Mills & Reeve: HR Law Live

Government acts to disapply public sector exit payments regulations

The Treasury has issued a Direction which disapplies the Regulations which introduced a cap on public sector exit payments in November last year. That means that the cap ceased to apply from 12 February, pending revocation of the Regulations. It also means that the exit payments of employees with termination dates between 4 November 2020 and 12 February 2021 should not have been capped.

Accompanying Guidance suggests that employees who have been affected by the cap should contact their former employers to ask them to pay them the amount they would have received had the cap not been in place. Employers are “encouraged” to pay employees “the additional sums that [they] would have paid but for the cap”.

The Guidance doesn’t address the practical difficulties of unwinding the arrangements made over the past three months where the cap was applied, or what happens if it is not possible to work out the addition sums that would have been paid but for the cap.

It does however re-iterate that it is still “vital that exit payments deliver value for the taxpayer and employers should always consider whether exit payments are fair and proportionate.” In the NHS, removal of the cap does not avoid the need to obtain Treasury consent for non-contractual payments.

The Guidance also states that the Treasury will be bringing forward new proposals “at pace” to tackle “unjustified” exit payments. The decision to scrap the current Regulations was made against the background of legal proceedings brought by Unison and others which challenged their legal validity. They were due to have been heard by the High Court next month.

The Direction disapplying the Regulations does not apply to exit payments made by a devolved Welsh authority

Coronavirus Job Retention Scheme extended to end of April

The Chancellor of the Exchequer has announced that the Coronavirus Job Retention Scheme will be extended by a further month, to the end of April 2021. Mr Sunak has also confirmed that the current level of grants will be maintained until the end of the Scheme.

Under the plans announced at the end of October, there was to have been a review of the grants payable in January 2021. Now there is certainty that the Government will continue to pay 80% of furloughed employees’ normal wages (subject to a cap) for unworked hours until the Scheme ends. So, for the remainder of the Scheme, employers will only be required to pay National Insurance Contributions and pension contributions for normal hours not worked. They will of course continue to be liable for the full contractual wages, plus NICs and pension contributions, for hours worked by furloughed employees.

The eligibility criteria will remain unchanged and these changes will apply across the whole of the UK.

The Chancellor has also announced that businesses will now be given until the end of March to access the Bounce Back Loan Scheme, Coronavirus Business Interruption Loan Scheme, and the Coronavirus Large Business Interruption Loan Scheme. These had been due to close at the end of January.

The Government will be providing a “further update on wider Covid-19 economic support” at the Budget on 3 March.  As the press release notes, perhaps a little optimistically: "extending the CJRS until the end of April gives businesses certainty well ahead of the 45 day redundancy notice period, with Budget setting out the next phase of support more than 45 days before the new end date of the scheme."

Redundancy definition focuses on staff numbers needed, not amount of work

A recent ruling from the Employment Appeal tribunal is a reminder that, where a business does not close completely, the statutory definition of redundancy focuses on the number of employees required to do work of a particular kind. This does not always amount to the same thing as looking at the amount of work to be done.

Where there is not a complete workplace closure, an employee is dismissed on redundancy grounds where the dismissal is wholly or mainly attributable to the fact that the requirements of the business “for employees to carry out work of a particular kind” have ceased or diminished, or are expected to cease or diminish (emphasis added).

In this case, the claimant was dismissed after the owner of the business, who had previously worked alongside her, increased his hours and in effect took over her role.  Relations between the claimant and the owner were not cordial, so one issue the tribunal had to decide was whether the decision to dismiss her was on redundancy grounds, for some other substantial reason, or simply personally motivated.

The employment judge cited the law correctly, but then, in the EAT’s view, failed to apply it correctly.  The fact that the employer had in effect organised its affairs to create a redundancy situation did not mean that it no longer needed an employee at the claimant’s level, even if there had been no drop in overall business activity. While these steps may have been personally motivated, that was not relevant to assessing whether there was a redundancy situation. Rather, the question of motivation was relevant to determine whether redundancy was the reason for the dismissal, and, if it was the reason, whether the dismissal had been fair.

The employment judge’s ruling that the dismissal was not on redundancy grounds has therefore been overturned, and this issue remitted to a new tribunal.

Cap on public sector exit payments takes effect next month

Regulations implementing the £95,000 cap on public sector exit payments were made yesterday (14 October) and take effect on 4 November.

The Regulations apply to most public sector organisations (including NHS bodies, local authorities and Central Government) as well as some arms-length bodies and cultural institutions. The full list of organisations to which the new cap applies is set out in the schedule to the Regulations.

There a number of complexities, particularly around pensions, but the broad picture is as follows:

• As well as covering all ex-gratia payments, the cap will extend to contractual entitlements on termination of employment, with the exception of notice pay (capped at 25% of salary) and accrued holiday pay
• Statutory redundancy payments and payments to compensate for injury or illness (including injury to feelings) will be exempt
• The value of any entitlement to an unreduced pension on early retirement will also be captured (these benefits ceased to apply in the NHS from March 2015)
• There are record-keeping and reporting requirements to support the obligation to apply the cap
• There is power to apply for a relaxation of these new rules in certain circumstances – for example where applying the cap would cause hardship. More details will be set out in a treasury direction which is expected to be published shortly

There are no transitional provisions in the Regulations, so it appears that they will apply to payments made on or after 4 November, even if they are made pursuant a legally binding agreement that was entered into prior to that date.  

Indeed the way the Regulations interact with employers' contractual obligations is a matter of some controversy, particularly when it comes to long-standing pensions obligations (for example in the local authority sector). The Government appears to be of the view that the Regulations take precedence over any contractual obligations that conflict with them, but this issue may soon be tested in the courts.

Job support scheme launch and other COVID news

The Chancellor’s launch of a new scheme to protect jobs hit the headlines last week. There have also been a number of other significant national developments over the last few days. 

These include:

• revisions to Government guidance on working from home
• an important joint statement on managing redundancies
• new legal obligations on employers to support self-isolation

Job Support Scheme

This new Scheme will run for six months from the beginning of November. The aim is to support viable jobs by providing financial assistance for short-time working. All SMEs automatically qualify for this support, but there will be eligibility requirements for larger businesses.

For more information see our FAQ document which collates what we know about the Scheme so far. Formal guidance with more detailed information is expected shortly.

Work from home if you can

Guidance has now been published, following the Government’s change of direction on 22 September about whether workers should return to the office. Revised guidance now states that “office workers who can work effectively from home should do so over the winter”.

As with previous iterations of the guidance, this leaves the decision about the precise arrangements to make in the hands of the employer, subject to the overriding legal requirement that the health risks of returning to the workplace must be reduced to the lowest practicable level. As previously, employers are encouraged to consult with their staff about the exact arrangements to be adopted.

New criminal sanctions to support test and trace

New regulations which came into force on 28 September impose new duties on employers to support test and trace. Relevant measures include imposing criminal sanctions on an employer if they “knowingly permit” a worker who is self-isolating to attend the workplace, though they may of course continue to work from home if they are self-isolating there.

The regulations also impose a legal obligation on workers to tell their employer they are self-isolating.

ACAS/CBI/TUC joint statement on handling redundancies

A joint statement from ACAS, the CBI and the TUC, issued on 24 September, encourages employers to “exhaust all possible alternatives before making redundancies”. This message is supported by articulating five key principles to help employers get the process right.

Publishing a joint statement like this is an unusual step, and it is safe to assume that employment tribunals will take note of it when assessing the fairness of any future redundancy process. However, the principles it sets out are well established, and it does not have the status of a formal code of practice.

Emergency legislation clarifies redundancy rights for furloughed employees

The Government has published new legislation on a week’s pay which comes into effect on 31 July. Its aim is to clarify the dismissal-related rights of employees who have been furloughed under the Coronavirus Job Retention Scheme, which ends on 31 October.  The basic idea is to ensure that statutory redundancy payments and other statutory dismissal-related entitlements are calculated based on the employee’s normal pay, rather than any reduced furlough rate.

Achieving this in practice is quite complicated, because there are four different ways of calculating a week’s pay, depending on the exact working arrangements.  This then forms the basis for calculating the amount of the relevant statutory payment, of which the two most commonly encountered are statutory redundancy payments and the basic award for unfair dismissal.

In the standard case of a salaried employee with normal working hours, this is achieved by treating their furloughed hours as normal working hours, and disregarding any reduction in the amount payable as a result of the employee being furloughed.  In other cases the averaging provisions need to be adjusted to achieve the same overall effect.

The new (and temporary) rules for calculating a week’s pay apply to the following statutory entitlements of employees who are – or have been – furloughed:

• Statutory redundancy payments
• Basic awards for unfair dismissal
• Payments guaranteed during the employee’s statutory notice period (these provisions don’t apply if the contractual notice period is at least a week longer than length of the minimum statutory notice)
• Compensation for breach of the requirement to give a written statement of reasons for dismissal
• Additional awards for failure to comply with an order for re-engagement or reinstatement
• Pay for periods during which employees under notice of redundancy take time off to look for work
• Calculating the trigger for engaging employees’ statutory rights in relation to short-time working

Redundancies and returning to work – immigration considerations

As staff begin to return to the workplace, or businesses consider implementing redundancies, it is important to consider the immigration compliance implications that may arise.

• Redundancies and restructures – additional considerations will apply in respect of staff who have Tier 2 visas. Changes to job titles, substantive duties, working hours, or work location and the termination of employment will all trigger reporting obligations. Where it is proposed an employee should take up a new role, or there are significant changes to the employee’s job content, careful consideration should be given to whether the role falls within the same SOC Code as the employee’s existing role. If the new role falls in a different SOC Code, a change of employment application would be required, subject to all of the usual requirements. This may impact on the timing and steps to be undertaken during the redundancy consultation exercise.
• Working from home – many staff will continue to work from home for several more weeks or months. Employers need to ensure that sponsored employees are monitored effectively in order that the employer is able to comply with its sponsor reporting obligations (e.g. in relation to absences from work, or failure to attend for work). Additional considerations may apply in respect of staff who are Key Personnel on the sponsor licence.
• Sponsor reporting duties – many employers have made changes to the working hours and salaries of staff as a consequence of the pandemic, including through use of the Coronavirus Job Retention Scheme and furlough. Many of these changes trigger sponsor reporting requirements. Further changes (e.g. return to previous working patterns, or flexible furlough) may trigger fresh reporting obligations. These must usually be completed within 10 working days.
• Right to work checks – the Home Office has published guidance for employers carrying out right to work checks during the pandemic. This introduces temporary changes to a manual right to work check by removing the requirement for an employee or prospective employee to submit their original right to work document. Instead it permits an employer to carry out a right to work check using video conferencing. However, where a check has been done in this way, a fully compliant check will need to be done within eight weeks of the end of the current arrangements. It would be sensible for the ‘full’ right to work check to be completed by employers as soon as it is practicable to do so.

Failure to take the necessary actions may have significant implications, either now (e.g. in respect of the ability of a migrant to remain in the UK), or several months or years in the future (e.g. during a Home Office audit) when the impact and timing of COVID-19 may be a distant memory. Visa holders and businesses with sponsored workers will want to ensure that all necessary steps are taken to minimise the risk of future compliance issues arising.

Alex Russell, Partner

Do employers need to consider bumping in redundancy consultations?

The Employment Appeal Tribunal has confirmed that there is no general rule that an employer is only required to consider bumping if it is raised by the employee. Whether or not bumping should be considered during redundancy consultations will depend on the particular facts of each case, in the context of the employment tribunal’s assessment of whether the employer’s decision to dismiss was reasonable – and hence fair.

Bumping refers to the process of transferring an employee whose role is at risk of redundancy into the role of another employee, who is then made redundant instead. The other employee is said to have been “bumped” out of their former position.

In this case, the claimant was engaged as a sales director and managed a team of account managers. Over time, it became clear that the division in which the claimant was employed was failing to grow as expected. The claimant’s role was unique in that he was the only sales director employed in the division, and as such he was informed that he was at risk of redundancy. During the consultation period, the employer relied on an email sent by the claimant during an earlier restructuring of the division which had stated that he did not wish to be made an account manager. It therefore did not consider transferring the claimant into a subordinate role as an alternative to redundancy.

The employment tribunal had concluded that, following earlier case law, the onus was on the claimant to suggest that he would consider taking an a more junior role to avoid redundancy. In absence of this, the ET ruled that the employer had not acted unreasonably in failing to consider bumping as part of the consultation process.

The EAT has now ruled that the ET was wrong to interpret the previous case law in this way. It did not set out a rigid rule in this respect. In addition, the ET had failed to recognise that the claimant had indeed raised the possibility of bumping. The EAT therefore remitted the case to the ET to reconsider its decision that the dismissal had been fair.

This latest EAT decision confirms that there is no firm rule on whether it is reasonable to consider bumping as part of a redundancy consultation process. Whether employers should consider bumping will depend on the individual circumstances of the redundancy. It may be more appropriate to consider this possibility where there is a single or small group of employees at risk of redundancy who have valuable transferable skills. It will be less likely to be appropriate to consider bumping where there are collective redundancies taking place, or where the employee at risk has a highly specialised role. In any case, employers must be aware that if an employee raises any possibility of bumping during a redundancy consultation process, then the employer should always take steps to consider whether this is a viable option.

Rumer Burnett, Trainee Solicitor

ECJ pushes back on starting point for collective redundancies consultation

In two Polish references about changing terms and conditions for hospital staff, the European Court of Justice has revisited the question of when consultation about collective redundancies should start.

For UK readers there is little surprising in its ruling that the Collective Redundancies Directive was engaged when two hospital employers in different parts of Poland sought to impose unfavourable changes to staff terms and conditions in order to save money. In one case it was a question of a temporary 15% pay cut and in the other the removal of generous long service payments.

What is more interesting is what the ECJ says about when the collective consultation required by the Directive should have started. That involved interpreting the somewhat vague wording of Article 2 which requires it to begin “where an employer is contemplating collective redundancies”. It is clear from earlier decisions that this must be prior to the decision to dismiss. But how much earlier?

In both these cases the employers sent out notices of amendment, which under Polish law had the effect of terminating the contract of employment if the employees did not accept the amendment. If they failed to object to the amendment by the mid-point of the notice period they were deemed to have accepted it. In one case, but not the other, sending the letters of amendment had been preceded by a period of individual consultation, after which about 20% of the employees accepted the change.

The ECJ has ruled that it should have commenced consultation before sending out the letters of amendment, since “it should reasonably have expected that some employees would not accept the change to their conditions of employment”.

As often with decisions of the ECJ it is not easy to apply this decision to the UK context, since the provisions in the Polish Labour Code about amending contracts of employment have no equivalent in English law. However the broad principle that emerges is that deciding on an action which is likely to lead to a number of dismissals in the future in the ECJ’s view amounts to “contemplating collective redundancies”, even if the precise numbers of actual job losses cannot be ascertained at that point.

In practice in the UK if negotiations about changing terms and conditions fail, imposing them is normally done by a letter of dismissal combined with an offer of re-engagement, which would clearly engage the obligation to consult. However there is more than a hint in these latest decisions that consultation should start at an earlier point, once the idea about imposing compulsory changes to terms and conditions has been formulated.

 

Could there be a gap in the UK's legal protection for pregnant women?

Pregnant women should enjoy additional protection against being made redundant, even in circumstances where it would be lawful to dismiss other employees, according to a recent advocate general’s opinion, given in a Spanish collective redundancies reference,

The question arose because the High Court in Catalonia was not sure whether a pregnant worker had to be given additional protection under EU law in a redundancy situation, or whether her rights in that situation were no greater than those enjoyed by the general workforce.

Advocate general Sharpston is of the opinion that it is not sufficient for an employer to comply with the requirements of the Collective Redundancies Directive when dismissing a pregnant employee on redundancy grounds. As well as establishing that the dismissal is “for one or more reasons not related to the individual employee concerned” and following the Directive’s information and consultation requirements, the employer must if at all possible redeploy a pregnant worker into suitable alternative employment.

Under UK law a women on maternity leave is given a similar level of protection. There is a requirement in the Maternity and Parental Leave Regulations which in effect requires an employer to give priority to a woman already on maternity leave when redeploying staff in a redundancy situation. There is however no equivalent requirement if a pregnant women is made redundant before going on maternity leave.

The reason for this gap in the legislation is not clear. Possibly it is because protecting the rights of women to return to work after maternity leave was seen as a particular priority, given they are underpinned by a specific requirement in the Equal Treatment Directive. However it is possible that the more general protection conferred by the Pregnant Workers Directive has been overlooked until now. This includes a “prohibition against dismissal” from the start or the pregnancy up to the end of the statutory maternity leave period “save in exceptional circumstances”.

The advocate general has said that a standard redundancy situation does not count as an “exceptional circumstance” for these purposes. If this opinion is adopted by the European Court of Justice it will mean that, on the face of it, our domestic legislation on redundancy has some gaps as far as pregnant workers are concerned, if it is to comply fully with EU law.