Employment Update 📰
Worker status - Employee or not employee?
We’re starting this update with a brief review of worker status.
We were instructed by a client who had not been paid a monthly invoice for work undertaken as a contractor. He had been told he was self-employed and, understandably, thought that was that. We identified that the case had more to it than initially met the eye. We pursued a much more involved claim based on worker status and, at a recent Employment Tribunal hearing, the judge agreed with us that our client was, in fact, an employee.
He was awarded not only the value of that unpaid invoice (plus interest), but also compensation for wrongful dismissal, holiday pay, loss of future earnings, loss of pension contributions, whistle-blowing damages, section 1 ERA breach award, and the maximum uplift for breach of the Acas Code. The moral of the story is that if a company gets worker status wrong, it can cost them a significant sum.
Do you know the status of all your workers? Chances are, you only think you do. All employees are workers, but not all workers are employees, and some people genuinely will be self-employed. The distinction between these categories is quite blurred.
To make things even more complicated, just because you and the worker sign a contract specifying agreed status does not guarantee that status. Employment Tribunals must consider the inequality of bargaining power and look at the whole context of the working relationship, not just the contractual documents, to make sure that the written contract genuinely reflects the parties’ intentions and practices.
So how are you meant to assure that a worker or self-employed individual is not an employee? You are never going to be 100% safe, but there are steps you can take to mitigate risk:
Make sure there is a contract in place setting out detailed terms, as an important indicator of the intended relationship between the parties. This on its own is not enough: As happened in our recent case, the Employment Tribunal will look beyond the written agreement and consider the day-to-day working reality of the relationship to determine the correct status of the individual. The main factors which the Tribunal will consider are:
Control – Who has it and how much control do they exert? Who decides the thing to be done, the means to be employed doing it, and the time and place where it shall be done? Generally, workers and self-employed individuals are free to choose what jobs they take, when they work, and how they perform the work.
Personal Service – Who must perform the work? Can there be delegation? Workers and employees must perform the work personally, whereas someone who is self-employed should have the option to send a substitute.
Mutuality of obligation – is there an obligation for the employer to provide work? Is there an obligation on the individual to accept that work?
Integration – is the individual an integral part of the organisation? Do they have a senior decision-making role? Do they have a team who report to them? Are they seen to be representing the company?
Why does this matter? Different status confers different rights:-
Self-employed – The self-employed have some very limited employment rights including health and safety protection on the work premises (under the common law duty of care in respect of occupier’s liability) and against discrimination.
Worker – Workers are not entitled to sick leave, maternity leave or other types of parental leave; redundancy payment; security from unfair dismissal; time off for emergencies; the right to request flexible working, or minimum notice periods. However, they do have a section 1 right to written particulars of employment, protection against unlawful deductions, paid annual leave and national minimum wage, vicarious liability and DPA protections, and possibly pension contributions and SSP (subject to eligibility).
Employee – Employees have the most rights including security from unfair dismissal (subject to qualifying service), discrimination protection, health and safety protection; a right to Statutory Sick Pay, pension, maternity and other parental rights; flexible working requests; paid annual leave and national minimum wage, minimum notice periods, redundancy pay, etc. Employees have the benefit of vicarious liability and DPA protections, and the benefit of the Acas Code of Practice on Disciplinary and Grievance Procedures – breach of this can result in an up to 25% uplift being applied to the employee’s award at Tribunal.
Worker status is still in a state of flux. Cases are still waiting to be decided to provide clarification of the differences between the three possibilities. We are happy to advise on how best to deal with this tricky area.
Legislation update
A number of relevant Bills received Royal Assent in May 2023. The ones to watch from an employment interest viewpoint are:-
- The Protection from Redundancy (Pregnancy and Family Leave) Act 2023 which is expected to come into force after July 2023. Regulations will be made to extend for women protection against redundancy during or after pregnancy or after maternity leave, adoption leave or shared parental leave. The extended period of protection after the woman’s return to work is expected to be six months.
- The Carer's Leave Act 2023 which is expected to come into force in April 2024, giving unpaid carers a right to one week of flexible unpaid leave a year to care for an older, disabled or seriously ill dependant with long-term care needs. This right will be available to eligible employees from the first day of employment. They will be able to take the leave flexibly to suit their caring responsibilities and will not need to provide evidence of how the leave is used or who it will be used. Employees taking their carer's leave entitlement will be subject to the same employment protections that are associated with other forms of family-related leave, meaning they will be protected from dismissal or any detriment as a result of having taken time off on carer’s leave.
- The Neonatal Care (Leave and Pay) Act 2023 is expected to come into force in April 2025 and will provide parents of babies who require specialist neonatal care with additional statutory leave in addition to other statutory leave entitlements (such as maternity and paternity leave). Up to 12 weeks' neonatal care leave will be available to eligible employees.
On a separate note, the government has announced an intention to introduce new legislation to restrict the duration of non-compete restrictive covenants to a maximum period of three months post-employment termination. Employers will still be able to impose restrictions on their departing employees during garden leave or notice periods. Non-solicitation and confidentiality clauses will not be limited in the same way but will remain subject to the test of being no more than is reasonably necessary to protect the employer’s legitimate business interests. No timetable has yet been given for when this may take effect.
Post-Brexit update
The government had suggested previously that almost all European Law would be revoked by the end of 2023, unless preserved via a statutory instrument. However, the government has announced recently that it will be abandoning the sunset clause in the Retained EU Law (Revocation and Reform) Bill, meaning that this position is being reversed. European law will now remain binding in the UK unless it is expressly repealed. This Bill will be amended to contain a list of the retained EU laws that the government intends to revoke on 31 December 2023, but anything not on that list will remain good law.
Various reform packages of employment laws have been proposed. The government has expressed the hope that these changes will improve regulation following our departure from the EU, whilst maintaining UK labour standards. The proposed reforms include:
- Working Time Regulations
- Merging ‘normal’ holiday leave with ‘additional’ holiday leave, to create one entitlement.
- Allowing ‘rolled-up’ holiday pay. This has been technically unlawful under EU law for some years, although the remedy for breach is limited if the rolled-up element is shown clearly on payslips.
- Removing the requirement for record-keeping of working hours under the Working Time Regulations.
- Tupe
- Removing the requirement to consult with appointed representatives when there are fewer than 50 employees in the business and fewer than 10 transferees.
Case Law Update 📢
Department for Work and Pensions v Susan Boyers
The employee had been employed for more than 12 years when she was dismissed for capability reasons in January 2018. She had been on sick leave for almost a year, claiming this was because of mental health conditions arising from alleged bullying and harassment by a colleague. She brought a claim of discrimination arising from disability under section 15 Equality Act 2010.
The employer claimed that their treatment of her was a proportionate means of achieving a legitimate aim, namely the aim of achieving a healthy and committed workforce to meet reasonable business needs. They later reformulated this as aims to protect scarce public funds and reduce the strain on other employees caused by the employee's absence. Mrs Bowers was successful at first instance. However, the DWP’s appeal to the Employment Appeal Tribunal was upheld and the case was sent back to the same Tribunal for reconsideration. They reached the same decision, namely that Mrs Bowers’ claim succeeded, so the DWP appealed again.
The second appeal was also dismissed. The employer had failed to show that its dismissal decision was a proportionate means of achieving the identified aims, largely because it had not provided evidence as to how its decision makers thought that their actions would serve those legitimate aims. Although Mrs Bowers had been given a trial in an alternative role, the DWP did not provide weekly feedback as promised, it withdrew the trial without giving notice, and there had been issues with IT and training, meaning that Ms Bowers had not been given a fair trial.
Lovingangels Care Ltd v Mrs B. Mhindurwa
The claimant was a live in carer for a resident in the respondent’s care home. The resident was hospitalised; in normal circumstances, the claimant would have been assigned to another of the respondent’s clients. However, due to the Covid-19 pandemic, there was no other residents, therefore the client was dismissed by reason of redundancy, even though she had been asked to be placed on furlough.
The tribunal held that this dismissal was unfair. The respondent had failed to consider using the furlough scheme, which should have been considered as a reasonable alternative to dismissal. The judge at first instance commented that this was the type of situation that the furlough scheme envisaged.
The decision was upheld on appeal. The circumstances of the pandemic were extraordinary, but the law of unfair dismissal was sufficiently robust to deal with them.
Daniel Tanase v Barchester Healthcare Ltd
The claimant brought claims of unfair dismissal and race discrimination against his former employer. The tribunal issued a case management order requiring the claimant to carry-out certain tasks by a specified date. The claimant failed to comply, so the tribunal issued a strike-out warning letter. The claimant responded by requesting an oral hearing. The tribunal ignored that request and instead dismissed the claimant’s claim for non-compliance with the case management order, referring to the case management order as an ‘unless order’. The claimant appealed.
Unsurprisingly, the EAT allowed the appeal. The case management order had not specified that non-compliance would result in the claim being dismissed – it was not an ‘unless order’ under Rule 38 of the 2013 Regulations. It was simply a case management order issued under Rule 29. The dismissal of the case had been ‘procedurally incompetent’. The dismissal order was set aside, and the case sent back to the tribunal for reconsideration.
Thank you to our contributors: Phil Cookson, Desley Sherwin, Laura Hill and George Miller.