End of summer round up - UK employment law developments

After the anticipated Employment Bill was superseded by a series of Private Members’ Bills introducing many of the promised reforms, this summer has seen progress on changes to family-friendly rights and sexual harassment reform, along with government action on industrial action. ACAS is also consulting on an updated Code of Practice in respect of flexible working requests.  

Decisions in the courts and tribunals have reinstated the prohibition against using agency workers to cover staff taking industrial action, and confirmed that individuals engaged through a personal service company cannot establish worker status if there is genuinely no contract between the end user and the individual. The Court of Session in Scotland also handed down a decision that a share incentive plan was capable of transferring under the TUPE provisions on protection of terms and conditions of employment. 

Developing family-friendly rights

This summer saw the advancement of a number of new or enhanced family-friendly rights which have been on the government’s agenda for some time. 

Right To Request Predictable Work Patterns

Earlier this year, the government indicated that it was backing the Workers (Predictable Terms and Conditions) Bill, which is a Private Members’ Bill introducing a right for both non-agency and agency workers to request a more predictable working pattern. This reflects recommendations in the Taylor Review of Modern Working Practices in 2017. The Bill is due to proceed to its third reading in the House of Lords in mid-September 2023, following which the Bill is expected to pass.

Paternity Leave Consultation

Four years ago, the government conducted a high level consultation on how the existing parental leave and pay system could be reformed to allow greater equality between parents. It has now published a response to the consultation by proposing some sensible, but not radical, changes. For example, the government intends to allow eligible parents to take their two week paternity leave entitlement as two separate periods of leave, rather than a single block of one or two weeks. Also, paternity leave could be taken within the first year of a child’s life/ adoption, rather than within eight weeks of their birth/ adoption. Finally, notice requirements for taking paternity leave will be simplified, such that eligible parents will only be required to give notice of their intention to take leave before a child’s birth/ adoption. They will subsequently have to give 28 days’ notice of their leave dates. 

Flexible Working

The Employment Relations (Flexible Working) Act received Royal Assent on 20 July.  Once implemented through regulations, this Act will:

• Allow employees to make two applications for flexible working each year, rather than one;
• Require employers to consult an employee before refusing a request;
• Reduce the period for deciding a request from three months to two; and
• Remove the existing 26-week service requirement for making a request.

ACAS is consulting on a revised Code of Practice on handling requests for flexible working, which will build on the good practice set out in the existing Code and reflect the changes established by the Act. The consultation closes on 6 September. This presents a good opportunity for employers to amend their current policies and practices on flexible working to reflect the new rules and draft ACAS Code, and to ensure those responsible for handling requests are familiar with these updates. For example, employers may choose to provide more information to explain their reasons for refusing a request which, although not mandatory, is good practice and may make it easier to defend a subsequent indirect discrimination claim.

Other recent changes

Some may recall that several other Private Members’ Bills received Royal Assent earlier this year, including

• The Carer’s Leave Act, introducing a week’s unpaid leave for carers;
• The Protection from Redundancy (Pregnancy and Family Leave) Act, allowing the government to extend enhanced protection against redundancy to pregnant employees and parents who have recently returned to work after certain types of family leave; and
• The Neonatal Care (Leave and Pay) Act, introducing a new right to leave for parents whose babies need hospital care on or shortly after birth.

We are still awaiting legislation that implements these changes, and so the details of these new entitlements and when they will come into force are not yet clear.

Employment status and personal service companies

In Plastic Omnium Automotive Ltd v Horton, the EAT overturned a decision that an individual who supplied his services via a personal services company (PSC) was a worker of the end-user client. The EAT observed that the starting point was to establish whether there was a contract in existence under which the claimant provided services personally to another party to the contract. Although there was a contract in existence, the employment tribunal had failed to recognise that the contract in question was not between the employer and the putative worker, but the employer and a third party (the PSC). There was no contractual relationship between the employer and the alleged worker, and the tribunal had accepted that the contract between the employer and the PSC reflected the true agreement between the parties. These findings were fatal to the argument that the claimant’s employment status was that of a worker, and the individual was not entitled to worker rights or protections under the Employment Rights Act 1996.

Although this decision does not deviate from our existing understanding, it is helpful to have court authority that the lack of a direct contractual relationship between an individual and the end user is fatal to an employee or worker status claim. This assumes that the PSC operating between the individual and end user is a genuine structure and not a sham. We note that this decision will not affect the tax treatment of such arrangements, which may trigger the off-payroll working tax rules. 

TUPE transfers and share incentive plans

In Ponticelli Ltd v Gallagher, the Court of Session in Scotland decided that a share incentive plan transferred under TUPE. Even though the employee’s right to participate was not contained in his contract of employment, but in a separate collateral contract, it arose “in connection with” his employment contract, and so the transferee employer had to provide a scheme of substantial equivalence. Although the decision was reached by the Court of Session in Scotland, the relevant provisions in TUPE apply across Great Britain. Faced with the same issue, the EAT in England and Wales would almost certainly follow the Court of Session decision.

The case highlights the importance of proper due diligence in any transaction to identify which rights and liabilities are capable of transferring under TUPE, including any that are not contained in employment contracts. A transferee employer will then have to review the terms of relevant schemes to decide whether it must provide them post-transfer and if so in what form.

Trade union changes

As well as seeing various strikes take place nationally, we saw two developments in trade union law this summer:

• The High Court, in R (on the application of ASLEF) v The Secretary of State for Business and Trade, quashed the government’s decision to repeal the prohibition on agencies supplying workers to cover for those taking industrial action.  The decision reflected the High Court’s view that the government had not carried out the appropriate consultation before removing the prohibition.  Therefore, as of 10 August 2023, the prohibition on using agency workers to cover for staff taking industrial action returned into effect. 
• The Strikes (Minimum Service Levels) Act was passed, giving the government power to impose minimum service requirements during periods of industrial action in public services such as health, transport and education.  Under this Act, trade unions must take reasonable steps to ensure that workers comply with a requirement to work in order to provide relevant services, and a Code of Practice (a draft of which is currently open for consultation) is expected to set out what will amount to “reasonable steps”. 

Sexual harassment reform

After a period of uncertainty, it appears that the proposed reforms of sexual harassment protection will be watered down. We still anticipate the introduction of a duty on employers to take “reasonable steps” (but no longer “all reasonable steps”) to prevent sexual harassment in the workplace. However, provisions re-introducing employer liability for third party harassment were removed from the Worker Protection (Amendment of Equality Act 2010) Bill by the House of Lords. In the 14 July debate, several peers expressed concerns that the third party harassment proposal would jeopardise free speech and increase regulatory burdens for employers. Although the protection will be narrower than first promised, the government has accepted the changes to allow some elements of the Bill to pass.  

So, although the duty to take reasonable steps to prevent sexual harassment is likely to become law, we can say with reasonable certainty that the current legal position on third party harassment will remain unchanged after this reform. That is, employers will not usually be found liable if a staff member is harassed by a third party in the course of their employment. However employers may still be liable for their own harassment or vicariously liable for harassment carried out by their employees unless they can show they took “all reasonable steps” to prevent it. They could also face enforcement action by the EHRC (and potentially an increased compensation award in a tribunal sexual harassment claim) if it fails to take “reasonable steps” to prevent sexual harassment in the workplace. The Bill will have its third reading in the House of Lords in early September.  

The reputational consequences of allegations of bullying and harassment can obviously be just as damaging as legal claims. By regularly refreshing your internal policies and staff training programmes on bullying and harassment, employers can reduce these reputational and legal risks and help demonstrate that they have taken reasonable steps to prevent sexual harassment. Also, by emphasising your commitment to tackling the issue and encouraging staff to raise concerns before problems materialise, employers will have the opportunity to address and resolve allegations at an earlier stage.

Authored by Eleanor Doubleday and Stefan Martin.