Employment Law Update - February 2023

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

In this month’s bulletin, we look at consultations about potential reform of the law in a number of areas: “fire and rehire” exercises, holiday entitlement and pay for part-year workers and the composition of panels in the Employment Tribunal, as well as one area where the Government has indicated that there will not be further consultation (menopause).

Consultation of “fire and rehire” Code of Practice

Following the controversy caused by P&O’s termination of 800 employees last year, the Government announced that it would introduce a Code of Practice on the use by employers of “fire and rehire” practices to change employees’ term and conditions of employment.

The Draft Code of Practice on Dismissal and Re-engagement has now been published for consultation, with consultation closing on 18 April 2023.

The practice is not a new phenomenon. For years, employers seeking to change terms and conditions, who have been unable to reach agreement with employees, have sought to implement changes by terminating employees’ current contracts of employment and offering to re-engage on the new terms. Employees who do not sign up to the new terms are deemed to be dismissed.

The intention of the new Code of Practice is to set expectations as to how the employer will approach such an exercise and whilst the Code is not “law” and does not impose strict legal obligations:

• It will have to be taken into account in Tribunal proceedings (for example, claims of unfair dismissal)
• If there has been an unreasonable failure to comply with the Code by an employer, any compensation awarded by the Tribunal can be increased by up to 25%
• If there has been an unreasonable failure to comply with the Code by an employee, any compensation awarded by the Tribunal can be reduced by up to 25%

The draft Code emphasises the need for the provision of information, consultation, and negotiation before an employer implements termination and re-engagement.

It remains to be seen whether the draft Code will change following consultation and when it will be introduced. In the meantime, employers seeking to make changes to contracts of employment without employee agreement should seek advice as such exercises contain significant legal and reputational risk. 

Consultation on holiday pay for part-year workers

The Supreme Court decision in Harpur Trust v Brazel caused concern for employers of part-year workers. The Supreme Court held that, as currently drafted, the Working Time Regulations require every worker to receive 5.6 weeks paid holiday per year, irrespective of the number of weeks that they work during the year. Further, the rate of pay for their holiday is based on their working weeks, rather than the whole year, so a worker working only two weeks in a year is entitled to 5.6 weeks holiday paid at the rate they earned during those two weeks. The Supreme Court considered that such an outcome was an anomaly, but one that nevertheless flowed from the wording of the Working Time Regulations.

The Supreme Court decision raised significant issues for employers with part-year workers (e.g., term-time workers paid only during term-time). A number of such employers had been paying rolled-up holiday pay to part-year workers at a rate of 12.07%, but the Supreme Court decision suggested that this rate would be too low in many cases.

The Government has recognised that the Supreme Court’s interpretation of the Working Time Regulations is not what was intended and has therefore opened a consultation about introducing legislation to avoid the above anomalies and, in their words, “to ensure that holiday pay and entitlement received by workers is proportionate to the time they spend working”. The Government’s proposal for doing so is to use a fixed 52-week reference period for calculating holiday entitlement, which will include weeks in which there was no work and no earnings. The proposal for calculating the holiday entitlement of a part-year worker or a worker with irregular hours is to:

• Calculate the total hours worked in the previous 52 weeks, including weeks without work
• Multiply those total hours by 12.07% to give the total annual statutory holiday entitlement in hours

This is only a consultation at present and whether any change will be made, and the timing of any change, is not known.

Employers with part-year workers should therefore be alive to the possibility of reform of the law in this area. 

Consultation on panel composition in the Employment Tribunals and the EAT

An Employment Tribunal was traditionally described as an “industrial jury” and comprised of three members: a judge and two lay members.

Over time, the number of cases heard by a full Tribunal panel has reduced and many cases are now heard by a Judge alone (e.g., claims for wages or unfair dismissal). All discrimination claims are still heard before a full panel of three members.

The Senior President of Tribunals has issued a consultation paper asking for views on the use of full panels, in light of the fact that using a full panel often increases the length of the hearing, can cause delays in issuing a judgement, and provides less flexibility to arrange hearing dates.

It is therefore possible that there will, in future, be a further reduction in the type of cases determined by full tribunal panels. 

Government response to menopause protection proposals

The Government has published its response to the Women and Equalities Committees’ report on “Menopause and the Workplace”. The Committee had suggested a number of steps which the Government has indicated it will not be taking forward. The Government has said that it does not intend to consult on making menopause a protected characteristic under the Equality Acy 2010 and that it will not produce a model menopause leave policy.

There have been instances of successful sex and disability discrimination cases linked to the menopause, but the Committee had considered that there should be consultation as to whether menopausal women should receive particular protection in their own right in line with other protected characteristics. Whilst the Government has indicated that it does not intend to introduce (or consult upon) such particular protection, there is a growing recognition from employers that support in this area is important, with initiatives such as the Menopause Workplace Pledge gaining momentum.