March 5, 2018

UK - CABLE: Current Awareness Bulletin - March 2018

Clyde & Co's UK employment team brings you CABLE. The legislation updates this month include pregnancy discrimination, reasonable adjustments & constructive dismissal, redundancy and more.

Pregnancy discrimination

The Employment Appeal Tribunal has decided that an employer is not required to revisit or revoke a lawful decision to dismiss after it is notified of an employee's pregnancy, where it was not aware of the pregnancy at the time it made the decision to dismiss.

The employer decided to dismiss Ms Thompson during her probationary period because of her emotional volatility and because she did not fit in with their work ethic.  The employer did not tell her this straight away and before they did, she told them that she was pregnant.  The employer went ahead with Mr Thompson's dismissal.  She brought claims for unfair dismissal by reason of pregnancy and pregnancy discrimination.

The Employment Appeal Tribunal decided that in order for the Claimant to be successful in her claims, the employer must have known, or believed, that she was pregnant when it made the decision to dismiss.  Given that the Employment Tribunal had accepted that the employer made its decision to dismiss before Ms Thompson notified it of her pregnancy and was unrelated to them, Ms Thompson had not been unfairly dismissed or discriminated against by reason of her pregnancy.

Really Easy Car Credit Ltd v Thompson UKEAT/0197/17


This case provides useful clarification for employers that there is no positive obligation to revisit or overturn a decision to dismiss made before it had knowledge of an employee's pregnancy.


Failure to make reasonable adjustments and constructive dismissal: expectation that employee works long hours was a PCP

The Court of Appeal has confirmed that the expectation (rather than actual coersion) for a disabled employee to work long hours amounted to a "provision, criterion or practice", potentially triggering the employer's duty to make reasonable adjustments to remove the (substantial) disadvantage faced by that employee when compared to non-disabled employees. 

An employer has a duty to make reasonable adjustments for a disabled employee where there is a "provision, criterion or practice" (PCP) which puts a disabled person at a substantial disadvantage compared with a non-disabled person.

Mr Carreras was an analyst for United First Partnership Research, a brokerage firm, when he was involved in a serious road accident whilst on his bicycle. He returned to work suffering with headaches, dizziness, difficulty with concentrating and working late. Prior to the accident he typically worked 9am to 9pm.  After his accident, he worked 8am to 7pm but soon came under pressure to work later, by requests to work late, progressing to an assumption he would do so, making him feel he might be made redundant or lose his bonus if he did not.  After emailing one of the business owners objecting to working late due to tiredness, he was reprimanded in front of his colleagues which prompted him to resign and leave the company.

The Employment Tribunal found Mr Carreras was disabled but dismissed his disability discrimination claim because it found he had not been "required" to work late.  However, the Court of Appeal found that the Tribunal was wrong to scrutinize the degree of compulsion to work late. Instead, it should have looked more broadly at the situation as it was clear from Mr Carreras's evidence that he genuinely felt under pressure to work late (because of an expectation and assumption that he would) and this was enough to establish a PCP so as to trigger the duty to make reasonable adjustments.

Carreras v United First Partnership Research [2018]EWCA Civ 323 Court of Appeal

practical point

Where in the workplace there is a “long hours” culture, this can make people feel obliged to work late even where it is bad for their health.  This case illustrates how this practice, even if not set by written rules, is potentially capable of being a "provision criterion or practice", particularly if, as in this case, it is accompanied by an explicit request to work late. 

Employers should be aware that a culture which requires staff to work in a particular way can be enough to trigger a disability discrimination claim from disabled employees who suffer as a result.  Where an employer is aware that an employee is disabled, it should take heed of the employee's requests/grievances and consider whether there are any adjustments it could reasonably make to help the employee overcome any substantial disadvantage they face compared to their non-disabled colleagues.

Redundancy – collective consultation

Can events occurring after 20+ redundancy dismissals are proposed, provide a defence to a claim for failing to inform and consult?  No, says the Employment Appeal Tribunal.  However, such events may affect the size of the protective award.

In June 2015, a charity, Keeping Kids Company (KKC), applied for emergency government funding to avoid financial ruin with a business plan envisaging a restructure whereby potentially half of its staff might be dismissed within a few months.

On 29 July a grant was offered but revoked on 3 August when a police investigation into safeguarding issues at KKC came to light. On 5 August KKC closed, dismissing its staff.

The tribunal heard a number of claims for protective awards for failure to inform and consult under UK collective redundancy laws.  It concluded that the business plan amounted to a ‘proposal to dismiss’ and in order to have complied with its obligations to consult in ‘good time’, KKC should have consulted ‘promptly’ after the business plan.  This meant that events in August did not constitute a defence of a ‘special circumstance’ which is available to employers in exceptional circumstances. KCC appealed.

The EAT held that the Tribunal was entitled to conclude that the obligation to consult arose in June and not August, because the business plan in June foresaw immediate insolvency or large-scale redundancies being the only routes forward. Whilst events in August did not excuse the obligation to consult, which crystallised beforehand, they could be relied on to reduce the size of the protective award.

Keeping Kids Company (in compulsory liquidation) v Smith & Ors UKEAT/0057/17

practical point
The obligation on an employer to begin collective consultation is triggered when there is clear intent to dismiss at least 20 employees of redundancy. It does not matter if it has not yet identified which employees are potentially at risk.  The case illustrates how the special circumstances defence is very difficult for employers to use in practice

Impending changes of legislation and other developments

Annual increases in National Minimum Wage and maximum awards for unfair dismissal

From 1 April 2018, all UK National Minimum Wage and National Living Wage (NLW) rates will increase.  The NLW which is paid to workers aged 25 and over is increasing to £7.83 (from £7.50).

From 6 April 2017, the maximum basic award for unfair dismissal and the maximum statutory redundancy payments will be capped at £15,240 (increased from £14,670), and the maximum compensatory award for unfair dismissal increases to £83,682 (from £80,541).

Employment Tribunals – tribunal quarterly statistics show a substantial increase in the number of employment tribunal claims lodged

Employment tribunal statistics show that the number of claims brought by a single claimant in the period September to December 2017 was up 90% on the same period in the previous year.  The number of new claims being lodged is however still lower than before the introduction of employment tribunal fees in July 2013 (which have since been ruled to be unlawful and abolished).

Government responds to the Taylor Report

The government has published its response to the Taylor Review, setting out proposals to improve and increase awareness of UK workers' rights.  The government considers many of the proposals need further consultation, so it has launched four separate consultations: employment status; the enforcement of employment rights; agency workers; and measures to increase transparency in the UK labour market.

Draft legislation has been published fulfilling some of their commitments, including the right to itemised payslips for all workers and requiring payslips to show the number of hours being paid for workers paid by the hour.

Changes to taxation of termination payments

From 6 April 2018 tax and National Insurance Contributions (NICs) on termination payments will change.  In particular, the distinction between contractual and non-contractual payments will be removed so that all payments made in lieu of notice on termination of employment, regardless of whether there is a contractual entitlement, will be subject to income tax and NICs.  This means, broadly that:  

  • Contractual pay in lieu of notice (PILON) will continue to be treated as earnings and taxed accordingly
  • Where an employee has not worked their notice (or part of it), before termination, the employer must calculate the "post-employment notice pay" (PENP) by applying a statutory formula which broadly works out the basic pay which the employee would have earned over the unworked portion of the notice period
  • PENP is taxable as earnings and is subject to employer and employee NICs
  • The new rules apply only where employment terminates on or after 6th April 2018
  • Foreign service relief is abolished for UK resident employees (although new exemptions will apply for UK resident employees with foreign seafaring service).

The proposal to impose, for the first time, Class 1A NICs (employer liability only) on termination payments which exceed £30,000 has been postponed until April 2019.

Trade Secrets Directive

Draft Regulations to implement the EU Trade Secrets Directive have been published and are expected to come into force by 9 June 2018.  The Regulations include a statutory definition of "trade secret" and provide for trade secret cases to be held in private, with limited access to the confidential documents in the case, set out the factors to be considered when awarding compensation, and impose limitation periods for trade secret cases. The Regulations do not make any changes to the rules around post-termination restrictive covenants, which remain a matter for UK national law.