i The employment relationship

In the United Kingdom, the employment relationship is primarily an individual relationship between an employer and employee. The relationship is determined by a combination of: the underlying contract of employment between the employer and the employee; common law principles (such as the duty of care owed by an employer to an employee) and, most significantly, statutory rights and obligations, which cover, among other things, protection against dismissal, discrimination, minimum pay, working hours and holidays. As a common law jurisdiction, the interpretation of all these elements is largely a matter of case law.

There are also statutory (and to a lesser extent) common law provisions in respect of collective rights, such as those relating to industrial action, trade union rights recognition and even works councils. However, a decline in trade union membership together with the fact that statutory rights have predominantly focused on the individual, means that in the UK the employment relationship is far more focused on individual rather than collective rights: the role of employee representative bodies, although influential in the public sector and certain industries, is less of a factor than in many other European jurisdictions.

ii Jurisdiction to determine employment disputes

In the UK, specialist employment courts, known as employment tribunals, have exclusive jurisdiction to resolve most individual claims arising out of statutory employment rights. Employment tribunals only have very limited scope to hear employment disputes that do not relate to statutory claims. As such, many employment-related contractual disputes are resolved by general civil courts, including disputes about restrictive covenants and high-value bonus disputes.

There is also a specialist tribunal, the Central Arbitration Committee, responsible for resolving disputes about the recognition of trade unions and other employee representative bodies.

Finally, under UK law, there is scope for a company to seek to enjoin a strike and other forms of industrial action. Such action must be brought before general civil courts. The grounds for enjoining industrial action are generally based on a failure by a trade union to comply with procedural requirements (rather than any judicial determination on the merits of the dispute).

iii Key employment rights

In the UK, employees enjoy the following statutory employment rights (in addition to rights provided for in their contracts of employment):

Unfair dismissal

This is a statutory right not to be ‘unfairly dismissed' (see further below).

Protection against discrimination because of protected characteristics

The Equality Act 2010 brought together and restated previous statutory provisions outlawing discrimination based on certain characteristics (protected characteristics). The protected characteristics are:

  • a age;
  • b nationality, race or colour;
  • c disability;
  • d gender reassignment;
  • e marital or civil partnership status;
  • f pregnancy and maternity;
  • g religion or belief;
  • h gender or gender identification; and
  • i sexual orientation.
Family-friendly rights

These include rights in respect of:

  • a paid adoption, maternity and paternity leave and shared parental leave for babies due or placed with them for adoption on or after 5 April 2015;
  • b parental leave (broadly an entitlement to up to 18 weeks' unpaid time off per child); and
  • c rights to request flexible working.
Protection of atypical workers

Part-time, fixed-term and agency workers all have rights that prevent them being treated less favourably than full-time, permanent employees especially in respect of their rate of pay and the benefits to which they are entitled.

Pay, hours and holiday

Employees (and other workers) enjoy rights to minimum rates of pay (see further below). There are also statutes relating to the number of hours that can be worked, breaks between work and paid holiday entitlement (see further below).

Protection against whistle-blowing

Employees and other workers enjoy the right to be protected against both detriment and dismissal by reason of being whistle-blowers.

Collective rights

There are detailed statutory provisions pertaining to: the rights of trade unions to be recognised; the circumstances in which industrial action is lawful; the rights to establish domestic and European works councils (although little used). In addition, recognised trade unions have the rights to be informed and consulted, including in relation to collective redundancies, transfers falling under TUPE2 and certain changes to pension arrangements.


This year can be summed up in one word: Brexit. The UK's vote to leave the EU on 23 June 2016 surprised many, including commentators, the political establishment and businesses alike. Questions about how and in what way the UK will disentangle itself from the EU still remain. In terms of changes to employment law, though employment law is often cited as an area where European legislation has a big impact on UK law, we do not anticipate there to be any radical changes in either the short, medium or long term. We expect this to be the case for the following reasons: (1) much of UK employment law is UK-specific, e.g., statutory notice periods and the national minimum wage; (2) the UK has introduced some rights, such as shared parental leave, that are significantly beyond EU minimum standards; and (3) some of the EU legislation, such as the discrimination laws, are based on UK laws, and in any case, where these rights have been refined, they are now so enshrined in UK employment law and culture that we do not anticipate that they will be radically altered. However, the law will not remain static. We anticipate that the rights of part-time, agency, fixed-term and atypical workers will be subject to close scrutiny, particularly in light of an increased focus on the burgeoning ‘gig' economy (see Section XIV, infra).

Aside from Brexit, the General Data Protection Regulation (Regulation (EU) 2016/679) (GDPR) was finally agreed after many years of controversy, negotiation and wrangling such that it comes into force automatically in each Member State on 25 May 2018. It has been confirmed that the GDPR will come into force in the UK despite Brexit. The GDPR, contains numerous, substantial and far-reaching amendments to the EU Data Privacy Directive (95/46/EC) that were implemented in each EU Member State through national legislation in differing ways. In the UK it was implemented through the Data Protection Act 1998. The GDPR aims to harmonise data privacy laws across the EU and also takes into account the technological advances and developments over the past 20 years. Its changes include:

  • a Data will need to be processed fairly, lawfully and transparently. This will require businesses to provide information about how and why data is processed in a clear and intelligible way. Business will not be able to hide behind technical jargon.
  • b If consent is used, it must be ‘freely given, specific, informed and unambiguous'. In cases of sensitive personal data it must also be ‘explicit'.
  • c Public authorities and those businesses whose activities involve ‘regular and systematic monitoring of data subject on a large scale' or the large-scale processing of ‘special categories' of personal data will need to appoint a Data Protection Officer to oversee compliance.
  • d Its scope will be expanded so that it will not apply just to businesses based in the EU, but also to businesses that target the EU, i.e., those that offer goods or services to EU citizens or monitor behaviours of EU citizens, even if those businesses are not based in the EU.
  • e The maximum penalty for non-compliance will increase materially to become the higher of €20 million and 4 per cent of an undertaking's worldwide turnover.

It is noteworthy that there is a carveout for employment data so that Member States can ascribe higher protection than that given in the GDPR to employment data. We anticipate more guidance on various aspects of the GDPR over the next year from the European Commission as well as the UK's data protection authority, the ICO, which will enable businesses to prepare for the substantial changes to the protection of personal data required by the GDPR.

In addition, the Trade Union Act 2016 became law in May 2016. However, the main changes, making balloting requirements for lawful industrial action for certain public services more stringent, are not yet in force. As to these changes, the government has published draft regulations that specify which public services are deemed important enough such that 40 per cent of eligible voters must vote in favour of a strike (in contrast to a 50 per cent minimum turnout for other services and a majority vote in favour of the industrial action). These public services cover some medical services, some transportation services, certain teaching services, some firefighting services and certain border control services. If approved, the Regulations will come into force by 1 March 2017, or, if Parliament has not approved them by then, 21 days after approval. The government has also announced an independent review on electronic balloting as required by the act to assess secure methods for delivery. The report is expected by the end of December 2017.



The long-running saga of how commission and overtime should be dealt with when calculating holiday pay has continued. In the latest instalment of Lock v. British Gas Trading Ltd, the Court of Appeal (2016 EWCA Civ 983) upheld the previous decisions of both the Employment Appeal Tribunal (UKEAT/0189/15) and the Employment Tribunal (ET/1900503/12) in holding that contractual results-based commission must be included when calculating holiday pay. However, the Court of Appeal did not go any further in deciding how such holiday pay should, in practice, be calculated. British Gas intends to appeal the decision to the Supreme Court.

We also had the awaited decision of the Court of Appeal in Secretary of State for Justice v. Windle and Arada [2016] EWCA Civ 459, a case concerning interpreters who both worked on multiple short-term contracts for one employer, Her Majesty's Courts and Tribunals Service. They claimed that they worked under contracts personally to do work such that they could receive protection under the Equality Act 2010, as their claim was in relation to race discrimination they had suffered. The Equality Act 2010's definition of ‘employee' also includes those under a contract personally to do work. Here, the Court of Appeal held that supplying services on an assignment-by-assignment basis, rather than under an umbrella contract, can indicate a degree of independence or a lack of subordination in the working relationship, and because lack of subordination is a factor that is inconsistent with employee status, it indicates that an individual is not an employee for the purposes of the Equality Act 2010.

The case of R (Hottak and another) v. The Secretary of State for Foreign and Commonwealth Affairs and another [2015] EWHC 1853 (Admin) found that the territorial jurisdiction of the Equality Act 2010 was the same as the territorial jurisdiction for unfair dismissal. There should be no lower bar just because claims are in relation to discrimination.

In the context of whistle-blowing, the decision of Royal Mail Group Limited v. Jhuti (UKEAT/0020/16) looked at what knowledge the decision-maker who dismissed an employee who had made protected disclosures to others within the business could be imputed as having. The Employment Appeal Tribunal found that in the circumstances, Ms Jhuti's dismissal was automatically unfair as her line manager (to whom she had made protected disclosures) had engineered her dismissal by misleading the person who decided to dismiss Ms Jhuti. A causal link could therefore be made between the protected disclosures made by Ms Jhuti and the decision to dismiss her, such that her dismissal was deemed to be because of her having made protected disclosures.


i Employment relationship

Although there are no formal requirements for a signed contract of employment, there is a statutory requirement for many of the main terms of employment (such as the identity of the employer, pay, working hours, holiday, sick pay, pension, notice period, job title and place of work) to be provided to an employee in writing.

Given these requirements, most employees are employed under a written contract of employment that is signed by both the employer and employee.

The starting point for amending a contract of employment will be through the explicit consent of the parties to that contract, albeit that this does not need to be by way of a formal amendment to a written contract of employment. In some circumstances consent can be implied by conduct.

ii Probationary periods

Probationary periods are lawful and there are no express provisions limiting the length of a probationary period or extending a probationary period or providing for shorter notice periods during a probationary period (which commonly occurs where there is a contractual notice period). However, employers must provide employees with the statutory minimum period of notice at all times (which is one week up to the first year of service and thereafter increasing by one week per completed year of service up to a maximum of 12 weeks). In addition, in most cases, employees only have rights not to be ‘unfairly dismissed' if they have at least two years' continuous service, which will often mean that those on probation do not generally enjoy this right.

iii Establishing a presence

Absent industry-specific regulation to the contrary, an overseas company can hire employees or engage an independent contractor in the UK without being officially registered to carry on business, whether through an agency or another third party. Nonetheless, such hiring triggers certain obligations including in respect of corporate tax if the hiring of an individual creates a permanent establishment (PE) and payroll obligations (regardless of whether a PE is created), such as a requirement to make withholdings for income tax and social security which must be deducted at source.

The mere hiring of an individual (whether as an employee or a contractor) will not of itself create a PE. Rather, the key issue will be whether such an individual has, and habitually exercises in the United Kingdom, authority to do business on the company's behalf and that individual is not of independent status acting in the ordinary course of its business. So for example, where an independent contractor genuinely does not have power to bind a company, this will be one factor (albeit not determinative) that militates against there being a PE. If there is a PE, then the relevant entity must file a corporate tax return annually and, will (broadly) be subject to corporation tax on its profits, to the extent that those profits are attributable to the company's United Kingdom PE.


During employment, an employer has broad powers to prevent an employee from working for anyone else, whether or not that other person is a competitor.

After the termination of employment, contractual provisions restraining the ability of employees to compete are enforceable provided that: they protect the legitimate interests of the business seeking protection (and in this context, ‘legitimate interests' has been interpreted to mean customer connections, confidential information and the stability of the workforce); and they are no wider than reasonably necessary to protect those interests, particularly having regard to the scope of the restraint, the sufficiency of lesser restraints and the duration of the restraint.

When determining whether a restraint is enforceable, it will be judged at the time it was entered into (and not the time at which it is being enforced). Moreover, even if a restraint is enforceable in principle, the decision as to whether to grant injunctive relief to enforce it is a matter for the discretion of the Court.

Significantly, there is no requirement for an employer to pay an employee in respect of a restrictive covenant. Indeed, even if an employer chooses to pay an employer in return for a period of restraint, this is not a factor that impacts on the enforceability of the restraint.

In addition, where an employer has dismissed an employee in repudiatory breach of their contract of employment (such as a dismissal without giving notice in breach of contract or a constructive dismissal), any restrictive covenants will fall away.

It is common for contracts of employment, especially for more senior employees, to contain restrictive covenants ranging from provisions preventing the solicitation of employees and customers through to provisions preventing an employee competing.

It is also common for contracts to contain ‘gardening leave' provisions, which give employers a right to require that an employee does not carry out any work or have any contact with employees or clients for the duration of their notice period. Gardening leave provisions are generally enforceable, albeit that because the employment relationship continues during any period of gardening leave, in most cases, an employer is required to continue to pay an employee during that period, save where an employee refuses a reasonable request to come to work (see Sunrise Brokers LLP v. Rodgers [2014] EWCA Civ 1373).


i Working time

The Working Time Regulations 1998 contain provisions limiting working hours and providing entitlements to rest breaks and holidays.

In broad terms the legislation provides as follows.

  • a individuals should not work more than 48 hours per week unless an individual has opted out of this limit or is an autonomous decision maker (such as a senior executive);
  • b the normal working hours of a night worker should not exceed eight hours a day on average;
  • c no night worker doing work involving special hazards or heavy physical or mental strain should work more than eight hours in any day;
  • d workers should be given ‘adequate' rest breaks where the pattern of work puts health and safety at risk, especially where work is monotonous;
  • e workers are entitled to the following rest periods:
    • 11 hours' uninterrupted rest a day;
    • 24 hours' uninterrupted rest a week (or 48 hours' uninterrupted rest a fortnight); and
    • a rest break of 20 minutes when working more than six hours a day; and
  • f workers are entitled to 5.6 weeks' paid holiday per year inclusive of public holidays (which equates to 28 day per year for a full-time worker).
ii Overtime

There are no specific requirements in the UK pertaining to overtime. As such, subject to an employer complying with minimum wage legislation (which requires employers to pay employees the national living wage of £7.20 an hour for those aged 25 and over; a minimum wage rate of £6.95 an hour for those aged over 21; a minimum wage rate of £5.55 an hour for those between 18 and 20; and a minimum wage rate of £4.00 an hour for those under 18), an employee's entitlement to overtime and the rate of overtime pay is a matter that is solely determined by their contract of employment. In addition, as noted above, the issue of whether overtime worked and commission paid should be included in holiday pay calculations is an area that has become increasingly complex following recent decisions.


It is a criminal offence to employ an individual who is subject to immigration control and who has not been granted leave to enter or remain in the UK, or does not have permission to work in the UK. Employers should (before allowing a job applicant to start work) require the person to produce documentary evidence indicating that he or she has the right to work in the UK, and keep copies of the documents. If an employer knowingly employs someone who does not have permission to work in the UK, it could be prosecuted. The offences, sanctions and penalties have been widened and increased under the Immigration Act 2016.

Employers have a duty to conduct follow-up checks on employees whose employment began on or after 29 February 2008 where, at the time of recruitment, the employees in question have been granted only limited leave to remain and work in the UK. A follow-up check will normally be required when an employee's permission to live and work in the UK expires.

Citizens of any country in the European Economic Area (EEA) (apart from Croatia) and of Switzerland are entitled to work in the UK without special permission.

Non-EEA nationals require a licence before they are legally allowed to work in the UK. Since 2011, the UK Border Agency has imposed limits on the number of individuals who may enter the UK under the most common tier (see below) used by employers. There are no absolute limits on the number of foreign nationals that a company can employ but by limiting the number of licences available for most roles earning under £155,300, the UK government does indirectly impose a limit. There is a merit-based five-tier points system for non-EEA nationals wishing to work in the UK. These categories are as follows:

  • a Tier 1: exceptionally talented and highly skilled individuals can gain permission to work in the UK without first having a specific job offer or sponsor under the Tier 1 (Exceptional Talent) category, provided that the individual has been endorsed as a leader or an emerging leader in their particular field. A Tier 1 (Exceptional Talent) visa lasts for five years and four months if the individual applies outside the UK and an application to extend the visa for a further five years can be made. There are further Tier 1 categories for investors and entrepreneurs.
  • b Tier 2: an employer can obtain permission to employ skilled workers who are non-EEA nationals provided that potential recruits score a sufficient number of points. From 2017, employers will have to pay an immigration skills charge of £1,000 per worker (£364 for small employers) who they sponsor for a Tier 2 visa. There are several different types of Tier 2 visas; of these it is noteworthy that:

• Tier 2 (general) visas can last up to five years and 14 days; an initial visa can be extended, but the total stay should not be more than six years; and

• Tier 2 (intra-company transfer) long-term workers may come to the UK for a maximum of nine years if the worker's annual remuneration is in excess of £155,300, or five years and one month if their remuneration is lower. Graduate trainees and short-term staff can stay for 12 months and skills transfer staff can stay for six months.

  • c Tier 3: low-skilled workers can get visas to fill skill shortages. This tier is currently suspended.
  • d Tier 4: this covers students.
  • e Tier 5: temporary or exchange workers can make an application to work in the UK on a short-term basis (generally for either 12 or 24 months) as part of a scheme such as the Youth Mobility Scheme (dependent on nationality and age) or international agreement or government authorised exchange. This is a points-based licence.

This is an ever-changing area of the law and we anticipate further significant changes over the next few years given the vote to leave the EU.


In the United Kingdom there is no requirement for employers to have particular policies in place, nor any prescribed form that such policies should take, with the exception that all employers with five or more employees are required to have a written health and safety policy. However, it is both normal and best practice for employers to have employee handbooks, which contain rules and policies on a broad range of issues, ranging from disciplinary and grievance procedures to equal opportunities.

A failure of an employer to have a policy on certain topics, such as outlawing discrimination and harassment or outlawing bribery and corruption, can create significant problems because it would be viewed as a failure to have complied with duties that an employer owes to prevent such unlawful conduct.

In general, most provisions contained in handbooks are expressed to be non-contractual unless explicitly stated otherwise, albeit that they govern how issues are dealt with in the workplace. It is best practice for employers to make handbooks readily available (whether through the intranet or in hard copy form) and to require employees to read handbooks and to provide evidence that they have done so and agreed to them (for example by sending an email confirming they have done so).

There is no requirement to file handbooks with any government authorities or to agree with any employee representative bodies.


There is no specific requirement for documents to be in any particular language under the laws of the United Kingdom.


In the United Kingdom there are no mandatory requirements for employers to have employee representative bodies in place. However, there are relatively complex procedures in places that require employers to recognise trade unions or to establish works councils (the latter has practically never been relied upon) if there is sufficient employee support for such representation.

Where employee representatives are in place, they have rights to be informed and consulted, including in relation to TUPE, where 20 or more employees are being made redundant and certain changes to pension arrangements.

Employee representatives also enjoy protection against being treated less favourably by reason of their status.


In the UK, the Data Protection Act 1998 (DPA), which implemented the EU Data Protection Directive of 1995 into local law, regulates the processing of personal data. From 28 May 2018, the GDPR, which contains different requirements, obligations and penalties, will automatically apply in the UK (for further information, see above).

Data protection law applies whenever a data controller processes personal data. A data controller is the person who determines the purposes for which, and the manner in which, any personal data is, or is likely to be, processed. The term ‘processing' has a very broad meaning under the DPA. It is intended to cover any conceivable operation of data, ranging from collecting, recording, and holding of data and the carrying out of any operation on that data through the data's subsequent disclosure and eventual destruction.

i Personal data

Personal data is data that relates to a living individual who can be identified from the data; or from the data and other information that is in the possession of, or is likely to come into the possession of, the data controller.

ii Restrictions on processing and use

The processing of personal data must comply with eight data protection principles as contained in the DPA. These can be summarised as follows:

  • a personal data must be processed fairly and lawfully and, in particular, shall not be processed unless: (1) at least one of the specified list of conditions is met (e.g., the data subject has given his consent or the processing is necessary for the performance of a contract to which the data subject is a party); and (2) in the case of sensitive personal data, at least one of an additional set of conditions is also met (e.g., the data subject has given his explicit consent or the processing is necessary for performing a legal obligation with respect to employment);
  • b personal data must be obtained only for one or more specified and lawful purposes, and shall not be further processed in any manner incompatible with those purposes;
  • c personal data must be adequate, relevant and not excessive in relation to the purpose(s) for which it is processed;
  • d personal data must be accurate, and where necessary, kept up to date;
  • e personal data processed for any purpose(s) shall not be kept for longer than is necessary for those purposes;
  • f personal data must be processed in accordance with the subject's rights under the DPA;
  • g appropriate technical and organisational measures must be taken against unauthorised or unlawful processing of personal data and against accidental loss or destruction of, or damage to, personal data; and
  • h personal data must not be transferred to a country outside of the EEA unless that country ensures an adequate level of protection for the rights and freedoms of data subjects in relation to the processing of personal data.

The DPA contains a number of exemptions from some or all of the data protection principles and other provisions, such as for processing concerning the detection of a crime or the assessment of taxation, where information must be made public by law, or where the disclosure is made in connection with legal proceedings, or pursuant to a court order.

iii Registration

Data controllers must generally notify UK Information Commissioner's Office (ICO) by registering with it. The ICO then publishes its details in the register of data controllers, which is available online for inspection by the public. There are limited exceptions to the need to register including when the personal data is held for payroll purposes, for tax collection or for salary surveys.

iv Cross-border data transfers

If personal data is transferred outside of the United Kingdom, there are restrictions. Transfers may be made to any country or territory:

  • a in respect of which the EU Commission has made a positive finding of adequacy;
  • b if adequate safeguards are put in place in the form of model contractual clauses as approved by the EU Commission, binding corporate rules or other contractual arrangements; or
  • c if the transfer is covered by the EU-US Privacy Shield.

Until October 2015, another option was for the US recipient of the data to sign up to the US Department of Commerce Safe Harbor Scheme. However, in the ECJ decision of Maximillian Schrems v. Data Protection Commissioner, Case C-362/14, 6 October 2015, the EU-US Safe Harbor framework was found to be invalid. The replacement for Safe Harbor, the EU-US Privacy Shield, came into force on 1 August 2016. The EU Commission has stated that the ‘new arrangement lives up to the requirements of [the ECJ in Schrems]'. It includes obligations on companies handling data, safeguards and transparency obligations on US government access, protection of individual rights. However, it does not address all of the concerns raised by other notable interested parties, including the Article 29 Working Party (a group that contains representatives from each of the EU Member States' data protection authorities), who, despite their concerns, have confirmed that data protection authorities in the EU will not challenge the adequacy of the Privacy Shield until at least after the first review in May 2017. Nevertheless, an Irish privacy advocacy group, Digital Rights Ireland, has already filed a legal challenge against the Privacy Shield, asserting that it provides inadequate protections.

In addition, in relation to the standard contractual clauses and binding corporate rules, there are pending ECJ decisions that may impact the validity of these methods of transfer. While this uncertainty remains, there is still no ‘risk-free' method for data transfers to the US.


v Sensitive data

Sensitive personal data is defined in the DPA as personal data consisting of information as to:

  • a the racial or ethnic origin of the data subject;
  • b his or her political opinions;
  • c his or her religious beliefs or beliefs of a similar nature;
  • d whether he or she is a member of a trade union;
  • e his or her physical or mental health or condition;
  • f his or her sexual life;
  • g the commission or alleged commission by him or her of any offence; or
  • h any proceedings for any offence committed or alleged to have been committed by him or her, the disposal of such proceedings or the sentence of any court in such proceedings.

Sensitive personal data will only be processed fairly and lawfully if at least one of a number of additional conditions is satisfied, which include the following:

  • a the individual has given his explicit consent to the processing (this need not necessarily be in writing);
  • b the processing is necessary for the performance of the data controller's obligations under employment law;
  • c the processing is necessary to protect the vital interests of the data subject (where consent cannot be given by the data subject or cannot reasonably be obtained by the data controller) or of another person (where consent by the data subject has been unreasonably withheld). This is interpreted as a life-or-death circumstance;
  • d the processing relates to information deliberately made public by the data subject;
  • e the processing is necessary for the purpose of legal proceedings, obtaining legal advice, establishing or defending legal rights, or for the administration of justice or the exercise of functions of a public nature;
  • f the processing is carried out by a health professional and is necessary for medical purposes; and
  • g the data relates to racial or ethnic origin and is processed in the context of equal opportunity monitoring.
vi Background checks

Background checks and credit checks are permitted in the United Kingdom provided the employer complies with the DPA. An employer may ask a successful candidate for details of their criminal record but the candidate will only be required to provide the information in two scenarios, namely, if the conviction is unspent (i.e., if the statutory time since the conviction has occurred has not yet expired) or if the job falls within the Disclosure Barring Service's list of regulated professions. This list includes medics, lawyers, accountants, vets, chemists and opticians; those employed to uphold the law (such as judges and officers of the court, the police, prison officers and traffic wardens); certain regulated occupations (in particular financial services); those who work with children, provide care services to vulnerable adults or who provide health services; and those whose work means they could pose a risk to national security.


i Dismissal

A termination will be lawful if it is in accordance with both an employee's contract of employment and statutory provisions protecting employees against dismissal.

As to contractual provisions, most contracts provide that an employer is entitled to dismiss an employee for any reason provided that an employer provides an employee with the notice of termination stipulated by the contract, or, where expressly permitted by the contract, the employer makes a payment in lieu of that period of notice.

As to statute, employees have a statutory right not to be ‘unfairly' dismissed. The essence of the right is: (1) a dismissal has to be reasonable (the test being it cannot be something no reasonable employer would not do); (2) it has to be for one of five potentially fair reasons (which are conduct, capability, redundancy, breach of a statutory restriction and the catch all ‘some other substantial reason'); and (3) it must be carried out using fair procedures.

Where a dismissal is unfair, an employee is entitled to compensation based on: a ‘compensatory award' (essentially damages for loss of earnings flowing from the unfair dismissal) that is capped at the greater of £78,962 or one year's salary; plus a ‘basic award' based on years of service, which is capped at £14,370. The cap on compensatory awards does not apply in certain circumstances, including where a dismissal is because of whistle-blowing, discrimination, raising health and safety issues or trade union membership or activities. Employees have no rights to be rehired (save in the case of redundancy - see below), and although reinstatement or re-engagement is a theoretical alternative remedy to damages, in reality, employees never seek this and nor is such remedy ordered by Employment Tribunals.

There are no obligations to notify any governmental or employee representative bodies about dismissals, save in the case of collective redundancies (see Section XII.ii, infra).

It is common for employees and employers to enter into settlement agreements in connection with a dismissal under which an employer agrees to make a payment to an employee in return for an employee waiving their rights against the employer. Such agreements must meet certain conditions in order for an employee's claim to be waived, including a requirement for an employee to have obtained independent legal advice as to the effect of the settlement agreement on their statutory employment rights.

ii Redundancies

Redundancy is a potentially fair reason for a termination. There is a redundancy situation where an employer has ceased (or intends to cease) to carry on the business for which the employee was employed, or if the requirements of the business for the employee to do work of a particular kind or in a particular place have ceased or diminished (or will cease or diminish).

For a redundancy to be fair an employer must identify an appropriate pool for selection, consult with the individuals in that pool, apply objective selection criteria to those in the pool and consider suitable alternative employment where appropriate.

When 20 or more redundancies are proposed within the same establishment within a period of 90 days additional obligations exist.

An employer is required to consult with employee representatives ‘in good time' before the first dismissal takes place (which must be a minimum of 30 days where there are fewer than 100 redundancies and 45 days where there are 100 or more redundancies). The obligation requires employers to provide specific information to employee representatives and consult with them in good faith with a view to reaching agreement.

In addition, employers must notify the Secretary of State about the redundancies. Notification must be received by the Secretary of State at least 45 days before the first dismissal, where the employer proposes to dismiss 100 or more employees within a 90-day period. Where fewer than 100 redundancies are proposed, the notification period is 30 days.


The Transfer of Undertakings (Protection of Employment) Regulations 2006 (commonly known as TUPE) implements an EU directive that is designed to protect the employment rights of employees working in a business whose assets are transferred (rather than one that is sold by way of share sale).

The main impact of the legislation is that the contracts of employees working in the transferred business automatically transfer from the transferor (usually the seller of a business) to the transferee (usually the acquirer of the business). It is intended to protect conduct such as the transferee offering new terms and conditions of employment to the transferring employees that are less favourable than those they enjoyed while working for the transferor.

TUPE applies where there is either:

  • a a ‘business transfer', which is the transfer of a business, undertaking or part of a business or undertaking where there is a transfer of an economic entity that retains its identity; or
  • b a change in service provider, for example a client engaging a contractor to do work on its behalf, reassigning such a contract or bringing the work in-house.

If TUPE applies, there are a number of key consequences:

  • a Anyone employed by the transferor in the ‘organised grouping of resources or employees' immediately before the transfer automatically becomes the transferee's employee on their existing terms of employment (including pay) and without a break in their period of employment. This includes employees who are dismissed before the transfer, but for a reason connected with it which is not an ‘economic, technical or organisational reason entailing changes in the workforce' (often called an ‘ETO reason').
  • b All rights, powers, duties and liabilities under the employment contracts pass to the transferee.
  • c Any changes to the employees' terms will be void if the sole or principal reason for the change is either the transfer itself or a reason connected with a transfer which is not an ETO reason.
  • d Any dismissal will be automatically unfair where the sole or principal reason for the dismissal is the transfer itself or a reason connected with the transfer that is not an ETO reason.
  • e Employees may refuse to transfer (known as objecting), but the effect is to terminate their employment without any right to compensation.
  • f Both parties must inform and, if they propose any ‘measures', consult representatives of their own affected employees in relation to the transfer. If they fail to do so, an employment tribunal can award up to 13 weeks' actual pay for each affected employee.
  • g The transferor must also provide the transferee with certain information about the transferring employees (employee liability information) not less than 28 days before the relevant transfer takes place.

Some of the above provisions are relaxed if the transferor is insolvent.


Brexit will continue to loom large on everyone's agenda in 2017. The initial timing of triggering Article 50 by March 2017 will depend on whether Parliament will vote on triggering Article 50 or not, and whether there are any delays because of it. We also hope that 2017 will provide further indications as to what a post-Brexit Britain will look like.

As to other developments over the coming year, we consider that one of the hottest topics will be the ‘gig' economy and what rights those in it should have. This is increasingly an issue as a record number of people in the UK are now self-employed (4.79 million, July-August 2016) and there are a significant number individuals employed on a temporary basis (1.66 million, July-August 2016). Although some of these individuals are highly remunerated, others are low-paid. There have also been a number of high-profile news stories and first instance cases and decisions about working practices and conditions concerning well-known companies such as Deliveroo and Asos. There are several ongoing inquiries and consultations into this. The Business, Energy and Industrial Strategy Committee (a Commons Select Committee, which is a cross-party committee that can examine issues in detail) has launched an inquiry into the changing nature of work and the status and rights of agency workers, the self-employed and those working in the ‘gig' economy. The Department for Business, Energy and Industrial Strategy has published a Green Paper (a preliminary report of government proposals and consultation intended to provoke discussion) to consider what changes might be appropriate to corporate governance, including looking at executive pay, corporate governance in large private businesses and strengthening employee and customer voice. The results of these inquiries require a response from the government and can sometimes lead to changes in government policy or proposals for new laws. In addition, the Taylor review has been announced, which will review modern employment practices across the country.

We expect the Equality Act 2010 (Gender Pay Gap Information) Regulations 2016 to come into force in April 2017. The Regulations require private sector employers with at least 250 employees and workers to publish their gender pay gap. The government has recently published the final draft regulations that include some modifications, following a consultation, to the draft legislation. Notably, the time for publishing the reports has moved so that reports will now need to be published by 4 April 2018 based on pay and bonus data for 2017. ‘Relevant employee' has also been broadened to include employees, workers and self-employed contractors, though some data for workers and self-employed contractors can be excluded in certain circumstances. Notably, there is a new reference in the Explanatory Notes to a failure to comply with the Regulations constituting an ‘unlawful act' such that the Equality and Human Rights Commission would be able to take enforcement action. We also expect draft legislation to come into force in relation to revised rules for the taxation of termination payments, such that the changes will come into place in April 2018. The key changes align the rules for income tax and employer NICs on compensatory payments so that employer NICs will be payable on the excess of any compensatory payment above £30,000 and tax and make subject to NICs any payment that the employee would have received if he or she had worked his or her notice period.


1 Daniel Ornstein is a partner, Peta-Anne Barrow is a special international labour and employment counsel and Kelly McMullon is an associate at Proskauer Rose LLP.

2 The Transfer of Undertakings (Protection of Employment) Regulations 2006. See Section XIII, infra.