The Employment Law Review: United Kingdom - England
Employment law in the United Kingdom (comprising the three separate jurisdictions of England and Wales, Scotland and Northern Ireland) is based on contract law, supplemented by statutory employment rights or protections, for example in relation to working time, discrimination and termination of employment. Statutory rights can generally be enhanced by the employer.
The principal legislation in relation to employment is:
- the Employment Rights Act 1996;
- the Equality Act 2010;
- the Trade Union and Labour Relations (Consolidation) Act 1992;
- the Working Time Regulations 1998; and
- the National Minimum Wage Act 1998.
For employment claims, the primary recourse for employees and workers is to an employment tribunal, with appeals to (in ascending order) the Employment Appeals Tribunal (EAT), the Court of Appeal (CA) and the Supreme Court (SC). Relatively few employment cases make it to the Supreme Court. Under the doctrine of precedent, lower courts are bound by the decisions of the higher courts within the same jurisdiction whereas judgments from a court or tribunal of the same level or from a different jurisdiction within the United Kingdom are persuasive but not binding.
Employment claims can generally only be brought in an employment tribunal, with some specific exceptions, namely:
- breach of contract claims, other than arising from the termination of employment:
- restrictive covenant claims and injunctions; and
- claims relating to trade union recognition and other trade union rights, which should be brought before the Central Arbitration Committee, with appeal, as necessary, to the EAT, the CA and the SC.
The following regulatory authorities have competence for enforcement:
- Her Majesty's Revenue and Customs (HMRC) for national minimum wage and issues relating to employment taxes and National Insurance contributions;
- the Health and Safety Executive for health and safety matters, including working time; and
- the Equality and Human Rights Commission for discrimination and other matters relating to equality.
Year in review
Despite relatively little new significant legislation this year (2019), there have been two broad trends in employment law in relation to, first, employment status issues, and second, equal treatment and harassment.
Employment status is under scrutiny from the perspective of both employment rights and employment taxes.
The government issued the Good Work Plan (December 2018) in response to the Taylor Review of Modern Working Practices (July 2017).2 A number of proposals to provide further protections for atypical workers are currently under consultation.
Employment status has been particularly prevalent in relation to the 'gig economy', with individuals contracted as 'self-employed' arguing that they are, in fact, 'workers'.3 Worker status entitles individuals to the national living wage or minimum wage, paid holiday entitlement, potential pension contributions and sick pay. In most cases, the individuals' argument that they are workers has been successful, but further clarification is expected from the SC in the Uber case, which is due to be heard in summer 2020.
In addition, the rules in relation to the taxation of 'off payroll' working are also likely to change under the new IR35 legislation,4 which is expected to come into force in April 2020, subject to the outcome of the further review announced by the new Conservative government in December 2019.
Non-disclosure agreements (NDAs) and sexual harassment in the workplace are also under scrutiny following the recent exposé on discriminatory practices and harassment as highlighted in the #MeToo campaign.
The Solicitors Regulatory Authority (SRA) has issued a warning notice on the use of NDAs.5 Lawyers face the risk of disciplinary proceedings before the Solicitors Disciplinary Tribunal if they are involved in imposing unethical NDAs.6 Although this is not an employment protection, as such, the net effect is broadly the same.
On 21 July 2019, the government announced further proposals7 to impose limitations on NDAs by way of specific legislation.
The government also issued a consultation on sexual harassment (which closed for responses on 2 October 2019),8 with a view to strengthening and clarifying the law.
i Restrictive covenants
TILLMAN V. EGON ZEHNDER LIMITED9
This is the first case to address the enforceability of restrictive covenants to come before the SC in more than 100 years. The SC held that a restrictive covenant that sought to prevent a senior employee from engaging, directly or indirectly, or being concerned or interested in any competing business for six months after the termination of her employment was enforceable provided that the offending words 'interested in' were severed from the remaining parts of the covenant. The SC held that this language was too broad to be enforceable as it would capture minor shareholding interests.
The SC upheld the validity of the 'blue pencil' test on the basis of the threefold test set out by the CA in Beckett Investment Management Group Ltd v. Hall:10 first, the unenforceable provision of the covenant must be capable of being removed so that the remaining wording can stand without further modification; second, the remaining terms must be supported by adequate consideration; and third, the removal of the wording should not substantially alter the overall effect of the restrictions.
The overall effect of this judgment is that of a widening in scope and application of the 'blue pencil' test. It is now relatively straightforward to draft covenants in such a way that the 'blue pencil' test can be applied without any major change to the effect of the overall restriction. However, the SC did warn of potential costs repercussions against employers when an employee needs to litigate over unreasonable restrictions included by the employer in reliance on the wide scope of the 'blue pencil' test.
ii Employee monitoring
LOPEZ RIBALDA AND OTHERS V. SPAIN 11
The Grand Chamber of the European Court of Human Rights has held (by a majority) that there was no breach of privacy under Article 8(1) of the European Convention on Human Rights when an employer used covert video recordings to provide a reason for dismissing employees.
Video evidence showed the employees on a shop floor stealing from their employer. The employees were not told in advance that their actions were being monitored, despite notice to the employee being a requirement of Spanish law. The court held that the failure to comply with this requirement was only one factor to take into account – other relevant factors were that the employees should have had a limited expectation of privacy on a shop floor, that the monitoring was for a limited duration; that only limited people were permitted to view the footage; and that if the employees had been told about the monitoring they would have modified their behaviour such that the employer would not be able to identify the thieves. The use of covert surveillance in this case was proportionate, and therefore the dismissals of the employees were fair.
This is a pragmatic approach to the use of covert surveillance, provided that the overall approach is proportionate and justified.
In the United Kingdom, guidance provided by the Information Commissioner's Office (ICO) confirms that only in exceptional cases will covert monitoring be justified.12 Employers will still need to conduct an impact assessment before undertaking the monitoring, not only to determine whether it is necessary but also to conduct the monitoring in a way that is the least intrusive.
Basics of entering into an employment relationship
i Employment relationship
The basis of the employment or worker relationship in the United Kingdom is that of a contract between the parties. There is no requirement for this contract to be recorded in writing, but under Section 1 of the Employment Rights Act 1996,13 employers are required to give to employees a statement of the principal terms of their employment within two months of the start of employment.14 In practice, this requirement is often satisfied by requiring the employee to sign a written employment contract that contains the required particulars.
The principal terms to be provided in writing in this Section 1 statement include, for example, the names of each party, pay, holiday entitlement, hours and location of work, entitlement to notice of termination and other matters.
Fixed-term employment contracts are permissible, but after the fourth year of employment on a successive fixed-term contract, employment will be deemed to be permanent or indefinite unless further use of a fixed-term arrangement can be justified.15 Fixed-term employees are entitled to equal treatment with comparable permanent employees, unless the difference in treatment is objectively justified. Employers should also be aware that the expiry and non-renewal of a fixed-term employment will be a dismissal at law and the employee may be able to claim that this dismissal is unfair.
As the terms of the employment or engagement are contractual in nature, usually the consent of both parties is required to effect any changes. If the terms are drafted so as to provide flexibility, the change in working conditions may not require further consent.
Employers should exercise caution when proposing changes to the terms and conditions of a number of employees, particularly when one option is to terminate the current contracts and re-engage the employees on the proposed new terms: this may constitute a collective redundancy (see Section XIII.ii).
ii Probationary periods
Probationary periods are permissible and often used in practice. The use of probationary periods is subject to:
- compliance with the statutory minimum period of notice of termination (see Section XIII.i); and
- the right of the employee to bring a claim for unfair dismissal (usually after two years' service) if the employment is terminated (see Section XIII.i).
iii Establishing a presence
There is no restriction on foreign employers operating in the United Kingdom insofar as employment law is concerned. However, there may be an obligation to operate Pay as You Earn and deduct income tax and National Insurance contributions (NICs) from employees' pay at source. In addition, corporate tax liabilities may arise if an employer establishes a permanent establishment in the United Kingdom, for example, when the employer, worker or contractor in the United Kingdom is able to enter into contracts that bind the employing entity.
Employees can be hired through agencies or other third parties and there are no restrictions in the United Kingdom in terms of labour loaning or labour leasing. However, they may be agency workers and as such would be entitled to rights under the Agency Worker Regulations 2010.
UK employment law generally applies when the work is performed in the United Kingdom. Thus, employees and workers in the United Kingdom will be entitled to the benefit of the statutory protections irrespective of the nationality of their employer or the governing law of the contract.
During employment, employees owe an implied duty of fidelity to their employer, which includes an obligation not to compete. For directors or senior employees who are classed as 'fiduciaries' by law, additional obligations will apply, such as to report any wrongdoing and to account for any secret profit made.
After employment, the ability of employers to prevent competition is more restricted as the duty of fidelity falls away, although certain obligations of confidentiality in relation to keeping trade secrets will continue.
Restrictions that go beyond confidentiality and attempt to limit the activities of the employee post-termination will be void and unenforceable unless specific conditions are met. A post-termination restriction will be enforceable only where it:
- protects the legitimate business interests of the employer (for example, trade connections, goodwill or employees);
- is the minimum required to protect that legitimate business interest; and
- is reasonable in scope.
This last condition requires a balancing of the interests of the employer and former employee and the factual matrix will be critical in determining whether the scope of the restriction is in fact reasonable in practice. Issues to consider will include the duration of the restriction, the seniority of the former employee, the nature of his or her role, and the nature of the industry (including whether it will be possible for the employee to obtain a new job if the restrictions were to be enforceable).
In 2019, the Supreme Court upheld the validity of the 'blue pencil' test in Tillman v. Egon Zehnder Ltd (see Section III).
i Working time
The Working Time Regulations 1998 provide for limits and obligations relating to working time for employees and workers working in the United Kingdom.
|Weekly working time||Limited to 48 hours on average per week (including overtime). Certain exceptions apply, for example:|
|Weekly rest break||24 hours' uninterrupted rest in each week or 48 hours' uninterrupted rest in each fortnight (exemptions may apply, in which case compensatory rest must be provided)|
|Daily rest break||11 hours' uninterrupted rest (exemptions may apply, in which case compensatory rest must be provided)|
|In-work rest break||20-minute rest break when the working day exceeds six hours.|
|Night work||Limited to eight hours per day on average. Free health assessment for night workers when starting night work and thereafter at regular intervals. Transfer to day work where possible if night work is causing health issues.|
|Paid holiday entitlement||5.6 weeks (full-time equivalent) (28 days). This can include the usual bank or public holidays (note that England and Wales, Scotland and Northern Ireland have different bank and public holidays).|
|Records||Employer to keep adequate records to demonstrate compliance with working time obligations, including daily working time.|
Subject to compliance with the applicable national living wage or national minimum wage, the law does not require employees to be paid for overtime. However, when employees are paid hourly, it would be unusual for overtime not to be paid. When overtime is to be paid, the rate of pay is agreed between the employer and the employee.
All foreign workers who do not have the right to work in the United Kingdom must have the necessary visa or work permit. Employers are under an obligation to check that workers have the right to work in the United Kingdom and should keep a record of these checks. Other than in relation to the immigration requirements, there is no requirement to keep a specific record of foreign workers engaged in the United Kingdom, nor any limit on the number of foreign workers that may be engaged.
Whether a foreign worker is subject to UK employment taxes and NICs will depend upon a number of factors, including the duration of the assignment to or employment in the United Kingdom and whether there is a tax treaty between the host country and the United Kingdom. This is an area of considerable future uncertainty, given the potential impact of Brexit.
In general terms, foreign employees working in the United Kingdom will be entitled to the benefit of UK employment law protections, as these apply territorially. In some cases, UK employment law may also apply to employees working outside the UK when the employment is otherwise closely connected with the United Kingdom.
Section 3 of the Employment Rights Act 1996 requires the employer to set out in writing (as part of the written statement of terms and conditions) the following information:
- to whom the employee can appeal if dissatisfied with a disciplinary decision;
- with whom the employee can raise a grievance in relation to his or her employment; and
- details of where the disciplinary rules applicable to the employment can be found (if not attached, these rules should be reasonably accessible by the employee – provided that the employees have access to the employer's intranet site, this would be perfectly acceptable).
The disciplinary rules should contain the following information:
- any procedure applicable to the taking of disciplinary action relating to the employee or any decision to dismiss the employee; and
- any explanation of any further steps to be taken following the submission of a disciplinary appeal or grievance.
The disciplinary and grievance rules do not have to be agreed with the employees or any employee representatives (unless the employer has agreed otherwise with any trade union, works council or other employee representative body). Disciplinary and grievance procedures would normally be expressly outside the contract of employment, so as to give the employer more flexibility in changing these procedures or adapting them to particular circumstances. There is no requirement to file the procedures with any authority.
Although there are no mandatory provisions for the procedures, employers should have regard to the ACAS16 Code of Practice on disciplinary and grievance procedures,17 which sets out guidelines for fair practice. Any failure to follow these guidelines could lead to employee claims, for example, for breach of contract or unfair dismissal.
Although there is no express requirement, these procedures should be written in English so that they are readily understandable by employees. Employers may want to consider whether the procedures should be translated for employees who do not speak English.
The law in the United Kingdom provides for the following types of leave: maternity, paternity, adoption, shared parental and parental. Pregnancy and maternity is a specific protected characteristic under the Equality Act 2010 and employees who are discriminated against on the grounds of pregnancy or maternity will have a discrimination claim against the employer.
|Length of leave / qualifying conditions||Entitlement to pay during leave / qualifying conditions||Responsibility for pay during leave||Additional comments|
|Maternity||Up to 52 weeks.|
No qualifying conditions.
|Six weeks' pay at 90% of pay (averaged over specific period if variable).|
33 weeks at lower level Statutory Maternity Pay, currently (2019) £148.68.
Subject to qualifying conditions in terms of level of earnings and length of service (26 weeks' service as at the 15th week before the expected week of childbirth (the 'relevant week')).
Can be enhanced by employer.
|Employer, but there may be a right to recoup some of the cost by way of deductions from NIC liability.||Right to return to the same job after up to 26 weeks' leave, or a suitable alternative job if the return is between 26 and 52 weeks' leave.|
|Paternity||Two weeks to be taken on or within 56 days of the birth or adoption of the child. Qualifying service of 26 weeks as at relevant week.||£148.68|
Can be enhanced by employer.
|Employer||Applies to the mother's partner irrespective of gender.|
|Adoption||Up to 52 weeks.|
No qualifying conditions.
|Six weeks' pay at 90% of pay (averaged over specific period if variable).|
33 weeks at lower level Statutory Adoption Pay, currently (2019) £148.68.
Subject to qualifying conditions in terms of level of earnings and length of service (26 weeks' service as at the date of notification of matching with a child (the 'relevant week')).
Can be enhanced by employer.
|Employer, but there may be a right to recoup some of the cost by way of deductions from NIC liability.||Right to return to the same job after up to 26 weeks' leave (ordinary adoption leave) or a reasonably suitable job if the return is between 26 and 52 weeks' leave.|
|Shared Parental||Up to 50 weeks of the mother's maternity leave can be shared with the mother's partner.||Up to 39 weeks at Statutory Shared Parental leave pay, currently (2019) £148.68.|
Can be enhanced by the employer.
|Employer||The first two weeks of maternity leave is compulsory and reserved for the mother.|
The mother needs to have curtailed her maternity leave for shared parental leave to apply.
|Parental||Up to 13 weeks' leave in total per child under the age of 18. Unless otherwise agreed, limited to four weeks per year.|
Qualifying service of one year as at the date of leave.
|Unpaid||n/a||Employee needs to request leave: employer can in some circumstances postpone.|
There is no legal requirement to translate employment documents into English or the employee's local language but this is strongly recommended.
There is no obligation to recognise a trade union or set up an employee representative body unless a specific and valid request has been made by the workforce.
The Information and Consultation of Employees Regulations 2004 provide that, following a valid request for a works council, if agreement is not reached as to the mandate of the works council, standard provisions will apply. These set out parameters or the obligations to inform and consult and the election process for the representatives.
The law requires information and consultation with employee representatives in certain circumstances, including in a collective redundancy situation or on a transfer of an undertaking. Where no trade union is recognised and there is no standing employee representative body, ad hoc employee representatives must be elected. There are specific conditions for this type of election set out in Section 188A of the Trade Union and Labour Relations (Consolidation) Act 1992 in relation to collective redundancies, and in the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) in relation to a business transfer.
All employee representatives are entitled not to be subjected to a detriment on the grounds of their status. Paid time off is available for:
- employee representatives for the purposes of a collective redundancy or a transfer under TUPE, to undergo training for the role and to perform the functions of that role;18
- employee representatives under the 2004 Regulations, to perform the functions of that role;19 and
- a trade union official of a recognised trade union, to carry out collective bargaining or to represent employees in relation to a collective redundancy or a transfer under TUPE.20
Employee representation (protected concerted activity)
i Requirements for registration
The Data Protection Act 2018 (the DPA 2018) implements the EU General Data Protection Regulation (Regulation (EU) 2016/679 (GDPR)) in the United Kingdom. Although there is no requirement under the DPA 2018 to notify the ICO of the processing of personal data, annual notifications should continue to be renewed, as failure to do so remains a criminal offence. An employer may also need to pay data controller fees.
Employers with at least 250 employees must keep records about data processing activities under Article 30 of the GDPR. These records must include:
- name and contact details of the employer and, if applicable, its data protection officer;
- the purposes of the processing;
- a description of the categories of both individuals (data subjects) and personal data;
- the categories of recipients to whom the personal data has been or will be disclosed (including recipients in non-EU countries);
- details of transfers to third countries or international organisations, including documentation relating to the transfer mechanism safeguards in place;
- where possible, the envisaged time limits for erasure of different categories of data; and
- where possible, a general description of technical and organisational security measures.
It is recommended that smaller employers also keep records so as to establish compliance as required by the general 'accountability' principle (see below).
Processing personal data must be done in accordance with the data protection principles. The first of these is that data should be processed in a lawful, fair and transparent manner – for this, the processing must satisfy one of the specific conditions in Article 6(1). The most relevant conditions for employment purposes are:
- data subject (employee) consent;
- the processing is necessary for the performance of a contract to which the data subject is a party; or
- the processing is necessary for the purposes of the legitimate interests of the data controller.
In an employment context, typically one of the latter two conditions will apply and so employee consent will not be required. If consent is required, it needs to be specific, informed and freely given.
Additional data protection principles are:
- purpose limitation: 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;
- data minimisation: personal data must be adequate, relevant and limited to what is necessary in relation to the purposes for which it is processed;
- accuracy: personal data must be accurate and, where necessary, kept up to date;
- storage limitation: personal data must be kept for no longer than is necessary for the purposes for which the data is processed;
- integrity and confidentiality: personal data must be processed in a manner that ensures appropriate security; and
- accountability: the data controller must be able to demonstrate compliance with the data protection principles.
ii Cross-border data transfers
Transfers of personal data to countries outside the European Economic Area is only permissible if the data controller or data processor complies with the conditions set out in the GDPR, relating to the adequacy of protection of personal data. These conditions will typically take the form of appropriate safeguards, for example, binding corporate rules, standard data protection clauses, or certification under an approved certification mechanism as provided for in the GDPR. The third country should also have enforceable data subject rights with effective legal remedies.
iii Sensitive data
Additional conditions apply in relation to the processing of personal data that is classed as a 'special category of personal data' (sensitive personal data). The special categories of data 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.
Additional conditions include explicit consent, when it is necessary to protect the vital interests of the data subject, or when it is necessary for carrying out rights and obligations under employment law.
iv Background checks
Background checks are permissible provided that they are conducted in compliance with the GDPR. Before seeking any personal information, the employer 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 GDPR in relation to the processing of information relating to criminal checks.
In relation to dismissal, an employee will have rights pursuant to his or her contract of employment and may also have statutory protections.
Rights under the contract will include prior notice of termination. The statutory minimum notice is one week for service of more than one month and less than two years, and thereafter one week per complete year of service up to a maximum of 12 weeks.
Employment contracts may provide for additional notice or payments on termination, and may also provide for the immediate termination (with or without cause), when a payment in lieu of notice is made.
Employees (in most cases, provided they have more than two years' service) are entitled not to be unfairly dismissed. The service requirement will not apply in specific cases, such as dismissal for whistle-blowing.
A dismissal will be unfair if there is no fair reason, or if the process followed is unfair. A dismissal without cause is not prohibited by law but is likely to be an unfair dismissal.
The dismissal of an employee for certain reasons (e.g., pregnancy, maternity or whistle-blowing) will be automatically unfair.
In addition to the basic award (which is calculated in the same way as a statutory redundancy payment), compensation for unfair dismissal is based on financial losses flowing from the dismissal and is generally capped at 12 months' salary or £86,444 (in financial year 2019–2020), whichever is the lower.
There is no requirement to notify any government authority of a dismissal other than in a collective redundancy situation, or in relation to payroll obligations.
There is no legal requirement to notify a trade union or works council about a dismissal unless the employer has agreed with the trade union or works council that it will do so. No social plan is required, and a dismissed employee will not have any rehire rights unless these have been agreed with the employer.
It is possible for the employee to waive any employment claims arising on termination, including unfair dismissal, by way of a settlement agreement, but this must comply with the statutory formalities to be effective and enforceable.
A redundancy situation arises when there is a reduction in the requirement for employees or a relocation resulting in dismissals. A redundancy dismissal can be unfair if it is either not a genuine redundancy or, more commonly, the process followed is unfair. A fair process would involve prior warning and consultation of the potential redundancy situation before the decision is confirmed, and selection on fair and objective grounds that have been consistently applied across the relevant employee population (the 'pool'). There is no obligation to consult with a works council or trade union in relation to a redundancy dismissal, save when the employer has already made a commitment to do so, or where there is a potential collective redundancy situation.
Employees dismissed as redundant are entitled to a statutory redundancy payment, provided that they have completed two years' service: this is calculated according to a statutory formula and is currently capped at £15,750.
The definition of redundancy for the purposes of a collective redundancy is slightly broader, encompassing all dismissals for a reason not connected with the individual employee. A collective redundancy situation arises when an employer proposes 20 or more redundancy dismissals at one establishment during a period of 90 days or fewer. Prior consultation with appropriate employee representatives is required over a minimum period of 30 days, where between 20 and 99 redundancy dismissals are proposed, or over a minimum period of 45 days where 100 or more redundancy dismissals are proposed. The Secretary of State must be notified in advance, at the beginning of the required minimum consultation period.
No social plan is required for either an individual or collective redundancy dismissal. All other rights and obligations in relation to dismissals will apply (see Section XIII.i).
Transfer of business
The TUPE Regulations are the UK's transposition of the EU Acquired Rights Directive21 and apply to:
- a transfer of an entity that retains its identity (a business or asset transfer); or
- a service provision change (typically arising in relation to the transfer of outsourced activities).
Note that TUPE does not apply on a share transfer, but may apply in relation to any pre-share or post-share transfer reorganisation.
Where TUPE applies, employees affected by the transfer have the following rights:
- protection from dismissal when the reason for the dismissal is the transfer, unless there is an economic, technical or organisational reason entailing changes in the workforce;
- protection from transfer-related changes to terms and conditions of employment, unless there is an economic, technical or organisational reason entailing changes in the workforce; and
- to be represented by appropriate employee representatives for the purposes of information and consultation in relation to the transfer.
The most significant events in the coming year are likely to depend upon the impact of Brexit. Employment law currently in force, even if derived from EU law, does not cease immediately on the UK's exit from the European Union, but may be changed by the next and future governments.
The SC is due to hear the appeal in the Uber case in summer 2020 and this may produce further guidance on employment status in relation to gig economy workers.
New IR35 legislation22 is already in force in the public sector and is due to come into force in the private sector on 6 April 2020 (subject to the outcome of the government review, to be announced mid February 2020).
In terms of legislative proposals, the government is currently consulting on (1) its proposals regarding the Good Work Plan and (2) extending the pay gap reporting to black, Asian and minority ethnic employees.