2014 Legal Round-Up

30 December 2014

Equal Pay

11th August 2014

The Independent has reported that the pay gap between the sexes began to widen again in 2013, reversing years of progress. The figures, based on an analysis by the House of Commons Library, show that in 1997 the pay gap between men and women was 27.5 per cent. Over the intervening years it has narrowed steadily – but in 2013 it rose for the first time, from 19.6 per cent to 19.7 per cent. Therefore women are earning only 80p for every £1 earned by men. At the current rate of progress, Labour says, it would take women more than 60 years to achieve financial equality with men – more than a century since the promise of equal pay was first made in Labour’s Equal Pay Act of 1970.

Last month, the Liberal Democrats announced that they would be including a commitment in their manifesto to require all businesses with more than 250 employees to measure and publish information on their gender pay gaps, in an attempt to shame large firms into action. The policy was included in the Equality Act 2010, which was passed by the Labour government just before the last general election, but the section referring to it was later shelved by the Coalition. Labour is expected to resurrect the policy in its manifesto for 2015.

The Conservative Party’s approach has been to equal out the opportunities for men and women to take on childcare responsibilities.  By opening up the right to request flexible working, increasing unpaid parental leave and allowing shared parental leave, the hope is to help more women stay in the workplace and also remove the assumption by employers that women in their 20s and 30s will be absent for large spells with childcare responsibilities.

Stress, Anxiety & Depression

9th September 2014

Professor Dame Sally Davies, the chief medical officer, has said the number of working days lost due to stress, depression and anxiety has increased by 24 per cent since 2009, while the number lost due to serious mental illness has doubled.  In her report, she said around 70 million working days were lost to mental illness last year at an “astounding” cost of up to £100 billion to the economy.

Dame Sally said faster help for anxiety, stress and depression could help to ensure more people stayed in work, and help the economy. Her report supported early medical intervention over “well-being” interventions. The report urges NHS commissioners to “treat mental health more like physical health” and to introduce waiting targets so patients do not have to wait so long.

“Anyone with mental illness deserves good quality support at the right time. One of the stark issues highlighted in this report is that 60-70 per cent of people with common mental disorders such as depression and anxiety are in work, so it is crucial that we take action to help those people stay in employment to benefit their own health as well as the economy…Too many people with mental health problems are given inadequate help to get or keep work. Yet employment can be an integral part of recovery for many people. Better help for people to retain employment and to get timely access to psychological therapy when they become unwell is crucial.”

The Telegraph’s article can be found here

Virgin’s Unlimited Annual Leave

25th September 2014

The Guardian has reported that Richard Branson intends to implement an annual leave buffet of sorts for staff managing his personal fortune.  The ‘policy’, or rather lack of, will mean that 170 of his UK and US personal staff can take holidays when they like and for as long as they like.

Branson said he had introduced the new “non-policy” on holidays for 170 staff in his private offices in the UK and US with immediate effect. Employees can take leave from their jobs when they like without seeking permission, as long as the timing of their break will not have a detrimental impact on the business:

“It is left to the employee alone to decide if and when he or she feels like taking a few hours a day, a week or a month off, the assumption being that they are only going to do it when they feel 100% comfortable that they and their team are up to date on every project and that their absence will not in any way damage the business – or, for that matter, their careers!”

Branson said he got the idea when his daughter Holly forwarded him an article about online streaming company Netflix, which has taken a similar approach.

The premise was founded on the concept that with the introduction of technology, employees were no longer expected to simply follow a 9-5 work routine and were normally responding to emails and continuing their duties on weekends and evenings.  Netflix employees queried the disharmony between the old-fashioned holiday structure and the realities of modern working hours and the company agreed.  A large number of Netflix employees are now permitted to take holiday whenever they wish, for any duration they wish, provided their managers know where they are and that their work is covered.

As above, Richard Branson is now adopting the policy and recommending other companies do the same.  As utopian as the concept appears, it potentially sets a minefield of employment law issues.  Richard Branson has stated that any holidays his employees take will be placed under the assumption that they are “a hundred per cent comfortable that they and their team are up to date on every project and that their absence will not in any way damage the business – or…their careers”. Seemingly then, the luxury of deciding their own holiday entitlement comes with stricter expectations than standard annual leave.  Indeed, it is important that the requirement of not causing “damage to the business” does not dissuade employees from taking their entitlement under the Working Time Regulations.  This is just one of a plethora of potential employment law implications of the scheme.

Whilst it is unlikely that the policy will be appropriate for most business models, it may well succeed where it is not necessary for employees to be physically present in the office to undertake the majority of their role duties.  This may explain Netflix’s success in implementing the policy thus far.


Employment Appeal Tribunal Judgment – Holiday Pay

6th November 2014

The recent Employment Appeal Tribunal (EAT) judgment delivered on Tuesday, 4 November 2014, in relation to holiday pay has been much reported and its ramifications greatly speculated.  A significant concern for a number of businesses, and specifically firms in the city, is that the judgment will apply to bonuses and commission payments which will see companies paying employees large sums (for holiday pay) in commission/bonus payments that have not been earned.

The landmark judgment in this case, Bear Scotland Ltd and others v Fulton and others; Hertel (UK) Ltd v Woods and others; Amec Group Ltd v Law and others, addresses whether workers are entitled to holiday pay which reflects normally received supplementary pay, such as overtime payments.  In his judgment, Mr. Justice Langstaff concluded that Article 7 of the Working Time Directive has the effect that normal pay for the purposes of calculating holiday pay included overtime pay if this was normally received by the employee.

Thus, a clear direction that holiday pay is not to be restricted solely to basic pay, but also to additional and variable pay normally received.  This ruling poses a threat to businesses that pay staff commission or bonuses based on the revenue that the employee creates.  Seemingly, businesses may now be required to pay similar sums of remuneration to staff for periods of holiday, where they are not generating any revenue for the company, as they would when rewarding an employee for commissions actually earned.  The obvious problem with this is that these additional payments when normally received are based on actual income the employee has generated for the company; the employee is receiving a slice of the pie they have baked, so to speak.  If entitled to commensurate remuneration for holiday periods, the business is forced to reward the employee for revenue which has not been created – the additional holiday payments will therefore have to be borne by the company.

Another significant element to Mr. Justice Langstaff’s judgment was his finding on whether the failure to include overtime pay in holiday pay amounted to a series of unlawful deductions so that backdated claims could be made.  Langstaff concluded in this respect that a series of deductions would be broken if any two instances were separated by three months or more (three months less one day being the time limit within which unauthorised deductions from wages must be claimed).  This ruling somewhat superficially appears to reduce the risk of a flood of backdated claims for deduction from pay; however in practice few are likely to fall foul of the time limit.  It is undoubtedly uncommon for employees to take annual leave at intervals exceeding three months and commission payments are often paid monthly or quarterly.

A decision in relation to commission payments specifically is due in February and permission to appeal the EAT decision in these cases was allowed.  It will therefore be some time before the consequences of the judgment and how it must be applied is clear.  For now, however, firms should take legal advice on how to limit the effect of the judgment on their business by reviewing their bonus and commission structures.

If you have any questions and would like to talk to an employment lawyer about the consequences of this judgment, please call 0203 178 5360. Alternatively, you can contact us by clicking here.