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By Eric Gilligan, Partner and head of Stronachs’ employment team; and Catriona Sutherland, Trainee Solicitor

2016 looks set to be a big year for employers as sweeping reforms relating to trade unions, gender pay gap reporting and illegal workers are due to be implemented in the coming months. Notable cases are also set to be called before the appeal courts, addressing such issues as the scope of protection afforded to agency workers, the duty to collectively consult and the vexed question of employment status. Some of the highlights are listed below.

11 January: Zero hours contracts and exclusivity clauses – employees’ redress against non-compliant employers

In May 2015 the Employment Rights Act 1996 was amended to render exclusivity clauses in zero hours contract unenforceable. However individuals affected by these clauses had no effective means of redress against a non-compliant employer. However, this will change when new regulations come into force 11 January 2016, when new rights to bring a complaint to the Employment Tribunal for a declaration and/or claim compensation from the employer are conferred.

Zero hours employees will have the right to claim automatic unfair dismissal where the reason for the dismissal is the failure to comply with an exclusivity clause. Note that the right will only apply to those who can claim employment status. However zero hours workers whose status falls short of employment) will (together with employees) be able to make a claim of unlawful detriment if the reason for unfavourable treatment is a similar failure.

The ramifications for employer are potentially significant. Therefore, employers, particularly those in such sectors as hospitality where zero hours contracts are widely used, may wish to address the issue sooner rather than later in order to avoid potentially heavy awards of compensation.

Regulatory reform and ban on recruitment from overseas European Economic Area (EEA) countries without prior advertisement in UK – consultation response 15 February

The Government is thought to be proposing an outright ban on recruitment agencies from recruiting their workers solely from overseas EEA countries. This would force recruitment agencies to advertise in the UK for each position every time they also recruit from overseas. This will have a significant impact on recruitment agencies which predominantly or exclusively, recruit from overseas.

26 March: Mandatory Gender Pay Gap Reporting

One to watch out for and plan ahead! Section 78 of the Equality Act 2010 will require companies with more than 250 employees to publish data on pay relating to their male and female employees. Specifically, it will require “employers to publish information relating to the pay of employees for the purpose of showing whether… there are differences in the pay of male and female employees”. This will include bonuses.

The deadline for reporting is not currently thought to be until 26 March 2016 at the latest as the Small Businesses, Enterprises and Employment Act 2015, (having received Royal Assent on 26 March 2015) states that regulations implementing gender pay gap reporting must be brought into force no later than twelve months after the passing of the Act. It would therefore perhaps be best practice for businesses which meet the employee threshold conduct an audit and address issues ahead of time. It is, however, thought that the reporting will be phased in with larger companies (over 500 employees) being asked to report first.

1 April 2016: National Living Wage to be introduced

The new National Living Wage will be introduced in April at the rate of £7.20. This will be for workers aged 25 or over. Businesses should prepare for this by finding out which members of staff will be eligible and updating the company payroll in time for 1 April 2016.

6 April: Employer NICs abolished for apprentices under 25

New legislation exempting employers from paying Class 1 national insurance contributions on earnings up to the upper earnings limit for apprentices under the age of 25 will be introduced as of 6 April. The desired effect of this measure is to make it cheaper to employ young people and therefore address youth unemployment.

Statutory parental and sick pay rates frozen

These rates usually increase annually in April but a fall in the consumer price index by 0.1% in September has led the Government to propose the freeze at the 2015-2016 rates. Currently, the weekly rate for statutory maternity and parental leave is £139.58 or 90% of weekly earnings if less and sick pay is £88.45. The threshold for eligibility for both of these payments has also been frozen at £112 per week or more.

There is, as yet, no indication of what the implications of the fall in the index will be for the limits for a weeks’ pay or the cap on the unfair dismissal compensatory award.

Immigration Bill 2015

Although there is still no definitive date for implementation, the Immigration Bill focuses on addressing the issue of illegal working. In particular, the Bill will require all customer-facing workers in the public sector to speak fluent English. Additionally, the Bill introduces significant penalties on employers. The definition of “knowingly” employing an illegal immigrant will be extended to having “reasonable cause to believe” an employee is an illegal worker for the purposes of enforcement. Those employers who knowingly employ an illegal worker will now face up to five years’ in prison. The power to introduce an “immigration skills charge” will also be introduced for employers sponsoring skilled workers from outside the EEA. Importantly, the new offence of “illegal working” will be introduced, enabling the seizure of assets including wages.

Trade Union Bill 2015

Although the Bill is still yet to be finalised, and is currently at its second reading in the House of Lords, it is due to introduce significant reforms as to how trade unions operate in the UK. The Bill will lift the ban on employers using agency workers to replace permanent staff who are on taking industrial action, a move which has been hugely contentious. Opponents of the Bill state that this will effectively undermine the right to strike. Additionally, a minimum turnout of 50% will be required for industrial action ballots and, for “important public sector services” (yet to be defined but including the health service) a 40% approval of all eligible members threshold for industrial action will apply. In addition, Union dues will no longer be deducted automatically from members’ wages.

The Scottish Government has opposed the Bill but has been unsuccessful in its efforts to require the UK Government to obtain legislative consent from the Scottish Parliament.

Simplification of the taxation of termination payments – consultation summary expected 2016.

This will have a significant impact, particularly industries undergoing major redundancies. The current limit is £30,000 for a tax free compensation payment but this is subject to review.

Upcoming cases:

  • Moran and Others v Ideal Cleaning Services Ltd. The issue of the definition of “temporary” under the Agency Workers Regulations will be heard in the Court of Appeal in March following an EAT decision that “temporary” meant “not permanent”. This effectively meant that agency workers who had been assigned for periods from 6 to 25 years were not protected under the regulations.
  • The so called “Woolworths case” has been sent back to the Court of Appeal following the ECJ’s decision in April 2015. This was an extremely important decision of 2015 as it dealt with the question of whether the duty to collectively consult applied only where 20 or more dismissals were occurring “at one establishment” or throughout the business. The ECJ confirmed that the limitation to 20 or more dismissals arising “at one establishment” should not be disregarded. It is widely expected that the Court of Appeal will overturn the EAT’s judgement and affirm the ECJ decision. It is, however, worth keeping track of.
  • Pimlico Plumbers Ltd v Smith is to be heard in the Court of Appeal in May. The issue is whether the person, a plumber, was a worker, employee or neither. The EAT upheld a first-tier decision that it could take into account the degree of financial risk taken by the plumber when finding that he was self-employed rather than an employee. The decision is likely to be a significant contribution to the long vexed question of employment status.

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