Articles | Employment bulletin March 2016

A reminder that the new National Living Wage (NLW) of £7.20 per hour comes into force on 1 April 2016. Announced with much publicity last summer, this is essentially a new band of the National Minimum Wage (NMW) for all workers aged 25 or over. The minimum hourly rate of pay for workers aged 21 or over stays at £6.70 per hour, while the rates for younger workers and apprentices also remain unchanged.

At the same time as the introduction of the NLW, the government is also increasing the penalty for failure to comply with the minimum rates of pay to 200% of the total underpayment. This is subject to a minimum penalty of £100 and a maximum penalty of £20,000 per worker. Employers paying their penalties within 14 days will have their penalty halved.

April is normally the time of year when the government updates the relevant rates for statutory sick pay (£88.45) and statutory maternity, paternity, adoption and shared parental pay (£139.58), however this year there are no changes. The statutory cap on a week’s pay (used for calculating statutory redundancy payments and the basic award for unfair dismissal) does rise slightly, from £475 to £479 with effect from 6 April 2016.

The Government has recently published draft regulations requiring employers to report on the gender pay gap in their business. The regulations are expected to come into force in October 2016 and will apply to all private and voluntary sector employers with at least 250 relevant employees (i.e. those who ordinarily work in Great Britain and whose contracts are governed by UK law).

The regulations will require employers to publish the overall mean and median gender pay gaps across their workforce by reference to an hourly rate of pay. This method mirrors the approach of the Office for National Statistics in calculating the national gender pay gap and should enable employers and employees to compare a business’ position against the national average.

For reporting purposes, “pay” is defined broadly, and includes basic pay, paid leave, maternity leave, sick pay, most allowances such as car allowances, shift premium pay and bonuses. However it will not include overtime, expenses, benefits in kind, redundancy pay, arrears of pay or tax credits.

In addition to publishing mean and median average figures for pay as a whole, employers will also have to disclose the difference between bonus payments made to men and women and reveal the number of men and women in each quartile of their pay distribution.
Employers within the scope of the regulations must take an initial snapshot of gender pay data on 30 April 2017 and publish their first annual gender pay figures on their website, signed off by a director, by April 2018. There are currently no plans to introduce financial penalties for failing to publish gender pay information, but employers may be ‘named and shamed’ and any failure to comply could be considered by a tribunal as part of any subsequent sex discrimination claims.

While many employers will see the new regulations as unnecessarily burdensome, the government has at least provided a reasonable window for employers to analyse their pay data and address any disparities before the figures must be published. Employers should also welcome the opportunity to release a statement alongside the pay figures, which will be a chance to explain and justify any differences and to ward off accusations of discriminatory pay practices.

Employers with less than 250 employees need take no action for now, but the government has not ruled out extending the reporting requirements to more employers in due course.

In Khan v Morrisons, the Supreme Court has reconsidered the question of vicarious liability. In other words, when is an employer liable for the actions of its employees?

One day in 2008, at Morrisons supermarket’s petrol station in Birmingham, one of their employees got upset with a customer. He started out with abusive language. He then followed the customer out to his car, opened the door and then punched and kicked him.

Previously, the Supreme Court had had to consider a similar question in Dubai Aluminium v Salaam. In that case, a group of defendants were involved in an alleged fraud on a Dubai state owned company. A partner in a London law firm was accused of knowingly drafting legal agreements that covered up the fraud. The court had to consider whether the innocent law firm was vicariously liable for the acts of its dishonest partner. The court applied a “close connection” test concluding that what the law firm partner had done was sufficiently closely connected to his work so as to make the law firm liable.

In Khan, the Supreme Court continued the same approach. Although Mr Khan appeared to have been personally motivated (and his employers were no doubt horrified), what he did was in connection with the business within which he was employed and therefore the supermarket was liable.

In many ways this is a harsh decision for employers. It reinforces the need for employers to be careful in putting in place proper training and supervision. They may also need to act early to weed out unsuitable members of staff.

Our dispute litigation partner, Bill Dixon, acted on the earlier Dubai Aluminium case and would be happy to assist with any questions that you may have in this tricky area.

Laying off employees and short time working are temporary measures sometimes used by employers when they suffer a temporary downturn in work. The practice is more common in some industries than others. In summary, laying off means that the employer provides employees with no work (and no pay) and short-time working means providing less work (and less pay). The employees are not dismissed and they remain employees despite the reduced work and pay.

An employer can only lay off an employee or put them on short time working, if they have a contractual right to do so. The contract should also clearly state that the employee will not receive their normal salary during this period.

The law recognises that there are certain circumstances where employees might be entitled to statutory redundancy payments as a result of lay off or short time working, but there is a formal process that has to be followed before they can receive such a payment.

The Employment Appeal Tribunal (EAT) recently considered a case where the employer exercised its contractual right to lay off staff for an indefinite period without pay. Mr Craig, an employee at Bob Lindfield & Sons resigned after over four weeks lay off without pay. Mr Craig was not entitled to claim redundancy, under the required formal process, and instead claimed that he had been constructively dismissed as the lay off period could not be considered reasonable.

The main issue for the EAT to decide was whether a term could be implied into the contract that the lay off should not be for any longer than was reasonable. The EAT held that there was no such implied term and Mr Craig’s claim for constructive dismissal failed.

The EAT found that the employer had a contractual right to enforce the lay off and they had experienced a genuine downturn in work. They also had an expectation that Mr Craig would be able to restart work within four weeks. Mr Craig was accordingly unable to claim constructive dismissal.

However, the EAT did also comment that where an employer keeps an employee on lay off without a reasonable prospect of future work, or otherwise acts in a manner likely or calculated to cause a breakdown in the relationship of trust and confidence, a constructive dismissal case could still arise.

If an employer requires the option to lay off employees, they need to ensure that suitable clauses are included in their contract of employment. They also need to exercise that contractual right reasonably and be aware of the process an employee may follow to claim a redundancy payment.