Employment law is a fast changing area and keeping on top of developments and remembering the key points to take away is not a straight-forward task for any employer or HR professional. Here is a summary of some of the important developments from 2018.
1. Gender pay gap reporting
In April 2017 legislation came into force requiring all employers with 250 employees or more to publish their gender pay gap data annually. The deadline for publication was 4 April 2018 (30 March 2018 for public sector employers).
Our previous article looked at the five top trends that emerged in the first year of reporting and highlighted that employers need to think carefully about the narratives which accompany their data, particularly if they happen to produce a worse set of results in 2019, as this may be subject to scrutiny from staff and potentially, for household names, the media.
The focus on gender pay reporting is also set to increase in the future. In August 2018, the House of Commons' Business, Energy and Industrial Strategy (BEIS) Committee published a report on gender pay gap reporting which made a number of recommendations for strengthening gender pay gap reporting and for closing the gap, including:
Extending reporting obligations to companies with 50 or more employees from 2020
- Additional requirement for an explanation for pay disparity accompanied by an action plan (currently optional, not mandatory)
- Inclusion of partner remuneration in the figures
- Revised guidance for dealing with ambiguous areas, for example on how bonus figures should be calculated
- Giving the Equalities and Human Rights Commission specific enforcement powers to levy fines for non-compliance
Watch this space for developments. For further guidance on gender pay gap reporting generally or how to prepare for reporting in 2019, please contact Partner Karen Bates.
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 closes in January 2019 and we will update you on this when the results are published.
The biggest change in European data protection laws in 20 years came into force this year. The General Data Protection Regulation (GDPR) took effect on 25 May 2018 and replaced the previous laws which were widely regarded as unfit for purpose due to rapid changes in technology and a change in consumer focus.
Not only are employers required to justify their use of personal data but they also need to be transparent with regard to their use of data by informing all staff exactly how their data will be processed and what rights they have regarding their data, in accordance with the information notice provisions of GDPR. Employers also need to ensure that as part of their data protection policy they have a set of rules/standards which clearly explain to individuals what they should be doing from a data protection perspective. This will need to include (amongst other things) information about data security, retention, dealing with information requests, identifying breaches and subsequent escalation.
One of the most important changes for businesses to note is that the maximum fines have substantially increased – they are now up to the greater of €20 million or 4% of global annual turnover. This provides a strong incentive for businesses to ensure they comply.
3. Data Protection and an Employer's Vicarious Liability
The liability for data breaches was also a key feature of the year. In a particularly high profile case which garnered much media attention in October, the Court of Appeal (CoA) confirmed that Morrisons Supermarket PLC was vicariously liable for a deliberate, and criminal, data breach by an employee. The employee, an internal IT auditor with a grudge against his employer, purposefully disclosed information relating to 100,000 Morrisons' employees, including their contact details, gender, date of birth, national insurance number, bank account and salary information.
Over 5,000 affected employees submitted that Morrisons was vicariously liable for the employee's actions and claimed for losses under the Data Protection Act 1998, the misuse of private information, and an equitable claim for breach of confidence. The CoA's decision that Morrisons was vicarious liable was seemingly largely influenced by the view that employers have the means to compensate victims and will have insured against such liabilities.
For our analysis of the case, and practical guidance on how employers can protect themselves from data risks, see our article here.
4. Taxation of Termination Payments
From 6 April 2018, taxation rules governing termination payments changed. The reforms introduced a number of changes, the most striking of which is that all payments in lieu of notice (PILONs), rather than just contractual PILONs, are taxable earnings. As a result, all employees will now pay tax and Class 1 National Insurance Contributions on the amount of basic pay that they would have received had they worked their notice in full. The application of tax and NICs to these payments is no longer dependent on the drafting of an individual's employment contract, with HMRC looking to prevent employers from structuring termination payments in such a way as to minimise the tax and NICs due on them.
All payments made to employees whose termination date is on or after 6 April 2018 are subject to the new rules.
For more information please see our FAQs on Taxing Exit Payments and our example PENP calculation.
5. Gig economy
The 'gig economy' (a staffing model under which businesses engage self-employed contractors on demand for short-term assignments) has remained in the spotlight this year, with the publication Government's response to the Taylor Review and several high profile cases.
- Taylor Review response – In February 2018 the Government published its response to the Taylor Review of Modern Working Practices, setting out proposals to increase workers' rights and the action they intend to take against employers who breach their workers' rights. As part of its response, the Government launched four consultations to examine the following in greater depth: employment status; agency workers; enforcement of employment rights and measures to increase transparency in the UK labour market. The consultations have now all closed and we await further reports on the same.
- Pimlico Plumbers Ltd v Smith - In June 2018 the Supreme Court delivered judgment in this case on worker status, where a plumber was labelled as an independent contractor in his employment contract. The Supreme Court upheld the judgments of the Employment Tribunal (ET), Employment Appeal Tribunal (EAT) and Court of Appeal (CoA) that a plumber was a "worker" for the purposes of the Employment Rights Act 1996 and the Working Time Regulations 1998, as well as being an employee within the extended meaning of that term within the Equality Act 2010.
- Uber BV and ors v Aslam and ors – In October 2018 the CoA heard Uber's appeal against the EAT decision that Uber are 'workers' rather than self-employed. The CoA has upheld the decision of the EAT. For our article on the EAT decision please see here. Uber has been given permission to appeal to the Supreme Court.
- Addison Lee Ltd v Lange and Others – In November 2018 the EAT confirmed that Addison Lee drivers were workers under the Employment Rights Act 1996, the Working Time Regulations 1998 and the National Minimum Wage Act 1998. For our full article, please see here.
6. Senior Management and Certification Regime
During 2018 the Government consulted on and began implementing its proposed extension of the Senior Managers and Certification Regime ("SM&CR") to all financial services firms, replacing the current Approved Persons Regime. 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 the Regime 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.
The position on whether a deal will be reached with the EU on Brexit varies considerably and seems to change on an hourly basis. As at the time of publication the Cabinet is 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. We will keep you up-to-date with developments on Brexit in future bulletins.
At the time of writing the Government has just published its White Paper on post-Brexit immigration For more information see here. We will report on developments in future bulletins.
8. The Parental Bereavement (Leave and Pay) Act received Royal Assent
The Parental Bereavement (Leave and Pay) Bill received Royal Assent on 13 September 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.
9. Public Sector Exit Payments
The Public Sector Exit Payment Regulations and Repayment of Public Sector Exit Payments Regulations were expected to come into force in 2016. The former provides for the capping of payments made to public sector employees upon termination for employment. The latter provides for the repayment of termination payments where an employee returns to public sector employment shortly after receiving a termination payment. However, a firm commencement date for these regulations however has yet to be announced.
A Private Member's Bill designed to limit exit payments made by public sector organisations to employees was presented to Parliament on 5 September 2017. There was no debate following its first reading. The Bill is expected to have its second reading in the House of Commons on the 25 January 2019.
10. Companies Miscellaneous Reporting Regulations
These regulations come into force on 1 January 2019 and apply in relation to the financial years of listed companies and large private companies beginning on or after 1 January 2019. From the 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. For further information see our full article here.
There are a number of key 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 next year.