2016 – A year in employment law: What were the most important developments?

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As we speed towards the sparkling tinsel finishing line of Christmas 2016, EEF takes a quick look back. What were the most important employment law developments in 2016?

1.  "It's Brexit, stupid!”

Well yes! However, although 2016 will inevitably be most memorable for the UK electorate’s monumental decision on 23 June to end our 40 year membership of the European Union (EU), we stand by our prediction at the time that, from a pure employment law perspective, we are unlikely to feel any seismic changes as a result - well certainly not any time soon. (See - Brexit – a brave new world for employment law in the UK?).

However, other wider ‘Brexit factors’, such as the potential end/restriction of free movement of labour and possible further changes to the UK’s business immigration system, will continue to loom large for many HR practitioners as we wait for our post-Brexit political and trading relationships to take shape. (For further information on impending immigration changes in 2017, see - A wave of non-EU migration changes hit employers' shores).

Brexit will inevitably remain a back-drop to most UK legal developments, employment or otherwise, for some time to come.

2.  Introduction of the National Living Wage?

From 5 April 2016, it became compulsory to pay employees aged 25 or older a minimum of £7.20 per hour, as a result of the introduction of the National Living Wage - fulfilment of the then Chancellor, George Osborne’s 2015 Budget promise. For most of us, it makes sense to think of the NLW as an additional wage bracket to the National Minimum Wage (NMW). (The initial NLW rate of £7.20 marked an increase of 50p on the pre-existing NMW and was calculated as a percentage of median income, (55%)).

The rate of the NLW is subject to annual change, based on advice submitted to the government by the Low Pay Commission (LPC). The NLW is set to rise to £7.50 with effect from April 2017.  On introduction, the figure of £9 per hour was stated to be the target rate for the NLW by 2020. In fact, the 2020 target the government set the LPC was 60% of medium earnings. Earnings growth has not been as strong as was expected at the point of introduction - the ‘Brexit factor’ having intervened -  a trend that is expected to continue, so the rate of the NLW by 2020 may well turn out to be less than the original forecasted £9 per hour. (For details of changes to the ‘other’ NMW rates for 2017, see - Minimum wage increases announced).

3.  Penalties for unpaid Tribunal awards and settlement payments?

Since April financial penalties can be imposed on employers in relation to unpaid Employment Tribunal awards, or sums due under ACAS COT3 agreements, including accrued interest. The amount of such  penalty is 50% of the unpaid sum, subject to a maximum of £5,000.

4.  The Trade Union Act?

In May, the Trade Union Bill finally received royal assent to become the Trade Union Act 2016. The Bill was always contentious, described by the government as necessary to “protect the public from undemocratic industrial action”, and by Unite and other unions as “marking a dark day for workers in England”.  The Act provides for various changes in the balloting requirements and time limitations for workers to take part in ‘lawful’ industrial action. Significantly, the proposed repeal on the ban for employers to hire agency workers to cover for employees taking industrial action did not make it into the final version of the Act. Although there is not as yet a confirmed commencement date for the key provisions of the Act, it is likely to be around April 2017.

And it might not end there.  The Transport Secretary, Chris Grayling, recently announced that he will “have a careful look” at the possibility of further legislation to seek to prevent strikes on the raiways following the commuter chaos caused in London and surrounding regions as the result of industrial action by the RMT and Aslef union  on Southern Rail routes.

5.  Modern Slavery Act annual statements

The first annual slavery and human trafficking statements were published this year following the introduction of the Modern Slavery Act 2015 and the statutory requirement this placed on commercial organisations which have a turnover above £36 million to publish an annual  statement setting out their organisational commitment to combatting modern slavery.  The Act has received mixed reviews as to its effectiveness in seeking to tackle the problem. 

6.  Gender Pay Reporting?

The long awaited regulations setting out the specific reporting requirements were published and laid before Parliament at the beginning of December – allowing gender pay reporting to sneak into our 2016 list.

Employers with 250 or more employees will have to provide six different reports on gender pay. The first reports on gender pay gaps and the proportion of male and female employees in quartile pay bands will be based on a snap-shot date of 5 April 2017.  The first bonus gap calculations will be based on the period 6 April 2016 to 5 April 2017.  Reports must be published on the employer’s website and a government sponsored website within 12 months of the snapshot date, and then annually thereafter. (See - Final gender pay gap information regulations published).

If you are seeking further step by step guidance on how to comply with the new GPR requirements, you should book a place on our popular seminar – “Gender Pay Reporting: How to comply”.  See - here for further details and to book.

7.  Or was it more about the case law?

For some, it will be the decisions of the courts and tribunals that have the potential to make the biggest impact. Key cases in 2016, included:

Aslam and others v Uber BV and others (ET) - employment status in the ‘gig economy’.

One of the most headline-grabbing employment cases of 2016 was the successful bid by Uber drivers to be recognised as ‘workers’ and not self-employed, thus giving them access to employment rights such as the right to receive the NMW and be paid annual leave.

Although the manner of the Uber drivers working arrangements are not reflective of the majority of working practices in the manufacturing sector, and Uber was only a first instance employment tribunal decision, so not binding, the decision was noteworthy as the first reported case dealing with employment status in so-called the ‘gig economy’. This is an area that will inevitably develop its own litigation head of steam in the future.

The employment tribunal judgment was also interesting for the level of criticism aimed at Uber for its alleged attempts to ‘mask the true nature of their relationship’ with their drivers and the tribunal’s willingness to disregard the ‘employer’s’ own classification of its working arrangements.

It is not coincidental that 2016 also saw the Business, Energy and Industrial Strategy Committee launch a new enquiry into the changing nature of work – looking into the status and rights of agency workers, the self-employed and those working in the developing 'gig economy'. The Committee is due to report back in 2017.

G4S Cash Solutions (UK) Ltd v Powell (EAT) - disability discrimination - pay protection can be a reasonable adjustment.

In Powell, the EAT accepted that, while not an “everyday event”, there is no reason why pay protection cannot be a ‘reasonable adjustment’ as part of a package of measures to get an employee back to work. Of course the ‘reasonableness’ or otherwise of any potential adjustment must be assessed on a case by case basis.

Peninsula Business Services Ltd v Donaldson (EAT) - childcare vouchers during maternity leave.

This EAT decision in March found that employers who make deductions from an employee’s salary in return for childcare vouchers do not have to continue to provide these vouchers during maternity leave. The decision was in direct contradiction to express HM Revenue & Customs (HMRC) advice. 

Although the decision was widely covered, it is open to criticism for choosing to ‘gloss over’ the realities of the contractual arrangements involved in salary sacrifice arrangements. Also, its impact was reduced by the March Budget announcement that childcare voucher schemes will be closed to new entrants from April 2018, as part of a package of proposed changes to the operation of employer salary sacrifice schemes. Look out for further guidance on this in the New Year. (Also see - EAT rules that discontinuing childcare vouchers during maternity leave is not discriminatory).

Onu v Akwiwu and another (Supreme Court) - immigration status does not equate to nationality

In Onu, the Supreme Court refused to further extend the definition of race discrimination when it held that the mistreatment of two migrant workers on the basis of their immigration status did not amount to race discrimination.

This case might become more significant if as a result of ‘Brexit fall-out’, employers find themselves having to dismiss EU nationals because they lose the right to work in the UK.  

British Gas Trading Ltd v Lock and another (Court of Appeal) – confirmation that holiday pay must include commission

Of course, no annual employment law round-up would be complete without a holiday pay case! In Lock, the Court of Appeal followed ‘the holiday pay trend’ by accepting that holiday pay must include more than just base pay and that the Working Time Regulations 1998 can be interpreted so as to require results-based commission to be included in holiday pay. (See, Holiday pay – Lock v British Gas - Court of Appeal gives judgment).

So, what will be ‘big’ in 2017 (Brexit aside)?

‘It’s all about the Levy!'

If 2016 has taught us anything, it should be to ‘expect the unexpected’. However, we feel fairly confident in predicting that one of the key employment issues that will be  taxing most of us, (quite literally), in 2017 will be the apprenticeship levy – coming into effect on 5 April 2017.

EEF has been battling hard throughout 2016 to get our member’s views and concerns about the impact and operation of the levy across to government. We have made some significant wins, but there are still gaps to be filled and hurdles to be cleared. (See Apprenticeship Levy – FAQs).

Look out for our latest Levy webinar which we will be running in the New Year or speak to your regional adviser about how we can help you understand your levy liability.  

And remember, whatever 2017 brings - EEF will be on hand for advice and assistance.  In the interim, we’d like to take the opportunity to wish you all a very Happy Christmas.  

Author

Principal Legal Adviser

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