Emplaw Monthly - End of June 2019
NEW ARTICLES FROM OUR AUTHORS
Voluntary overtime and holiday pay
An article from Emplaw authors, Lewis Silkin, discussing the recent Court of Appeal decision in East of England Ambulance Service NHS Trust v Flowers confirming when the Working Time Directive requires voluntary overtime to be included in holiday pay, plus WTD tips for employers
Working Time: what records must employers keep?
An inciteful article from Emplaw authors, Gowling WLG, taking a look at the recent CJEU ruling that, in order to comply with the EU Working Time Directive, employers are obliged to maintain reliable records, and how the decision may affect UK employers.
For the Emplaw case summary and link to full report, click here
Podcast - Prove it: Some thoughts on the burden of proof in equality law after Efobi
A podcast from barristers at Cloisters discussing the practical ramifications of the Court of Appeal decision in Efobi, including what evidence each party is expected to present or seek in discrimination claims for the purpose of Stage 1, and the extent of the assistance a litigant in person can expect from a tribunal
The EU gets Transparent and Predictable
An article from Emplaw author Colin Lekey from Lewis Silkin with 10 key takeaways from the EU’s Transparent and Predictable Working Conditions Directive . The Directive has been passed by all parts of the EU’s legislative machinery and Member States have until mid-2022, to implement it into domestic law. Depending on the final shape of Brexit or not, the UK may or may not be obliged to comply with the Directive but it has already shaped UK legislation with regards to new requirements for written statements coming into force next year.
FOCUS ON EMPLAW
A year on from the introduction of GDPR and the DPA, retaining a grasp of the detail is a challenge. Our helpful cards and definitions are an invaluable tool
With working time holiday and record keeping headlining our articles this month, see our Key card on the Working Time Regulations which links to related cards on all aspects including holiday.
REPORTS AND CONSULTATIONS
EHRC report on Access to legal aid for discrimination cases
An Equality and Human Rights Commission report warns that victims of discrimination are denied justice and perpetrators are going unchallenged under the current legal aid system.
Currently, while legal aid is available for advice and representation in certain types of discrimination case, it does not cover representation in the Employment Tribunal, although ‘exceptional case funding’ (ECF) can be granted for any case where it is necessary to avoid a breach of a person’s human rights or EU rights.
The EHRC report, issued as a result of their inquiry into access to legal aid, highlights the inadequacy of legal aid for discrimination cases since the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) came into force in 2013. Since LASPO, anyone seeking legal aid for a discrimination issue must do so through a phone line known as the Telephone Gateway. If they are then assessed as unsuitable for telephone advice, they should be referred for advice face-to-face.
In February 2019, the government published its own Post-Implementation Review of LASPO and a subsequent action plan which committed the government to remove the mandatory requirements from the telephone gateway for discrimination (as well as debt and special educational needs) by Spring 2020.
The EHRC report finds that between 2013/14 and 2017/18 no workplace discrimination cases received legal aid funding for representation in the employment tribunal, and only 1 in 200 cases taken on by discrimination specialists received funding for representation in court. The EHRC considers that justice requires bringing Employment Tribunal representation into scope for discrimination cases, subject to appropriate criteria regarding merits and complexity. However, it recognises that this is a long-term aspiration requiring changes to legislation and recommends that, as an intermediate step, the ECF guidance should be amended to clarify how applications for funding in the Employment Tribunal should be approached. It also recommends more changes to the Telephone Gateway.
Final report of the Independent Review of the Modern Slavery Act 2015
The review of the Modern Slavery Act 2015 disclosed that there are too few convictions being handed down for the new offences prosecuted under the Act and too few Slavery and Trafficking Prevention and Risk Orders are in place to prevent offender activity.
The report recommends putting teeth into the Act so that all businesses take seriously their responsibilities to check their supply chains. The recommendations include the following:
- Companies should not be able to state that they have taken no steps to address modern slavery in their supply chains
- The six areas of reporting currently recommended in guidance should be made mandatory
- The Government should set up a central repository for statements
- The Independent Anti-Slavery Commissioner should monitor transparency
- There should be an enforcement body which can enforce sanctions against non-compliant companies
- The Companies Act 2006 should be amended to include a requirement for companies to refer to their modern slavery statement in their annual reports and failure to do so should be an offence under the Company Directors Disqualification Act 1986
Report on the use of NDAs in discrimination cases
The House of Commons Women and Equalities Committee has published a report on the use of non-disclosure agreements in discrimination cases. The report follows an inquiry it launched in November 2018 and shows that in many cases signing a NDA is not benign and the committee challenges the Government to act to change this now.
The report in context
The inquiry followed on from WEC’s report on sexual harassment in the workplace in July 2018 which called for NDAs to be better controlled and regulated, and condemned their use in sexual harassment cases where the effect is to prevent the victim from ever being able to talk about what has happened.
Before that, in March 2018, The Equality and Human Rights Commission (“EHRC”) produced a report on sexual harassment at work which recommended that any contractual clause preventing disclosure of future acts of discrimination or harassment should be void. The EHRC also proposed a statutory code of practice setting out the circumstances in which confidentiality clauses preventing disclosure of past acts of discrimination or harassment will be void.
Also in March 2018, the Solicitors Regulation Authority (SRA) published a warning notice on the use of confidentiality agreements which highlights the obligations on solicitors as regards NDAs both when their firm is considering an NDA with someone who has complained but also when advising clients on NDAs with individuals. The topic was also covered in the SRA’s report on Balancing duties in litigation in November 2018 which examines the ways in which misconduct can arise and a Practice Note in January 2019
In March the government launched its own consultation on Confidentiality clauses: measures to prevent misuse in situations of workplace harassment or discrimination. The consultation closed on 24th April and the government response is awaited. Whilst accepting that NDA’s can serve a legitimate purpose as part of the employment contract and Settlement Agreements, the consultation was about understanding the legal framework and to assess the changes required to ensure individuals are protected. There are of course existing limits to NDAs in that they can’t exclude whistleblowing protections and confidentiality obligations are subject to a necessary quality of confidence . Proposals in the consultation include:
- to legislate so that no confidentiality clause can prevent a person making any disclosure to the police
- to require that confidentiality clauses clearly set out their limitations, either in settlement agreements or as part of a written statement of particulars
- to extend the obligations of the independent adviser in a Settlement agreement to ensure the worker receives advice specifically on any confidentiality provisions within the agreement, and its limitations
- that any confidentiality clause in a settlement agreement that does not meet new wording requirements is made void in its entirety.
The key recommendations for governement from this latest WEC report:
• ensure that NDAs cannot prevent legitimate discussion of allegations of unlawful discrimination or harassment, and stop their use to cover up allegations of unlawful discrimination, while still protecting the rights of victims to be able to make the choice to move on with their lives;
- require standard, plain English confidentiality, non-derogatory and similar clauses where these are used in settlement agreements, and ensure that such clauses are suitably specific about what information can and cannot be shared and with whom;
- strengthen corporate governance requirements to require employers to meet their responsibilities to protect those they employ from discrimination and harassment; and
- require named senior managers at board level or similar to oversee anti- discrimination and harassment policies and procedures and the use of NDAs in discrimination and harassment cases.
It also renews calls for the Government to:
- place a mandatory duty on employers to protect workers from harassment and victimisation in the workplace; and
- urgently improve the remedies that can be awarded by employment tribunals as well as the costs regime to reduce disincentives to taking a case forward. Tribunals should be able to award punitive damages, and awards for the non- financial impact of discrimination should be increased significantly.
Institute of Employment Rights and ASLEF launch new On Track with Diversity report
Train drivers union ASLEF launched a new report On Track with Diversity which is produced by The Institute of Employment Rights, is an update on a 2012 report produced by them for ASLEF. The 2019 edition reviews the progress made since the recommendations 2012 report
Legislation and Litigation
Executive Pay and Remuneration Report Regulations
Companies (Directors’ Remuneration Policy and Remuneration Report) Regulations 2019
The Companies (Directors’ Remuneration Policy and Remuneration Report) Regulations 2019 came into force on 10 June 2019.
The Regulations implement in part EU Directive 2017/828 (commonly known as the Revised Shareholder Rights Directive) regarding the encouragement of long-term shareholder engagement. The Companies Act 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended) already provide a legal framework in the UK for the approval of and voting on directors’ remuneration and this legislation currently applies to quoted companies, which includes traded companies unless they are unquoted companies. These regulations bring unquoted traded companies within scope of the existing legal framework. The regulations implement Articles 9a and 9b of EU Directive 2017/828/EC.
The requirements in Articles 9a and 9b that were not previously given effect in UK law, and which are introduced through the new regulations, are summarised below:
A. Remuneration policy:
- Certain additional detail to be provided on when shares indicatively awarded to directors may be granted or exercised, in particular by providing information on vesting periods, and on any holding or deferral periods;
- The policy must provide an indication of the duration of directors’ service contracts;
- The policy must set out the decision-making process through which it has been determined, and highlight key changes compared to the previous policy;
- The company must put the date and results of the shareholder vote on the new policy on its website as soon as reasonably practicable;
- If the company loses the shareholder vote on the policy, it must bring a revised policy to another vote within a year.
B. Renumeration report:
- The report must compare the annual change of each director’s pay to the annual change in average employee pay, over a rolling five year period;
- The report must show the split of fixed and variable pay for each director, as two additional columns to the existing ‘Single Figure’ table;
- The report must set out any changes made to share options granted or offered and the main conditions for the exercise of these rights including the exercise price and date, compared to the previous year;
- The report must be freely available on the company’s website for ten years;
- Remuneration reports must not include any sensitive personal data, revealing racial or ethnic origin, political opinions or religious beliefs
In addition to introducing those requirements in Articles 9a and 9b of the Directive that are not already enacted in UK law, the regulations make some amendments to the Companies Act to ensure that the Directive’s requirements are compatible with the UK’s existing executive remuneration reporting framework, as summarised below.
Scope: Section 430 and related sections of the Companies Act are amended to provide that the directors’ remuneration policy and remuneration report requirements under the Act apply to both quoted companies and to traded companies whether quoted or unquoted. This is to ensure consistency between the UK’s existing directors’ remuneration reporting requirements under the Act, which apply to quoted companies, and the requirements of the Directive, which apply to traded companies.
Directors’ remuneration payments: Section 226B(1)(b) and related sections of the Companies Act are amended by the new regulations to provide that shareholder approval of proposed payments to directors that would otherwise be out-with the existing approved remuneration policy results in an amended, approved policy for the purpose of those payments. This is to ensure that the continuing use of the shareholder voting power under section 226B(1)(b) is consistent with the Directive’s requirement that all payments to directors must be in accordance with an approved remuneration policy. Shareholders will only be approving the amendment to the policy. This will not be regarded as approval of a new policy the purposes of section 439A of the Companies Act.
BEIS has also published a Q&A document to help companies understand the reporting requirements under these Regulations.
Executive rewards: paying for success
BEIS has also earlier this month published the Government’s response to the Committee’s report on Executive rewards: paying for success. The response states that in the light of new Regulations above and other reforms including strengthening of UK Corporate Governance Code and The Companies (Miscellaneous Reporting) Regulations 2018 , that ‘Our immediate priority is to focus on the effective implementation and then assessment of these reforms before considering any significant further changes’.
Interestingly, the response to the BEIS recommendation that companies should be required to appoint at least one employee representative to the remuneration committee, simply refers to the strengthening of the UK Corporate Governance Code which apples to Premium listed companies and which now expects remuneration reports to include an explanation of “what engagement with the workforce has taken place to explain how executive remuneration aligns with wider company pay policy.”. Similarly, in response to the BEIS recommendation that ‘ pay ratio reporting requirements be expanded to include all employers with over 250 employees and that the lowest pay band be included alongside the quartile data required’ , it was stated that the ratio disclosure requirement introduced last year by the government (under the Companies (Miscellaneous Reporting) Regulations 2018) for quoted companies is a significant reform.
For more information on the recent reforms see the Emplaw Law Card Company Directors
Employment tribunal statistics
The statistics from the Ministry of Justice for the first quarter of 2019 show an increase of 6% in receipts of single Employment Tribunal claims and 13% in receipts of multiple claims cases compared to first quarter 2018. This continues the increase in claims since the abolition of tribunal fees in July 2017, although in most categories (including sex discrimination and redundancy), they remain significantly below what they were when fees were introduced in 2013, no doubt in part as a result of the Acas pre-claim conciliation process introduced in April 2014.
The figures ,unsurprisingly for most practitioners, show that single claim cases took an average of three weeks longer to dispose of than the same time last year, that is 30 weeks, rather than 27 as Tribunals try and cope with the increase in claims and as the recent employment judge recruitment exercise settles in.. The figures do however show that the average length of time for disposal of multiple claim cases (which represent less than 10% of the total number of claims) were down from 245 weeks to 126 weeks.
The figures also show that £17.3 million has been paid out in ET Fee refunds since the launch of the refund scheme to 31 March 2019. Of 22,000 applications for refunds received, 21,700 refund payments were made.
For those with an interest in this area, the EAT judgment in Dray Simpson v Cantor Fitzgerald Europe sets out a useful review of the law around whistleblowing in the employment context.
Use of information on employee’s mobile found by police was not a breach of Article 8 ECHR
This case, before the European Court of Human Rights concerned Mr Garamukanwa’s dismissal by a NHS Trust after an investigation for harassment based on photographs stored on his iPhone, and on emails and WhatsApp correspondence.
Whistleblowing - EAT upholds ET’s decision that claimant had subjective belief in breach of a legal obligation although those words were not used
Elysium is a provider of hospitals with specialist treatment programmes for patients detained under the Mental Health Act. Elysium appealed against an ET decision upholding Mr Ogunlami’s claim of public interest disclosure detriment pursuant to section 47B Employment Rights Act 1996.