Chris Tutton and Caroline Glacken survey the complex and costly employment law outlook for property and construction firms in the general election year
Key points
- CJEU is to rule on collective redundancy consultation with potentially significant effect on construction and surveying firms
- Other cases will determine holiday pay calculation and the introduction of shared paternity leave and pay could increase costs
The employment law landscape has been subject to much change in the past four years. 2015 will be no different; not least because the next general election is fast approaching. What are the major issues that will affect employers in the property and construction industries?
Holiday pay
Recent rulings from the Court of Justice of the European Union (“CJEU”) and the Employment Appeal Tribunal (“EAT”) have found that many employers have been underpaying elements of holiday pay, in particular relating to overtime and commission.
The CJEU ruled in Lock v British Gas Trading Ltd (C-539/12) that contractual commission (determined by reference to sales achieved) should be included in holiday pay. The case has been referred back to the Employment Tribunal (“ET”) for a decision as to how that holiday pay should be calculated.
A number of separate cases have been brought concerning the inclusion of overtime when calculating holiday pay. Compulsory overtime should now be included when calculating holiday pay but there is no definitive guidance yet in respect of voluntary overtime.
Workers who wish to bring claims for underpaid holiday must do so within three months of the last underpayment and there must be no gaps of more than three months between underpayments in any series of deductions. Following the recommendation of the (hastily convened) Government Taskforce on Holiday Pay, there will also be a two-year cap on back pay claims brought on or after 1 July 2015.
Collective redundancy
In USDAW v WW Realisation [2013] IRLR 686 (“the Woolworths decision”) the EAT greatly increased the likelihood that redundancies across a business would trigger complex collective redundancy consultation obligations. The EAT decided that European law required employers to aggregate all redundancies across their business over a 90-day period when assessing whether the 20-redundancy threshold was met for collective consultation purposes.
Previously, employers had been able to distinguish business units based on geography and the level of management autonomy when calculating the numbers of redundancies. This meant that locations where there were less than 20 employees being made redundant did not qualify for collective consultation, even though redundancies were taking place elsewhere in the business.
This has created a headache for many employers, particularly large employers in the construction sector that manage significant workforces (which at any one time may well be proposing to make 20 or more roles redundant across the business), or the big surveying firms which are taking over or merging with other firms and will need to rationalise.
At the heart of this issue is whether the UK has properly implemented European law. The Woolworths decision was appealed to the CJEU and the Attorney General’s opinion was released on 5 February. In his view, European law does not require businesses to aggregate all redundancies – which is, in principle, good news for employers. However, he confirmed that there is nothing to preclude a member state from increasing the level of protection for employees. The CJEU will rule on this matter later in the year (although the Attorney General’s opinion is almost invariably followed) and there are a number of cases stayed in the tribunals pending decision – a key point of law to watch develop further this year.
Shared parental leave and pay
Adding to existing rights, new shared parental leave and statutory shared parental pay rights came into force on 1 December 2014 and apply to parents or to adopted parents of babies due on (or placed with on) or after 5 April 2015.
From April, eligible new parents will be able to share up to 52 weeks’ leave between them and up to 37 weeks’ pay. The scheme allows for requests to be made in blocks of leave, at as little as one week at a time, with only eight weeks’ notice required.
Statutory shared parental pay (paid at a flat rate) is available to employees provided there is some remaining statutory maternity or adoption pay that would otherwise be available. Subject to rules, this pay may be transferred to the other parent or used by the primary carer.
This optional scheme offers greater flexibility to parents but the rules governing the scheme are highly complex. Companies must amend policies and assist staff and managers with this new right. Those administering the new scheme will need to familiarise themselves quickly as employees are already raising questions.
Initial government statistics indicated that only 2 to 6% of fathers would take up shared parental leave and the cost impact to business was estimated at £17m. This is likely to be a significant underestimate. The flexibility of the scheme will make it more attractive to new parents juggling their commitments than the government estimates. The administrative burden of managing a number of requests for leave and arranging cover is likely to make the costs impact much greater than anticipated.
A key decision for businesses is whether to offer enhanced pay to parents taking shared parental leave on the basis that many employers offer enhanced pay to maternity leavers. However, such a decision needs to be carefully thought through as it could have significant cost consequences (particularly in a male-dominated sector like property) and raise some complex issues under discrimination legislation.
New sickness absence controls
The government will start to roll out its “fit for work” service on a region-by-region basis in 2015 which will independently assess an employee’s ability to work. There will be greater emphasis on the employer to facilitate a return to work for those on sick leave. Employers should review relevant procedures to ensure they reflect new practice and consider the impact on any in-house occupational health resource.
General election approach
2015 is also an election year and employment law is high on the agenda of each of the main political parties. All are promising further changes to employment law: the Conservative Party on limitations to strike action; the Labour Party on pay transparency, the minimum wage and abolishing tribunal fees; the Liberal Democrats on equal pay, the minimum and living wage, and increasing ordinary paternity leave.
All three parties promise reform or prohibition of zero-hour contracts, some of which are currently used in the construction sector. Clearly, employment law and politics are inextricably connected as we approach the 2015 general election.
Chris Tutton is head of the London employment law team and Caroline Glacken is a solicitor at Irwin Mitchell
