Employment Briefing – November 2015
Print newsletterOur recent Employment Briefing covers all the main employment-related legislative and case law developments since our last briefing.

Preparing for gender pay reporting
Under current proposals, private and voluntary sector employers with over 250 employees will be required […]
Under current proposals, private and voluntary sector employers with over 250 employees will be required to publish details of their gender pay gap on their websites. This may come into force as early as April next year and it is likely that the requirement will be rolled out to smaller employers over time as the government aims to close the gender pay gap within ‘a generation’. Gender is undoubtedly on the agenda and we look at what employers can be doing to prepare.
Despite the fact that equal pay law has existed in the UK since 1970, there is undisputed evidence of a gender pay gap in the UK. The gap is relatively narrow in the 18-39 year age group but, according to a recent survey, widens to 13.6% for employees aged 40-49 and 17.6% for employees aged 50-59. The gap also increases depending on seniority and the difference in pay between high-earning men and women is up to 20%. The government has stated its intention to eradicate this pay gap ‘within a generation’ and gender pay reporting is the first of many likely measures aimed at achieving this.
What will employers have to report?
The proposal (which has formed the basis of a recent public consultation) is that employers with over 250 staff will have to report one overall gender pay gap figure showing the difference between average earnings between male and female employees. Some organisations may wish to provide further information to provide more context. For example, the figures might be broken down by reference to full and part time employees or grade/job type and geographical location.
What are the consequences of non-compliance?
Failure to comply with the duty will be a criminal offence and it goes without saying that simply failing to provide the gender pay details would risk reputational damage. Where the figure shows a significant gender pay gap employers will be under pressure to justify this and take remedial action. Unions and no-win/no-fee firms will be looking for potential claims. Companies involved in public procurement will need to be fully compliant.
What can be done to prepare?
- Conduct a gender pay audit to identify areas where there is a pay differential. If you can break the audit down into work types, seniority and age groups it will provide a more nuanced picture than a single average figure.
- Make sure the audit covers benefits and bonus payments as well as just basic pay as these are also areas where inequalities exist.
- In order to be fully effective, the audit should look at the cause as well as the symptoms so, if there is a pay gap in a particular part of the workforce, consider the factors behind this and whether anything can be done to redress the balance. It may be that there are lawful factors behind any pay gaps and the audit should address this too.
- Bear in mind that the contents of the audit will be disclosable in any litigation so consider carrying it out via your legal advisers to benefit from legal professional privilege.
We have fewer than 250 staff. Should we be doing anything?
Such employers will not be required to publish their pay gap under the new law. They may, however, wish to look at their own gender pay profile because given the current political climate, it is likely that the government will extend the duty to smaller employers over time. Indeed, the Scottish government has already announced plans to extend the duty to publish gender pay gap information to public bodies with more than 20 employees. Moreover, Unions and no win-no fee firms will be on the look-out for potential equal pay claims arising from gender pay differentials regardless of workforce size so smaller employers are not immune from claims.
If you would like assistance with carrying out a gender pay audit or further advice on this topic please contact Andrew Rayment or David Smedley.

November 2015 – Modern Slavery Act 2015
The Modern Slavery Act 2015 now requires large businesses supplying goods and services and with […]
The Modern Slavery Act 2015 now requires large businesses supplying goods and services and with an annual global turnover of £36m or more to report annually on the steps they have taken to ensure that their business and supply chains are free from slavery or human trafficking. The statement requires board approval and must be signed by a director. Affected businesses need to act now to ensure the new rules are integrated into existing risk management, due diligence and supply chain management procedures. The importance of getting it right, both from a legal and reputational perspective, cannot be overstated.
What is slavery and human trafficking?
Modern slavery is a criminal offence. It includes forced or compulsory labour and human trafficking and includes situations where someone’s liberty is taken away in order to exploit that person for personal or commercial gain.
What must the annual statement include?
The Modern Slavery Act requires companies to make an annual statement setting out the steps it has taken to ensure that modern slavery does not exist in its business and supply chains either in the UK or overseas. The statement can simply say that the organisation has taken no such steps although this is clearly not advisable. The statement must be approved by the Board and signed off by a director and must be published on the company’s website via a ‘prominent’ link on the homepage.
What steps should affected businesses be taking?
Modern slavery and human trafficking is a recognised problem in the UK and overseas. The reputational risks involved in a slip up are potentially serious. Although the requirement to produce a statement only applies to large businesses there is a lot to be said for smaller and medium sized businesses adopting the following HR-based safeguards:
- Introduce an anti-slavery and human trafficking policy setting out a ‘zero-tolerance’ approach to slavery and trafficking.
- Identify one director or senior manager who will be responsible for monitoring and implementing the policy.
- Ensure that management receive training on the issue of modern slavery in supply chains and that they understand what to do if they suspect it is happening. In particular, managers at the ‘coal-face’ and those with operational responsibility for overseas supply chains must receive clear and practical training.
- Decide how concerns should be raised in your workplace. An existing whistle-blowing policy may be the best procedure to follow.
- Ensure that training on the anti-slavery and trafficking policy is included in induction procedures.
This is an area where HR will be working in conjunction with other areas of the business to ensure an organisation-wide approach. For example, it will be important to audit current risk management and due diligence procedures as well as supply chain relationship management procedures. It may be necessary to introduce supplier codes of conduct or introduce new terms into existing supplier contracts.
Please click here to see our Modern Slavery Act checklist.

Capping public sector exit payments
The Government has announced that it will introduce a £95,000 cap on the total value […]
The Government has announced that it will introduce a £95,000 cap on the total value of all exit payments made to public sector employees. The cap will apply before tax and will cover all redundancy and ex-gratia payments as well as payments in lieu of notice, holiday and benefits.
Payments made following a breach of contract or unfair dismissal claim and ill-health retirement payments will be excluded from the cap which will be brought in via the Enterprise Bill 2015-2016 on a date yet to be confirmed.
This £95,000 cap is in addition to the soon to be introduced rules on repayment of public sector termination payments. Under the Small Business, Enterprise and Employment Bill 2014-2015 Regulations will be introduced in April 2016 to require public sector employees or office holders earning more than £100,000 p.a. to repay exit payments on a pro rata basis if they return to the same part of the public sector within 12 months.
What does this mean for affected employers?
Public sector employers need to think about how the cap and the repayment provisions are likely to impact termination discussions and settlement negotiations. These changes (together with proposed changes to the general tax rules on termination payments – see our article in this newsletter) are likely to call for an overall rethink of the way in which termination arrangements and payments are typically structured.
Walker Morris’s employment team regularly advise employers on structuring termination payments, settlement agreements and the associated tax considerations. Please contact David Smedley or Andrew Rayment.

Grandparents to share parental leave
Those rumours were true…the Government has now confirmed that, from 2018, working grandparents will be […]
Those rumours were true…the Government has now confirmed that, from 2018, working grandparents will be able to share parental leave and pay.
There will be a public consultation during the first half of 2016 which will address the logistical and practical challenges of making further changes to a system that is still in the ‘bedding down’ stages for many employers. According to Government figures, nearly 2 million grandparents have given up work, reduced their hours or have taken time off work to help families with childcare and there are around 7 million grandparents involved in childcare in the UK. Whether these figures translate into swathes of grandparents actually taking shared parental leave remains to be seen. As the changes are still at least 2 years away, there is no call for immediate action although some employers may be interested to follow or even contribute to the public consultation next year.

Is the end in sight for tax free termination payments?
The £30,000 ‘tax free’ element of termination payments has long been used to structure settlement […]
The £30,000 ‘tax free’ element of termination payments has long been used to structure settlement agreements to both employers’ and employees’ advantage. This may be soon to change. A public consultation on reforming tax and national insurance exemptions for termination payments has recently closed and the Government’s response is awaited. If implemented, these reforms could significantly reduce the amount of a termination payment that can be paid free of tax and NICs.
The £30,000 tax exemption for non-contractual payments has helped to oil the wheels of many a severance negotiation, enabling employers to structure settlements in a tax efficient way, providing an extra incentive for an employee to accept a deal.
All good things must come to an end it seems. The Office of Tax Simplification concluded in a July 2014 report that the current tax treatment of termination payments is “fraught with confusion and uncertainty”. This is likely to be a reference to cases where termination payments have been treated as tax free when they shouldn’t have been (typically pay in lieu of notice (PILON) payments). Employers or employees (or both) may have to pay additional tax later on and may be at risk of HMRC fines and penalties if the correct deductions from a payment have not been made.
What is being proposed?
The Government is proposing that all payments made on termination of employment will be subject to income tax and NICs in full unless an exemption applies.
The main exemption applies to redundancy payments. It would only apply to employees who have completed at least two years’ service and would increase in line with the employee’s length of service. The consultation paper suggests an exemption of £6,000 after two years’ service with an extra £1,000 for each additional year of service. By way of example, an employee with 6 years’ service would be eligible for an exemption of up to £10,000, with any remaining payments subject to tax and NICs.
This proposal is significantly less than the current £30,000 exemption that applies to all employees, regardless of length of service.
The Government is also considering introducing exemptions (possibly subject to a cap) for situations where employees lose their job through no fault of their own and for:
- Payments for unfair or wrongful dismissal
- Payments connected with discrimination (where awarded by an Employment Tribunal).
Payments into pension schemes would remain exempt from tax and NICs, subject to the normal pension rules.
What does this mean for employers?
If the proposals are implemented, the existing ‘incentive value’ provided by the current system will be severely restricted. Employees may press for an increased termination package to reflect the reduction in any net settlement payment. It may be that employers will have to look at other ways to reduce liabilities for tax or NICs, such as making payments into pension schemes or staging payments over two tax years.
The Government has also confirmed it is actively monitoring the use and growth of salary sacrifice schemes given that such schemes have become increasingly popular and the cost to the taxpayer is therefore increasing.
If you have any questions about the proposals please contact David Smedley or Andrew Rayment in our employment team.

Data protection – EU to US data transfers are no longer automatically covered by the ‘safe harbor’ scheme
Following an EU law decision, transfers of employees’ personal data from the EU to the […]
Following an EU law decision, transfers of employees’ personal data from the EU to the US are no longer protected under the ‘Safe Harbor’ scheme. UK employers now need to consider how employee data transfers to the US (both historic and going forward) will be managed and legitimised.
Under the Data Protection Act 1998, employers can transfer personal data about their employees outside of the EU only where the country receiving the data has similar data protection safeguards. UK employers have usually relied on parent or recipient companies’ registration with the US ‘Safe Harbor’ scheme (designed to replicate EU data protection safeguards). This, for many years, has effectively legitimised transfers of personal data about employees from the UK to the US.
The Court of Justice of the European Union (CJEU) has now decided that the Safe Harbor scheme is compromised and the scheme can no longer be relied upon to legitimise EU to US transfers of personal data. This is because, under increased homeland security measures, US security agencies can access personal data held by US employers without the affected employee’s consent.
What does this mean for affected employers?
- There is no cause for immediate alarm although thought does need to be given to how personal data transfers will be covered going forward. The CJEU decision does not say that all EU to US personal data transfers are unlawful, it simply says that employers can no longer work on the assumption that the Safe Harbor scheme provides total protection from challenge.
- The Data Protection Act allows for transfers outside the EU where the employee has given consent to the transfer or where the transfer is necessary for entering or performing the employment contract. It is therefore sensible to ensure that employees give written consent to data transfers outside the EU in their employment contract and also to consider the necessity of the data transfers.
- It would be wise for UK employers to agree a specified level of protection for personal data with US parent companies.
- Look at where personal data of UK employees is held. If, for example, it is on US based servers of parent companies could it be held within the EU instead?Question whether it needs to be held outside the EU.
- Consider historic personal data too. If this is held outside of the EU consider bringing it back or deleting any personal data that is no longer required.

Zero-hours contracts
The Department for Business, Innovation and Skills has published employer guidance on zero-hours contracts setting […]
The Department for Business, Innovation and Skills has published employer guidance on zero-hours contracts setting out best practice and outlining appropriate and inappropriate use of such contracts. The guidance states that zero hours contracts should not be considered as an alternative to proper business planning and should not be used as a permanent arrangement unless this can be justified.
It is clear that zero hours contracts will probably not be appropriate if the job involves an individual working regular hours over a continuous period of time. The example given in the guidance is that of an individual asked to work from 9am to 1pm, Monday to Wednesday for a 12 month period. In this case, it would be more appropriate to offer that worker a permanent part time contract or a fixed term contract.
The guidance recognises that zero hours contracts might be useful for unexpected or irregular events or to deliver appropriate levels of customer service during peaks in demand. Where, however, the business provides a regular service or product with a broadly predictable timetable or output, permanent or fixed hour contracts are probably more appropriate.
Alternatives to using zero-hours contracts might include:
- offering overtime to permanent staff to deal with temporary fluctuations in demand
- recruiting a part time employee or someone on a fixed term contract if regular hours need to be worked to adapt to a change in the business needs
- offering annualised hours contracts if annual peaks in demand are predictable
- using agency staff if staff are needed temporarily or at short notice
Finally, remember that all workers, however ‘casual’ they may be, are entitled to protection under the National Minimum Wage and Working Time Act.

Case law round-up – November 2015
Pushing the boundaries of equality law – is discrimination protection widening? Three recent court decisions apparently […]
Pushing the boundaries of equality law – is discrimination protection widening?
Three recent court decisions apparently widening the types of discrimination claims that can be brought have caused much discussion and debate within the HR community. We analyse the decisions and look at their practical implications.
Indirect discrimination claims can be brought by someone who does not possess the protected characteristic in question but has suffered alongside a group that do – CHEZ Razpredelenie Bulgaria AD v Komisia C-83/14
It has long been established that individuals must possess a protected characteristic (sex, race, disability etc) in order to bring a claim of indirect discrimination. This is in contrast with direct discrimination and harassment claims where the individual does not have to actually possess the protected characteristic in order to bring a claim (individuals can claim they have been treated less favourably because they associate with someone with a protected characteristic or are perceived to have a protected characteristic).
A decision of the Court of Justice of the European Union (CJEU) has rather upset the apple cart. It has found that, contrary to what has apparently been set in stone for many years, individuals can suffer indirect discrimination by association. In this case, the claimant (Ms Nikolova) suffered a disadvantage with her Roma neighbours in that the electricity company had placed meters in the Roma neighbourhood 20 feet off the ground. This was driven by a stereotypical assumption that meter tampering was more likely to occur in Roma neighbourhoods. Ms Nikolova was not Roma herself but was unable to check her meter and so she suffered a disadvantage alongside her Roma neighbours. The CJEU held that she could bring a claim of indirect discrimination by association.
Walker Morris comment
This decision arguably extends the concept of indirect discrimination but should UK employers be worried? The answer is probably no. The electricity company’s practice of placing meters high up in Roma areas was, on the face of it, discriminatory and they had not been able to provide any evidence of justification. The company was therefore vulnerable to discrimination claims from the Roma population in any event (indeed, that was where their real exposure lay). If they had been able to justify the practice with proper evidence then Ms Nikolova’s claim would fail along with any indirect discrimination claims brought by Roma individuals. This case therefore underlines the importance of employers being able to objectively justify any potentially indirectly discriminatory policies or practices. There is no need to make changes to equality policies and the advice remains to ensure that there are sound, justifiable reasons for anything the employer does that might indirectly disadvantage a protected group.
Finally, it is worth noting that the facts of this case are quite unique. This was not an employment claim and it is difficult to envisage many workplace situations where someone would be able to bring a claim for associative indirect discrimination.
Claims for associative victimisation may be possible under the Equality Act 2010 – Thompson v London Central Bus Company Ltd – UKEAT/0108/15.
Can someone bring a victimisation claim not because they have complained of discrimination but because they are associated with someone who has done? The Equality Act 2010 clearly states that they cannot. A recent EAT decision, however, has found that EU law may require the Equality Act to be interpreted in such a way that such an ‘associative victimisation’ claim is possible.
Facts
Mr Thompson brought a claim that his employer had victimised him (i.e. subjected him to a detriment) by disciplining him for a minor matter. He claimed that the reason the employer had done this was because it associated him with a group of employees who had complained that management were in breach of the Equality Act 2010 (complaints about breach of equality law are defined as ‘protected acts’). Mr Thompson had reported to management, prior to the disciplinary case being instigated against him, that he had overheard staff complaining about discrimination by the employer.
The Employment Tribunal struck out his claim at a second preliminary hearing on the basis that the Equality Act 2010 did not provide him with protection against victimisation by association with another person’s protected act. Mr Thompson appealed to the EAT which allowed his appeal and remitted the case back to the Employment Tribunal to be heard again. The EAT took the view that proper evidence on the ‘association’ point needed to be heard and that the test for the Tribunal to apply was whether Mr Thompson had been subjected to a detriment because of a third party’s protected act. It appeared to accept the Employment Tribunal’s finding at the first preliminary hearing that victimisation can occur by ‘association’.
Walker Morris comment
S27 of the Equality Act 2010 states that the ‘protected act’ must attach to the complainant and not to a third party. If the EAT’s contradictory approach is followed this will therefore be a significant extension to the law on victimisation. It also extends the concept of ‘associative discrimination’ as we have also seen in the CHEZ Razpredelenie case above.
On a practical level, as long as equality policies are followed and employers do not act in a discriminatory way then there is nothing to fear from this decision.
Companies can bring complaints under the Equality Act 2010 for discrimination – EAD Solicitors LLP and others v Abrams UKEAT/0054/15.
The EAT has held that whilst most complainants in direct discrimination claims are individuals, the Equality Act 2010 does not prevent limited companies from bringing such claims.
Facts
Mr Edwards was a member (a partner) of EAD solicitors LLP and was due to retire at age 62. For tax reasons, shortly prior to reaching 62, he set up a service company (he was sole shareholder and director) and it became a member of the LLP in his place. EAD solicitors objected to this company remaining a member once Mr Edwards reached age 62 and Mr Edwards made an age discrimination claim to the Employment Tribunal naming both himself and his company as complainants. The Tribunal and the EAT found that the company could bring a complaint of direct discrimination and cited the following reasons:
- Although the Equality Act 2010 describes discrimination by a ‘person’ it is established that a discriminator may be a company. There was nothing in the wording or interpretation of the Act that prevented the same logic from applying in relation to the ‘person’ discriminated against.
- The Equality Act 2010 does not require the person complaining of discrimination to actually possess the ‘protected characteristic’ in question. For example, someone can be directly discriminated against because of their association with someone with a protected characteristic or because they are perceived, wrongly, to have a protected characteristic. Therefore there was no merit in EAD’s submission that companies cannot possess a protected characteristic and therefore cannot be discriminated against
Walker Morris comment
It is unlikely that this case will rock employment law to its foundations because most direct discrimination claims are brought by individuals. Circumstances where a company might have an employment related discrimination claim will be very rare. Contractors providing services via service companies and the self-employed are specifically protected from discrimination under the Equality Act in any event.
It is, however, possible to think of examples of how this decision might give rise to claims in other business areas. For example, a lender refusing a business loan to a limited company because of the owner’s ethnic origins or a refusal to lease premises to a company because it intended to set up a religious centre.
The bigger question is whether a company could be awarded an injury to feelings award or whether a company could bring an indirect discrimination claim. The case of CHEZ Razpredelenie (above) suggests that a ‘person’ (which we now know can include a limited company) does not need to actually possess a protected characteristic in order to bring an indirect discrimination claim. It is very much a case of watch this space!
TUPE and service provision changes – identifying the ‘organised grouping’ of employees Inex Home Improvements Ltd v Hodgkins and others (UKEAT/0329/14) and BT Managed Services Ltd v Edwards and another (UKEAT/0241/14)
The EAT has provided helpful guidance on identifying the ‘organised grouping of employees’ when dealing with Service Provision Changes under TUPE.
Service Provision Changes (SPCs) happen in outsourcing, second generation outsourcing and when a client brings an activity back ‘in-house’. TUPE states that, immediately before the change, there must be ‘an organised grouping of employees carrying out the relevant activities on behalf of the client’. In practice, there is often debate over which employees are assigned to the organised grouping. Two recent EAT decisions provide some guidance in this area.
In Inex Home Improvements Ltd v Hodgkins and others, the EAT held that a temporary lay-off of staff prior to a change in contractor did not prevent there being a SPC. In this case, the client released the work in tranches so the contractor would lay off staff in between tranches on the understanding that staff would be re-engaged as soon as the next phase of work came in. In this case, the client changed contractors in between tranches of work and a dispute arose as to whether there could be an SPC given that there was, apparently, no organised grouping of staff at the point of transfer as they had been laid off. The EAT considered that the cessation of work was temporary and that there was an expectation that the work would continue on release of the next tranche of work by the client. As TUPE is designed to protect employment the EAT had no hesitation in finding that the workers who were laid off at the point of transfer formed part of an ‘organised grouping’ and therefore transferred under TUPE according to the SPC rules.
In BT Managed Services Ltd v Edwards and another, the question was whether an employee who was still on the employee’s books and in receipt of PHI payments was assigned to the organised grouping of employees transferring under TUPE. The employee, Mr Edwards, had been off on long term sick since 2008 and the SPC occurred some 5 years later in 2013. Mr Edwards was in receipt of PHI payments and BT accepted that it had no expectation of him ever returning to work. He had been allowed to remain as an employee ‘on the books’ only in order to benefit from the PHI payments.
The EAT found that Mr Edwards was not assigned to the organised grouping of employees for the purposes of TUPE. It held that whilst employees on long term sick leave may, in many cases, remain assigned to the organised grouping there must at least be some expectation that they will return to work at some point.
Walker Morris comment
Whether an employee is assigned to an organised grouping of employees for the purposes of TUPE will always be a question of fact based on the circumstances of the case. However, these two cases provide helpful guidance in cases of temporary cessation of work and long term sick leave.
To what extent can HR influence a disciplinary case? Ramphal v Department of Transport (UKEAT/0352/14)
How much involvement does your HR team have in disciplinary decisions? Does it decide on guilt and sanction and write all the letters and reports for the manager to sign off? Or does it let the managers steer proceedings and make decisions with appropriate support?
A recent EAT decision highlights the risks of HR advice going too far. In a nutshell, ‘behind the scenes’ advice must not stray too far from procedural and legal advice into the territory of apportioning blame and determining the sanction.
The facts
Mr Ramphal was accused of over claiming expenses. A disciplinary investigation was handled by his manager, Mr Goodchild, who had no previous experience of conducting such investigations. Mr Goodchild found that Mr Ramphal had committed misconduct but was unable to find that he had been dishonest. He wrote a report in which he recommended that Mr Ramphal be given a final written warning. The report went to HR and by the time it was sent out to the employee it had been changed to find that he had been dishonest and that he should be dismissed for gross misconduct.
Mr Ramphal appealed the Employment Tribunal’s finding of a fair dismissal on the basis that there was no explanation as to why the final draft of the investigation report was so different from the one prepared by Mr Goodchild. He asked, “How could the sanction in the final report have changed so fundamentally from the sanction recommended in the first report?”
The EAT were not satisfied that the Department of Transport had adequately answered this question and so it remitted the case back to the Employment Tribunal to decide if input from HR after the disciplinary investigation meeting changed the final disciplinary decision. The law permits HR to provide procedural and legal input but not to change or decide on disciplinary sanctions made by a manager especially where the employee has not had the opportunity to address any new concerns that HR might have raised.
Walker Morris comment
This case has a lot of practical relevance to day to day HR practice and there are several tips that can be drawn from it:
- Always remind managers that documents, emails, internal notes and reports relating to disciplinary proceedings are disclosable unless they are covered by legal professional privilege (e.g. correspondence with lawyers).
- If you are not satisfied that the manager has asked the right questions or addressed the right issues make sure that they arrange a further meeting with the employee to do so. ‘Papering over’ cracks in managerial investigations is never a good idea. It is always worth taking the time to go back and do it properly even if that means an extra meeting with the employee.
- Remind managers that they do not have to be satisfied of an employee’s misconduct ‘beyond reasonable doubt’. It is not uncommon for inexperienced managers to be under the misapprehension that unless the misconduct can be proved the employee cannot be found guilty of it. The correct test is that the manger must be satisfied that the employee committed the misconduct on the balance of probabilities following a fair and reasonable investigation.