The Employment Law Review: United Kingdom
Employees in the United Kingdom have two sets of rights: contractual and statutory. Contractual rights derive from the individual's employment contract with the employer and statutory rights arise under UK legislation. These rights are supplemented by certain common law principles that have developed through case law, including the duty of care owed by an employer to its employees and the implied term of trust and confidence.
There is a separate employment court system that is designed to hear employment disputes and that stands apart from the UK's civil courts. Employment Tribunals hear these disputes at first instance and appeals may be made in limited circumstances to Employment Appeal Tribunals. Employment Tribunals primarily hear employment disputes that relate to statutory claims, for which see below. They also have jurisdiction to hear small contractual claims. More substantial contractual disputes are resolved by the civil courts, including disputes about high-value bonus entitlements and restrictive covenants.
The main statutory employment rights are as follows.
i Unfair dismissal
This is the principal statutory claim and entitles employees with two or more years of service not to be 'unfairly dismissed'.
ii Unlawful discrimination
The Equality Act 2010 consolidated a number of earlier statutory provisions outlawing discrimination based on certain characteristics (known as protected characteristics). The main protected characteristics are:
- marital or civil partnership status;
- gender or gender identification;
- pregnancy and maternity;
- nationality, race or colour;
- religion or belief; and
- sexual orientation.
iii Family-friendly rights
These rights include:
- paid maternity and paternity leave, adoption and shared parental leave;
- parental leave (broadly an entitlement to up to 18 weeks' unpaid time off per child); and
- rights to request flexible working.
iv Atypical worker rights
Those employees who work part-time, on a fixed-term basis or as agency workers have rights that protect them from being treated less favourably than comparable full-time, permanent employees, specifically with respect to their rate of pay and the benefits to which they are entitled.
v Pay, hours and holiday
Workers (which would include employees) benefit from rights to minimum rates of pay. UK legislation also limits the number of hours that an employee can be required to work and provides for breaks between work and paid holiday entitlement.
Workers are protected against both detriment and dismissal in circumstances where they have made qualifying whistle-blower disclosures.
vii Collective rights
Collective legislation addresses the rights of trade unions to be recognised, the circumstances under which industrial action can be taken and the rights to establish domestic and European works councils.
Year in review
Employment status was a key feature of the employment landscape this year with the Supreme Court (SC) delivering its long-awaited decision in the case of Uber BV and others v. Aslam and others2 in February 2021 and March 2021, and its landmark decision in the case of Royal Mencap Society v. Tomlinson Blake.3 These cases are considered in further detail in Section III.
The new IR354 'off-payroll' rules for the private sector came into effect on 6 April 2021, following a year-long postponement because of the covid-19 pandemic. The rules mean that certain medium and large private sector businesses are now responsible for determining the employment status of individuals who work for them through a personal service company. Where a business determines that such an individual is in fact an employee, it will need to pay the individual through its payroll as if the individual were an employee. These rules have been in place in the public sector since 2017.
On 11 November 2021, it became mandatory5 for individuals working in registered care homes in England to be vaccinated against covid-19, unless there are clinical reasons exempting them. It is currently anticipated that covid-19 vaccinations will become mandatory for patient-facing staff in health settings in spring 2022.
i Uber BV and others v. Aslam and others
The SC held that Uber drivers are 'workers' under Section 230(3) of the Employment Rights Act 1996 and, therefore, entitled to the national minimum wage and paid holidays, among other things.
Uber's case was that the drivers were independent contractors who provided services to passengers. The SC had disagreed with this position and held that looking at how the relationship was characterised in the written contracts was not conclusive. The correct approach was to consider the true nature of the relationship by taking into account all the relevant circumstances (including the written contract, the way in which the relationship worked in practice and the parties' understanding of the relationship) and, crucially, assessing the degree of control exercised over the individual.
The SC found that Uber exercised a high degree of control over the drivers, including:
- Uber set the fares for the rides;
- the contract terms under which the drivers worked were imposed by Uber unilaterally; and
- a driver's choice as to whether to accept a ride was constrained by Uber, which imposed a penalty if too many rides were declined or cancelled.
On that basis, the SC found that the drivers were not self-employed, but workers.
ii Royal Mencap Society v. Tomlinson Blake
In a landmark decision, the SC held that care workers who are required to undertake overnight 'sleep-in' shifts as part of their jobs are not entitled to be paid the national minimum wage for the periods of the shifts when they are asleep.
The claimant was a care worker required to sleep in at the home of vulnerable adults and help the residents if needed. She claimed the entire sleep-in shift should be counted for national minimum wage purposes.
The SC held that the time a worker spends sleeping during a sleep-in shift does not count for national minimum wage purposes; only the time they spend 'awake for the purposes of working' during that shift would count. In particular, the SC highlighted the distinction in the National Minimum Wage Regulations 2015 between 'actual work', where the time is counted, and 'being available for work', where the time did not count.
Basics of entering an employment relationship
i Employment relationship
The employment relationship is primarily an individual relationship between employer and employee, and is governed by multiple elements, namely the contractual terms agreed between the employer and the employee, statutory rights and obligations (for example, protections against dismissal and discrimination), and common law principles (for example, the employer's implied duty of care towards an employee). As the United Kingdom is a common law jurisdiction, the interpretation of these sources is largely governed by case law.
Fixed-term contracts of employment are permissible in the United Kingdom. However, employees who have a fixed-term contract benefit from protection under the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002, which ensure that they are not treated less favourably than comparable permanent employees by reason of their fixed-term status, unless the employer is able to objectively justify the difference in treatment.
There is no requirement for an employee's contractual terms to be recorded in a written contract. However, under Section 1 of the Employment Rights Act 1996 (as amended), employers are required to provide employees and workers with a written statement of key terms of their employment, such as those regarding pay, hours of work, holiday entitlement and notice periods. The majority of these key terms must be provided in a single written statement (often known as an 's.1 statement'), whereas others can be contained in another reasonably accessible document.
There is no legal requirement for the parties to execute an employment contract within a particular time frame, or at all. However, best practice is for the parties to execute an employment contract at the outset of employment and for the employer to keep copies of all executed employment contracts.
To amend or change an employee's contractual terms, the consent of both parties is usually necessary. In some cases, for example in relation to changes that are to the employee's benefit or are otherwise minor, consent can be implied by the parties' conduct by continuing the employment relationship. However, explicit, written consent should be obtained for more significant changes, particularly in relation to any provisions that are intended to survive the termination of the employment relationship. The employer should also ensure that the employee is receiving some form of consideration in exchange for agreeing to the changes to ensure that they are enforceable.
ii Probationary periods
Probationary periods are permissible and frequently used in practice, particularly for junior and mid-level employees. Employers must provide employees with statutory minimum notice of termination of employment, including where the employee is subject to a probationary period. The statutory minimum notice to be given by the employer is one week's notice where the employee has between one month's and two years' service, increasing after two years' service to one week's notice per year of service, up to a maximum of 12 weeks where the employee has been employed for 12 years or more.
iii Establishing a presence
Foreign companies can employ employees or engage contractors without being officially registered in the United Kingdom. Likewise, foreign companies can also hire employees through an agency or other third party without being officially registered. Generally, UK employment law will apply where work is carried out in the United Kingdom, regardless of where the employer is located or the jurisdiction that is stated to govern the relationship. Likewise, tax obligations may be triggered, for example, payroll obligations and corporate tax obligations associated with having a permanent establishment in the United Kingdom.
Restrictive covenants are permissible in employment contracts. During an employee's employment, the employer has broad powers to prevent an employee working for another business, whether or not a competitor, and many employment contracts contain provisions in relation to this.
After the employment relationship has ended, an employer will have more limited protection against competition and must therefore rely on express clauses contained in the employment contract. Post-termination restrictive covenants that are included in UK contracts will typically prevent employees soliciting or dealing with customers or clients or poaching key employees, as well as preventing them from going to work for a competitor.
To rely on any restrictive covenants, an employer will need to demonstrate that the covenants are enforceable under UK law. As a starting point, the employer will need to show that it has a legitimate business interest that is capable of being protected and that the covenant goes no further than is reasonably necessary to protect that legitimate business interest. When determining the enforceability of restrictive covenants, the covenants will be judged by the surrounding circumstances at the time at which the covenants were entered into.
i Working time
The Working Time Regulations 1998 contain provisions regarding working hours, rest breaks and holiday entitlements. Broadly, these are as follows:
- Weekly working time: Employees' and workers' average working time must not exceed 48 hours per week over a 17-week reference period. Employees and workers can, however, opt out of the limit on weekly working hours.
- Weekly rest break: Employees and workers are entitled to 24 hours' uninterrupted rest per week or 48 hours' uninterrupted rest per fortnight.
- Daily rest break: Employees and workers are entitled to 11 hours' uninterrupted rest per day.
- In-work rest break: Employees and workers are entitled to an uninterrupted rest break of not less than 20 minutes where a day's working time exceeds six hours.
- Night work: Employees' and workers' normal working hours should not exceed eight hours a day on average.
- Annual holiday entitlement: Full-time employees and workers are entitled to 5.6 weeks' paid holiday per year.
There are no specific provisions under UK law regarding overtime, provided that the employer complies with national minimum wage, working time and other relevant legislation.
There are no special provisions in the United Kingdom regarding foreign workers. There is no requirement for employers to keep a register of foreign workers and no limit on the number of foreign workers that a company may have. Generally, foreign workers will be subject to UK employment law and taxes where work is carried out in the United Kingdom.
Employers must not employ anyone they know or have reasonable cause to believe is an illegal worker. Therefore, foreign workers will generally need to obtain a work permit, of which there are various categories. Employers must carry out right-to-work checks before any worker is allowed to carry out any work. Where an employer knowingly employs a worker who does not have the right to work in the United Kingdom or for the employer, it may face prosecution under the Immigration Act 2016.
There is no legal requirement for employers to have specific employee policies in place, nor any prescribed form that employee policies must take, save that all employers with five or more employees are required to have a written health and safety policy. Additionally, there is no requirement to agree or consult with staff regarding the contents of a handbook, nor does a handbook have to be filed or approved by government authorities. It is best practice, however, for employers to have employee policies in place to cover a range of issues.
As a matter of best practice, employers should ensure that any policies are non-contractual so that they can be varied or updated without employee consent.
UK law provides for maternity, adoption, paternity, shared parental, parental and parental bereavement leave.
|Leave and pay entitlements||Conditions to entitlement||Other entitlements or comments||Protection from dismissal, detriment and discrimination|
|Maternity leave||Up to 52 weeks' Statutory Maternity Leave (SML)|
Statutory Maternity Pay (SMP), paid by the employer at:
|SML:||Employees have a right to:||Pregnant employees are protected from dismissal, detriment or discrimination because of pregnancy, childbirth or taking maternity leave|
|Adoption leave||Up to 52 weeks' leave|
Statutory Adoption Pay (SAP), paid by the employer in the same way as SMP (see above)SAP can be enhanced by employers
|Leave: as for Maternity leave|
|An employee who is the adopter has a right to:||An employee who is an adopter is protected from detriment and dismissal relating to adoption leave|
|Paternity leave||Up to two weeks, to be taken within 56 days of birth or adoption|
Statutory Paternity Pay (SPP), payable by the employer for up to two weeks at the lower of the prescribed rate9 and earnings-related rateSPP can be enhanced by employers
|Leave:||The employee has a right to return to the same job in certain circumstances||Employees are protected from detrimental treatment and dismissal for reasons connected with their rights to paternity leave|
|Shared parental leave||Eligible parents can take or share:||Broadly, parents are eligible if:||An employee will generally have a right to return to the same job (or a suitable alternative job in certain circumstances)||Employees are protected from detrimental treatment and dismissal for taking or seeking to take shared parental leave|
|Parental leave||For the purpose of caring for a child, each parent is entitled to up to 18 weeks which:||An employee has a right to return to the same job (or a suitable alternative job in certain circumstances)|
An employer is usually entitled to postpone an employee's leave where it considers that the operation of its business would be unduly disrupted
|Employees are protected from detrimental treatment and dismissal for taking or seeking to take parental leave|
|Parental bereavement leave||Up to two weeks (separate or consecutive), starting on any day of the week and to be used within 56 weeks of the child's death/stillbirth|
Statutory Parental Bereavement Pay (SPBP), payable by the employer at the same rate as SPP (see above)
|Leave:||Employees are protected from detriment or dismissal for exercising their right to parental bereavement leave|
Under UK law, there is no legal obligation for employment documents to be in any particular language.
There is no requirement for employers to put in place employee representative bodies. There are complex procedures, however, that require employers to recognise an employee representative body (usually a trade union) where a specific and valid request is made by the workforce and there is sufficient employee support for such representation. Where an employee representative body has been recognised by an employer, the employee representatives must be informed and consulted with in relation to certain matters, such as in relation to a 'relevant transfer' under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) (see Section XIV, below).
i Requirements for registration
Data protection is governed by the Data Protection Act 2018, which implements the EU's General Data Protection Regulation (Regulation (EU) 2016/679) into UK law and continues in force, although in slightly amended form, post-Brexit. The Data Protection Act 2018 will apply where a data controller or data processor processes personal data. A data controller is a person or company that determines the purposes for which and the manner in which personal data is processed. A data processor is a person or company that processes personal data on behalf of the controller. 'Processing' has a broad meaning under the Data Protection Act 2018 and is intended to cover any operation of data, including collecting, recording and storing personal data. Personal data is data that relates to a living individual who can, directly or indirectly, be identified from the data or from the data and other information that is in the possession, or is likely to come into the possession, of the data controller.
The processing of personal data must comply with key data protection principles under the Data Protection Act 2018, namely:
- personal data must be processed fairly, lawfully and transparently;
- personal data must be collected only for specified, explicit and legitimate purposes and not further processed in a manner that is incompatible with those purposes (purpose limitation);
- personal data must be adequate, relevant and limited to what is necessary in relation to the purposes for which it is processed (data minimisation);
- personal data must be accurate and, where necessary, kept up to date;
- personal data must be kept for no longer than is necessary for the purposes for which the data is processed (storage limitation);
- personal data must be processed in a manner that ensures appropriate security, which includes introducing appropriate technological and organisational security measures in an organisation, including limiting access on a need-to-know basis (integrity and confidentiality); and
- the data controller must be able to demonstrate compliance with the data protection principles (accountability).
To comply with the above principles of transparency, organisations must provide data subjects with detailed information about their processing of the data subjects' personal data. The transparency obligation also applies to the employment context and this information is typically set out in a staff privacy notice. The content requirements of privacy notices are largely prescribed by the Data Protection Act 2018.
One of the key elements of the Data Protection Act 2018 is that processing of personal data will only be lawful if there is a lawful basis for such processing. The Act sets out a number of prescribed lawful bases for processing. The most commonly used in the employment context are the following:
- processing is necessary for the performance of a contract;
- processing is necessary to comply with a legal obligation (not including contractual obligations);
- processing is necessary for an organisation's legitimate interests or the legitimate interests of a third party (and there are no reasons relating to an individual's personal data that override those legitimate interests);
- processing is necessary to protect the vital interest of the data subject or another person; or
- the employee's consent.
Notably, relying on consent in the employment context is generally not advisable owing to the inherent imbalance of power between employers and employees, which prevents consent being 'freely given' (which forms part of the definition of a valid consent under the Data Protection Act 2018) by an employee.
The Information Commissioner's Office (ICO) is an independent public body responsible for upholding information rights in the public interest. Data controllers must generally notify and register with the ICO. The ICO then publishes its details in the register of data controllers, which is available online to the public.
ii Cross-border data transfers
Irrespective of the appropriate safeguard that is being used for international data transfers, data importers will have certain obligations with regard to onward transfers (e.g., to sub-processors), although the exact obligations will depend on the appropriate safeguard that is being used.
iii Sensitive data
Additional conditions apply in relation to the processing of personal data that are classed as a 'special category of personal data' (sensitive personal data), which are:
- race or ethnic origin;
- political opinions;
- religious or philosophical beliefs;
- trade union membership;
- genetic and biometric data;
- health; and
- sex life or sexual orientation.
Processing of sensitive personal data requires the existence of an additional lawful basis for processing. The most common basis that is relied on is 'explicit' consent (note that the rules on 'explicit' consent go beyond what is required for 'normal' consent), when it is necessary either to protect the vital interests of the data subject or for carrying out rights and obligations under employment law.
iv Background checks
Background checks are permitted provided that they are conducted in compliance with the Data Protection Act 2018 and other applicable laws. Before seeking any personal data, employers should conduct a data privacy impact assessment to ensure that the information is legitimately required and that there is compliance with the data protection principles.
Official criminal records checks are administered by the Disclosure and Barring Service and, in some cases, an employer may request that an employee makes a voluntary disclosure. There are specific obligations under the Data Protection Act 2018 in relation to the processing of information relating to criminal checks.
A dismissal will be lawful only where it is carried out in accordance with the employee's contractual entitlements and the relevant statutory provisions that protect employees against dismissal.
Under the statutory provisions, for a dismissal of an employee with more than two years' service to be fair it must be (1) for one of five potentially fair reasons and (2) have been carried out following a fair procedure. The five potentially fair reasons for dismissal are conduct, capability, redundancy, breach of a statutory restriction or illegality, and the catch-all 'some other substantial reason'. What constitutes a fair procedure will depend on the circumstances. For example, if a dismissal is carried out by reason of misconduct, an investigation and disciplinary process would need to be carried out with regard to the alleged misconduct before any dismissal can take place. Generally, an appeal against dismissal should also be offered to the dismissed employee.
If an Employment Tribunal determines that an employee has been dismissed unfairly, the employee will be awarded compensation comprised of (1) a basic award calculated by reference to a week's pay and the length of service, currently subject to a cap of £16,320, and (2) a compensatory award (based on the employee's past and future losses) of the lower of one year's salary or a current cap of £89,493.
Additionally, other than when an employee has committed an act of gross misconduct or similar, employees must be dismissed with the appropriate notice of termination. The statutory minimum notice to be given by the employer is one week's notice where the employee has between one month's and two years' service, increasing after two years' service to one week's notice per year of service, up to a maximum of 12 weeks for an employee who has been employed for 12 years or more. An employee's contract may also, and often does, provide for notice of termination in excess of statutory minimum notice.
Employers and employees can enter into a settlement agreement in relation to a dismissal pursuant to which the employer agrees to make an additional payment to the employee in return for the employee waiving his or her rights and potential claims against the employer. For such an agreement to be effective against statutory claims, certain conditions must be met, including a requirement for the employee to have received independent legal advice as to the terms and effect of the settlement agreement.
A redundancy situation arises when an employer has ceased (or intends to cease) to carry on the business or part of the business in which the employee is employed or when the requirement for employees to do work of a particular kind or in a particular place has ceased or diminished (or is expected to cease or diminish).
As noted above, redundancy is a potentially fair reason for dismissal. However, a redundancy dismissal will be unfair if there is no genuine redundancy situation or if the employer has not followed a fair process. A fair process involves prior warning and consultation with the affected employee in respect of the potential redundancy situation and before any decision is made by the employer. During the redundancy process, employers should also take care not to discriminate on the basis of any protected characteristics under the Equality Act 2010.
There is no obligation to consult with a works council or trade union regarding redundancies, save where the employer has already made a commitment to do so, or where collective consultation obligations apply. Collective consultation obligations arise where an employer proposes to make 20 or more redundancy dismissals at one establishment within a period of 90 days or less.
When an employee is dismissed for redundancy and has more than two years' service with the employer, the employee will be entitled to a statutory redundancy payment calculated in the same way as the basic award in an unfair dismissal claim (see Section XIII.i, above).
Transfer of business
TUPE implements Council Directive 2001/23/EC (the Acquired Rights Directive)12 into UK law. TUPE applies in two situations: (1) the transfer of a business (or part of a business), and (2) the transfer of services (e.g., when a service is brought in-house, transferred to a new service provider or outsourced). Where TUPE applies, any employee who is employed in the relevant business or services immediately before the transfer will transfer to the new business or service provider automatically and by operation of law. The incoming employer inherits virtually all rights, obligations and liabilities (including pre-transfer liabilities) in relation to the transferring employees. The circumstances in which either the outgoing employer or incoming employer can dismiss employees or make changes to their terms and conditions for a reason connected with a TUPE transfer are very limited and doing so is likely to give rise to claims.
Additionally, where TUPE applies, there are various informing and consulting obligations that apply to both the outgoing employer and incoming employer before the transfer. There is also an obligation on the outgoing employer to provide the incoming employer with employee liability information (a basic level of information about the transferring employees) no less than 28 days before the transfer date.
Women and family-friendly rights are expected to be high on the legislative agenda in the forthcoming months. The UK government has confirmed its intention to introduce:
- an obligation on employers to prevent sexual harassment in the workplace;
- a right for all employees to make a request to work flexibly from 'day one' of employment (thereby removing the current 26-week minimum service requirement);
- a right for employees with long-term caring responsibilities to take up to five days' unpaid leave per year;
- a right to neonatal leave and pay for parents of premature babies; and
- an extension of the current redundancy protection period for employees on maternity leave for six months after they return to work.
The government's consultation on reforming post-termination non-compete restrictions in employment concluded in February 2021 but it has yet to publish its response. Measures it is considering include banning such restrictions outright, placing statutory limits on their length and requiring the employer to compensate its former employee during the period of the restriction.
1 Alex Denny is a partner, Emma Vennesson is a counsel and Charlotte Marshall is an associate at Faegre Drinker Biddle & Reath LLP
2  UKSC 5.
3  UKSC 8.
4 IR35 is the anti-avoidance tax legislation that determines the tax treatment of an individual's pay where the individual provides their services through an intermediary.
5 Pursuant to the Health and Social Care Act 2008 (Regulated Activities) (Amendment) (Coronavirus) Regulation 2021.
6 £151.97/week until 10 April 2022 and £156.66/week from 11 April 2022 to 10 April 2023.
7 Have average earnings of at least the National Insurance lower earnings limit (£120/week until 5 April 2022 inclusive and £123/week from 6 April 2022 to 5 April 2023 inclusive) during the eight-week period ending with the 15th week before the expected week of childbirth.
8 Have average earnings of at least the National Insurance lower earnings limit (£120/week until 5 April 2022 inclusive and £123/week from 6 April 2022 to 5 April 2023 inclusive) during the eight-week period ending with the week when notified of having been matched with the child.
9 £151.97/week until 10 April 2022 and £156.66/week from 11 April 2022 to 10 April 2023.
10 Have average earnings of at least the National Insurance lower earnings limit (£120/week until 5 April 2022 inclusive and £123/week from 6 April 2022 to 5 April 2023 inclusive) during the eight-week period ending with the week before the expected week of childbirth or before the week when notified of having been matched with the child.
11 Namely, have average earnings of at least the National Insurance lower earnings limit (£120/week until 5 April 2022 inclusive and £123/week from 6 April 2022 to 5 April 2023 inclusive) during the eight-week period ending with the week before the child died.
12 Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses.