Workers' rights: View from the hot seat

The recent economic climate has not been easy for employers, particularly in the construction industry, with increasing numbers of businesses becoming insolvent, or resorting to redundancies or restructuring as a result of the downturn. Although the government is apparently taking steps to reduce the burden on employers, a number of recent cases highlight the problems they face.

Below are five legal pointers - some of which we will return to in future articles - to guide employers through the coming months.

• Employment status. The 6 July issue of Building featured two articles dealing with the recent cases of Bates van Winkelhof vs Clyde and Co and Quashie vs Stringfellows Restaurants, highlighting that it can be difficult to be sure of an individual’s employment status. To add to this debate, the recent case of The Hospital Medical Group vs Westwood showed that even where individuals are in business in their own right, if they are sufficiently integral to the business of the hirer, they could be considered a “worker” and therefore be entitled to (among other things) paid annual leave (although not the right to claim unfair dismissal). Similarly, employers cannot rely on creative drafting in their contracts (for example, a zero hours contract) to prevent employees accruing continuous employment (Pulse Healthcare vs Carewatch Care and Drake vs IPSOS Mori).

These cases highlight that certainty over employment status remains hard to achieve, although hiring via an agency or using a subcontractor can reduce the risks, albeit with potential additional costs that these types of arrangement involve.

• Pensions auto enrolment. From 1 October 2012 “job holders” (which includes certain “workers” and self-employed individuals as well as employees) will start being automatically enrolled into pension schemes, with employers being required to make at least a minimum level of contributions. Employers will have a staging date by which they have to comply with the new system, with large companies going first and smaller companies not until as late as 2016.
• TUPE. The Transfer of Undertakings (Protection of Employment) Regulations 2006 are complex and aim to protect employees in the event that a business is sold or where there is a “service provision change” (including the purchase of an insolvent business or the acquisition of contracts from such a business).

A number of recent cases highlight the difficulties in identifying whether there has been a service provision change and which employees are entitled to protection. Identifying a potential TUPE situation at an early stage can help as the parties can agree how to handle the situation (for example, ensuring indemnities are negotiated if necessary).

• Sickness and holiday. Two recent European cases (Pereda vs Madrid Movilidad SA and ANGED vs FASGA) confirmed that if an employee falls sick while on holiday, they can request to take those days’ holiday at another time. Further, in the UK the Court of Appeal confirmed in NHS Leeds vs Larner that if an employee is on long-term sick leave they do not need to request to take their holiday - it will automatically carry over to the next (and possibly subsequent) holiday years.

Employers should ensure that their policies specify in particular what evidence of sickness the employee will need to produce and that this applies even when they are on holiday, how many days paid sick leave an employee is entitled to (if any) in any given period and, in line with other European case law, may wish to specify a long stop date (of around 15-18 months) to avoid employees accruing holiday indefinitely.

• Changes. In April, the qualifying period for unfair dismissal increased from one year’s continuous service to two (although this does not apply to dismissals that are discriminatory or due to whistleblowing). This change, along with proposed changes to tribunal procedure, including introducing fees, are expected to reduce the number of claims.

Finally, the rules on collective redundancy consultation and TUPE are also under review, with employers looking forward to greater clarity on the scope of both of these complicated pieces of legislation. Watch this space.

Catherine Taylor is a partner at Employment Group Olswang. She was assisted in the preparation of this article by Libby Payne, associate