Employment Law Developments - Q&A with Mark McAllister

During our webinar on 10th January with Mark McAllister of the LRA on his update on key employment law developments from 2017, we received a number of questions on the day, some of which we didn't have time to answer live. Mark has pulled together some of those questions into a wide-ranging Q&A article for Legal-Island subscribers. At the end of this email, we also have links to the entire podcast recording of the webinar and a searchable transcript document.

Q: Can HR challenge the individuals’ assertion that it is a whistleblowing complaint at the point the complaint is made?

When it comes to HR “challenging” an assertion this presents difficulties especially if the individual has instigated the whistle-blowing procedure. Our American cousins like the term “due process” which in essence means once the matter is in train it needs to come to a conclusion. If you are challenging to shut the complaint down then the argument is that the worker has been denied to ability for the matter to be heard. To that extent the gift of how to handle the matter lays with the worker, in that it may be easier for someone to “close down” or re-direct or clarify an issue if it has been raised by the worker in a query-like informal chat way but not if it has been formally submitted as a whistleblowing complaint and then effectively re-categorised by HR. Policy, protocol and procedure clarity are essential so that workers are clearly signposted with the help of related guidance for sign-posting, indicative examples and “what-if’s?”. This will speak to the culture of the organisation if the first port of call for workers is a formal procedure in writing. The question that is left is, what about informal or alternative dispute resolution? HR need to be careful not to deny workers access to what can be perceived as a basic tenant of “natural justice” internally and workers need to be apprised of the consequences of abusing a procedure. A tricky balance to achieve!

Q: Was behaviour related to attendance patterns?

A: In the “Stratford” case discussed in the webinar/podcast the issue at the heart of the pattern was behaviour related misconduct (not attendance) including – preparing materials for personal use, use of mobile phone on factory floor and a whole host of other behavioural offences.

Q: 5 months ago we introduced holiday pay calculated over a 12 weeks average to include overtime. A query has arisen from an employee who was off sick for 6 weeks and then took a week’s holiday on return. The employees average holiday pay was lower in total than the holiday pay she expected based on the old hourly rate. The employee is querying that we are incorrect that it’s in her contract of employment that she would earn X per hour including holidays and is arguing that we paid Y. Y rate was well above the national minimum wage. Her query is we are in breach of contract? Surely there is no merit in this?

This is a query that permeates many holiday pay calculation queries in terms of what is the definition of “regularly worked” overtime, and in the absence of the watertight definition may employers have adopted the twelve week system thus if an employee has not achieved the “regularity” under the twelve week system then it is not reflected in the calculation. The inference in the employee’s assertion is that you operated a “rolled up” rate in the contract which does not sit with the EU jurisprudence on the matter. So perhaps the contract does not reflect the new calculation practice and needs to be amended by agreement to reflect the new practice and scrap the notion of a rolled up rate (which is now a very rare and exceptional practice).

Q: With the onset of IR35, certain workers are now classified as employees and not self-employed contractors and if we bring them onto payroll and give them annual leave now, assume from the King v Sash case we may have to give them 4 weeks holiday pay ( even if it was their choice to be self-employed for tax reasons). National Insurance contributions go back 6 years max and tax by 4 years as per HMRC rules but is it open-ended for holiday pay since they started as independent contractors? Should this be given automatically or only if asked by individuals? Or can they go onto payroll now?

The “Sash Windows” case has opened up the proverbial Pandora’s Box regarding the classification of individuals and the interaction between Working Time regulation and Working Time jurisprudence which now are so different that they are almost like different subjects and this is proving grist to the mill of Brexiteers throughout the UK. This query differs and can be distinguished from the facts in “Sash Windows” in that the individual in the case was incorrectly classified as an independent contractor rather than a worker. In this query it focuses on the interaction between tax and employment law which are two very different beasts and it is not yet clear whether these individuals will automatically be reclassified with or without de facto continuity for working time purposes and so HMRC need to clarify where the “line in the sand” is to be drawn in order to clarify the matter for practitioners. The issue of automatic entitlement versus exercisable right is also dependent upon HMRC interpretation.

Q: Have the EAT given any indication as to the calculation to be used regarding voluntary regular OT and holiday pay? / Is there any definition or guidelines as to what ‘regular overtime’ is?

This is the elusive holy grail of working time interpretation (with the short answer being – No) at the minute (i.e. a clear superior court definition of the word “regular” still eludes us). Many practitioners use the fall back of the 12 week back referencing period (as detailed in the Working Time Regs) whilst others look to their payroll and simply look over the year to see a clear “pattern” of worked overtime and apply common sense when there are no massive gaps, or alternatively when for example overtime is sporadic at best, patchy or tied to predictable periods (i.e. the run-up to Christmas etc) it is important not to conflate temporal “regularity” with event-related “predictability”.

Q: We have recently dismissed an employee who has been on sick leave for 6 years. When we contacted our pay roll they said there was no holiday pay owed - are we obliged to pay a certain amount of holiday pay even if he hasn't worked for 6 years?

All things being equal with the contract still subsisting (albeit in skeleton form) the interpretation espoused in the “Sash Window” case infers that a worker is entitled to be paid for holidays and that is as simple as that, but the preceding body of EU case law from 2013-2016 talks about automatic carry-over into the new holiday year but having to be used within 18 months. The key question is whether or not the employee is actually going to return or not. If they do they may be caught by the limitation on the carry-over and if they don’t the inference may be the have accrued it and get it back-dated upon termination of employment as permitted as an in-lieu sum.

Q: Accepting that there is a huge difference in the amount of back pay in NI to GB surely any claim to a tribunal would have to be made within the 3 month time limit from the last missed holiday entitlement?

As the dust has yet to settle on the “Sash Window” case it is becoming apparent that the simplistic yet significant interpretation on regulation 7 applied by the CJEU means that at first blush the GB only Deductions from Wages (Limitation) Regulations 2014 limiting claims to two years and the 3 month “break the chain” argument are incompatible with EU law. But context informs everything and I am sure you will soon see a sub-classification of holiday pay cases which distinguish – overtime calculation cases from incorrect classification of worker cases but we await the tsunami.

Q: My company is registered in NI but also has employees/ operations in England, Isle of Man and ROI.  Do we need to do the pay gap analysis in each of the jurisdictions, in line with the requirements of each, rather than for the organisation as a whole based on NI requirements?

The GB regulations cover England Scotland and Wales only (thus you will have separate provisions to follow for ROI but The Isle of Man is covered by the Equality Act) and the draft Regulations for NI cover NI only, so you may find that from a presentational perspective there will need to be some disaggregation of how the figures sit rather than simply producing UK wide figures. In the absence of definitive NI provisions some employers may look at the GB provisions and apply the logic of the GB advice and guidance into an NI context e.g. - ACAS in GB advise – An employer that is based in Great Britain who sends employees abroad to work may find that some or all of these employees will need to be counted for the gender pay reporting regulations.

Similarly, a multinational organisation that has employees working wholly or partly in Great Britain may also find that some or all of these employees will need to be counted for the gender pay reporting regulations.

As a general rule, an employee working overseas will be within the scope of the regulations if they can bring a claim to an Employment Tribunal under the Equality Act 2010. This will depend on whether the employment relationship suggests a stronger connection to Great Britain and British employment law than to the law of any other country.

Rules around international employment and jurisdiction are complex but indications that someone should be counted in the Gender Pay Reporting regulations include:

• having a contract subject to GB legislation;
• continuing to have their home in GB; and
• having the UK tax legislation apply to their employment.

Where an employee is employed by an overseas entity and seconded to work for an organisation in GB, the GB organisation will need to consider whether that person is their employee within the meaning of the regulations.

Each case should be considered on its own facts and the employer will need to make a decision. Where there is uncertainty, they should consider seeking professional advice to help clarify their situation.

Where currency needs to be converted to carry out relevant calculations, an employer should generally use the exchange rate that applied at the date of payment. Because we have yet to see the detail of the NI Regulations in their “final” form it is difficult to be definitive about specific provisions for NI companies with a “presence” elsewhere in the UK or beyond.

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Mark McAllister's Review of Important Employment Case Law Decisions from 2017 webinar recording is available here:
https://www.legal-island.com/articles/uk/features/supplementary/2018/jan/review-of-important-employment-case-law-decisions-from-2017/