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Employment Law Update | March 2021
Welcome to our second employment law update of 2021. We hope that everyone is still surviving lockdown and looking forward with baited-breath to the gradual – and safe – relaxing of restrictions as we move into spring and summer.
As always, it has not been a quiet start to the year in terms of employment law updates and so below we have summarised the most pertinent changes since our last newsletter. You will no doubt have read or heard about some of these changes in the press in recent weeks and below we give our take on these developments and what they might mean for you. We have also included a reminder of the upcoming changes to IR35 as well as the changes to rates for minimum wage, redundancy pay and other statutory payments which come into effect from April 2021.
- Is there an entitlement to ‘carry over’ holiday pay when holiday has been taken, but not paid for?
- What was the Uber case about?
- Working time – does standby time spent sleeping count towards working time?
- COVID-19 vaccinations and employment
- Shielding and SSP
- Furlough scheme extension
- IR35 update
- Update to rates and limits from 1 April 2021
In a recent case, the Employment Appeal Tribunal has confirmed that where an employee takes but is not paid for a period of annual leave, any claim for unpaid wages for such leave must be brought within three months of the date of the leave. The right to pay for that leave does not carry over to subsequent years, in the same way as the right to take leave which has been denied altogether.
In an earlier decision of the Court of Justice of the European Union, it had been confirmed that where an employee was prevented from taking leave, including where they were dissuaded from taking that leave because an employer made clear that they would not be paid for it, the right to take that leave carried over into subsequent holiday years.
In this case, the Claimant’s employer had made clear that it would not pay Mr Smith (the Claimant), as it considered him to be self-employed and therefore not entitled to holiday pay. However, this had not dissuaded Mr Smith from taking the leave and he had, in fact, taken periods of annual leave for which he was not paid. Mr Smith subsequently brought a claim for holiday pay ‘owed’ for the holiday taken throughout his employment.
Mr Smith claimed that he was entitled to holiday pay for the leave taken throughout his time working for the Respondent. He said that the right to pay for these periods of holiday carried over to subsequent holiday years and was therefore payable on termination of employment. However, the EAT held that his claim was out of time. Mr Smith had not claimed for the unpaid holiday pay within three months of the ‘deduction’ being made – i.e. the failure to pay for the relevant period of holiday. Any claim for the deduction from wages which arose each time he was not paid for a period of annual leave should have been brought within three months of the deduction – or in the case of a series of deductions, within three months of the last deduction.
The EAT held that whilst a right to take annual leave which an employee is prevented from taking in the relevant holiday year will carry over to subsequent years, the right to pay for any holiday actually taken does not carry over in the same way. Had Mr Smith not taken the leave, on termination he would have been entitled to claim for payment for any untaken leave. However, as he had taken the leave, any claims for unpaid wages should have been brought within three months of the date on which payment should have been received.
This case serves as an important reminder for employers of the potential for holiday to be carried over where employees are denied the right to take such leave, but also an important reminder for employees that the time limits are operated strictly in the Employment Tribunal and employees need to ensure that claims are brought in time.
We doubt that there is anyone in the country who has not become aware of the ongoing Uber drivers’ claims against Uber, in which they alleged that they were workers, rather than self-employed, and therefore entitled to corresponding rights such as national minimum wage, holiday pay, pensions and other benefits.
Uber claimed that the individuals were not workers, but rather self-employed contractors who paid Uber to use their platform. Uber maintained that the use of the platform was merely allowing the drivers to contract directly with passengers. The drivers did not therefore, in reality, work for Uber, but rather for the passengers who used the service. The drivers maintained that they worked for Uber, who exercised significant control over how and when the services were performed, determined the fees charged and a number of other factors.
Last month, the Supreme Court reached a final decision on the case, holding that the Uber drivers were workers, and not self-employed. There were five main factors which were relied upon when making this decision:
- Uber determines the remuneration received by the drivers, in that it controls the fees that the drivers charge, the circumstances when refunds are issued to passengers following a complaint and the service fees charged for each trip;
- The drivers are required to accept Uber’s standard terms;
- Once logged onto the app, Uber can penalise drivers, including logging them out of the app, if they cancel or decline too many journeys. Drivers are also not informed of the journey destination prior to accepting a booking and cannot therefore refuse a journey based on the destination. This means that the drivers are clearly in a position of subordination to Uber;
- Uber exercises significant control over way in which the services are performed, including vetting the types of car to be used, monitoring rates of acceptance, setting routes (at risk of poor feedback for the drivers if these are not followed) and monitoring performance via customer ratings. Uber can also terminate use of the app for any driver with poor performance ratings;
- Uber handles all interactions with customers, including handling complaints, and prevents relationships forming between drivers and customers, other than for each individual journey. There is therefore no possibility for individual drivers to develop new business outside of the app.
On the basis of the above, the Supreme Court concluded that the drivers are workers, and not self-employed. The drivers had limited opportunity to profit from their work other than by simply performing additional journeys and complying with Uber’s rules and requirements. In addition, the Court held that their working time includes the full duration of the time during which they are logged into the app, ready and willing to accept passengers, and not just the time spent actually transporting passengers.
Importantly, the Supreme Court made clear in its judgment that the contract between the parties is unlikely to be determinative of the legal status of the relationship between the parties. The most important factor when determining the status of the individual ‘contractors’ will be what actually happens in practice, even where the parties may have agreed something to the contrary in writing. The question of determining whether a party to a contract is a ‘worker’ will be determined by applying the law to the facts of the case, and not by the terms of the written contract. Whilst the written contract should not be ignored altogether, there should not be any presumption that it contains all the parties’ rights and obligations towards one another and any clauses purporting to determine the status of the parties in the contract should be disregarded.
This decision will have significant and far-reaching consequences, not only for Uber but also for many other organisations who engage individuals, whether via platform apps as in this case, or otherwise. Any attempt by employers to disguise the true nature of an arrangement through complicated contractual terms is likely to fail and employers would be well advised to review any such arrangements to ensure that they have been correctly classified and appropriate rights afforded to the individuals working under those arrangements. This case has certainly brought the issue once more into the spotlight, and it seems unlikely that this will be the last case of its kind.
The Supreme Court has issued an important decision clarifying whether time spent on ‘sleep-in’ shifts will count as working time for the purposes of the National Minimum Wage. Prior to this decision, there were conflicting decisions on this point which left many employers in an unenviable position as regards whether NMW should be paid for such time.
This decision of the Supreme Court will therefore provide welcome clarification – particularly as the decision means that such time is not to be classed as working time, unless the employee is actually called upon to carry out any duties during that time.
This case concerned employees who were required to be at their place of work, in accommodation provided for this purpose, in case they were required to provide assistance during the night. It was rare that they would be called upon during such shifts and they were permitted to carry out other activities, including sleeping, during the shifts, provided they were available to assist should the need arise.
The Supreme Court unanimously held that such time would not be classed as working time for the purposes of the NMW. The definition of ‘working time’ for these purposes was ‘awake for the purposes of working’ and in the circumstances of this case, the staff were only considered to be ‘working’ when actually called upon to assist. They would therefore be entitled to be paid the NMW for any time when called upon to assist, but if they were otherwise free to carry out other activities, including sleeping, then this could not be classed as working time.
This case will come as a relief to many employers, particularly in the care sector, who may otherwise have faced significant increases in staff costs if they were required to pay the NMW for all time, including sleeping time, in these circumstances. However, it is worth bearing in mind that any such cases will depend to an extent on the facts of the particular case and it is always worth taking advice.
As we continue full steam ahead with the vaccination programme in the UK, the Government has made clear that there will be no compulsory vaccinations. Whilst it seems that the majority of people will welcome a vaccination, there is a significant minority who remain concerned about vaccination or are simply unable to be vaccinated. There may be a number of reasons why people might not get vaccinated which may include medical conditions and/or existing medication, pregnancy, religious or other philosophical belief, allergies or other personal reasons.
However, as people gradually start returning to work and more and more of the country receive their COVID-19 vaccinations, the question is being asked what, if anything, employers and potential employers can do if their staff/ applicants refuse to get vaccinated? Are employers able to refuse to employ someone who has not had a vaccination? Can employers refuse to allow staff who have not had vaccinations to return to work, or dismiss them?
Whilst there has been a lot of speculation in the press about so-called ‘no jab, no job’ policies, things are rarely as simple as they seem and there are a number of matters to be considered if you are thinking about applying such policies. For a start, whilst employers may wish to find out which staff have/have not been vaccinated, this information will be classed as ‘special category data’ or ‘sensitive personal data’ under data protection laws, and employers will need to be able to demonstrate why they are processing this information, what they are using it for and ensure that it is processed in accordance with the data protection principles. Whilst this may well be possible to do, the collection and use of this information will need to be considered carefully and dealt with under your privacy notices and data protection policies to ensure compliance with data protection laws.
Having obtained the relevant information, the question is how and to what extent you can act on it? If employers apply blanket ‘no jab, no job’ policies, there is the risk of claims for indirect discrimination, whether on grounds of pregnancy, disability or religion or belief where these are the reasons why certain individuals may not be able to comply with such policies. Employers will therefore need to be able to demonstrate that they are justified in imposing such a requirement in accordance with discrimination legislation. This may well be easier to do in certain industries such as the care sector where there is a significant risk of infection, and indeed, it has been reported that Health Secretary Matt Hancock is considering legislation which would legally require care workers to be vaccinated against COVID-19 - but regardless of the sector in which the employer operates, absent a change in the law, it will necessitate looking at all alternatives prior to any dismissal/ failure to offer a role if an employer wishes to avoid claims for unfair dismissal or discrimination.
Given that we don’t yet know the full extent of the protection offered by vaccines, businesses will also need to consider very carefully the reasons they are relying upon when mandating vaccines for all staff. If the vaccine does not reduce or remove the risk of transmission, this is likely to substantially weaken any argument for mandatory vaccinations for all staff, even in a care setting.
Employers may well be better off encouraging staff to be vaccinated, educating on the benefits of vaccines and allowing (paid) time off work to attend vaccination appointments in the hope that the most staff will want to be vaccinated, regardless of any requirements which may be imposed in due course by an employer. And we would always recommend taking advice prior to seeking to implement any policies in this arena.
New guidance has been issued by Public Health England confirming that those who were previously advised to shield will no longer be required to do so, as of 1 April 2021.
This means that whilst they should continue to work from home where possible (along with other employees), the ‘stay at home’ guidance will no longer apply and if such employees cannot work from home, they can be expected to return to work. Workplaces will of course still need to carry out appropriate risk assessments and ensure that risks are minimised wherever possible, but staff who were previously shielding will no longer be entitled to SSP if they do not attend work due to their previous shielding status.
It is worth remembering that the furlough scheme is continuing until 30 September 2021 and it will remain possible to furlough staff who were previously shielding, if appropriate, in line with the terms of the scheme.
As we are sure you are all aware, the Coronavirus Job Retention Scheme – known as the furlough scheme – has now been extended to 30 September 2021. Whilst this was no doubt very welcome news for both employers and employees alike, it is just worth mentioning the changes to the scheme as we head into the summer.
Until the end of June 2021, the Government will continue to pay 80% of wages (up to £2500) per month for any hours not worked. From July onwards, the Government contribution will start to reduce and employers will need to make a contribution as follows:
|Month||Government Contribution||Employer Contribution|
|July||70% up to £2,187.50||10% up to £312.50|
|August||60% up to £1,875||20% up to £625|
|September||60% up to £1,875||20% up to £625|
Regardless of the contribution paid by the Government, employers will continue to be required to pay the employer NICs and pension contributions due on all sums paid to employees and can choose to top up beyond the 80%/ £2500 for the hours not worked but are not compelled to do so. For those employees on flexible furlough, employers will of course be required to pay the full amount for any hours worked, along with pension and NICs in the normal way.
From 6 April 2021, the new rules relating to ‘off-payroll’ working will apply to medium sized businesses, as well as larger organisations and the public-sector. This means that from April 2021, the IR35 rules will apply to all public sector clients and private sector businesses that meet two or more of the following conditions:
- they have an annual turnover of more than £10.2 million
- they have a balance sheet total of more than £5.1 million
- they have more than 50 employees
For these purposes, ‘balance sheet total’ means the total amounts shown as assets in the company’s balance sheet before deducting any liabilities.
This is a significant change to the IR35 rules which previously only applied to the public sector. What this means is that if any of these organisations (the ‘end-user client’) contracts with a third-party contractor (the ‘intermediary’) who supplies an individual to work for them, the end-user client will need to carry out an assessment to determine whether, if the individual was engaged by them directly rather than through the intermediary, they would be classed as an employee. If they would, then the end-user client will be responsible for deducting PAYE tax and NIC from any amounts paid to the intermediary.
Any end-user client who contracts with any intermediary in this way would be well advised to carry out a ‘CEST’ test (check employment status for tax), available on gov.uk, in order to determine the status of such contractors so that they can ensure that they are compliant with IR35. If IR35 will apply, then the way in which such intermediaries are paid will need to change. The CEST test can be located here: https://www.gov.uk/guidance/check-employment-status-for-tax
From 1 April 2021, the level of statutory payments in a number of areas is changing. We have set out below the new rates which will apply to the most common of these payments:
|National Minimum Wage||Age 23+: £8.91
Age 21 – 22: £8.36
Age 18 – 20: £6.56
Age 16 – 17: £4.62
Apprentice rate: £4.30
|SSP||£96.35 for up to 28 weeks|
|Statutory Maternity Pay & Statutory Adoption Pay||6 weeks at 90% followed by 33 weeks at £151.97|
|Shared Parental Pay||39 weeks, less any maternity/adoption leave taken, at £151.97|
|Statutory Paternity Pay||2 weeks at £151.97|
|Redundancy pay - cap on a week’s pay||£544 (up from £538)|
|Maximum redundancy pay (based on 20+ years’ service, all over the age of 41)||£16,141|
|Maximum compensatory award in unfair dismissal claims||£89,493|