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Logistics & Transport Legal Update: Autumn 2017

It’s been a busy few months and in this edition we have highlighted a number of issues which will impact businesses operating in this sector. We hope that you will find it useful.

In this bulletin we look at:


The General Data Protection Regulation

The UK’s new data protection and privacy regime, the General Data Protection Regulation (GDPR) is close to implementation. The GDPR will be in full force and effect from 25 May 2018, and Brexit will not prevent or repeal it.

The GDPR will have a significant impact on logistics companies. From personal data relating to staff and subcontractors, to the identities of mail senders and recipients, every detail relating to living identifiable individuals will be heavily regulated. In addition to huge increases in fines for non-compliance (up to €20m or 4% of group worldwide turnover, whichever is higher), both data controllers and processors will be liable under the new regime.

Logistics providers process enormous amounts of personal data each day, and data protection and information security are critical business risks. The GDPR also imposes strict contract requirements, and you will need to update legal agreements and policies to avoid a breach of the new law. Contracts being entered into now, which are still in force next May, should be GDPR compliant (otherwise you may have to go back and amend them).

The GDPR may require you to appoint a Data Protection Officer, and you will have to carry out privacy impact assessments and facilitate enhanced data subject rights (including the right to be forgotten, the right to data portability and a stricter right of access). If you do suffer a breach, it will have to be reported (either to your customers or the regulator, and possibly also to the individuals affected, depending on the circumstances).

These are just a few of the changes, and further privacy reforms (which could have a significant impact on B2B marketing) are also on the horizon.

GDPR compliance might seem overwhelming, but it does not have to be that way. Oliver Neil, a Data Protection Associate in our Oxford office, is working with numerous clients (including logistics providers) to help them understand how the changes will affect their businesses, and put in place practical and effective compliance programs.


Employment Issues

Tribunal Fees

The UK’s Supreme Court has ruled that workers will no longer have to pay fees levied by the Employment Tribunals and the Employment Appeal Tribunal to issue proceedings against their employers. The Supreme Court has held that these charges prevented access to justice and breached both EU and UK law.

The Ministry of Justice said the Government will take immediate steps to stop charging employment tribunal fees and refund those who have already paid them. The Government will have to refund in the region of £27m to thousands of people who have gone to tribunal since fees were introduced in July 2013. These fees range from £390 – £1200.

The general consensus is that employers should now prepare for an initial increase in the number of employment tribunal claims they are likely to receive over the coming months. However, the Government may decide to introduce a new scheme that addresses the concerns raised by the Supreme Court. Also claim numbers are unlikely to return to the numbers seen prior to the introduction of fees given the impact of early ACAS conciliation. There are other questions yet to be answered:

  • will employers who have been ordered to pay successful claimants’ fees be able to recover such sums?
  • will employees who were deterred from bringing claims as a result of the fees be able to argue that they should be able to now bring claims outside of the relevant time limits?

Employment status

The case below comes at a time of significant interest in worker status and the gig economy, following the recent employment tribunal decisions in Aslam & Ors v Uber and Dewhurst v Citysprint UK Ltd and in light of the Taylor review into modern working practices.

In Pimlico Plumbers Limited & Mullins v Smith the Court of Appeal has upheld an employment tribunal’s decision that a plumber was a worker and not truly self employed.

Pimlico Plumbers (PP) engaged Mr Smith as a plumber for approximately five years and terminated the relationship shortly after Mr Smith suffered a heart attack. Mr Smith subsequently issued proceedings claiming unfair dismissal, wrongful dismissal, entitlement to pay during medical suspension, holiday pay, unlawful deductions from wages and disability discrimination.

Mr Smith was registered for VAT and filed tax returns on the basis that he was self employed and the contractual agreement stated that Mr Smith was an independent contractor, subject to restrictive covenants, working a minimum of 40 hours a week, under no obligation to accept work, and PP was not obliged to offer him any work.

The Court of Appeal upheld the employment tribunal’s decision that Mr Smith was a worker, not a self employed contractor and the judgment commented that the test for determining whether an individual is a worker or self employed does not involve any one deciding factor.

As with so many worker status decisions, the Court of Appeal’s decision is fact sensitive. However, the case illustrates that courts will continue to critically examine the relationship to determine whether employers are attempting to sidestep the established principles of employment law.

Therefore, businesses categorising an individual in a particular way should carefully consider all aspects of the working relationship. The starting point in determining the status of an individual will be the written contractual agreement but day to day arrangements will also be deciding factors.

Gender Pay Gap Reporting

The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 introduce mandatory gender pay gap reporting on an annual basis for private and voluntary sector employers with 250 or more employees.

Employers are required to compute and report on the difference in pay between ‘relevant’ male and female employees on an annual basis using data from a specific pay period that contains the relevant ‘snapshot’ date – the first of which was 5 April 2017. Employers have 12 months beginning with the relevant date in which to publish the information – i.e. the first report needs to be published by no later than 4 April 2018.

The information that employers must report on will include differences in mean and median hourly pay and bonuses between men and women as well as the proportion of women in each pay quartile within the organisation.

We recommend undertaking the assessment as soon as possible to enable remedial action to be taken where required.

Employers should be aware that:

  • a wider definition of “employee” is used for gender pay gap reporting than is used in the Equality Act (so take care when deciding who should be included in the review);
  • six calculations will be required;
  • the results must be confirmed by an appropriate senior person within an organisation and published on its website and a government website.

Voluntary overtime must be included in holiday pay

The Employment Appeal Tribunal’s (EAT) decision in the holiday pay case of Dudley Metropolitan Borough Council v Willetts and Ors the EAT, means we now have binding legal authority that regular payments for voluntary overtime have to be taken into account in calculating employees’ holiday pay.

The employees in this case were claiming that, whilst they had been paid for their holidays, certain aspects of their pay (including voluntary overtime) had not been included for the purposes of calculating holiday pay, which ought to have been.

Therefore the question was whether voluntary overtime should be included within the calculation of holiday pay. We know from previous cases that non-guaranteed overtime and compulsory overtime should be included in the calculation, but there had been some level of uncertainty around the treatment of voluntary overtime as there had not been a binding decision made directly in relation to voluntary overtime.

The test used by the employment tribunal (and subsequently endorsed by EAT) was that established in the recent line of cases that we have had on holiday pay, which was whether voluntary overtime (i) ‘formed part of the employees’ normal remuneration’ and (ii) was ‘intrinsically linked to the performance of their duties under their contracts’ such that they would suffer a financial disadvantage in taking holiday if those payments were not otherwise included.

The employment tribunal had found in this case that voluntary overtime did form part of their normal pay and should be included within the calculation of their holiday pay, and the EAT has upheld this decision. Whilst the employees were not required to work overtime and were free to refuse working overtime, in reality, they were working overtime in 1 out of every 4 or 5 weeks, and they had been doing this for several years. Of relevance was also the fact that they were on a staff rota for working voluntary overtime, so whilst it was voluntary, there was a plan in place and an expectation that it would be worked, and in one case, was viewed by the employee as an extension to his working week.

Only one of the employees was found not to be entitled to pay for voluntary overtime, as it was rarely worked in cases of emergency.

It is the regularity and consistency of overtime worked and the employee’s perception of the relevance of overtime work in the overall scheme of their duties, rather than the label attached to the type of overtime worked, which is relevant to the assessment of holiday pay. It appears from this case that only genuinely ad-hoc / unplanned cases of voluntary overtime will escape the definition of being part of normal remuneration.


Taxation

T-Charge

From 23 October 2017 a new Emissions Surcharge (also known as the Toxicity Charge, or T-Charge) will operate in central London, and apply in addition to the Congestion Charge. T-Charge will be introduced in an attempt to tackle the air pollution in London by discouraging the use of older and more polluting vehicles within central London.

Vehicles subject to the charge are cars, vans, minibuses, buses, coaches and heavy goods vehicles (HGVs), motorised caravans and horseboxes, breakdown and recovery vehicles, private ambulances, motor hearses, dual purpose vehicles and other specialist vehicle types that do not meet the minimum exhaust emission standards. Motorcycles will not be affected by the T-Charge, however, motorised tricycles and quadricycles, to which the Congestion Charge applies, have to pay the T-Charge.

Taxis and private hire vehicles that are not actively licensed with TfL will have to pay both the Congestion Charge and also the T-Charge if they do not meet the required emission standards.

Even if your vehicle currently meets the Low Emission Zone (LEZ) standards to drive within Greater London you will still need to check whether it will be subject to a T-Charge. This is because the T-Charge standards are tighter than the LEZ standards.

The minimum emissions standards are Euro 4/IV for both petrol and diesel vehicles. You can check whether your vehicle meets the required emissions standards using the TfL’s T-Charge checker: https://tfl.gov.uk/modes/driving/emissions-surcharge/emissions-surcharge-checker

The T-Charge will be £10 and it will use the same payment and operational systems as the Congestion Charge. Existing Congestion Charge Autopay customers will be automatically charged from 23 October 2017. Discounts are available for residents that are registered for the Congestion Charge Residents’ Discount. They will automatically be registered for a 90% discount on the T-Charge. Also residents who pay via Congestion Charge Auto Pay will pay £2.05 per day (£1 T-Charge plus £1.05 Congestion Charge) to drive in the Congestion Charging Zone in charging hours.

The T-Charge will operate Monday-Friday between 07:00 and 18:00 excluding Bank Holidays and the period between Christmas Day and New Year’s Day.

If the daily charge is not paid, a Penalty Charge Notice (PCN) will be issued payable by the registered keeper or operator. This will be £130 (reduced to £65 if paid within 14 days).

The T-Charge will end when the Ultra Low Emission Zone (ULEZ) is implemented.

HMRC Spotlight on splitting supplies for VAT purposes

In June 2017 HMRC published a spotlight on splitting supplies for VAT purposes. In HMRC’s view the artificial splitting of a single supply of goods and services into separate supplies to give an overall lower rate of VAT is tax avoidance and HMRC warns that such schemes will be challenged.

Arrangements that should be taxed as a single supply include those when:

  • multiple suppliers are used where the same elements could be provided by one supplier;
  • the customer has no opportunity to decline to take one of the individual elements.

It is worth noting that even if the supplies are made by two suppliers which are distinct legal entities, they may nevertheless be treated as a single composite supply. This approach appeared to have received some implicit approval from the Court of Justice of the European Union (CJEU) in the cases of Bookit Limited and National Exhibition Centre Limited (NEC).


Insurance

Consultation on the Scope of Compulsory Motor Insurance

Following the European Court of Justice of the European Union (CJEU) Decision in Vnuk v Zavarovalnica Triglav the Government issued a consultation paper to address the broadened scope of compulsory motor insurance.

In Vnuk the CJEU found that compulsory motor insurance has to cover any accident caused in the use of a vehicle that is “consistent with the normal function” of that vehicle. According to the Court the concept of “vehicle” within the meaning of the European Directive on motor insurance (72/166/EEC) bears no relevance to the use of the vehicle. As long as a vehicle is used in a manner consistent with its normal function the requirement for compulsory motor insurance applies.

The UK-wide consultation was launched on 20 December 2016 and closed on 13 April 2017. The Department for Transport reported that the majority of the respondents expressed concerns about the implications of the Vnuk judgment, in particular that the comprehensive option (i.e. the CJEU judgment as it currently stands) is worse than the current position on motor insurance in the UK and should be limited. The predominant view was that the compulsory motor insurance should apply only to vehicles used in traffic.

A Government response informed by the results of the consultation is due to be published. It will shed light on government plans to extend the scope of compulsory motor insurance.


Policy Issues

The challenges this year are mainly matters of policy rather than law and the uncertainties of Brexit makes it difficult to present a clear picture on legal challenges.

Transport Investment strategy

July 5th 2017 will be seen as an historic date as the Secretary of State for Transport announced the new Transport Investment strategy which aims to create a more reliable and less congested transport system. Also, aims to enhance productivity and respond to local government priorities increase Britain’s attraction for investors and traders and create new housing.

To achieve this, the Government plans to spend:

  • An extra £1.1bn on local transport and 220m on road works
  • Up to £235m until 2019 to support investment in rail freight
  • 2.5bn investment in flood defences
  • £1bn on Manchester airport and improving its facilities
  • £15bn investment on motorways and major roads including upgrading the A5036 to improve access to the port of Liverpool
  • …and continue investment in transport technology.

The Transport Investment Strategy features the proposed creation of a new Major Road Network (MRN), which would see a share of the annual National Road Fund, funded by Vehicle Excise Duty, given to local authorities to improve or replace the most important A roads under their management. The MRN would form a middle tier of roads sitting between the national Strategic Road network and the rest of the local road network.

The new, long-term Road Investment Strategy is considered to be another step towards achieving a safer, smarter and more sustainable road network. The plan envisages investments of over £15bn between 2015 and 2021 to tackle some of the most notorious bottlenecks on the network, like the A14 and A303, adding 1,300 miles of new lane capacity to cut congestion and smooth journeys on the most heavily trafficked sections and creating a network of Expressways that provide high quality, fast dual-carriageway routes across the country.

The building of High Speed 2 (HS2), linking London to Birmingham, and Birmingham to Manchester and Leeds, is part of the Government’s strategic plan to ease the pressure on some of the busiest parts of the existing network, while opening up opportunities for new services into as many as 100 towns and cities across the UK. HS2 will connect 8 out of UK’s 10 largest cities and those cities to the rest of the world. HS2 services will travel at up to 220pmh and will be calling at Heathrow, Birmingham International and Manchester Airport. The Government expect the project to provide a significant boost to the economy – currently estimated at £21bn – and a combined £81bn of benefit to the travel users.

Is Brexit becoming a road block?

On 23 June 2016 the United Kingdom voted to leave the European Union. The Prime Minister, Theresa May, triggered Article 50 of the Treaty on European Union on 29 March 2017 to begin the process of exit. This article discusses the potential impact Brexit may have on the UK’s transportation industry. Currently, the UK is still a member of the European Union as Ministry of Transport has stated ‘Until we leave, EU law will continue to apply to the UK’.

Aviation

Aviation and access to European Common Aviation Area (ECAA) is one area where Brexit may be a stumbling block . The ECAA is a single market which allows airlines to be registered in one member state but still operate between other member states; for example EasyJet, registered in the UK, can fly without restriction from the UK to other Member States, wholly between other markets (France-Germany) and wholly within countries (domestic Italy).

Withdrawal from the ECAA would mean an end to this; hence after the EU referendum many airlines such as EasyJet are considering relocating their headquarters to different countries like Austria. This could dampen UK’s image and attraction to investors. Access to the ECAA could decide the fate of airline prices as Consultancy Oxera has estimated restrictions on market access could lead to fares rising by 15 to 30%.

However, if UK wants to remain part of the ECAA it would mean UK effectively accepting EU aviation law. Overall, the impact Brexit makes on aviation depends on the trade deal agreed but leaving ECAA will mean UK will have to negotiate agreements with EU and countries like USA which will be a long and stringent ordeal.

Rail

The Railway industry may be better suited for Brexit after the recent announcement of Transport Investment strategy, which will give the sector more government backed funding. However, with the UK at the forefront of Railway industry, if a suitable agreement with the EU is not reached, the UK may lose its role as the market leader. Also, there still remains a question on whether UK-registered companies would be able to obtain a single safety certificate to ensure compatibility with both the UK and EU rules.

Furthermore, with the recently implemented ‘Fourth Railway Package’ the UK intends to create a single railway market which would increase competition and synchronise other member states railways by meeting a set standard by having to gain a single certificate. Whether this law would still be applicable depends on the deal agreed by UK.

There are other uncertainties to consider such as whether train drivers would require both a UK and EU licence to provide services between UK and EU. Such requirements would impact cost and, potentially, the pool of available drivers that could be recruited for the position. Nevertheless, it should be noted that the HS2 project is unlikely to be affected by Brexit but if leaving the EU causes a massive decline in the economy, the expensive project may be put on hold.

On the other hand, a UK Government that no longer applied EU procurement rules could award rail services, train contracts etc. to British-based companies. At the moment large parts of the GB rail network are run by foreign-owned (and in several cases foreign government-owned) rail companies, with UK-based companies seeing little reciprocal benefit in other EU countries.

Road Haulage & Shipping

Road haulage is expected to be affected greatly by Brexit as The Secretary of State for Transport Chris Grayling stated that 85% of lorries operating between the UK and Europe are owned by EU businesses. Henceforth, leaving the single market could be detrimental as many of the EU owned business may decide to operate in a different country resulting in job losses. There are other questions which need to be answered such as whether drivers with UK licences would be able to drive in the EU member nations. It is also uncertain how Brexit will affect border controls and whether there would be tariffs. Also, questions arise over whether EU laws on road safety, driving tests and vehicle safety will continue to have effect. The Secretary of Transport has indicated that securing a deal which allows free movement of goods is a top priority for the UK but there is uncertainty over whether this can be achieved. Hence, the full effect of Brexit on road transport will be visible in few years time.

As over 40% of British trade is with EU members, shipping is important for transport of goods which is the reason why the shipping industry has benefited significantly with the Single Access market. Whether they would still be able to benefit depends on deal agreed with the EU. Brexit leads to uncertainties regarding many issues such as vessels safety and whether and to what extent they would still comply with EU law. In addition, it is questionable whether EU would still have access to British ports considering the ports make most of its revenue from EU.

In conclusion, it is clear that transportation will be effected by Brexit but whether the impact will be a positive or negative one depends on the trade deal agreed with the EU.

UK joins the electric car trend

The 2017 Queen’s speech outlined plans to improve national charging and hydrogen refuelling infrastructure. The Automated and Electric Vehicles Bill provides for installation of charge points for electric vehicles at motorway service areas and petrol stations. The Bill will also extend compulsory motor vehicle insurance to cover the use of automated vehicles, to insure that compensation claims continue to be paid quickly, fairly and easily, in line with longstanding insurance practice.

Government’s focus on improving the regulatory framework for electric cars seems justified given that he popularity of electric cars have significantly increased. In 2016 Bloomberg New Energy Finance estimated that electric car models would make up 35% of all new car sales by 2040. In a more recent article from July 2017 Bloomberg New Energy suggests that the electric cars will dominate the car market by 2040 with the electric vehicles comprising up to 54% of the new car sales.

In addition in 2016 the number of electric cars sold globally had reached 2 million. Figures published by the Society of Motor Manufacturers and Traders (SMMT) demonstrate that electric cars sales in the UK have risen dramatically over the past few years. By the end of 2016, more than 35,000 plug-in cars had been registered over the course of the year, the highest number ever. The first six months of 2017 have seen more than 22,000 cars registered, ahead of the same period in 2016 by around 15%.

As a result of sustained government and private investment.


The content of this page is a summary of the law in force at the present time and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.

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