Zero hour contracts – a Scottish perspective and litigation update

avatar Posted on April 24th, 2014 by Nicholas Thorpe

It’s been a while since we last reported on zero hour contracts. While we may have abstained from posting anything on zero hour contracts during Lent, we thought another post on zero hour contracts was now long overdue.

As many of you will know, the UK Government has been consulting on the use of zero hour contracts following last Summer’s media furore over their apparent increased use in the UK. The UK Government’s consultation, which closed in March, focused on the issues of exclusivity and transparency, with the Government stepping back on some of the more radical, headline grapping proposals suggested by some.

The Government has yet to publish its response to the consultation. However, in the meantime, the House of Commons’ Scottish Affairs Committee has produced an interim report on the use of zero hour contracts in Scotland. The Scottish Affairs Committee is a cross party select committee chaired by Ian Davidson MP, the Labour/Co-op MP for Glasgow South West.

While the focus of the Committee’s report is, as one might expect, on the current practice in Scotland, the Committee’s findings and recommendations have wider application to the UK as a whole.

The Committee is critical of the Government’s consultation, describing it as “too narrow”. It is also critical of the Government’s main proposal to introduce an “employer led” Code of Practice. It suggests that any Code should only be used as a stepping stone to more significant legislative change aimed at reducing the use of zero hour contracts and protecting those who are on them.

The Committee concluded that, in the majority of cases, zero hour contracts need not and should not be used. Some employers have already taken steps to phase out the use of zero hour contracts, by guaranteeing minimum hours, with the option to offer additional hours if and when required. However, the fact remains that many employers continue to engage individuals on zero hour contracts. In the retail sector alone, the Committee heard evidence that across the UK, approximately 83,800 McDonalds staff, 20,000 Burger King staff, 20,000 Sports Direct staff, 24,000 JD Wetherspoon staff, and 4,000 Boots the chemist staff were all on zero hour contracts. And the list goes on.

The reasons why so many individuals are engaged on zero hour contracts are clear; they offer the flexibility to manage fluctuations in demand, avoid recruitment costs and can allow companies to expand services whilst limiting the risk of over-recruiting permanent staff. However, as the Committee noted, they can give rise to confusion in terms of the individual’s status and what rights they are entitled to.

Employers need to be clear, in particular, on what benefits should be offered. A case in point concerns Sports Direct. Sports Direct is currently facing a claim in the Employment Tribunal under legislation which protects part-time workers from being treated less favourably compared to full time workers, with lawyers for the Claimant arguing that there is no practical difference between the obligations put on those placed on zero hour contracts and full time staff. It is understood that this case is listed for a 10 day hearing in November. Sports Direct is also facing civil court litigation in which it is alleged that Sports Direct’s failure to award employee shares to one of its zero-hour workers is a breach of contract. If successful, these claims could result in significant awards, potentially, totalling millions of pounds.

While the Government is unlikely to ban the use of zero hour contracts, or go any further than is currently proposed in its consultation document (notwithstanding the appeals of the Committee to use “every lever in their disposal” to change the current culture), employers still need to take care when using zero hour contracts and understand the attendant benefits which come with such arrangements for both themselves and the individuals concerned. What may, at first, appear to be an operational and cost advantageous arrangement for your business can prove costly if poorly implemented.

For more information on the use of zero hour contracts and the attendant benefits for your business and the individuals concerned, please do not hesitate to contact any member of the team.

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Sunday trading and the Sunday opt out

avatar Posted on April 23rd, 2014 by Nicholas Thorpe

Come on, hands up, who did a bit of gardening or DIY over the Easter weekend. While UK shops reported an overall drop in footfall over the Easter weekend, retail parks and DIY stores fared much better with a reported 6.1% increase in footfall over the long weekend period. However, Easter Sunday remains one of the few days that large stores (such as DIY stores) are restricted from trading. Christmas day being the only other day. Large stores are also restricted to six hours trading on any other Sunday.

These measures were seen as a compromise when the Sunday trading laws were first introduced in 1994. However, it is reported that Philip Davies MP is going to put down amendments to the Government’s Deregulation Bill after the Easter recess to abolish all restrictions on opening large stores on Sundays, arguing that such restrictions are now out of date.

While Mr Davies’ amendments do not appear to have the backing of the Government, according to reports the Government has not ruled them out. So, what might this mean for retailers and retail workers?

Retail workers currently have the right to opt out of Sunday working (a right limited to retailer workers and not workers in any other industry – see earlier post). The exercise of the opt out does not have to be religious based, but employees must give their employer three months’ notice if they wish to opt out. There does not appear to be any suggestion that this right should be abolished with the proposed extension of Sunday trading. But is the Sunday working opt out also a thing of the past?

In practice very few employees elect to opt out of Sunday working. But retailers need to be mindful of the opt out when workforce planning. Retailers will also need to consider whether they continue to offer shift premia for Sunday working if the Sunday trading laws are changed and Sunday becomes just another normal trading day. Retailers who are currently reviewing their pay structures to take account of the recent run of holiday pay cases should therefore be mindful of the potential changes to Sunday trading laws.

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Holiday pay update

avatar Posted on April 11th, 2014 by Angharad Schell

In the case of British Airways plc v Williams and ors, the Supreme Court held that holiday pay must correspond to a worker’s normal remuneration and should take into account payments which are ‘intrinsically linked’ to the performance of the tasks which the worker is required to carry out under his or her contract of employment.

Last year, the recent Employment Tribunal case of Neal v Freightliner Ltd applied the BA decision and held that an employee was entitled to have voluntary overtime and shift premiums taken into account when calculating holiday pay. This decision was later followed in the case of Bear Scotland Ltd v Fulton.

In each case, the decision was appealed. The appeals have been consolidated and are due to be heard in the EAT on 30 and 31 July 2014. The EAT’s findings will provide some much needed certainty as to whether voluntary overtime and shift premia need to be included in the calculation of holiday pay. We will be following these cases and will update when a decision is reached. Until then, watch this space…

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ACAS Early Conciliation

avatar Posted on April 7th, 2014 by William Hampshire

The mandatory ACAS early conciliation (“EC”) procedure became available from 6 April 2014 and must be followed by claimants who present “relevant proceedings” on or after 6 May 2014. Along with the introduction of tribunal fees, EC may have a significant impact on the way in which workplace disputes are resolved.

As part of its plans to make the tribunal system more efficient, the government decided to impose a duty on the parties and ACAS to attempt EC in relevant proceedings before a tribunal claim can be issued. Relevant proceedings will be the majority of tribunal claims including unfair dismissal, discrimination and claims under the Transfer of Undertakings (Protection of Employment) Regulations (“TUPE”). The mandatory EC procedure involves:

1.  A prospective claimant who wants to institute relevant proceedings must provide “prescribed information” to ACAS either by submitting an EC form or by telephone. In relation to cases where there is more than one potential respondent, a prospective claimant must submit a separate EC form for each potential respondent (or, if notifying ACAS by phone, identify each potential respondent over the phone).

2.  An ACAS early conciliation support officer (“ECSO”) will make contact with the prospective claimant and (if the prospective claimant agrees) pass his/her information on to a Conciliation Officer (“CO”). The prospective claimant is not obliged to proceed with conciliation.

3.  The CO will contact the prospective claimant and, subject to the prospective claimant agreeing, try to promote a settlement between the prospective claimant and the employer within the “EC period”. The EC period is one calendar month from the date on which the prospective claimant made initial contact with ACAS.

4.  If a settlement is not reached, because:

(a)  it is not possible to contact the parties;
(b)  the parties do not wish to participate in EC;
(c)  the CO considers that settlement is not possible; or
(d)  because the EC period expires,

an EC certificate must be issued containing a unique reference number. Employees will need this unique reference number to submit a tribunal claim.

The introduction of EC will not change the services ACAS offers parties after any claim is issued. ACAS has published new guidance which outlines the features of EC. In particular, it highlights that EC can help by giving the parties a clearer idea of the strengths and weaknesses of the potential case and explore the options for resolving their differences. ACAS also states that, if the parties can settle their differences, this will avoid the time, expense, risk and stress of going to tribunal.

Some employers may be reluctant to engage in EC, preferring instead to wait and see if employees are prepared to pursue the matter further by paying a tribunal fee and commencing litigation. However, the opportunity to resolve matters at an early stage should not be ignored. It remains to be seen how successful the new process will be and both ACAS and EC will be under some scrutiny over the coming months.

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Yet more changes – 6 April 2014

avatar Posted on April 4th, 2014 by Neil Johnston

Oh for the days when the Government brought in changes to employment law just twice a year. There have been so many changes recently, with more in the pipeline over the next few months, that it is hard even for us lawyers to keep up. However, the Government is at least keeping up the tradition of introducing changes at the start of the new tax year. By way of a reminder the changes that will be implemented on Sunday, 6 April 2014 are:

  • ACAS early claim conciliation starts on an optional basis. It will be compulsory from 6 May 2014. Keep an eye out for Will Hampshire’s Blog on this next week;
  • Statutory discrimination questionnaires will be abolished;
  • A re-classification of the type of claims, including equal pay and failure to inform and consult under TUPE, that require payment of the higher fee (£250 issue and £950 hearing) to bring an Employment Tribunal claim;
  • Employers who lose at Tribunals may face financial penalties of up to £5,000 – payable to the State not to the Claimant;
  • New compensation awards limits take effect. A week’s pay rises from £450 to £464 and the maximum unfair dismissal cap will rise from £74,200 to £76,574 (try remembering those!);
  • Statutory maternity, paternity and adoption pay increases to £138.18 per week;
  • The requirement to keep records of employees’ sickness is abolished. However, so too is the Percentage Threshold Scheme, which enables employers to reclaim statutory sick pay payments from their national insurance contributions – so this is less “deregulation” more “indirect taxation”.
  • Statutory sick pay will increase to £87.55 per week;
  • Transferee employers have the option of matching the transferor employer’s level of employee pension contributions as an alternative to the requirement to match the employee’s contributions up to 6%.

As always if you need any advice or wish to discuss any of these changes please feel free to contact me or one of the team.

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ECJ rejects surrogacy maternity leave

avatar Posted on March 20th, 2014 by Neil Johnston

Followers of our Blog will recall my Blogs at the end of September on two cases on the right of women who have a child through a surrogate mother to take maternity leave. Within a matter of hours the ECJ issued two conflicting opinions from different Advocate Generals (who issue non-binding opinions of cases before the full hearing), one of whom felt that the Pregnant Workers Directive gave such women the right to take maternity leave, the other felt that it did not.

At a full hearing both cases were heard together and the ECJ held that women who have a child through a surrogate mother do not have the right in EU law to either maternity or adoption leave. Despite recognising that maternity leave is to ensure that the special bond between a mother and her child is protected, the ECJ held that because the women had not been pregnant they were not entitled to maternity leave. Further, they had not been discriminated against because a man who had a child through a surrogate mother would be treated the same.

The decision goes against the trend towards greater family friendly rights in the UK. While the ECJ’s decision is a setback for parents who have children through surrogacy, the Children and Families Act 2014 will extend adoption leave and pay to prospective parents going through surrogacy provided one partner is the child’s biological parent from April 2015.

For further information on this and the new Shared Parental Leave Regulations please contact me or any member of the team.

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Statement of Changes to the Immigration Rules

avatar Posted on March 18th, 2014 by Lynn McCloghry

On 13 March 2014, the Home Secretary laid before the House of Commons a Statement of Changes in Immigration Rules which are designed to improve flexibility for applicants applying under the work route of the Points Based System and to help boost economic growth whilst the Government continues to “be tough on those who break the rules or flout the law”. Some of the changes are effective from 13 March 2014 whilst others will come into force over the next few months. Key highlights are detailed below:

Tier 1 (Entrepreneur)

  • Tier 1 (Entrepreneur) category is for those applicants who wish to invest in the UK by setting up or taking over, and being actively involved in the running of one or more business in the UK. Applicants may qualify for this category on the basis of funds invested in their businesses up to 12 months before they apply. This is being widened to 24 months for applicants switching from the Tier 1 (Graduate Entrepreneur) category, which is designed to feed into Tier 1 (Entrepreneur) and in which leave may be granted for up to two years in total.
  • Minor changes are being made to refine the rules around funds being spent by the business and provisions for entrepreneurial teams.
  • Minor updates are being made to the evidential requirements including (i) removing the need for third party declarations to be provided when funds are held in a joint account with the applicant’s spouse or partner; (ii) requiring lawyers providing declarations to be independent of those providing investment funds; (iii) changing the contents of third party funding declarations from banks to better reflect banking practice; (iv) and requiring business accounts produced as evidence of investment to meet statutory requirements.

Tier 1 (Graduate Entrepreneur)

  • The Tier 1 (Graduate Entrepreneur) category caters for graduates who have been endorsed by UK Higher Education Institutions or by UK Trade and Investment to establish one or more businesses in the UK.
  • The requirement for applicants to have obtained their degrees within the last twelve months or from a particular institution is being removed. This will be advantageous to overseas applicants and will also benefit those who have been undertaking research in the UK since graduating. As a consequence of this change, the evidence required to support this application is also changing.
  • Under current rules, applicants can have a maximum of two grants of leave in this category and a change is being made to allow the second grant to be with a different endorsing body than the first, to increase flexibility for applicants.

Tier 1 (Investor)

  • Tier 1 (Investor) category is for high net worth individuals making a substantial financial investment in the UK.  Investors are required to invest their funds within three months of entering the UK in this category. Under current Immigration Rules, if an applicant fails to make their investment within three months of entry, they cannot be granted an extension. However, a change is being made to allow extensions to be granted if there are exceptionally compelling reasons for the delay in investing, providing the reasons were unforeseeable and outside the investor’s control. Investors who do not invest within the first three months may still have their leave curtailed and will have to wait for longer before they become eligible to apply for settlement.

Tier 1 (Exceptional Talent)

  • Tier 1 (Exceptional Talent) category was introduced for those who lead the world or show exceptional promise in the field of science, humanities, engineering and the arts, who have been endorsed by a Designated Competent Body and wish to work in the UK. This category will be expanded to include world-leading individuals in the digital technology sector by enabling Tech City UK to endorse Tier 1 visa applications. This will allow innovators and professionals in the digital technology industry to come to the UK without the need for a sponsoring employer.
  • Rules are being introduced to allow applicants applying under Tier 1 (Exceptional Talent) to apply from any country overseas as opposed to the usual standard of being able to apply from only your country of residence or country of nationality. Greater flexibility will also enable applicants to switch from all other Tier 1 categories whilst in the UK and for those already in the category to make extension applications whilst overseas.
  • An amendment is being made to the settlement rules to allow applicants to amalgamate time spent in other Tier 1 and Tier 2 settlement routes towards the five year qualifying period.

Tier 2

  • Tier 2 of the Points Based System is for migrants with an employment offer from an employer that holds a Sponsor Licence in the UK.
  • A fundamental change is being made to allow applicants under Tier 2 (Intra-Company Transfer) and Tier 2 (General) be granted leave up to five years at a time as opposed to the current three years. This will benefit employers by providing them with greater flexibility and comfort in knowing that their employee can remain in the UK for up to five years whilst also reducing the management time and cost of making an extension application after three years.
  • Annual updates are being made to the minimum salary thresholds and appropriate salary rates for individual occupations (as set out in the relevant Codes of Practice) to reflect changes in average weekly earnings for resident workers.
  • The maintenance funds threshold in Tier 2 will increase to £900 in line with the cost of living increase in the UK. This change is planned to take effect from 1 July 2014. As applicants must typically hold the maintenance funds for a period of 90 consecutive days it is imperative that note is taken of this change and funds held accordingly for any future application.

Tier 5 (Temporary Workers)

  • A new 24 month visa category under the Tier 5 Government Authorised Exchange route for overseas government language placements has been created. This category will enable language teachers who are sponsored by their overseas government to carry out teaching placements at UK institutions through established government to government partnership agreements. The first of these schemes will support a Mandarin teaching scheme designed to foster good cultural relations between the UK and China.

There have also been a series of minor changes to reflect the fact that all information and forms are now available on the UK Visas & Immigration pages of the gov.uk website rather than the former UK Border Agency website. For further information, please contact Lynn McCloghry.

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Changes to National Minimum Wage

avatar Posted on March 13th, 2014 by Neil Johnston

Those of you who attended our Annual HR Planner may recall my brief update on the changes proposed in relation to the National Minimum Wage (NMW) legislation. As from last Friday, 7 March 2014:

1.  the maximum penalty for employers who fail to pay their workers the NMW has been increased to £20,000, in addition to making up the shortfall in any wages; and

2.  work done as part of a traineeship does not qualify for the NMW.

Traineeships are skills programmes which last a maximum of six months aimed at people aged 16-23 without the skills or experience needed to get a sustainable job.

The Government have also announced this week that from 1 October 2014 the NMW rates will increase as follows:

1.  apprentices from £2.68 to £2.73 per hour;

2.  16 – 17 year olds from £3.72 to £3.79 per hour;

3.  18 – 20 year olds from £5.03 to £5.13 per hour; and

4.  adult rate from £6.31 to £6.50.

The increases represent the first rise in real terms to the NMW rates since 2008 and the Government has stated that there will be bigger rises in future rates of the NMW provided economic conditions improve.

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Tier 1 (Investor) – Report Issued by the Migration Advisory Committee

avatar Posted on March 7th, 2014 by Lynn McCloghry

On 9 October 2013, the Minister for Immigration asked the Migration Advisory Committee (the “MAC”) to consider whether the investment thresholds under Tier 1 (Investor) category are appropriate to deliver significant economic benefits to the UK. At present, the minimum level of investment for the Investor category is £1 million but accelerated settlement status (also known as Indefinite Leave to Remain) can be achieved by investing either £5 million or £10 million and migrants may use money loaned to them by UK banks when making the investment. The £1 million threshold has remained unchanged since its introduction in 1994.

The MAC report was published last week. The main findings/recommendations made by the MAC are as follows:

  • The minimum threshold should be raised from £1 million to £2 million.
  • Several of the current restrictions on permissible investment instruments should be relaxed so as to permit wider investment activity. The report found that alternative investments such as investments in private UK companies; Venture Capital schemes; Angel Investments; Infrastructure Bonds and Property Developments would deliver greater economic benefit to the UK rather than simply investing in UK Government bonds.
  • Remove the requirement to “top up” investment funds where the value has dropped below the prescribed amount due to market fluctuations.
  • Remove or restrict the proportion of investment permitted in UK Government bonds to drive investment elsewhere.
  • Introduce a “premium route” instead of the accelerated investor routes of obtaining settlement after three years if invested £5 million or after two years if invested £10 million. The premium route would operate akin to an auction process limiting the number of visas available for accelerated settlement (proposed to be around 100 applicants per year) with a reserve price of £2.5 million. The reserve price would comprise £2 million investment plus an additional gift of at least £500,000 plus any excess above the reserve price donated to the UK Government to be applied to a specific “good causes” fund similar to the arrangements used by the National Lottery.
  • Relax the residence requirements for those applicants on the “premium route” so that investors need only be resident in the UK for 90 days per year, rather than the current 180 days per year.

The MAC’s report is an advisory document which analysed the economic benefits of the Tier 1 (Investor) category and proposed alternative recommendations to generate greater benefit for the UK. The Government must now decide whether to implement the MAC’s recommendations and any proposed changes are expected to come in force in April 2014. As such, we strongly encourage any applications under the current rules be submitted as soon as possible.

For further information, please contact Lynn McCloghry.

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Shared parental leave – draft regulations published

avatar Posted on March 5th, 2014 by Margaret Davis

The Department for Business, Innovation and Skills (BIS) has published the draft regulations outlining the new system for shared parental leave and pay today.

The draft Shared Parental Leave Regulations 2014 are due to come into force on 1 October 2014 and are intended to apply to babies whose expected week of childbirth begins on or after 5 April 2015 (or, in the case of adoption, children matched or placed for adoption on or after 5 April 2015). Alongside these draft regulations, BIS has also published draft Statutory Shared Parental Pay (General) Regulations 2014 and draft Maternity and Adoption Leave (Curtailment of Statutory Rights to Leave) Regulations 2014. BIS is asking for views/comments on the draft legislation as it is aiming to make the new system meet the needs of parents and employers and make it as simple as possible to use.

We outlined the basics of the new system of shared parental leave and pay in a recent post. However, with nearly 70 pages of draft regulations to digest, it is clear that the new system will require careful thought and planning. At first glance, many of the provisions of the draft regulations are as we expected. They outline the conditions for entitlement to shared parental leave, where eligible women can curtail their statutory maternity leave to enable them or their partner to take shared parental leave (and, similarly, eligible people can curtail their statutory adoption leave for the same purpose).

However, the devil will be in the detail and it is likely to be a challenge for employers to get to grips with the mechanics of the new system. We are well placed to flesh out some of the detail. Next week, I will be speaking at a conference on ‘Managing Maternity, Paternity and Parental Leave’, alongside a speaker from BIS who will outline the Government’s proposals for shared parental leave and pay. I will report back after the conference on this blog and share my thoughts on how the Government envisages shared parental leave and pay, and the draft regulations, will work in practice.

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