Employment Law Briefing
February 2017
Employment Matters
Need a break? Need to read this case
In a recent case of Grange v Abellio London Ltd, the
Employment Appeal Tribunal (“EAT”) held that if an
employer fails to allow rest breaks, it is considered ‘a
refusal’ under the Working Time Regulations. This is
true even if no request had been made by the employee
to take a break.
Facts
Mr Grange works as a ‘Relief Roadside
Controller’ for Abellio London Ltd (“the
Company”). Even though he was entitled to take
a half an hour lunch break during his working
day, his job role made it difficult for him to take
it. Therefore, in July 2012, the Company (by
way of collective agreement) decided to reduce
the working day by half an hour, from 8.5 hours
to 8 hours a day, so that all Relief Roadside
Controllers would work without a break and finish
earlier. Mr Grange submitted a grievance in 2014
complaining that as he had not been allowed to
take a lunch break for two and a half years, his
health had started declining. His grievance was
rejected so he issued proceedings against the
Company.
Decision
The Tribunal rejected Mr Grange’s claim, basing
their decision on an earlier case which held that
a refusal of a rest break had to be “an act of
refusing, a denial or a rejection of something
demanded or offered”. The Tribunal found
that because there had been no distinct act in
refusing Mr Grange from exercising his right to a
break, there was no breach of the Working Time
Regulations.
The EAT overturned the decision of the Tribunal.
The EAT considered that the Working Time
Regulations were designed to interpret the
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Working Time Directive into national legislation
and thus viewed the initial intention of the EU
Working Time Directive. The EAT held that the
purpose of the Directive was to ensure the
protection of workers. It held that it was incorrect
to adopt the approach of that there had to be an
act of refusing for a refusal to take place under
the Working Time Regulations.
Following on from this, the EAT allowed the
appeal, sending the case back to the Tribunal to
determine whether:
• the Relief Roadside Controllers were too
busy for a break prior to 2012 and whether
that amounted to a breach of the Working
Time Regulations; and
• Mr Grange has been deprived of his
entitlement since July 2012.
Welcome
to the February edition
of our Employment
Law Briefing
Hello again from Clarke
Willmott LLP’s Employment
& HR team. Welcome to
another edition of Employment
Matters.
For further information on any of the topics
in this month’s Employment Matters, please
contact a member of the Employment & HR
team.
As ever, we welcome your feedback and
if you would like to see a particular area or
topic featured in future issues, please let us
know by emailing
[email protected].
Kevin Jones
Head of Employment & HR
Contents
Conclusion
Need a break? Need to read this case
As employers you must ensure that you give the
appropriate rest breaks to your staff. The legal
entitlement under the Working Time Regulations
is 20 minutes every 6 hours. It must be the
employee’s decision if they do not want to take
a break and you should not encourage this.
Ensure that break times are also made clear in
your employment contracts and casual worker
agreements. If you have any queries on this,
please do not hesitate to get in touch with us.
The gig economy and CitySprint
Employment and worker status – the hot
topic
Personal Service Companies and the
Public Sector
Case update: Stratford v Auto Trail VR
Limited – do you need a live warning?
Immigration skills charge
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02
Employment Law Briefing
February 2017
The gig economy and CitySprint
The gig economy continues to be in the spotlight and we now report on the
outcome of a further case against CitySprint in the Employment Tribunal.
CitySprint is reputedly the UK’s largest and fastest-growing same-day
courier business. It uses 3,200 self-employed couriers. Ms Dewhurst, a
cycle courier for CitySprint, bought a claim for two days holiday pay and, to
succeed in her claim, had to demonstrate that she was a worker, rather than
self-employed. Both employees and workers are entitled to paid holiday,
whereas self-employed individuals are not.
Ms Dewhurst was provided with a “CityTrakker” device, bag, uniform and ID
and she paid for this through weekly deductions. Although CitySprint denied
that couriers were required to wear a uniform, the Employment Tribunal
found that this was at odds with it trying to sell the image of a professional
looking fleet of couriers. Couriers did; however, have to provide their own
bike.
The Employment Tribunal had to consider: (1) if the contract expressed
the true agreement between the parties; (2) if Ms Dewhurst satisfied the
definition of a worker; and (3) if so, when Ms Dewhurst held worker status to
calculate how much she was due.
In many instances, the Employment Tribunal found that the agreement did
not reflect the reality of the situation. Furthermore, due to the limited number
of circumstances that a substitute could be provided in, it was found that
Ms Dewhurst was contracted to provide a personal service.
Ms Dewhurst signed a “Confirmation of Tender” document which described
her as “a contractor” and included a “tick” box exercise against a number of
statements. These included that she: was not obliged to provides services;
was not entitled to be offered work; could send a substitute provided they
satisfy certain criteria; did not get paid if she did not work; was not entitled
to holiday, sick or maternity pay; and covered her own costs - all designed
to support and evidence that she was self-employed.
Ms Dewhurst also had little autonomy in terms of how the service was
provided – she was required to log in and out of the Citytrakker when she
joined and left the circuit, wear a uniform, was directed by a controller,
told what to do if a parcel could not be delivered and to smile. Therefore,
the Employment Tribunal found that Ms Dewhurst was not working for
herself with CitySprint as her customer but on CitySprint’s behalf and was
integrated in to the business. Therefore, Ms Dewhurst was a worker.
A two day induction “covered every facet of the job and set down in precise
terms the way in which [she] was expected to work at each stage of the
process”.
When it came to determining when Ms Dewhurst was working, the
Employment Tribunal held that this was the case during the time that she
was on circuit.
Ms Dewhurst had no start or finish time but generally worked four days
a week. Once she was “on circuit”, she was paid per job. On induction
couriers were told, all payments would be made weekly in arrears and there
was a self-billing service with invoices available on their iFleet system. In
reality, CitySprint automatically calculated payments and paid them one
week in arrears, less deductions.
Although this case was only for two days’ pay, it exposes CitySprint to
similar claims from the remainder of its couriers.
Although couriers were allowed to send substitutes, the website describes
a “secure, dedicated service” with couriers who are “fully trained”.
Furthermore, the terms of substitution would only allow for Ms Dewhurst to
use another courier on circuit due to the complexity of invoicing, allocation
of jobs and liaising with customers. There were no examples of this
happening and, in reality; it was unlikely that a substitute could be used.
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Businesses should be mindful that cases of this nature are on the increase
and that the Employment Tribunals place more weight on the actual
working arrangements (and what happens in practice) rather than what
is recorded in the paperwork. This case of Pimlico Plumbers (see below)
clearly reiterates the risks for employer organisation in this area. Therefore,
employers should undertake an assessment of any self-employed
individuals to ensure this reflects the nature of the relationship in practice.
As can be seen this is a far from straight forward analysis and we would be
happy to assist on a project basis if need be.
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03
Employment Law Briefing
February 2017
Employment and worker status – the hot topic
Another leading decision has just been made by the Court of Appeal (“CA”) relating
to employment status (in other words, whether an individual is an employee, a
worker, or self-employed).
The question of employment status has been the central issue to many
employment cases over the past 12 months and this recent case, Pimlico
Plumbers & Charlie Mullins v Gary Smith is important as it is likely to be a
leading case on employment status in future years.
In Pimlico, the court has ruled that self-employed plumbers providing their
services to a plumbing company were in fact workers, not self-employed
contractors. As the Master of the Rolls said: “This case puts a spotlight on a
business model under which operatives are intended to appear to clients of
the business as working for the business, but at the same time the business
itself seeks to maintain that... there is a legal relationship of... independent
contractor rather than employer and employee or worker.”
As with all employment status cases, it is a fact- sensitive case, and the
Judge carried out a detailed assessment of the evidence and contractual
documentation that Mr Smith worked under when at Pimlico Plumbers.
Importantly, the Court of Appeal gives a clear summary of the principles for
the ‘personal service’ aspect of the employment status tests.
The facts
Mr Smith was a plumber who carried out work solely for Pimlico Plumbers
between August 2005 and April 2011. He had signed an agreement that
his work would be governed by terms and conditions set out in Pimlico’s
manual, which included stipulations as to working hours, uniform and
appearance; restricted the ability of Mr Smith to work for himself or other
companies; obliged Mr Smith to use a Pimlico van for his work; and
provided that Mr Smith could only swap jobs with other Pimlico operatives.
During this period, Mr Smith filed tax returns on the basis that he was selfemployed. He was registered for VAT and submitted regular VAT invoices
to Pimlico. In January 2011, Mr Smith had a heart attack and Pimlico
subsequently terminated its arrangement with him on 3 May 2011, following
which he brought claims in the employment tribunal alleging unfair dismissal,
wrongful dismissal, entitlement to pay during the period of a medical
suspension and failure to provide particulars of employment. These claims
all depended on Mr Smith being an “employee”. At a pre-hearing review,
an employment judge found that Mr Smith was not employed under an
employment contract, and therefore concluded that he could not continue
with these particular claims.
However, Mr Smith had also made claims for unpaid holiday pay and
unlawful deductions from wages. For these purposes he did not need to
show that he was an employee, just that he was a ‘worker,’ in other words,
he was employed under a contract ‘whereby the individual undertakes to do
or perform personally any work or services for another party to the contract
whose status is not by virtue of the contract that of a client or customer of
any profession or business undertaking carried on by the individual’. He also
claimed against both Pimlico and its owner, Mr Mullins, for direct disability
discrimination, discrimination arising from disability and failure to make
reasonable adjustments. For these purposes, he needed to be an employee
within the extended definition in the Equality Act 2010, which includes
those employed under ‘a contract personally to do work’ (in other words,
“workers”).
The employment judge ruled that Mr Smith was a worker and an employee
in the extended sense (meaning that he could claim disability discrimination).
The main purpose of the agreement he signed in 2005, and a subsequent
agreement containing updated terms which Mr Smith signed in 2009, was
for Mr Smith to personally provide work for Pimlico. The Pimlico manual
stated that he had to work 40 hours per week (Mr Mullins’ evidence was
that the minimum week in practice was 36 hours per week), and although
there was some flexibility, Mr Smith was required to agree the hours he
would work with Pimlico. There was not an unrestricted right to provide
a substitute if Mr Smith did not want to carry out work himself at any
given time: there was no such right given to Mr Smith by the contractual
documents and no evidential basis for such a practice. Even though in
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practice engineers with Pimlico swapped jobs around between each other,
and also used each other to provide additional help where more than one
person was required for a job or to do a job more quickly, and there was
evidence that external contractors were sometimes required to assist a job
due to the need for further assistance or to conduct specialist work, the fact
was that Mr Smith was under an obligation to provide work personally for
a minimum number of hours per week or on the days agreed with Pimlico.
Mr Smith had a degree of autonomy in relation to the estimates and work
done, but Pimlico exercised very tight control in most other respects. These
factors led the judge to conclude that Pimlico could not be considered to be
a client or customer of Mr Smith’s business.
The Employment Appeal Tribunal (“EAT”) agreed with the employment
tribunal, prompting Pimlico to appeal further to the Court of Appeal. In the
CA’s view, the EAT had been correct to conclude that Mr Smith was under
an obligation to provide his services personally. Unlike earlier decisions of
the EAT and Court of Appeal, in which it had been held that an express right
of substitution or delegation was incompatible with an obligation of personal
performance, the facts here indicated that there was not an express right.
Nor was there any scope for the Court to imply such a right. Furthermore,
having found that Mr Smith was obliged under the terms of his agreements
with Pimlico to do a minimum number of hours per week, the employment
judge was correct in concluding that the degree of control Pimlico had over
Mr Smith was also inconsistent with Pimlico being a customer or client of a
business run by Mr Smith. In particular, the judge was entitled and right to
place weight on the onerous restrictions in the agreement, preventing Mr
Smith from working as a plumber in any part of Greater London for three
months after termination.
What does this mean for employers?
This case provides useful guidance on the factors that may make an
individual a ‘worker’ for employment law purposes, rather than a selfemployed contractor. It highlights the importance of getting the paperwork
right from the outset, but also that if what happens in reality is different
from what is set out in any written agreement, the courts will rely on what
happens in practice. The fact that the individual initially “agreed” that
they were self-employed and were happy to work on that basis for many
years, does not prevent them from bringing and succeeding with a claim
to the contrary later down the line. This can lead to employers having to
face expensive claims for back-pay (for example in relation to any unpaid
holiday and sick pay) and in some circumstance will enable workers to bring
successful discrimination claims. It may also encourage others within the
business to follow suit.
If you regularly use self employed contractors but are unsure whether they
are actually workers or employees, please do get in touch.
Increase in Employment Tribunal compensation limits
From 6 April 2017, the following compensation limits will be increased:
•
The cap on a week’s pay to rise from £479 to £489. This will be
important for calculating redundancy payments and the basic
award for unfair dismissal.
•
The minimum basic award in unfair dismissal cases due to health
and safety, employee representatives, trade union or occupational
pension trustee reasons to increase from £5853 to £5970;
•
Guarantee pay to increase from £26 to £27 a day;
•
The maximum compensation for unfair dismissal is set to rise from
£78,962 to £80,541; and
•
The maximum compensation for basic award is set to be £5868.
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04
Employment Law Briefing
February 2017
Personal Service Companies and the Public Sector
HM Revenue & Customs (“HMRC”) recently published changes to the
intermediaries legislation, commonly known as IR35, to be included in the Finance
Bill 2017.
The object of intermediaries legislation is to make sure that an individual
who provides his services through an intermediary, for example a personal
services company, who would otherwise have been taxed as an employee,
pays employment taxes on his income. The proposed changes take effect
from 6 April 2017.
The changes also apply to contracts entered into before that date. If work is
completed before 6 April 2017, but payment made on or after 6 April 2017,
it will be within the new legislation.
IR35 in the public sector will be amended as follows:
• responsibility for determining IR35 status will sit with the public sector
client;
• where IR35 applies, the entity paying the intermediary limited company
will be required to deduct the appropriate amount of income tax
and National Insurance (“NI”) before paying the intermediary limited
company;
• the liability for any unpaid tax and NI contributions will sit with the body
that pays the intermediary limited company, unless the client fails to
provide a decision within 31 days of a request; and
consultant/consultancy service company) agree they will be engaged as an
independent contractor, and not as an employee or worker. To enforce the
new rules HMRC has decided that the end user (i.e. the public authority) will
determine whether a contract is in, or out of scope of the new guidelines
and has developed an online tool to assist with making a decision. The tool
covers the following five areas:
• Supervision.
• Control.
• Financial risk.
• Business details.
• Part and parcel of the organisation.
Implications for consultants
• Consultants will have to decide whether to continue invoicing via
their limited company, transfer to an umbrella or a managed service
company arrangement or move on to a PAYE contract.
• A recent report concluded that consultants’ earnings would be
reduced by up to 33%.
• the 5% deduction currently allowed to intermediaries for “notional
expenses” will no longer be available for public sector contracts.
• The public authority will have to make deductions for PAYE,
employees’ NI and will also be liable for employers’ NI.
How will IR35 status be determined from 6 April 2017?
Long-term implications for public authorities
In summary the new provisions apply when:
• Consultants may reject roles in the public sector in favour of the private
sector, leading to a shortage of change/transformation skills to lead on
major programmes.
• a worker personally performs services, or is under obligation personally
to perform services for the public sector client;
• the definition of a “public authority” is as set out in the Freedom
of Information Act 2000. This includes government departments,
universities, local authorities, parish councils and the NHS as well as
many companies controlled by such authorities; and
• the services are provided under circumstances where, if the contract
had been directly with the public authority, the worker would be
regarded (for Income Tax purposes) as an employee of the public
authority (or alternatively the holder of an office with the public
authority).
HMRC will look at the reality of the working relationship and what happens
in practice, regardless of whether the parties (the public authority and the
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• The HMRC online tool is very time consuming and requires significant
input from the consultant in order to complete it.
• There will be cost implications for the public authority. A public
authority will need to assess whether it is able to maintain the current
rate to the consultant to cover the employers’ NI contributions.
• There are potential additional costs if the consultant transfers to PAYE
contracts including pension and the apprenticeship levy.
HMRC has given public authorities thirty one days to give a decision on
whether the contract is in or out of scope of the new guidelines. Failure to
make a decision will result in the public authority being responsible for the
PAYE and NI.
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05
Employment Law Briefing
February 2017
Case update: Stratford v Auto Trail VR Limited – do you need a live
warning?
The employee in this case, Mr Stratford, had worked for Auto Trail VR Limited (the
employer) since November 2001.
During the employee’s employment, he had been subject to formal
disciplinary action no less than 17 times. However, at the time of the
incident which led to his dismissal, he had no live warnings on his record.
The employer strictly prohibited the use of personal mobile phones on the
shop floor and this was clearly set out in the Employee Handbook. On 15
October 2014 the employee was seen using his mobile phone on the shop
floor and was subject to disciplinary proceedings.
Mr Bristow chaired the disciplinary hearing. Mr Bristow concluded that,
although the employee was aware of the procedure for emergency contact
during work hours, and therefore had no reason to have his mobile phone
on the shop floor, there were extenuating circumstances. He decided that
this was not gross misconduct and a final written warning was appropriate.
However, as this was the 18th time that the employee had been subject to
formal proceedings, Mr Bristow believed that it was likely he would again
be the subject of disciplinary proceedings in the future and that, although
the employee understood the consequences of his actions, he would not
change. Mr Bristow dismissed the employee with a payment in lieu of his 12
weeks’ notice.
After appealing the decision to dismiss him and the decision being upheld,
the employee issued unfair dismissal proceedings.
The employee was unsuccessful at the Employment Tribunal. The
Employment Judge found that the employee had been dismissed due to
his disciplinary history because the employer had no reason to think that he
would change his ways. The Judge considered it was standard employment
practice that, once a warning had expired, it was not taken into account in
future formal proceedings but concluded that the employer was entitled to
find that the employee’s behaviour could no longer be tolerated in light of his
attitude towards such disciplinary proceedings.
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The employee appealed to the Employment Appeals Tribunal (“EAT”) on
the basis that the Employment Tribunal had erred in law. His case was that
if an employee is found guilty of misconduct (not gross misconduct) which
does not justify a dismissal, it is not reasonable to rely upon earlier, historical
disciplinary warnings which have expired to justify a subsequent dismissal.
The EAT considered the principles previously set out by the Court of Appeal.
It summarised these as:
• the decision depends on the construction of legislation as “the tort
of unfair dismissal is entirely the creation of statute” (the written
legislation);
• the correct construction of the legislation means a tribunal can find
that a dismissal is fair even if account was taken of expired warnings
regarding similar conduct; and
• the legislation does not set out particular circumstances to determine
the questions of reasonableness, equity, merits or fairness.
The EAT found that the Employment Tribunal had not erred in this respect
and the manager was entitled to consider the employee’s previous record as
well as what he thought would happen in the future.
There appears to be a distinction in the previous authorities between relying
on an expired warning to elevate the conduct into a dismissible offence
(previously found to be unfair) and considering previous conduct when
determining the sanction of a dismissible offence (previously found to be
fair).
In practice, employers should consider tailoring warnings for repeat
offenders so that they are live for a longer period of time and/or will be taken
into account for subsequent conduct which is of a similar nature. Please
contact us if you are considering such a dismissal or sanction.
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06
Employment Law Briefing
February 2017
Immigration skills charge
Subject to parliamentary approval, a new immigration skills charge is
expected to come into force from 6 April 2017. The aim of the charge is
to encourage companies to increase the skills of British nationals.
The immigration skills charge is an extra fee that will need to be paid to
the Home Office in addition to the usual fees that are already paid. It is
applicable to all Tier 2 workers that are being sponsored via the “General”
or “Intra-company Transfer” route who is applying:
The charge is payable for the total period of time and is payable upon
assigning a Certificate of Sponsorship.
A small business is considered as a company with:
• An annual turnover of £10.2 million or less
• Less than 50 employees.
You will not have to pay the skills charge if you are sponsoring:
• Outside the UK for a visa
• A migrant sponsored in Tier 2 before 6 April and is applying inside
the UK to extend their Tier 2 stay with either the same, or a different
sponsor
• Inside the UK to switch to this visa from another
• A Tier 2 (ICT) graduate trainee
• Inside this UK to extend their existing visa.
• A worker to do a specified PhD level occupation
The charge will be at a rate of £1000 per employee that an employer
sponsors per year for medium or large sponsors, and £364 per year per
employee for small or charitable sponsors. This means that if a large
company wishes to sponsor a migrant for 3 years, they will have to pay
an additional £3000 or a small company will have to pay £1092.
• A Tier 4 student visa holder in the UK switching to a Tier 2 (General)
visa.
Please let Tim Copplestone of our business immigration team know if you
would like further information on this new immigration skills charge or any
guidance on sponsoring or employing migrant workers.
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Kevin Jones
Partner
0345 209 1140
[email protected]
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Partner
0345 209 1581
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Partner
0345 209 1332
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Partner
0345 209 1420
[email protected]
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Partner
0345 209 1878
[email protected]
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Head of HR Consultancy Unit
0345 209 1831
[email protected]
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The articles in this briefing are not intended to be definitive statements of the law but instead provide general guidance.