Top 5 recent workplace developments – July 2019
This is our selection of the recent developments which we think will have the most significant impact on HR practice.
1. Supreme Court saves otherwise unenforceable non-compete covenant
The Supreme Court (the UK's highest court) has ruled that courts can in effect delete any part of a restriction in an employment contract that is too wide or too restrictive and enforce what's left. The Court clarified when courts are entitled to edit contracts in this way.
For historic reasons only, the section of an employment contract which contains restrictions on what an employee can do is known as the restrictive covenant. The Courts police carefully this type of agreement. It is well-established law that a restrictive covenant will only be enforceable if the employer has a legitimate business interest to protect and the protection sought is no more than is reasonably necessary to protect that interest. In assessing reasonableness and in order to get the balance right, the court will consider whether some lesser restriction would give the employer enough protection.
T, a senior employee of an executive search firm, tried to extricate herself from a non-compete restriction which provided that she would not for six months after the end of her employment "directly or indirectly engage or be concerned or interested in any business carried on in competition with any business of the Company…". She argued that this restriction had such a wide scope that it prevented her from even having a small shareholding in a competitor – which meant it went much further than necessary to protect the company and so could not be enforced against her.
The Supreme Court agreed that the clause did have this meaning but decided that the words ‘or interested’ - which did go too far by preventing T having a shareholding in a competitor - could be removed from the restriction without altering the meaning of the remaining words. As the restriction without these words was reasonable in context, the rest of the restriction could be enforced against her.
The injunction which had previously been granted by the High Court to prevent T from breaching her non-compete restriction, but then overturned by the Court of Appeal, was reinstated - even though the period of the non-compete restriction had long since expired.
The Supreme Court said the test for deciding whether words which make a restrictive covenant unreasonable can be deleted in employment cases is that:
(i) words can only be removed if there is no need to add to or modify the wording that remains; and
(ii) removal of the words should not generate any major change in the overall legal effect of all the post-employment restraints in the contract.
While employers have welcomed this decision, it is nonetheless a good idea to review the restrictions (not just any non-compete restrictions) in your standard employment contracts and:
- make sure they go no further than is reasonably necessary to protect your business from departing employees. As part of this, consider whether the wording would prevent a departing employee from holding a small shareholding in a competitor, and if so amend the contract to ensure such shareholdings are permitted
- look carefully at how the restrictions are worded. Are there any words that might go too far that could easily be deleted by a court, without affecting the meaning and effect of the rest of the restriction? If so, they should be re-worded with this in mind.
See our detailed update on this decision: Supreme Court saves otherwise unenforceable non-compete covenant in Tillman v Egon Zehnder Ltd
2. Disability discrimination – perceived disability
The Court of Appeal has ruled that it is discriminatory to refuse employment because of a perception that a health condition will affect an employee's ability to work in future.
C, a police officer, suffered from mild hearing loss. Her condition had not caused her any problems in her job - she was able to do her 'normal day-to-day activities' - so it did not constitute a disability. She applied to transfer to another police force but was not accepted because a pre-employment health assessment showed her hearing was just outside the standards for recruitment and there was a concern about recruiting an officer who they feared would in the future be restricted in the duties she could carry out, as this would reduce the pool of officers who were operationally deployable.
C brought a direct discrimination claim on the basis that:
- she was treated less favourably because she was perceived to have a disability
- this perceived disability was a progressive condition that was likely to have a substantial impact on her ability to carry out normal day-to-day activities in the future.
The Court of Appeal noted that the police were influenced by stereotypical assumptions about the effects of hearing loss. It said the police's perception of a risk that she would not be able to work in the future indicated she was perceived to have a disability in the form of a progressive condition.
This Court of Appeal decision is the first to consider whether direct discrimination covers less favourable treatment based on a perceived protected characteristic. The Court said it did, and that such a claim does not depend on whether the employee is presumed to be disabled as a matter of law - but whether they are perceived to have an impairment which is likely to have a substantial effect on their ability to carry out normal day-to-day activities in the future.
This decision confirms that claims can be brought based on a perception of disability.
This case highlights the dangers of making assumptions about an employee’s health when making decisions relating to their employment, particularly where the employee has or could develop a progressive condition. Instead, employers should base their decisions on medical advice on the employee's condition.
3. Gender equality roadmap published
The Government Equalities Office has published Gender equality at every stage: a roadmap for change which sets out the Government's proposals to tackle eight key drivers of gender inequality.
The key proposals to tackle gender inequality include:
Strengthening equality legislation
- A consultation on the effectiveness of workplace sexual harassment legislation, including whether to extend the three-month time limit for bringing discrimination and harassment tribunal claims.
- Technical guidance by the Equality and Human Rights Commission on sexual harassment and harassment at work (to be published later this year) which will form the basis of a statutory code of conduct.
- A review of the enforcement of equal pay legislation to maximise its efficiency.
- The publication of a Gender Equality Monitor to monitor issues relating to gender equality.
- Setting up a collaborative taskforce of employers and other bodies to tackle the workplace culture which breeds pregnancy and maternity discrimination.
Closing the gender pay gap
- A review of the gender pay gap reporting metrics to assess how effective they are, as well as considering what additional information should be provided by employers to increase transparency about the steps they are taking to support gender equality.
- A national campaign to provide employers with the tools to help employees balance work and care and to support progression in the workplace. Updated Government guidance will be published later this year, along with implementation guides for HR on tackling gender inequality.
Review of shared parental leave and pay scheme
The effectiveness of the shared parental leave and pay schemes is currently under review and should be completed by the end of 2019. The Government will consult on increasing the transparency of organisations' parental leave and pay policies and on improving the availability of flexible working in job adverts.
Employment rights for carers
The Government confirms its manifesto commitment to launch a consultation on a new right to carers' leave, although no timeframe is given.
The Government plans to monitor the impact of equalising participation rates in workplace pension schemes to tackle the structural inequalities that lead to the private pensions gap.
This roadmap suggests that the Government is serious about trying to tackle gender inequality in the workplace. But as the proposals include potential changes to employment law it is unlikely that these changes will happen quickly.
4. #Metoo: Recommendations on confidentiality clause in discrimination and harassment cases
The Women and Equalities Select Committee has now published its report, making a number of recommendations, which comes after the Government's consultation on the regulation of non-disclosure agreements (NDAs) in cases of workplace harassment and discrimination.
Following the Select Committee's report on sexual harassment in the workplace in July 2018, it launched an inquiry into the use of confidentiality and non-disparagement provisions - often referred to as NDAs - in settlement agreements in discrimination and harassment cases.
This latest report makes a number of recommendations, including:
- The Government should consider requiring employers to investigate all discrimination and harassment complaints, and there should be guidance on investigating these - even if a settlement agreement is agreed.
- New legislation should be introduced within 12 months requiring employers to provide a reference for all former employees that confirms, as a minimum, their dates of employment.
- New legislation should ensure that NDAs do not suppress legitimate discussion about discrimination or harassment allegations. If individuals raise allegations of unlawful discrimination or harassment, then in addition to being able to discuss certain issues with nominated close family and friends, they should be able to decide whether to tell a new employer why they left their previous employment. Also, NDAs should not prevent individuals from sharing information that may be helpful to another employee's harassment or discrimination claim.
- The Committee welcomes the Government's proposal in its consultation that the legal advice required for a settlement agreement - on its terms and effect - should be extended to cover the nature and limitations of any confidentiality clause and the disclosures an individual can make.
- Employers should have to appoint a named senior manager to oversee discrimination and harassment policies, and the use of NDAs in such cases.
- Employers should have to collect data and report on:
- the number and type of discrimination and harassment complaints and their outcomes, and
- the number of NDAs entered into and the type of dispute they relate to.
- The three month time limit for bringing sexual harassment, pregnancy or maternity discrimination claims should be extended to six months.
- A review of whistleblowing laws should consider the issue of when a disclosure would be in the public interest, and therefore qualify for whistleblower protection, particularly when the disclosure is of a single act of discrimination against an individual.
It seems unlikely that the Government will accept all the Committee's recommendations, given that they are far-reaching and some have already been rejected by the Government. Some of the more onerous proposals which the Government will probably be reluctant to endorse include making employers pay additional legal costs to negotiate confidentiality provisions and introducing additional reporting requirements for employers, particularly as gender pay gap reporting may be extended to smaller employers and the ethnicity pay reporting may also be introduced.
5. #Metoo Government consultation on harassment in the workplace
As promised (see Gender equality roadmap above), the Government published a further consultation on 11 July 2019 to explore some of the concerns raised by the Women and Equalities Select Committee in their 2018 report. This follows the consultation earlier this year on the use of NDAs and wider confidentiality clauses in sexual harassment cases.
The consultation acknowledges that sexual harassment in the workplace persists at "a startling rate", despite the strong and clear protections provided by the Equality Act 2010. The Government is now exploring the concerns raised by the Select Committee, with a view to ensuring that our legislation is operating effectively.
The consultation explores:
- the evidence for the introduction of a mandatory duty on employers to protect workers from harassment and victimisation in the workplace
- how best to strengthen and clarify the laws in relation to third party harassment
- whether interns are adequately protected by the Equality Act
- the evidence for extending the protections of the Equality Act to volunteers
- the evidence for extending Employment Tribunal time limits in the Equality Act from three months.
The current consultation is open until 2 October 2019.
The Government will be carrying out a survey over the summer to help it target and tailor its proposed solutions.
This consultation suggests that the government is committed to doing more to try and tackle sexual harassment in the workplace.