Category Archives: Insight Article

Section 230(3) of the Employment Rights Act contains a two-part definition for worker status. Part one defines a worker as an individual who has entered into or works under a contract of employment (all employees, therefore, are also workers).

The second part of the definition requires different elements to be present:

• there must be a contract with the organisation, but this contract does not have to be expressly written, as was the case in Uber (see my earlier article on this latest case), where the contracts were implied;
• the individual must be contracted to do the work personally (the personal service test) and not in a business capacity. It follows then, that the contract cannot be with a customer or client of any business undertaking; and
• finally, there must be mutuality of obligation, meaning work must be given and paid for by the organisation.

A defining feature of a worker is that they must turn up for work even if they do not want to, whereas someone who is self-employed can decide when they work.

Another feature is that self-employed individuals have control over the way in which the work is carried out. Self-employed people also pay their own tax and national insurance, whereas workers and employees pay tax using the PAYE system, which deducts the tax and national insurance at source.

If you need help determining your employment status or believe you have a worker status claim, call Karen Cole today.

Note: This is not legal advice; it provides information of general interest about current legal issues.

This case highlights the importance of properly identifying the employment status of individuals to know what employment rights will apply.

Why does employment status matter?

The development of the gig economy, in which individuals are engaged by businesses on a flexible and ad hoc basis, has caused problems in determining employment status.

In employment law, the distinction between the three categories of employment status (employee, worker and self-employed independent contractor) is significant for many reasons.

Some core legal protections apply only to employees, significantly the right not to be unfairly dismissed and the right to receive a statutory redundancy payment.

Workers, though, are covered by some important protections too. For instance, workers are entitled to:

• paid annual leave (something which is not enjoyed by the self-employed);
• the right to receive the National Minimum Wage; and

Uber B.V -v- Aslam & Others

The key deciding factor in this decision was the degree of subordination and control that Uber drivers were subjected to.

When passing judgment, Lord Leggatt stated that worker status was a question of statutory interpretation rather than contractual interpretation.

This means that it does not matter what name the parties give to their working arrangement. It is the factual day-to-day practice of that arrangement which is the key to interpreting how the law will define it.

Lord Leggatt surmised that the legislation is there to protect vulnerable individuals who are in a position of subordination and dependence on another person who controls their work. Therefore, where there is a greater degree of control, it is likely that the individual will be a worker rather than self-employed.

The subordination and control exercised by Uber manifested itself in several ways.

1. the drivers’ pay was fixed by Uber and the contractual terms under which drivers performed their services was also controlled by Uber. Flagging Uber drivers as workers, as the self-employed can set their own fees and contractual terms; and
2. once Uber drivers logged into the app, they had little choice in accepting rides. Uber could penalise drivers based on their trip cancellation rate, demonstrating the drivers’ subordination to Uber.

The effect of this decision and the importance placed on the purpose of the legislation demonstrates that the courts should look to protect workers, irrespective of any signed contractual documents.

This emphasises the Supreme Court’s decision in Autoclenz Limited v Belcher, which made clear that tribunals should look at the substance of any contract and not just its form.

“Employers would be wise to review the arrangements in place regarding their exposure to worker status claims and the financial consequences of a successful claim.”

Many employers will state on an employment contract that an individual is self-employed for various reasons. However, the court will look at the actual relationship between the parties and the whole context of that relationship, not just the contract itself.

Speak to Karen Cole today, who can review the reality of the working arrangement and what rights and protections will apply.

Note: This is not legal advice; it provides information of general interest about current legal issues.

Record numbers signed up to ditch meat during January for the Veganuary Challenge, but even when burgers are back on the menu, employers need to keep an eye on safeguarding ethical beliefs for vegans who make it a lifestyle.

The interest in veganism has seen the numbers undertaking Veganuary soar in recent years, with 500,000 people taking part in 2021. But while many are simply testing the health benefits of a short-term change in their fridge contents, for those people who choose to become vegan in the long term, it is often not just about diet, but rather a way of life. If they make an ethical decision to live without the use of animal products, this will affect what a person wears, the products they use, or their work and leisure activities.

The Vegan Society describe veganism as “…a philosophy and way of living which seeks to exclude … exploitation of, and cruelty to, animals for food, clothing or any other purpose; and by extension, promotes the development and use of animal-free alternatives for the benefit of animals, humans and the environment”.

Such beliefs caused a clash when long-standing ethical vegan Jordi Casamitjana challenged his employer, The League Against Cruel Sports, for the way pension funds were invested. The League is an animal welfare charity which campaigns against sports such as fox hunting or bullfighting and Mr Casamitjana was a qualified zoologist who had dedicated his life to helping animals in need, working in animal protection most of his working life, becoming a strict vegan in 2000.

On joining the League, he was enrolled into their pension scheme but later discovered that the fund was investing in companies known to engage in animal testing, such as pharmaceutical or tobacco companies. After objecting, and there being no change in practice, Mr Casamitjana wrote to colleagues setting out his discovery, and when he was later dismissed claimed this was due to his ethical veganism, although the League argued that the dismissal was on conduct grounds.

When the case was first heard by the Employment Tribunal, the focus was not on whether he had been unfairly dismissed, but on whether ethical veganism was a philosophical belief capable of protection under the Equality Act 2010. The Act prevents direct and indirect discrimination based on protected characteristics, which include:

• Gender
• Age
• Disability
• Race
• sexual orientation
• personal relationship status, and
• religion or belief.

These characteristics extend to consumers, the workplace, education, public services, private clubs or associations and when buying or renting property.

To satisfy the definition of a philosophical belief, ethical veganism had to pass a series of tests, as set out in the Equality and Human Rights Commission Code of Practice on Employment 2011. These include whether it was formed in respect of a weighty and substantial aspect of human life, has attained a level of cogency and coherence and could be worthy of respect in a democratic society. It must not be incompatible with human dignity nor conflict with the fundamental rights of others.

In giving his ruling, Judge Robin Postle said he was “overwhelmingly” satisfied that ethical veganism constituted a philosophical belief and so those holding such beliefs should be protected against discrimination.

This ruling distinguished ethical veganism from vegetarianism, which was tested in an earlier case – Conisbee v Crossley Farms Limited & Others. Here the Employment Tribunal decided that vegetarianism was not a philosophical belief which qualified for protection under the Equality Act 2010, saying it did not attain the necessary level of ‘cogency, seriousness, cohesion and importance’ required and that the practice could be adopted for a variety of reasons, such as lifestyle, health, diet or concerns about animal welfare.

Employment partner, Karen Cole said:

“While last year’s decision in the case of Mr Casamitjana does not have a binding effect on other tribunals, as each case will depend on its own facts, it highlights the need for employers to continually review their practices and policies to be sure they are not discriminating against any employees because of their beliefs.

The implications are perhaps more significant given the continued rise in popularity of veganism. Figures suggest there are as many as 2.2m vegans in the UK currently, compared to just 150,000 in 2014. That rise has been pushed in no small part by reports from the UN and academics, highlighting how switching to a plant-based diet could help fight climate change.”

While the ruling may appear to open the floodgate for vegan-related demand by employees – such as whether leather chairs are acceptable or if they should handle products containing animal ingredients – tribunals will be taking a measured approach in deciding whether such issues are discriminatory. A similar case involving a Muslim employee, who argued his beliefs prevented him from handling alcoholic products, was unsuccessful when heard by the tribunal.

Karen added:

“Best practice is to ensure that vegan beliefs are accommodated in the same way as other beliefs, such as ensuring that any food provision for employees in canteens takes account of vegan preferences or avoiding demands that employees wear leather shoes. Staff training should be kept up to date as to what constitutes discrimination and unacceptable behaviour, and employees should have an identified point of contact to report incidents of discrimination.

This reflects the ongoing need for business recruitment and working practices to keep pace with both the law and changing attitudes across society. Failure to keep up with such trends is no defence when it comes to employers providing appropriate protection for employees.”

For more information on Veganism, contact Karen Cole.

Note: This article is not legal advice; it provides information of general interest about current legal issues.

In Quilter v Falconer, the High Court found that the post-termination restrictions clauses contained in Falconer’s employment contract were an unreasonable restraint on trade and therefore void and unenforceable.

What are post-termination restrictions clauses?

Post-termination restrictions clauses (PTRs) are often referred to as restrictive covenants and are the non-solicitation, non-compete, and non-dealing clauses contained in an employment contract.

Background

In 2019, Falconer joined Quilter as a financial adviser and was unhappy with her employment, citing her dissatisfaction with the administrative support she was receiving and the restriction on the products she could recommend to clients. She resigned during her 6-month probationary period, serving her two-week notice period on garden leave.

Falconer then began working for one of Quilter’s competitors as a self-employed financial adviser, in breach of the PTRs contained in her employment contract with Quilter.

Quilter brought a breach of contract claim against Falconer and sought an interim injunction to enforce the restrictive covenants in her employment contract. Quilter also alleged that Falconer had not devoted her whole time and attention to her work and that she had taken confidential information, contacted clients during her garden leave, and breached her duty of fidelity.

Whilst the interim injunction was granted, by the time the case came to trial the covenants in question had already expired leaving only the issue of assessing damages and costs.

The High Court’s decision

The Court held that the non-compete, non-solicitation, and non-dealing clauses in Falconer’s employment contract were invalid under the restraint of trade doctrine. The Court held that had the clauses been valid then Falconer would have breached her employment contract by, amongst other things:

1. contacting Quilter’s clients during her garden leave without permission
2. attending an induction course for her new employer whilst still being employed by Quilter
3. failing to show her new employer the restrictive covenants contained in her contract, despite an express clause requiring her to do so; and
4. scanning confidential client documents to divert business away from Quilter.

Quilter had legitimate business interests which it sought to protect by the post-termination restrictions.

The Court, however, held that Quilter was obliged to assess the reasonableness of any clause at the time it was entered into and that the burden of proving whether a clause is indeed reasonable lies with the employer. Quilter could not evidence the reasonableness of such clauses.

The non-compete clause

In Falconer’s contract, the nine-month non-compete clause applied regardless of how long she had worked for Quilter. During Falconer’s probationary period, she could be dismissed with two weeks’ notice and therefore it was reasonably foreseeable that Falconer could be employed for a very short period, whilst still being restricted by the nine-month non-compete clause.

The Court held that the length of the period of notice can be an indication of the unreasonableness of the duration of the restraint. Such a short notice period indicates the employee’s services are less valuable to the employer and therefore in need of less protection. As such, it was an unreasonable clause.

Further, Falconer was restricted from working with clients who had ever been a client of Quilter. The Court rejected this clause on the basis that it went further than protecting confidential information by seeking to prevent competition.

The Court noted that the Head of Quilter, who had access to much more confidential information, was only subject to a six-month restriction. Quilter offered no evidence to justify imposing the same or, as is the case here, longer restraints on a junior employee thus indicating that Quilter had adopted a ‘one size fits all’ approach and was failing to consider the suitability of restrictions for each level of employee.

The Court’s preference would be for Quilter to have protected its interests by using an appropriately worded non-dealing clause. The Court doubted the necessity of the non-compete clause, given the evidence at trial also suggested that non-compete clauses are not common practice for financial advisers. Once Quilter was aware of Falconer’s new employment it decided to wait five months before seeking to enforce the non-compete clause which suggests it was content with the protections afforded under the non-dealing and non-solicitation clauses.

The non-dealing and non-solicitation clauses

Both clauses were similar in scope in that they were to last for 12 months from termination and sought to prevent Falconer from supplying financial services to any customer of Quilter who had been a client during the 18 months before the termination date. This 18-month “backstop” was the central issue for the Court. The wording of the clause was such that Falconer would be prevented from soliciting or dealing with anyone within the book of clients she had taken over, even if she had not met or spoken to them, as the wording would capture all such clients. It would prevent Falconer from even dealing with her family and friends.

In the absence of evidence from Quilter as to why such clauses were reasonable, the Court held that these PTRs went further than necessary and that the 18-month backstop, together with a 12-month restriction, was excessive for a junior employee.

Noteworthy is that Quilter’s monetary claim amounted to £39,000, yet by trial, its costs had reached £500,000, with Falconer having to act as a litigant in person due to a lack of funds. Those representing Quilter candidly admitted that the case had proceeded to trial based largely on a dispute as to who would pay the costs. Whilst the trial dealt with liability and injunctive relief only, Mr. Justice Calver did remark that “…it is highly regrettable, and to nobody’s credit, that the parties failed to settle this case at mediation in January 2020 and instead chose to occupy the court’s time fighting a full-blown trial“. Certainly words of warning for would-be litigants.

The takeaway lesson for employers

Employers should avoid using PTRs in a “one size fits all” manner and should instead consider the reasonableness against the employee’s role and level within the business.

To consider the reasonableness, and importantly, the enforceability of any PTR, employers should consider a range of different scenarios including, as was the case here, an employee leaving after a very short period of employment. It is arguably reasonable to enforce a 9-month restriction on an employee who has worked somewhere for a long time and developed longstanding relationships with clients, whereas it is clearly less likely when compared to a new starter, employed for a short period of time, who has not yet developed those client relationships.

Employers should consider limited PTRs that apply during an initial period, such as a probationary period, having regard to the employee’s exposure to clients, and provide for more stringent PTRs thereafter.

If you use template employment contracts that include PTRs, this judgment makes it abundantly clear that a “one size fits all” approach is not reasonable and could lead to clauses being unenforceable. Call Karen Cole today to review your existing and future employment contracts. Karen can also advise you on the reasonableness and enforceability of any PTRs.

Note: This article is not legal advice; it provides information of general interest about current legal issues.

Employment claims are complex, with little prospect of recovering the legal costs incurred in defending them. Awards to employees can often be substantial. It’s therefore worth taking the time to get things right.

You must act fairly and reasonably, whilst ensuring compliance with any relevant terms of the employment contract and likewise make sure you do not discriminate unlawfully when you dismiss an employee.

What are the fair reasons for dismissal?

1. Conduct
2. Capability
3. Illegality
4. Redundancy
5. Some other substantial reason (SOSR)

SOSRs are a “catch all” category capturing any reasons that don’t fall within the other categories. For instance, they can cover scenarios where there is a personality clash or irretrievable breakdown in the working relationship.

Automatically unfair reasons for dismissal

Lawfully dismissing an employee with two or more years’ service

The first hurdle is to ensure there is a fair reason for dismissal (as above). It’s vital you:

Guidance on the procedure for dismissal is set out in the ACAS Code of Practice.

Employees with less than two years’ service

Generally, employees must have been employed for two years, known as the ‘qualifying period’, before they are eligible to bring a claim for unfair dismissal. As such, and with the correct legal advice, it can be a relatively straightforward process to lawfully dismiss an employee with less than two years’ service – if the reason for dismissal is not automatically unfair and/or discriminatory. Importantly, there is no qualifying period for either of these claims. You must take great care as successful claims will be deemed unfair regardless of the employee’s length of service.

Discrimination and the protected characteristics under the Equality Act

There is no need to demonstrate that an employer acted unreasonably in any of these claims.

Time limits

There are strict time limits that preclude certain claims being brought with extensions being granted to employees when they begin the ACAS early conciliation process.

We can advise you of the relevant time limits depending on what stage the potential claim is at. It may be that the employee’s claim is out of time regardless of its merits. There are occasions whereby an employee can obtain an extension of time by applying to the Employment Tribunal.

Contractual claims also known as “wrongful dismissal claims”

Employees who are unable to claim unfair dismissal can still claim for breach of contract (regardless of the length of the employment relationship), if you, as the employer, breach a term of the employment contract. For such claims, fairness is not an issue; with the remedy being limited to putting an employee in a position they would have been if the employer had not breached the employment contract.

In any dismissal, it is crucial that you give notice or notice pay to the employee – unless it is a summary dismissal and all accrued but untaken holiday is accounted for as at the date of dismissal.

When to seek legal advice

You should seek legal advice as early as possible to stay on the right side of the law and protect your business from potential claims.

Some practical steps to avoid potential pitfalls

Whether you are looking to protect your business from claims, or need assistance with a new or existing claim, or require a review of your current policies and procedures, speak to employment lawyer Karen Cole today

Note: This is not legal advice; it provides information of general interest about current legal issues.