Dechert LLP

07/22/2024 | News release | Distributed by Public on 07/22/2024 03:12

The Employment Edit – Issue 9 – July 2024

Welcome to the ninth edition of The Employment Edit - a summary of the most important recent cases and news affecting employers in the UK. We hope you find this newsletter helpful and informative. In this edition, we look at:

New Labour Government's proposed changes to employment law in the UK

Following the general election, with the Labour Party now in power, significant changes to employment law are expected. The Government's first step has been to indicate in the King's Speech that it will introduce draft legislation - an Employment Rights Bill and a Draft Equality (Race and Disability) Bill which will implement parts of the employment law related proposals contained in the Labour Party's election manifesto (the manifesto).

The King's Speech, which sets out the Government's legislative agenda for the coming months, confirmed the Government's intention to implement in full the proposals contained in its paper 'Labour's Plan to Make Work Pay, Delivering a New Deal for Working People' published in May 2024, which built on earlier proposals published in 'A New Deal for Working People' published in September 2023. The key proposals that are likely to be of most interest to employers are as follows:

Employment Rights Bill

  • Removing the two-year qualifying period for claiming unfair dismissal, which applies unless the dismissal is automatically unfair (for example where an employee is dismissed for reasons relating to pregnancy or whistleblowing). It appears that employers will still be able to dismiss an employee fairly where they fail their probationary period. There is no detail yet as to how this will work in practice. An earlier proposal to remove the cap on compensation for unfair dismissal (currently £115,115) appears to have been dropped.
  • Ending the practice of 'fire and rehire.' This has been on the employment law agenda for some time, as reported in previous issues of the Employment Edit. It describes the process by which employees may be dismissed and either replaced with lower paid staff or re-engaged on less favourable terms. The statutory Code of Practice introduced by the previous Government setting out best practice for employers managing a 'fire and rehire' exercise is described as 'inadequate' and will be replaced.
  • Making flexible working the 'default' from day one for all workers, with employers required to accommodate this as far as is reasonable. The proposal would build on the changes made to the right to request flexible working in April 2024, reported in the previous issue of the Employment Edit. Currently, employers can refuse a request for flexible working for one of eight statutory business reasons (e.g. inability to reorganise work among existing staff, or detrimental impact on performance).
  • Changing the statutory sick pay (SSP) scheme so that sick pay is payable to all 'workers' from the first day of sickness. Currently SSP is not payable for the first three days of sickness absence and employees must earn more than the 'lower earnings limit' in order to receive SSP.
  • Giving additional protection for women who take maternity leave by making it unlawful to dismiss a woman during the period of six months following her return from maternity leave except in specific, as yet unspecified, circumstances.
  • Making parental leave available from day one of employment. The manifesto also contained a proposal to review the 'parental leave system.' It is not entirely clear what this means. This could mean a general review of all leave available to parents (i.e., including maternity, paternity, adoption and shared parental leave) rather than just parental leave itself, which is unpaid and usually taken to care for older children as it is available up to a child's 18th birthday. The minimum period of service required to qualify for different types of family related leave and pay currently varies (e.g. employees may take maternity leave from day one of employment but need 26 weeks' service to qualify for statutory maternity pay).

Draft Equality (Race and Disability) Bill

  • This bill is described as giving people who are from an ethnic minority or are disabled, the 'full right to equal pay' by making it much easier for these groups to bring unequal pay claims. Currently employees may only bring equal pay claims on the basis of gender (e.g. a claim that a woman is being paid less than a man who is doing the same or similar work). Under the current legislation a claim that a person is being paid less than a colleague doing the same or similar work because of their race or disability would be brought as a claim for direct or indirect discrimination.
  • Requiring large employers (i.e. those with more than 250 staff) to report on their ethnicity and disability pay gaps. This proposal has been considered previously, and it is widely acknowledged that collecting data and calculating pay gaps in relation to ethnicity and disability is a more complex process than calculating pay gaps between men and women. It would, for example, require careful and sensitive consideration of the different categories of ethnicity and disability to be used and will require employers to build a certain level of trust with their employees so that they are comfortable sharing personal data with their employers.

The manifesto also contained the following key proposals:

  • Increasing the time limit for bringing claims in the Employment Tribunal from three to six months.
  • Strengthening the new legal duty for employers to take all reasonable steps to prevent sexual harassment (which comes into force in October 2024 - discussed in Issue 7 of the Employment Edit ). This appears to include a proposal to protect employees from harassment by third parties that was removed from the legislation governing the new duty during the legislative process, and a proposal to strengthen protection for whistleblowers who report sexual harassment at work.
  • Creating a single status of worker so that there would be two categories of employment status - worker and self-employed, rather than the current three categories of employee, worker and self-employed.
  • Changing the rules on collective redundancies so that, in deciding whether the thresholds for collective redundancies are met, it appears that an employer may have to consider all employees impacted across its business. This would make it more likely that the collective consultation obligations will be triggered. Currently employers can generally consider separately: (i) employees employed by different group companies and (ii) workplaces in different geographical locations.
  • Introducing a 'right to switch off' for employees in light of the increase, since the COVID-19 pandemic, of remote and flexible working. Such a right already exists in other countries, including France and Ireland.
  • Extending gender pay gap reporting by requiring employers to develop, publish and implement action plans - which are not currently mandatory - to close gender pay gaps.
  • Requiring large employers (i.e., those with more than 250 staff) to produce Menopause Action Plans setting out how they will support employees through the menopause.
  • Considering the introduction of paid carer's leave. The right to take up to a week per year of unpaid carer's leave was introduced in April 2024, highlighted in the previous Edit.
  • Introducing bereavement leave for all workers.

Takeaway: the new Government has committed to a substantial programme of employment law reform, starting with the draft legislation indicated in the King's Speech. It may take some considerable time to implement all the manifesto proposals in full. This could be a busy period of change, and employers will need to keep on top of the changes and ensure that policies and working practices are kept up to date.

Timing of consultation about a redundancy selection pool

In Valimulla v Al-Khair Foundation, the Employment Appeal Tribunal (EAT) found that an employee who had been made redundant was unfairly dismissed because the employer's consultation with him was not 'meaningful' - in the sense that it did not take place at a time when it could potentially make a difference to the outcome of the redundancy.

Mr. Valimulla worked as a Majid Liaison Officer based in Bolton in the Northwest of England raising funds in the community for his employer, which was a charity. Three other employees performed the same or similar roles for the employer in different geographical locations. During the COVID-19 pandemic, it became more usual for donations to be made online, and Mr. Valimulla's role was identified as potentially redundant. He was informed that he was in a unique role and that he was therefore in a redundancy pool of one. Three redundancy consultation meetings then took place and at the end of the consultation process Mr. Valimulla was dismissed as redundant.

The EAT found that, while there was a genuine redundancy situation, it was not limited by geographical location, i.e., the need to reduce the workforce was not limited to the Bolton branch but applied across the business. In order for a redundancy dismissal to be fair, an employer must be able to show that its redundancy selection process was reasonable. While this may be achievable in different ways, the employer must be able to show that it 'genuinely applied its mind' to the question of the pool from which those employees who are to be made redundant should be selected. There was no evidence that the employer had done so in this case.

In addition, there had been no meaningful consultation with Mr. Valimulla. The selection pool was a key issue - i.e., why was Mr. Valimulla in Bolton selected for redundancy while those performing the same role in different locations were not. The consultation meetings took place after the decision had been taken by the employer to place Mr. Valimulla in the selection pool of one. It was too late for any proposals that he might make on this issue during the consultation meetings to be meaningful. This meant that the dismissal was unfair.

Takeaway: the EAT said that 'meaningful consultation' means setting out a provisional proposal, along with its rationale, and providing an opportunity for feedback, comments and observations. A decision maker should consider the responses to the consultation with an open mind, considering whether they alter the initial proposal or not. A decision should only be made after this has been done.

A number of recent cases have focused on the requirement for employers to consult with employees who are potentially redundant at a formative stage in the process. While this requirement is not a new principle, it appears to be coming under greater scrutiny by tribunals and raised more regularly by employees as a challenge to the fairness of a redundancy process. Employers need to consider carefully the point at which redundancy proposals have become sufficiently clear such that consultation is practically possible, while not leaving it so late that consultation is not meaningful.

Settlement agreement can protect an employer against identified future claims

In Clifford v IBM United Kingdom Ltd, the EAT confirmed that a waiver of future claims contained in a settlement agreement dated 2013 was effective, and that therefore claims for disability discrimination brought by Mr. Clifford in 2022 should be struck out.

Mr. Clifford was continuously absent from work from 2008 as a result of ill health. In 2012, having raised various grievances against his employer, it was agreed that he would move to his employer's long-term disability plan. He signed a settlement agreement in which he waived the right to bring various claims against his employer including disability claims, whether or not they were known to the parties at the date of the agreement. This waiver covered future claims linked to the grievance and his move to the disability plan.

In February 2022, Mr. Clifford sought to bring a number of disability discrimination claims against his employer that related to payments under the long-term disability plan. The EAT found that the waiver in the 2013 settlement agreement was effective. Future claims can be compromised by a settlement agreement if all the statutory conditions for a valid settlement agreement are met. The fact that Mr. Clifford remained in employment on the long-term disability plan did not affect the validity of the waiver of future claims.

A waiver of claims has to be specific and identify the particular complaints that it is intended to cover. An employer cannot use a blanket waiver in relation to which an employee signs away their right to bring any claim at all. However, provided that the specific claim is identified, a waiver can cover future claims. In this case, the waiver covered disability claims related to Mr. Clifford's grievance and the long-term disability plan. It was therefore valid.

Takeaway: this is a helpful case for employers confirming that while a blanket waiver of future claims will not be valid, a well-drafted waiver can be valid to protect the employer against future claims arising in respect of an identified set of circumstances.