Employment legal update #52 | February 2022

Our Employment & HR team brings its monthly review of new legislation, guidance and case law.

News: 

On 21 December 2021, the Chancellor announced a support package for businesses that have been adversely impacted by the last Covid surge, fuelled by the rapid spread of the Omicron variant. The three main elements are:

• The hospitality and leisure sectors in England will be eligible for one-off grants of up to £6,000 per premises .
• Discretionary funding of more than £100 million will be made available for local authorities to support other businesses.
• The government will reintroduce the Statutory Sick Pay Rebate Scheme (SSPRS), which ended on 30 September 2021, to cover the cost of Statutory Sick Pay for Covid-related absences for small and medium-sized employers across the UK. The focus for this is on employers with fewer than 250 employees, to assist them by reimbursing the cost of SSP for Covid related absences of up to 2 weeks per employee. Eligibility commenced on 21 December and employers can claim retrospectively from mid-January.
• Further funding of £30 million will be made available through the Culture Recovery Fund, so that more cultural organisations in England can apply for support during the winter. This is to support organisations such as theatres, orchestras and museums through the winter to March 2022.

The Statutory Sick Pay (Medical Evidence) Regulations 2021 came into force on 17 December 2021 and modify the Statutory Sick Pay (Medical Evidence) Regulations 1985 which allow an employer to only obtain medical evidence in respect of sickness after 7 days of ill health. These new regulations increase this period to 28 days. The rationale is to increase the capacity of GPs to fulfil the vaccine booster programme by reducing their requirement to provide sick notes after only 7 days. This change only covers periods of illness which either start during the period 17 December 2021 to 26 January 2022 or which started before 17 December 2021, but which have not lasted more than 7 days on that date (so the requirement for medical evidence has not yet arisen). The change will not apply to illnesses which begin after 26 January 2022 but will continue to apply to any illness (other than those starting more than 7 days before 17 December 2021) which is ongoing, having commenced prior to 26 January 2022.The guidance, Statutory Sick Pay: employee fitness to work, has been updated accordingly, and states that if an employee is off sick on or after 10 December 2021 and up to and including 26 January 2022, an employer cannot ask them for proof of sickness until they have been off for 28 days or more. The same amendment has been made in Northern Ireland.

The TUC has carried out research on the gig economy. Their findings suggest up to 4.4 million people in England and Wales work for gig economy platforms at least once a week. This is 14.7% of working adults, an increase from 5.8% in 2016. In relation to delivery and driving "gigs", the number has more than quadrupled from 1.9% to 8.9%.  The TUC has suggested strengthening individual rights to protect those who work in the economy from poor working conditions and unequal treatment. These include:

• a right of access to workplaces for unions, including a digital right of access to enable unions to talk to workers about the benefits membership would offer them.
• A new definition of worker covering all existing employees and workers and giving them the full range of legal rights.
• Banning of zero-hours contracts – instead, all workers should have the right to a contract that reflects their normal hours of work and adequate notice of shifts.

The proposed increase in several statutory benefits has been announced, to take effect from April. The proposals are:

• SSP to go up to £99.35 from £96.35
• SMP and maternity allowance up to £156.66 (up from £151.97
• SPP up to £156.66 from £151.97
• ShPP up to £156.66 from £151.97
• SAP up to £156.66 from £151.97

These will be confirmed once the necessary Order is made and will come into effect from 11 April 2022.

The Parliamentary Under-Secretary of State for Health and Social Care has announced that, if legislation regarding the effect of the menopause on women is introduced, this would include reducing prescription charges for HRT products in England. There was also an update on the government's work to improve menopause care in main areas, one of which was the workplace as follows:

• employers should ensure a supportive environment such as a policy setting out the employer's approach to dealing with workplace issues relating to the menopause
• Flexible working options, whether part-time working or job-sharing, can assist those going through the menopause.

A study has found that 17% fewer couples requested shared parental leave during the pandemic than before it - the first decline recorded since shared parental leave was launched. Prior to the pandemic, the number of applicants had been increasing steadily by 1% or 2% each year. The low level of shared parental pay and the increased flexibility during the work from home restrictions are believed to have contributed to this decline.

The Chartered Institute of Personnel and Development has produced new guidance on flexible working on behalf of the government's flexible working taskforce which has previously recommended that flexible working should be the default position for all workers post-pandemic. This augments the ACAS advice on hybrid and flexible working. The guidance recommends that:

• Employers should define what hybrid working would mean in their context, taking account of strategic goals and input from workers.
• Organisations should consider how to effectively recruit and manage hybrid workers.
• Organisations should look at ensuring that hybrid working policies and practice are inclusive and fair to avoid any unintended consequences.
• Training should be provided to managers; HR processes should be reviewed; and ongoing listening exercises should take place with employees.
• Employers should remember their responsibilities to the health and wellbeing of employees, even in a hybrid context, and of the opportunities that hybrid working may offer companies to promote wellbeing.
• Finally the report comments that hybrid working continues to evolve and organisations may need to continue to develop their approach to effectively implement flexible working.

Commentary: 

Striking employees protected from detriment

The extent of protection for those taking part in industrial action under sections 146 and 152 of TULRCA has been explored in the EAT case of Ryanair DAC v Morais and others. Prior to this decision, just taking part in industrial action had not been one of the activities which are protected by these sections. Although employees cannot be dismissed for taking part in industrial action there is no protection in the legislation for subjecting those who do, to detriment short of dismissal.

In an earlier case the EAT held that protection from detriment should in fact be read into section 146 so that it is compatible with Article 11 of the European Convention on Human Rights.

A group of pilots took part in a strike called by their trade union, BALPA, as a result of which certain concessionary travel benefits were withdrawn. The pilots brought claims under section 146 claiming that they were subjected to an unlawful detriment. Section 146 includes protection for any detriment aimed at ‘preventing or deterring [the worker] from taking part in the activities of an independent trade union at an appropriate time’.  They also brought claims under the Blacklist Regulations which outlaw detrimental treatment in relation to a prohibited list which comprises details of those who have taken part in trade union activity, the purpose of which is discriminatory use.

The EAT held that the Tribunal had rightly concluded that the pilots had been partaking in trade union activities for the purposes of section 146. Where it has gone wrong was finding that this was dependent on the strike being protected industrial action. Compatibility with Article 11 meant that the section must be read as extending to workers who participate in all industrial action regardless of whether it is protected. As such, the detriment in being deprived of the concessionary travel vouchers was held to fall under section 146 and the pilots were protected. The outcome of this case, therefore, is that if those taking part in industrial action are subjected to a detriment, they have the protection of section 146 TULRCA.

The EAT also held that striking workers are protected from detriment under the Blacklist Regulations, and that this is not restricted to protected industrial action, as this is not referred to in those regulations.

Hypothetical contract was a contract – IR35 decision

In Little Piece of Paradise Ltd v HMRC the First-tier Tribunal (FTT) has held that the IR35 intermediaries rules applied to a sports presenter providing services to Sky through a personal service company. They inferred a hypothetical contract which demonstrated that the presenter was in fact an employee for the purposes of IR35.

The presenter’s services to Sky were to provide live darts and boxing coverage. Implying a hypothetical contract, the FTT concluded that the individual would have been an employee of Sky. The hypothetical contract was inferred both from the documents and from the parties’ conduct. They took into account the following:

• There was sufficient mutuality of obligation under the terms of the hypothetical contract. The same monthly fee had been paid throughout the term of the contract, notwithstanding indications in the documents and from the appellant that it was calculated by reference to the number of days actually worked.
• The fact that there was a termination clause was a further indication of mutuality of obligation.
• The degree of control was also considered, and this was held to be considerable. Sky had “first call" on the individual's time; dictated which events should be covered; and therefore had control over the time and place of the presenter’s work. The individual had a high degree of autonomy in the method of presentation, but Sky dictated what was actually presented.
• The only right of substitution was with Sky’s consent and Sky paid the substitute directly if this was utilised. It was the tribunal’s view that the hypothetical contract would not have included the right of substitution.

The key point to take out of this decision is the importance of the conduct of the parties when assessing whether that contract exists. This decision is a reminder of the importance of the conduct of the parties when assessing the terms of the hypothetical contract. In addition, the FTT commented that a company-wide review of arrangements with third party contractors, which was triggered by the extension of the off-payroll working rules, indicated that arrangements prior to the changes would have fallen foul of IR35.

Recurring effect in establishing disability

In Sullivan v Bury Street Capital Ltd the Court of Appeal has upheld an employment tribunal decision that an employee suffering from paranoid delusions was not disabled for the purposes of the Equality Act.  The tribunal had found that there were two separate delusional episodes which had the relevant substantial adverse effect on the ability to carry out normal day-to-day activities, but the claimant had not established that it was likely the substantial adverse effect would continue for at least 12 months or be likely to do so.

The tribunal looked at whether the substantial adverse effect occurring during the first episode made it likely that it would occur in the second episode, but held that whether it would, is irrelevant. While one episode may cause a substantial adverse effect, this may not always happen. The tribunal had found that the second episode was triggered by an event which itself was unlikely to recur, hence the conclusion that the substantial adverse effect was not likely to last the required period to establish disability.

Director/shareholder neither employee nor worker

In Rainford v Dorset Aquatics Ltd the EAT has upheld a tribunal decision that a director and 40% shareholder was neither an employee nor a worker of the company.

The claimant and his brother were the shareholders and co-directors of the respondent company. They were advised by their accountants to each take a salary which would be subject to PAYE, plus annual dividends. When one of the brothers left the business following a dispute, he brought various tribunal claims and a preliminary issue arose as to his employment status to be able to bring the claims.

The employment judge found there was no mutuality of obligation other than that the brothers would generate and carry out sufficient work to keep the company afloat. The claimant worked to his own hours and took holiday when he chose; he was free to undertake other work outside the company. There was no requirement for personal service, because the brother’s evidence was that the claimant could have substituted someone else to do his work although he never did as a matter of practice. He was therefore found not to be an employee and promptly appealed.

His key ground was that, because it had been found that he worked for a salary, and the arrangement was not a sham, he must therefore be an employee, a worker, or a self-employed contractor working for a client or customer. He argued that he must be an employee or a worker because the company was not either a client or customer of his (so he could not be considered self-employed).

The EAT, however, did not agree. It pointed to case law demonstrating that working director-shareholders do not have to have employment contracts, and there was no suggestion, in the key Supreme Court case on worker status, that an individual had to fall into one of the identified three categories.  The EAT considered that the judge was entitled to take into account the parties' views as to the nature of their relationship when it came to the matter of substitution.

The claimant also argued that the judge was wrong to take account of his level of control over the company and his exposure to risk, which was due to his status as a director-shareholder. The EAT accepted that one could not say that a director/shareholder cannot be an employee, but in this case the control/risk factors only formed part of the overall scenario and had not significantly influenced the judge’s decision.

Uplift on injury to feelings and aggravated damages confirmed by EAT

In Slade and anor v Biggs and ors, the EAT has held that a 25% uplift on awards of injury to feelings and aggravated damages for non-compliance with the ACAS Code of Practice on Disciplinary and Grievance Procedures, did not entail double counting. Furthermore, it held that the absolute value of the uplift was not so high as to be disproportionate. It commented that while awards which are wholly disproportionate should be reduced, there should not be an inevitable benefit of a non-statutory ceiling for large sums where there is not with smaller claims. It also held that the tribunal’s grossing up was correct.

The facts were these. Ms Biggs and Ms Slade were employed by a company which operates venues for weddings and other events owned by an organisation called BS. Ms Biggs went on maternity leave in September 2017 and the employer found out that Ms Slade was also pregnant the following January. The employer then did its best to ensure their departure because their pregnancies and maternity leave, falling together, were ‘highly inconvenient’. Various tactics were adopted, including a sham TUPE transfer, and neither were paid their statutory maternity pay. Ms Biggs lodged a grievance which was not dealt with, and she eventually resigned. Ms Slade was subjected to a sham disciplinary process and dismissed for gross misconduct without a hearing, without being told the allegations against her, or given a right of appeal. When they both brought tribunal claims for unfair dismissal and maternity discrimination they were, unsurprisingly, successful. They sued their employer, and the owner of the company which operated the venues.

They were each awarded £23,243.50 and £41,375.32, and this included the maximum 25% uplift for breach of the ACAS Code of Practice on Disciplinary and Grievance Procedures. They were also awarded injury to feelings in the amounts of £20,000 and £25,000 respectively, plus £5,000 each for aggravated damages. On top of this, both awards were themselves uplifted by 25% to reflect the breach of the ACAS Code.

The respondents appealed on the basis that the uplift was disproportionate and the injury to feelings and aggravated damages awards involved ‘double counting’ which was not permitted.

The appeals were dismissed. The EAT found that the Tribunal’s reasoning disclosed no obvious or significant double counting in making the awards for either aggravated damages or injury to feelings, or indeed the uplift. Ms Briggs’ uplift was not connected to injury to feelings. Ms Slade’s injury to feelings was accounted for by the vindictive nature of the sham disciplinary process. Regarding the uplift, the EAT held that the maximum amount could have been justified by the punitive element alone which could not overlap with the compensatory award of injury to feelings and aggravated damages.

It stressed that not every case would allow for aggravated damages and compensation for injury to feelings to both be considered as susceptible to an uplift for non-compliance with the ACAS Code, but any overlap should be adjusted for.

The EAT also held that the figures were not disproportionate. After discussing the statutory discretion for tribunals and the range for the most serious cases, it went on to propose a 4-stage test as follows:

• is the case one where it is just and equitable to award any ACAS uplift?
• if so, what does the tribunal consider a just and equitable percentage, not exceeding, although possibly equalling, 25%?
• does the uplift overlap, or potentially overlap, with other general awards, such as injury to feelings; and, if so, what is the appropriate adjustment, if any, to the percentage of those awards in order to avoid double counting?
• applying a ‘final sense-check’, is the sum of money represented by the application of the percentage uplift arrived at by the ET disproportionate overall and, if so, what further adjustment needs to be made?

Finally, since the injury to feelings and aggravated damages were payments in connection with the termination of employment, the EAT held that they were taxable under S.401 of the Income Tax (Earnings and Pensions) Act 2003 and as such the tribunal was correct to gross them up.

Request to extend time to lodge discrimination claims upheld

In Wells Cathedral v Souter, the EAT has upheld a tribunal decision to extend the time limit for lodging employment tribunal claims for discrimination which were very considerably out of time. In doing so, they set out the 5 points of consideration as to why the decision to extend time was granted and upheld by the EAT.

The claimants had brought grievances which extended over a 2-year period alleging acts of discrimination which subsequently resulted in their resignation.

The two claimants were married, and the wife had had cancer. Both lodged grievances against the treatment meted out to them by a senior member of the respondent. The wife instructed solicitors to help with her grievance which was not upheld on appeal on 21 December 2018, and she resigned on 4 January 2019. The husband lodged a grievance in July 2018, using the same solicitors as his wife to assist. Following a protracted process, and grievance hearings on 26 February and 1 March 2019, the panel appointed to hear the grievance then withdrew and it was never determined. He resigned on 25 April 2019.

The grievances were lodged, respectively, on 2 July and 4 August 2018. By that point all the allegations of discrimination had crystallised. The claim forms were issued on 24 April and 26 July 2019 (although interestingly the judgment has a typo in it; at paragraph 8 it states that the husband lodged his claim on 26 July. However, the quote from the tribunal judgment under paragraph 12, heading “delay”, states that the claims were lodged, respectively, on 24 and 26 April 2019). Most of the complaints were at least 1 year old by the date of issue and most had been known to the complainants for some time.

Both claimants requested an extension of time under section 123 (1) (b) for the tribunal to exercise its discretion to extend time, which it did. In upholding the tribunal decision, the EAT said that it was a balancing exercise involving consideration of 5 factors, the first two of which were in the claimants’ favour, but which carried more weight than the three which were not. These were:

• The significant length of the delay
• That the claimants were aware of the factual matrix and that they had had potential claims since 2018
• Despite the fact that they had received legal advice they had decided not to issue within the time limit
• The relevance of the grievances, both the fact that the claimants had used the process in a genuine attempt to resolve the issues, and that the grievances gave substance to the allegations which enabled the respondents to properly investigate and so preserve any evidence which might be needed for a hearing
• The point above had considerable influence on the potential prejudice to the respondent but there was no evidence that the cogency of the evidence had been adversely affected

The EAT reached its decision considering the case of Miller v MOJ and the following 5 points:

• The discretion under section 123 (1) (b) is very wide
• Time limits must be strictly observed
• The EAT can only interfere with the decision if it is Wednesbury unreasonable/perverse
• Prejudice to the respondent in allowing the time extension is usually relevant
• Section 33 of the Limitation Act as a useful checklist

This is a case which may turn on its very specific facts, and the fact that a grievance had been lodged is not automatically enough on its own to be granted a time extension. However, it is an interesting case and the fact that the claimants were genuinely using the grievance process to try and resolve their issues and continue working, rather than issuing proceedings as soon as they could, influenced the Tribunal’s reasoning. Part of the learning to take out of this judgment is not to assume, when acting for an individual, that the acts of discrimination can extend until the outcome of any grievance appeal to bring the discriminatory acts, which may have taken place some time ago, within time as part of a series of continuing acts. This should only be feasible where the grievance process and the appeal are themselves discriminatory; which of course will depend on the facts.

Enhanced redundancy payment not an implied term through custom and practice

In Thomas & Ors v FW Farnsworth Ltd (t/a Pizza Factory) the EAT upheld an employment tribunal decision that the claimants, who were made redundant, were not entitled to an enhanced redundancy payment as a matter of custom and practice. The claimants alleged, either that they were contractually entitled to an enhanced redundancy payment under a collective agreement or, alternatively, that the payment of an enhanced redundancy payment had become an implied contractual term through custom and practice. When the tribunal rejected both claims, the claimants appealed to the EAT on the matter of custom and practice only.

The EAT dismissed the appeal, holding that the tribunal had correctly applied the principles in Park Cakes Ltd v Shumba, and the tribunal reasonings gave no indication that they had misapplied those principles. It was up to the tribunal the weight which it attached to the various factors, in the absence of any perversity (there was none here).

The EAT held that just because an enhanced redundancy payment was consistently paid, did not of itself give rise to a legal obligation to pay it. It would only do so if the employers were solely interested in short-term profits and would never make payments which they were not legally obliged to make.

If employers make enhanced redundancy payments because they genuinely want to support their employees who are being made redundant, this may have a goodwill factor both to the employees and also to their customers. Consequently, employers might make decisions which are not necessarily in their short-term interests, and that is a matter for them and does not give rise to a legal obligation. It also held that, to the extent the respondent company and other companies had a practice of paying enhanced payments along the lines of a collective agreement, the practice can equally be a matter of discretion but not a legal obligation. In this case the only way the claimants could have won was if they could point to something other than a legal obligation which, as they could not, the claim failed

This is an interesting exposition around the value of the implied contractual term of custom and practice and could very well be a useful case, depending on the facts, to argue that there is no such legal obligation formed by regular payments which could become a custom and practice.