Employment Law Update - July 2022

Welcome to our employment law update bringing you up to speed with this month's key cases and developments.

In this month's update we concentrate on several high-profile judicial decisions. The Supreme Court has ruled on the correct method for employers to calculate holiday pay for part-year workers, and elsewhere the Court of Appeal overturned an injunction which had prevented `firing and re-hiring` tactics. We also highlight an Employment Tribunal decision which provides guidance for employers on gender critical beliefs in the workplace. New legislation on parental leave and trade unions will also be discussed.

• Government supports proposed Neonatal Care Bill

• New legislation to impact industrial action

• Failure to renew contract due to gender critical beliefs held to be direct discrimination

• Lifting of `fire and rehire` injunction signals return to orthodoxy

• Supreme Court rules on holiday pay for part-year workers

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Government supports proposed Neonatal Care Bill

On 15 July 2022, the Neonatal Care (Leave and Pay) Bill passed its second reading in Parliament after receiving Government support. The legislative reforms will allow parents whose babies are receiving specialist care after birth to take up to 12 weeks of paid shared leave and therefore reduces the pressure to return to work.

If the Bill is passed, the right to neonatal care leave would be available to those parents whose babies are admitted into hospital up to the age of 28 days, and who have a continuous stay in hospital of 7 full days. This right would be available to employees from their first day in a job. However, the additional neonatal care pay will only be offered to parents who have at least 26 weeks' continuous employment and who meet specified earning requirements. Employers will be entitled to recover these payments from the Government.

It is anticipated that the Bill will be passed in 2023, meaning that the new rights would not be implemented in England, Wales, and Scotland until sometime in 2024, or 2025.

New legislation to impact industrial action

New Regulations came into force on 21 July 2022 which, according to the Government, will enable employment businesses impacted by industrial action to `plug staffing gaps` with agency workers. Previously it had been unlawful for such businesses to supply temporary workers to perform the duties of workers on strike. However, the change in law has removed these restrictions, and employment businesses across all sectors from 21 July will now be able to supply temporary staff to replace striking workers. In addition, the Regulations have increased the maximum damages which may be awarded against a trade union where industrial action is found to be unlawful.

With effect from 21 July, the limits are increased as follows:

• Less than 5000 members: £40,0000 (previously £10,000)

• 5000 to 24,999 members: £200,000 (previously £50,000)

• 25,000 to 99,999 members: £500,000 (previously £125,000)

• 100,000 members or more: £1,000,000 (previously £250,000)

These changes are intended to make it easier for employers to mitigate the impact of industrial action. However, twelve trade unions, including Unite, ASLEF, Unison and RMT have since indicated that they will be seeking judicial review of the Regulations. They claim that the new law violates Article 11 of the ECHR and the EU-UK Trade and Co-operation Agreement.

Failure to renew contract due to gender critical beliefs held to be direct discrimination

The Employment Tribunal (ET) has found that the claimant, Ms Forstater, had suffered direct discrimination after the respondent, the Centre for Global Development (CGD), chose not to renew her contract due to her expression of gender critical beliefs at work and on social media. This has been a highly contentious and publicised case, and it highlights the challenges faced by employers in balancing freedom of speech against the rights of transgender persons not to be misgendered in the workplace.

Ms Forstater had lost her job as a consultant researcher at CGD in 2019, after expressing her belief that biological sex is immutable through various statements made on Twitter and at work. At a preliminary hearing in 2019, the ET found that her beliefs were not protected under the Equality Act 2010 but on appeal this decision was overturned in a landmark ruling by the Employment Appeal Tribunal (EAT), which found that those who held gender critical beliefs were protected by the law although it clarified that this did not mean that one could misgender trans persons with impunity. The case then returned to the ET this year, to establish whether discrimination against the claimant had occurred on the facts. It was held that Ms Forstater had suffered less favourable treatment as her expression of gender critical beliefs had had a significant influence on CGD's decision not to renew her contract. In making this finding, the ET concluded that none of Ms Forstater's statements had been objectively offensive or unreasonable when taken individually. It was satisfied that although individuals might be offended by her statements, this did not mean that these beliefs were undeserving of legal protection.  Accordingly, the ET found that she had suffered both direct discrimination and victimisation as a consequence of CGD's actions.This decision makes clear that employees not only have the right to hold and express gender critical beliefs at work, but also the right to not be discriminated against for these beliefs. Nevertheless, employers may still restrict the way in which such beliefs are expressed, if doing so is necessary, proportionate and in pursuit of a legitimate aim, such as ensuring that the workplace is free from harassment.

Lifting of `fire and rehire` injunction signals return to orthodoxy

The Court of Appeal (CA) has overturned an injunction which had prevented Tesco from dismissing its employees and then re-hiring them on less favourable terms. This decision reverses the previous High Court ruling, where 42 distribution centre workers had won a landmark victory against the supermarket, and which had been viewed at the time as a novel way to combat `fire and rehire` tactics used by employers.

In January 2021, Tesco announced that it would remove `Retained Pay`, which had been an enhanced pay alternative to a lump sum redundancy payment, from its workers' contracts. It instead offered its workers a lump sum payment, in return for them giving up any future entitlement to Retained Pay. If the workers refused, they would be dismissed and then re-hired on inferior terms which expressly excluded the Retained Pay. Earlier this year, the High Court had found that, as the parties had agreed this payment was to be permanent and guaranteed for life, the contracts were subject to an implied term that Tesco would not exercise its right to terminate on notice if the sole purpose for this was to remove the right to Retained Pay. It therefore granted an injunction against Tesco to restrain it from doing so.

However, the CA, in discharging the injunction, has made clear that the High Court was wrong to find that pre-contractual statements made by Tesco showed that both parties intended that entitlement to Retained Pay would be permanent. Instead, the CA held that the contractual wording should be given its `natural and ordinary meaning`. This had two implications: firstly, that Tesco had the contractual right to give notice in the ordinary way, and secondly that the workers' entitlement to Retained Pay would only last as long as the contract itself. In any event, the Court indicated that the injunction had been inappropriate, and should never have been granted given that the remedy for wrongful dismissal at common law has almost always been a financial one.

This decision is significant in that it signals a return to the established judicial position. It should, however, be noted that the right of dismissed employees to bring claims for unfair dismissal remains unaffected by this ruling, even if these employees go on to accept new contractual terms. USDAW has since indicated that it will seek leave from the Supreme Court to appeal this decision.

Supreme Court rules on holiday pay for part-year workers

The Supreme Court (the Court) has clarified the law on calculation of holiday pay for part year workers. Upholding the Court of Appeal's decision, the Court confirmed that pro-rating holiday entitlement is no longer a lawful way to calculate holiday pay for those employed on part year contracts. This case concerned a music teacher, Ms Brazel, who was employed by Harpur Trust to work during the school term-time only. As was standard practice for many employers with irregular or zero- hour workers, Harpur had calculated her holiday entitlement on a pro-rata basis (12.07% of every hour worked). This was an approach endorsed by ACAS and which reflected the conformity principle, that is, that workers only accrue holiday entitlement under the Working Time Directive (WTD) for the time actually worked.

However, Ms Brazel argued that her holiday entitlement should instead be calculated based on her average weekly pay, excluding the weeks she had not worked, (the calendar week method). Harpur contended that this would lead to `an absurd result` where zero hour and part year workers would receive a higher proportion of their earnings as holiday pay compared to full time and part time workers. This assertion was dismissed by the Court, which, in endorsing the calendar week method, made clear that Ms Brazel and other part-year workers, are entitled to 5.6 weeks holiday pay notwithstanding the fact that they do not work all year-round. The Court expressed the view that the conformity principle is contrary to the Working Time Regulations (WTR) 1998, and that even if the WTR affords part-year workers more leave than a full-time worker, it was satisfied that `such construction is compliant with the WTD`. The Court indicated that whilst it may be unlawful for a part-year worker to be treated less favourably, it was not unlawful for those working part-time to be treated more favourably than their full-time counterparts.  Whilst the Court did acknowledge that the application of this ruling in practice could lead to `odd results in extreme cases`, it was satisfied that this was the correct interpretation of the WTR, and had it ruled in favour of Harpur, it would have effectively been amending legislation laid down by Parliament.

Employers who engage workers on zero-hour contracts or irregular hours and who calculate their holiday pay based on 12.07% of hours worked will now need consider updating their practices to remain compliant with the law. According to the Court, holiday pay for part-year workers should be calculated based on the endorsed calendar week method and any written contracts should reflect this. Employers should also be mindful of the risk of part-year or otherwise irregular hour workers whose holiday entitlement has traditionally been prorated bringing claims for past under-payments in light of this ruling.