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15 January 2020
What were the most significant employment law developments in 2019? What can be expected in 2020 under a newly elected Conservative government with a sizeable majority?
Despite Brexit continuing to dominate the political agenda in 2019, there were some significant decisions in the courts and proposals for reform. Looking ahead to 2020, various Good Work Plan reforms will come into effect in April and the government plans to introduce a new Employment Bill, which will pave the way for further employment law reforms.
Sexual harassment and confidentiality
Concerns arising from the #MeToo movement regarding the extent of sexual harassment and similar misconduct at work continued to be a high-profile topic in 2019, particularly with regard to the legitimacy of employers using non-disclosure agreements (NDAs) in this context.(1) Among other things, the government is expected to introduce legislation in this area (see below) and the Equality and Human Rights Commission is developing a statutory Code of Practice on sexual harassment.
The flow of court decisions about worker status in the context of the gig economy (and otherwise) slowed down somewhat in 2019, but several cases remain in the pipeline, including the Uber case in the Supreme Court (for further details please see "Court of Appeal rejects Uber's worker status appeal"). There was a surprise employment tribunal decision, with potentially wide-ranging ramifications, that workers as well as traditional employees transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (for further details please see "Tribunal finds that workers transfer under TUPE"). Further, the Supreme Court ruled that judges are workers for whistleblowing purposes – a judgment illustrating how European human rights law can be used to interpret domestic legislation and effectively add to it where appropriate (for further details please see "Judges are workers protected by whistleblowing law"). Perhaps unsurprisingly, there has been no news on government plans to introduce detailed plans to reform the current legal framework for employment status (these were announced in December 2018 in the Good Work Plan, which was a response to the Taylor Review) (for further details please see "Good Work Plan – any good?").
In the long-running cases of Ali and Hextall regarding shared parental pay, the Court of Appeal ruled that it is not direct or indirect sex discrimination or a breach of equal pay rights to provide enhanced pay for maternity leave and statutory pay only for shared parental leave (for further details please see "Failing to enhance pay for shared parental leave is not sex discrimination"). However, these cases are being appealed (see below).
Gender pay gap reporting is now well established, with employers in scope of the legislation preparing their third annual report (which is due in April 2020). It appears that the government has no immediate plans to build on or reform the current gender pay gap reporting rules. There was no reference to this in the Conservative election manifesto, nor any mention of introducing publication of pay gap data relating to ethnicity (which was subject to consultation some time ago) (for further details please see "Ethnicity pay reporting: why it's not that simple"). However, the launch of CEO pay ratio reporting seems to be on track for 2020 (see below).
A new EU Directive designed to set a minimum level of common protection for whistleblowers was adopted in October 2019 and member states have until 17 December 2021 to implement it. Whether the United Kingdom must do so will depend on the outcome of the Brexit negotiations. Meanwhile, the law on whistleblowing continues to develop through case law. The Supreme Court has ruled that a dismissing manager need not know about an employee's protected disclosures in order for their dismissal to be automatically unfair. The claimant's dismissal was by reason of her protected disclosures and unfair, where the decision maker had been manipulated by another manager. Meanwhile, the Court of Appeal dealt with a difficult but potentially significant case regarding liability of overseas co-workers for whistleblowing detriment (for further details please see "Court of Appeal rules on liability of overseas co-workers for whistleblowing").
The correct calculation of holiday pay continues to be a thorny topic, with various issues arising in the courts during 2019. In a major National Health Service case, the Court of Appeal confirmed that the EU Working Time Directive requires voluntary overtime to be included in holiday pay if it is sufficiently regular and settled to amount to normal remuneration (for further details please see "Voluntary overtime must be included in holiday pay if sufficiently regular and settled"). The forthcoming increase in the reference period for calculating holiday pay from 12 weeks to 52 weeks (see below) will help employers to reduce the impact of seasonal variations in overtime. Another Court of Appeal ruling in a case highlighting the complications of working out holiday pay for part-year staff established that holiday entitlement and pay for workers on permanent contracts need not be prorated for term-time workers (for further details please see "Holiday need not be prorated for term-time workers").
In the courts
In addition to abovementioned cases, the following judgments in 2019 were particularly noteworthy:
It is clear that the government's main priority is "getting Brexit done", but it is expected that several employment law reforms will be progressed during the course of 2020, many of which are to be included in the proposed new Employment Bill.
The prime minister has brought the Withdrawal Agreement Bill back to Parliament and expects members of Parliament to ratify it prior to the United Kingdom leaving the European Union on 31 January 2020. The government has, at least for the time being, ruled out extending the transition period beyond 31 December 2020. The Conservative manifesto contained no detail about long-term plans for employment law, although it did include a pledge to ensure high standards of workers' rights.(3)
New IR35 rules
Changes to the operation of the IR35 regime are due to take effect from 6 April 2020. Private sector businesses engaging contractors which supply their services personally via an intermediary (eg, a personal service company) will become responsible for determining whether IR35 applies. If the business considers that IR35 applies, the person paying the intermediary will be responsible for operating pay-as-you-earn and national insurance on the fees that it pays. Companies affected should urgently prepare for these important changes by, for example:
Before the general election, Chancellor Sajid Javid said that there would be a review of the proposed IR35 changes to ensure that they were "right to take forward". It seems more likely than not the reforms will proceed in April 2020, so it remains sensible to continue preparations.
One of several reforms being implemented from the government's Good Work Plan is a revamp of the rules requiring employers to supply staff with a written statement of key particulars of their employment (for further details please see "Good Work Plan – first steps down the path"). From 6 April 2020, statements must be provided to those with worker status in addition to employees, by day one of employment. More information must be set out in the statement, including details of the full benefit and remuneration package. Many employers are likely to be recruiting for April 2020 starters, so now is the time to start reviewing and amending their standard documentation.
The law on agency workers is also changing in April 2020 (for further details please see "Good Work Plan – first steps down the path"). When the United Kingdom first implemented the EU Agency Workers Directive it enacted the so-called 'Swedish derogation', which provides that certain agency workers are not covered by the principle of equal treatment. This is being abolished with effect from 6 April 2020. Businesses must decide what to do about any agency workers on Swedish derogation contracts and, where appropriate, migrate them onto standard agency contracts or take them on as direct hires.
The reference period for calculating holiday pay is increasing from 12 weeks to 52 weeks on 6 April 2020. This change may create practical problems relating to people who work intermittently for just some weeks of the year (for further details please see "Good Work Plan – first steps down the path"). Employers should review their current approach to calculation and identify any changes required and perhaps conduct a dry run to assess any cost impact.
Information and consultation
The final April 2020 Good Work change is a reduction in the threshold for demanding information and consultation arrangements under the Information and Consultation of Employees Regulations 2004 from 10% to just 2% of employees (for further details please see "Good Work Plan – first steps down the path").
After significant changes to the tax treatment of termination payments were introduced in April 2018, a related requirement for employers to pay employer national insurance contributions on any part of an ex gratia termination payment exceeding £30,000 was put on hold (for further details please see "Employer NICs on termination payments delayed again"). This change will now come in on 6 April 2020, making termination payments more expensive.
CEO pay ratio reporting
The first reports will be due in 2020 under the new legislative regime requiring directors of UK-listed companies with 250 or more employees to report annually on the difference in pay between their CEO and average workers (for further details please see "CEO pay ratio reporting coming soon").
Parental Bereavement (Pay and Leave) Act 2018
A new right to parental bereavement leave, giving parents two weeks' paid leave if they lose a child under 18, is expected to come into force sometime this year (for further details please see "Parental bereavement bill receives royal assent"). Regulations setting out details of how the right will operate are still awaited.
The government has promised to implement a planned reform to provide priority access to redeployment opportunities for pregnant women and new parents in redundancy situations. The new Employment Bill will include provisions to implement these new rights.
Regulation of NDAs
The government is expected to adopt legislation introducing new restrictions on confidentiality clauses in employment contracts and settlement agreements. This follows the publication of a consultation response on the issue in July 2019 (for further details please see "Response published to consultation on misuse of confidentiality clauses"). However, there is no draft legislation yet and the implementation date is unknown.
Family and carers' rights
The government will be advancing plans to allow parents to take extended leave for neonatal care (following a consultation published in July 2019). The Employment Bill will also provide for a new right for carers to take one week's leave each year. The Conservative manifesto said that the party would look at ways to make it easier for fathers to take paternity leave, but no further details have been released.
Making flexible working the default
The government intends to encourage flexible working arrangements and consult about making them the default unless employers have a good reason otherwise. Details are unclear, but the plans could go further than the proposals currently under consultation that would require employers to state whether flexible working is available in job adverts and publish their flexible working policies.
Employment status and protections
Despite the unresolved issue of employment status (see above), the Conservative manifesto promised that workers would gain the right to request a more predictable working contract. This is something which had already been promised in the Good Work Plan and forms part of the requirements of the EU Transparent and Predictable Working Conditions Directive (for further details please see "Good Work Plan – any good?"). The right to a more predictable working contract will form part of the new Employment Bill. The manifesto also mentioned other 'reasonable protections', which may refer to rights to reasonable notice of work schedules and compensation for shift cancellation, which are already under consultation.
The new Employment Bill will provide for legislation requiring employers to pass on all tips. The government also plans to introduce a new Statutory Code of Practice to ensure that tips are fairly and transparently distributed.
New state enforcement body
The Conservative manifesto also pledged to create a new state enforcement body to tackle non-compliance in the labour market, following a consultation published in 2019. The plan outlined in the consultation was to bring together the existing patchwork of enforcement under the remit of a single body and expand that remit to cover holiday pay for vulnerable workers and umbrella companies operating in the agency workers sector. The government is likely to focus on targeting the most exploitative employers.
Upcoming cases in 2020
Important employment cases to be decided this year include the following:
For further information on this topic please contact Sean Dempsey or Richard Lister at Lewis Silkin by telephone (+44 20 7074 8000) or email (firstname.lastname@example.org or email@example.com). The Lewis Silkin website can be accessed at www.lewissilkin.com.
(1) A table setting out all of the current legal and regulatory requirements, best practice and future proposals for using NDAs and confidentiality provisions in settlement agreements and employment contracts is available here.
(2) Further information on the three key restrictive covenant cases of 2019 is available here.
(3) Further information about the implications of the current divorce deal and long-term divergence from the European Union for employment rights is available here.
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