Key employment law developments: employment references; enhanced shared parental pay; strike out

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Summary: Our May update outlines key recent employment law developments. These include cases on giving an employment reference, whether failure to enhance shared parental pay is discriminatory and guidance on striking out a claim for a claimant's unreasonable conduct. We also outline other points of note including important HMRC guidance on the taxation of termination payments and the ICO’s recent guidance on key aspects of the GDPR.

Employment references – no need to examine the fairness of earlier investigations

The High Court has dismiss a claim for negligent statement in relation to a reference given by a former employer which referred to previous disciplinary action. The claimant’s authorisation to work as an independent financial adviser had been withdrawn following an investigation into various breaches of internal procedures, during which he had been suspended. Subsequently, his employer gave a reference which referred to the investigation and suspension, and stated that the claimant had “knowingly and deliberately circumvented” the internal processes.

The claimant claimed damages for loss of earnings caused by the unfavourable reference. He said that the reference was not true and accurate and gave a misleading impression and alleged that this was partly because the investigation on which it was based was carried out in bad faith and was pre-determined. Dismissing the claim, the High Court stated that there were “formidable difficulties” with the claimant’s argument that the employer should have conducted an investigation into the fairness of the previous investigation. The Court recognised the practical difficulties and onerous burden that this would place on reference writers. It reaffirmed the general requirement that, when referring to prior investigations, reference writers need only take reasonable care to understand the basis for the previous action and be satisfied that there was a proper and legitimate basis for it.

Why this matters

Employers will welcome this decision, which places helpful restrictions on the degree to which they are expected to review prior disciplinary action when giving references. Nonetheless, employers still need to be mindful of their duties to exercise reasonable skill and care and to give a reference which is true, accurate and fair.  In some cases, this may require a critical appraisal of prior investigations. Certain employers, for example those in the financial services sector, may also be subject to regulatory requirements which overlay and enhance their common law obligations.

Hincks v Sense Networking Ltd


Tribunal justified in ordering strike out when claimant discussed case with a journalist whilst under oath

Whilst under oath, witnesses in tribunal claims are prohibited from discussing their evidence or any aspect of the case with any other person. The Employment Appeal Tribunal (EAT) held that a Tribunal was entitled to strike out a claim where the claimant was overheard discussing her claim with a journalist during a break in her evidence.

A Tribunal has the power to strike out a claim for ‘unreasonable conduct’. As this is a particularly draconian sanction, the Tribunal should first consider (a) whether a fair trial is still possible; (b) if not, whether a lesser sanction (for example, striking out only part of the claim, or remitting the case to a fresh tribunal) is more appropriate; and (c) the consequences of strike out, for example whether the offending party should still be allowed to participate in a remedy hearing. In this case, in deciding to order strike out the Tribunal held that its trust in the claimant was irreparably damaged, given in particular that she had been given numerous clear instructions not to discuss the case, and that she had presented conflicting accounts of the event when questioned. Because of its concerns over her veracity, the Tribunal found that a fair trial was no longer possible and considered that another Tribunal would have identical concerns and, therefore, that strike out was appropriate. The EAT confirmed that the Tribunal had approached the issue in the correct manner and had been entitled to reach its finding.

Why this matters

This case is a salutary reminder of the need for witnesses to avoid any discussions about the case whilst under oath. Although the power to strike out is one which the Tribunal should exercise with caution, disobeying this rule can call into question a party’s honesty and integrity, which may irreparably undermine the possibility of a fair trial, with the real possibility that their case may then be struck out.

Chidzoy v British Broadcasting Corporation


Shared parental pay – failure to enhance is not direct sex discrimination

Since the introduction of the shared parental leave (ShPL) regime, there has been much debate as to whether an employer’s failure to pay enhanced shared parental pay (ShPP) amounts to sex discrimination in circumstances where it pays enhanced maternity pay. The argument revolves primarily around the degree to which it is appropriate to compare the situation of a woman on maternity leave with a man on ShPL.

In this case the EAT, overturning the Tribunal below, held that the employer’s failure to pay enhanced ShPP was not discriminatory. In reaching the opposite finding, the Tribunal had decided that after the two-week mandatory leave period, the purpose of maternity leave (and pay) is to assist with childcare. As the claimant had wanted to take ShPL for childcare purposes, the Tribunal had therefore found that it was correct to compare his treatment with that of a woman on maternity leave (who would have received enhanced pay). The EAT disagreed, finding that the purpose of the maternity leave regime is to aid the health and wellbeing of the mother, whereas the ShPL regime is focussed on the provision of childcare. Therefore, the correct comparator in this case should have been a woman on ShPL, who would have received equal treatment to the claimant. Therefore, there was no discrimination.

Why this matters

This decision will be welcomed by those employers who have chosen not to enhance ShPP. However, it is important to bear in mind that much will turn on the particular facts of each case and so this decision is not the final word in the matter. This is a developing area of law, and in particular there is a separate EAT case that we will cover in our next blog which considers whether it is possible to claim indirect sex discrimination on a failure to enhance ShPP.

Capita Customer Management Ltd v Ali and another


LTIPs – unlawful to introduce a malus clause to existing awards

The High Court has granted summary judgment in favour of two former senior executives of Lloyds Bank where the Bank withheld shares due to them under a long term incentive plan (LTIP). The Bank had sought to amend its LTIP rules to insert a clause granting its remuneration committee (RemCo) the power to reduce awards at its discretion (known as a ‘malus’ clause), as the Bank was concerned about the negative reputational consequences of paying the awards to these individuals. The Bank relied on a rule which permitted it to unilaterally vary the scheme rules to make a minor change to help with the administration of the scheme, or to account for a change in the law.

The High Court held that this rule did not give the Bank a broad power to rewrite the terms of the LTIP. It said that clear and specific wording would have been required to allow the Bank to amend the rules unilaterally to the detriment of the claimants, or to give the RemCo the power to amend existing awards. The Bank was also prohibited from relying on a different rule which prevented claims for loss arising from its exercise of a discretionary power under the LTIP rules (known as a ‘Micklefield’ clause). The Court said that such a clause cannot protect a defendant from claims arising from a breach of its own obligations under the scheme rules.

Why this matters  

Many banks and financial services institutions are now obliged to include malus provisions and other similar restrictions in agreements relating to employee remuneration. This case is a reminder of the limitations on an employer’s ability to unilaterally amend existing awards and that clear drafting is essential, as any ambiguity in such provisions will be construed against the party seeking to rely on them.

Daniels and Anor v Lloyds Bank Plc and Anor


Time limits – at least one of a series of alleged detriments must be within time

Under the statutory protection for whistleblowers, a detriment claim must be presented within three months beginning with the date of the act or the failure to act to which the complaint relates. Where that act or failure is part of a series of similar acts or failures, the trigger point is the date of the last act or failure to act. In this EAT case, the claimant brought a claim concerning various alleged detriments, ending with issues relating to a grievance process which finished within the three month time limit. Although the first instance Tribunal did not uphold her claim in respect of the grievance process, it nonetheless found that the detriments were a series of similar acts or failures and that her claim had been brought in time.

Perhaps unsurprisingly, the EAT confirmed that at least one actionable detriment must be within the time limit in order to bring the rest of the series within the time limit. To hold otherwise, it said, would essentially render the time limit meaningless. It therefore overturned the Tribunal’s decision.

Why this matters 

For employers facing whistleblowing claims, this a welcome if expected decision. Nonetheless, it is important to remember that claimants are not required to prove each allegation in the alleged series. They need only establish that one actionable detriment occurred within the time limit and that this act is one of a series with other acts which would otherwise be out of time.

Royal Mail Group Ltd v Jhuti


Round up of other developments

Guidance on new rules on taxation of termination payments

On 6 April 2018 new rules came into force on the taxation of payments in lieu of notice (PILONs) and on the foreign service and death, injury and disability exemptions. HMRC has recently revised numerous sections of its Employment Income Manual to reflect and provide further guidance on these changes. Of primary interest to practitioners is the extensive guidance on the new requirement to calculate and tax ‘post-employment notice pay’ (PENP). This includes guidance on the calculation of the various aspects of the PENP formula, including as to the benefits which are included and excluded from the definition of ‘basic pay’.

Gender pay gap reporting

The deadline for large employers to publish their gender pay gap (GPG) statistics passed on 4 April 2018. Over 10,000 public and private sectors employers have now published their figures, although approximately 1,500 are estimated to have missed the deadline. From the figures released to date, nearly 80% of employers pay men more than women. The national median GPG was reported to be 9.7%. The industry with the largest GPG is finance (35.6%) and the lowest is accommodation and food services (1%). Only 8% of employers reported no GPG at all and only a small fraction reported negative GPGs.

More ICO guidance on GDPR

The ICO has recently published more guidance on key aspects of the GDPR, to accompany its general Guide to the GDPR. Specifically, guidance has been published to assist when using a ‘legitimate interest’ as the basis for processing personal data, including guidance as to when using legitimate interests as a lawful basis is appropriate, what it means, and how to decide whether it applies to a particular form of processing. The ICO has also published for consultation draft guidance on ‘data protection impact assessments’ (DPIAs), a process to help data processors identify and minimise the data protection risks of a project. The guidance included extensive guidance on conducting a DPIA, including template documents.

Delay on closure of employer-supported childcare schemes

The government had previously decided to close employer-supported childcare schemes to new entrants with effect from April 2018. However, it has recently announced that existing scheme will remain open for a further six months, until October 2018.

Government consultation on bereavement leave

The government has previously indicated an intention to give employees who lose a child below the age of 18 (including a still birth after 24 weeks) the right to at least two weeks' leave and pay (irrespective of their length of service), as well as protection from detriment, redundancy and dismissal as a result of taking bereavement leave. The Department for Business, Energy & Industrial Strategy has now launched a bereavement leave and pay consultation seeking views on key issues. The consultation closes on 8 June 2018.

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