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28 January 2016

Employment - Top 10 thoughts for 2016

There’s no doubt that the world of employment law is changing. On the one hand significant deregulation by the Coalition and Conservative governments has led to the feeling of a more relaxed regime.

But at the same time some potentially game-changing, and expensive new regulation is on the way (gender pay gap reporting is potentially huge, no pun intended). And whilst the Government desperately tries to deregulate, the ECJ has decidedly different ideas (wholesale recalculation of holiday pay, for example).

So when it comes to 2016, it’s not so much that there is less employment law, it’s more that it’s different… Here’s our top 10.

1. Gender Pay reporting - The time to audit is now 

The Government has made clear that it wants to “end the gender pay gap in a generation”, and the first step is the requirement on any employer with more than 250 employees to publicly report on the gender pay gap within its business. The challenge will lie in collating the data and presenting it in a statistical format that is both compliant and does not amplify or understate any gender pay gap.

There is no precise implementation date yet, although it is likely to be in the Spring of 2016. We recommend undertaking equal pay audits now, to nip any potential problems in the bud early. Over recent years equal pay claims have spread from the public to private sector, for example the Brierly v Asda Stores case is due to be heard later this year and involves female workers working in Asda stores claiming equal pay with male workers in the distribution centres on the basis their jobs are of equal value. It seems inevitable that reported statistics will be used to leverage further private sector claims.

Until the first draft regulations, employers do not yet know precisely what action will be required. The Government’s Equality Office published a framework report entitled “Think, Act, Report” in 2011 encouraging voluntary gender pay reporting. The report kickstarts employers' contemplation of gender equality and checking whether more could be done using workforce and pay measures to take action to address any differences. There is ACAS Guidance which breaks this down into steps. Employers need to understand whether there are gender pay differentials in their business, or where it could improve equal participation in certain roles or at certain levels in order to improve parity in gender pay. The purpose of the mandatory reporting, aside from eradicating the gender pay gap, is to do exactly this; encourage employers to consider how to resolve any gender pay gaps. For example, if a business identifies a low participation in one particular type of role by women, it needs to consider why that should be and then take steps to improve participation by women in that role.

As to how the figures are to be reported, it would be better for there to be some discretion for employers. It seems unlikely that a broad brush approach will be permissible as any overall gender pay differentials could be hidden. A narrow reporting structure could be counterproductive, resulting in some employers reconsidering the way people are employed. Moving away from employment contracts would run contrary to public policy of increasing employment. Ultimately, there are a variety of reasons for gender pay differentials, valid or otherwise, which cannot properly be explained by hard reporting of figures.

2. Our new national living wage – what's the knock on effect?

The new National Living Wage (not to be confused with the campaign for a “Living Wage”), comes into force in April 2016, and may bring unintended consequences with it.

The NLW will give workers who are 25 and over an additional 50p per hour on the national minimum wage. Much has been reported on the increased cost to employers, but there are potentially additional unexpected consequences to consider. For example, NLW may impact on the wider workforce where employers want to retain certain differentials in pay between workers and therefore have to raise wages in the wider workforce.

There may also be an impact on outsourced contracts with prices pegged to the NMW who find these costs may not be factored in to their contractual arrangements, leaving the contractors with additional, unexpected, costs.

3. A striking blow to the unions?

The Government is implementing the biggest change to trade union rights for 30 years.

The number of working days lost due to strikes was 704,000 in the 12 months to April 2015. Whilst this is a far cry from the near 13 million days lost through strike action on average in the 1970s, the Government says it felt forced to act due to the number of strikes called based on small turnouts or 2 year old ballot mandates.

The Trade Union Bill introduces changes to the balloting rules for industrial action and measures on picketing, facility time, political donations and additional powers for the Certification Officer. The most significant changes relate to balloting thresholds; in all cases at least 50% of those eligible to vote must do so, and in cases where the majority of those eligible to vote work in “important public services” or ancillary activities, at least 40% of those eligible to vote must vote in favour.

The Government sees this as a way of creating more balance between powerful Unions and the rights of businesses, consumers and commuters ensuring that strikes will only occur if there is a clear, democratic decision. The Unions see it as a direct attack on their authority and freedom.

4. Holiday pay – what’s in and what’s out?

Whilst recent decisions at European level have established that holiday pay calculations should take into account commission and certain types of overtime, cases in the UK Courts are still considering what additional payments should be included.

In December 2015, the EAT heard an appeal against the decision that commission and similar payments should be included (Lock v British Gas). Judgement is awaited and could have wide ranging implications for calculating holiday pay. Fortunately for employers, retrospective holiday pay claims are now limited to a maximum of 2 years, but employees are likely to question their pay and bring claims in relation to this for some time to come. Implementing compliant but affordable holiday pay arrangements remains a challenge.

It remains possible that the Lock decision will not provide the clarity required and statutory regulation is not anticipated. In those circumstances, employers will need to objectively assess its risks based on what we currently know.

5. Tribunal fees – will they stay or will they go?

The latest tribunal statistics show a continuing year on year reduction in the number of claims being brought in Employment Tribunals, as a result of which the landscape of litigation in the Tribunal has radically changed.

There has been an approximately 80% reduction in claims overall since fees were introduced.It is clear that the former Government’s objective to stem the tide of litigation has been too successful. Those to the left of the political debate have been campaigning for fees to be abolished or at least reduced to improve access to justice.

So far the legal challenges by Unison and others have been unsuccessful, but there are signs of a shift with Scotland announcing its intention to abolish fees at a time when the Government is consulting on the issue. Whilst it seems unlikely that fees will be abolished in their entirety, there is a growing case for reduction.

6. Public sector exit payments - payback time

The Government is introducing rules requiring employees leaving the public sector to repay some or all of their exit payments if they return to public sector employment within 12 months.

The Government also proposes a cap of £95,000 on the pre-tax value of exit payments to public sector workers. Whilst these rules only apply to the public sector, they are concepts which could be adopted by private sector employers. A limit on exit payments (potentially with a very limited power to exceed in exceptional circumstances with specific Board approval) could be a useful negotiating tactic.

7. Restrictive covenants - time to get your house in order

In the last few years the explosion of social media as a business tool and the ability to do business from a portable device from anywhere in the world means that employers must sharpen up their restrictive covenants.

Before social media became such an important business tool, protecting your business was a mixture of garden leave clauses and the right restrictive covenants. Protecting confidential information was ensuring your client lists were not downloaded by the departing employee. But times have changed.

You may now need to consider restrictions without geographical limits to protect your business. You will want to protect and preserve confidential information which a departing employee may have on various social media sites such as LinkedIn.

Employment contracts and policies will need to keep pace with the modern technology of the world. Regular review will be more necessary than ever and keeping to the old tried and tested formulas will no longer be good enough.

8. Tightening the screws on UK banks – the new senior managers and certification scheme

From 7 March 2016, a new regulatory regime will replace the approved persons regime for senior managers working in UK banks.

During 2018, the Government intends to extend the regimes to all persons authorised under FSMA. The new framework includes a Senior Managers Regime to replace the “significant influence function” of the approved persons regime; a “certification regime” which is broader than the current approved persons regime, relevant firms will be responsible for “certifying” on an ongoing annual basis a person’s fitness and propriety to perform their role.

There are also new conduct rules which will apply to all bank staff (except those in support roles doing work that would be the same if they worked in a non-financial services firm).

9. Zero hours contracts – more bite for exclusivity protection

Exclusivity clauses in zero hours contracts have been banned since May 2015.

Since 11 January 2016, new regulations gave zero hours employees the right not to be unfairly dismissed and not to be subjected to a detriment for refusing to comply with an exclusivity clause.

Realistically, many workers enjoy the flexibility and freedom that a zero hours contract offers, and would otherwise be unable to accept fixed hours employment.

10. Keeping an eye on the courts

As ever, the appeal courts will make game-changing decisions this year, some to watch are...

What is in the public interest?

In October, the Court of Appeal will determine how broad (or narrow) the “public interest” test should be under the whistleblowing legislation in Chesterton Global Ltd v Nurmohamed.

Is an employee on permanent sick leave protected by TUPE?

In BT Managed Services v Edwards, the Court of Appeal will, in June, decide if an employee on permanent sick leave can be “assigned to an organised grouping of employees” for the purposes of TUPE.

For more information please contact Michael Powner on +44 (0)20 7203 5216 or at