You will be delighted to know that, at least over the last month or so, things have for once been fairly quiet on the employment law front.
So this month, instead of our usual "round up", we are merely noting the main employment law related changes in effect from 1st October 2007 and examining in rather more detail than is normal in these newsletters one particularly important issue (see item 7 below). If you would like information on other statutory changes please go to the "In the pipeline" section on our website.
The 1st October 2007 changes follow the government's declared intention of trying to concertina statutory changes where possible into two "batches" coming into effect every 1st October (the date on which the minimum wage is revised each year) and 6th April (the start of the tax year).
Apart from these changes, a relatively minor new item which may be of interest concerns the case of Reaney v Hereford Diocesan Board of Finance . This was the case in which, as noted in our September newsletter, an employment tribunal at Cardiff decided that the Bishop of Hereford had acted unlawfully in turning down a gay applicant for the post of Diocesan Youth Officer in spite of expressly recognising that it should not substitute its own view "to that of an employer who is reasonable". At the end of September the Diocese announced that it had decided not to appeal against this ruling "due to the high cost and length of time it would be expected to take". A remedies hearing is therefore expected at which compensation will be awarded. This is likely to take place in December 2007 unless the parties first settle "out of court".
Under law in force until 1st October 2007 almost every worker has had the right to four weeks paid holiday per year, or proportionally for part of a year - so, for example, a full time worker who worked 5 days a week for a full year was entitled to a minimum of 20 days paid holiday per year and a worker who worked 3 days a week for a full year was entitled to 12 days paid holiday per year.
There was, and is, no statutory right to bank or public holidays, with or without pay. In 2005 the government announced plans to change this but in the event replaced those plans with a proposal to increase the normal statutory annual holiday entitlement. The increase for full timers is to 28 working days, pro rata for part timers, phased in over 18 months from 1st October 2007. The precise detail of the phase-in is quite complicated as it depends on the date on which a worker's leave year begins.
We set out below the formulae for the phase in period appropriate for a worker whose leave year begins on 1st January and who is employed for the full year.
The new rules include a provision releasing employers from the obligation to comply if and for so long as under the terms of a "relevant agreement" (in effect any enforceable written agreement) in operation at 1st October 2007 they already provide at least 28 days' annual leave - pro rata for those working part time. This will usually ensure that a worker who is already contractually entitled to time off for bank and/or public holidays will not also be entitled to the new statutory increase in holiday entitlement - "usually" as certain conditions must be fulfilled, notably that the "relevant agreement" must not allow commutation of the holiday for cash.
As the new holiday right exceeds the minimum required by EC rules under the Working Time Directive, the excess does not have to comply with those rules. One result is that, subject to strict limits, the excess can be carried forward and another is that there are some minor exemptions to the rules which forbid commutation of holiday for cash.
The October 2007 changes are set out in the Working Time (Amendment) Regulations 2007, SI 2007/2079.
The increases from 1st October 2007 are as follows:
Also with effect from 1st October 2007 three new classes of persons are added to those who do not qualify for the national minimum wage, namely (i) persons doing work experience as part of a further education course; (ii) workers participating in the latest phase of the Leonardo da Vinci Programme (an EC scheme providing participants with vocational training); and (iii) workers participating in the EC Youth in Action Programme.
There are separate provisions for Agricultural Workers. The standard adult minimum wage for agricultural workers (Grade 2) rises from £5.74 to £6.00 per hour.
The October 2007 changes are set out in the National Minimum Wage Regulations 1999 (Amendment) Regulations 2007, SI 2007/2318 and the Agricultural Wages Order 2007 (for England and Wales)
No surprises here. In general the new statutory rules on directors' duties in effect from 1st October 2007 codify, but are not intended to change, the law established by the courts over many years concerning the duties of company directors. The only is in an exception provision concerning conflicts of interest and authorisation of matters which involve such a conflict.
The official guidance notes set out the duties of a company director as being to:
It is worth noting that it continues to be a criminal offence for a company to fail to keep at least a written memorandum of every director's service contract, even if the director is the only shareholder
Since 6th April 2003 parents and certain others who are responsible for looking after children aged under 6 (or under 18 if the child is disabled) have had the legal right to ensure that requests they make for flexible working arrangements are taken seriously by their employers. Typically flexible working arrangements include part-time working or working from home.
Earlier this year (6th April 2007), the right was extended to employees with responsibility for caring for (i) spouses/partners (ii) adult relatives and (iii) adults living at the same address as the employee.
As from 1st October 2007 it is further extended so that private foster carers (and their spouses and partners) are added to the list of people who are entitled to request a contract variation to care for a child. A person in whose favour a residence order is in force in respect of a child (and their spouses and partners) are also added to the list.
The October 2007 changes are set out in the Flexible Working (Eligibility, Complaints and Remedies) (Amendment) (No. 2) Regulations 2007, SI 2007/2286
As from 1st October 2007 a single equality commission, the Commission for Equality and Human Rights (CEHR), replaces the Equal Opportunities Commission, the Commission for Racial Equality and the Disability Rights Commission. In addition the CEHR is responsible for enforcing anti-discrimination rules in the areas of sexual orientation, religion or belief, and age. Finally, it has a general responsibility for promotion of human rights. The first chair of the CEHR is Trevor Phillips.
The CEHR has power to make grants to others. This was something which the Commission for Racial Equality was also able to do but which neither the Equal Opportunities Commission nor the Disability Rights Commission could generally do.
It seems likely that the CEHR will need a little while to get fully into gear. As recently as 4th September 2007 it was advertising in the Times newspaper for recruits to fill 13 Director posts and a committee of MPs has expressed concern that it is underfunded.
The "right to Equal Pay" sounds boring. Even a government minister thought so when introducing important changes to the rules (see the end of this note). However, whether boring or not, over the last couple of years Equal Pay has developed into an issue of enormous importance.
Equal pay now affects literally millions of people. Some are directly affected as employers or employees. The public sector is most at risk of claims due to the nature of the services it provides and the number of employees involved but the same basic rules apply to the private sector and claims can be expected there too. Many, many more people are indirectly affected, no doubt including almost every reader of this newsletter, as a result of local authorities passing on the huge costs involved by increasing council tax bills and/or cutting back services.
As recently as last week, in an effort to cushion the blow, the government has announced that 46 local authorities in England will be given permission to break the normal rules and spend £500m of capital to settle equal pay claims (see Department for Communities and Local Government memo of 28th September 2007).
Already equal pay was attracting wide press coverage (see for example the Times on 21st September 2007). It will continue to be of importance for a long while to come. Newspaper reporting sometimes provides a less than accurate summary of relevant law so we thought it might be useful if we prepared a note for readers to explain something of what is going on. This newsletter is therefore rather different from our normal monthly format. There are fewer items but this final one is longer than usual, focusing on equal pay. So, take a deep breath - here we go:-
The most basic point is that equal pay law is part of the anti-sex discrimination framework. Whatever its underlying philosophy, the Equal Pay Act 1970 is not concerned with fair pay generally or even whether men generally are paid more than women. It is concerned only with ensuring that the sexes have the same pay and other terms and conditions of employment if and when they are doing the same work, work of equal value or work rated as equivalent by a job evaluation scheme. As a matter of mechanics this is done by providing that every employment contract must include an appropriate equality term. If, as is normal, a contract does not include a suitable clause the Equal Pay Act provides that it will be "implied" and thus be as valid as if in writing.
The second, and in practice, perhaps the most important point is that until 2003 there was a two year back-dating restriction on equal pay claims. This was changed by the Equal Pay Act 1970 (Amendment) Regulations 2003 so that now a person making an equal pay claim can now look for up to six years arrears. This change had to be made because the European Court of Justice ruled that the original 2 year back-dating restriction was contrary to EC law. The result was to increase the value of many potential claims by 300% in one fell swoop.
A third important item is that under the terms of a "Single Status Agreement" concluded in 1997, local authorities agreed with trade unions that over the following ten years there would be a formal evaluation to establish which council jobs should be regarded as at the same level as each other and should therefore receive the same rate of pay. Thus, for example, cooks might be graded as equivalent to joiners. In practice there has been a pay differential of around £3 to £4 per hour between the two. Cooks are mainly female and joiners are mainly male so it is easy to see how cooks can use the sex discrimination rules of the equal pay legislation to make equal pay claims. As awards can now be back-dated for up to six years, the aggregate amounts involved are enormous.
A final important item which has contributed to the explosion of equal pay claims was the simplification in 1996 and 2001 of the original complex rules for comparing the value of a job being done by a claimant with the value of one being done by someone of the opposite sex. The complications of the original "job evaluation" rules meant that equal pay cases were rarely brought, could take years to being to a conclusion and be incredibly expensive to run - for example a well known equal pay case started in 1986 by a lady named Pamela Enderby against her employer, the Frenchay Hospital in Bristol was not finally concluded until 2000. The combined effect of regulations made in 1996 and 2001 (the Sex Discrimination and Equal Pay (Miscellaneous Amendments (Regulations) 1996 and the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001, replaced in 2004) and the "Single Status Agreement" noted above made it practical to bring equal pay claims and the increase in back-dating from 2 to 6 years noted above means they can be much more valuable than previously.
Not surprisingly, specialist advisers have emerged. They seek out and encourage potential claimants to enforce their legal rights. Claimants are basically on a winner to nothing as these advisers generally operate on a "no win no fee" basis and the normal employment tribunal costs rules apply. Thus if a claimant loses her case it is unlikely that costs will be awarded against her and she will have nothing to pay. So many decide to have a go and the results have been spectacular.
Apart from the huge cost, mainly to local authority employers, there is a further problem in that employment tribunals are now in danger of being swamped by equal pay claims. It is estimated that some 50,000 equal pay claims are currently waiting to be heard at employment tribunals. There will probably be many more to come as this does not take into account claims likely to be brought by staff in the NHS and in the education sector. Figures support the estimates. There were only 23 successful "work of equal value" claims in the 10 years 1984 to 1994. In 2006/07 there were very nearly as many equal pay claims as there were unfair dismissal claims. The number going to employment tribunals has more than doubled each year for the last four years (there were 3,000 equal pay claims in 2003/04; 8,000 in 2004/05; 17,000 in 2005/06 and 44,000 in 2006/07). Expressed as percentages of the total number of claims to employment tribunals the figures are even starker - 5.2% in 2004/05; 8.5% in 2005/06 and 18.4% in 2006/07.
One of the final recommendations of the outgoing Equal Opportunities Commission (replaced by the CEHR as from 1st October - see item 6 above) is for a moratorium on all new equal-pay claims. They suggested in September that employers should be allowed three years to address any outstanding discriminatory pay issues because "the flood of pay claims brought recently against local authorities is pushing the tribunal system to breaking point". Of course while this might provide a breathing space for tribunals, it would not address the underlying economic and cash problem for employers.
That, in briefest outline, is the background and a general explanation of what is happening. Of course the detail is much more complicated and there has been much case law over the last few years - a couple of interesting recent cases on detail legal points are noted below:
This note barely scratches the surface of what is complicated but extremely important subject. We noted above the change which had to be made in 2003 to the equal pay rules to bring them into line with European law. As a final note to this brief sketch here is a quote from the 1983 diary of Alan Clark, the government minister charged with bringing forward the "work of equal value" changes to the Equal Pay Act required by EC law which, ultimately, enabled the current spate of claims. He didn't understand, he found the subject boring and he'd had a good dinner with good wine. His diary (Weidenfeld & Nicolson, 1993) records that on a fateful evening in July 1983 the House of Commons was "unusually full ..... As I started, the sheer odiousness of the text sank in. The purpose of the Order, to make it more likely .... that women should be paid the same rate for the same task as men, was unchallengeable .....In my view, in most instances women deserve not less but more than the .... males who control most organisations at most levels. But give a civil servant a good case and he'll wreck it with clichés, bad punctuation, double negatives and convoluted apologies. Stir into this a directive from the European Community ..... and a few caveats from the European Court of Justice and you have a text which is impossible to read - never mind to read out..... Helter-skelter I galloped through the text. Sometimes I turned over two pages at once, sometimes three. What did it matter?...... Up bobbed a teeny little fellow, Janner by name ....... he asked me what the last paragraph 'meant'. How the hell did I know what it meant ....... This had the makings of a disaster...... Then the inevitable .......A new Labour member whom I had never seen before, called Clare Short, dark haired and serious with a lovely Brummie accent, said something about she'd read that you couldn't accuse a fellow member of being drunk, but she really believed I was incapable...... Screams, yells, shouts of 'Withdraw', counter shouts. General uproar....".
Such was the genesis of the rules now causing such headaches up and down the country. Sadly, the indications are that things can only get worse.