CFR December 2016 Employment Update

December 21, 2016

Update – The Employment Act 2016

The Employment Act (Northern Ireland) 2016 contains a number of provisions resulting from an extensive review of employment law carried out by the Department of Employment and Learning (DELNI).  The Act received Royal Assent on 22 April 2016. This is the primary legislation that gives the legislative backing for Regulations and Orders that will make it work in practice.  The Act brings some alignment with employment law practices in Great Britain. A number of key changes have been introduced and particular areas of interest include:

1. Labour Relations Agency Early Conciliation

This is one of the principal areas of the Bill. The act amends the Industrial Tribunals (NI) Order 1996 and the Fair Employment and Treatment (NI) Order 1998 and introduces pre-claim conciliation to require potential claimants to lodge specified details with the Labour Relations Agency prior to issuing a tribunal claim at an industrial tribunal or Fair Employment Tribunal. The intention behind this change is obviously to encourage potential Claimants to resolve their disputes without the need for the issue being taken through the judicial route. This has been in force in GB for some time and has had a high success rate.

2. Protected Disclosures

The Employment Rights (Northern Ireland) Order 1996 (ERO) is amended to say that a worker will only be provided with protection against unfair dismissal and detriment if a whistleblowing disclosure is made that is in the public interest (in their reasonable belief). There is no effective commencement date for this provision. This mirrors the public interest test that was inserted into the Employment Rights Act 1996 in Great Britain in 2013.

3. Zero-Hour Contracts

Given the controversy over the misuse of zero-hours contracts, Section 18 of the 2016 Act allows for the Department for Employment and Learning (DEL) “to prevent abuses associated with the use of zero-hours contracts.” These Regulations have not yet been published. We will have to wait to see if the preventative measures are aligned to the ban on exclusivity clauses that applies in Great Britain.

4. Gender Pay Gap Report

Section 19 introduces a ‘Gender pay gap information’ reporting obligation on employers, similar to the provisions that already exist in Great Britain. There will be Regulations published by 30 June 2017, which will stipulate that employers must publish information which will show whether there are gender pay gap differences in their workforce. Where gender pay differences are identified it requires employers to publish an action plan and provide a copy of it to employees and any recognised trade union.  The aim is to reduce discrimination and inequality in the workplace.

5. Whistleblowing Legislation

A loophole currently exists, where someone can avail of whistleblowing protection where it relates to their own personal contract of employment. The amendment will now mean that if someone blows the whistle it must be in the public interest in order to be protected.

6. Unfair Dismissal Qualifying Periods

The Employment Rights Order 1996 states, an employee has the right not to be unfairly dismissed but this does not apply to continuous employment that is less than one year. This qualifying period was to be increased from one year to two years, as is the case in Great Britain however this was removed during the Consideration Stages. The qualifying period remains at one year.

7. Employment Law Payments & Awards

The Act provides for more accurate annual rounding to the maximum unfair dismissal award and other employment rights – related payments. The Employment Act amends the effective date to 6 April each year and makes changes to the way the values are rounded when they are reviewed. The Act also makes rounding changes so that all awards and limits are rounded up or down to the nearest whole pound and mirrors the change that were made in Great Britain effective 06 April 2014. Other measures include provision for careers guidance to be provided to appropriate groups; provides for arrangements to be made for apprenticeships and traineeships, a new professional and technical training offer for 16- to 24 years olds; and includes public interest disclosure protections for student nurses and student midwives.

Update – The Apprenticeship Levy

The Government is seeking to pass the cost of vocational training on to employers in order to save £3billion per annum. One of the ways in which it intends to do this is by introducing an Apprenticeship Levy (“the Levy”) on all employers (in both the private and the public sectors) in the United Kingdom. The hope is that this will increase the quantity and quality of apprenticeships. The legislative provisions for the Levy are contained in Part 6 of the Finance Act 2016 and it will have effect on and after 6 April 2017.

Who has to pay and how much is it?

The Levy will have to be paid by all employers in the United Kingdom with a pay bill of more than £3 million. This means that most small and medium sized employers in NI will not need to pay it.

The rate for the Levy will be 0.5% of the employer’s pay bill and will be collected via the Pay as You Earn (PAYE) scheme. All employers will receive a levy allowance of £15,000 and this is why only employers with a pay bill of more than £3 million will need to pay (as £15,000 is 0.5% of £3 million).

What will be done with the money raised?

The collection of the levy will be administered by HMRC and is a matter reserved to the UK Government. However, in terms of what will be done with the money raised, separate arrangements will exist in England, Wales, Scotland and Northern Ireland.

HM Treasury allocates funding to the Northern Ireland Executive through the Block Grant and it is for the Executive to decide how to spend the money received. It is not certain that all of it will be allocated to vocational training.

Since the recent dissolution of the Department for Employment and Learning responsibility for this area has transferred to the Department for the Economy (“the Department”). The previous Minister for Employment and Learning had favoured a ring fencing of the funds raised for skills development programmes, including apprenticeships.

However, The Department has recently stated that the Levy will give the Executive a Barnett consequential gain of £76m. However it has claimed that, the cessation of funding for existing apprenticeships in England and the burden which the Levy will impose on the public sector means that there is not anticipated to be an increase to the Executive’s budget. The Department will be launching a short and focused consultation to garner the opinions of those impacted. Therefore, although nothing has been finalised, it may be the case that there is no benefit at all for employers in Northern Ireland.

Comment

With the introduction of the National Living Wage it is possible that apprenticeships will become more and more popular as means of providing cheap labour. Although most private sector employers in Northern Ireland will not have to pay the Levy this will be a consideration for large employers and, in particular, the public sector, which accounts for a higher proportion of employment in Northern Ireland than that of other regions of the United Kingdom.

The fact that multiple schemes will apply in different parts of the United Kingdom will mean that employers who are based in multiple regions of the United Kingdom will need to understand the regional differences.

Employers who already pay into an existing industry levy scheme (such as CITB NI) will still be required to pay the Levy if they reach the £3 million threshold. This is causing great concern within the construction industry and consultations on the impact of the Levy are currently being undertaken to determine whether or not changes will be required.

Overall, it is impossible to say how exactly employers in Northern Ireland will be affected by the Levy. However, this is not a matter which the Northern Ireland Executive will be able to opt out of. Ultimately employers in Northern Ireland who meet the £3 million threshold will have to pay the Levy. What benefits exactly they will be able to obtain for this, if any, remains to be seen.

Uber Loses Landmark Tribunal Case

Introduction

The highly anticipated employment tribunal ruling in Aslam and Farrar v Uber has stated that the Uber drivers who took the case are workers and not self-employed. This ruling has potentially massive repercussions as Uber could now face claims from all of its 40,000 drivers in the UK, who are currently not entitled to holiday pay, pensions or other workers’ rights. Uber has already said that it will appeal against the ruling. The result of the appeal will be of great interest for the many employers using a similar business model which has come to be known as the “gig economy”. The gig economy model has become increasingly prevalent as businesses can use apps to match customers with workers; the firms (arguably) do not employ the workers but take commission from their earnings.

Position of the Parties

In this case Uber’s argument was that it is a technology firm, not a transport business and that its drivers are independent, self-employed contractors who can choose where and when they work. Conversely the drivers claimed that this was not an accurate reflection of reality. Mr Farrar told the tribunal how he was put under “tremendous pressure” to work long hours and accept jobs, adding that there were “repercussions” from the company if he cancelled a pickup. He said some months he earned as little as £5 an hour – far below the £7.20 that employers are obliged to pay workers aged over 25.

The  Law

In deciding whether an individual is an employee, a worker or self employed there are a number of tests which have been developed in case law over the years. These include:

  • Control- the less control the individual has over when, where and how they work the more likely it is that they are an employee or worker rather than self employed;
  • Integration- the more benefits (for example pension, company car etc.) and burdens (for example liability to be subjected to disciplinary procedures) a person has the more integrated they are into the business and therefore the more likely it is that they are employees or workers;
  • Mutuality of Obligations- If there is an express or implied obligation on the employer to give the work and the individual to do the work then it is likely that the individual is an employee or a worker. If the individual is free to choose whether or not he or she does the work then it is more likely that they are self employed; and
  • Economic reality- If the individual is simply paid a salary and (subject to disciplinary procedures) free from the consequences of the work then it is likely that the individual is an employee or a worker. Conversely if the individual is responsible for losses and liable to correct unsatisfactory work at his or her own expense it is more likely that they are self employed.

The tribunal in this case had to consider all of these points to decide what employment status the Uber drivers had. This case is of key importance because in the 21st century “gig economy” there are more and more people working in conditions similar to the claimants in this case.

Decision and Comment

The tribunal was scathing in its assessment of Uber’s arguments, saying: “It is, in our opinion, unreal to deny that Uber is in business as a supplier of transportation services“. The judges accused the firm of “resorting in its documentation to fictions, twisted language and even brand new terminology”, quoting Shakespeare to suggest that the group’s UK boss was protesting too much about the firm’s position. It was said that “the notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculousDrivers do not and cannot negotiate with passengers … They are offered and accept trips strictly on Uber’s terms”.

Lawyer Nigel Mackay, representing the drivers said, “This is a ground-breaking decision. It will impact not just on the thousands of Uber drivers working in this country, but on all workers in the so-called gig economy whose employers wrongly classify them as self-employed and deny them the rights to which they are entitled”.

The GMB union, which took up the case for the drivers said: “Uber drivers and thousands of others caught in the bogus self-employment trap will now enjoy the same rights as employees. This outcome will be good for passengers, too. Properly rewarded drivers are the same side of the coin as drivers who are properly licensed and driving well-maintained and insured vehicles”.

However, the regional general manager of Uber in the UK has claimed that many of the firm’s drivers did not want to be classified as workers: “Tens of thousands of people in London drive with Uber precisely because they want to be self-employed and their own boss… The overwhelming majority of drivers who use the Uber app want to keep the freedom and flexibility of being able to drive when and where they want”.

This decision comes amid mounting concern within government about the growing trend towards self-employed workforce. Other firms with large self-employed workforces could now face scrutiny of their working practices and the UK’s biggest union, Unite, announced it was setting up a new unit to pursue cases of bogus self-employment. Research by Citizens Advice has suggested that as many as 460,000 people could be falsely classified as self-employed, costing up to £314m a year in lost tax and employer national insurance contributions. The government has recently announced a six-month review of modern working practices and HMRC is setting up a new unit, the Employment Status and Intermediaries Team, to investigate firms.

The ruling is not the end of the process for Uber. The firm will take the case to the Employment Appeal Tribunal, and following its decision there could be further hearings in the Court of Appeal and then the Supreme Court. Any payments due to drivers will not be calculated until that process is over. This is one of the most important employment law cases in recent years and the appeal will be followed with great interest by legal commentators, politicians and businesses alike.

Can Advice from Employment Consultants be Privileged?

The English Employment Appeal Tribunal (“EAT”) case of Howes v Hinckley & Bosworth Borough Council shows the difficult legal issues which can arise in an employment context when seeking to withhold disclosure of employment legal advice from a source other than a firm of solicitors. This article will examine the role which privilege plays in this area and why it is important.

Rationale for privilege

The two main types of privilege are legal advice privilege and litigation privilege. The first occurs in relation to a lawyer/client communication for the purposes of giving or receiving legal advice. The second occurs in relation to a document created for the dominant purpose of litigation which is in reasonable prospect. The effect is that documents covered by either or both of these types of privilege cannot be disclosed in an employment tribunal case. The justification for these types of privilege is clear. If legal advice privilege did not exist, clients would not be free to speak to their lawyers openly for fear of anything they say being heard as evidence in the Tribunal. If documents made for the purpose of litigation were disclosable then proper investigation of issues before the hearing would be discouraged and the possibility of reaching settlement at an early stage of proceedings would be adversely affected.

Facts of the case

In this case the respondent took advice on a statutory employment grievance from an employment consultant. In this case the adviser happened to be a qualified solicitor but it was unclear whether or not when giving the advice he was giving it as a lawyer or as a human resources adviser. It was also unclear whether or not litigation was in reasonable contemplation at this stage or not. The respondent successfully argued at first instance that both legal advice and litigation privilege applied. However, the appellant took the case to EAT and claimed that:

1. the adviser did not give his advice as a lawyer; and

2. the dominant purpose of the communications was to resolve a grievance not for litigation

Decision of EAT

Luckily for the respondent, EAT found that the documents were not relevant to the case anyway. The effect of this decision is that they were automatically not disclosable and privilege did not need to be invoked. However, EAT went on to give guidance on issues of privilege in this area nevertheless.

It was said that “the fact that someone is a solicitor with a practice certificate does not mean that any advice given is automatically protected by a legal advice privilege. It must be provided in the context of that professional relationship”. Further the seminal Three Rivers case was quoted saying that what matters is “whether the lawyers are being asked qua lawyers to provide the advice”. On the facts EAT found that there was no evidence that the adviser was not giving his advice as a lawyer and that on balance it would also have been covered by litigation privilege.

Commentary

This case shows the danger of seeking legal advice from a source other than a solicitor firm or a full-time in-house lawyer. In this case the respondent was lucky that:

1. the documents were considered to be not relevant; and

2. the adviser happened to be a qualified lawyer with a valid practicing certificate

If the facts of this case were slightly different the outcome could have been prejudicial documents needlessly being disclosed to EAT and harming the respondent’s case. The issue of privilege can be a complex one but when one is seeking advice on an employment issue one should always carefully consider whether or not this is legal advice that one is seeking. If so it is strongly advisable to contact a solicitor and formally seek legal advice so that one does not needlessly weaken one’s position if the matter ends up before the Employment Tribunal.

This article has been produced for general information purposes and further advice should be sought from a professional advisor. Please contact our Employment Team at Cleaver Fulton Rankin for further advice or information.