Legal briefing | |

Employment Update - May 2023

Employment Update - May 2023


Key employment and business immigration developments for employers.

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In the News

Bullying - what is the threshold?

Dominic Raab recently quit as deputy prime minister and justice secretary after an independent report upheld two claims of bullying against him. Mr Raab said the report "set a dangerous precedent" by "setting the threshold for bullying so low".

But what is bullying and when does managerial behaviour cross the line?

Unlike discrimination or harassment, there is no legal definition of bullying. It is described in Acas guidance as "unwanted behaviour" that is either "offensive, intimidating, malicious or insulting" or "an abuse or misuse of power that undermines, humiliates, or causes physical or emotional harm to someone." In practice, it can be difficult to distinguish between firm management and conduct which crosses the line. Often context is critical, and behaviours are particularly likely to be considered inappropriate when they are repeated and/or there is an imbalance of power such as between a manager and their subordinates.

While bullying itself is not unlawful, it is likely to breach the employer's duty to protect the health and safety of staff, and the duty to act in a way which does not undermine trust and confidence.  Employees who feel bullied could therefore potentially claim constructive dismissal.

Allegations of bullying are also increasingly on the radar of regulators (who have a focus on workplace culture). Workplace culture is also relevant to the "S" in ESG, with employers being held to account on issues like bullying by various stakeholders such as employees and investors.

Employers should therefore ensure their policies make it clear that bullying is not tolerated and set out what types of behaviours this might include. Managers should also receive specific training which covers giving feedback and handling complaints, alongside more general anti-bullying and harassment training for all staff.

Immigration Radar

Remote working

Employers who sponsor work visas for their employees have various reporting and compliance obligations. For example, sponsors are required to notify UK Visas and Immigration (UKVI) of any change in a sponsored worker's normal work location. UKVI recently clarified that a notifiable change in "work location" would include a sponsored worker working from home on a permanent or full-time basis. Employers who have employees who have moved to fully remote working should, therefore, notify UKVI of this change if they have not done so already. Notification is done online via UKVI's sponsor management system. UKVI initially updated its guidance to suggest that any move to a hybrid working pattern would be reportable but has since confirmed it plans to remove this from its guidance, on the basis that hybrid working is now commonplace.  Please get in touch with your usual Employment department contact if you would like any support with the reporting requirements or sponsor compliance generally.

New Law

Changes to non-competes

The Government has announced plans to limit the length of non-compete clauses in employment contracts to three months. This would represent a significant change to the current position. While non-competes must be no longer than necessary to protect the employer's interests, case law suggests the upper limit for senior executives is currently six to twelve months for non-competes. The new law would mean employers could never enforce a non-compete longer than three months. However, there would be no change to non-solicitation provisions. The aim of the new law is to boost competition and innovation, by making it easier for employees to switch jobs or start up a rival business.

The announcement suggests it would not affect the ability to keep an employee out of the market using garden leave. In addition to garden leave, we are increasingly seeing employers use indirect restrictions, e.g. incentives which are lost if the employee competes. It seems likely that such indirect restrictions will become more common when the limit on non-competes is introduced. In the meantime, employers may wish to start thinking about alternative ways to protect their business so that their contracts and arrangements are fit for purpose when the new rules come in. There is currently no timetable for the change – Employment Update will report developments.

Changes to TUPE

The Government has launched a consultation on changes to the Transfer of Undertakings (Protections of Employment) Regulations ("TUPE"). TUPE protects employees on the transfer of a business or part of a business, including business sales and outsourcing arrangements. Where TUPE applies, employers are required to inform and consult with representatives of affected employees. Where there are no existing representatives, the employer must arrange for employee representatives to be elected. The Government plans to remove the requirement to elect employee representatives in relation to TUPE transfers where either:

  • the business has fewer than 50 employees; or

  • the transfer affects fewer than 10 employees (whatever the size of the business).

Employers would be allowed to consult directly with affected employees in these circumstances, provided there are no existing employee representatives (such as a recognised trade union). This is likely to be helpful, as it can seem disproportionate to elect representatives for only a small number of employees. The consultation, which closes on 7 July 2023, also asks whether there are other ways that TUPE could be improved.

Changes to holiday and recordkeeping

The Government has also lunched a consultation on changes to statutory holiday entitlement and the recordkeeping requirements under the Working Time Regulations. The Government plans to change the Working Time Regulations to confirm that employers do not need to keep detailed records of daily working hours for all staff, as previous European case law had suggested this was necessary. This is likely to be welcomed by employers, given it is uncommon for employers in the UK to keep such detailed records.

In relation to holiday entitlement:

  • the Government plans to amalgamate the 4 weeks' EU holiday and the additional 1.6 weeks' UK statutory holiday to form one annual 5.6 weeks' statutory entitlement. At first glance, this does not seem like a significant change. However, currently the 4 weeks' EU holiday must be paid at a rate that includes regular additional payments such as overtime and commission, whereas the additional 1.6 weeks' UK holiday can be paid at basic rate only. The Government is considering whether the whole 5.6 weeks could be paid at basic rate only;

  • the Government also plans to permit employers to pay "rolled-up" holiday pay (by incorporating an element for holiday pay in the worker's hourly rate). "Rolled-up" holiday pay would be paid at 12.07% of the worker's pay, which is the rate at which 5.6 weeks' holiday accrues over the working weeks of the year. This is likely to be useful for businesses which engage casual and zero hours workers, as rolled-up holiday pay is easier to administer than other mechanisms for ensuring holiday pay for such workers.

The consultation remains open until 7 July 2023.

Review of EU-derived worker rights?

The Government had originally proposed legislation that would mean most EU-derived laws would be revoked automatically on 31 December 2023, unless specifically preserved. However, the "sunset" date of 31 December 2023 has now been abandoned. Instead, the Government has set out a list of specific EU-derived regulations which will be revoked on 31 December 2023. The list does not include any substantive legislation in the field of employment law. The Government has confirmed it does not have any plans to revoke or change any EU-derived employment laws other than those set out above (in relation to TUPE, holiday and working time recordkeeping).

Fair allocation of tips

The Government has passed a new law which will require employers to ensure all tips and service charges are allocated fairly between workers. A new code of practice will be published in due course setting out what a fair allocation looks like.  Under the new law, employers whose workers regularly receive tips will also be required to have a written policy on how tips are dealt with and to ensure tips are paid to workers in full, without deduction for administrative charges. Workers will also be able to request information about an employer's tipping record and bring claims for breach of the new law in an employment tribunal. The Employment (Allocation of Tips) Act 2023 is expected to come into force in May 2024, with the exact date to be confirmed.

Compensation for discrimination

Compensation for successful discrimination and harassment claims is made up of two elements – the employee's financial loss and injury to the employee's feelings. The so-called "Vento bands" have been created to guide tribunals what to award for the injury to feelings element. On 6 April 2023, the Vento bands were increased in line with inflation, and the current bands are now as follows:

  • Lower band: £1,100 to £11,200 (for a low-level, one-off act of discrimination or harassment)

  • Middle band: £11,200 to £33,700 (for something more serious)

  • Upper band: £33,700 to £56,200 (for the most serious acts, such as an ongoing campaign of discrimination or harassment)

There is technically no cap that can be awarded for injury to feelings, and in exceptional cases, tribunals can award compensation which is higher than the upper band. There is also no limit on the compensation which can be awarded for financial loss in discrimination and harassment claims.

Case Watch

Non competes - when are they enforceable?

A recent Court of Appeal case has considered whether a non-compete that covered group companies was too wide to be enforceable.

The employee in this case was the Head of Commercial – Specialty Products for a pharmaceutical company. He worked for one entity within the group which specialised in the niche area of producing pharmaceuticals derived from the bile acid of animals. Other companies within the group were much less specialised and produced general pharmaceutical products. When the employee resigned to work for a competitor, the employer sought to enforce a 12 month non-compete in his contract. The non-compete prevented him from being involved with any business which competed with the employer or any other entity within the employer's group.

The employee argued that the non-compete was too wide to be enforceable. He argued that the reference to group companies meant he could not join any company which sold pharmaceutical products of any kind, even if they were completely unrelated to the work he did with his former employer. However, the Court of Appeal ruled that the references to group companies could be severed from the covenant, meaning it would not be too wide to be enforceable.

This case highlights the importance of careful drafting in post termination restrictions, such as a non-compete that prevents a former employee from working for a competitor. Such restrictions are only enforceable if they go no further than is absolutely necessary to protect the legitimate interests of the employer. A clause which is too wide will be unenforceable. Courts will generally not rewrite a clause which is too wide. However, courts can in some circumstances delete words if the restriction would still make sense without the deleted words and this would not significantly change the overall effect of the restriction. Here, the court was able to preserve the covenant by deleting references to group companies, but that might not be possible in every case. A non-compete has a much better chance of being enforceable if it is limited to preventing the former employee from competing with parts of the employer's business that the employee was actually involved with during their employment.


Mental health and misconduct

A recent case has considered the interaction between an employee's mental health and their misconduct in the workplace.

The employee in this case was a registration officer with dyslexia and some symptoms of Asperger's Syndrome. Medical evidence suggested that in times of stress or conflict he would raise his voice and adopt aggressive mannerisms, with inappropriate speech and tone. On one occasion, he challenged an instruction from a more senior colleague in a way that was rude and disrespectful, with aggressive gestures and body language. He was warned that any repetition could lead to disciplinary action. The employee was referred to occupational health and some adjustments were put in place, including that certain instructions would be given or confirmed in writing. There were further conflicts with colleagues, one which left a colleague in tears, and the employee was given a written warning for failing to follow instructions. He subsequently raised a grievance and brought a disability discrimination claim. He argued that he had been treated unfavourably because of behaviour that was caused by his disabilities.

The Employment Tribunal disagreed. It found that the employee's behaviour did not arise from his dyslexia or Asperger's but because he had a short temper and resented being told what to do. The disciplinary action was therefore not related to the employee's disability. On appeal, the Employment Appeal Tribunal agreed, and the disability discrimination claim therefore failed.  

This case is helpful up to a point. It shows that even where an employee has an underlying mental health condition, there is still scope for disciplinary action where the employee's misconduct is not related to that condition. However, drawing the distinction can be incredibly difficult. Employers will need to seek medical advice on the extent to which a disability is impacting the employee at work and what, if any, adjustments can be made. Where there is a link between disability and misconduct, the employer must tread carefully, as taking disciplinary action could amount to disability discrimination and would need to be justified. The employer in this case put itself in a good position by giving a prior informal warning, referring the employee to occupational health and implementing some adjustments to avoid trigger events as much as possible.


New Guidance

Ethnicity Pay Gap reporting

Employers with 250 or more employees are required to report annually on the gender pay gap within their organisation. In contrast, there is no legal requirement to report on the ethnicity pay gap, although many employers do so voluntarily. To encourage more voluntary reporting, the Government has produced guidance for employers who want to measure, report on and address differences in pay across ethnicities in their workforce. In general, the guidance recommends using a similar methodology to gender pay gap reporting but also covers issues such as collecting ethnicity data from employees, which categories to use and ensuring confidentiality. The guidance recommends that employers break down pay gap information by individual ethnic groups as much as possible, unless aggregating groups is necessary to ensure confidentiality. The Government has also produced guidance on taking positive action, which sets out the steps employers can take to address the underrepresentation of minority groups within the organisation without falling foul of anti-discrimination legislation. The guidance on positive action is relevant for all protected characteristics, not just race or ethnicity.

Mental health and reasonable adjustments

Acas has published guidance for employers on making reasonable adjustments for employees with mental health conditions. Employers have a legal duty to make reasonable adjustments where an employee's mental health condition constitutes a disability, which for these purposes is any physical or mental impairment that has a substantial and long-term adverse effect on a person's ability to carry out day-to-day activities. The Acas guidance is a useful starting point and gives examples of adjustments employers might consider. However, what is reasonable and appropriate in any case will come down to the employee's particular condition and the employer's particular workplace. Employers should always consult with the employee and, if necessary, seek advice on what is appropriate in any given case. 

Watch this Space

Review of Whistleblowing law

The Government has launched a review of the effectiveness of UK whistleblowing legislation. The aim of the review is to gather evidence to help determine whether changes should be made to the law, in terms of who is covered by whistleblowing protections and whether those protections need strengthening. The review will also consider the availability of information and guidance for whistle-blowers, and best practice for how employers respond to disclosures. We are certainly seeing an increased focus from regulators, investors, service-users and employees on how employers respond to allegations of wrongdoing in the workplace.

The Government research is expected to conclude by autumn 2023, with policy announcements to follow. Employment Update will report developments.  

Community Engagement

In recent weeks our team has been involved in a variety of pro bono work for organisations such as the Vavengers, Just Like Us, GiveOut, Social and Sustainable Capital, and Impact Investing Institute.

Our Work

Since the last Employment Update, our work has included:

  • putting in place a suite of handbook policies for a company setting up in the UK

  • advising on the effect of TUPE in the context of the end of an outsourcing arrangement and preparing appropriate indemnity protections for the incoming service provider

  • presenting training for managers on diversity, inclusion and fostering a "speak up" culture

  • carrying out an investigation into allegations of bullying by a senior executive at a FTSE 250 company

  • advising on a multi-jurisdictional redundancy programme

  • advising on the TUPE implications of a customer services outsourcing.

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