wording we have had since 1999 when the first Regulations were introduced. I am just going to look at what the current Regulations – the National Minimum Wage Regulations 2015 – say.

I am also going to concentrate on the definition in relation to ‘time work’ – that is work where the employee is paid by the hour. In Shannon the work in question is technically, I think, ‘salaried hours work’ which is dealt with in a different part of the Regulations. But I don’t think this makes any difference.

Here is what the Regulations say about sleep-over shifts:

Time work where worker is available at or near a place of work

32.—(1) Time work includes hours when a worker is available, and required to be available, at or near a place of work for the purposes of working unless the worker is at home.

(2) In paragraph (1), hours when a worker is “available” only includes hours when the worker is awake for the purposes of working, even if a worker by arrangement sleeps at or near a place of work and the employer provides suitable facilities for sleeping.

You may need to read this more than once. Take your time.

The meaning doesn’t exactly leap out at you does it? You don’t read this and think – ‘of course! it all makes sense now that you put it that way’.

(Personally I am baffled by the words ‘even if’. They seem to suggest that the provision of suitable facilities for sleeping would otherwise make it more likely that hours spent asleep would count as working time – which seems odd. Perhaps I’m missing something.)

Anyway. What this Regulation seems to be saying is this:

  • The time that you have to spend ‘available for work’ will count as working time if you are required to be at or near your place of work
  • But that does not apply if the place where you are required to be is your home
  • Nor does it apply to times when you are asleep – it only applies when you are ‘awake for the purposes of working’

So here comes the tricky bit.

This provision applies when workers are required to be ‘available for work‘. The implication is that they are not actually working, but the Regulations will treat them as though they are working because they are required to be at or near their place of work.

The provisions about sleeping only apply to this time when the workers are ‘available for work‘ – and it is worth noting that the Low Pay Commission report used the phrase ‘on call’ which carries the same implication of being available to do work if needed.

But what if sleeping over on the premises is the very work that you are employed to do? What if sleeping over is not something you do so that you are available for work if needed, but is an inherent part of your duties? If we can draw that distinction then we do not need to rely on Regulation 32 to turn that time spent available for work into working time because it already is. And if it already is working time then the fact that you are asleep for all or part of it does not matter because the sleeping exception only applies to time spent ‘available for work’ not to time that already counts as working time.

I think this argument is ingenious and clever.

The trouble is that, as a general rule, you do not want to present a court with ingenious and clever arguments. You want your arguments to sound like good plain common sense and I am not sure that this argument achieves that. But it has nevertheless been accepted in a number of cases. So much so that its rejection by the Court of Appeal in the cases that the Supreme Court will hear next week cases surprised almost everybody. That includes HMRC who just a few months earlier had launched a major new initiative aimed at helping the social care sector pay the huge amounts of backpay they were believed to owe workers who were working sleepover shifts. Since the Court of Appeal’s decision that has rather taken a back seat.

The Case Law

The case that first set the cat among the pigeons was British Nursing Association v Inland Revenue back in 2002. That was not about sleepover shifts, but it did challenge the traditional understanding of what ‘on-call’ or ‘stand-by’ means.  The employer ran an emergency bank nurse booking service that ran 24-hours a day. Overnight calls were answered by staff who were at home and free to do as they wished – including sleep – between calls. The Court of Appeal held that the workers were working throughout the overnight shift even when they were not taking calls. There was, after all no suggestion that the periods between calls during a normal day shift would not count as working time. Why then should the (admittedly longer and more frequent) periods between calls during the overnight shift be treated any differently?

Next was the case of  Scottbridge Construction Ltd v Wright in 2003. The employee was a ‘nightwatchman’  on the premises of a construction company. He came in at 5pm each evening and stayed until 7am the next morning. His tasks were described as ‘not onerous’ and for long stretches at time (including midnight to 5am) there was nothing specific for him to do. There was a TV that he could watch and a mattress that he could sleep on when he was not needed. The Inner House of the Court of Session (the Scottish equivalent of the Court of Appeal) held that the work he was hired to do was to be the nightwatchman for the whole of his shift. The fact that he had little or nothing to do for extended periods and was allowed to sleep on the job did not alter the fact that he was performing his duties throughout.

In 2008 these two cases were followed by the EAT in  Burrow Down Support Services Ltd v Rossiter. The employee in that case was hired to provide overnight security for a care home. he worked two nights a week running from 10pm to 8am. Apart from a handover when he arrived and a requirement to assist with breakfast from 7am he was free to sleep through the night if nothing untoward occurred. The EAT agreed with the Tribunal that the whole of his overnight shift should be treated as working time. The employee was not just ‘available for work’ overnight, the overnight shift was the work he was employed to do.  This meant that there was no need to deem him to be working under Regulation 15 and that the sleepover exception that applied under that Regulations was irrelevant.

The Burrow Down case opened the way for care workers working a sleepover shift to claim that they were working even while they slept. That was the conclusion in each of the following cases:

The cases do not all go the same way, however. On a number of occasions it was held that an employee was not working throughout an overnight shift but could properly be seen as being merely ‘available for work’ so that the time spent sleeping would not count. See, for example:

And indeed in the case of Shannon v Rampersad, now due to go before the Supreme Court, the Tribunal held – and the EAT agreed – that the employee could not really be said to be working throughout the night. His was genuinely a case in which he was merely ‘available for work’ – with the result that the time he spent sleeping did not count.

The Court of Appeal Decision

The decision of the Court of Appeal in the two joined cases of Mencap v Tomlinson Blake and Shannon v Rampersad runs to a pretty epic 70 pages. But its actual reasoning is easy to summarise. Basically the Court held that the Burrow Down case (see above) was wrongly decided. The idea that someone on a sleepover shift could be regarded as working throughout so that Regulation 32 did not apply to them was contrary to the ‘clear meaning of the Regulations’.

In Burrow Down the EAT had relied on the British Nursing Association case and the Scottbridge case. But in British Nursing the Court of Appeal’s decision was based on the assumption that the employees were effectively working throughout the shift – albeit with predicable lulls in the volume of calls they received. There was no suggestion that the Court would have taken the same view if the employee had actually been expected to sleep throughout the night.

In Scottbridge, the circumstances were also different from those of a genuine ‘sleep in’ arrangement. While the employee was allowed to sleep on a mattress when there was nothing for him to do it was not the case that he was specifically expected to sleep through the night with only infrequent interruptions. The Court of Appeal accepted that the distinction between working and merely being available for work was ‘subtle’ but held that it was artificial to treat a worker as working throughout a shift when it was positively expected that they would spend most of the time asleep.

The Court also placed a surprising amount of emphasis on that 1998 report of the Low Pay Commission. Since the Regulations were intended to implement the recommendations made in that report, this bolstered the view that workers on a sleepover shift should not be treated as working when they were actually sleeping.

On that basis, the Court overturned the finding in the Mencap case that the employee was working throughout her sleepover shift. She was merely available for work and so – in accordance with Reg 32 – the time she spent asleep did not count towards her minimum wage entitlement.

In Shannon the Tribunal had held that the employee was merely ‘available for work’ rather than actually working while he slept. The Court of Appeal held that this was ‘plainly right’. Since he was merely available for work it followed that Reg 32 applied and the time that Mr Shannon spent either at home or asleep did not attract the minimum wage.

So now it’s over to the Supreme Court to decide this issue once and for all.

What will the Supreme Court say?

The most important thing to remember is that the Supreme Court is not bound by any of the earlier case law. There will be lots of discussion about these cases, but when push comes to shove the Supreme Court is entitled to ignore them all. The central question the five Justices will have to decide is whether they think it makes sense to regard someone who is expected to sleep through the night as working rather than simply making themselves available for work.

In my view the Court of Appeal decision is too dismissive of the idea that someone on a sleepover shift can be working even if they are permitted to sleep for most of it. I also think the Court’s reliance on a 1998 report from the Low Pay Commission in interpreting the Regulations is just bizarre and I hope the Supreme Court does not vanish down that particular rabbit hole.

This case is actually an opportunity for the Supreme Court to consider what we mean by ‘work’. It is an odd feature of the Minimum Wage Regulations that there is no overarching definition of what constitutes work. We do have a definition in the Working Time Regulations, but that does not apply in this context and I doubt the Court will find any reference to that definition helpful.

So what is ‘work’?  To my mind you are working when you are performing a service at the behest of your employer. That might involve frantic activity, but in some circumstances it may involve no more than your physical presence – if that is the service that the employer requires of you. A care worker who works a sleepover shift does not tell their family ‘I’m off to be available for work in case I’m needed’ –  they say ‘I’m working tonight’. They sacrifice their freedom to spend their time as they choose because the employer needs them to be at work. They are not likely to be spending a restful night in a comfortable bed. Sleeping arrangements in a care home will probably not match the comfort they get at home. I don’t think it’s unreasonable to regard them as doing a night’s work in those circumstances and to expect employers to pay properly for the service that care workers are providing.

If I were sitting on the Supreme Court I think I would uphold the Tribunal’s decision in both cases. I would agree with the Tribunal that Ms Tomlinson-Blake was working when she had to stay overnight with her service users. But I would also agree that Mr Shannon falls on the other side of the line and cannot really be said to be working except on those rare occasions when he was actually called upon to help. This is the sort of distinction that should be left to employment tribunals to draw.

And yet… What niggles about this view is that I don’t think it leaves much room for Regulation 32. What is it actually there for? If being required to be present in the workplace is treated as essentially being required to work rather than just be available for work, then there is no need for a provision deeming it to be work at all.  The Supreme Court can’t just say ‘Look, Regulation 32 is a bit of a mess, lets just work around it’. They have to give it meaning. The best argument in favour of the Court of Appeal’s approach (much as I dislike it) is that it does just that. It doesn’t rely on a clever and ingenious approach and accords with what many people – particularly those who don’t have to work a sleepover shift in a care home – would regard as common sense.

Obviously I don’t know what the Supreme Court will actually say – and we will probably have to wait until late spring / early summer for a result. It should however be a fascinating case to watch on Supreme Court Live. I plan to be an enthusiastically partisan observer.

 

 

 

 

 

 

 

 

 

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