HR briefing

Welcome to the second in our new series of monthly briefings for HR teams and in-house employment counsel – bringing you this month’s employment law highlights in an easy-to-read package.

In the courts


The Court of Appeal has reviewed the law on suspension, in a case involving a teacher who was suspended pending a misconduct investigation after she used force to deal with misbehaviour by two special needs pupils in her class. Two important findings come from the case:

  • first, the Court makes the point that the long-standing argument on whether suspension is a neutral act is not very helpful; and
  • second, it confirms that the real question is whether suspension was for a reasonable and proper cause. That test is not the same as asking whether suspension was necessary.

Employers should ensure they retain an express right to suspend in cases of suspected misconduct, either in an employment contract or in a disciplinary policy.

Religious discrimination

Readers will be familiar with the well-publicised "gay cake" case (in which a Christian bakery company refused to produce a cake with a message supporting gay marriage, and was held by the Supreme Court not to have committed unlawful religious discrimination). The key point for the Court was that the refusal was based on the religious beliefs of the baking company, rather than the customer - the company would have refused to bake that cake for any customer. Analogous reasoning has led to the rejection of a claim of religious discrimination by an employee of an orthodox Jewish nursery by the Employment Appeal Tribunal. The nursery disapproved of the employee cohabiting with her partner, and dismissed her. As the dismissal was based on the decision-makers' religious beliefs, rather than the employee's, the discrimination claim failed. The employee gained some satisfaction, however, as her parallel claim for sex discrimination succeeded. 

Working time

The Working Time Regulations contain an obligation to record an employee's working time - but only to demonstrate whether the 48-hour per week limit on average working time, limits on night work and provision of health and safety assessments are being complied with. Since workers can opt out of the 48-hour maximum, many employers effectively have very limited record-keeping obligations. The Advocate-General of the ECJ has given an opinion that risks substantially altering the existing position, stating that employers must keep a record of all working time, not just in relation to night work and the 48-hour limit. Such an obligation would go beyond the current requirements of UK law, and go beyond the Health & Safety Executive's current guidance. The ECJ is likely to give its ruling on the case later this year, and will be watched with some concern by employers.

In the news

Employment rates and limits

The annual uprating of the main statutory awards and rates has taken place. It sees  statutory sick pay (SSP) rise to £94.25 per week, statutory maternity pay (SMP) and other family-friendly leave payments rise to £148.68 per week and a week's pay for statutory redundancy pay rise to £525.

Most eye-catchingly, the unfair dismissal cap now exceeds £100,000 for the first time - the maximum basic award having gone up to £15,750 and the maximum compensatory award to £86,444. This year's employment, immigration and pension rates and limits are on our useful reminder card, which will be sent out in hard copy shortly. If you would like any extra copies, please contact us.


We looked at the ongoing debate about the use of Non-disclosure agreement (NDAs) in settling employment disputes in last month's edition. The government has now launched a consultation on reforming the law in this area, proposing (i) that in no circumstances can an employee be barred from disclosing a matter to the police, (ii) that a settlement agreement should explicitly state the types of disclosure that are permitted, and (iii) clarify that the independent advice that an employee must receive before a settlement agreement can be valid must include advice on any confidentiality or NDA wording. Many commentators have noted that they have never seen a clause that would bar disclosure to the police, and that they would always advise as a matter of course on the extent of a confidentiality clause. That reflects our experience, so it remains to be seen whether the proposed reforms really address the perceived misuse of NDAs at which they are aimed.

If you would like us to review your current settlement agreement wording to ensure it is up to date, please speak to your usual Macfarlanes contact.

Using consultants

Many clients use consultants in their businesses. The individual providing services typically is employed by their own personal service company (PSC) and that corporate entity contracts with the end client for the relevant services. The individual is, for employment purposes, an independent contractor - so does not benefit from many of the usual employment protections. The reason for this structure is usually tax-driven, as the PSC charges a gross fee, the individual is paid a minimal salary subject to income tax and NICs, and can then withdraw the remainder as a dividend subject to a lower marginal tax rate.

For many years, the Government has attempted to address perceived misuse of this off-payroll contracting structure, most notably through the so-called IR35 rules. These apply where, if the PSC or other intermediary were not in place, the individual would be treated as an employee of the end client. If that test is met, the individual is treated for tax purposes as employed.

In recent years, end clients in the public sector have been required to determine for themselves whether IR35 applies to each engagement, and the Government has now launched its second consultation on extending those rules to the private sector. The current rules in the private sector require the PSC to determine whether IR35 applies, so that it is the PSC's risk and liability if HMRC successfully challenges that determination. The extension is already proving contentious, with some business groups arguing that the result is likely to be that end clients will err on the side of caution and treat consultants as being subject to IR35 and therefore liable for income tax and NICs, and that consultants will charge higher fees to offset this change to their tax position. Our note on the consultation with six recommended action points to put you in the best position ahead of the new regime is here.