Employment legal update #40 | November 2020
In this month's legal update, our Employment & HR team cover:
• Employment law news, including a cap on public sector exit payments; tribunal cases backlog; conduct rules reporting for solo-regulated firms; new immigration routes for international students; updates to Employment Status manual; checks through the Disclosure and Barring Scheme; and the largest costs award in an Employment Tribunal.
• Commentary on recent employment law tribunal cases, including a struck-out personal injury claim; workers and holiday pay; re-employment in an unfair dismissal claim; use of WhatsApp messages in disciplinary proceedings.
The Government has published the draft Restriction of Public Sector Exit Payments Regulations 2020 which introduce the long-awaited £95,000 cap on public sector exit payments. The regulations set out payments which will be taken into account for the purposes of applying the cap; exemptions to this; and circumstances in which the cap may be waived, either with Treasury consent or in accordance with Treasury directions. Finalised guidance and Treasury directions will be published when the Regulations come into force.
The current backlog of tribunal cases currently stands around 40,000. The Law Society has joined a campaign to urge the Government to increase the time period for claimants to lodge claims from 3 months to 6 months, to try and spread the lodging of claims and ease the backlog.
On 13 August 2020, the FCA published a new webpage on conduct rules reporting for solo-regulated firms under the Senior Managers and Certification Regime (SM&CR). Under the SM&CR, FCA solo-regulated firms must annually report to the FCA whether disciplinary action has been taken against individuals who are not senior managers for breaches of the conduct rules, by way of a report called REP008 which must contain the following information:
- the individual who has committed the breach
- The conduct rules that have been breached
- the disciplinary action taken, whether formal written warning, suspension or dismissal of a person, or reduction or recovery of remuneration (clawback).
These reports must be submitted annually even if there have not been any conduct rule breaches resulting in disciplinary action. Firms that do not submit REP008 by the reporting deadline will be charged a late return fee of £250.
On 10 September 2020, the Government published its Statement of Changes to the Immigration Rules, which introduces new immigration routes to the UK for international students. The new routes replace the existing Tier 4 student categories with effect from 5 October 2020 and give an indication of what the new immigration rules will look like. The key differences between the existing Tier 4 routes and the new student routes are as follows:
- The rules will apply to EEA nationals and non-EEA nationals from 1 January 2021.
- There will be greater flexibility to switch into the student categories from within the UK.
- EEA countries and Switzerland have been added to the list of countries with reduced documentary evidence requirements.
- Applicants can apply for entry clearance up to six months before the start of their course (three months in-country, as currently).
- There is no limit on the time an individual can spend studying postgraduate courses in the UK (limited to eight years under Tier 4).
On 17 September 2020, HMRC published updates to its Employment Status Manual regarding the extended off-payroll working rules for the private sector. The extended rules will apply from 6 April 2021. Small entities are excluded from their scope (although IR35 will still apply to them). Key points to note are as follows:
- Guidance setting out how to determine whether a business is a small entity. Corporate entities are medium or large by reference to turnover, balance sheet and average number of employees. ESM10006 and ESM10007 explain how to calculate this average and that "deemed" employees are excluded, giving examples.
- There is further detail, with examples, of businesses' responsibility in relation to the issue and challenge of status determination statements (SDS); for example the responsibility of passing the SDS along the chain where there are offshore agencies, and the procedure where a challenge to a SDS leads to a different conclusion.
- International issues are also addressed. Standard tests apply to determine residence and the existence of permanent establishments (PE). The amendments confirm HMRC's view that where a non-UK client has a UK connection through a PE, the client is responsible for operating the rules, but HMRC will pursue the debt through the UK PE if tax is unpaid.
- Clarification as to when HMRC will use its powers to recover unpaid tax from other persons in the labour chain and in cases of insolvency, and further detail on how the recovery and appeals processes will operate, with examples. In cases of genuine business failure it appears HMRC would not seek to recover the unpaid tax from other persons in the chain.
The guidance is helpful given the confusion around how the extension of the rules would apply in practice. What would also be welcomed is guidance on how the small entity exclusion will apply.
The Ministry of Justice has published a White Paper entitled A Smarter Approach to Sentencing, in which is proposed a time reduction for the disclosure of certain spent convictions so that they no longer appear on checks through the Disclosure and Barring Scheme. The proposals are:
- Custodial sentences of up to 1 year would become spent after a further 12 months without reoffending (current rules are up to 4 years).
- Sentences of between 1 and 4 years would become spent after a further 4 years without reoffending (current rules are up to 7 years).
- Sentences of more than 4 years would become spent after 7years without reoffending (currently, such crimes are disclosable indefinitely).
The proposals would not affect convictions for serious sexual, violent and terrorist crimes or applications for sensitive roles such as teaching.
An Employment Tribunal has made what is thought to be the largest costs award made in a tribunal of £432,000 against an unsuccessful claimant. Following a redundancy process in which he lost his job, the claimant claimed for unfair dismissal, age discrimination, race discrimination, sex discrimination, victimisation, harassment, whistleblowing detriment and unlawful deduction from wages. The judgment had found that the Claimant had been duplicitous and had undermined the trust and confidence between employer and employee. The solicitor acting for the employer was our very own David Israel.
Personal injury claim struck out following tribunal strike out
In Akay v Newcastle University the High Court has upheld a County Court decision to strike out a personal injury claim as an abuse of process which was based on the same facts as an employment tribunal claim for discrimination which had also been struck out. The discrimination claim had been struck out in the tribunal because the claimant had failed to follow orders and directions, and his subsequent attempts to bring a claim for personal injury arising from the same facts was deemed to be an abuse of process.
Not all the claimant's claims had been stuck out; some had been settled by a settlement agreement which specifically allowed the claimant to bring a personal injury claim. However there was nothing in the settlement agreement to indicate that the defendant considered that doing so would not be an abuse of process, or that the defendant could not apply to strike out the claims.
Workers and holiday pay – again
In Mr S O'Eachtiarna and others v City Sprint (UK) Ltd and others the Employment Tribunal has found that, despite a change to contractual terms effected in November 2017, five cycle couriers who provided their services to CitySprint (UK) Ltd remained workers after that date.
This group of five lead cases emanated from a wider holiday pay claim. The tribunal previously found in January 2017 that a courier engaged by CitySprint on an earlier contract was a worker.
The tribunal did not accept the couriers' argument that, as CitySprint had conceded worker status prior to November 2017 and little had changed in practice, worker status should also attach to the subsequent period. That argument did not address the crucial aspect of the contract and the statutory definition of "worker". In most respects, the new terms reflected the situation on the ground and were clear and unambiguous. Even acknowledging the imbalance of power between the individuals and the courier company, the terms could not just be disregarded.
There was a contractual right of substitution, but it was theoretical only and had never been exercised. Following Pimlico Plumbers Ltd v Smith the tribunal looked at whether the key feature of the contract was personal performance, which it was. Neither was CitySprint a client or customer of a profession or undertaking. Although most of the couriers did other work, they did not provide their services as a cycle courier elsewhere or market themselves as such. Accordingly, even after November 2017, the couriers were workers when working "on the circuit".
As to their entitlement to holiday pay, the new terms provided that any fees paid would be deemed to include holiday pay at the minimum statutory rate. As no specific sum had been identified as holiday pay, nor any calculation mechanism given, this wording was not sufficiently transparent or comprehensive to be a valid rolled-up holiday pay clause. The matter was listed for a remedies hearing.
Lack of trust in capability relevant to re-employment
The case of Kelly v PGA European Tour required the EAT to consider whether a lack of trust and confidence in the employee’s capability was relevant to the decision to re-employ in an unfair dismissal claim or whether this just applied to conduct cases.
The EAT considered that it was not confined to conduct cases, and that it was relevant to whether or not it was appropriate for the tribunal to order that the employer re-employ the unfairly dismissed employee. In any event the EAT found that the tribunal was wrong to order re-engagement into a role in which an essential component was the ability to speak Mandarin; which the claimant could not.
The claimant had requested reinstatement or re-engagement as a remedy. Reinstatement was considered unsuitable by the tribunal but it considered re-engagement was feasible. The tribunal had to consider whether it was practicable under s.116(3) (b) but the majority rejected the employer’s claim that it had a lack of trust and confidence in the individual’s ability; and that was why reinstatement was not appropriate. The tribunal considered that, managed sensibly and reasonably, these concerns were not so great that they could not be overcome.
On appeal to the EAT, however, the decision was overturned on the basis that the employer’s concerns should have been properly taken into account, especially given the re-engagement concerned a role in which one of the essential requirements could not be met. As such the decision was overturned.
WhatsApp messages can be referred to in disciplinary proceedings
In BC and ors v Chief Constable of the Police Service of Scotland and ors the Inner House of the Court of Session has upheld the Outer House decision that messages, discovered during an internal criminal investigation into sexual offences on the WhatsApp group of an officer who was a suspect, could be used to separately bring misconduct proceedings against the officers who were part of the group. The officers had challenged the admissibility of the messages on the WhatsApp group on the basis that they were entitled to privacy. However the court held that they could have had no reasonable expectation of privacy, given that they were professionals who had a duty to act with honesty and integrity and report improper conduct, in circumstances where the messages themselves were highly inappropriate, offensive, racist, sexist, homophobic and mocking disability.