Employment Briefing - April
1st May 2018
- When is a decision pregnancy related?
- Does the requirement to work long hours have to involve coercion to be considered a provision, criterion or practice (“PCP”)?
- HMRC Guidelines on new PILON Tax Rules
- When does notice of termination take effect?
- The WJM Online Employers’ Manual
Welcome to April's Employment briefing.
If you have any questions about any of the topics covered, or would like to meet with our Employment team, please call Martin Stephen on 0141 248 3434 or email firstname.lastname@example.org
When is a decision pregnancy related?
In the case of Really Easy Guard Credit Limited v Thompson the Claimant was dismissed during her probationary period for unsatisfactory performance and conduct. The decision to dismiss was made before the Claimant told her former employer that she was pregnant. The Claimant argued that she was dismissed because she was pregnant and that the employer had not made the decision before she told them of her pregnancy.
Although in the facts the Tribunal did not accept that the employer’s decision was made after he was informed of the pregnancy, the Employment Tribunal found in favour of the Claimant on the basis that despite the employer making the decision before actual knowledge of pregnancy, it was clear that the performance issues and the pregnancy were linked.
The Employment Appeal Tribunal rejected the Employment Tribunal’s findings and held that the decision to dismiss was not because of pregnancy. The Employment Appeal Tribunal has however remitted the case back to the original Employment Tribunal to consider whether the Directors of the employer had sufficiently re-examined their decision after they learned of the pregnancy. We will report further on this case.
This case highlights the importance of keeping correct records and notes of what decisions have been taken, the reasons for those decisions and crucially, when those decisions were taken. Importantly, it also underlines the fact that whilst knowledge of pregnancy is a crucial issue, it is not the only issue to be taken into account when dismissing an employee who then tells you that she is pregnant.
Does the requirement to work long hours have to involve coercion to be considered a provision, criterion or practice (“PCP”)?
In the case of United First Partners Research v Carreras, the Court of Appeal upheld the Employment Appeal Tribunal’s decision that the expectation for an employee to work long hours constituted a PCP which requires an employer to make reasonable adjustments to avoid disability discrimination.
In this case the Claimant maintained that he had been required to work long hours and argued that this did not need to carry a connotation of coercion. The Claimant claimed disability discrimination and unfair constructive dismissal. The Employment Tribunal rejected the claim but the Employment Appeal Tribunal allowed the Appeal. The Employment Appeal Tribunal found that the employer’s frequent requests that the Claimant work long hours created pressure on him to agree which was capable of amounting to a PCP.
On appeal the employer argued that the Claimant had resigned to go to be with his wife in the USA. The Court of Appeal dismissed the Appeal and upheld the Employment Appeal Tribunal’s decision that it was sufficient that the PCP constituted one reason for the resignation and therefore amounted to unfair constructive dismissal.
The message from this decision is that employers who regularly require employees to work long hours should give careful consideration to whether or not reasonable adjustments should be made to accommodate any employee who might be disabled.
HMRC Guidelines on new PILON Tax Rules
Where an employee’s employment terminates after 5th April 2018 and he or she receives a payment after that date, the basic salary that the employee would have received for any period of unworked notice is subject to income tax and NIC in full. This is irrespective of whether or not there is a PILON clause in the contract of employment.
Under the new rules, if an employee is paid in lieu of some or all of his or her notice period, the employer must deduct income tax and employer’s NIC from and pay employer’s NIC on the employee’s “post-employment notice pay” (PENP).
PENP is calculated using the following :
((BP x D) – T
BP = “basic pay” in the pay period which ends prior to the date on which notice is given (if any) or, if no notice is given, the termination date (“relevant pay period”)
D = the number of calendar days in the “post-employment notice period” (see below)
P = the number of calendar days in the relevant pay period
T = the contractual PILON.
A simplified formula can be used where the employee is paid monthly, under the employment contract the minimum notice period is the number of whole months and the unworked period of notice is a number of whole months. In that situation, D = the number of whole months in the post-employment notice period and P = 1.
Basic pay includes benefits, bonuses, commission, allowances and share options/awards. However, if the employee participates in a salary sacrifice arrangement, the pre-salary sacrifice salary must be used for the calculation.
The employer must deduct the PENP from the employee’s “relevant termination award”. This is defined as any payment or benefit which compensates the individual for the termination of their employment (i.e. those payments and benefits which prior to 6th April 2018 would have qualified for the £30,000 tax exemption), excluding any statutory redundancy pay.
If the employee works out their full notice, or is put on garden leave for their full notice, the new rules do not apply. In those situations where the new rules apply, the employer will need to ensure that any Settlement Agreement makes it clear that the employer will deduct income tax and employer’s NIC from the PENP. Employers will need to calculate the PENP for those employees whose employment is terminating, including those employees whose contracts of employment contain a PILON clause. Employees are likely to want to see this calculation before signing any Settlement Agreement.
These changes tighten up the rules in relation to the taxation of Termination Payments and will make it much more difficult to structure the payments in such a way that the first £30,000 can be paid free of tax and NIC. Please contact a member of the Employment Team for detailed advice before agreeing terms of settlement with outgoing employees.
Here are eight things you should know before the GDPR come into force next month:
1. Consider processing personal data in a way so that you cannot tell from looking at it which person it relates to. You would need additional information (say a key or code). This is known as “pseudonmyisation”.
2. Think about whether some data can be anonymised. Do you really need to be able to identify an employee to use their data? For example, if you are processing information for research or statistics then you could probably anonymise it. We see a lot of this in the public sector where data is collated for the purpose of equal opportunities.
3. Use passwords and encourage employees to use more complex passwords, not to share them and to change them regularly.
4. Encrypt data where possible, particularly if you are transferring data or allowing remote working.
5. Think about the devices that employees use and their security access. Will you still allow employees to use their own smartphones etc., or will you provide company phones and laptops now instead?
6. Only process personal data necessary for specific purposes.
7. Put in place measures to ensure you are compliant with the principles.
8. Keep records to prove you are compliant.
For detailed advice in relation to GDPR please contact a member of the Employment Team.
When does notice of termination take effect?
When an employment contract is silent on when notice is deemed to be given, when does the notice of termination take effect? Is it when the letter would have been delivered in the normal course of post, or is it when in fact the letter is delivered to the address or is it when it comes to the attention of the employee and she has read it (or has had a reasonable opportunity to do so)?
The answer is when it is actually received by the employee and he or she has read it or has had a reasonable opportunity to do so.
This established principle was re-stated in the case of Newcastle-Upon-Tyne NHS Foundation Trust v Haywood. In April 2011 Ms Haywood was told that she was at risk of redundancy. She had turned 50 on 20th July 2011. Redundancy after her 50th birthday would have entitled her to a considerably more generous pension than redundancy beforehand. Ms Haywood was contractually entitled to be given 12 weeks notice but her contract was silent about how notice was deemed given.
On 19th April 2011 Ms Haywood went on holiday. On 20th April her employer sent her notice of termination by recorded delivery and ordinary post. She read it on her return from holiday on 27th April.
If delivery was deemed effective before 27th April she would have received the much lower pension, but if it was deemed effective on the day she returned from holiday and read it, she would have received a much more generous pension.
The majority of the Supreme Court held that there was no good reason to disturb the long established line of case law from the Employment Appeal Tribunal. The notice was only deemed effective when it was read by the employee (or she had a reasonable opportunity to read it). Notice was therefore deemed to be effective from 27th April and Ms Haywood was entitled to the higher pension.
Giving notice of termination can be complicated and can lead to difficulties in establishing the effective date of termination. Detailed advice should therefore be sought from a member of the Employment Team.
The WJM Online Employers’ Manual
We have re-launched our highly successful Employers’ Online Manual. The latest version has additional content and improved functionality. If you would like trial access to this must have resource please contact a member of the Employment Team.
The information contained in this newsletter is for general guidance only and represents our understanding of relevant law and practice as at May 2018. Wright, Johnston & Mackenzie LLP cannot be held responsible for any action taken or not taken in reliance upon the contents. Specific advice should be taken on any individual matter. Transmissions to or from our email system and calls to or from our offices may be monitored and/or recorded for regulatory purposes. Authorised and regulated by the Financial Conduct Authority. Registered office: 302 St Vincent Street, Glasgow, G2 5RZ. A limited liability partnership registered in Scotland, number SO 300336.