The general election - implications for employment law

With just three weeks to go until the general election, and the main parties having now published their manifestos, what is the future looking like for employment law?

The Conservatives have indicated their support for real terms increases in the National Minimum Wage, rising from its current level of £6.50 per hour to reach £8 per hour by the end of the decade. The Conservatives have also promised to prohibit the use of exclusivity clauses in zero-hours contracts. Employers with more than 250 employees will be required to publish the difference between the average pay of male and female employees.

There will also be restrictions on the ability to strike. Lawful strike action will only be able to take place where at least half of eligible workers have voted. In essential public services, industrial action will require the support of at least 40 percent of those entitled to vote, as well as a majority of those who actually turn out to vote. Restrictions on the ability of employers to hire agency workers to provide cover during strikes will also be lifted.

Of potential far greater significance is the promise to hold a referendum on the UK’s membership of the EU by the end of 2017. Any re-negotiation of the UK’s terms of membership, and any withdrawal from the EU, has the potential for a huge upheaval in employment law.

Labour also promises to increase the National Minimum Wage to £8 per hour, by October 2019. Labour will additionally use government procurement to encourage the higher Living Wage (currently £7.85 per hour, £9.15 per hour in London). Publicly listed companies will be required to report whether they pay the Living Wage.

Zero-hours contracts will also be restricted. Those workers who work regular hours for more than 12 weeks will be entitled to a “regular” contract. Employers will also be prevented from undercutting the pay of permanent staff by using cheaper agency workers.

Labour has also promised to abolish the current Employment Tribunal fees system. It is not clear whether fees will be abolished completely or whether a new system will be put in place with (we assume) lower fees.

The Other Parties

While it is almost certain that either the Conservatives or Labour will be the largest party after the general election, the likelihood that neither will secure an overall majority and may need to form a coalition or looser alliance with smaller parties, makes the policies of those smaller parties significant.

The Liberal Democrats aim to expand flexible working. They aspire to paternity leave and shared parental leave becoming rights from day one of employment. More particularly, the Liberal Democrats will expand shared parental leave and introduce a “use it or lose it” month to encourage fathers to take time off to care for their young children.

The Liberal Democrats will also require employers with more than 250 workers to publish details of pay differentials between men and women. By 2020, those employers will also be required to publish details of those who are paid less than the Living Wage and the difference between top and median pay. Interestingly, the Liberal Democrats also propose measures to prevent employers from avoiding employment rights by wrongly classifying employees as workers or self-employed. In relation to zero-hours contracts, the Liberal Democrats would introduce a right to request a regular-hours contract, and consult on making regular working patterns contractual after a certain period of time.

UKIP proposes that the UK should leave the EU. Given that so many UK employment rights (such as those relating to unlawful discrimination, the regulation of working time, and paid holidays and rights provided under TUPE) derive from EU law, there promises to be a significant upheaval to employment law. If Britain left the EU, UKIP have said that they will seek to incorporate EU derived rights into UK law, but with amendments. The Working Time Directive has been cited as an EU law which would require amendment before being incorporated into UK law. UKIP also promises to give employers the right to choose to employ British citizens first. UKIP additionally proposes to regulate, but not ban, zero-hours contracts.

The Green Party aim to increase the National Minimum Wage to £10 per hour by 2020, with the highest earner in an organisation earning no more than 10 times the pay of the lowest earner. A 35-hour working week would be phased in, together with an end to ‘exploitative’ zero-hours contracts. The Greens would also reduce Employment Tribunal fees.

The Scottish National Party has today launched its “Jobs Manifesto”. Proposals include increasing the minimum wage to £8.70 per hour by 2020 and ending ‘exploitative’ zero-hours contracts.

Plaid Cymru proposes to end ‘exploitative’ zero-hours contracts, as well as to increase the National Minimum Wage to the level of the Living Wage. Plaid Cymru would also require supervisory boards of employers with more than 500 staff to include employee representatives. A ‘fair pay’ scheme will be introduced to link the pay of everyone within a company. The stated aim is to prevent spiralling executive pay while other staff receive no pay increase. A review of the Employment Tribunal Fees system is also promised, together with legislation against ‘blacklisting’.

With the opinion polls so close, it is very unclear at the moment as to what changes will be made to employment law after the election. What is clear, though, is that further changes are coming, with the National Minimum Wage and zero-hours contracts being targets for whoever is elected.

Breaking: NYC Council Bars Most Pre-Employment Credit Checks

This post was written by Cindy S. Minniti and Mark S. Goldstein.

New York City employers who routinely use credit checks as part of the pre-employment process may be in for a rude awakening. Earlier today, the NYC Council passed legislation that bars most employers with four or more employees, as well as employment agencies, from requesting or using a current or prospective employee’s “consumer credit history” for employment purposes, including those related to hiring and compensation (the Bill). The Bill defines “consumer credit history” as an individual’s creditworthiness, credit standing, credit capacity, or payment history, as indicated by:

  • A consumer credit report
  • A credit score, or
  • Information an employer obtains directly from the individual regarding
    • Details about credit accounts, including the individual’s number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit, prior credit report inquiries, or
    • Bankruptcies, judgments or liens.

As a slight consolation to the business community, the Bill – informally dubbed the Stop Credit Discrimination in Employment Act – contains several exemptions, which were a late addition that helped push it across the finish line. Specifically, the Bill exempts:

  • Entities that are “required by state or federal law or regulations or by a self-regulatory organization as defined in section 3(a)(26) of the securities exchange act of 1934” to use an applicant’s or employee’s “consumer credit history for employment purposes”
  • Certain law enforcement personnel
  • Positions that require an individual to be bonded under federal, state, or local law
  • Positions that require an individual to possess security clearance under federal or state law
  • Non-clerical positions pursuant to which individuals will have “regular access to trade secrets, intelligence information or national security information” (the Bill goes on to provide that “[t]he term ‘trade secrets’ means information that: (a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; and (c) can reasonably be said to be the end product of significant innovation. The term ‘trade secrets’ does not include general proprietary company information such as handbooks and policies. The term ‘regular access to trade secrets’ does not include access to or the use of client, customer or mailing lists”).
  • Individuals applying for positions “(i) having signatory authority over third party funds or assets valued at $10,000 or more; or (ii) that involve[] a fiduciary responsibility to the employer with the authority to enter financial agreements valued at $10,000 or more on behalf of the employer,” or
  • Individuals applying for positions “with regular duties that allow the employee to modify digital security systems established to prevent the unauthorized use of the employer’s or client’s networks or databases.”

The Bill also directs the NYC Commission on Human Rights – the City’s fair employment practices agency – to issue a report within the next two years concerning employers’ use of the aforementioned exemptions.

With regard to enforcement, the Bill permits employees to pursue a private right of action and seek the same broad remedies as any other claims asserted under the employee-friendly NYC Human Rights Law. It will take effect 120 days after it is signed by Mayor Bill de Blasio.

Practical Considerations

For New York City employers who perform credit checks on job candidates or current employees, a review of existing policies and procedures is a must. Employers should also review job descriptions to identify which positions are exempt from the Bill. Working with experienced counsel now to align your pre-employment and other relevant practices with the Stop Credit Discrimination in Employment Act will result in fewer headaches down the road.

UK Update - Whistleblowing: When is a disclosure made in the public interest?

In Chestertons –v– Nurmohamed, the Employment Appeal Tribunal has given the first appellate guidance on when a worker’s disclosure is made in the public interest, so as to attract whistleblower protection.

Changes to Whistleblowing legislation

In July 2013, the whistleblower legislation was changed to require a worker making a disclosure to have a reasonable belief that the disclosure was made in the public interest. The change was primarily aimed at removing whistleblower protection from workers who made disclosures about an employer’s alleged breaches of their own personal contract of employment, where such breaches had no wider public interest.

Mr Nurmohamed’s disclosures

Mr Nurmohamed was a director at the Mayfair branch of Chestertons Estate Agents. In August and September 2013, Mr Nurmohamed made three disclosures to the effect that Chestertons was manipulating its accounts to the benefit of shareholders with the effect that he, and approximately 100 other managers, would be disadvantaged through receiving lower commission payments. Mr Nurmohamed was subsequently dismissed and brought claims in the Employment Tribunal. One of his claims was that he had been automatically unfairly dismissed for making a protected disclosure, i.e., he had blown the whistle on his employer’s wrongdoing.

The Employment Tribunal agreed with Mr Nurmohamed. It found that Mr Nurmohamed’s three disclosures pointed to Chestertons having breached its legal obligations to the 100 managers in question. This meant that the disclosures were potentially covered by the whistleblowing legislation. The Tribunal also found that the disclosures were made in the (reasonable) belief of Mr Nurmohamed at the time that it was in the interest of the 100 senior managers (and not just himself). The Tribunal felt that this was a sufficiently large group of ‘the public’ to amount to being a matter of public interest. Chestertons appealed to the Employment Appeal Tribunal

The EAT’s Decision

The EAT upheld the Employment Tribunal’s decision. The EAT made the following points about disclosures in the public interest:

  • The question was not whether the disclosures were actually in the public interest, but whether Mr Nurmohamed had a reasonable belief that they were. Mr Nurmohamed had such a reasonable belief in this case.
  • The new requirement for disclosures to be made in the public interest was introduced to do no more than prevent a worker from relying on a breach of his own employment contract, where the breach was of a personal nature and there were no wider public interest implications. The implication of the EAT’s statement is that the legislation should not be read too widely to exclude potential whistleblowing claims.
  • The EAT did not accept the argument made on behalf of Chestertons that Mr Nurmohamed’s disclosures were essentially about a private dispute between Chestertons and its workers regarding their contracts of employment and, therefore, not in the public interest. The Tribunal had recognised that the person that Mr Nurmohamed was most concerned about in making the disclosures was himself. However, it was satisfied that Mr Nurmohamed did have other managers in mind as well. There was no reason to overturn the EAT’s conclusion that this resulted in a section of the public being affected, and the public-interest test was therefore satisfied.

Effect on Employers

This is the first appellate decision on the meaning of ‘public interest’ in the whistleblowing legislation. The EAT has made clear that the public interest hurdle will be fairly easy to clear. Even in circumstances where an employee’s primary motivation in making a disclosure involves a dispute about his or her own contract of employment, that disclosure may be in the public interest so long as other employees are affected, even in what is essentially a ‘private’ dispute between the employer and its employees about their contracts of employment.

In this case, the fact that 100 other senior managers were affected made it relatively easy for the Tribunal to find that a section of ‘the public’ was affected by Mr Nurmohamed’s disclosure. However, it will be interesting to see how this case law develops where fewer employees are affected. What happens if an employee’s disclosure about an employer’s breach of employment contracts only affects that employee and one other? We shall have to wait and see.

Is Your Social Media Influencer or Blogger an Employee or an Independent Contractor? What Companies Need To Know Before They Engage Bloggers and Other Independent Contractors

With the first quarter of 2015 behind us, many companies are already deeply engaged in social media campaigns. Many of these campaigns include the engagement of professional bloggers or other persons with social media influence to promote corporate brands through social media. These individuals are typically classified as independent contractors, but are they really employees? This article describes the risks and rewards of classifying bloggers (and any other workers) as independent contractors instead of employees, and ways to manage that risk.

Click here to read the entire post on Adlaw By Request.

Term Limitations in Competitive Sports: Are All German Professional Sports Contracts Invalid?

The Labour Court Mainz is currently creating quite a stir in German professional sports. For decades, it was customary and recognized by the courts that contracts of professional athletes could be limited. The Labor Court in Mainz now sees this differently.

German goalkeeper Heinz Müller brought an action against his club Mainz 05. He had been under a fixed-term contract with the club since 2009, most recently between 2012 and summer 2014. The club Mainz 05 was of the opinion that because of uncertain progress in performance of the player (Müller, in 2012, was already 34 years old), and because of it being customary practice in the industry, a fixed-term contract was permissible. However, the Labour Court Mainz instead agreed with Müller's complaint, and explained that with regard to the last contract of employment, there were no substantive exculpatory reasons. The central assertion of the Labour Court is that even in professional sports, the mere uncertainty of future performance does not justify a limitation.

The club Mainz 05 has announced plans to appeal. The case carries explosive force and is expected to be decided before the Federal Labour Court or the European Court of Justice. This can take time, and there is uncertainty whether countless professional sports contracts contain invalid fixed-term clauses.

The decision can hit the clubs hard. That the uncertain progress in performance of professional athletes should not justify a term limitation is difficult to accept. Careers of professional football players regularly end no later than in the athlete’s late 30s. This must be taken into account. Either the legislature must intervene, or collective bargaining agreements in professional sports must regulate practice-oriented term limitations in the future. First, however, the opinion of the Labour Court Mainz must contend with the judicial instances. Thus, the game is not over by a long shot. We will keep you posted.

It May Not be a Matter of 'If,' but 'When' for Private Employers in the Commonwealth -- Virginia 'Bans the Box' for Many State Employment Applications

This post was written by Betty S. W. Graumlich and Gregory J. Sagstetter.

On April 3, Virginia Governor Terry McAuliffe issued Executive Order #41, thereby adding Virginia to the growing list of jurisdictions (including California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Nebraska, New Jersey, New Mexico, Rhode Island, Washington, D.C., and more than 100 cities and counties) that have “banned the box” and excluded and/or limited the use of criminal background checks in hiring for certain jobs.

As drafted, Executive Order #41 applies only to “agencies, boards and commissions within the executive branch of [state] government,” and requires removal of questions relating to convictions and criminal history from state employment applications. The text of the Order, however, encourages private employers to adopt “similar hiring practices,” and signals that legislation affecting the commonwealth’s private employers may be next.

While Executive Order #41 does not currently impact private employers, Virginia employers should begin evaluating whether the use of criminal background information for employment purposes is appropriate for their organizations, including whether the benefits of such practices are worth the risks in the current political environment. Given the EEOC’s current position that use of criminal background information to screen job applicants may violate Title VII, waiting for mandatory “ban the box” legislation to consider the issue may not be prudent.

Sickness absence management - employee rights, risks and recommendations

This post was written by Séverine MartelMarie BrunotJan WeißgerberMartin GätznerDesmond LiawAnita WanMichael Smith, Amy Ferrington, and Joel S. Barras.

France

Under French law, the employment contract of an employee who is on sick leave is suspended. The employee is expected to inform his or her employer and the relevant social security organisations of the sickness absence within 48 hours, and will be entitled to receive social security allowances while absent from work.

Depending on the provisions of the applicable collective bargaining agreement, employees may be entitled to receive their full salary for a limited period. In such cases it falls to the employer to pay the difference between usual salary and the allowances provided by the French social security organisations.

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Lock v British Gas - eagerly awaited holiday pay Judgment now handed down

This post was written by Amy Ferrington and Michael Smith.

The recent line of holiday pay cases has led to widespread media coverage suggesting some employers’ payroll costs are due to soar. Businesses have therefore been eagerly awaiting the Employment Tribunal’s decision in Lock v British Gas, which has now been handed down on the question of whether commission structures will impact holiday pay. In short, many employers are to pick up a bill, but the question of quantum here is yet to be determined.

Summary

In our previous blog on this case, we described the decision of the European Court of Justice which established that, in some circumstances, a worker’s holiday pay should be calculated based on salary and commission payments, not just basic pay, where commission payments are “intrinsically linked” to the performance of tasks required to be carried out by a worker. The ECJ left it to the Employment Tribunal to decide the method of calculating commission payable to workers away on annual leave.

The case returned to the Tribunal in February this year, and in the Judgment handed down this week, the Tribunal has held that the Working Time Regulations 1998 should be interpreted so that an employee’s holiday pay includes an element of commission. A further Employment Tribunal Hearing will be held to determine the applicable reference period for calculation purposes (i.e., over what period a worker’s earnings should be averaged to calculate holiday pay) and how to quantify claims.

Facts

Mr Lock was a sales consultant with British Gas. Mr Lock’s wage was made up of basic monthly salary plus commission payments, which were calculated in accordance with the level of sales achieved. Commission earned in one month was paid in subsequent months. Accordingly, when on annual leave, Mr Lock received commission payments relating to his sales achieved in previous months. However, Mr Lock incurred a reduced income in the months following his annual leave because he had not generated any sales during his period of holiday. Mr Lock argued that the reduced income constituted a breach of the Working Time Regulations 1998.

The case was referred to the ECJ, which held that where a worker's remuneration includes contractual commission, which is determined by reference to sales achieved, a national law that calculates statutory holiday pay based on basic salary alone will be incompatible with the Working Time Directive.

The case therefore returned to the Employment Tribunal, to determine the extent to which the WTR 1998 could be read consistently with the EU law and, if not, whether words should be added to the WTR to ensure conformity.

Tribunal Decision

The Tribunal held that it was necessary to interpret the domestic legislation (i.e., the WTR 1998) to require that employers take results-based commission into account when calculating pay for annual leave. The Tribunal went on to decide that a conforming interpretation of national law could be achieved by adding a new sub-paragraph to the WTR 1998.

The new sub-paragraph provides that where remuneration includes commission or similar payments, employers should calculate “a week’s pay” for holiday pay purposes on the basis that remuneration varies with the amount of work done. In short, this will likely mean that under the WTR 1998, employers are now required to calculate the employee’s holiday pay by reference to the previous 12 weeks’ total earnings, including commission.

Unfortunately for employers, however, key issues have been set aside for determination at a later date, including what the correct reference period should be for calculating commission payments due during holiday (i.e., whether it should be more than 12 weeks). The issue before the Tribunal at this stage was purely conceptual, that is, how to resolve any potential conflict between EU and domestic law.

This means that a definitive conclusion regarding the reference period for calculation and how to quantify Mr Lock’s claim has been reserved for a future Hearing, and therefore employers cannot be assured just yet that all uncertainty in this area has been resolved.

Also, note that a further potential frustration for employers is the reference in the new WTR wording to both commission and “similar payments”. So while this case should ultimately provide clarity for employers on commission payments in particular, this change to the WTR could throw up a wealth of related claims on other types of remuneration.

A Note on Limitation Periods

Employers can take some comfort from the Deduction from Wages (Limitation) Regulations 2014, which came into force on 8 January 2015. The Regulations provide that for most claims for unlawful deductions, there is a new backstop period of two years. This will apply to claims concerning commission, holiday pay, bonuses, fees and other emoluments (but not other types of remuneration, such as statutory sick pay and statutory maternity pay). The Regulations will take effect for claims presented on or after 1 July 2015.

UK update - Type 2 diabetes controlled by diet is not automatically a disability

This post was written by David Ashmore and Amy Treppass.

In Metroline Travel v Stoute, the Employment Appeal Tribunal (“EAT”) decided that employees with type 2 diabetes controlled by diet (rather than medication) are not automatically protected by disability discrimination legislation.

The Facts

Mr Stoute was employed by Metroline and worked for them as a bus driver for 21 years. He suffered from type 2 diabetes. To keep his blood sugar levels low, he followed a low sugar diabetic diet which mainly consisted of avoiding soft drinks.

On 11 March 2013, he arrived late at work and was dismissed for gross misconduct. He claimed that his late arrival at work was the result of diarrhoea, which was a consequence of his diabetes.

Mr Stoute brought claims against Metroline of unfair dismissal, discrimination arising from disability, and failure to make reasonable adjustments. A preliminary hearing took place to determine if type 2 diabetes meant that he was disabled under the Equality Act 2010.

The Employment Tribunal (“ET”) referred to a medical report where it was noted that for two periods of time, Mr Stoute was not taking medication which reduces blood sugar levels, but was following a controlled diet.

In rendering its decision, the ET had regard to guidance from the Equality and Human Rights Commission on the definition of disability. The guidance provides that if a person suffers from an impairment and is undergoing treatment or correction for that impairment, then the impairment is to be treated as having a substantial adverse effect if, without the treatment or correction, the impairment was likely to have that effect.

The ET decided that a controlled diet amounted to treatment or correction of an impairment, and that Mr Stoute was disabled within the meaning of the Equality Act as a consequence of his type 2 diabetes.

The EAT’s decision

The EAT found that the ET had made an error of law in concluding that anyone with type 2 diabetes was automatically disabled under the Equality Act. In the EAT’s view, abstention from sugary drinks did not amount to medical treatment that had to be ignored when determining the issue of disability. The EAT also pointed out that a coping or avoidance strategy (such as a controlled diet) might result in the effects of an impairment being reduced to the extent they are no longer substantial, with the outcome that an individual is not disabled under the Equality Act 2010. The EAT also concluded that diabetes controlled by diet does not amount to an impairment or interference with normal day-to-day activities. The EAT allowed the appeal and ordered Mr Stoute to pay the appellant’s fees in full.

What does this decision mean for employers?

This is an interesting and potentially important decision. Type 2 diabetes is by far the most common type, with 90% of approximately 3.1 million diabetics in the UK having type 2 diabetes. This case illustrates the fact that even where a medical condition is clinically well recognised, that in itself is not sufficient for it to be a disability. This case will also likely make it harder for people suffering from nut allergies, lactose intolerances, etc., who manage their conditions by avoiding certain foods/drinks, to claim that they are disabled. Note that the EAT accepted that medicated diabetes sufferers (type 1 or type 2) are regularly considered to be disabled for the purposes of the Equality Act.

Webinar: Philadelphia's New Paid Sick Leave Law

Philadelphia Mayor Michael Nutter recently signed the “Promoting Healthy Families and Workplaces” Ordinance, adding Philadelphia to the growing list of cities and states to require sick leave. The new law, which takes effect May 13, 2015, generally requires employers to provide workers with 40 hours of sick leave each year.

On Thursday, April 16 at 12 p.m. EDT, Reed Smith attorneys John DiNome and Lindsay Freid will present a webinar: “Employer Briefing: Philadelphia’s New Paid Sick Leave Law.” They will provide an overview of how the new law will affect employers.

Topics include:

  • Which employees are entitled to paid sick leave, which employees and employers are exempt, and exactly what qualifies as “sick leave”
  • How sick leave accrues and how it may be used
  • Obligations employers may impose on employees to entitle them to sick leave
  • New employer obligations – including record-keeping and notice requirements – as well as prohibited conduct
  • What to do now to ensure compliance with the law on its effective date

This webinar is part of Reed Smith’s ongoing series, "What Employers Need To Know in 2015." We invite employers to register here.

Thursday Webinar: Managing the Risks of Social Media in the Workplace

Facebook, Twitter, and other social media have become ubiquitous in the workplace, with a staggering 75 percent of employees using social media at work. But employers face a great deal of uncertainty about what restrictions on social media use are permissible – and which could get them into trouble.

On Thursday, March 26 at 12 p.m. EST, Reed Smith attorneys Joel Barras, Cindy Schmitt Minniti, and Keri Bruce will present a webinar: “Beyond the Water Cooler: Managing the Risks of Social Media in the Workplace.” They’ll address practical steps for managing the risks of social media in the workplace.

Topics include:

  • The NLRB’s recent decisions on social media use, and what they mean for union and non-union employers
  • Tips for drafting enforceable electronic-use policies
  • Use of social media in employment decisions
  • Determining whether an employee’s social media activity is legally protected
  • What to do when an employee goes rogue on social media

This webinar is part of Reed Smith’s ongoing series, "What Employers Need To Know in 2015." We invite employers to register here.

Employment Appeal Tribunal gives guidance on what constitutes sufficient knowledge of a disability to give rise to a duty to make reasonable adjustments

In Donelien v Liberata, the Employment Appeal Tribunal (“EAT”) has held that an employer did not have constructive knowledge of an employee’s disability, even though further steps could have been taken to investigate her condition.

Background

Under the Equality Act 2010, employers are obliged to make reasonable adjustments to help disabled employees overcome disadvantages arising from working rules and practices, the physical features of the workplace, and the need for auxiliary aids. However, that duty only arises where an employee is disabled within the meaning of the Equality Act 2010 and the employer knows (i.e., has “actual knowledge”) or could reasonably be expected to know (i.e., has “constructive knowledge”) that the employee is disabled. This case was decided under the Disability Discrimination Act 1995, which was replaced by the Equality Act 2010. However, the legal principles are the same.

Whether an employer has constructive knowledge of an employee’s disability will be determined by an Employment Tribunal looking at all of the facts of the case, including the information known to the employer and the efforts made to investigate the employee’s medical condition and its effect on the employee. This will often involve referring employees to Occupational Health or another medical expert so a report can be prepared. However, in Gallop v Newport City Council, the Court of Appeal held that the employer in that case had constructive knowledge of the employee’s disability, even though the Occupational Health report indicated that the employee was not disabled. An employer must therefore form its own view of whether an employee is disabled, and cannot uncritically rely on an Occupational Health report.

The facts

Ms Donelien was employed by Liberata as a Court Officer. She was dismissed in October 2009 for unsatisfactory attendance, a failure to comply with sickness notification procedures and a failure to work her contractual hours. This followed Ms Donelien being absent from work for 128 days in the last year of her employment for a variety of different reasons, including stress, colds, stomach upsets, a viral infection and high blood pressure.

Liberata had instructed its Occupational Health provider to prepare a report on Ms Donelien’s condition in May 2009. The enquiries put to the provider included (i) whether Ms Donelien suffered from a medical condition which explained her pattern of absences; (ii) whether any such condition impacted her ability to carry out her role; (iii) how long any such condition would be likely to last; (iv) whether any such condition amounted to a disability; and (v) whether any reasonable adjustments were recommended. The Occupational Health report provided general information but did not fully engage with these enquiries. Accordingly, Liberata followed up by telephone and received a more detailed response. However, although the second response stated that Occupational Health did not believe Ms Donelien to be disabled, it was still lacking in detail, including by not explaining the impact of her medical conditions and their likely duration. However, Liberata did not ask for more information again.

Following her dismissal, Ms Donelien brought Employment Tribunal claims, including for disability discrimination for an alleged failure to make reasonable adjustments.

At a preliminary hearing, the Employment Tribunal determined that Ms Donelien was disabled by August 2009 at the latest. In contesting liability for a failure to make reasonable adjustments, Liberata denied having actual or constructive knowledge that Ms Donelien was disabled. The Employment Tribunal agreed with Liberata.

The decision of the EAT

Ms Donelien appealed to the EAT on two grounds:

  1. In reaching its decision, the Employment Tribunal had failed to take account of Gallop v Newport City Council when determining whether Liberata had constructive knowledge of Ms Donelien’s disability. Liberata had unreasonably relied on the Occupational Health report and failed to form its own view of whether Ms Donelien was disabled.
  2. The Employment Tribunal’s decision that Liberata had done what it reasonably could to investigate Ms Donelien’s medical conditions was incorrect, such that Liberata did have constructive knowledge of her disability.

The EAT dismissed both grounds of appeal.

In relation to the first ground of appeal, the EAT, in reviewing the Employment Tribunal’s judgment, decided that the Employment Tribunal had made a determination that Liberata formed its own view that Ms Donelien was not disabled and had not uncritically relied on the Occupational Health report. The EAT noted that Ms Donelien had a variety of apparently unconnected medical complaints, and that it was also difficult for Liberata to draw a distinction between what she could not do and would not do. As such, the Employment Tribunal was entitled to find that Liberata did not have constructive knowledge of Ms Donelien’s disability from the information available to it.

In dismissing the second ground of appeal, the EAT accepted the Employment Tribunal’s finding that Liberata had taken reasonable steps to understand Ms Donelien’s medical position. Clear instructions had been sent to Occupational Health, and Liberata had followed up when the initial response was lacking in detail. Although some employers may have followed up again when the second response still lacked particularity, the test for whether an employer had constructive knowledge is one reasonableness, and Liberata was not required to conduct the perfect investigation.

What does the case mean?

The case is helpful for employers in that it confirms that Employment Tribunals may give them some latitude in determining whether they have constructive knowledge of an employee’s disability. However, care should be taken in seeking to rely on this case as grounds for limiting investigations into an employee’s state of health. The decision of the Employment Tribunal was highly fact-sensitive, and another Employment Tribunal may have taken a different view.

Accordingly, it remains best practice to conduct as thorough an investigation as possible into the medical reasons for employee absence, and to follow up with Occupational Health providers and other medical professionals if their reports are lacking in detail.

Newsflash: New ACAS Code Now In Force

This post was written by Amy Ferrington.

ACAS has issued a new Code of Practice on Disciplinary and Grievance Procedures, which came into force last Wednesday (11 March 2015).

The new Code has been issued due to uncertainty regarding workers’ statutory rights to be accompanied by a trade union representative or fellow worker at disciplinary and grievance hearings, following the EAT decision in Toal and another v GB Oils Ltd.

In Toal, the EAT held that an employee's right to choose a companion is an absolute right, which is subject only to the requirement set out in the Employment Relations Act 1999 that the companion be a trade union representative or fellow worker.

This decision was at odds with the previous version of the ACAS Code, which stated “To exercise the right to be accompanied a worker must first make a reasonable request. What is reasonable will depend on the circumstances of each individual case.”

In the new Code, ACAS reflects the decision in Toal, stating “The statutory right is to be accompanied by a fellow worker, a trade union representative, or an official employed by a trade union. A trade union representative who is not an employed official must have been certified by their union as being competent to accompany a worker. Employers must agree to a worker’s request to be accompanied by any companion from one of these categories” (emphasis added).

This could give rise to potential issues, for instance where an employee’s chosen companion is somehow involved in the matter under investigation, meaning that they may have a conflict of interests.

Note that employees may receive compensation for a breach of the right to be accompanied, up to a maximum of two weeks' pay.

No other parts of the ACAS Code have been changed.

UK update - TUPE service provision changes become more complex with the potential involvement of multiple clients and contracts

In Ottimo Property Services Ltd -v- Duncan and another, the Employment Appeal Tribunal has decided that, where several different clients change service provider at or around the same time, each individual service provision change can be considered together to decide how TUPE applies.

The facts

Mr Duncan worked as a site maintenance engineer at a residential estate called Britannia Village. The estate was made up of several different blocks, each of which had a residents' management company. Each of these companies was a separate legal entity which contracted separately for the provision of property management services for each block. Additionally, a general management company at the estate contracted for the maintenance of the common parts, such as the estate car park and gardens.

Initially, Mr Duncan's employer was responsible for providing the maintenance work under most of the maintenance contracts at Britannia Village, but, gradually, those contracts were lost to other contractors. Between May and August 2012, Mr Duncan's employer, Ottimo, lost work under five of the contracts to Warwick Estate Properties. Warwick employed a property manager to work on the contracts and also engaged contractors to provide some of the services. Warwick did not believe that TUPE applied to transfer Mr Duncan's employment to it and did not consider him for the property manager's position. In July 2012, Ottimo terminated Mr Duncan's employment.

Mr Duncan brought a claim in the Employment Tribunal. The Tribunal had to decide whether Mr Duncan's employment had transferred to Warwick under TUPE when Warwick acquired the five contracts. The Tribunal decided that there had been no transfer. The key part of their decision concerned whether there had been a "service provision change" from Ottimo to Warwick which might have caused TUPE to apply to transfer Mr Duncan's employment.

Service Provision Changes under TUPE

Regulation 3(1)(b)(ii) of TUPE says that a service provision change can occur where:

"activities cease to be carried on by a contractor on a client's behalf……and are instead carried out by another person…" [emphasis added]

Ottimo and Mr Duncan argued that the word "client" should not be limited to the singular; in other words, where several clients changed service provider as here, those changes should be considered together as one single service provision change. If there was one single larger service provision change, Mr Duncan would be better able to say that he was assigned to that service, such that TUPE applied to transfer his employment, rather than having the more difficult task of arguing that he was assigned to one of the individual contracts that had been transferred to Warwick.

The Tribunal disagreed. It said that, reading TUPE literally, a service provision change occurred when a single client changed contractor; in other words each client's situation needed to be looked at individually, not together with other service provision changes going on at the same time. In this case, while it could be argued that the service provision change provisions of TUPE applied to the change of contractor made by each individual residents' management company, Mr Duncan was assigned to none of these contracts, and so his employment did not transfer to Warwick under TUPE.

The EAT's decision

On appeal, the Employment Appeal Tribunal overturned this decision. It said that the word "client" in regulation 3(1)(b) of TUPE could be read as the plural "clients", so long as the clients retained their identity before and after the service provision change (as was the case here). However, the EAT was keen to emphasise that there must be some commonality, or link, between those clients for individual service provision changes to be considered together. This does not mean that there needs to be a single "umbrella" contract between all the clients and the contractor. The fact that each client contracted individually with the contractor in this case was not fatal. However, in this case, the EAT said the fact that each individual client contracted with the contractor using the same standard form contract did not necessarily mean that there was such commonality. The case has been sent back to the Tribunal to decide the point.

Practical Issues for Employers

Unfortunately, this case does muddy the waters for employers deciding whether the service provision change provisions of TUPE might apply. The EAT's decision makes clear that where several different clients change contractors at or around the same time, the employer cannot focus on an analysis of each individual contract change to decide how TUPE might apply. Where there is some "commonality", there is a risk that a Tribunal may analyse each service provision change together to decide how TUPE might apply.

For the time being, and until a Tribunal makes a decision on what "commonality" might mean, employers may understandably struggle to come to a conclusion as to whether a contract change needs to be considered in isolation or together with other changes going on at the same time. This may have a significant impact on the analysis of those employees who may be in scope to transfer under TUPE.

New York Employment Roundup: February 2015

This post was written by Cindy S. Minniti and Mark S. Goldstein.

Today’s New York employment law landscape is increasingly dynamic, with a constant stream of new legislation and judicial opinions. To keep our readers current on the latest developments, we will share regular summaries of recent developments affecting Empire State employers. Here’s what happened in February 2015:

Likely Rise in Pre-Tip Minimum Wage for Tipped Workers

Last month, we wrote about a series of recommendations made by a state wage board to the acting Commissioner of Labor regarding New York’s tip credit structure. Chiefly, the wage board advocated in favor of an increase in the pre-tip minimum wage – to $7.50/hour – for all tipped workers in New York state. On February 24 – just weeks after the wage board’s recommendations were submitted for his review – the Commissioner adopted four of the wage board’s five suggestions, all but ensuring that the pre-tip minimum wage will increase at year-end.

The recommendations adopted by the Commissioner include:

  • Eliminating the different pre-tip minimum wages for food service workers and non-food service workers
  • Increasing the pre-tip minimum wage to $7.50/hour effective December 31, 2015 (causing a corresponding reduction in the state’s tip credit, which permits businesses to pay tipped employees less than the minimum wage – provided that the employees earn enough gratuities to cover the difference)
  • Further increasing the pre-tip minimum wage by an additional $1/hour for workers in NYC in the event that state lawmakers enact a separate minimum wage for the city

Notably, the Commissioner rejected the lone employer-friendly recommendation, which would have reduced the tipped minimum wage by $1/hour for tipped workers who make substantially more than the minimum wage as a result of their tips.

De Blasio Convenes Paid Sick Leave Advisory Panel

On February 4, NYC Mayor Bill de Blasio announced the formation of an advisory panel to study the impact of the city’s paid sick leave law on the business community. As readers will undoubtedly recall, the NYC Earned Sick Time Act took effect April 1, 2014, and requires that businesses with five or more employees provide those employees with up to 40 hours of paid sick leave per calendar year. The panel, which is expected to meet twice a year, comprises – among others – Andrew Rigie of the Hospitality Alliance, two City Council members, and the presidents of the five borough chambers of commerce.

Employee Misclassification Remains a Significant Problem According to Task Force

As many Empire State businesses are aware, New York has emerged as a national leader in combatting misclassification of employees as independent contractors. Indeed, one of Governor Andrew Cuomo’s first acts in office was to continue the Joint Enforcement Task Force on Employee Misclassification, a coalition consisting of six state agencies, chaired by the Commissioner of Labor. The main goal of the Task Force is to investigate the practice of worker misclassification, coordinate state agencies to ensure enforcement of state law when employers misclassify workers, and develop legislative proposals and other tools to combat misclassification. According to the Task Force, “[m]isclassification occurs when an employee is incorrectly labeled an independent contractor, or is not reported by the employer in any capacity (i.e. ‘off the books’).”

On February 1, the Task Force issued its annual report to Gov. Cuomo. Perhaps most significant, the report noted that in 2014, the Department of Labor alone “completed over 12,000 employee misclassification audits and investigations, finding over 133,000 misclassified workers and unpaid contributions due of over $40.4 million.” Overall, the Task Force members discovered nearly $316 million in unreported wages. Given the state’s emphasis on fighting misclassification, New York businesses should assess all independent contractor designations and perform a self-audit in order to evaluate areas of potential exposure.

Buffalo E-Cigarette Ban Impacts Employers

On February 3, Buffalo Mayor Byron Brown signed into law a bill prohibiting the use of e cigarettes in any location where smoking tobacco cigarettes is already prohibited. For most employers, this means that employees may not use e-cigarettes in the workplace. Similar legislation took effect in NYC last spring, and a statewide bill is currently under deliberation in Albany.