This month we cover the significant new developments in holiday pay case law and gender pay reporting legislation.
We look at cases on the meaning of “normal day to day activities” for the purposes of disability discrimination, religious discrimination in the context of requests for extended leave and the extent of an employer’s duties regarding unfair treatment on the grounds of trade union membership. We also consider pitfalls to avoid with “mutually agreed terminations” of employment, and the advantage of having a widely drafted lay off clause in employment contracts.
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Calculating holiday pay
A long awaited ruling has come from the Employment Appeal Tribunal in the case of Lock v British Gas Trading Ltd . The employee was paid a basic salary plus commission, calculated based on the sales that he achieved. Whilst he was on annual leave his holiday pay was calculated on basic pay only, and did not include any commission. During holidays the employee continued to receive commission based on sales achieved prior to the holiday period, however his commission payments were lower during the months that followed because he had been unable to generate sales while on holiday. The Employment Tribunal concluded that, when calculating the holiday pay due, commission must be included in the calculation of average pay. The EAT has dismissed the appeal against this ruling, giving us more certainty as to what is the correct approach in these circumstances.
- When calculating the amount due to an employee during annual leave you must include commission when determining the average pay that the employee earns.
- Previous rulings have also confirmed that guaranteed and non-guaranteed overtime should be included in the calculation, but no guidance has yet been given on voluntary overtime.
- This is a complex area, so please contact us if you are in any doubt about how the recent changes in the law affect your organisation.
Gender pay reporting
As you may have seen in our separate bulletin in mid February (see link below), the draft Regulations which will introduce gender pay reporting have now been published.
The draft Equality Act (Gender Pay Gap Information) Regulations 2016 are due to come into force in October 2016. Employers must complete their first report on 30 April 2017, and it must be published by April 2018. The Regulations will apply to all private and voluntary sector employers in England, Scotland and Wales who have at least 250 employees.
The requirement will be to publish mean and median pay information for men and women across the whole workforce. There will also be a requirement to divide the workforce into quartiles, in ascending order of pay, and publish the number of each gender in each quartile. The report, due on 30 April each year, will therefore be a ‘snapshot’ of the pay information on that date.
You will also be required to publish the difference in mean bonus payments to men and women, along with the number of men and women who received a bonus. Bonus information will be worked out over a 12 month period, rather than being a ‘snapshot’.
There will be a requirement to publish the full report on your website every year along with a written statement confirming that the information is accurate. The information will have to be left on the website for at least three years. There will also be a requirement to upload the information to the government. Employers who do not comply with this requirement will be ‘named and shamed’ and there is a possibility that civil or criminal penalties for non-compliance will be introduced.
There is still plenty of time to get prepared for this, but we recommend that you carry out a ‘snapshot’ analysis of your pay some time in the near future. It might be useful to do this on 30 April this year, as this will be the usual reporting date.
The benefit of doing this now is to see if the report shows anything that causes you concern. If it does, you would then have a full year to address this before you need to carry out the first formal report.
For further information and a link to the draft regulations, see our separate bulletin on our website.
Please contact us if you require any advice about how to carry out these reporting duties.
Defining normal day to day activities
In the Equality Act 2010 a disability is defined as being a physical or mental impairment which has a substantial and long term effect on a person’s ability to carry out normal day to day activities. Although the Disability Discrimination Act 1995, which was replaced by the Equality Act 2010, did include a list of ‘normal day to day activities’ this list is not included in the Equality Act 2010. There is the opportunity, therefore, for ‘normal day to day activities’ to be interpreted quite widely.
When determining whether something is a normal day to day activity the focus has always been on what the average person does on a daily basis. However, this approach has been challenged in the case of Banaszczyk v Booker Ltd .
The employee suffered from a back problem. He worked in a warehouse where he was required to lift and carry items weighing up to 25kg. He was expected to move 210 items per hour, but struggled to achieve this due to the problem with his back. He was dismissed due to missing his targets on a regular basis, and claimed disability discrimination.
His employer argued that he was not disabled because his impairment (his back problem) stopped him from carrying items of up to 25kg at the rate of 210 an hour – which the employer argued was not a normal day to day activity. However, this argument has not been successful in the Employment Appeal Tribunal.
In giving their reasoning the EAT has referred back to the EU Equal Treatment Framework Directive. Previously the Court of Justice of the European Union has said that, when defining a disability in accordance with the Directive, the impairment includes something which limits the participation of the individual in a professional life on an equal basis with other workers. The requirement to move the 25kg items was part of the employee’s professional life, and hence it was a normal day to day activity.
Some care needs to be taken with this ruling, because the guidance document accompanying the Equality Act 2010 suggests that ‘inability to move heavy objects without assistance or a mechanical aid, such as moving a large suitcase or heavy piece of furniture without a trolley’ would not be a normal day to day activity.
Although there seems to be conflict between the two approaches here, what is clear is that ‘normal day to day activities’ must not be interpreted too narrowly.
- If you are considering the dismissal of an employee who has a health problem always seek a medical opinion. Specifically ask the medical practitioner to advise on whether or not the employee is disabled as defined in the Equality Act 2010.
- If you are going to rely on the argument that the employee is able to do normal day to day activities ensure that you are thinking about this broadly. Seek our advice if you are not sure.
Refusal of leave for religious festival was not discrimination
There are occasions when an employee might request an extended period of annual leave to attend a religious festival. Do you have to agree to this?
In Gareddu v London Underground Ltd  the employee was a Catholic from Sardinia. Each August he liked to return to Sardinia for five weeks to participate in religious festivals with his family. This had been allowed for some years, but in 2014 he was told that this was the last occasion and he would not be permitted to take the extended leave in the following year, because of the negative impact it had on the planning of work in the small team in which he worked. He claimed religious discrimination.
His claim was not successful. In the definition of indirect discrimination the employee has to show that some requirement has been imposed (in this case to keep annual leave to two weeks or less), that is more difficult for a group with a particular protected characteristic (e.g. race, religion) to comply with, it is to the detriment of that individual and it cannot be justified.
Gareddu failed to demonstrate that the requirement to keep annual leave to two weeks was more difficult for Catholics to comply with. There was no requirement on people of this religion to participate in the festivals, and hence it was not possible to show that there was a detriment to Catholics as a group.
- There is no requirement to allow employees extended leave to attend religious festivals, but you must act consistently. If you allow employees extended leave for other reasons, in special circumstances, it could be seen as treating the employees less favourably if you simply refuse because the reason for requesting the leave is to attend a religious festival.
- If you do allow an employee to take extended leave make it clear that this is a ‘one off’ situation, and that there is no guarantee that similar leave will be allowed in future, and no guarantee that other employees will be allowed extended leave.
Do not allow your employees to be harassed due to trade union membership
An employee must not be treated unfairly because s/he is a member of a trade union, or is not a member. If you know that your employee is suffering some sort of unfair treatment from colleagues and you choose to do nothing to stop this, that inaction could mean that you are allowing the employee to suffer a detriment.
In Bone v North Essex Partnership NHS Foundation Trust  the employee was a member of two trade unions – UNISON and the Workers of England Union (WEU). UNISON was recognised by the employer, but WEU was not and was not well liked. Bone suffered a lot of nasty comments and other unpleasant treatment because of his membership of the WEU. Although his employer knew that this was happening they did nothing to stop it. Bone brought a claim that he had suffered a detriment due to his trade union membership.
Bone was successful in his claim. The Court of Appeal concluded that the reason that the employer had done nothing to stop the unfair treatment was to marginalise the influence of Bone and the WEU.
- Even if you do not recognise a trade union, an employee can still choose to join one.
- An employee must never suffer a detriment due to being a member of a trade union, and you are responsible for ensuring that any unfair treatment is stopped.
Take care if you are agreeing termination by mutual consent
There might be an occasion where both you and your employee conclude that the employment is not working out, and it is appropriate to end the employment. However, you must take care to ensure that this is correctly documented, and there is no chance of the employee arguing that there has actually been an unfair dismissal. In particular, in cases of voluntary redundancy, previous case law tells us that volunteering to be dismissed in a redundancy situation is likely to be treated as a dismissal.
In Khan v HGS Global Ltd and Dreams Ltd  the employee worked in marketing for HGS Global, with the main client he worked for being Dreams Ltd. Dreams Ltd decided to bring its marketing in-house, resulting in a transfer of undertaking situation which affected Khan and some other employees.
The employees were offered three options – to transfer to Dreams, to take another role within HGS Global (if there was one available) or to take redundancy. Khan chose the option of redundancy, having expressed on a number of occasions that this was his preference. This was agreed, however the termination letter itself referred to “dismissal by reason of redundancy”. Mr Khan subsequently brought a claim of unfair dismissal.
His claim was unsuccessful. The EAT concluded that (despite the wording of the letter) the reality of the situation was that Mr Khan had a free choice in accepting the offer of redundancy, and it was clear that this had been his choice. He had therefore voluntarily agreed that his contract of employment should be terminated at a time and in circumstances in which there would otherwise have been no dismissals.
- If you do agree to terminate the employment of an employee by mutual consent ensure that it is correctly documented, with the employee signing a document to confirm that s/he is choosing to leave the company.
- To be certain that the employee cannot make a claim against you consider entering into a settlement agreement. Seek our advice on appropriate wording for a settlement agreement.
Take care when imposing lay offs
If you have to impose a lay off on employees they can claim a redundancy payment if the lay off is for four consecutive weeks, or six weeks over a 13 week period. However, if you have a contractual right to lay an employee off for a longer period of time it will be possible to impose this, without the lay off being a breach of contract.
This has been confirmed in Craig v Lindfield and Son Ltd , where the employee was laid off for just over four weeks. There was a clause in his contract which allowed his employer to lay him off indefinitely, but he claimed that the lay off was a breach of contract and hence he resigned and claimed constructive dismissal.
His claim was unsuccessful. A lay off of just over four weeks could not be a breach of contract, given the contractual clause that was in place.
- If you have employees working in a line of work where lay offs are not unusual ensure that you have a contractual clause that protects you in the situation of a lay off.
- Seek our advice on the wording to use in this contractual clause.