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Gig economy: Pimlico Plumber found to be a worker

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A Pimlico Plumber was held to be a worker despite his contract labelling him as an independent contractor. This gives him a right to be paid holiday and the national minimum wage, amongst other things.

Mr Smith was a plumber with Pimlico Plumbers for over 5 years. Around 4 months after Mr Smith suffered a heart attack, Pimlico terminated his contract. Mr Smith brought claims in the Employment Tribunal claiming unfair dismissal, wrongful dismissal, sick pay, holiday pay, unlawful deductions from wages and disability discrimination.

Before the Employment Tribunal could hear those claims, it had to determine whether Mr Smith was in fact an employee or a worker rather than a self-employed person in business on his own account. In order to do so, it had to look at the contractual and factual relationship between him and the company. Among the factors taken into consideration were the following:

• Mr Smith’s contract said that he was under no obligation to accept work, and that Pimlico was not obliged to give him work, but that Mr Smith should complete a minimum of 40 hours’ work per week.
• Whilst Mr Smith would drive a Pimlico Plumbers branded van and wear a uniform, he was obliged to provide his own tools and materials.
• Mr Smith was VAT registered, completed tax returns on the basis that he was self-employed and would submit invoices to Pimlico in order to receive payment. He would lose out on pay if a customer failed to settle a bill and he had to provide his own liability insurance.
• The contract did not expressly allow Mr Smith to send in a substitute to perform work on his behalf. However, it was found on the evidence that the plumbers would swap assignments between themselves.

Mr Smith’s contract also contained restrictive covenants, including one which prevented him from rendering plumbing services in the Greater London area for 3 months after the termination of his employment.

The Court of Appeal held that Mr Smith was a worker rather than a self-employed contractor (however, he was not an employee so not entitled to unfair dismissal protection). His contract, and the reality of the working relationship, required him to provide personal service. In addition, the degree of control Pimlico had over Mr Smith’s work was inconsistent with a client-contractor relationship.

It has been reported that Pimlico Plumbers is considering appealing this judgment, though it follows several high-profile cases in recent months challenging the mis-labelling of workers within the ‘gig economy’ as self-employed persons.

Pimlico Plumbers Ltd and Mullins v Smith [2017] EWCA Civ 51

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Government publishes review into Employment Tribunal fees

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The Government’s long-awaited review into the Employment Tribunal fees regime has been published, and fees will remain.

Employment Tribunal fees have been in place since 2013. At present, Claimants in cases involving unfair dismissal, whistleblowing and discrimination (among others) must pay £250 to issue a claim and a further £950 once the final hearing approaches. The Ministry of Justice has reported that the intake of these fees has met approximately 20% of the running costs of the Employment Tribunal system.

Despite criticism of the fee regime from a number of sources, the review states that the fee regime is working well and largely meeting its objectives (which are the generation of fee income, greater use of Acas early conciliation, and protection of access to justice).

That said, the review acknowledged that the fall in the number of Employment Tribunal claims has been greater than expected. As a result, a few tweaks to the system have been announced. For example:

• the process of obtaining fee remission has been simplified and rebranded as ‘Help with Fees’. The Ministry of Justice has reported a “marked increase” in the number of fee remissions granted since the changes were implemented – from 15% in the quarter July to September 2013 to 29% in the quarter January to March 2016; and
• the Government will consult on proposals to expand ‘Help with Fees’ by increasing the gross monthly income threshold necessary to qualify from £1,085 to £1,250.

On the other hand, the review rejected suggestions that the fee regime is either indirectly or directly discriminatory.

Review of the introduction of fees in the Employment Tribunals: Consultation on proposals for reform

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Tribunal compensation limits to increase

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As of 6 April 2017, higher limits will apply to various compensation awards payable under employment legislation.

At the start of each new financial year, the limits applicable to various Employment Tribunal awards are increased. The two most important changes this year are as follows:

• the limit on the compensatory award for unfair dismissal claims will rise from £78,962 to £80,541; and
• the limit on a week’s pay (which features in the calculations of redundancy payments and basic awards for unfair dismissal claims, among other things) will increase from £479 to £489.

It is important to note that the new rates will apply to cases where the liability arises after 6 April 2017. This means that people who are unfairly dismissed or made redundant after that date can enjoy the higher limits, but those dismissed before then will have the lower 2016/2017 rate applied to them regardless of when their award of compensation is made.

The Employment Rights (Increase of Limits) Order 2017 SI 2017/175

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Online database of Employment Tribunal judgments goes live

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The much-anticipated online database of Employment Tribunal judgments is now live, meaning that employees suing their former employer and employers being sued can now be identified by journalists and prospective new employers much more easily. This will make some claimants think twice before taking a case to trial and some employers will also feel more hesitant about going the full distance.

The database remains a work-in-progress, but at the time of writing there are already 7 pages of judgments publicly available in full.

The judgments available so far seem to be final judgments as opposed to judgments on preliminary hearings, and it is not clear whether that will change as more are added.

An interesting feature of the database is that the search function not only searches against the title of the case, i.e. the names of the Claimant and Respondent, but also text within the judgment itself. This means that any names mentioned within a judgment may also be picked up.

This new feature has a variety of potential implications for both individuals and employers.

From an individual’s perspective, the prospect of having a judgment on the internet which can be readily searched for by potential new employers may pressurise them to settle, or to avoid litigating in the first place. Even if an individual’s claim is upheld, it is possible for certain unflattering details about their behaviour to remain in the judgment and the very fact that they have brought proceedings at all will put many employers off paying them. It is conceivable that this could have a chilling effect on the number of claims.

As a company, this is an obvious source of bad press. Any bad behaviour will be available for all to see, and potential new employees may even search for their prospective employer before applying for a job in the first place. In discrimination or whistleblowing detriment cases, it is not unusual for staff of the employer to be named as individual Respondents. This adds an additional layer of pressure, as senior mangers’ professional reputations could also be at stake.

Another important factor for companies is the use of confidential information. Whilst tribunal judgments have always been theoretically public (in the sense that Employment Tribunal hearings are held in public and there was a database of judgments available for inspection in Bury St Edmunds), the full text of a judgment has never been so readily accessible by so many people. Any confidential evidence which makes it into the judgment will now be out in the world at large, and this is an additional risk to consider. To circumvent this issue, it may be that employers begin applying to tribunals to ask that such details are kept in a confidential schedule to the judgment, or something similar.

That said, it is still early days for the database and its practical impact remains to be seen.

See the database here.

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Regulatory reference rules now in force under senior managers regimes

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As of 7 March 2017, many executives working in banking and insurance now come within the scope of the new regulatory rules relating to references. Although the full regime has only now come into force, this regulatory development has already had a palpable effect on the employer-to-employee relationship in those sectors.

Background

For context, the rules form part of the senior managers regimes, introduced by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) in March 2016 in response to the global financial crisis and a desire to more closely regulate the conduct of individuals.

The senior managers regimes are known in banking as the Senior Managers and Certification Regime (SM&CR) and in insurance as the Senior Insurance Managers Regime (SIMR). They are underpinned by the recommendations of the Parliamentary Commission on Banking Standards, which consulted and reported on professional standards and culture in the UK banking sector, and by the subsequent Financial Services (Banking Reform) Act 2013.

In 2013, in the wake of the Libor and FX-rigging scandals that have featured regularly in the news, the Bank of England’s ‘Fair and Effective Markets Review’ made further recommendations aimed at raising individuals’ conduct standards, including that the FCA and PRA should consult on a compulsory form of regulatory reference.

The new rules are the culmination of this, and have among their aims the identification and prevention of the ‘rolling bad apple’ – the individual who moves from employer to employer to avoid their conduct history from catching up with them.

What do the new rules require?

The full rules are intended by regulators to be a key tool in enabling firms to share relevant information to support their assessment of candidates’ fitness and propriety. These are those who are candidates for senior management functions, significant harm functions, senior insurance management functions, controlled functions, key function holders and notified non-executive directors.

• The new rules contain a mandatory form of standard reference, which specifies information that must be included. In addition to identifying the individual, it must include:
• whether they performed a significant harm function or had been an approved person at the firm;
• whether they were in a specified role, such as a key function holder or notified non-executive director;
• whether any disciplinary action was taken against them that amounted to a breach of an individual conduct requirement, such as the Conduct Rules, or breaches under the Statements of Principle and Code of Practice for Approved Persons, or that is relevant to the individual’s lack of fitness and propriety to perform a function. ‘Disciplinary action’ means the issuing of a formal written warning, suspension or dismissal of a person, or reduction or recovery (‘clawback’) of their remuneration;
• a factual description of the breach including dates, the basis for disciplinary action and its outcome. Firms are not obliged to include information that has not been properly verified;
• any information that may be relevant to the assessment of whether the individual is fit and proper.

The hiring firm must take reasonable steps to obtain regulatory references from past employers going back six years from the date of the reference request. There is no time limit for misconduct that is serious, and so a firm giving a reference must check whether there was any serious misconduct at any point and, if so, disclose it in the reference.

A firm also has a duty to update a regulatory reference it sent previously to an individual’s employer where misconduct comes to light after the employee’s departure. It must do so for a period of six years from the date the individual left the firm where it becomes aware of matters which, if it were drafting the reference now, would cause it to write it differently.

The practical effects

Along with other features of the senior managers regimes, such as certification, these new rules are part of the shifting of responsibility for verifying individuals’ fitness and propriety from the regulator to the firms.

Although implementation of the new rules was delayed for a year to March 2017, preparation for their entry into force, combined with the changes already brought about by those parts of the senior managers regime introduced a year ago, has already had an important and tangible bearing on the employment relationship for those working at affected firms.

Individuals’ behaviour and conduct histories are now being scrutinised like never before. Recently detected conduct issues that may have otherwise passed unadmonished and past conduct that did, are being picked up and used to form the basis for disciplinary processes and investigations of fitness and propriety.

There has been an emphatic hardening of employers’ attitudes to the pursuit of such matters and away from resolving them. In great part this must be attributed to firms wanting to ensure their regulatory compliance, but in some cases there is also a notable zeal on the part of those conducting the processes and making the decisions. It is not always the case that firms take a fair and impartial approach to investigating and disciplining individuals and, if anything, some firms are adopting a more obviously adversarial approach than before.

Furthermore, the rules are clear that a firm must not enter into an arrangement or agreement that limits its ability to make regulatory reference disclosures. In other words, a firm is precluded from agreeing or limiting what it will say about an individual in a regulatory reference by terms agreed in a settlement agreement or a COT3. The FCA’s guidance to the rules states: ‘A firm should not give any undertakings to supress or omit relevant information in order to secure a negotiated release.’ Any such agreement or arrangement will be void.

Where an employee’s future career is at risk, not only at that firm but also within their chosen area of financial services, the stakes for the individual could not be higher.

The unsurprising consequence of this hardening in positions is that disputes between employers and employees over alleged misconduct are being fought harder and for longer. An employee who faces a disciplinary sanction that threatens to end their career has little option but to challenge it forcefully, if only to influence what lies on the firm’s record when regulatory references are compiled in future.

It remains the case that employers have common law duties when providing a reference, including that a reference provided must be true, accurate and fair, and not give misleading information. Satellite litigation is bound to be created where regulatory references are not so compiled.

What does the future hold?

The senior managers regimes currently apply to deposit takers and investment firms, that is to say banks, and Solvency II firms and large non-directive insurers, that is to say insurers. For the present, this does not include insurance brokers.

However, the Government is proposing that, from 2018, the regime will be extended to the wider financial services industry, replacing the Approved Persons Regime. It is understood that this would bring approximately 60,000 more firms within its scope, meaning that it would apply to asset managers, private equity firms, inter-dealer brokers and other types of broker. As with banks and insurers, the impact for those firms and their employees is difficult to over-estimate.

Nick Wilcox, Senior Associate

A variation of this article appeared in the ELA Briefing Vol. 24

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Southern Rail fails to obtain injunction to prevent strike

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Southern Rail’s parent company has failed in an attempt to obtain an injunction preventing strikes led by ASLEF by relying on breaches of freedom of movement principles under the Treaty for the Functioning of the EU (TFEU).

Govia GTR Railway is the franchise-holder for Southern Rail. ASLEF has disputed Govia’s plans to extend the use of driver-only operated trains, arguing that the new system for closing doors is less safe and more stressful for drivers. As a result, ASLEF announced a series of strikes in December 2016 and January 2017.

Govia applied to the High Court seeking an injunction to prevent the strikes from going ahead. Govia argued that the planned industrial action was unlawful on the basis that it interfered with the rights to freedom of establishment and freedom to provide services under the TFEU.

The Court of Appeal upheld the High Court’s decision to reject the application for an injunction. The Court did not accept Govia’s argument that the strikes were a deterrent to the freedom of establishment – whilst industrial action may discourage Govia’s French investors from doing further business, the law is not there to protect against that. Any strike, even if legal, could arguably have the same effect.

The Court also found that Govia was “free-wheeling in the slip stream of their passengers” in arguing that the strike impeded passengers’ freedom to give and receive services through Gatwick Airport and therefore breached TFEU rights. It was not possible in advance of the strike action to say that passengers’ ability to travel to and from the EU would be impeded. Even if there were such an impediment, relying on such an argument could undermine the right to strike. Previous EU authorities that found industrial action unlawful because they interfere with freedom of movement principles did so on the basis that this was the purpose or intention of the action, rather than a by-product.

Govia has announced that it will be appealing to the Supreme Court.

Govia GTR Railway Ltd v The Associated Society of Locomotive Engineers and Firemen [2016] EWCA Civ 1309

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New gender pay gap regulations due in April 2017

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A final draft of the new gender pay gap regulations has been published. Subject to receiving parliamentary approval, the regulations will come into force on 6 April 2017, with the first publications due in April 2018.

The new regulations will require employers with 250 workers or more to publish the mean and median gender pay gap for workers’ hourly pay (including a pro rata proportion of any bonuses) and the mean and median gaps in annual bonuses. The data must also show the percentages of men and women who received bonuses and the number of men and women in each pay quartile. The regulations cover all individuals providing personal services to the employer except those who are genuinely self-employed, LLP members and partners.

The figures (which a director or partner must certify for accuracy) will have to be published on the company’s website and be easily accessible to everyone – staff and the general public alike – for at least 3 years. The government will also set up its own central database to publish the figures aggregated by sector and it is anticipated that there will be widespread interest by the press and campaigning bodies in the information published.

Acas has published guidance to help employers to implement the changes and it is expected that the government will follow suit before the regulations come into force.

Information will be published as at a snapshot date and the first snapshot will be 6 April 2017. Employers are well advised to do a “dry-run” prior to that date, perhaps under cloak of legal privilege, to determine how the figures will look and how the information can be best presented. In some cases, swift corrective action will be needed to pre-empt employee complaints or even legal claims.

Equality Act 2010 (Gender Pay Gap Information) Regulations 2017

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When does workplace stress amount to a disability?

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Work-related stress which is the product of unhappiness with a particular situation may not of itself amount to a disability.

Mr Herry was employed as a design and technology teacher and part-time youth worker. From May 2010, Mr Herry was signed off work regularly and as of June 2011, he was signed off work entirely. Whilst the earlier absences were attributed to physical injuries, later GP certificates all referred to work-related stress.

He brought Employment Tribunal proceedings against Hillcrest School and Dudley Metropolitan Council relating to 90 allegations over a 4 year period. Among them were allegations that Mr Herry had been discriminated against on grounds of his disabilities, which he claimed were dyslexia and stress/depression.

The Employment Tribunal had made adjustments to take into account Mr Herry’s dyslexia, but found that he was not disabled at the time to which his allegations related. Neither his dyslexia nor his stress had substantial adverse effects on his ability to carry out day-to-day activities. The Tribunal took the view that Mr Herry’s stress was “very largely a result of his unhappiness about what he perceives to have been unfair treatment of him, and to that extent is clearly a reaction to life events”.

The Employment Appeal Tribunal similarly dismissed Mr Herry’s disability discrimination claims. The Tribunal’s decision to make adjustments had no bearing on whether either condition was a disability given how different long-running litigation is to Mr Herry’s ordinary professional life. Also, medical evidence from the relevant time showed Mr Herry was taking no medication for his stress and Occupational Health had ruled him fit to work.

The EAT ruled that, on the facts, stress caused by being unhappy with a decision or colleague was not a mental impairment; Mr Herry could not therefore be disabled. This follows an earlier case, which ruled that tribunals should take particular care before finding that a mental impairment exists if the only manifestation of work-related stress was an unwillingness to return to work until an issue is resolved to the employee’s satisfaction. This is a helpful decision for employers faced with the all-too-common problem of a prolonged employee absence prompted by the onset of a disciplinary or grievance process.

Herry v Dudley Metropolitan Council and Governing Body of Hillcrest School UKEAT/0100/16 & UKEAT/0101/16

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Teacher’s dismissal for showing horror film to pupils was discriminatory

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An employer’s decision to dismiss a disabled employee for gross misconduct which was seemingly unrelated to the disability amounted to discrimination arising from disability.

Mr Grosset was Head of English at a school operated by the City of York Council. He suffered with cystic fibrosis, which the Council agreed amounted to a disability. As a result of his condition, Mr Grosset had to spend up to 3 hours a day doing gruelling physical exercise to clear his lungs.

A new Head Teacher was appointed who brought in various new initiatives at the school, leading to an increase in Mr Grosset’s workload. Given the time he had to spend exercising, the additional workload proved very stressful to Mr Grosset, and the stress in turn exacerbated his cystic fibrosis.

During this period, Mr Grosset showed ‘Halloween’, a violent horror film with a certificate of 18, to a group of vulnerable 15 and 16 year olds. The Council suspended Mr Grosset pending an investigation into potential gross misconduct. When interviewed, Mr Grosset agreed that he had made an error of judgment but explained that he had been under significant stress, contributed to by his cystic fibrosis. The medical evidence available to the Council at the time did not suggest any link between Mr Grosset’s disability and his decision to show the film. As a result, the Council took the decision to dismiss Mr Grosset.

Mr Grosset brought claims in the Employment Tribunal against the Council, including the allegation that his dismissal amounted to discrimination arising from his disability.

Medical evidence produced during the course of proceedings suggested that there may be a medical link between Mr Grosset’s behaviour and his disability. On that basis, the Employment Tribunal and the EAT found that the dismissal amounted to discrimination arising from disability. By contrast with the law on reasonable adjustments, it was held that discrimination of this nature only requires that the employer knows of the employee’s disability – it is not necessary for the employer to have knowledge of the specific consequences of the disability. Therefore, although it was reasonable for the Council to determine that the misconduct was not connected to Mr Grosset’s disability given the evidence it had at the time, the later evidence can still be relied on to show that the dismissal was discriminatory and was not objectively justified.

This is a rather scary case for employers, as the Council’s decision to dismiss Mr Grosset on the basis of the information it had at the time seems reasonable at first glance (and indeed, Mr Grosset’s unfair dismissal claim failed on that basis). The Council is seeking permission to appeal to the Court of Appeal; in the meantime, the best thing for employers to do in such a situation is to seek independent medical evidence before making a decision as to a disciplinary sanction.

City of York Council v Grosset UKEAT/00151/16

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Can employers take into account expired warnings in deciding to dismiss?

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In some cases, an employer can take into account an employee’s history of expired written warnings in deciding to dismiss them following a further instance of misconduct.

Mr Stratford worked for Auto Trail VR Ltd from November 2001. He had 17 items on his disciplinary record, the most recent of which was a 3-month warning received in January 2014. All of the written warnings he had received had expired.

In October 2014, Mr Stratford had his mobile phone in his hand on the shop floor, which was strictly prohibited according to Auto Trail’s handbook. Following a disciplinary hearing, Auto Trail decided to dismiss Mr Stratford with 12 weeks’ pay in lieu of notice. It reasoned that, whilst the mobile phone offence was not of itself an act of gross misconduct (particularly given that there were some extenuating circumstances), it was the eighteenth time his behaviour had attracted formal action. If it gave Mr Stratford another chance, there was nothing to suggest that there would not be a similar situation in future.

Mr Stratford brought a claim in the Employment Tribunal alleging unfair dismissal.

The Employment Appeal Tribunal held that the dismissal was fair. An employer (and an Employment Tribunal in determining the claim) need not always totally disregard expired warnings. It was open to them to take into account all of the relevant circumstances, given the broad wording of the legislation on unfair dismissal. An employee’s disciplinary record is among those circumstances – an employer need not disregard it simply because the respective written warnings have expired.

However, the facts of this case were quite extreme and circumstances where expired warnings can be relied on will continue to be the exception, not the rule. In general, expired warnings will not be relevant unless the act under consideration is already sufficient to justify dismissal and the employer is taking the older offence into account only in deciding whether to exercise leniency.

Stratford v Auto Trail VR Ltd UKEAT/0116/16

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Is an employer liable for an assault at the Christmas after-party?

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An employer was found not to be liable for an employee’s serious injury caused by an assault during drinks held after the office Christmas party.

Mr Major was the managing director of Northampton Recruitment Limited. He hired Mr Bellman, who was a childhood friend of his, as a sales manager. Northampton’s office Christmas party in 2011 was held at a golf club. After that, Mr Major, Mr Bellman and around half of the guests went back to the hotel in which some people were staying. Northampton paid for the taxi fares from the golf club to the hotel.

Many of the group at the hotel continued drinking into the early hours of the morning. Conversation turned to work-related matters at around 2:00am including, in particular, a controversial issue about which Mr Major lost his temper. Mr Bellman challenged him in a non-aggressive way. Nonetheless, Mr Major swore at Mr Bellman and punched him twice, despite the efforts of another colleague to restrain Mr Major.

The second punch caused Mr Bellman to fall and hit his head on the floor. He fractured his skull and fell unconscious. It later emerged that Mr Bellman had been severely brain damaged and would not be able to work again.

Mr Bellman brought a personal injury claim against Northampton, alleging that the company was vicariously liable for Mr Major’s actions.

The High Court dismissed Mr Bellman’s claim, holding that Northampton was not liable for the assault. It took into account that Mr Major ran the company with a wide remit, and it was ultimately at his discretion that Northampton paid for the party, drinks, taxis and accommodation. However, the Court held that the drinks at the hotel were ‘impromptu’ and not part of the Christmas party and Mr Major could not be said to be on duty at the time of the assault. The mere fact that the drinkers were colleagues and were talking about work at the time did not create enough of a connection to Mr Major’s employment to render Northampton liable.

This case is one of many which discuss the circumstances in which an employer will be vicariously liable for the harm caused by its employees’ wrongdoing. Whilst at first blush this may look like a very employer-friendly case, this decision does not mean that employers will never be liable for harm caused at an ‘after-party’, as each case will depend on its own facts.

Bellman v Northampton Recruitment Ltd [2016] EWHC 3104

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Partner Hire: Cerys Williams

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Cerys Williams joins BDBF as a Partner in this leading employment law boutique firm, based in the City of London.

Cerys has a wealth of domestic and international experience and was formerly employment law counsel at King & Wood Mallesons, and a partner and head of employment at Fasken Martineau.

Williams brings with her 17 years of expertise in the technology, financial services, professional services and natural resources sectors, advising businesses and senior executives on contentious and non-contentious employment law.

A key appointment to the excellent 4-strong partner team that has led the firm to its top tier status acting for senior executives, Cerys joins to add resilience to the partnership and to strengthen the firm’s existing SME and entrepreneurial businesses employment law practice.

Gareth Brahams, Managing Partner of BDBF said, “We are excited that Cerys has joined as a partner, bringing her knowledge, broad range of experience and vision to grow BDBF’s employer side practice and to solidify BDBF as a market leading, go-to employment law firm for SMEs as well as senior executives”.

Cerys said, “I am delighted to join BDBF as a partner. The firm has an outstanding reputation and I look forward to harvesting new opportunities and developing the growing employer side of this fantastic employment law practice.”

For more information about Cerys, please see her profile here.

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