The Santa Clause: Employment Law issues in Lapland

Penguin Santa You know who’s having a low media presence this year? Santa Claus! I mean, just look at the Christmas adverts this year! Without naming names, the ‘biggest’ Christmas adverts this year involve a monster, a carrot and a toy factory. The only ‘big’ advert that sees the big, red man is one in which Paddington bear mistakes a burglar for Santa!

So, why the low media presence? Where is Santa?

On that front, I may be able to help. You see, Mr Claus is currently having some Employment Law and HR issues with his workforce and has been busy obtaining legal advice on what to do next. It’s a stressful time of year, particularly with less and less people believing in him (there seems to be a rumour going around that he isn’t real) and certain big rival companies in the logistics business setting up in competition (the main one named after a geographical location considerably far away from Lapland).

Put simply, Christmas needs saving and Santa can’t operate without solving his current employment law issues. With this in mind, let’s go on a Christmas journey and help Santa save Christmas!

US firm starts microchipping employees – Science fiction or the future?

Microchip reader Yes, you read that correctly. Microchipping employees. And, no, that’s a real headline. A technology company in the USA has been widely reported as microchipping employees in place of their security and identity cards.

The first thing to get out of the way here is that they aren’t implanting an actual, square computer chip. Rather, they insert a tiny implant (the same size as a grain of rice) between an employee’s thumb and forefinger with a syringe. Apparently, removing it is akin to taking out a splinter (ouch?)

Now, apparently, the ‘younger generation’ are most likely to get onboard with this in the future. Well, I’m in my twenties and I’m not tempted in the slightest. Saying that, I hate needles, so that’s a poor starting point…

Looking at the wider picture, we live in a world of fingerprint ID on phones and being able to unlock the latest phone handsets with your own face. So why is an implant so controversial?

Pimlico Plumbers and the definition of a “worker”

As I mentioned in last month’s newsletter, an important judgment concerning the status of workers was handed down by the Court of Appeal on 10 February, namely Pimlico Plumbers Limited and Mullins -v- Smith. The decision was regarded as significant enough to make it on to the national news bulletins and Newsnight, as well as widespread coverage in the press.

Mr Smith is a plumber who worked exclusively for Pimlico Plumbers between August 2005 and April 2011. He claims that, following a heart attack in January 2011, he was wrongfully dismissed in May 2011. According to his initial agreement with Pimlico Plumbing he was a “sub contracted employee”. The contract also stipulated that he had to wear a Pimlico Plumbers uniform, work for five days a week (a minimum of 40 hours), give notice of annual leave and be available to take on-call work. There was a ban on undertaking what was described as “private work”, breach of which would lead to instant dismissal. The contract also provided for payment of “wages”.

The initial contract was replaced with a longer and more detailed contract in 2009, which was entitled “Agreement – Self-Employed Operative”. Mr Smith was required to provide his own tools and equipment and he had to pay his own expenses. He also had to maintain adequate public liability insurance. Sub-paragraph 6.1 of the contract stated:
You are an independent contractor of the Company, in business on your own account. Nothing in this Agreement shall render you an employee, agent or partner of the Company and the termination of this Agreement (for whatever reason) shall not constitute a dismissal for any purpose.
Following the termination of the 2009 contract, Mr Smith lodged an employment tribunal claim, complaining of unfair dismissal, wrongful dismissal, entitlement to pay during medical suspension, holiday pay and arrears of pay. He also claimed direct disability discrimination, discrimination arising from disability and a failure to make reasonable adjustments on account of his disability. At a pre-hearing review Judge Corrigan determined that Mr Smith was not an employee. There were circumstances set out in the contract in which Pimlico Plumbers did not have to pay Mr Smith such as when an invoice was unpaid after six months; he had to rectify problems at his own cost; the understanding of the parties that he was self-employed, both for employment and tax purposes, and that he was VAT registered.

However, Judge Corrigan went on to find that he was a ‘worker’ within the meaning set out in section 230 of the Employment Rights Act 1996:

Subconscious motive for discrimination

The Equality Act 2010 states that it is against the law to discriminate against an employee on the grounds of their race, sex, age, marital status, religion, sexual orientation, disability, age or pregnancy (protected characteristics).

The discriminatory act is straightforward to establish where there is an obvious or direct act of discrimination however what is not so clear is the approach to take in the event that no direct intent can be established.

It has long been accepted that proof of intent is not required to prove an unlawful act of discrimination. However the application of these rules has proven to be problematic in practice. This issue again arose in the recent case of Geller v Yeshurun v Hebrew Congregation in which the Employment Tribunal failed to explore the possibility of subconscious discrimination despite, on the facts, there being good cause to do so.
The facts
Mr and Mrs Geller both worked for the Yeshurun Company. Mr Gellar was an employee and Mrs Gellar worked on an ad hoc basis for which she submitted time sheets. In 2013 the couple began to receive a joint salary. Mrs Gellar was not paid for the work that she had done previously.

Mr Gellar was provisionally selected for redundancy and Mrs Gellar argued that she too should have been involved in this process as an employee. They were subsequently both made redundant. Mrs Gellar brought a claim for sex discrimination on the basis that both the unlawful deduction of wages and the fact that the company had failed to recognise her as an employee were both acts of discrimination which related to her sex.
The Employment Tribunal
The Employment Tribunal dismissed the claim. They found no evidence that she had been treated unfavourably on either ground commenting that she had actually been treated more favourably as a result of being married to Mr Gellar and that the deductions of wages were as a result of an administrative oversight not as a result of her sex.
The appeal

A Guide to the National Living Wage

If you have had the opportunity to read my previous blog post ‘Key Employment Law Changes’, you will be aware that from 1st April 2016, all employers are under a duty to comply with new obligations under the ‘National Living Wage’ regulations.

It is important that small business owners in particular are aware of the implications of this, to ensure that they implement any necessary pay increases and are not subject to later claims for arrears of wages owed.

By way of background, the National Living Wage was originally calculated based on the amount that employees would have to earn in order to cover basic living costs – prior to this month however, this was used as a benchmark/guidance only, and the rates were not legally enforceable.

From 1 April 2016, the National Living Wage became law under the National Minimum Wage (Amendment) Regulations 2016 for workers aged 25 and over, increasing the minimum wage by £0.50 to £7.20 per hour – the effect is therefore essentially that the National Minimum Wage rate is increased.

Please note – the National Minimum Wage rates will continue to apply for workers aged under 25.

If you are a business owner, you should therefore make arrangements to assess who within your organisation will be entitled to this increase, notify them accordingly and advise your accounts/payroll team to implement the rise.

Six year time limit for contract claims does not apply in tribunals

Pursuant to section 5 of the Limitation Act 1980 there is a time limit of six years to bring a breach of contract claim, running from the “the date on which the cause of action accrued”. However, in Grisanti v NBC News Worldwide Inc, an employment tribunal has held that the six year time limit does not apply to breach of contract claims brought in an employment tribunal. In doing so it has declined to follow an earlier decision in which it was held that the six year limit did apply.

Employment Judge Wade, sitting in the Central London Tribunal, was asked to consider the issue at a preliminary hearing on 11 June. The judgment has recently been handed down. Ms Grisanti claims (among other things) that her employer deducted national insurance contributions from her salary between 1996 and 2003. However, when she came to claim her pension in 2015 she was told by HMRC that no payments were made for those seven years. The result is that she is entitled to a greatly reduced pension.

The deductions were calculated correctly and Ms Grisanti does not allege that her employer has kept the money. However, at the time of the hearing it was unclear what had happened to it. However, HMRC had commenced an enquiry.

NBC took the opportunity at the hearing to argue that the claim should be struck out in any event on the basis that the breach of contract claim was out of time, as was a claim under Part II of the Employment Rights Act, commonly referred to as a “Wages Act claim”. It was contended that not only was the claim not brought within three months of termination (as extended by the ACAS early conciliation scheme), it was also subject to section 5 of the Limitation Act 1980 so that it was barred on the basis that more than six years had passed since the cause of action accrued in 2003.

The Employment Tribunals Extension of Jurisdiction Order 1994 allows breach of contract claims to be brought in an employment tribunal. The objective was to avoid duplication of claims in courts and tribunals. NBC submitted that, logically, the time limit of six years must also have been imported otherwise there was the risk of a flood of old claims and claimants would have the right to pursue claims in tribunals that could not be pursued in courts. More particularly a tribunal only has jurisdiction if “the claim is one…which a court in England and Wales would under the law for the time being in force have jurisdiction to hear and determine”. It seems to be a pretty compelling argument, not least because it was successful in the 2012 employment tribunal case of Taylor v Central Manchester University Hospitals NHS Trust.

Holiday pay doesn’t include voluntary overtime, does it?

I rarely report decisions of the Northern Ireland courts because they are not binding in England and Wales. However, this is the second consecutive month in which a Northern Irish decision is worthy of comment, this time from the Court of Appeal in Patterson v Castlereagh Borough Council.

Mr Patterson, a lead claimant for the purposes of a multiple claim, alleged that there was an unlawful deduction from his wages because he was no longer paid holiday pay relating to casual work as a recreation assistant in addition to his post as an assistant plant engineer. His claim was amended to allege that his holiday pay did not take into account the voluntary overtime he worked in his full time post.

His claim relating to his casual work was successful and this was not challenged. Consequently his appeal was limited to the voluntary overtime aspect. In this case Mr Patterson was asked to work overtime by his employer and could choose whether or not to do so because it was not a contractual obligation. Hence its classification as voluntary. There was a technical point concerning whether Mr Patterson had established the earnings he received pursuant to the voluntary overtime but both parties agreed that the point of principle should be determined.

Assuming that the earnings were established evidence submitted for the appeal suggested that they would have amounted an average additional pay of £60 per week. Having considered the relevant sections of the Working Time Directive the Court went on to consider the relevant case law. In British Airways plc v Williams (2012) the Supreme Court considered whether, for the purposes of calculating holiday pay, a pilot’s remuneration should be treated as basic pay or whether it should be based on “normal remuneration”, i.e. including payments “intrinsically linked” to the performance of the employee’s duties. Having referred the question to the European Court of Justice the answer was that it should be based on normal remuneration.

In Lock v British Gas (2014) that principle was extended to include commission payments and in Bear Scotland Limited and Others (2015) employees were successful in having included in the holiday calculation overtime which they were required to work, but which the employer was not obliged to offer.

big payouts

In November 2014 I warned that employers should get ready for backdated holiday claims, particularly from those who are now entitled to include average overtime when calculating the rate payable.

The Government’s response was to attempt to limit the effect on employers by introducing the Deductions from Wages (Limitation) Regulations 2014. The Regulations are intended to restrict employers’ exposure to backdated claims by limiting the period of claim to two years before presentation of the claim and by confirming that the right to paid holiday is not automatically incorporated as a term in employment contracts. However, of course, this does not displace the entitlement to paid holidays under the Working Time Regulations.

Further, the Regulations only apply to claims lodged after 1 July so there is a window of opportunity for employees.

Of the UK workforce of 30.8 million, five million do voluntary or compulsory overtime. The scope for claims and increased payments going forward is therefore considerable.

In mid-January John Lewis and Waitrose staff were informed that they will share £22 million in additional payments this year to provide for the increased entitlements. 60,000 employees will share “bonus” (i.e. backdated) payments in February amounting to £10 million and the ongoing cost for the employer will be £12 million per year. However, there is a catch. The cost of the payments is likely to result in the reduction of a profit-related bonus which is due in March.

Tracey Killen, the partnership’s director of personnel said:

The John Lewis Partnership has acted promptly to change its pay practices in response to the EAT ruling. We believe our approach is a fair and practical outcome for our partners in light of this decision.

Meanwhile, a voluntary redundancy deal agreed with workers at Cadbury’s Bournville plant has in resulted payouts which average £100,000 per employee.

can an employee whose employment contract is illegal claim for discrimination?

In June 2012 I reported the decision of the Court of Appeal in Hounga v Allen. Ms Hounga had entered the UK from Nigeria on a false passport, ostensibly to visit friends, but in fact to take up work as an au pair for a Nigerian family. She was about 14 years old and was to be paid her keep plus £50 per month. There was no doubt that the parties knew that the arrangement was illegal. She was not enrolled in a school and although she was provided with bed and board she was never paid her £50 per month or any wages at all.

Following her dismissal after 18 months she made claims for unfair dismissal, breach of contract, unpaid wages, holiday pay and race discrimination. The tribunal found that Mrs Allen had inflicted serious physical abuse on Ms Hounga and had caused her extreme concern by telling her that if she left the house and was found by the police she would be sent to prison because her presence in the UK was illegal. However, all bar the discrimination claim were dismissed on the basis that the contract was illegal. The discrimination claim was successful at tribunal and the employer appealed successfully to the Employment Appeal Tribunal. Ms Hounga appealed unsuccessfully to the Court of Appeal. The somewhat surprising reasoning was that the discrimination was so closely connected to the illegality that the claim had to fail. More controversially it was suggested that her employers would not have treated her so badly had it not been for Ms Hounga’s vulnerability as an illegal worker.

The decision was appealed by Ms Hounga to the Supreme Court, with support from the Anti Trafficking and Labour Exploitation Unit.

The tribunal had found that the circumstances of dismissal were that one evening Mrs Allen was angry when she discovered that the children had not eaten the supper which Ms Hounga had been told to prepare for them. Mrs Allen smacked and hit Ms Hounga. After the children went to bed Mrs Allen attacked Ms Hounga again, threw her out of the house and poured water over her. Mr Allen let her back into the house but then changed his mind and said that Mrs Allen could do whatever she liked to her. Mrs Allen then opened the door, told Ms Hounga to leave and pushed her out. As a result Ms Hounga slept in the garden in wet clothes. She made her way to a supermarket and was then taken in by social services.

a very expensive assumption

The outcome of Vision Events (UK) Ltd v Paterson was, to say the least, harsh on the claimant, Mr Paterson. He worked as a multimedia producer on a flexi time basis. He enjoyed his job. He had joined the Company in 2004 and after a promotion in 2008 his salary increased from £21,000 per annum to £28,000 per annum but without overtime (as had previously been paid). However, in place of the overtime he was entitled to flexitime whereby if he worked beyond his contracted 45 hours per week he was entitled to take time off at a time to suit the employer. He did not take all the time off he could have. When he asked to take a block of flexi time off in one go to make a trip to New Zealand, his employer refused to let him. He built up over 1000 hours owing to him, at which point, in May 2012, he was (fairly) selected for redundancy. Unsurprisingly, he looked for payment for those hours, but his employer maintained that there was no obligation to pay him at all – there was nothing in his contract saying they had to. The employer did offer a part payment in respect of the extra hours. This offer was refused and it was withdrawn. He successfully made a claim for unlawful deductions from wages in the Employment Tribunal. He was awarded £12,514 for 1042.84 hours. the employer appealed.
It is worth noting that the employer had not entirely ignored the flexi-time procedure in its documentation. There was a policy in the handbook:
Although the system is intended to be flexible and beneficial to both companies and employee, the company always retains the final say in determining the hours to be worked by all employees.

Due to the nature of the company’s business, flexi-time system, without appropriate rules would result in chaos, therefore the system is based on the principles of organised flexibility and prior notification of all variations in working hours.

The basic rules of the flexi-time system are explained below with the timesheet example in the next section giving an idea of how it is administered in practice.

1. Unless otherwise stated in the employee’s statement of particulars of employment, or otherwise agreed with their direct manager no later than 17:30 the previous working day, all employees are expected to start work no later than 08:30 each day. Any employee not at work by that time without prior agreement to the contrary will be considered late for work.

2. Employees are not allowed to let the number of flexi-hours they are carrying drop below zero at any time, without specific prior agreement from the company. Where this is agreed, the employee will be required to make up the time as soon as possible, subject to the requirements of the company.

3. If an employee is carrying a number of flexi-hours greater than zero, then they may or may not be entitled to be paid overtime as defined employee’s statement of particulars of employment [sic] if overtime is payable then the employee will normally be paid 50% of their outstanding flexi-hours as overtime each month. Normally this is calculated at the end of each month but the accrued position can be calculated at any interim date if necessary. If an employee is not carrying any flexi-hours at the end of the month, then they are not entitled to be paid overtime.

4. In exceptional circumstances employees may request to be paid more than the normal 50% of outstanding flexi-time. The company will not be obliged to agree or give reasons for declining the request.

5. Overtime is calculated on a monthly basis and is not determined by the length of any work period on any particular day.

6. Flexi-time will be paid as the number of hours multiplied by the employee’s hourly salary rate.

7. Any flexi-hours not paid are carried forward to the next month.

8. The company reserves the right to instruct that all or part of an employee’s outstanding flexi-time is taken as time off, rather than being held for payment.

9. All requests to take time off using the company flexi-time system must be approved in advance by the administration manager.

However, critically in this context, no mention was made of arrangements to apply on the termination of employment