EMPLOYMENT RIGHTS What s happened so far?

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1 Legislation, consultation papers, ministerial announcements, important cases keeping track of what s been happening in employment law since January 2012 The first half of 2012 has been a confusing time for those trying to keep up with current and future changes to employment law. As well as new legislation coming into effect, and the usual case-law developments, there have been numerous consultations on and proposals for legislative change in the future. At the same time, previously-announced proposals for change have been left in abeyance, with uncertainty over if and when they will be introduced. In addition, there has been much speculation about changes which the government might be thinking of introducing, but which have not yet reached the stage of any formal proposals, with contradictory press reports and (sometimes) ministerial statements over initiatives which may or may not be progressed. There have also been some important developments relating to public sector pensions, including local government, and, in the case of local authorities, statutory pay policy statements. Steve Vale, HR Consultant, attempts to impose some order, by analysing and setting out a summary of changes which have actually occurred, changes which are formal proposals and changes which, whilst they may have been discussed, seem further away from being implemented. PAY POLICIES Statutory pay policy statements o The Localism Act 2011 obliged all local authorities to publish a statutory pay policy statement for the year 2012/13 by 31 st March Thereafter, they will need to review the policy (at least) annually, and publish a statement by the end of March each year, setting out their policies for the subsequent year. o The Department for Communities and Local Government published final guidance on the content of such statements on 17 th February o Among the most important implications of this guidance is an expectation that senior appointments (above a remuneration threshold) will need to be made/approved by the full Council. o The guidance was also amended at a late stage so that Councils had to state their policies on the use of contracts for services (as opposed to the use of normal contracts of employment (See, below) Taxation of senior managers o Following concerns over the number of employees in the public sector who are engaged and paid through arrangements other than straightforward contracts of employment and PAYE, HM Revenues and Customs issued a consultation paper in May 2012, setting out proposals to ensure that all senior employees of organisations, in both the public and private sectors, must be taxed as employees. 1 P a g e

2 o The Taxation of Controlling Persons consultation paper was published on 23 rd May, and the closing date for the submission of responses was 16 th August EMPLOYMENT RIGHTS Annual Leave entitlements of employees on sick leave o The case of Larner v NHS Leeds finally clarified that employees who are on sick leave continue to accrue holiday entitlement during periods of sickness absence, and have the right to carry over such leave to a subsequent year (if they are unable to take it in the same year), whether or not they make a request to take the leave. This judgment has direct effect (see below) for public sector and local authority employers, so that it is now clear that they must not only allow the carry-over of such leave (more precisely, the leave which carries over is the 4-week statutory leave which derives from the WTD), but also, if the employee leaves before they have had a reasonable opportunity to take this, make a payment in lieu of the untaken leave. o Direct effect means the judgment is based on an interpretation of the relevant EU Directive, and that the interpretation applies immediately to those employed in emanations of the state, so that the public sector, including local authorities, is bound by the implications of this case, even though the government has yet to amend the UK Working Time Regulations (WTR) on this issue. (See, below). Human rights - representation at disciplinary hearings o In the case of Mattu v University Hospitals of Coventry & Warwickshire NHS Trust, the Court of Appeal has confirmed that legal representation for an employee at a disciplinary hearing will only be a requirement if a possible outcome is a legal termination of the employee s right to carry on their profession. The fact that the employee may be unlikely to secure another job as a result of being subject to disciplinary action does not, of itself, constitute a legal termination of that right. Annual Leave entitlements of employees on sick leave o In the 2011 Modern Workplaces consultation paper, the government acknowledged the need to amend the WTR to permit carry-over of annual leave which was untaken because the employee was off sick. The government consulted on a proposal to allow employers to limit the ability to carry over annual leave to the four weeks required under the EU Working Time Directive, i.e. excluding the additional 1.6 weeks required by the WTR and any further contractual leave. o The government has yet to announce its response to this consultation, and has not indicated how it intends to proceed. Whistle blowing o Following the Employment Appeal Tribunal decision in the case of Parkins v Sodexho that an individual raising a concern about their personal employment contract could be protected by current whistle blowing legislation, the government is proposing to introduce a provision into the Enterprise & Regulatory Reform Bill to prevent employees from being able to blow the whistle about their employment contracts, by restricting protection to situations where the disclosure is made in the public interest. 2 P a g e

3 The Agency Workers Regulations o In March 2012, the government announced that it intends to review the paperwork obligations of the Agency Workers Regulations in This review will look to expose any unnecessary and burdensome paperwork obligations which are not required by law, with a view to removing them. National Minimum Wage increases o The government has confirmed that, as from 1 st October 2012, the national minimum wage (NMW) for adults (age 21 and over) will rise to 6.19 per hour (it is currently 6.08 per hour). The rate for apprentices will rise to 2.65 per hour (from 2.60 per hour) on the same date. The national minimum wage rates for younger workers will not be increased in October, and will remain at their current levels: 3.68 per hour for year olds 4.98 per hour for year olds. What s been the subject of speculation? Working Time Regulations o There is still periodic speculation over the EU taking action to end the opt-out from the absolute 48-hour limit on the working week, but there are no firm proposals on this. (The European Commission has recently agreed to extend the period for the European social partners to agree on reform of the Working Time Directive to 31 December 2012).The UK government can be expected to mount vigorous resistance to any such action. Consultation on UK Bill of Rights o The Commission established by the government in March 2011 to investigate the creation of a UK Bill of Rights and to provide advice on reform of the European Court of Human Rights issued a consultation in July, asking for views on whether a United Kingdom Bill of Rights would be beneficial, and what form any such Bill might take. The consultation period runs until 30 September It is not clear whether any legislation introduced would have an employment rights dimension, although this is a possibility. TUPE No changes to TUPE have been made in No formal or specific proposals for change have been announced. What s been the subject of speculation? Possible TUPE review affecting service provision changes o For some time the government has expressed concern at the complex nature of the current TUPE regulations, highlighting the fact that some businesses believe they go beyond what European law requires and are overly bureaucratic. This includes disquiet over the inclusion of service provision changes. In November 2011 the Department for Business Innovation & Skills 3 P a g e

4 (BIS) published a call for evidence on the effectiveness of the current Regulations, which were introduced in The call for evidence ended on 31 January 2012, but the outcome is not yet known, nor is it clear whether the government will move on to formal consultation on possible changes to TUPE. DISMISSALS Unfair dismissal qualification o An increase in the qualifying period for unfair dismissal claims to two years applied to all employees whose employment commenced on or after 6 April Employees whose employment started before 6 April will remain subject to the one-year qualifying period. This means that: an employee with 12 months' continuous employment on 6 April will not lose their right to claim unfair dismissal; an employee with 11 months' service on that date will have been able to bring a claim from May 2012 onwards; an employee with 1 months service on 6 April would need to work for a further 11 months before they are able to bring a claim. Redundancy - reduction in hours o The case of Packman t/a Packman Lucas Associates v Fauchon has led to an important change in the approach taken by the Courts in determining whether an employee who is asked to work reduced hours in response to a drop in workload is potentially redundant. In this case, the Employment Appeal Tribunal (EAT) held that where the amount of work available for the same number of employees is reduced, the dismissal of an employee wholly or mainly for that reason is by reason of redundancy, even if the employer is not proposing a reduction in employee numbers. This appears to reverses the previous case-law position to the effect that there can be no redundancy situation if the employer does not seek to reduce the number of employees. It means that there are now two conflicting EAT decisions, so clarification by the Court of Appeal would be welcomed Redundancy - changes to collective consultation rules o The government is consulting on changing the rules on collective redundancy consultation. It proposes to: reduce the 90-day minimum consultation period for redundancies of 100 or more employees to either 30 or 45 days (the minimum consultation period for redundancies of 20 to 99 employees is 30 days); issue a new, non-statutory, Code of Practice on how to conduct redundancy consultations; improve guidance for employers and employees on the support on offer from government. Consultation closes on 19 September 2012, and it is expected that changes will be implemented as a result. 4 P a g e

5 What s been the subject of speculation? No-Fault Compensated Dismissals o In March 2012, the government launched a call for evidence on the possibility of introducing a new system of no-fault compensated dismissals. The call for evidence closed on 8 June 2012, but it has since been announced that this proposal will not be pursued, other than (possibly) for very small businesses. EMPLOYMENT TRIBUNALS Changes in rules o From 6 April: The Employment Tribunals Act 1996 (Tribunal Composition) Order 2012 enables employment judges to sit alone when hearing unfair dismissal cases. The Employment Tribunals (Constitution and Rules of Procedure) (Amendment) Regulations 2012 made the following amendments to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004: increase the maximum limit at which deposit orders can be made from 500 to 1000, if the employment judge considers that a claim has a limited chance of success at tribunal; give employment judges and tribunals a power to order a party to pay the expenses incurred by a witness in attending a tribunal to give evidence; increase the maximum limit at which judges can award costs to either party from 10,000 to 20,000; change the rules on witness statements in the employment tribunal so that they shall be taken as read, meaning that a witness statement will not be read out in its entirety unless directed by the employment judge. Equality Act repeal of tribunal powers to make recommendations o The Equality Act 2010 contained a provision which, if implemented, would have given employment tribunals powers to make wider recommendations to an employer, e.g. to introduce an equal opportunities policy, retrain staff, or to make public the selection criteria used for transfer or promotion of staff. The government is proposing to repeal this provision, so these powers will not now be introduced. (Employment tribunal judges would still be able to make recommendations for the benefit of the individual claimant.) But the government has said that it intends to give tribunals powers to require employers to undertake equal pay audits in certain circumstances see Equalities Compulsory Equal Pay Audits, below. Fees o The government intends to introduce fees for bringing claims to an employment tribunal in the second half of There will be a 2-tier fee structure, with more straightforward claims, such as those for redundancy payments and unauthorised deduction of wages subject to an initial fee of 160 when the claim is made, and a further 230 at the hearing stage. More complex claims (including unfair dismissal and discrimination claims) will be subject to fees of 250 initially and a further 950 at the hearing stage. 5 P a g e

6 Further changes in rules o The government has confirmed that it will consult later in 2012 on the changes to employment tribunal rules proposed by Mr Justice Underhill, following his fundamental review of the current rules. The changes include: Sifting out weak cases at an earlier stage; Provision for lead cases in multiple claims; Provision for better guidance to tribunals; Stricter timetables in hearings. DISPUTES RESOLUTION No changes have yet been made in The government published the Enterprise and Regulatory Reform Bill on 23 rd May 2012, and this contains a number of proposed provisions relating to employment disputes and their resolution: Mandatory ACAS conciliation o Other than in certain circumstances, a prospective claimant must first have submitted the details of their claim to ACAS before they can lodge the claim at an employment tribunal. Power to Secretary of State to increase/decrease limit on unfair dismissal compensatory award o To confer a power on the Secretary of State to amend section 124 of the Employment Rights Act 1996 to increase or decrease the limit on the compensatory award for unfair dismissal. It is not clear yet how this power will be used. Penalties on employers o That a financial penalty could be imposed on an employer for a breach of an employee s statutory rights, irrespective of the nature of any remedy awarded to the claimant. It is proposed that any financial penalty imposed would be at least 100 and would not exceed 5,000. Settlement agreements to replace compromise agreements o Proposed change to the rules for the use of compromise agreements. A key aspect of the changes is that compromise agreements will be renamed settlement agreements. Once the provisions are introduced, employers will be able to offer employees a settlement agreement to terminate their employment, irrespective of whether any dispute between them has arisen. If the employee rejects the offer, he or she will be not able to use the fact that the employer made the offer at any subsequent employment tribunal hearing. Standard settlement agreement forms for both employers and employees will be introduced. The government is also proposing to simplify the statutory requirements for compromise agreements to be valid by removing the requirement for them to set out a detailed list of the causes of action to be compromised. This measure will enable settlement agreements to cover both existing and potential future claims. 6 P a g e

7 What s been the subject of speculation? ACAS Code of Practice on Discipline & Grievance o In March 2012, the government issued a call for evidence on whether the current ACAS Code of practice should continue to apply to small businesses or whether an alternative model that sets out similar principles to the Code but seeks to provide greater certainty for such organisations in handling the dismissal stage of a disciplinary process should apply. The call for evidence closed on 8 th June, and the government s intentions are not clear, but any changes are likely to affect only small businesses with fewer than 10 employees. EQUALITIES Equality Act Specific Duties publication of information o The Equality Act 2010 required relevant public authorities other than schools to publish information to demonstrate their compliance with the Equality Duty by 31 st January 2012; schools were required to publish information by 6 April o All public authorities, including schools, were required to publish their equality objectives by 6 April Equality Act - repeal of socio-economic duty and dual discrimination provisions o The Equality Act 2010 contained provisions to create a socioeconomic duty for public bodies (requiring them to analyse the socioeconomic implications of decisions) and to implement specific provisions to tackle dual discrimination. The government has confirmed that it will not be implementing these provisions and that they will be repealed. On 15 May 2012, the government issued a consultation paper proposing to amend certain provisions of the Equality Act 2010: Abolition of employers liability for harassment o Removing the third party harassment provisions in the Act, whereby employers can be liable for the unlawful harassment of their employees by third parties. Abolition of the statutory questionnaire procedure o Amend the procedure for someone who thinks that they may have been unlawfully discriminated against, harassed or victimised, to obtain information from the person (for example, an employer or service provider) who is thought to be responsible for the unlawful treatment. For employers, this would mean the end of the standard questionnaire procedure to support a discrimination claim, although it would not remove the right of potential claimants to ask questions and seek information by other means. Compulsory Equal Pay audits o The government has now announced that it intends to implement powers for employment tribunals to order employers to undertake equal pay audits in circumstances where they lose an equal pay claim. An employment tribunal which finds that an employer has discriminated on the 7 P a g e

8 grounds of sex in contractual or non-contractual pay matters will be obliged to order a pay audit where continuing discrimination is likely. However, an audit would not be ordered if one has been completed in the last three years, the employer has transparent pay practices, or can show a good reason why an audit would not be useful. Failure to comply with an audit would result in a financial penalty, which would be a variation on that contained in the Enterprise and Regulatory Reform Bill (see Disputes Resolution, above), which provides for tribunals to impose a financial penalty on employers who have breached workers employment rights. Further details on how the audits will operate, their content and what employers will be expected to publish will be the subject of consultation later this year. Review of Equality Duty o On 15 May 2012, the Home Secretary announced a review of the public sector equality duty, as part of the outcome of the government s Red Tape Challenge spotlight on equalities. The review will establish whether the equality duty is operating as intended. This announcement brings forward a planned review of the Equality Act (Specific Duties) Regulations 2011, which the government had committed to undertake by late It now combines this with a planned review of the general equality duty which would have formed part of the Equality Duty review in 2015, as provided for within the Equality Act. The government anticipates that by commencing the review at an earlier stage, this work can be completed by April Reform of the Equality and Human Rights Commission o The government has now indicated its response to its 2011 consultation on reforming the Equality and Human Rights Commission. It has decided to amend the Equality Act at the earliest opportunity to remove the requirements for the Commission to exercise its functions with a view to developing a fairer society, to promote good relations between different groups, and to undertake activities to promote good relations. It will retain its other equality and diversity and human rights roles. What s been the subject of speculation? Abolition of the Equality and Human Rights Commission o In announcing its proposals on reform of the Commission, the government indicated that, in parallel with the reforms, it would be implementing a strong package of non-legislative measures, including: recruiting a new chair and a smaller board; conducting a comprehensive review of the EHRC's budget; implementing tighter performance and financial controls. It indicated that it will review the EHRC's progress on these issues in the autumn of This has led to speculation that insufficient progress could lead to scrapping the present Commission, with its responsibilities split across new or existing bodies. 8 P a g e

9 FLEXIBLE WORKING AND FAMILY FRIENDLY POLICIES No changes have yet been made in Flexible working right for all employees o The government has yet to announce its response to the consultation within the Modern Workplaces document on the introduction of a right to flexible working for all employees with 26 weeks service, and it remains uncertain if/when such a right will be introduced. New parental leave system/ Increased parental leave as a result of the EU Directive on Parental Leave o Legislation to implement the EU Directive s requirements to extend workers' rights to parental leave from three to four months for each parent has been postponed until March 2013, so that it can be implemented alongside other changes to the maternity/paternity/parental leave which were the subject of the Modern Workplaces consultation. The government has yet to announce its response to this consultation, and it is not yet clear what changes will be implemented. PENSIONS Automatic enrolment in pension schemes o Automatic enrolment in pension schemes will be phased over a period starting in October 2012, creating s a requirement for employers to enrol employees in a qualifying workplace pension scheme. The Local Government Scheme will be a qualifying scheme, and automatic enrolment provisions already exist within the scheme. Changes to the Local Government Pension Scheme o On 31 st May, the Local Government Association (LGA) and trade unions announced the outcome of their negotiations on new LGPS proposals (for England and Wales) to take effect from 1 April These proposals are now being communicated to scheme members, employers, funds and other scheme interests. Unions are consulting their members over these proposals and the LGA are consulting individual Council employers. The government has confirmed that a favourable outcome of these consultations will enable it to move directly to a statutory consultation later in the autumn to implement the proposals. o The main provisions of the proposed LGPS 2014 are a Career Average Revalued Earnings (CARE) scheme using CPI as the revaluation factor (the current scheme is a final salary scheme). 1. The accrual rate would be 1/49th (the current scheme is 1/60th). 2. There would be no normal scheme pension age, instead each member's Normal Pension Age (NPA) would be their State Pension Age (the current scheme has an NPA of 65). 3. Average member contributions to the scheme would be 6.5% (the same as the current scheme) with the rate determined on actual pay (the current scheme determines parttime contribution rates on full time equivalent (FTE) pay). While there would be no change to average member contributions, the lowest paid would pay the same or less 9 P a g e

10 and the highest paid would pay higher contributions on a more progressive scale after tax relief. 4. Members who have already or are considering opting out of the scheme could instead elect to pay half contributions for half the pension, while still retaining the full value of other benefits. This is known as the 50/50 option (the current scheme has no such flexible option). 5. For current scheme members, benefits for service prior to 1 April 2014 are protected, including any remaining Rule of 85' protection. Protected past service continues to be based on final salary and current NPA. 6. Where scheme members are outsourced they will be able to stay in the scheme on first and subsequent transfers (currently this is a choice for the new employer). All other terms remain as in the current scheme. CRIMINAL RECORD DISCLOSURES AND BARRING Changes to criminal records and barring systems o The government is scaling back the criminal records and barring systems to ensure fair and proportionate regulation of those who want to work with vulnerable groups. The changes are included in the Protection of Freedoms Act 2012, which received Royal Assent in May The following changes in the Act will come into effect on 10 September 2012: new definition of regulated activity (people engaged in regulated activity have the most contact with vulnerable groups); repeal of controlled activity (people engaged in controlled activity have less contact with vulnerable groups); repeal of registration and continuous monitoring of those working with vulnerable groups; repeal of additional information (provided by the police to employers but not to applicants) although police may still provide such sensitive information under common law; minimum age (16) at which someone can apply for a CRB check; more rigorous relevancy test for when the police release information held locally on an enhanced CRB check. As the above analysis makes clear, there is a great deal of change in the pipeline, and some of the impending changes seem to be taking a long time in moving from the consultation to the implementation stage. The fact that there is often speculation about further changes in the meantime can often lead to confusion. Hopefully, this analysis will help HR professionals distinguish things they need to prepare for from those which are maybe less likely to occur. Steve Vale is a Consultant in Human Resources and is a regular contributor to Croner-i HR for Local Government. Croner-i HR for Local Government is an on-line employment law and practice reference source designed specifically for HR Managers and their teams in local government. 10 P a g e