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Employment eBulletin: summer 2019

19 July 2019

Our latest Employment eBulletin focuses on improving mental health in the legal industry, voluntary overtime and holiday pay, restrictive convenants, the effect of pay rises on contractual maternity pay, paternity pay and discrimination on grounds of religion and belief.

Law Society coverage for Howard Hymanson

One of our Employment partners, Howard Hymanson, shares his views on improving mental health in the legal industry in an article for The Law Society’s Managing for Success.

Howard is quoted in the article as saying: “Measures should be put in place to lessen the excessive demands which law firms place on their lawyers. Utilisation targets need to be reduced and HR departments adequately resourced, with upper management support, to stand up to those partners and departments who take advantage of lawyers prepared to work themselves to the bone.

“This is the key measure that any large firm seeking to implement genuine change should be thinking about.”

The article is available in full to those with membership to the Law Management section of The Law Society. It can be found here.

Holiday pay update: regular voluntary overtime must be included

The Court of Appeal has confirmed in East of England Ambulance Service v Flowers that voluntary overtime which is sufficiently regular and settled should, under the Working Time Directive, (the Directive) be included in holiday pay.

The decision follows the overarching principle when it comes to calculating holiday pay that workers should not be worse off in terms of remuneration when taking annual leave and thereby be a deterrent from taking holiday.

The Court of Appeal’s decision has confirmed the EAT’s 2017 decision in Dudley Metropolitan Borough Council v Willetts that ‘normal remuneration’ must be paid during the four weeks’ annual leave guaranteed by the Directive. If payments for voluntary shifts are normally paid, they must be included in pay for holiday leave.

You can read one of our Employment partners Marian Derham’s Insight article on the topic here.

Restrictive covenants and severance: the Zehnder Judgement

The Supreme Court has carried out a very thorough review of the approach the Courts should take where a restrictive covenant contains wording which might render it too wide in scope to be enforceable.

The case in question, Egon Zehnder Limited v Tillman, concerned an individual working for a firm of head-hunters, who was restrained under her contract from working with the competitors for a period following termination of her employment. The restriction involved being “concerned or interested in any business carried on in competition with any of the businesses of the Company… during the period of 12 months prior to [the termination date] and with which [she] was materially concerned during such period.” The restriction did not include an exception for an interest relating to a small holding of shares in a publicly quoted Company. Such a provision is common and indeed appeared in this contract in the restriction on what Ms Tillman could do during the course of her employment.

You can read the article in full here.

The effect of pay rises on contractual maternity pay

Some employers are not clear on how to deal with pay rises awarded during an employee’s maternity leave with regards to calculating enhanced maternity pay.

The position is that when calculating statutory maternity pay (SMP), the employer must look at the employee’s average earnings during an eight week reference period ending with the Qualifying Week. The Qualifying Week is the 15th week before the expected week of childbirth. However, complications can arise in calculating SMP where an employee is awarded a pay rise during this time or during maternity leave. The judgment in Alabaster v Woolwich Plc and Another [2004] led to the UK Government amending the SMP Regulations in order to provide clarity in this area. The amendments provide that if a pay rise is awarded to an employee after the start of the eight week reference period for calculating SMP (the Relevant Period) but before the end of her statutory maternity leave, the employee’s SMP needs to be recalculated as if the pay increase applied in each week of the Relevant Period. This means that SMP needs to be recalculated from the start of the Relevant Period to take into account the pay rise awarded. A top up payment must then be made to make up for any shortfall. Even if an employee is awarded a pay rise towards the end of her statutory maternity leave, her entire SMP would be recalculated.

The position is fairly straight forward with regards to SMP, but the impact of Alabaster is less clear-cut with regards to contractual (or enhanced) maternity pay (CMP). Whether an employer needs to backdate enhanced maternity pay to take account of a pay rise during an employee’s maternity leave will depend on the terms of the maternity pay scheme and the method used to calculate CMP. Employers’ policies on CMP tend to deal with enhanced maternity pay in one of two ways:

  1. CMP is calculated by referring to the employee’s average earnings during the Reference Period (in the same way that SMP is calculated). The employee will be paid a percentage of those earnings during the maternity leave period (e.g. The employee shall receive maternity pay based on 90% of her average weekly earnings calculated during the Relevant Period for the first six weeks of her maternity leave).
  2. The employee is paid a percentage of their usual salary that they would have received had they been working during that time (e.g. The employee shall receive 100% of her salary in the first 26 weeks of her maternity leave).

The ruling in Alabaster gave the impression that it would only impact upon maternity pay which is calculated by reference to pre-maternity leave pay. This means that when CMP is based on average earnings during a pre maternity leave period it is likely that Alabaster would apply and it would therefore be advisable for employers to backdate the enhanced maternity pay element in the same way as backdating the SMP rather than risk a claim of maternity discrimination or unlawful deduction from wages.

When dealing with CMP that is calculated according to a percentage of the employee’s usual salary, the CMP will not need to be backdated and recalculated. However, employer’s should note that they will still need to backdate the SMP proportion of the employee’s maternity pay.

To avoid backdating or top up of enhanced maternity pay it is possible for employers to draft an enhanced maternity scheme to make it clear that there will be no backdating of maternity pay. For example, by adding the following clause “Any annual pay increase awarded after the start of maternity leave will apply only to maternity pay due from the date of the award.” Although technically SMP would need to be recalculated, in practice, if the enhanced maternity pay significantly exceeds the SMP, there will be no need to make a top up payment for SMP.

Are fathers entitled to enhanced paternity pay?

The Courts have been considering for some time whether an employer, which operates a policy of paying enhanced benefits to women on maternity leave above that required by law, is required to apply the same enhancement for the benefit of its male employees who take shared parental leave.

The Court of Appeal has recently considered three cases on this issue and the answer, simply, is ‘no.’ An employer is not required to enhance the pay of fathers taking parental leave to match the enhancement given to mothers taking maternity leave. Whether the arguments are framed as Equal Pay claims, or Sex Discrimination claims, they cannot succeed.

There is a specific exemption under the Equality Act in relation to terms which afford special treatment to women in connection with pregnancy and childbirth. Terms relating to maternity leave and pay clearly fall within the scope of these exemptions.

A direct discrimination claim cannot succeed, because a woman taking maternity leave is not an appropriate comparator for a man taking shared parental leave. The correct comparator for a man is a woman seeking to exercise her right to shared parental leave and she is also not entitled to the benefit of the enhanced maternity pay proposal offered to a woman taking a period of maternity leave.

If an employer provides more generous pay to a woman taking shared parental leave than to a man, a claim would certainly arise, but maternity leave and pay are available only to women in connection with pregnancy and childbirth, and those who are not eligible for this right cannot compare themselves with those who are.

Employers are not, therefore, obliged to enhance benefits for shared parental leave. In practice, the reality may be that as the numbers of men seeking to take extended leave in connection with the birth of a child increase, employers will come under commercial pressure to enhance the rates of pay offered.

That, however, will be a commercial decision, and not one required by the law as it presently stands, which continues to recognise a unique status afforded to pregnant women, during and for a period after, pregnancy and childbirth.

Discrimination on grounds of religion and belief

The Courts have provided useful guidance recently on the line between the ability to manifest a religious belief in the workplace and the point at which an individual’s conduct can properly be the subject of disciplinary proceedings.

The Court of Appeal considered a case in which a nurse working in an intensive therapy unit was dismissed for allegedly repeatedly initiating discussions about religion with patients, despite having clearly been advised not to do so, unless a patient asked for such a discussion.

The nurse brought a claim of unfair dismissal, rather than unlawful discrimination, but the Court in considering the case recognised that religion and belief issues arose.

These were considered in the context of the European Convention on Human Rights and the Human Rights Act, rather than the Equality Act, but the principles are comparable and the decision of the Court is helpful guidance on unlawful discrimination cases.

The employee argued that an employer was not permitted to place a blanket ban on religious discussions in the workplace.

The Court of Appeal, however, took a practical approach to the issue and expressed a preference that cases of this kind should not become over-elaborate or excessively complicated.

The essence of this case was that the employer had given a lawful management instruction, that the nurse would not initiate conversations with patients about religion. She continued to do so in a manner which patients reasonably considered was inappropriate and about which a number had complained.

The dismissal was not because of her religious belief, but because of her disregard of a clear and reasonable management instruction.

The case suggests that the Courts are not willing to see arguments about religion and belief used to muddy the waters in cases where there is an explanation for dismissal, which is based on acceptable rules about workplace conduct.

In the press

You might have missed some of our Employment specialists in the media.

Here’s a round-up:

  1. Recruiter coverage for Yvonne Gallagher
  2. Employment and social enterprise coverage
  3. Employee Benefits coverage for Yvonne Gallagher
  4. Coverage: Howard Hymanson on mental health in the work place
  5. Recruiter coverage: Charlie Thompson on social media checks
  6. People Management coverage on IR35
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