Employment Law Review – January 2021

Welcome to our January Employment Law update. With Brexit and Coronavirus still dominating headlines we bring you up to speed with this month’s key Coronavirus developments and consider what the new UK-EU trade deal means for employers. We highlight some important cases including a decision which means that interim relief (a rare, but powerful, remedy for claimants) may soon be available in discrimination cases, and a High Court decision that restrictive covenants were not enforceable after an employee left employment during her probation period. Lastly, we discuss the impact of furlough on gender pay gap reports which are due in the coming months.

• Coronavirus Developments
• Brexit: What does the new trade deal mean for employers?
• Restrictive covenants unenforceable after employee left during probation period
• Interim relief on the cards in discrimination cases?
• Gender pay gap reporting to go ahead with furlough considerations

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Coronavirus Developments

This month’s key developments are below:

• Calculating reference salary and working hours for employees on variable pay – A new Treasury Direction has been published covering the extension of the Coronavirus Job Retention Scheme (CJRS) until 30 April 2021. The guidance has also been updated. The CJRS will have been running for a year in March 2021 and an employee could potentially have been furloughed back in March and April 2020. So to calculate usual working hours and reference salary for employees who were furloughed in March/ April 2020 and whose pay varies, employers will need to look back to their hours/ pay in March and April 2019.
• COVID-19 Vaccines – With the vaccine rollout progressing at pace, ACAS has recently published guidance stating that employers should only mandate vaccines if they are required for someone to do their job. Notwithstanding this guidance, many businesses are considering making vaccines mandatory for their workforce. Monitoring tools to track whether employees have accepted the COVID-19 vaccine have been developed by HR systems providers, with hundreds of companies already having installed the software. The National Care Association is currently taking legal advice on whether COVID-19 vaccines can be mandated for care home staff, and Barchester Healthcare, which runs 200 care homes, has already stated that it will not hire new staff who have refused the COVID-19 vaccine on non-medical grounds. As more individuals are offered the COVID-19 vaccine, this is likely to be tricky area for employers. We share our views here on the key considerations for employers.
• Transparency data – To create a more transparent culture HMRC has published data on claims made by employers through the CJRS. At the moment, the data only includes employer names, but from February an indication of the value of the claim within a banded range will also be published. Employers should be aware that there is a link on the website so individuals can report fraud directly to the HMRC if they have evidence to suggest that an employer on the list is abusing the scheme.
• Employees with caring responsibilities – The CJRS guidance has been updated making it clear that those with caring responsibilities are eligible to be furloughed. There is no legal right to be furloughed but with schools going back no earlier than 8 March employers may see a growing number of furlough requests from working parents balancing home schooling.
• Self-Employment Income Support Scheme (SEISS) – The current SEISS calculations use a three year average to reflect self-employed income. A charity representing the views of pregnant women and working mothers has started judicial review proceedings against the Chancellor claiming that the way SEISS is calculated indirectly discriminates against self-employed women on maternity leave between 2016 and 2019.

 Brexit: What does the new trade deal mean for employers?The UK-EU Trade and Co-operation Agreement was signed shortly before the end of the transition period. See What does the new trade deal mean for employers? to find out more about what the deal means for the future of employment law and key questions for employers around the recognition of professional qualifications in other EU member states and changes to business travel (outside of Coronavirus travel restrictions). 

Restrictive covenants unenforceable after employee left during probation period

The High Court has decided that a 9 month non-compete and 12 month non-solicitation and non-dealing clause in a financial adviser’s employment contract were void when the employee left employment during her probation period. This case is a useful reminder that employers should not apply a ‘one size fits all’ approach to restrictive covenants and should consider shorter, more limited restrictions during an employee’s probation period.

Restrictive covenants can be a valid way to protect legitimate business interests (e.g. an employer’s connections with clients or customers) provided they go no further than is reasonably necessary. The validity of a restrictive covenant is assessed at the time it is entered into, not in light of what may happen during the course of employment. Ms Falconer was employed by Quilter as a financial adviser. Her contract contained a 9 month non-compete and 12 month non-solicitation and non-dealing covenants. Ms Falconer left Quilter after less than six months and accepted a role with competitor. As she was still in her probationary period, she was only required to give two weeks' notice during which Quilter placed her on garden leave. Quilter brought a breach of contract claim against Ms Falconer in the High Court and sought an interim injunction to enforce her restrictive covenants. The court held that the restrictive covenants were void as an unreasonable restraint of trade and in particular commented on the following.

• Probation period and notice – Ms Falconer had a 6 month probation during which she could be dismissed on two weeks’ notice; the court considered this be reflective of Ms Falconer’s importance to the business.
• Length of service – the 9 month non-compete applied irrespective of how long Ms Falconer had been with Quilter; so the contract envisaged a situation where she was employed for a very short period (and only had time to build short-term relationships with clients) but would still be bound by a 9 month restriction.

Restrictive covenants are commonplace in senior executive contracts but these should always be tailored to each employee. Employer’s should have a clear, legitimate business interest in each case and should consider notice periods to ensure they reflect the employee’s importance to the business. In light of this case, employers who rely statutory notice periods are less likely to see a court uphold lengthy restrictions until their employees have worked for the business for several years. Employers should also consider shorter, more limited restrictions during an employee’s probation period, especially when the notice entitlement is reduced. The use of non-compete clauses is currently subject to a Government consultation. The consultation seeks views on whether non-competes should be banned (e.g. in California), time-limited, or compensated (e.g. in France and Germany) and whether business interests would be adequately protected if such reforms were implemented. The consultation closes on 26 February 2021. If you would like to contribute to, or discuss the potential impact of the consultation on your business, please contact us or click here to respond online. 

Interim relief on the cards in discrimination cases?

The Employment Appeal Tribunal (EAT) has ruled that it was a breach of the European Convention on Human Rights (ECHR) for the remedy of interim relief not to be available to someone who has been dismissed for discriminatory reasons. The Court of Appeal will hear this case in the coming months and it could see interim relief introduced as a new remedy in discrimination claims.

Interim relief can provide an immediate financial remedy for employees who are dismissed. At the moment, interim relief is only available in very limited circumstances; largely related to whistleblowing or trade union membership. If an interim relief application is successful, the Tribunal will ask the employer to reinstate or re-engage the employee on the same terms as prior to the dismissal. If the employer does not agree to reinstate the employee, the Tribunal must make an order for suspension on full pay and benefits until the claim settles or the final hearing. This can be a very powerful tool for claimants who effectively remain on full pay until their claim is concluded. In Steer v Stormsure Limited Mrs Steer alleged that she had been subject to a discriminatory dismissal (on grounds of sex) but was unable to apply for interim relief which she claimed was required by European Law and the ECHR. The EAT held it was probably a breach of the UK’s obligations under the ECHR not to allow this remedy to an individual dismissed for alleged discriminatory reasons. The EAT did not have the power to declare UK law to be incompatible with the ECHR, and so the case will now go to the Court of Appeal. If the decision is upheld there, the Court of Appeal can issue a declaration of incompatibility, meaning the UK Government will have to amend our discrimination law to introduce the interim relief remedy. This EAT decision together with language in the new UK-EU trade deal, that the UK should ensure “appropriate and effective remedies, including interim relief” open the door for interim relief to be expanded to discrimination claims. Since the Coronavirus pandemic, we’ve seen a significant rise in the number of interim relief applications; a particularly effective remedy for claimants who are having to wait many months for their claim to be heard. It’s important that employers are prepared to act quickly if they receive an application for interim relief. These applications are made to a Tribunal within 7 days of termination of employment and without ACAS pre-claim conciliation so can often come as a surprise. A hearing to determine the claimant’s interim relief application is listed very quickly after the claim is received by the Tribunal, and an employer usually gets no more than 7 days’ notice of the hearing.

Gender pay gap reporting to go ahead with furlough considerations

Last year, mandatory gender pay gap reporting was suspended. It has also been made clear that the data for the reporting year 2019/2020 will not need to be published at a later date. However, the reporting requirement for 2021 has not been suspended. This means qualifying employers with 250 employees at the snapshot date of 5 April 2020 must publish their gender pay gap report for the 2020/2021 reporting period by 4 April 2021. Different dates, including an earlier reporting deadline of 31 March 2021, apply for public sector employers. New guidance on reporting has been issued and whilst many employers are now comfortable with the obligations, an extra consideration for 2020/2021 reports will be the impact of furlough.

Furloughed employees:

• should be included when assessing whether the 250 employee threshold is met;
• should be included in the gender pay gap calculations relating to bonus pay;
• however, if the employer did not 'top-up' furlough pay, the furloughed employees should not be included in the gender pay gap calculations relating to hourly pay.

Including a supporting narrative with the gender pay gap is not mandatory, however, more employers may choose to publish an explanation of how the pandemic has affected their gender pay gap and perhaps an action plan to help redress any imbalances.