NEWSLETTER APPEAL TRIBUNAL RULES THAT EMPLOYERS MUST CONSIDER RESULTS-BASED COMMISSION WHEN CALCULATING HOLIDAY PAY EMPLOYMENT.

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1 NEWSLETTER EMPLOYMENT APPEAL TRIBUNAL RULES THAT EMPLOYERS MUST CONSIDER RESULTS-BASED COMMISSION WHEN CALCULATING HOLIDAY PAY In British Gas Trading Ltd v Lock, the Appeal Tribunal has upheld an Employment Tribunal s decision that results-based commission payments should be included when calculating holiday pay in respect of the four weeks minimum holiday granted by the EU Working Time Directive. Jesper Christensen (Partner) E jesperchristensen@bdb-law.co.uk T +44 (0) Mr Lock worked as a salesman for British Gas. He received basic pay plus commission depending on sales achieved which amounted to around 60% of his total remuneration. When Mr Lock took annual leave, he was paid his basic salary plus the sales commission which fell due during that holiday period. However, when he returned to work, his income was reduced because he could not generate any commission whilst on leave. Mr Lock s claim that this reduction breached the Working Time Regulations 1998 was referred to the European Court of Justice (ECJ). The ECJ agreed with him, ruling that results-based commission must be included in holiday pay to avoid workers being deterred from taking annual leave, which would be contrary to the purpose of the Directive. However, the ECJ left national courts to decide the appropriate reference period for calculating commission. Mr Lock s case returned to the Employment Tribunal which held that in order to give effect to the ECJ s decision, the provisions relating to the calculation of a week s pay should be rewritten to include commission and similar payments in statutory holiday pay. British Gas then appealed against this decision. As expected, British Gas s appeal has now been dismissed. The Appeal Tribunal followed its earlier decision in Bear Scotland Ltd v Fulton that non-guaranteed overtime must be taken into account when calculating holiday pay, confirming that UK legislation must be interpreted in accordance with the EU Directive. British Gas s arguments that the Bear Scotland case could be distinguished from Lock, or Bircham Dyson Bell LLP Broadway London SW1H 0BL

2 2 was incorrectly decided, were firmly rejected by the Tribunal. The decision did not provide practical guidance on the precise compensation payable to Mr Lock, or the appropriate reference period which employers should use to calculate holiday pay for workers earning commission. In addition, it is still unclear whether bonus payments and voluntary overtime should be taken into account when calculating holiday pay. British Gas is expected to appeal to the Court of Appeal and the Fulton v Bear Scotland litigation is also continuing, so the uncertainty in this area is likely to continue for some time. Thousands of other claims are on hold pending the outcome of these cases. However, it is worth noting that claims brought after 1 July 2015 are limited to deductions where the relevant date of payment fell within two years before the claim was presented. A TEMPORARY CESSATION OF WORK WILL NOT NECESSARILY PREVENT TUPE APPLYING In Mustafa and another v Trek Highways Services Ltd and others, the Appeal Tribunal has ruled that a temporary cessation of work prior to the transfer of services to a new employer will not necessarily prevent TUPE from applying. Brian Gegg (Partner) E briangegg@bdb-law.co.uk T +44 (0) Mustafa and his co claimant were originally employed by Amey Services Ltd to carry out road maintenance in the North London region on behalf of Transport for London (TfL). In 2011, Amey sub-contracted the traffic management element to Trek Highways Services Ltd. The employees then transferred to Trek under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) as they were working wholly or mainly on traffic management services. Following a re-tendering exercise by TfL, the road maintenance contracts were awarded to Ringway Jacobs and FM Conway, to commence on 1 April 2013 when Amey s contract expired. It was broadly accepted that Trek s employees would transfer to Ringway and Conway on that date. However, in March 2013 a commercial dispute arose between Amey and Trek. This resulted in Trek suspending its operations and sending staff home on 8 March. On 20 March, the Amey/Trek sub-contract was terminated by consent and Amey took over the traffic management services for the few days remaining on the contract. Trek went into administration on 26 March When Ringway took over the TfL contract on 1 April 2013 it refused to accept that any of the employees used by Trek to deliver the TfL services had a right to transfer. Ringway argued that the service provision change rules in TUPE do not apply where a subcontract has been terminated because of a commercial dispute rather than at the request of the client. The Employment Tribunal held that there was no TUPE transfer from Trek to Amey since there had been a temporary cessation of activity between 8 and 21 March 2013, and there was no organised grouping of employees. In addition, because Amey only carried out the services for a matter of days, this was a task

3 3...THERE IS NO REQUIREMENT UNDER TUPE FOR THE EMPLOYEES TO BE WORKING IMMEDIATELY BEFORE A SERVICE PROVISION CHANGE... of short-term duration which meant that TUPE could not apply. The Tribunal also held that the suspension of work meant that there could be no subsequent transfer from Amey to Ringway or Conway. In any event, TUPE could not apply because Ringway had no specialist traffic management operatives and would have to change the structure of the traffic management services. On appeal, the Appeal Tribunal rejected almost all of Employment Tribunal s reasoning, remitting the case back to the same Tribunal. The Appeal Tribunal made several key conclusions: although a temporary cessation of activities is relevant, it is not the decisive factor. It is just one factor amongst many others. The Employment Judge had focused on the activities of the entity rather than the entity itself. In this case, the economic entity was the provision of traffic management services, which involved staff, vehicles, and equipment. Despite the temporary cessation of activities by Trek, Amey had made interim arrangements to provide the traffic management services until 1 April 2013, so the economic entity had not ceased to exist for the purposes of TUPE; there is no requirement under TUPE for the employees to be working immediately before a service provision change. It is a question of fact as to whether the organised grouping of employees retains its identity even though work has temporarily stopped; if the services are required by the client after the transfer on an ongoing basis, the short-term task exception under TUPE will not apply. The Employment Judge had misunderstood this when he concluded that this was a short-term task simply because of Amey s very brief involvement prior to the expiry of its contract with TfL; TUPE can still apply if the transferee integrates the transferring employees into a different organisational structure. What matters is whether the employees are undertaking the same economic activity; and Tribunals may need to consider a party s motives in refusing to take on employees. Here, the Employment Judge had failed to examine evidence that Ringway Jacobs had, from the outset, sought to avoid the application of TUPE. Ringway s argument that TUPE did not apply where a sub-contract was terminated because of a commercial dispute was irrelevant. The decision shows that a temporary cessation in activities is only one of the many relevant factors to consider when assessing whether TUPE applies. This case also illustrates the difficulties that can arise when parties do not agree in advance of a change in service providers whether TUPE applies and what is to happen to employees. Addressing uncertainty through legal action is clearly very costly, both financially and commercially.

4 4 LIFTING CASES OF UP TO 25KG CLASSIFIED AS A NORMAL DAY- TO-DAY ACTIVITY The Appeal Tribunal s recent decision in Banaszczyk v Booker Ltd has highlighted the difficulties involved in assessing what constitutes a day-to-day activity for the purposes of the Equality Act Aisleen Pugh (Associate) E aisleenpugh@bdb-law.co.uk T +44 (0) A disability is defined by the Equality Act 2010 as a physical or mental impairment which has a substantial and long-term adverse effect on an employee s ability to carry out normal day-to-day activities. Under EU law, disability is described as a limitation which, in interaction with various barriers, may hinder full and effective participation in professional life on an equal basis with other workers. In Banaszczyk v Booker Ltd, the Appeal Tribunal considered whether a worker s inability to manually lift and move cases of up to 25kg amounted to a disability. Mr Banaszczyk was employed by Booker as a picker in a distribution centre. Picking involved selecting, lifting and moving cases weighing up to 25kg for loading onto pallet trucks. Employees were expected to pick 210 cases per hour, known as the pick rate. The minimum accepted standard, agreed with the recognised trade union, was 85% of that figure. In 2009 Mr Banaszczyk suffered a spine injury in a car accident which resulted in long-term back pain and significant periods of absence from work. He was also unable to meet the minimum target pick rate. In 2013 an occupational physician concluded that there was no realistic prospect of an improvement and that there was a likelihood of further absences. Mr Banaszczyk was subsequently dismissed on grounds of incapability. He brought claims for unfair dismissal and disability discrimination....in DECIDING WHETHER AN ACTIVITY IS A NORMAL DAY-TO- DAY ACTIVITY, ACCOUNT SHOULD BE TAKEN OF HOW FAR IT IS CARRIED OUT BY PEOPLE ON A DAILY OR FREQUENT BASIS... A preliminary hearing was held to decide whether Mr Banaszczyk was disabled. The Employment Judge accepted medical evidence that Mr Banaszczyk s back condition impaired his performance so that he was unable to meet his pick rate, and that this was a long-term physical impairment. However, he concluded that it did not have a substantial effect on Mr Banaszczyk s normal day-to-day activities, and he was not therefore disabled for the purposes of the Equality Act Mr Banaszczyk appealed,

5 5...THE APPEAL TRIBUNAL REJECTED THE COMPANY S ARGUMENT THAT THE PICK RATE REQUIREMENT MEANT THAT WHAT MR BANASZCZYK DID WAS NOT A NORMAL DAY-TO- DAY ACTIVITY... mainly on the basis that it was wrong in law to find that his work activities were not normal day-to-day activities. The Appeal Tribunal upheld Mr Banaszczyk s appeal. It referred to the Guidance to the Equality Act which states that in deciding whether an activity is a normal day-to-day activity, account should be taken of how far it is carried out by people on a daily or frequent basis, and that normal should be given its ordinary, everyday meaning. The term is not intended to include activities which are normal only for a particular person or a small group of people. In the Appeal Tribunal s view, lifting and moving goods of up to 25kg manually is a normal day-to-day activity across a range of occupations in modern working life. The Appeal Tribunal rejected the company s argument that the pick rate requirement meant that what Mr Banaszczyk did was not a normal day-today activity. In this case the activity was the lifting and movement of goods manually. The pick rate was not the activity, but a requirement as to the speed with which the activity was performed. The Appeal Tribunal considered that the pick rate was also potentially a barrier which interacted with Mr Banaszczyk s disability to hinder his full participation in working life. There was clear medical evidence to show that the effect of his impairment was that he was significantly slower than others when lifting and moving cases. His activities were therefore substantially and adversely affected by his physical impairment. The Appeal Tribunal concluded that Mr Banaszczyk was disabled. This case illustrates the difficulties involved in assessing whether an employee meets the statutory definition of disability, particularly given the Appeal Tribunal s broad interpretation of a normal day-to-day activity. It suggests that even if an activity is specific to a particular role, it could still be a normal day-today activity if it is normal for the wider workforce. Whenever an employee s under-performance is found to be due to a physical or mental impairment, the safest option is therefore always to explore whether reasonable adjustments can be made. This must be undertaken in consultation with the employee and appropriate medical experts.

6 6 COURT OF APPEAL FINDS TRADE UNIONIST WAS SUBJECTED TO A DETRIMENT WHEN HIS EMPLOYER FAILED TO PREVENT HARASSMENT AT WORK BY MEMBERS OF ANOTHER UNION Workers have the right to not be subjected to a detriment by any act, or deliberate failure to act, by their employer which aims to prevent or deter them from being a trade union member or from taking part in union activities, or to penalise them for doing so. Nicholas Le Riche (Partner) E nicholasleriche@bdb-law.co.uk T +44 (0) A Tribunal must be satisfied that this was the sole or main purpose of the employer s conduct (Trade Union and Labour Relations (Consolidation) Act 1992, Section 147). In Bone v North Essex Partnership NHS Foundation Trust, the Court of Appeal has ruled that an employee suffered detriment when his employer deliberately failed to act to prevent his harassment at work, in part, so that it would not offend another trade union. Mr Bone worked for the NHS Trust as a mental health nurse. He was a leading activist of the Workers of England Union (WEU), a small independent nationalist trade union. In addition, he was a member of Unison. The Trust had a partnership agreement with a number of recognised trade unions including Unison but not the WEU. Neither the recognised unions nor the NHS Trust welcomed the arrival of the WEU. Mr Bone brought various claims against the Trust including allegations that a number of acts and omissions constituted detriment on grounds related to his trade union activities. The Employment Tribunal upheld his complaints in relation to the following issues: a colleague who was also Unison s local representative circulated an suggesting that the WEU was linked to fascism and the British National Party; the same colleague later greeted Mr Bone with the words Hello Adolf ; another colleague described Mr Bone as a bigot; the local Unison branch official sent an internal to another member of staff expressing concerns about the creeping cryptofascism of WEU; and none of these matters were dealt with in accordance with the Trust s disciplinary procedures and dignity at work policies. The Tribunal found that local Unison officials had set out to ostracise and intimidate Mr Bone because of his WEU membership and the leading role he was taking in the workplace on WEU s behalf. Although the Tribunal accepted that the Trust did not assist Unison in these actions, it held that the Trust had deliberately failed to protect Mr Bone from a

7 7...THERE WAS CLEAR EVIDENCE THAT THE MAIN INTENTION BEHIND THE TRUST S FAILURE TO ACT OR INTERVENE TO PROTECT MR BONE WAS TO LIMIT HIS TRADE UNION ACTIVITY... campaign of harassment and bullying because it feared offending one of the major recognised unions in its workplace, and wished to discourage others from joining the WEU. The Tribunal concluded that the Trust had subjected Mr Bone to a detriment by deterring him from taking part in WEU activities or penalising him for doing so. The Appeal Tribunal allowed an appeal by the Trust. However, the Court of Appeal has now allowed a further appeal by Mr Bone, restoring the decision of the Employment Tribunal. The Court of Appeal agreed that the Trust s main purpose in not taking appropriate action was to limit Mr Bone s and WEU s influence in the workplace, motivated by a desire to appease Unison. The facts of this case are somewhat extreme, and there was clear evidence that the main intention behind the Trust s failure to act or intervene to protect Mr Bone was to limit his trade union activity. This also highlights the importance of investigating and dealing with all allegations of bullying and harassment fairly and in accordance with grievance and disciplinary procedures. Seeking to maintain good relations with a recognised union will not be seen as a defence to inaction or inappropriate action.

8 8 DRAFT GENDER PAY GAP REPORTING REGULATIONS PUBLISHED Businesses and charities in the UK are to be required to publish annual details of their gender pay and bonuses gap under proposed legislation which has now been published in draft form. Caroline Yarrow (Partner) E carolineyarrow@bdb-law.co.uk T +44 (0) Last month, the Government published its response to the consultation on the gender pay gap reporting duty being introduced under the Equality Act 2010 (section 78). It has also published the draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2016, together with a further consultation which closed on 11 March These regulations will implement the requirement for employers in the private and voluntary sectors with 250 or more employees to provide information annually about their gender pay and bonus gaps. Employers include companies, LLPs, partnerships and other types of employing entity. A consultation is expected later this year on extending gender pay gap reporting to the public sector. The draft regulations set out the information which must be published: median and mean gender pay gap figures; the gender gap for bonus payments (based on the mean not the median); and the number of men and women in each of four salary quartiles. An explanation of any pay gaps and action to be taken may also be included, but is not mandatory. Pay is widely defined in the regulations and includes basic pay, paid leave, sick pay, car allowances, shift premiums and bonus pay. It excludes overtime pay, expenses, the value of salary sacrifice schemes, benefits-inkind and redundancy pay. The information must be published on a government website as well as the employer s own website. Guidance will be published on implementing the new duty, including advice on drafting narratives to explain and address pay gaps, and on how to account for different corporate structures. The Government has also confirmed that it proposes to build up a database of employers with examples of good compliance and, possibly, non-compliance....an EXPLANATION OF ANY PAY GAPS AND ACTION TO BE TAKEN MAY ALSO BE INCLUDED, BUT IS NOT MANDATORY... It is anticipated that the regulations will come into force on 1 October 2016, although employers will probably have until April 2018 to analyse and publish the required information for the first time. Gender pay gap statistics must then be published every 12 months.

9 9 GOVERNMENT PUBLISHES CONSULTATIONS ON FURTHER REFORMS TO PUBLIC SECTOR EXIT PAYMENTS The Treasury has recently launched a consultation on further reforms to public sector exit payments with a view to reducing redundancy costs and ensuring greater fairness and consistency. Ian Wasserman (Associate) E ianwasserman@bdb-law.co.uk T +44 (0) Any changes would cover both current and future public sector employees. The proposals include: setting a maximum of three weeks pay per year of service when calculating an exit payment; capping the maximum number of months salary that can be used when calculating redundancy payments at 15 months; setting a maximum salary for the calculation of exit payments. This could potentially align with the NHS redundancy scheme s salary cap of 80,000; enabling lump sum compensation to be tapered as pension age approaches; and reducing the cost of employer-funded pension top up payments by applying eligibility restrictions, for example, stipulating a minimum age (such as 55 or 58). Payments made by employers in relation to injury, ill-health or death during employment are outside the scope of the proposals. This consultation closes on 3 May A separate consultation, which closes on 4 May 2016, covers reform of the Civil Service Compensation Scheme. This seeks views on reducing the cost of exit payments; ensuring that any early access to pensions is appropriate; increasing incentives for staff to exit earlier in the process; and ensuring that the scheme aligns with wider reforms in public sector exit pay....payments MADE BY EMPLOYERS IN RELATION TO INJURY, ILL- HEALTH OR DEATH DURING EMPLOYMENT ARE OUTSIDE THE SCOPE OF THE PROPOSALS... These proposals are in addition to the new requirement for exit payments to be repaid if individuals earning at least 80,000 return to any part of the public sector within a year and the introduction of a statutory cap of 95,000 on the total value of a public sector exit payment.

10 10 AND FINALLY... The Government has confirmed that it will proceed with its proposed amendments to Employment Tribunal postponement procedures. With effect from, once a party has been granted two postponement requests in the same case, further postponement applications by that party will only be granted in exceptional circumstances. This will apply to all hearings, including preliminary hearings. In addition, any postponement application made less than seven days before a hearing, or at the hearing itself, will only be granted in exceptional circumstances. Tribunals will also be required to consider making costs orders against a party who is granted a late postponement. The new rules will not apply where a postponement is needed to facilitate a settlement; in cases of ill-health related to an existing long-term health condition or disability; or if the Tribunal considers that a postponement is required due to an act or omission of the Tribunal or another party. BIS has published a consultation seeking views on how to implement the requirements of the EU Non- Financial Reporting Directive which aims to provide investors and other stakeholders with a more comprehensive view of a company s performance. The Directive will require certain large companies with at least 500 employees to disclose information in management reports about their policies, environmental risks, employees, respect for human rights, anti-corruption and bribery issues, and diversity in their board of directors. The consultation is also asking for views on whether there is a desire for wider reforms to the scope of narrative reporting by UK companies....the POSTED WORKER WILL HAVE THE OPTION TO SUE EITHER THE EMPLOYER OR THE CONTRACTOR (BUT NOT BOTH)... The Government has published its response to the consultation on implementing the Posted Workers Enforcement Directive. This confirms that it will take a light touch approach to the new EU requirements. Posted workers are already entitled to statutory employment rights in the country they are posted to, covering work and rest periods, holidays, minimum rates of pay, health and safety, and discrimination. In order to address concerns that these

11 ...HMRC HAS PUBLISHED DRAFT LEGISLATION TO IMPLEMENT THE NEW APPRENTICESHIP LEVY... rights are being ignored, the Directive aims to improve compliance and cooperation, particularly in relation to the right to be paid. The Government has now confirmed that posted workers in the construction industry will have a new right to bring an unpaid wages claim against the contractor immediately above the direct employer in the supply chain. The posted worker will have the option to sue either the employer or the contractor (but not both). Contractors will be able to raise a due diligence defence when faced with such a claim. Although this will not be defined in the new regulations, government guidance will explain what due diligence might be appropriate. The proposals are due to be implemented by 18 June HMRC has published draft legislation to implement the new apprenticeship levy. The levy will be charged monthly through PAYE at the rate of 0.5% of annual pay bills, based on total employee earnings subject to Class 1 secondary NICs. Each employer will receive an annual allowance of 15,000 to offset against the levy payment. In practice, this means that the levy will be paid only on annual pay bills over 3 million. Where companies are directly or indirectly connected, only one of them will be entitled to use the 15,000 allowance. In England, employers will have control of their own apprenticeship funding through the Digital Apprenticeship Service. The new provisions will be included in the Finance Bill 2016 and will take effect from 6 April The Cabinet Office has published its response to the consultation on a draft Code of Practice to support the new requirement in the Immigration Bill for public authorities to ensure that workers in customer-facing roles speak fluent English (or Welsh for public authorities operating in Wales). This will cover staff who are required to speak to the public as a regular and intrinsic part of their role, either face-to-face or by telephone. The response confirms that the Government will continue with its proposed approach, although the Code will be revised to provide more detailed advice on implementing the new duty. For example, further guidance will be included on avoiding any potential discriminatory impact. The Government has also indicated that it may extend the duty to private and voluntary sector providers of public services. The Government has announced that name-blind recruitment will be rolled out across the public sector to ensure that jobs are awarded on merit alone. This follows the release of the Bridge Report, commissioned by the Civil Service, which analysed why only 4.4% of successful applicants to the Civil Service are from the poorest backgrounds. The NHS and the Civil Service are due to implement name-blind recruitment by Major private employers are also being urged to take a similar approach. 11

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