High Court rules tribunal fees are lawful


The High Court yesterday (Wednesday 17 December) rejected a judicial review brought by trade union Unison to have tribunal fees ruled unlawful.

Unison argued that the structure of the fees discriminates against women and ethnic minorities. Currently for an employee to start an action and bring it to tribunal can cost upwards of £1,000.

In his ruling, the Hon. Mr Justice Foskett admitted that although it is likely there have been instances where individuals have been refused access to justice as a result of the fees, the “assessment has to be seen as speculative until convincing evidence to that effect is uncovered”.

It is the second time Unison has failed in a legal challenge against the validity of the fees, after a court ruled its first attempt was “premature” in February of this year.

The union has vowed to appeal the decision, with general secretary Dave Prentis calling the High Court ruling a “missed opportunity” to restore access to justice for employees.

Eversheds partner Geoffrey Mead said that despite the ruling, many employment groups still believe fees are too high.

“Furthermore, a change in government at the election next year could result in a significant reduction in fee levels: both the Labour party and Liberal Democrats have indicated that they would reduce fees,” he said.

While Nicola Ihnatowicz, employment partner at law firm Trowers & Hamlins, said employers will be “relieved” that the number of cases is not likely to increase in the short term.

“Certainly we’re seeing that the claims being brought are those that are higher value and more complex, including those involving multiple claimants; these are the claims that justify a risk on the fee,” she added.

“Lower-value claims for individuals, such as claims for redundancy pay or maternity rights, are now far less common.”


ECJ obesity ruling ‘real problem’ for employers


The ruling of the European Court of Justice (ECJ) that obesity can constitute a disability could cause real problems for employers, according to Osborne Clarke employment partner Julian Hemming.

The ECJ ruled that obesity can constitute a disability after a case brought by an overweight Danish childminder found its way to Europe’s highest court of law.

Karsten Kaltoft sued his former employers for discrimination after he claimed he was sacked for being overweight. Following the decision Kaltoft will now be assessed in Denmark to judge whether his weight means he will be classed as disabled.

But Hemming claims the ruling is a “real problem” for employers because “it’s still not clear enough for them to be sure that they’re going to be on the right side of the law.”

“While the ECJ doesn’t consider obesity a disability in itself, businesses could still face discrimination claims from obese staff if their weight problem is of such a degree that they fall within the definition of having a ‘disability’ in the legislation,” he said.

He added that some of the finer details will also need to be released to avoid further legal and practical complications.

“The ECJ’s press release makes no reference to the level of an individual’s BMI, which we hope will be addressed in the full judgment. Skirting this issue is going to leave the phrase ‘severely obese’ open to judgement and create further confusion for employers and employees,” he added.


MPs back equal pay transparency bill


A bill to give the government powers to force big business to reveal their gender pay data was passed with an overwhelming majority in the House of Commons yesterday.

Only seven MPs, all male Conservatives, voted against the move. One MP abstained on the motion that was brought by Labour MP for Rotherham Sarah Champion, leading to a majority of 250.

Now passed, it will give more powers to implement elements of the 2010 Equalities Act in forcing firms with 250 employees or more to publish pay data for male and female staff, including any difference between the two.

An October report by the World Economic Forum revealed the UK has dropped from 9th to 26th in the gender equality rankings since 2006, with women seeing their average pay fall by £2,700 over that period.

Champion said the bill was not about “naming and shaming” companies, but rather making them focus on the reasons behind any gender pay gap that exists.

“Pay transparency places the responsibility on employers to be actively conscious of the law on equal pay and have policies to address the gap,” she said.

PwC is one of very few companies that already voluntarily publishes its gender pay data. Speaking at a Grazia event to coincide with the vote, UK head of diversity and inclusion Sarah Churchman said that firms can only start to tackle inequality “if they understand what is happening” within the business.

“We know that a sizeable part of the gender pay gap is the symptom of not having enough women in senior positions, so this is an area where we are continuing to focus our efforts,” she said.

“This includes introducing a range of initiatives that help all of our people achieve their potential; including board-level mentoring schemes, women’s leadership programmes and diversity training for all employees.”


Employment groups welcome tax relief on apprenticeships


Employers and employment groups have welcomed the government’s announcement that all national insurance (NI) charges on taking on apprentices under 25 are to be abolished.

Chancellor George Osborne made the announcement in the autumn statement. It was one of very few details that hadn’t been widely predicted before the event.

PwC employment tax partner John Harding called the move “a further boost to tackling youth unemployment”.

“[It] will enable employers to invest the savings they make in national insurance in training and development or even more jobs,” he said. “For an employer with 100 apprentices earning around £22,500 a year, the overall saving to the company could exceed £200,000 per year.”

Association of Employment and Learning Providers CEO Stewart Segal also welcomed the move. He went on to urge the government to extend the exemption to all apprentices who were previously unemployed.

City & Guilds praised both the policy on apprenticeships and the decision to offer loans of £10,000 to postgraduate students.

Chief executive Chris Jones called the abolition of NI payments for young apprentices a “welcome surprise”. But he added the government must make sure assistance in this area “doesn’t stop at a tax cut”.

“It is crucial that the government continues to work with education providers and businesses to ensure we are developing the skills that our economy needs,” he said.

Meanwhile City & Guilds managing director Kirstie Donnelly expressed hope that the accessibility of loans for postgraduate students will be extended to higher-level vocational courses.

“The government’s focus is quite obviously on young people, but it’s also important that older people who are looking to re-train and re-skill receive support. In a world where the nature of work is changing, we need to be looking at developing the skills of everyone – not just those under the age of 30,” she said.


HR professionals most fearful of whistleblowing reprisals


Almost three-quarters (73%) of HR professionals fear that senior management would treat them less favourably, or even look for ways to terminate their contracts, if they blew the whistle on wrongdoing, according to research by law firm Freshfields Bruckhaus Deringer.

The report, Fair Game or Foul Play?, is based on a global survey of more than 2,500 middle and senior managers. It suggests HR professionals fear the consequences of whistleblowing more than employees in any other area. Across all staff, the figure who are worried about unfavourable treatment is only 37%.

Despite HR professionals’ concerns, 36% of middle or senior managers within HR would still consider blowing the whistle. More than one in 10 (12%) have thought about doing so in the past.

HR managers are also most likely to encourage employees with concerns to go directly to a regulator (23%) or even straight to the media (14%). However, more than half (53%) of respondents said there is either no formal process for whistleblowing within their organisation or one that is publicised.

Caroline Stroud, global practice group leader for Freshfields’ employment, pensions and benefits team, warned that many companies are “ill-prepared” to deal with concerns raised by their employees.

“Corporates need to adopt sufficient internal reporting systems to recognise and manage these matters more effectively,” she said.

“Given the high-level nature of whistleblowers’ issues such as financial mismanagement, corruption or criminal activities, and the related major reputational risks, adequate whistleblowing procedures are clearly a board-level issue.”

Applications open for shared parental leave


Prospective parents can apply for shared parental leave from today (Monday 1 December).

Anyone whose child is due on or after 5 April 2015 will be eligible for the new benefit, which means parents are able to split 52 weeks of parental leave evenly if they wish. The leave can be taken in up to three separate blocks.

CBI director for employment and skills Neil Carberry said the new flexibility will allow fathers to “play a stronger role in their child’s development”.

“Businesses support the new scheme because it encourages greater diversity in the workplace and allows women to return to work earlier if they want to – avoiding a loss of key business skills,” he said.

He added that “good guidance” for employees will be essential for the new system to be embedded effectively.

Institute of Leadership and Management (ILM) chief executive Charles Elvin warned that the new legislation will pose “practical challenges” for managers, especially within small businesses.

“But it’s a crucial step towards enabling more women to progress into senior roles, making it a huge enabler of equality in the workplace,” he continued.

“If organisations are serious about realising the benefits of a gender diverse senior team and meeting impending government targets for more balanced boards, this introduction of shared leave is a crucial step towards that.”

Norton Rose Fulbright senior associate Lauren Pullen-Stanley commented that it is hoped shared parental leave will contribute to “fairness and diversity”. But she warned it may be “some time” before the proposals lead to any practical change.

“Key stumbling blocks were low levels of pay during leave and entrenched cultural resistance to men taking an active role in childcare. Eighty-nine per cent of respondents among employers predicted a low level of take-up.”


Employers need to accept parents’ family focus, says Mumsnet CEO


Employers must accept that working parents will always put family considerations ahead of work, according to Mumsnet CEO and founder Justine Roberts.

Speaking at an event in London to discuss flexible working as part of the CBI Great Business Debate, Roberts urged employers to accept this truth as a way of forging better relationships with working families.

“I had careers both in the City and as a football journalist, which were both very male-dominated environments. And I noticed that there were parents there who really had to pretend their children didn’t exist,” she said.

“I needed a different working environment, one that recognised an essential truth – that parents will always put family first and work second.”

Roberts added that for many work will come “a close second”, but accepting it will not be put first will make for “much better employers”.

Research carried out by the CBI, based on a YouGov poll of around 1,300 workers, revealed 38% of British working parents report finding it either “fairly difficult” or “very difficult” to balance their work and family/home lives. The results are almost identical for men and women.

Another part of the research suggests 40% of employees feel comfortable asking for flexible working, although 42% would feel uncomfortable doing so.

Jill Sheddon, group HR director at Centrica, said that “the language of corporates can sometimes suffocate the debate” around flexible working in large corporates.

“When we had some round tables about flexible working what struck me is that SMEs actually did a lot of this stuff but just didn’t label it as such. The mindset was that what was good for the individual was good for the company.”


One in five HR directors not ready for shared parental leave


More than one in five (21%) HR directors admit they are not ready for the requirements of the shared parental leave legislation that comes into effect on 1 December, according to research by HCM solutions provider ADP.

The Workforce View 2014/15 is the latest annual barometer of the views and attitudes of UK workers. It is based on a survey of around 2,500 British working adults. It also suggests 70% of HR directors predict little or no interest in shared parental leave within 12 months of its implementation.

Despite it being available to any parents expecting or adopting a child on or after 5 April 2015, 11% of those staff questioned admit that they have not heard of it. However, 33% of 16- to 34-year-olds asked said they intend to take advantage of it within five years.

ADP UK HR director Annabel Jones told HR magazine all HRDs are “instrumental in raising awareness” of shared parental leave.

“It is crucial for HRDs to make sure that organisations have policies and processes in place to comply with the new legislation,” she said.

“They must clearly indicate how the process works, how much leave is available and who is eligible. Working closely with line managers and other functions will enable them to make sure that teams can operate efficiently before, during and after shared parental leave.“


Two-thirds of newly-employed paid below living wage


Two-thirds of people who moved from unemployment to work over the past 12 months took jobs that pay below the living wage, according to research by the Joseph Rowntree Foundation.

The report, Monitoring Poverty and Social Exclusion 2014, is based on wage data and comparative research on factors such as the retail price index and average housing costs.

It also revealed the average hourly rate for men fell from £13.90 to £12.90 between 2008 and 2013. For women it has decreased from £10.80 to £10.30. Both figures take into account inflation.

Across the same period the average income for the lowest-paid 25% has fallen by 70% for men and 40% for women, making this group the worst affected by the fall in wages.

There is also an issue with getting people out of long-term, low-paid work. Only one-fifth who were in low-paid roles 10 years ago have now moved out of it. Additionally, there are 1.4 million people in part-time work because they cannot find full-time positions.

Joseph Rowntree Foundation chief executive Julia Unwin warned the UK will not reach its “full economic potential” if large numbers of people are still struggling with low incomes.

“We are concerned that the economic recovery we face will still have so many people living in poverty. It is a risk, waste and cost we cannot afford,” she said.

“A comprehensive strategy is needed to tackle poverty in the UK. It must tackle the root causes of poverty, such as low pay and the high cost of essentials.”


The Holiday Pay Saga Continues

On 4 November 2014 the Employment Appeal Tribunal (EAT) handed down an important ruling in Bear Scotland and others v Fulton and others. The EAT ruling demonstrates that employers are now required to include most types of overtime payment when calculating holiday pay for salaried workers.

The judgment changes the previous understanding of the law and therefore means that most employers who pay overtime are currently at risk of claims in respect of underpayments of holiday pay.


The Working Time Directive (WTD) required all member states of the EU to create an entitlement, for all workers, to a minimum of 4 weeks’ paid annual leave. The WTD does not specify how to calculate pay during such leave. The UK incorporated these provisions into domestic law using the Working Time Regulations 1998 (WTR) which also gave UK workers an additional 1.6 weeks’ paid leave over and above the WTD minimum entitlement. The mechanism for calculating holiday pay is contained in complicated provisions under the Employment Rights Act 1996.

The mechanisms for calculating holiday pay are different depending on whether or not the worker in question has normal working hours, it is the mechanism for calculation in respect of workers with normal working hours (i.e. fixed contractual hours or salaried) that is called into question.
For workers with normal working hours domestic legislation has been interpreted for many years as requiring holiday pay to be based on basic pay alone (with some exceptions like compulsory and guaranteed overtime). This means that employers have not previously been required to include variable payments such as non-guaranteed overtime, commission or incentive bonuses when calculating holiday pay.

UK Law Incompatible with WTD

Prior to Bear Scotland we were already on notice that the European Court of Justice (ECJ) considered the UK method of calculating holiday pay for workers with normal working hours to be inconsistent with the WTD. This is because to not include all elements of remuneration intrinsically linked to the performance of the job (or part of their normal pay) could have the effect of discouraging workers from taking annual leave. These ECJ decisions specifically dealt with time away pay, flying pay and seniority payments (Williams v British Airways) and commission payments that are regularly received (Lock v British Gas Trading Ltd).

Bear Scotland Ruling

The main point to take from the EAT judgment is that employers are now required to include the following in holiday pay calculations:
• Non-guaranteed overtime (overtime that the employer is not obliged to offer but when     offered the employee is required to work);
• Semi-voluntary overtime (overtime that the employer is not obliged to offer but when       offered the employee can only refuse on reasonable grounds);
• Pay supplements for anti-social hours or short-notice availability (stand-by or on-call       payments).

To properly include the above in holiday pay calculations employers would need to include average overtime payments over the previous 12 week reference period.

As guaranteed and compulsory overtime was already required to be included as part of holiday pay calculations this means that the only form of overtime that is still unclear is genuinely voluntary overtime. It should be noted that comments made in the judgment tend to suggest that voluntary overtime which is worked regularly should also be included but the position will not be clear unless and until a ruling on the specific point.

A particularly important aspect of the Bear Scotland ruling from an employer perspective is that it clear that the judgment only applies to the 4 weeks’ paid annual leave under the WTD and not the additional 1.6 weeks’ under the WTR. Further, claims for unlawful deductions from wages based on historic underpayments will be limited as claims can only go back as far as the start of a series of deductions where the gap between deductions is 3 months or less. Due to the way the EAT construed the difference between the WTD annual leave entitlement and the WTR entitlement this means that claims will very rarely go back beyond the current holiday year.


The parties in Bear Scotland have already been granted leave to appeal to the Court of Appeal, which means that the position is far from settled and may change.

Other Holiday Pay Issues

UK employers are likely to find the holiday pay saga continuing for years to come, there is likely to be considerable further litigation relating to various variable pay elements.

It is very likely that the following types of variable pay would be required to be included when calculating holiday pay for workers with normal working hours:

• Guaranteed, non-guaranteed, semi-voluntary overtime (and possibly voluntary overtime);
• Commission;
• Shift premia;
• Seniority payments (i.e. payments linked to grade/seniority);
• Stand-by payments;
• Incentive bonuses.

The reference period over which to calculate an average overtime for the purposes of holiday pay is the previous 12 weeks but it is possible that a different reference period may apply with respect to other variable pay elements such as commission or bonus. If the reference period remains 12 weeks then many employers will find this unfair due to significant fluctuations in variable pay throughout the year. Workers would find it advantageous to take holiday immediately after a reference period in which high commissions or an annual bonus was awarded as this would greatly increase their holiday pay. Based on the ECJ case of Lock v British Gas Trading Ltd (concerning commission payments) it may be that a 12 month reference period is deemed more appropriate but we will have to await a domestic ruling on this point (currently expected February 2015).

Next Steps for Employers

It is clear that the current law requires employers to include most types of overtime, shift premia and stand-by payments in holiday pay calculations. Other variable pay elements are less clear but most likely will also need to be included if they are intrinsically linked to the work the worker is required to carry out under their contract.

The main question for employers is whether to change the way you calculate holiday pay now or await the outcome of appeals and domestic rulings on specific variable pay elements that affect your business. Beginning to include variable pay elements in holiday pay now will increase operating costs (estimated as 3-5% increase) but has the advantages of ensuring compliance, good employee relations/industrial relations, avoiding adverse publicity and preventing or limiting historic claims. However, while the law is unclear and unsettled you are at significant risk of overpaying or paying in circumstances where it may later be proven is not necessary at all (which you could then be held to continue with).

The second question is if you do decide to include variable pay elements in holiday pay calculations will you limit this change to the strict requirement to include them when calculating the 4 week’ annual leave under the WTD? There is currently no requirement to change the way you calculate holiday pay for the additional 1.6 weeks’ leave under the WTR or any contractual additional entitlement over and above 5.6 weeks. However, consider whether the administrative burden of different methods of calculation for different “types” of holiday is worth the saving in holiday pay. It is unlikely that you specify which “type” of holiday is deemed to be taken first but this is probably a good idea if you intend to calculate holiday pay differently for different types of holiday and more importantly to assist with limiting claims for historic underpayments (to create the 3 month gap between underpayments by specifying that the first 4 weeks’ holiday is the WTD entitlement).

For now, the best advice for any business which is affected by the changes in holiday pay is to conduct a risk analysis of your workforce with a view to identifying variable pay elements and the related additional salary costs if they are included in holiday pay calculations. If you decide not to change your current method of calculating holiday pay consider putting aside a budget to meet the costs of any later claims or settlements.