The Dewhurst case (extending TUPE to workers as well as employees)

EMPLOYMENT LAW - KEY DEVELOPMENTS OF 2019 (PROGRAMME 2)

Hello and welcome to the second of our programmes looking back at the key developments of the last twelve months with a focus on the news programmes you have found to be the most popular during 2018, judging by the hit rate on our website.

Sexual harassment – an increased awareness during 2019

As you will be aware sexual harassment is a key area of focus for businesses at the moment and that has been the case throughout the whole of 2019. 40% of women surveyed and 18% of men said they have been sexually harassed at work in the last 12 months and employers are now waking up to the scale of the problem. As a result of the rise of the #MeToo movement and the publicity around allegations brought against high profile individuals such as Harvey Weinstein, there is an increased awareness of this issue and a willingness to take action. Susi Donaldson has been a regular commentator on this:

Susi Donaldson: “These movements have certainly galvanised people, empowered people, destigmatised the issue, and therefore made them much more likely to come forward with these complaints. By extension we definitely have seen an increase in sexual harassment grievances, tribunal complaints, over the past eighteen month period. We have also noticed that companies are much more tuned in to the issues, the negative publicity surrounding them, and they are very keen to take a hard line in relation to these issues and many of our clients, for example, have said that they want to take a zero tolerance approach. A word of caution though in relation to that. As you know, there are no types of misconduct which would automatically warrant dismissal and that includes even very serious sexual misconduct and in every case you need to follow a process, look at the mitigating circumstances, carry out an investigation, so there are no circumstances in which a case of sexual harassment would automatically warrant dismissal and that is something that companies need to bear in mind despite a desire to take a hard line in relation to these issues. If companies have in place robust policies and procedures then that will obviously support any desire to take a hard line in relation to these types of issues. It will also be particularly important in organisations which perhaps in the past have had quite a macho culture where inappropriate behaviours have been normalised. In order to take disciplinary action in relation to people engaging in those activities you need to make clear what has changed, the parameters have shifted and you need to make sure they are trained on the standards of behaviour expected of them and having these robust policies and procedures in place in relation to sexual harassment will also ensure that companies are better equipped to respond to the anticipated legislative developments in this area. The government has just recently closed a consultation on sexual harassment in the workplace and is proposing radical measures such as a positive duty to prevent sexual harassment in the workplace, prevention of third party harassment, and we have been promised a statutory code of practice on sexual harassment next year so this is going to be a big area of activity and should be a focus for businesses. Another proposal that has been made is greater transparency in relation to sexual harassment cases. One proposal that has been mooted is a requirement to report on the incidents of sexual harassment complaints and potentially also on the extent to which companies are taking measure to comply with the duty to take reasonable steps to prevent harassment. I'm not sure how effective reporting on the number of complaints will be – the question is what does good look like? So if you have a high level of complaints is that negative and it means the culture is rife within your business or does it actually reflect positively because it means that you have got a robust reporting mechanism in place which people feel able to use, they feel able to speak up? So I think that rather than going down that route the government will probably impose a requirement for companies to report on the measures they have taken to comply with the anticipated statutory code on sexual harassment."

SMCR – a new regime from 9 December 2019

Moving into December we arrive at a very important deadline for the FS sector. From 9 December the Senior Managers and Certification Regime came into force for all solo-regulated FSMA authorised firms - including investment advisers, investment managers, private equity firms and consumer credit firms. Throughout 2019 the FCA has been flagging this issue and telling firms it needs to be their top priority, so engaging with key staff and reviewing the impact on their governance and accountability frameworks. That mirrors what we have been saying to our own clients throughout 2019. Jon Fisher had this to say:

Jon Fisher: “The big thing about this new regime is it is not just another piece of legislation. Clearly it is supposed to drive fundamental change and therefore what you really need to do is start preparing immediately and this needs to be a business priority and there needs to be a working group set up and that shouldn't just be about compliance or legal, there clearly needs to be HR involvement, operations involvement, there needs to be involvement from across the business because this is going to tough so many areas. The things that working group are going to have to consider, as well as the operational side of things, is obviously from the HR side there is the contract review for your senior managers, the policy review, your disciplinary policy, your grievance policy, you are looking at whistleblowing, all of those kind of issues. Then there is training, you are going to have to train your staff on the conduct rules, you are going to have to train your senior managers on the new rules that apply to them, and there is also a whole host of other issues that obviously you are going to have to get up and running with the Statement of Responsibilities and all the other documents that we have already referred to which are going to have to be drafted in good time so that you can discuss those with the senior managers because one of the big lessons we have learned from other clients is that buy-in from those senior managers at an early stage is really crucial because at the end of the day they are the individuals who are subject to this regime and it is all well and good working in isolation but they are the ones that are going to have to consent to these issues and it is very important that you get that buy-in."

TUPE – the Dewhurst case (protection extends to workers as well as employees)

Finally, TUPE and the end of the year one of the most interesting and potentially significant cases. This was the decision of an employment tribunal in London in the case of Dewhurst v Revisecatch & City Sprint, ruling on the scope of TUPE and deciding that the UK’s regulations protect not only employees but also workers. Whilst this is only a tribunal decision, so not binding, it is persuasive and is likely to be taken into account by other tribunals unless and until it is appealed – an appeal is expected at some point next year and we will be tracking that closely. The case concerned three couriers who were so-called "limb b workers". So to explain, the definition of ‘employee’ in regulation 2(1) of TUPE 2006 covers not only ‘employees’ in the traditional sense but also those who are ‘workers’ under limb (b) of section 230(3) of the Employment Rights Act 1996 and ‘employees’ under section 83(2) of the Equality Act 2010, meaning any person who works for another under a contract, with the specific exception of independent contractors who are genuinely in business on their own account. The employment judge in this case has decided that in order to interpret TUPE in line with European law, the Acquired Rights Directive, TUPE has to be interpreted liberally. So under TUPE, the definition of 'employee' is "an individual who works for another person whether under a contract of service or apprenticeship or otherwise..." This case says that the words 'or otherwise' must be taken to add something to the normal definition of 'employee', and hence covers limb 'b' workers. There are plenty of commentators out there giving their opinion on that interpretation and the general view is this is a well reasoned judgment and follows the mood music around extending workers rights. In fact this is not the first time this has been looked at - back in 2013 in a case brought by racing tipster John McCririck against Channel 4 Television and IMG Media an employment tribunal ruled that TUPE protects workers as well as employees. One of those commenting on the current case is Ed Goodwyn who has pointed out in an article for Outlaw how this case follows the trend of cases expanding workers' rights in the gig economy. He says it highlights the need for the government to complete the independent research on employment status heralded in the Good Work Plan, which followed the Taylor Report, and to introduce legislation to provide clarity for both employers and workers on employment status of individuals. So what about the practical implications of this decision? So, if we assume the case is correct and we assume it is not overturned on appeal, what does it mean for those involved in TUPE transfers? It is a question I put to Laurence Mills:

Laurence Mills: “This case has potentially wide-reaching implications for how we manage TUPE transfer processes. In essence your TUPE "to do" list which currently applies to employees should now also encapsulate limb (b) workers. This is clearest in three ways. Firstly, that these workers would also transfer over to the transferee, to the new employer. Secondly, that your duties to inform and consult now also apply to these workers as well, and thirdly you have to include these workers in your calculations and processes for election of reps if necessary. Now it is really the inform and consult obligations that are the important ones here because failure to do so can leave you on the hook for up to 13 weeks' pay per employee. It is also important to keep a close eye on the definitions and indemnities in those underlying corporate contractual documentations to make sure they now address this point that workers are part of this process. Of course this is only an employment tribunal decision at the moment, so it is likely to be appealed, but it is certainly one to keep a close eye on.”

So, as Laurence says, subject to any appeal, this case is saying that workers will automatically move across from the outgoing employer, the transferor, to the new employer, the transferee. Only those individuals genuinely in business on their own account will fall outside of TUPE.  So if you are the transferor you need to give details about those transferring workers in your “employee liability information” which you give to the transferee. As Laurence said, the most important point is your compliance with TUPE’s collective information and consultation obligations. These require the outgoing transferor to provide specified information to representatives of the affected employees and also to consult with those representatives where “measures” are envisaged in relation to the transfer such as dismissals and contract changes. Importantly, if you are following this case,  it means you will need to make sure that workers are properly accounted for in any election and consultation process so, for example, you will need to check that your existing trade union recognition arrangements or other representative structures cover these workers. This is where it can get complicated, especially if you have trade union recognition arrangements, so we strongly recommend you take legal advice because, as Laurence said, getting this wrong is potentially serious given that the penalty for failure to comply with TUPE’s information and consultation can be very costly, up to 13 weeks’ pay per employee.

That’s it for our Review of 2019. For now from me, good bye.