Employment Update - January 2019

The key changes outlined in the Government's Good Work Plan are:

• Casuals: Currently a break of at least a week between assignments for genuine casuals usually means the individual does not have continuous service for the purposes of employment rights like unfair dismissal or statutory redundancy pay. The Government will increase the period required to break continuity from one week to four weeks.
• Right to request guaranteed hours: All workers, including casuals, agency workers and zero-hours
  workers, will be given a right, after 26 weeks of service, to request a more stable contract that guarantees hours.
• Agency workers: Currently agency workers have the right to the same pay as comparable employees after 12 weeks in a given role. The 'Swedish Derogation' is an exemption to this and operates where the agency worker is employed by the agency and paid a minimum amount in between assignments. The Government has confirmed it will remove the Swedish Derogation, giving more agency workers the right to equal pay. The Government will also require agencies to provide more information to agency workers about their pay at the start of an assignment.
• Written statements of particulars: The Government will require all employers to provide a written statement of terms and conditions to all workers on recruitment, not just employees. The statement will need to cover eligibility for sick pay and annual leave.
• Works Councils: Employers are currently required to set up a works council where 10 percent or more of the workforce requests this. The Government plans to lower the threshold from 10 to two percent of the workforce, making it easier for a minority of workers to insist on a works council. (This may be particularly relevant for quoted companies in light of the new requirements around employee engagement under the Corporate Governance Code – see New Law below).
• Employment status: The Government will legislate to improve clarity on the tests for employment status so that it is easier to determine who is an employee (with full employment rights) and who is a worker (with some employment rights). The Government will also try to align the tests for tax and employment rights purposes.
• Tips: The Government will legislate to ban employers from making deductions from staff tips.
• Holiday pay: The Government will ask HMRC to enforce statutory holiday pay and sick pay. The
  Government will also increase the reference period for calculating holiday pay from 12 weeks to 52 weeks.
• Penalties and enforcement: Currently Employment Tribunals can impose financial penalties of up to £5,000 on employers that flagrantly breach employment rights. The Government will increase the
  maximum penalty to £20,000. The Government also plans to 'name and shame' employers that fail to pay Employment Tribunal awards.

Most of these changes will come into effect in April 2020. However, the increase in penalties for a flagrant
breach of employment rights will come into force on 6 April 2019.

Case watch

Employment status cases

Recent weeks have seen three key rulings on employment status for gig economy workers. The decisions are highlighted below.

These rulings, and changes to employment and tax law expected in April 2020, are prompting many employers to review their atypical working arrangements (including arrangements for casuals, zero-hours workers, self-employed contractors, freelancers and consultants). Employers will want to ensure that workers are properly classified and that such arrangements remain appropriate. Please speak to your usual Employment department contact if you would like to discuss how these issues might affect your business.

Immigration radar

Brexit update: existing employees

The Government has confirmed that, whether the UK leaves the EU with a deal or no deal, all EU nationals and their family members living in the UK as at 29 March 2019 will be able to stay and must apply for status under its new EU Settlement Scheme. The Government has announced that, following a limited trial in 2018, a further trial of the EU Settlement Scheme will open to all applicants on 21 January 2019. This will give EU nationals the opportunity to apply prior to the date of Brexit, 29 March 2019. Under the Withdrawal Agreement, EU nationals (and their family members) would technically have until 30 June 2021 to apply and, even in a 'no-deal' scenario, EU nationals (and their family members) would still have until 31 December 2020 to apply. However, many employers will be encouraging EU national staff to apply as soon as they can, in order to avoid delays, including where appropriate, taking
advantage of the trial opening on 21 January 2019.

Brexit update: future recruitment

The Government has released the long-awaited White Paper on its post-Brexit immigration policy. The White Paper sets out the proposed immigration regime that would apply from 1 January 2021, whether the UK leaves the EU with a deal or no deal. The starting point is that EU free movement rules will end and the same rules which apply to non-EU nationals will apply to EU nationals from January 2021. This will fundamentally mean businesses being required to employ EU nationals under the sponsored Tier 2 visa route for skilled work. However, there will be some significant changes to the rules and requirements for sponsorship, given their wider scope. Some of the key highlights for employers from the proposals are:

• the annual limit on the number of sponsored skilled work visas (Tier 2 General visas) will be removed
• employers would no longer be required to carry out a resident labour market test in order to obtain a sponsored skilled work visa (Tier 2 General visa)
• employers would require a sponsor licence to employ both EU and non-EU nationals on sponsored skilled work visas but the Government is considering a 'tiered' system of sponsorship to ease the burden on employers who only require a licence for a small number of vacancies
• the skill level required for sponsored skilled work visas (Tier 2 General visas) will be lowered - currently these are for degree level or managerial roles only (although there would be no lowering of the current skill level required for intra company transfers from linked offices outside the UK)
• the Government will consult with businesses about reducing the current minimum salary threshold of £30,000 for sponsored skilled work visas (Tier 2 General visas)
• the current two-year Tier 5 (Youth Mobility) visa route is to be expanded to allow for a new UK-EU Youth Mobility Scheme
• visitors from EU27 countries would not require a visit visa in advance of travel, including business travel, and would be able to use e-gates for quick entry
• international students would be granted a six-month period to stay and work in the UK on completion of a master's or bachelor's degree in the UK
• there will be no dedicated route for unskilled labour but, for a transitional period after Brexit, there will be a 12-month visa route for nationals of any skill level from specified low risk countries (with no option to extend, switch into other routes or bring dependants).

While the changes will be welcomed by many employers, the lack of any dedicated route for unskilled labour may present challenges for employers in sectors such as hospitality, agriculture and manufacturing.

Right to work checks

The Home Office has introduced a new online Right to Work Checking Service. From 28 January 2019, employers will be able to check right to work for some employees online, instead of relying on physical documents. The service can be used for non-EEA nationals who hold biometric residence permits and EEA nationals who have been granted settled status under the EU Settlement Scheme. However, it is not available for British citizens or EEA nationals without settled status, and employers will still be required to see physical documents for such individuals. From 28 January 2019, British citizens without a passport will be able to produce a short birth or adoption certificate, along with proof of their national insurance number. Previously, the employer could only accept a full birth or adoption certificate, which could only be obtained at a cost, whereas the short birth or adoption certificate is free of charge.

Immigration Health Surcharge increase

Since 6 April 2015 UK visa applicants have been required to pay an Immigration Health Surcharge (IHS) fee as part of their applications to give them access to the NHS during their stay in the UK. The fee is paid online at the time the visa application is submitted and is mandatory for applicants applying to come to the UK for six months or more. On 8 January 2019, the IHS fee level was doubled to £400 for each year of the visa sought for individuals coming to work or join family members in the UK. The discounted rate for students and those on the Youth Mobility Scheme has also doubled to £300 for each year of the visa.

New Law

New company reporting requirements

A number of new requirements to report about employees and pay take effect in 2019. The changes apply to financial years beginning on or after 1 January 2019, so the first reports will be published in 2020.

• CEO pay ratios: Quoted companies (i.e. those listed on the London Stock Exchange, an EEA exchange, the New York Stock Exchange or NASDAQ) with more than 250 UK employees will be required to report pay ratio information in their annual directors' remuneration reports. The pay ratio information will need to compare the total remuneration of the company's CEO with the
  remuneration of employees at the 25th, 50th and 75th percentiles of the workforce, and provide an explanation of the ratios. Going forward, it is intended that the ratio information should cover a ten-year period.
  
  
• Corporate governance for private companies: Large private companies will be required to include a statement about their approach to corporate governance in their directors' reports, including which corporate governance code the company has applied (if any), how it did so and the reasons for any departure from that code. The Financial Reporting Council has published the Wates Corporate Governance Principles for Large Private Companies which can be used for this purpose. The requirement will apply to companies that have either more than 2,000 employees or a turnover of more than £200 million and a balance sheet of more than £2 billion.
  
  
• Employee engagement: All companies with at least 250 UK employees will be required to report on employee engagement as part of their annual directors' reports. The report will need to describe what measures were taken during the financial year to introduce or develop arrangements for providing information to employees and consulting with them about decisions likely to affect them. Directors will also need to explain how they engaged with employees and had regard to their interests, and how this has impacted on key decisions of the company.

Revised Corporate Governance Code

A revised UK Corporate Governance Code for premium listed companies has been published, with the changes applying to financial years beginning on or after 1 January 2019. The key changes in relation to employment are that:

• companies should use one or more of three specified mechanisms for employee engagement – namely, appointing a director from the workforce, implementing a formal workforce advisory panel or designating a non-executive director to represent the workforce
• the board should routinely review the company's whistleblowing procedures and ensure a proportionate and independent investigation, and follow-up, of any matters arising from them
• appointments to the board and succession planning should promote diversity of gender and social and ethnic backgrounds.

Watch this space

Sexual harassment

The Government has announced a range of new measures to tackle sexual harassment at work. The measures are in response to the Women and Equalities Select Committee's report on sexual harassment in the workplace published in July 2018. The measures include:

• introducing a new statutory code of practice for employers on how to prevent and address sexual harassment at work
• considering a new positive duty on employers to prevent sexual harassment in the workplace
• consulting on possible restrictions on the use of non-disclosure or confidentiality provisions in discrimination and harassment cases
• consulting on how to strengthen and clarify the law on when employers can be liable for harassment of staff by third parties, such as customers, clients, suppliers and contractors
• consulting on whether to increase the time limits for employees to bring discrimination and harassment claims (currently the time limit for such claims is three months from the incident or the latest in a series of incidents).

The Government has not set out its timetable for these measures but employers can certainly expect further developments in this area during 2019. Employment Update will report developments.

Our Work

Since our last Employment Update, our work has included:

• advising on a number of sexual harassment issues
• advising a seller on the TUPE aspects around the asset sale of one of its divisions
• advising on the enforceability of post-termination restrictive covenants and options around enforcement
• advising on strategy around the removal of a C-suite executive and subsequent settlement negotiation
• advising a global private equity business on the departure of one of its senior deal executives, his settlement agreement (including the treatment of his carry awards) and the firm's associated financial regulatory obligations
• advising on strategies for implementing changes to pay and terms and conditions for a manufacturing client, following unsuccessful pay negotiations with its recognised trade union
• advising on strategy and planning for a collective redundancy programme
• supporting a client with a Subject Access Request under GDPR
• drafting a retention bonus scheme.