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14 July 2020 0 Comments
Posted in Business, Employment, Opinion

Employment legal update #38 | July 2020

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

Employment law update


Treasury Direction concerning the new flexible furlough scheme

The Government has issued a Treasury Direction concerning new the flexible furlough scheme which came into force on 1 July 2020. The rules will apply from 1 July 2020 until 31 October 2020, when the scheme is wound up.

There is detailed information regarding how pay is calculated and what can be claimed, including formulae for calculating payments in accordance with the hours worked/furloughed and details regarding the type of study and training (and trustee work) which can and cannot be undertaken during furlough.

Points to note are:

  • The cut-off date for making claims under the original CJRS is 31 July for furlough periods up to 30 June.
  • Any claim for furlough periods from 1 July must be claimed under the new scheme (so employers with staff followed which straddle these two schemes will have to make two applications; one for the period up to 30 June, and one from the period, 1 July forward).
  • An employer will only be able to participate in the new CJRS from 1 July if it has made a claim under the original scheme by 31 July in respect of an employee who has been furloughed for a minimum of three weeks beginning on or before 10 June.
    The only exception to the 10 June cut-off is for family leave returners and armed forces reservists.
  • As before, employer and employee must reach agreement on flexible furlough arrangements which must be confirmed in writing and retained by the employer until at least 30 June 2025.

Right to work from home

Legislation enshrining an employee’s right to work from home may be contained within the Government’s return to work package. BIS is apparently considering legislation which would protect the employee’s right work from home in circumstances where they feel there is a threat to their health and safety and that it is unsafe to return to work. This may also assist employers who are struggling to implement the required adaptations for employees to return to work safely following the pandemic. The TUC general secretary has endorsed this proposal.

ACAS updates its COVID-19 guidance

ACAS has recently updated its COVID-19 guidance, which now contains new sections on employers planning a return to the workplace and what to do if employees raise issues about this. The key message from the guidance is consultation and dialogue between employer and employee at all times.

ACAS updates Access to Work scheme guidance

ACAS has also updated its guidance on the Access to Work scheme to provide that eligible disabled employees may apply for financial support where they have to work from home because of COVID-19. If their allowance for the year has already been spent they are encouraged to contact their Access to Work adviser.

ACAS updates mental health issues guidance

ACAS has also produced guidance to assist employers and employees with any mental health issues as a result of extended periods of working from home during the pandemic. It suggests employers may consider setting up a mental health support group, with a mental health champion; workplace counselling; or using a wellness action plan from charities such as Mind. A survey commissioned by ACAS found that 2 out of 5 people working from home experienced varying degrees of mental health symptoms; 50% of those working from home experienced feelings of isolation; and 7 out of 10 missed the interaction with colleagues.

Updated guidance from the Pension Regulator

The Pensions Regulator has issued updated guidance for employers on the effect of auto enrolment and furloughed staff because of the pandemic. Under the CJRS employers can claim an additional amount in respect of the minimum employer pension contribution under auto enrolment for furloughed employees (please note this only applies until 1 August, after which employers will have to pay this themselves).There is practical guidance on three key issues:

  • Enrolling employees who become eligible during the furlough.
  • Automatic re-enrolment – if the third anniversary of the employer’s staging duties start date falls during a period of an employee’s furlough, the employer can choose a date up to 3 months after this anniversary to assess staff.
  • Requests to join a pension scheme – employees who are not members of the pension scheme can request to join at any time during their furlough leave period.

Full details can be found here.

Statement of Changes to the Immigration Rules CP232

The Government has published its Statement of Changes to the Immigration Rules CP232. Most of the new rules took effect on 4 June 2020 and include:

  • The requirements of the Representative of an Overseas Business category are being tightened and will include more subjective assessments and a genuineness test.
  • An Innovator applicant’s business may be already trading, providing the applicant was one of its founders.
  • Higher education providers can be endorsing bodies for Innovator visas (currently they can only endorse Start-up applicants).
  • Access to the EU Settlement Scheme is being extended for victims of domestic violence or abuse.
  • Eligible family members from Northern Ireland will be able to submit applications under the EU Settlement Scheme for UK settled or pre-settled immigration status on the same terms as family members of Irish citizens. This change will take effect on 24 August 2020.

High Court case on alleged inadequacies of the Self-Employed Income Support Scheme (SEISS)

The High Court has heard a case brought by Uber drivers about alleged inadequacies of the Self-Employed Income Support Scheme (SEISS) brought by two Uber drivers and the Independent Workers’ Union of Great Britain (IWGB). HM Treasury was accused of failing to provide adequate protection for gig economy workers under the SEISS. The claimants claimed that the Coronavirus Job Retention Scheme (CJRS) offers workers significantly better financial support citing, amongst other reasons, the fact that it covers more months of income than the SEISS. The claimants also accused HM Treasury of discrimination on the basis that the current Statutory Sick Pay regime discriminates against women, black, Asian, and minority ethnic workers and individuals in the gig economy, and that the exclusion from the CJRS of “limb (b)” workers also amounts to discrimination. The Government denied the allegations, stating the CJRS was just designed for workers on PAYE and not for the self-employed, and claiming that, in the context of self-employment “HMRC can’t tell who is and who isn’t a ‘limb (b)’ worker”.

Four days after the hearing, the High Court issued an expedited judgement dismissing the application for judicial review.

90% of workers employers want to maintain flexible working patterns

A survey undertaken by Working Families has found that 90% of workers want their employers to maintain flexible working patterns introduced by the COVID-19 pandemic. The survey, which pooled data from 1000 working parents and carers, found that 84% of people are now working flexibly, whereas only 65% were offered flexible working before the pandemic. In a different survey by Deloitte’s, the Future of the City survey, which pools research from 500 City of London financial services employees, has revealed that 70% have found working from home during lockdown a positive experience. Most cited the lack of commute as the main reason for this, with 43% citing flexible working, and 28% having more time for exercise.

Employment tribunal fees

And finally… if you thought employment tribunal fees had disappeared never to see the light of day again, you might be wrong. Apparently the Government has approached the Law Commission asking them to come up with a coherent programme for the reintroduction of fees to lodge employment tribunal claims. Funny that they should be doing this right in the teeth of the likelihood of a multitude of claims following furlough… Watch this space.

Commentary on recent case law

Settlement agreement – breach of confidentiality clause does not abrogate employer’s obligation to pay

In Duchy Farm Kennels Ltd v Steels the High Court has upheld a County Court decision that the breach of a confidentiality clause in a settlement agreement by the employee was not enough of a breach of the agreement to allow the employer to withhold further payments which were still due under the agreement. The confidentiality clause was not a condition of the agreement, breach of which would entitle the employer to withhold payment. The confidentiality clause was considered to be an intermediate term and as such insufficient to entitle the innocent party to treat the contract as repudiated and not comply with the remaining clauses.

The agreement reached between the parties for compromising proceedings against the employer was done by a COT3. The payment was provided for in weekly instalments but, after having paid several, the employer stopped paying and the employee issued proceedings for breach of the agreement. The employer’s argument was that the confidentiality clause in the COT3 had been breached. The County Court judge found that the employee had indeed disclosed the terms of the agreement, and the amount he had been paid, to, amongst others, a former colleague.

Although the County Court judge accepted that this breach could encourage other disaffected employees to sue the employer in the hope of getting a settlement, he nonetheless found that the confidentiality clause was not fundamental to the agreement, compliance with which was conditional on full payment being made.

The employer appealed to the High Court, which agreed with the County Court that the confidentiality term was not sufficiently fundamental to the agreement as to go to the root of it, breach of which would entitle the employer to withhold the balance of the payments due under the agreement.

The moral of the story – if you want to be able to withhold or clawback payments under a settlement agreement for breach of confidentiality, make sure that the confidentiality clause is included within the clause which allows for clawback on breach of certain terms.

Beneficial contractual changes void if agreed because of TUPE transfer

In a case which is a salutary reminder to company directors not to enhance their contractual terms in advance of a buyout to ensure they have more beneficial terms with the new employer, the EAT has held, in Ferguson and ors v Astrea Asset Management Ltd, that any changes, whether beneficial or otherwise, to employees, will be void on a TUPE transfer.

It held that the TUPE regulation which renders void any variation of a TUPE-transferred contract of employment if the sole or principal reason for the variation is the transfer, applies to all variations, not just those that are adverse to the transferring employee.

The claimants were four company directors, who were also employees of LPAM Ltd, an estate management company with one client. LPAM Ltd transferred to the respondents following the termination of the client contract with LPAM, when the client transferred its services to the respondent. This constituted a service provision change under TUPE to transfer the employee/directors to the respondent. Prior to the transfer date, they agreed enhanced terms to compensate them for the loss of dividends which they would suffer as a result of not being directors in the new company, as well as a termination payment based on length of service should their employment be terminated, and a 24 month notice period.

Shortly after the transfer, their employment was terminated and they brought claims in the employment tribunal to enforce the terms of their contract, including the termination payment. The question was whether the variation of terms agreed pre-transfer was valid; and an employment judge found they could not enforce them. The reason was that they had negotiated these in a deliberate attempt to gain an undue advantage for themselves and not for any legitimate commercial purpose. The judge found that the purpose of TUPE was not for employees to unduly benefit but instead for the protection of their existing terms and conditions. Consequently TUPE rendered the prior agreed terms void because they were negotiated in consequence of the transfer.

The claimants appealed to the EAT, which upheld the Tribunal decision and held that they could not enforce these terms against the transferee because of the effect of this regulation. Even without it, the EAT found that these actions would have been void under the abuse of law principle in EU law because their intention was to gain an improper advantage through a purely artificial transaction.

No discrimination in shared parental leave appeals

The Court of Appeal has delivered its long-awaited decision in the two conjoined appeals of Capita v Ali and Hextall v Chief Constable of Leicestershire. This case concerned whether or not it was unlawful discrimination on the basis of sex (direct, indirect or equal pay) to pay men on shared parental leave less than women on maternity leave. The Court of Appeal considered in both cases that it was not. The reasoning given was as follows:

  • There is no direct discrimination because a man on shared parental leave (the purpose for which is childcare) is not in a comparable situation to a birth mother on maternity leave (who is afforded special treatment for health and safety purposes having given birth).
  • It is not indirect discrimination to have a policy of paying statutory pay to men on shared parental leave because men and women in the comparison pool were not placed at any particular disadvantage by that policy, criterion or practice. It would anyway be justified as it was proportionate and legitimate to apply the policy of EU law ensuring special treatment relating to maternity.
  • A claim that contractual shared parental leave pay is less favourable than contractual maternity pay was correctly brought as an equal pay or equality of terms claim – alleging that a sex equality clause should ensure men and women in like circumstances are paid equally.
  • However any equal pay claim by a man on shared parental leave and pay would fail because the sex equality clause does not apply where there is special treatment relating to maternity, even if the terms were truly comparable.

Mr Ali and Mr Hextall are reportedly seeking leave to appeal to the Supreme Court.

TUPE – and buses

In the case of Grafe v Sudbrandenburger Nahverkehrs GmbH, the ECJ has followed the Advocate General’s opinion regarding whether or not there is a relevant transfer for the purposes of the Acquired Rights Directive in a situation where tangible assets, which were a key part of the business, did not transfer.

This case concerned the operation of a bus service. The ECJ held that where a relevant transfer did not involve the transfer of tangible assets because of legal, economic, or environmental constraints, the fact that the assets did not transfer was relevant but, crucially, was not decisive. In the case in hand, the ECJ found that there was a relevant transfer even though the key assets (the buses) did not transfer to the new service provider.

When the service of providing the bus routes transferred from the company, SBN, to KD, SBN terminated the employment of its entire staff. Subsequently all bar two of these were hired by KD. The two staff who were not hired claimed that their employment should have automatically transferred to KD under the Acquired Rights Directive.

KD argued that there was no relevant transfer between it and SBN, because the buses, the tangible assets, had not transferred. The reason was that new technical and environmental requirements rendered the old buses non-compliant and so new, environmentally friendly and more easily accessible buses were required to run the new service. As such, KD could not take on the buses or the depots from SBN. The ECJ concluded that, if SBN had retained the contract, it would have been forced to replace its old busses with new ones anyway because of the new regulations. The fact that virtually all its staff had been hired by KD demonstrated that the service was continuing, on much the same routes and with a relatively seamless transition. Therefore, in this circumstance, the fact that the buses themselves as tangible assets did not transfer, did not mean that there was not a relevant transfer under the Acquired Rights Directive.

In the UK, the above scenario would be dealt with under the service provision change of TUPE which goes further than the requirements of the Acquired Rights Directive.

Our Employment & HR team is on hand to steer businesses through the minefield that lies ahead. Contact Partner Gemma Ospedale:

020 7842 1496     Email

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