Employment Update - November 2023

ITV has reportedly issued a relationships at work policy which requires staff to disclose any "sexual, romantic or close relationship" with a colleague. This comes in the wake of an investigation into allegations that presenter Phillip Schofield conducted an affair with a younger employee and sought to cover it up.

More and more employers are introducing guidelines on workplace relationships. Whilst in the USA it is common for such policies to prohibit relationships, in the UK and rest of Europe it is more common for a relationships at work policy to help set out the standards expected of staff and require staff to disclose relationships with colleagues – either in all circumstances or in certain situations, such as employees in the same team. The policy could also make it clear that it may be necessary to reallocate responsibilities or, in some cases, transfer one or both of the couple where there are concerns about confidentiality, conflicts of interest or actual or perceived favouritism.

However, such a policy will not be appropriate for all organisations. Ensuring the company's policies on harassment, conflicts of interest and confidentiality cover these issues can be equally effective. In any event, it is critical that employers have an effective policy on sexual harassment which explains clearly what constitutes harassment and provides relevant examples. The policy should be communicated clearly to staff through regular training sessions, including specific training for managers on handling complaints. This is already good practice but will become even more important when the new duty to prevent workplace sexual harassment comes into force in October 2024 (see "New Law" below).

The UK Government is introducing a new Electronic Travel Authorisation (ETA) system (similar to the ESTA system in the USA) for everyone visiting the UK on a visa-free basis for tourism or business (except British or Irish nationals). The ETA system is being introduced in phases. On 25 October 2023, ETA applications opened for Qatari nationals for travel from 15 November 2023. From 1 February 2024, the ETA will apply to nationals from Bahrain, Jordan, Kuwait, Oman, the UAE and Saudi Arabia. The ETA is expected to apply to all non-British/Irish nationals from the end of 2024.

Work visa fees

On 4 October 2023, the application fees for a variety of work-related visas increased. For the majority of work visas, including the Skilled Worker visa and the Global Business Mobility visa, the fees increased by 15 percent. The Government has also confirmed that the Immigration Health Surcharge (IHS) will increase from 2024. The IHS is payable by most visa applicants at the time of applying and contributes towards the costs of running the NHS. The IHS is currently £624 per person per year for the length of the visa, and this is increasing to £1,035 per person per year from as early as January 2024. This represents a significant additional cost for visa applicants and may mean some employers will want to bring forward visa applications where possible to avoid the fee increase.

E-Visas

The UK Government will slowly be replacing physical visa documents (including biometric residence permit ("BRP") cards) with an online record of an individual's immigration status (known as an "eVisa"). These eVisas are already being issued to EU nationals applying for UK immigration status as well as certain other nationalities when they apply for their visas from within the UK. Instead of receiving a BRP card, such individuals need to register for a UKVI account to view and share relevant information about their status securely with third parties, such as employers or landlords. While BRP cards are being phased out, cards issued currently all have a 31 December 2024 expiry date (even though the underlying visa will continue to be valid beyond the BRP card expiry date). The UK government will continue to provide updates throughout 2024 in relation to these changes, which will affect both employers when completing right to work checks and individuals who will need to register for a UKVI account.

A recent case has considered the enforceability of a bonus clawback in an employment contract. The employee in this case received a bonus which was conditional on him remaining in employment for three months after it was paid. His employment contract contained a clawback provision which required him to repay the bonus if he gave (or received) notice of termination within three months of the bonus being paid.  The employee resigned shortly after receiving the bonus and the employer asked him to repay it under the contract. The employee argued that the clawback provision in his contract was unenforceable as an unlawful restraint of trade, as it discouraged him from working elsewhere for three months after the bonus had been paid.

The High Court ruled that the clawback provision was not an unlawful restraint of trade. Although the clawback provision disincentivised the employee from resigning, it did not stop him from taking up other employment with a competitor or otherwise. This was the case even though the employee had to give three months' notice to resign, so effectively had to remain in employment for six months in order to keep the bonus.

Case law over the last decade has confirmed that holiday pay must be based on a worker's normal remuneration and include payments that the worker regularly receives, such as overtime, allowances and commission. This applies to the first four weeks of statutory holiday entitlement which is derived from EU law. (The statutory entitlement in the UK is 5.6 weeks, so this rule does not apply to the additional 1.6 weeks' statutory entitlement or any contractual entitlement over and above that).

Where a worker has not received their correct holiday pay for several years, they can bring an unlawful deduction from wages claim. The claim must be brought within three months of the last in a series of deductions (i.e. the last time they were underpaid for holiday). Until now, case law has suggested that if there is a gap of more than three months in between deductions, then the series is broken and any claim can only go back as far as the last three-month gap. That gap could arise because the worker has not been paid for a holiday at all for a three-month period, or has only been paid for additional statutory or contractual holiday above the core four week entitlement.

However, the Supreme Court has now ruled that a gap of three months will not break a series of deductions. This means that workers can potentially claim backpay for underpaid holiday going back further than previously thought. In this particular case, police officers and civilian staff working for the police in Northern Ireland were able to claim backpay for underpaid holiday going back to 1998, when the right to statutory holiday pay was introduced.

The FCA has issued a consultation paper on a proposed new regulatory framework on diversity and inclusion in the financial sector. For most regulated firms, the proposals will formally incorporate non-financial misconduct into the FCA's Conduct Rules and such misconduct will be expressly relevant for assessments of fitness and propriety for certified staff and regulatory references. Large firms, with 251 or more employees, will also be required to:

• develop a diversity and inclusion strategy;
  
  
• set targets to address underrepresented groups;
  
  
• report and make disclosures annually on certain diversity and inclusion matters; and
  
  
• incorporate diversity and inclusion into the firm's governance. 

In order for the FCA and PRA to monitor which firms qualify as "large", all firms (other than limited scope SM&CR firms) will have to report on the number of employees annually. The deadline for comments on the proposals is 18 December 2023. The FCA intends to publish a policy statement in 2024, with the new rules coming into force 12 months after that. You can read more about the proposals in our briefing.

The Government has passed legislation that will introduce a new duty on employers to take reasonable steps to prevent sexual harassment of their employees. If an employer fails to do so, and an employee succeeds in a claim of sexual harassment, then compensation will be increased by up to 25%. The new duty will also be enforceable by the Equality and Human Rights Commission (EHRC), regardless of whether any sexual harassment claim is brought.

The new duty will come into force on 26 October 2024, to give employers time to prepare. The EHRC is also developing a new statutory code of practice on sexual harassment at work, specifying the steps employers should take to prevent harassment. For more information on the new law and what employers should be thinking about doing to prepare – including culture audits, updating policies and the provision of relevant training – please read our briefing.

Right to request predictable work pattern

The Government has passed legislation that will introduce a new right for workers to request a more predictable working pattern. The Workers (Predictable Terms and Conditions) Act 2023 will apply to workers who lack certainty in terms of the hours or times they work, as well as workers on fixed-term contracts of 12 months or less. In practice, the new right will cover a number of casuals, zero hours workers, agency workers and those on short fixed-term contracts. Such workers will be able to apply to their employer for a variation to their employment contract to provide more certainty. Agency workers will be able to apply to either the agency that supplies them or the hirer that uses their services. It is expected that the right to request will only apply to workers who have 26 weeks' service but these weeks will not need to be continuous. There will also be a limit of two requests in any 12-month period.

Employers (and agencies) will be required to consider such requests reasonably and respond within one month. Requests will only be able to be rejected on specified business grounds, such as the burden of additional costs or insufficient work being available (similar to a flexible working request). Acas has published for consultation a draft code of practice on handling these requests. The draft code suggests that employers should allow workers to be accompanied at meetings to discuss their requests, provide reasons for any decision and allow an appeal against a rejection. 

The consultation on the draft code of practice is open for comment until 17 January 2024 and it is expected that the right to request will come into force in September 2024.

Changes to holiday

Following a consultation earlier this year, the Government has announced that it will make a number of changes to the rules on holiday and holiday pay. The changes will primarily affect workers with irregular hours (such as casuals, zero hours workers and agency workers) and workers who work part of the year (such as term-time workers). The changes are that:

• holiday for such workers will accrue at the rate of 12.07% of hours worked; and
• employers will be allowed to pay "rolled up" holiday pay for such workers, by including an element for holiday pay in the worker's hourly rate.

Draft regulations have been laid which will bring these changes into force for holiday years starting on or after 1 April 2024. The changes will be welcomed by many employers as making the administration of holiday pay more straightforward.

The Government is also confirming in regulations a number of rules relating to holiday for all workers which are based on EU case law, including:

• specifying the types of payments employers should include in holiday pay for the four weeks' EU derived holiday entitlement, such as commission and regular overtime;
  
  
• allowing workers who are unable to take holiday due to sickness to carry over up to four weeks' statutory holiday, to be used within 18 months;
  
  
• allowing workers who are unable to take holiday due to being on maternity leave or other statutory family leave to carry over up to 5.6 weeks' statutory holiday to the following holiday year; and
  
  
• allowing workers who have not been given a reasonable opportunity to take holiday to carry over up to four weeks' statutory holiday to the following holiday year.

However, the Government has said that it will not change the way holiday pay is calculated more generally. The Government had been considering whether holiday pay could be based on a worker's basic rate rather than "normal remuneration", which includes regular additional payments such as overtime and commission, but will not proceed with this change.  

TUPE consultation

The Government has confirmed that it will proceed with its proposals to change the consultation obligations under the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"). TUPE protects employees on the transfer of a business or part of a business, including business sales and outsourcing arrangements. Where TUPE applies, employers are required to inform and consult representatives of affected employees about the transfer. Where there are no existing representatives, the employer must normally arrange for representatives to be elected. However, this requirement will be amended so that employers can consult directly with affected employees (without the need to elect representatives) where there are no existing employee representatives and either:

• the business has fewer than 50 employees; or
• the transfer affects fewer than 10 employees (regardless of the size of the business).

Draft regulations have been laid which if enacted would bring these changes into effect for transfers taking place on or after 1 July 2024.

The Labour Party has announced a number of reforms to employment law that it would introduce if elected. Labour would, among other things, ban zero hours contracts, end "fire and rehire" and strengthen sick pay by making it available to all workers, including the lowest earners, from day one of absence. In addition, Labour has said it would introduce mandatory disability pay gap reporting for large employers and introduce a Race Equality Act to tackle structural racism and low pay for ethnic minorities. Labour has also argued that women who report sexual harassment should get the same protection as other whistleblowers and that the "public interest" test for whistleblowing should be reviewed. It is expected that a general election will be called at some point in 2024 and Employment Update will be monitoring the employment-related pledges of the main political parties.

In recent weeks, our team has been involved in a variety of pro bono work for organisations such as the YMCA, Just Like Us, the Chancery Lane Project, Cresco Biotech and the Impact Investing Institute. 

Since the last Employment Update, our work has included:

• advising a client on breach of contract and injunction options in relation to a team move to a competitor
  
  
• providing training for managers of a regulated financial services client on conduct, culture, diversity and speak up
  
  
• carrying out an independent investigation into grievances raised at a regulated business
  
  
• supporting a client with an investigation into allegations of bullying, sexual misconduct, and financial impropriety by a senior executive
  
  
• carrying out a review of post termination restrictions in light of competitor threats and anticipated new law
  
  
• conducting a fact-finding investigation into bullying claims against a senior manager
  
  
• advising and supporting a client in defending a claim of unfair dismissal and discrimination on the grounds of a philosophical belief