UK: Discrimination – tax treatment of compensation, zero hours claims, and equal pay comparators

  • In Pettigrew v HMRC the First Tier Tribunal has held that settlement payments made by reference to underpaid past earnings arising out of a claim of discrimination against part-time workers were fully taxable as employment income. The appellant referred to the earlier case of Mr A v Commissioners for HMRC where it was held that a settlement sum representing underpaid salary and bonuses due to racial discrimination was not taxable, a decision which HMRC did not appeal. However, the Tribunal in Pettigrew did not accept this – noting in particular that the Tribunal in Mr A were not referred to the correct legal authorities and in particular the principles in Kuehne + Nagel (that for a payment to be an emolument, employment need not be the sole cause but only sufficiently substantial) and Mairs v Haughey (that a payment will usually take its taxable character from the payment which it substitutes). Both Pettigrew and Mr A are only First Tier Tribunal decisions and so not binding, but the case is a firm indication that HMRC is now likely to seek to fully tax compensation for loss of earnings arising from discrimination during employment.

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UK: Gig economy- Taylor Review released

The Taylor Review of Modern Working Practices “Good Work” was published yesterday. It considers how technology platforms have impacted working practices and the rights of workers, and examines whether our current legislative and regulatory framework is fit for purpose. The Review focuses on the importance of quality work: “fair and decent work with realistic scope for development and fulfilment” and recommends to the government certain employment and tax reforms.

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UK: Legislation – Employment law reform proposals during the Summer 2017 General Election

The main parties' manifestos for the general election all contained numerous proposed employment law reforms, the Conservatives promising "the greatest expansion in workers' rights by any Conservative government in history" while Labour included a 20 point "plan for security and equality at work" proposing radical changes to the rights of individuals and strengthening the position of unions. The political uncertainty resulting from the outcome of the election means that it is now unclear which, if any, of these proposals will see the light of day.  However, it may be helpful to those planning HR strategy to note the key areas featuring in all the main party manifestos, as these can perhaps be seen as the most likely to see change at some point.  They include:

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UK: Gender pay gap reporting – revised final Acas/GEO Guidance published

A revised, final version of the non-statutory guidance by Acas and the Government Equalities Office was published on 3 April 2017, available here.  Although the GEO had indicated that no substantive changes were expected to the original draft published a few days before formal approval of the final regulations, in fact there are a few significant changes helpfully addressing some of the grey areas highlighted by commentators.  Employers currently preparing for the first data capture covering the pay reference period including 5 April 2017 should review the guidance urgently. 

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UK: Gig economy – further rulings finding worker status

We recently reported on the tribunal ruling that Uber drivers were 'workers' entitled to statutory rights such as holiday and minimum wage (see here). That ruling is being appealed, but in the meantime there have been further decisions along similar lines. Although the cases are fact-sensitive, the trend highlights the need for employers using workers on a self-employed basis to review their arrangements and consider whether their employment model can be tweaked to minimise the risk.

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UK: Government announcements – workers’ rights post Brexit, employee representation on boards, employment of foreign workers, and review of modern employment practices

At the Conservative Party conference, Theresa May announced plans to repeal the 1972 European Communities Act, which gives direct effect to EU law in the UK, and to transpose all existing EU laws into domestic legislation. She also promised that "existing workers' legal rights will be guaranteed" during her premiership.

The conference speeches also built on the policy announced by Mrs May at the G20 summit to tackle corporate irresponsibility, "cracking down on excessive corporate pay and poor corporate governance, and giving employees and customers representation on company boards".

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UK: Zero hours workers – remedies now available

On 11 January 2016 individuals on zero hours contracts were finally given a legal remedy where their employer penalises them for breaching an (unenforceable) exclusivity term in their contract. (Exclusivity clauses in such contracts were made unenforceable on 26 May 2015.) Dismissed employees will be able to claim automatically unfair dismissal, without a minimum service requirement, while all workers will also be able to bring a detriment claim. Both will be subject to Acas early conciliation rules.

UK: New resources

UK: Zero hours and national minimum wage changes in force 26 May

Two employment provisions of the Small Business, Enterprise and Employment Act 2015 came into force on 26 May 2015:

  • The ban on exclusivity clauses in zero hours contracts and the power for the Secretary of State to introduce regulations in relation to zero hours contracts. Any clause in a zero hours contract will be unenforceable against the worker if it prohibits the worker from doing work or performing services under another contract or other arrangement, or prohibits this without the employer's consent.
    • A zero hours contract is defined as a contract under which the worker undertakes to perform work/services conditionally on the employer requesting or requiring the worker to do so, where there is no certainty the employer will request or require work/services.
    • Draft Regulations to tackle avoidance of the prohibition were published prior to the election (available here), but have not yet been passed. These provide protection against detriment for zero hours workers if they work for someone else, impose financial penalties for employers seeking to avoid the ban, and extend protection to low income workers. The regulations will presumably be finalised and brought into force shortly, as the ban itself does not provide any meaningful protection.
  • Amendment of the maximum penalty for breach of the national minimum wage to £20,000 per worker (rather than per employer).