Employment Law Bulletin - August 2023

A recent Employment Appeal Tribunal decision has set out further guidance on how tribunals should approach the issue of employment status following the landmark decision of the Supreme Court in Uber BV v Aslam. In Manning v Walker Crips Investment Management Limited the Claimant was engaged as an ‘associate’ for the Respondent working as an investment manager. His contract with the Respondent stated that he was a self-employed contractor, and he was paid on a commission-only basis. His contract included a substitution clause which stated that any substitute had to be approved by the Respondent.

The Claimant brought a claim alleging worker status. At a preliminary hearing the employment tribunal concluded that the Claimant was not a worker. In coming to this conclusion they looked, amongst other factors, at the substitution clause. They implied a term into the clause that the Respondent would not unreasonably refuse to approve a substitute. The tribunal held that this term had to be implied for the clause to work effectively.

The EAT disagreed. It found that the clause was perfectly workable without such an implied term. The EAT was also critical of the tribunal for deciding that the substitution clause was genuine without having regard to the fact that it had never been used. The EAT substituted the decision that the Claimant did undertake to perform work personally for the Respondent and that the substitution clause was not genuine. Other aspects of the test of worker status were remitted to the tribunal to look at again.

This case is a reminder that tribunals will now look very closely at substitution clauses in contracts where the relationship is stated to be one of self-employment. If substitution clauses are limited in scope and there is no evidence of them having been used then they cannot be relied upon to support a finding of self-employed status.

Tim Lang

Religion and belief discrimination – manifestation of belief and how employers need to tread-carefully in action taken as a result

In the recent case of Higgs v Farmor’s School the claimant was dismissed from her role as a pastoral administrator after putting posts on Facebook which criticised aspects of relationship education in primary schools which she saw as contrary to Biblical teaching. She was dismissed by the respondent on the basis that someone reading the posts might consider that she held homophobic and transphobic views. She claimed direct religion or belief discrimination and harassment. Her claim was unsuccessful in the employment tribunal but her appeal to the Employment Appeal Tribunal was allowed. The EAT, in finding that the tribunal had incorrectly applied the test for direct religion or belief discrimination, set out some helpful guidance on the approach to be taken in such cases:

• Direct religious discrimination cannot generally be justified
• The law protects not just the religion or belief of the individual, but also manifestations of those beliefs.
• In deciding whether an act is a manifestation of a religion or belief what should be looked for is a “sufficiently close and direct nexus between the act and the underlying belief” (Eweida v United Kingdom). The EAT held that the nexus existed in this case.
• Once a finding has been made that the act which led to the alleged unfavourable treatment (here, dismissal) was a protected manifestation of religious belief, there is then a requirement to decide the reason why this treatment occurred: whether it was related to the manifestation of the protected belief or due to an objection to the manner of that manifestation.
• If it is an objection to the manner of the manifestation then Article 9.2 of the European Convention on Human Rights (ECHR) kicks in, under which the right to manifest a belief may be restricted if it is necessary in a democratic society, in the interests of public safety, for the protection of public order, health or morals, or for the protection of the rights and freedoms of others. In looking at this, account needs to be taken of the fact that the ECHR protects freedom of speech and freedom of religion and the right to express views in a forthright and passionate manner.  It is also important to consider whether the restriction (here, dismissal) has gone further than is necessary and whether a less intrusive response would have achieved the same objective (in which case the act may still be held to be discriminatory).

Automatic unfair dismissal – a day 1 risk

A recent Employment tribunal case serves as a reminder that, although employees with less than 2 years’ service do not have the right to claim ordinary unfair dismissal, they are still able to claim automatic unfair dismissal if the reason for their dismissal is one of those protected by law. In the case of Howson v Restore the Claimant was employed as a manager at a charity shop. She worked 35 hours per week but was only paid for 30 hours per week by her employer. After having worked there for less than 6 months she queried this with HR and a director. On the same day she had sent these emails she was invited to what was termed an ‘informal meeting’ which was due to take place a few days later. At this meeting the Claimant was dismissed. The tribunal found that the claimant’s emails about her wages were “the principal reason for her dismissal” and that she had been automatically unfairly dismissed for asserting a statutory right.

The employer may have thought that formalities could be dispensed with as the employee had less than 2 years’ service but, because the real reason for her dismissal was an automatically unfair one, it was liable for automatic unfair dismissal. Whenever employers are looking at dismissing employees with less than 2 years’ service, they should take time to consider any risks of automatic unfairness and also any discrimination risk as legal rights in both of these areas accrue from day 1 of the relationship.

Neonatal Leave and Protection from Redundancy Bills get Royal Assent

Under new laws which have recently received Royal Assent, parents will receive additional support in relation to neonatal care and additional workplace protection from redundancy during pregnancy and family leave.

Under the Protection from Redundancy (Pregnancy and Family Leave) Act, pregnant women and new parents will see an extension of existing redundancy protections, to cover pregnancy and a period of time after parents return to work. Currently, parents are only protected from redundancy whilst on maternity leave, adoption leave or shared parental leave.

The Neonatal Care (Leave and Pay) Act will allow parents whose newborn baby is admitted to neonatal care to take up to 12 weeks of paid leave, in addition to other leave entitlements such as maternity and paternity leave. The length of leave and statutory neonatal pay will be based on how long their baby receives neonatal care, and will apply if their baby receives neonatal care for more than seven continuous days before they reach 28 days old.

Both of these new laws will require secondary legislation to implement them so are not likely to come into effect until next year.

National Minimum Wage – the ‘name and shame’ approach highlights the risks of getting it wrong

The National Minimum Wage and the National Living Wage rose by 9.7% this April. The burden of wage costs is high, particularly in labour-intensive sectors such as retail. However, the risks of failing to pay national minimum wage are significant. As well as a requirement to reimburse any underpayment there is the possibility of fines of up to £20,000 (and a minimum of £100 for each employee or worker affected, even if the underpayment is worth less) alongside the reputational impact of the government’s policy of ‘naming and shaming’ offenders.

Indeed, the government has recently announced details of a string of companies who have failed to pay the minimum wage. These included retail giants WH Smith, Marks & Spencer and Argos. All three retailers said the breaches were unintentional and had been swiftly remedied. The issue is a costly one: remedy will involve significant reimbursement together with fines, with the government confirming that penalties amounted to up to 200% of the arrears owed.

National minimum wage is not always easy to calculate as there are several areas of permitted deductions and also complex rules relating to workplace equipment. WH Smith, the worst offender, having failed to pay more than £1m to over 17,600 workers, explained that it had misinterpreted rules around uniforms, having asked staff to wear specific-coloured clothes without reimbursing them for it.

Employers should review pay to make sure that employees are not inadvertently receiving less than their minimum entitlement. Two areas to focus on are:  

• Deductions or payments from wages that take pay below the relevant minimum rate; and
• Unpaid working time (e.g. getting changed into PPE pre and post shift, clocking in and out time being rounded, employees not being paid for mandatory training, time worked on a sleep in shift, or carrying out trial shifts).

A ‘relevant agreement’ on holiday can’t result in a lower payment than you would get under the calculations set out in the Working Time Regulations 1998

The Working Time Regulations 1998 set out the key rules regarding holiday rights in the UK, including holiday pay. The Regulations include a provision (Regulation 14) which states that the amount of holiday pay due on termination of employment is either that which would be prescribed if the formula set out in the Regulations were applied or such other sum which is stated to be payable on termination of employment pursuant to a ‘relevant agreement’. There had been much debate amongst employers about what such a ‘relevant agreement’ could include.

There was a trend of including a provision in employment contracts for the payment of a nominal sum for accrued but untaken holiday in the event of a gross misconduct dismissal. Many contracts of employment also calculate a day’s holiday pay on termination by taking a 1/365 day average rather than a 1/260 day average (working days only).

The Employment Appeal Tribunal, in the case of Connor v Chief Constable of West Yorkshire Police, have held that a ‘relevant agreement’ on the payment of holiday on termination of employment cannot result in a payment which is lower than that which would be calculated using the method set out in the Regulations. The Claimant’s employment contract included a clause which stated that holiday pay on termination of employment would be calculated by taking a 1/365 day average. This resulted in a lower payment for holiday than that which he would have received if the calculation under the Regulations had been used. The EAT held that this clause could not be relied upon as a ‘relevant agreement’ and that the Claimant was entitled to receive, at least, payment in line with the calculation method set out in the Regulations.

Employers whose contracts of employment contain a provision permitting a nominal holiday pay payment on termination of employment for gross misconduct or who calculate holiday on termination based on a 1/365 average, in light of this case, should be careful before relying on these terms in the future. Consideration should also be given to removing them from any new contracts which are issued going forward.

In harassment claims it is the ‘purpose’ or ‘effect’ of the behaviour which is relevant

The legal provisions dealing with workplace harassment in the Equality Act 2010 state that: “A person (A) harasses another (B) if— (a) A engages in unwanted conduct related to a relevant protected characteristic, and (b) the conduct has the purpose or effect of— (i) violating B's dignity, or (ii) creating an intimidating, hostile, degrading, humiliating or offensive environment for B.” They go on to say that in deciding whether conduct has the effect referred to, each of the following must be taken into account - “(a) the perception of B; (b) the other circumstances of the case; and (c) whether it is reasonable for the conduct to have that effect”.

In the recent case of Sidhu v Our Place Schools Limited the EAT looked at the definition of harassment and stressed the importance of considering whether the conduct had the ‘purpose’ or ‘effect’ required to support a claim. Mr Sidhu was employed as a weekend support worker. He was a Sikh. In the context of a discussion with a colleague regarding Sikh executions by Muslims in the 17th Century, a colleague made a ‘sawing gesture’. Separately, another colleague made a comment that there were not many ‘coloured people’ in Herefordshire. Mr Sidhu claimed harassment on grounds of religion and race. The EAT agreed with the tribunal that these instances, which were found to have occurred, did not constitute unlawful harassment. Importantly, they looked closely at the context involved and held that, in neither instance was the ‘purpose’ of the behaviour to harass Mr Sidhu. It also found that it did not have the ‘effect’ on Mr Sidhu that he later claimed. He had not complained at the time or for several months following the incidents. In terms of the alleged ‘sawing gesture’ this had been in the context of a discussion about Sikh history with a knowledgeable colleague. They found that even if it had had the proscribed ‘effect’ it would not have been reasonable for it to have done so.

This case skirted very close to the line on workplace harassment and employers should make sure that they carry-out clear and detailed training on diversity, equality and bullying and harassment so that employees are aware of issues surrounding differences in culture, religion and race.

And Finally...

And finally, a man has revealed that he learnt he had been unsuccessful in a job application after the company’s HR department accidentally copied him into an email chain. After applying to work at a coffee company he received an email from the hiring manager which was not intended for him. He had been accidentally CC’d. According to a screenshot shared on the social media platform TikTok, the email read: “Well that’s interesting okay so let’s reject him…”

This error has had unintended reputational consequences for the coffee company - who have been called-out for their behaviour on social media. It also goes without saying that informing a candidate that they have not been successful by CC’ing them into internal correspondence discussing the rejection is not, in any way, best practice. A reminder, if one was ever needed, to check all recipients before pressing ‘send’ on communications, especially sensitive ones such as this!