Employment Briefing – June 2017


Staff underpayments at John Lewis lead to revision of 2016-17 pre-tax profits
John Lewis has set aside £36m after its ‘pay averaging’ system (which smooths out monthly […]
John Lewis has set aside £36m after its ‘pay averaging’ system (which smooths out monthly pay for non-salaried staff over the year) led to wage underpayments for the last 6 years. The underpayments are potentially significant and the group has revised its 2016-17 pre-tax profits from £577m to £541m.
This case demonstrates that even the most established and reputable of employers can inadvertently fall foul of national minimum/living wage (NMW/NLW) regulations due to errors in payroll processes. It is likely that the errors went undetected for years. Employers cannot assume that there will always be ‘red flashing lights’ in these scenarios.
A spokesman for John Lewis said, “This arrangement was implemented to support partners with a steady and reliable monthly income, but we now believe this arrangement may not meet the strict timing requirements for calculating compliance with the national minimum wage regulations. Once we have completed our review, we will make any retrospective payments required to current and former partners affected.” Its Chairman confirmed that the group was now working with HMRC to ensure that its pay practices meet minimum wage and living wage rules.
This error has led to a significant reduction in this year’s profits and generated unwelcome adverse publicity for John Lewis.
This announcement comes at a time when the Government and HMRC are taking an increasingly interventionist approach. Although the John Lewis partners are employees, similar issues have been raised by the ‘worker status’ debate (highlighted by cases such as Uber, Citysprint and Pimlico Plumbers). This is because the courts have found that individuals who have been classified as self-employed, when they are in fact workers, will be entitled to receive the NMW/NLW and paid holidays (including any historical payments owed). Misclassification of workers can also lead unwelcome attention from HMRC.
Our employment team have extensive experience of advising in this area. If you would like advice on a current concern please contact David Smedley or Andrew Rayment.

Hermes to face worker status challenge and HMRC investigation
The latest high profile employment status tribunal claim is being brought by the GMB who […]
The latest high profile employment status tribunal claim is being brought by the GMB who are challenging the self-employed status of Hermes drivers.
The GMB is arguing that Hermes drivers (who are classed by the company as independent contractors) are workers and are therefore entitled to various employment rights including paid annual leave and holiday pay. This case follows on from the GMB’s success in the Uber case.
In the meantime, HMRC is also investigating the self-employed classification of Hermes drivers. This was triggered as a result of media reports suggesting that the company’s working practices did not reflect Hermes’ classification of its drivers as self-employed. It has been reported that HMRC has recently written to Hermes drivers asking them to provide evidence for the investigation, including written contracts and payslips and to attend one-hour interviews. “This will help us decide what your employment status is/was,” the HMRC letter says.
Earlier in May, the Work and Pensions Committee criticised the use of self-employment contracts by Hermes and other gig economy companies.
This case is yet further illustration that businesses using self-employed individuals need to carry out appropriate risk assessments to ensure that their workforce models are compliant and do not expose them to unacceptable levels of risk.
Our employment team have extensive experience of advising in this area. We have a handy checklist which helps us to consider the best approach to managing your workforce. If you would like a copy of this checklist or if you need any advice on a current concern please contact David Smedley or Andrew Rayment.

Employers begin to publish gender pay gap data on Government’s website
The Gender Pay Gap legislation came into force on 6 April 2017 and applies to […]
The Gender Pay Gap legislation came into force on 6 April 2017 and applies to private and voluntary sector employers with 250 or more employees. We are starting to see the first gender pay gap reports being published on the Government’s gender pay gap data website.
The reports published to date contain the mandatory information required by the Regulations including:
- percentage figures for the gender pay gap and gender bonus gap using both the mean and median average
- proportion of men and women within each pay quartile
- the name of the person who has signed off the employer’s gender pay gap report.
The website does not provide a facility to include any voluntary narrative with the report, however, employers can include a link to their gender pay gap report on their own website where a narrative can be displayed. This can be useful in explaining any anomalies or setting out action that the employer is taking to tackle any pay gaps.
If you would like any advice or support with preparing your gender pay gap report please contact David Smedley or Andrew Rayment.

Are employers moving away from zero-hours contracts?
As part of a growing trend amongst some larger employers, McDonald’s (one of the biggest […]
As part of a growing trend amongst some larger employers, McDonald’s (one of the biggest users of zero-hours contracts in the UK) is to offer 115,000 of its UK workers the option of moving from zero-hours on to contracts with a minimum number of weekly guaranteed hours.
McDonald’s has trialled the changes over 23 sites and has reported that around 8 out of 10 of workers in the trial chose to remain on the flexible, zero-hours contracts. Staff were offered contracts in line with the average hours per week they usually work including contracts of four, eight, 16, 30 or 35 hours a week. The company plans to roll the changes out nationwide later this year stating, “The vast majority of our employees are happy with their flexible contracts, but some have told us that more fixed hours would help them get better access to some financial products.”
Other employers, notably Sports Direct, Homebase and Wetherspoons, have adopted a similar approach. Sports Direct recently announced it would offer zero-hours employees the opportunity to switch to permanent contracts providing at least 12 guaranteed hours per week.
Employers currently utilising zero-hours workers will be following these developments with interest and this certainly an area for strategic HR thinking. For example, McDonald’s reported that employee satisfaction levels increased significantly after the trial was announced notwithstanding the fact that only 20% of workers in the trial opted to move onto the fixed hour contracts.
If you would like any advice on this issue please contact David Smedley or Andrew Rayment.

Co-working spaces set to rise
New research suggests that the growing phenomenon of co-working, where workers can rent desk space […]
New research suggests that the growing phenomenon of co-working, where workers can rent desk space and access communal office facilities is set to rise rapidly over the next 3 years growing globally by just under 1m in 2016 to nearly 4m in 2020.
Whilst co-working is a practice most commonly used by freelancers, the trend is reflected in the employment market by practices such as home-working, remote-working and flexible hours. Ever developing technology enables employers to become more innovative in their employment models and many find that the sense of empowerment it gives to employees is reflected in productivity and loyalty.
A word of warning – the sheer pace of change makes it doubly important to ensure that contracts of employment, staff handbooks, IT usage and security policies, data protection and encryption practices and policies remain relevant and fit for purpose. This is especially the case where employees are storing and processing confidential, personal or price-sensitive data off-site or on their own devices. A good question to ask is ‘what would happen and how exposed would the company be if employee x left their laptop on a train?’
If you would like any advice on this issue please contact David Smedley or Andrew Rayment.

Case Law Update – June 2017
Court of Appeal upholds the Central Arbitration Committee’s (CAC) decision that a small group of […]
Court of Appeal upholds the Central Arbitration Committee’s (CAC) decision that a small group of Lidl warehouse staff was an appropriate trade union bargaining unit – R v Central Arbitration Committee [2017] EWCA Civ 328
The Court of Appeal has held that a group of warehouse operatives constituting 1.2% of Lidl’s total UK workforce was an appropriate trade union bargaining unit in an appeal against a decision of the CAC. This case highlights that the question of whether a bargaining unit is ‘appropriate’ (under the Trade Union and Labour Relations (Consolidation) Act 1992 requires a broad view and, as such, the Courts are unlikely to be willing to interfere with CAC decisions on this point.
Facts
Lidl had unsuccessfully issued judicial review proceedings against the CAC’s decision that a small group of its warehouse staff was an ‘appropriate bargaining unit’ for the purposes of collective bargaining with the GMB trade union. The staff in question made up just 1.2% of Lidl’s UK workforce. The case reached the Court of Appeal where Lidl argued that the CAC had failed to properly apply the statutory test contained in paragraph 19B of Schedule A1 to the Trade Union and Labour Relations (Consolidation) Act 1992 (the Act). This test required it to take into account “the desirability of avoiding small fragmented bargaining units within an undertaking.” The policy reason for this test is that it is thought undesirable for an employer to have to negotiate in more than one forum in relation to groups of its workforce that are not essentially different.
Lidl argued that the CAC was wrong to hold that this test was not relevant in this case because there was only a single proposed bargaining unit and no evidence of any demands for additional bargaining units (and as such, fragmentation was not an issue).
The Court of Appeal held that the CAC had correctly applied the statutory test. The word “fragmented” in the Act suggested a whole entity that has been broken into parts. It held that paragraph 19B was intended to avoid fragmentation of collective bargaining so that employers would not have to negotiate with a number of different unions in respect of the same categories of staff. It was not intended to prevent a situation where a union is recognised in respect of a small number of employees and where the rest of the workforce remains non-unionised.
Lidl’s concern that only a very small proportion of staff at the same site were in the bargaining unit should instead have been considered under the more general requirement in the Act to take into account the need for the proposed bargaining unit to be compatible with effective management. The CAC had considered this point and was satisfied that it was.
Walker Morris comment
The first point to note from this case is that no trade union recognition request can be considered ‘too small’.
The second point to note is that we are seeing recognition requests being brought as a ‘back door’ method of establishing ‘worker’ status for individuals who are classified (the union would say wrongly) as self-employed. For example, courier company Deliveroo is currently facing such a request and the CAC are due to make a decision shortly. This is because, in its role as the ultimate arbiter of the recognition request, the CAC must determine whether the individuals in question are workers.
To this end, it is noteworthy that in the Lidl case, the Court of Appeal observed that the CAC is an expert body. This validation suggests that its decisions will be viewed by the appeal courts in that context so, unless there is a clear error of law, they are unlikely to be especially vulnerable to judicial challenge.
Union recognition is area where specialist advice is always recommended. If you would like advice please contact David Smedley or Andrew Rayment.
Multiple choice application test discriminated against applicant with Asperger syndrome – The Government Legal Service v Brookes UKEAT/0302/16
The Employment Appeal Tribunal (EAT) has held that a job applicant with Asperger syndrome suffered disability discrimination because she was required to undergo a multiple choice test to apply for a role.
Facts
Ms Brookes applied to join the Government Legal Service (GLS) as a trainee lawyer in July 2015. At the first stage of the recruitment process, she was required to sit a multiple choice test. Ms Brookes contacted the GLS and asked if an adjustment could be made to the format of the test because she is a person with Asperger syndrome. She asked if she could provide short narrative answers instead.
GLS refused her request but stated that extra time might be given for tests at a later stage, if she were able to pass the three entry level tests. Ms Brookes took the test at the end of July but failed it, scoring 12 out of 22 points – the pass mark was 14.
Ms Brookes brought claims in the employment tribunal for disability discrimination. She claimed that:
- GLS had indirectly discriminated against her by requiring her to sit a multiple choice test without justification
- GLS had failed to make reasonable adjustments to the test by allowing her to submit short written answers to the multiple choice test
- GLS’ discrimination against her arose as a consequence of her disability.
An employment tribunal upheld Ms Brookes’ complaints of disability discrimination on all three grounds. It accepted that GLS was pursuing the legitimate aim of testing the competency of applicants to make effective decisions but it held that the means by which it did this were not proportionate. A reasonable adjustment could have been made to the format of the test by allowing Ms Brookes to supply written answers as she had requested.
As well as ordering compensation, the employment tribunal recommended that GLS review its procedures for recruiting disabled candidates, with a view to providing greater flexibility in the psychometric testing regime.
GLS appealed to the EAT arguing that the employment tribunal had not placed enough emphasis on its need to assess a core competency, which it said was inextricably linked with the multiple choice method of testing for that competency. The EAT dismissed the appeal. It acknowledged that GLS needed to test the core competency of an applicant’s ability to make effective decisions, however, the tribunal had been entitled to reject the argument that the only way of doing this was by means of the test. Allowing Ms Brookes to provide short written answers might have presented logistical problems, extra expense and introduced the need for a subjective ‘human’ assessment of a test designed to be marked by a computer but these inconveniences did not outweigh the disadvantage to Ms Brookes in requiring her to undergo a multiple choice test.
Walker Morris comment
Multiple choice testing is fairly common in volume selection procedures and is a tried and tested method of sifting applications. It has the advantage of providing a level playing field (for most candidates) and avoiding subjective human bias. This important decision makes it clear, however, that binary selection systems can still lead to discrimination. If a candidate requests an adjustment to a selection process because of a disability, then it may well be a reasonable adjustment to do so. As in Ms Brookes’ case demonstrates, additional inconvenience and cost on their own might not be enough to justify a refusal of an adjustment.
If you would like any advice on the issues raised by this case please contact David Smedley or Andrew Rayment.
Tribunal awards £2 for breach of right to be accompanied – Gnahoua v Abellio London Ltd ET/2303661/2015
An employment tribunal has awarded nominal compensation of £2 for a breach of an employee’s right to be accompanied.
Facts
Abellio had a policy of refusing to permit two brothers (who were both union officials) to accompany employees at disciplinary or grievance meetings. This was because, in a previous employment tribunal claim against Abellio, the tribunal had awarded £10,000 costs against the brothers for vexatious conduct. The vexatious conduct involved falsifying the date on which a witness statement was prepared. Following that hearing and costs award, Abellio felt it reasonable to take the view that the brothers had attempted to obtain substantial compensation from it using dishonest means. It therefore barred them from acting as companions to other employees at disciplinary and grievance meetings.
Sometime later and in line with its policy, Abellio refused to permit Mr Gnahoua to be accompanied by one of the brothers at a meeting under its disciplinary procedure. This was a clear breach of Mr Gnahoua’s legal right to be accompanied because the brother was a union official. However, the tribunal found that Mr Gnahoua had not suffered any loss or detriment as a result of the breach. This was because Abellio had conducted Mr Gnahoua’s disciplinary hearing in a reasonable and thorough way, had given appropriate consideration to his representations and had taken into account his long service.
Walker Morris comment
The EAT has held previously that an employee has an unfettered right to be accompanied by their chosen companion provided that the companion comes within one of the permitted categories (an employed trade union official, a certified trade union official or a colleague). The Acas guidance on the right to accompaniment was updated as a result of this decision. However, the previous EAT decision also suggested that nominal compensation of £2 was an option for tribunals in cases where the employee had not suffered any loss or detriment as was found to be the case here.
This decision shows that employers who are prepared to take a pragmatic and commercial view on risk in such cases will not be ‘held hostage’ by the law as long as the employer acts reasonably throughout the process. Whilst there may be a technical breach of the legal requirement, the exposure to compensation may well be nominal. We would, nevertheless, always recommend taking professional advice and weighing up the risk in each case.