Key employment law developments to look out for in 2019

There is likely to be a lot going on in employment law over the next year, with some headline hitting issues, along with some developments that may fall under the radar.

1. Brexit

The position on whether a deal will be reached with the EU on Brexit varies considerably and seems to change on an hourly basis. It is difficult to predict on what terms the UK will leave the EU as the current deal has been rejected by parliament, and also whether this will take place on 29 March 2019. The following summary reflects the position at the time of writing. On 29 January 2019 Parliament voted in favour of renegotiating the current deal to change the Northern Irish backstop, and also voted for a (non-binding) amendment rejecting the UK leaving the EU without a deal. However, a proposal to delay Brexit if a deal is not agreed by 29 March 2019 was defeated. Theresa May will therefore resume talks with the EU, but members of the EU have already stated that they do not intend to reopen negotiations, and so it is likely to be difficult to find a way through.  A further vote will take place on 14 February once any amendments are agreed.

Theresa May has also scrapped the £65 fee EU citizens were due to pay to secure the right to continue living in the UK after Brexit (see our article here) and intends to seek a unilateral exit mechanism from the EU on the controversial Northern Irish backstop.

The Cabinet is also discussing ramping up preparations for a "no-deal" Brexit amid increasing uncertainty that Theresa May will be able to secure a parliamentary majority for her proposed deal.

The European Commission has released details of the measures it is taking to limit disruption in areas such as finance and transport should there be a "no-deal" Brexit. The Commission has stated that visas will not be required for UK citizens to spend short periods in EU countries but a residence permit or a long-stay visa will be required for stays of over 90 days. More information can be found here.

The Government has also published its White Paper on post-Brexit immigration. For more information see here. We will provide further updates on developments in this continually changing area in future bulletins.

2. Gender pay gap reporting

The focus on gender pay reporting is set to increase in the future. On 17 January 2019, the Government published its response to the House of Commons' Business, Energy and Industrial Strategy (BEIS) Committee's report on gender pay gap reporting, which made recommendations aimed at strengthening gender pay gap reporting and closing the gap. The Government will not be making any immediate changes to the gender pay gap reporting regime, however it has taken on board the comments and indicates that some recommendations will be revisited in the future. Points to note include:

  • The Government will not be extending reporting obligations to companies with 50 or more employees from 2020 (as recommended), but will encourage smaller companies to look at their gender pay gaps.
  • It will not be including partner remuneration as suggested, or revising the guidance in order to deal with ambiguous areas (for example calculation of bonuses).
  • The Government is satisfied with the Equalities and Human Rights Commission (EHRC) strategy on enforcement and will not be giving the EHRC specific enforcement powers to levy fines for non-compliance.

As a reminder, legislation came into force in April 2017 requiring all employers with 250 employees or more to publish their gender pay gap data annually. The deadline for publication of the first reports was 4 April 2018 (30 March 2018 for public sector employers).

In December 2018, the Equalities and Human Rights Commission (EHRC) published a report urging companies to include narrative reports as this will provide employers with the opportunity to explain reasons for gaps, and set out what they plan to do to eliminate them.

We will report throughout the year on any further developments but for guidance on gender pay gap reporting generally or how to prepare for reporting in 2019, please contact Partner Karen Bates or your usual Foot Anstey contact.

Ethnic Pay Gap

The Government is also now consulting on whether to introduce mandatory ethnic pay gap reporting for employers and whether this will address disparities between the pay and career prospects of minorities. The Government's Race Disparity Audit last year showed widely varying outcomes in areas including education, employment, health and criminal justice between Britain's white and ethnic minority populations. In October BEIS launched a consultation to seek views on this matter. The consultation closed on 11 January 2019. A further update will be provided once the results are published.

3. Sexual harassment in the workplace

Following the #metoo movement, the use of Non-Disclosure Agreements (NDAs) in sexual harassment cases has been an employment law hot topic. A report is expected following an inquiry looking at the use of NDAs in cases involving any form of harassment and discrimination (wider than just sexual harassment). This closed in November 2018. The Law Society has also published a practice note on the use of NDAs and confidentiality clauses in an employment context.

Following a Women and Equalities Select Committee's report on sexual harassment in the workplace, the Government also plans to introduce a statutory code of practice on sexual harassment, to help employers understand and demonstrate that they have taken steps to prevent harassment. It will also be consulting on other recommendations from the report, including a mandatory duty to protect workers from sexual harassment, improving laws in relation to third-party harassment, protecting interns and volunteers, extending tribunal time limits, and the better regulation of non-disclosure agreements.

Our article providing practical tips for businesses on dealing with these issues can be found here.

4. Employment status and the gig economy

No doubt employment status and the 'gig economy' (a staffing model under which businesses engage self-employed contractors on demand for short-term assignments) will remain in the spotlight in 2019. Key developments in this area include:

The Government's Good Work Plan – In December 2018, the Government published its further response to Matthew Taylor's Review of Modern Working Practices. The Good Work Plan is a package of changes to employment law to upgrade workers' rights, which take forward 51 of the 53 recommendations from the Taylor Review. A number of the changes will be coming into force from 6 April 2020 whilst others have no set timetable. Further draft legislation implementing the proposals is expected during 2019, although the changes are unlikely to come into force until 2020 and beyond.

Employment status – As part of the Good Work Plan, the Government committed to improving the clarity of the employment status tests, in order that individuals are not misclassified as self-employed/workers. We are still waiting for the results of a consultation on this area to be published, and it is likely that there will be further developments in 2019.

Uber BV and ors v Aslam and ors – In December 2018 the Court of Appeal upheld the EAT's finding that Uber's drivers are 'workers' rather than self-employed. Uber has been given permission to appeal to the Supreme Court.

5. IR35

Changes to the way self-employment status is taxed will be extended from the public sector to medium and large private companies, from 2020.

In its Autumn Budget, the Government announced its intention for businesses in the private sector to become responsible for assessing an individual's employment status, where that individual engages with the business through their own company. Currently, when an individual provides services to a client in the private sector through an intermediary, such as a personal service company, income tax and national insurance liabilities can fall on the intermediary (not the client). The rules, which are known as 'IR35', apply if the individual would have been regarded as an employee of the client, had the individual not contracted through the intermediary.

The proposed rule changes put the obligation to assess whether the IR35 rules apply onto the client to whom the individual delivers their services. Where it is determined that the rules apply, the business, agency or third party paying the worker's company will need to deduct income tax and employee National Insurance Contributions (NICs) and pay employer NICs.

This proposed change will bring the private sector in line with the public sector, which became subject to similar rules from April 2017.

6. Senior Management and Certification Regime

During 2018, the extension of the Senior Managers and Certification Regime ("SM&CR") (which replaces the current Approved Persons Regime) to all financial services firms began. The ultimate aim of the SM&CR is to make individuals more accountable for their conduct and competence in order to reduce consumer harm and strengthen market integrity. The extension of SM&CR took effect for insurers on 10 December 2018 and is due to apply to all FCA solo-regulated firms from 9 December 2019.

The focus of the new regime is on increasing personal accountability at all levels of regulated firms (with particular emphasis on Senior Managers) and, in doing this, there will be an increased focus on a firm's governance and culture, which will impact on assessing fitness and propriety under the new regime. In October 2018 the FCA announced that when assessing whether a person is "fit and proper", they will consider not only the individual's financial conduct but also their non-financial behaviour, including sexual harassment which falls within its regulatory scope as misconduct. See our article for more information.

7. The Parental Bereavement (Leave and Pay) Act

The Parental Bereavement (Leave and Pay) Bill received Royal Assent in 2018, becoming the Parental Bereavement (Leave and Pay) Act 2018. The new Act is the first law of its kind in the UK and is expected to come into force in 2020.

The Act will give all employed parents a statutory right to two weeks' leave if they lose a child under 18 or suffer a stillbirth from 24 weeks of pregnancy. Statutory bereavement pay can also be claimed for this period, subject to employees meeting the eligibility criteria. This is a significant change to the current law under which employed parents have a day-one right to take a reasonable amount of unpaid work.

Further regulations are anticipated to flesh out the detail of the provisions under the Act, such as how parental leave must be taken. In the interim, it is important to be aware of the proposed changes to begin preparations for 2020.

8. Corporate Governance

The Companies Miscellaneous Reporting Regulations, which came into force on 1 January 2019, increase the reporting requirements for listed companies and large private companies and apply in relation to the financial years beginning on or after 1 January 2019. From an employment perspective it is notable that the regulations include mandatory reporting on employee engagement, and publication of the ratio between CEO and average staff pay. Such companies will therefore need to make plans this year to collate the information in order to be able to publish the reports in 2020. For further information or guidance in this area see our full article here, or contact Kevin Lau, Associate in our employment team, Tim Young, Legal Director in our corporate team or your usual Foot Anstey contact.

9. National minimum wage (NMW) consultation

The Government launched a consultation at the end of 2018 on salaried hours work (one of the four types of work in the NMW Regulations) and salary sacrifice schemes, looking at whether these aspects of the NMW legislation are inadvertently penalising employers. Some reported issues include that the rules on salaried hours work are complex and restrictive, and employers are not offering salary sacrifice schemes to low-paid workers to avoid non-compliance with the NMW. The consultation closes on 1 March 2019 and we will report on any outcomes later in the year.

10. Tribunal Fees

Near the end of 2018, the Ministry of Justice indicated that tribunal fees may be re-introduced in a way that 'strikes an appropriate balance between funding the court system and ensuring access to justice'. No timescale has been given, however it was suggested that a new fee regime was in development, so watch this space.

11. Legal privilege

There have been a number of recent cases in the area of legal privilege, including X v Y, where the EAT held that an email from a lawyer was not covered by legal advice privilege because there was a strong prima facie case of an iniquity. For further guidance in this area please see our article here or contact Rebecca Harries-Williams in our dispute resolution team, or your usual Foot Anstey contact.

12. Public Sector Exit Payments

The Public Sector Exit Payment Regulations (which provide for the capping of payments made to public sector employees upon termination of employment) and the Repayment of Public Sector Exit Payments Regulations (which provide for the repayment of termination payments where an employee returns to public sector employment shortly after receiving a termination payment) were expected to come into force in 2016. However, a firm commencement date for these regulations is still awaited.

We will report on any further updates as they are published.

There are a number of further developments in employment law which will be implemented in 2019. For details see our Changes on the Horizon table and look out for our monthly employment bulletins over the next year.