Don’t Get Uberexcited

By robh@wearefinally.co.uk,

matthew_pascallBy Matthew Pascall, Barrister, Guildford Chambers

  • The Uber decision has not made new law and is highly fact sensitive;
  • Businesses need to be sure they understand the consequences of the arrangements they have with casual staff;
  • Individuals working in the “Gig Economy” should not assume that they have signed away their employment rights on the basis of the agreements they may have signed with those for whom they work.

Aslam and Farrar and othrs v Uber BV, Uber London Ltd & Uber Britannia Ltd Case No’s 2202550/2015

1.      In a reserved judgment following a Preliminary Hearing at the Central London Employment Tribunal, the Tribunal has set out its reasons for holding that the Claimants were “workers” within the meaning of section 230 (3) (b) of the Employment Rights Act 1996 and within the meaning of section 43K of the 1996 Act (which contains a slightly different definition of “worker”). This is a first instance decision and it is understood that the Respondents (“Uber”) are to appeal to the EAT.

2.      Section 230 (3) (b) states: –

(3)     In this Act “worker” (except in the phrases “shop worker” and “betting worker”) means an individual who has entered into or works under (or, where the employment has ceased, worked under)—

(a)   a contract of employment, or

(b)   any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual;

and any reference to a worker’s contract shall be construed accordingly.

3.      In the Uber case the real issue was whether or not the Claimants were caught within sub-paragraph (b) (“Limb B workers”).

4.      Applying section 230 (3) (b) to the case, the issues can be defined in the following way: –

i)  Are the drivers the “individual[s]” or potential workers;

ii)  Is there a contract between the driver and Uber under which the driver undertakes to do or perform personally any work or services for Uber.

iii)  Is Uber a client or customer of any profession or business undertaking carried on by the driver.

5.      The contentious issues was ii). Put more simply, did the driver claimants personally perform work or services for Uber? In short, the ET decided that they did.

6.      The facts are set out in paragraphs 13 to 69 of the reserved judgment and to fully understand the rationale underlying the decision, these paragraphs should be read with care. The facts are a little confusing because of the existence of three Uber corporate entities but for present purposes they can be referred to collectively as Uber. The Respondents sought to argue that the drivers did not perform work or services for Uber.

7.      In paragraphs 13 to 69 the Tribunal looked with great care at the various agreements between Uber and the drivers and at the way the arrangements worked in practice. In broad terms the Tribunal concluded that the relationship between drivers and Uber was close and that Uber exercised a significant degree of control over the drivers.

8.      Having switched on the Uber driver app, a driver is directed to passenger/s close to his location. He will have been allocated and “offered” those passengers based on his proximity to them. Drivers can decline to accept the “offered” passengers but must do so within 10 seconds. The passenger/s will have already received a quoted fare from Uber via its passenger app. The driver may agree a reduced fare but cannot charge above the Uber quoted fare. The driver is then given a route to follow via his Uber app. At the conclusion of the trip no money changes hands between driver and passenger – the passenger’s registered debit or credit card is charged by Uber who subsequently pass on the fare to the driver less a charge (25% of the fare). Drivers are rated by passengers – poorly rated drivers are penalised by Uber in terms of access to the app. Drivers are also penalised if they cancel accepted trips or reject offered trips. Drivers are discouraged from any sort of contact with a passenger or past passenger outside the scope of the booking system comprised in the app.

9.       The Tribunal reviewed the leading cases on the definition of worker, in particular, the EAT decision in Byrne Brothers (Formwork) Ltd v Baird [2002] ICR 667 and the Supreme Court decisions in Bates van Winkelhof v Clyde & Co LLP [2014] 1 WLR 2047 and its earlier decision in Autoclenz Ltd v Belcher [2011] ICR 1157.

10.  The Tribunal concluded that when drivers switch on their driver apps and until they switch them off at the point in time they decide that they will no longer accept trips, they are “workers.”

11.  When looking at the arrangements under which Uber drivers work, it is easy to understand how the Tribunal came to its conclusion. For whom other than Uber did the drivers perform services? The overall substance of the arrangements left the clear impression that the drivers performed services for Uber. The EAT may come to a different conclusion but given the fact sensitive nature of the decision, there may be little scope to argue that the decision was wrong in law or perverse.

12.  The lesson to learn from the Uber case is the need to look at the reality underlying the relationship between a potential worker and the individual for whom, it could be said, he or she works. In layman’s terms, if it looks as if A works for B, A is likely to be a worker. A might well not be an employee of B but, as a worker, A will have certain employment rights. To dress the arrangement up under the guise of an agreement will make no difference. To misquote a great judge: You can call a five-pronged garden implement anything you like but it will always be a fork[1].

13.  We will see in time how the EAT approaches this case. But in the longer term employment rights in the “Gig Economy” are to be the subject of a review by the Matthew Taylor, the chief executive of the RSA. The Review will consider six themes, one of which is in these terms: “Do current definitions of employment status need to be updated to reflect new forms of working created by emerging business models, such as on-demand platforms?”

Watch This Space!

[1] Per Lord Templeman Street v Mountford [1985] 1 AC 809 at page 819 letter f.

TUPE and Pensions – A Short Briefing Note

By robh@wearefinally.co.uk,

matthew_pascallBy Matthew Pascall, Barrister, Guildford Chambers

Ordinarily one would assume that obligations and duties in relation to pension schemes that form part of or are related to contracts of employment would be caught by the TUPE Regulations and pass from transferor to transferee on a transfer of an undertaking. In fact, occupational pension schemes fall outside the provisions of the TUPE Regulations. Nonetheless, the pension arrangements in existence at the time of a transfer of an undertaking cannot be ignored.

This Briefing Note aims to summarise some important issues in relation to pensions and TUPE that those advising transferees and transferors need to be aware of when the terms of a relevant transfer are being negotiated.

Pension Schemes Within and Without TUPE

Regulation 10 of the 2006 TUPE Regulations is the key provision that takes occupational pension schemes out of the TUPE framework.

Occupational pension schemes are defined by reference to the definition of that term in section 1 of the Pension Schemes Act 1993. In simple terms, the 1993 Act categorises three distinct types of pension: i) occupational pension schemes, ii) public service pensions schemes and iii) personal pension schemes. In very basic terms, occupational pension schemes are pension schemes established by employers. Personal pension schemes are pensions schemes that have not been established by employers and public service pension schemes are, not surprisingly, public sector pension schemes.

Personal pension schemes and public service pension schemes do not fall out of TUPE under Regulation 10 but as personal pension schemes are, by their definition, schemes that have not been established by an employer for the benefit of that employer’s employees, but are free standing schemes (even if offered or promoted by employers), rights and obligations under such schemes would not normally form part of a contract of employment in any event. Nonetheless, there remains the potential for them to be caught by the TUPE regulations.

Having said that occupational pension schemes are not caught by TUPE, it is important to not that “provisions of an occupational pension scheme which do not relate to benefits for old age, invalidity or survivors shall not be treated as part of the [occupational pension] scheme.” In other words:

i) Occupational pension schemes are not caught by TUPE,

But:

ii) Any parts of an occupational pension scheme which does NOT relate to benefits for old age, invalidity or survivors IS caught by TUPE and the transferee will be bound by any obligations relating to these part of the otherwise exempt occupational pension scheme.

How does this work? 3 Cases offer some conflicting guidance.

Frankling v. BPS [1999] ICR 347 EAT. The Claimants had been employees of the NHS and entitled to be paid certain benefits set out in section 46 of the Whitley Agreement governing NHS contracts of employment in the event of early retirement (“section 46 benefits”). After a TUPE transfer the transferor did not pay the section 46 benefits when the claimants retired early. The claimants argued before the Industrial Tribunal that the transferor was bound by TUPE to pay the section 46 benefits. The Tribunal said no. The claimants appealed. Their appeal was dismissed, the EAT holding “That… section 46 of the Whitley Council conditions was an agreement that related to “an occupational pension scheme” within the meaning of the… Regulations, since, although the provisions of the scheme in relation to superannuation benefits to redundant employees were triggered by the redundancy dismissal and not the age of the employee, the benefits retained their character as retirement benefits, albeit accelerated and enhanced; that all the benefits payable under section 46 were effected on the basis that the recipient was a retiree and as such could be described as “for old age;” and that, accordingly, the rights or obligations under section 46 would not transfer from the trust to the company.”

Beckman v. Dynamco [2003] ICR 50. This was a decision of the ECJ. This case concerned different employees but an identical claim that the transferor was bound to pay the enhanced section 46 benefits to former NHS employees. The ECJ came to a completely different conclusion and found that the transferor was bound to pay the section 46 benefits to former NHS employees. The ECJ focussed on the Acquired Rights Directive, from which TUPE is derived. They held that: “the benefits in question were not old age, invalidity or survivors’ benefits within the meaning of Art.3(3) and were therefore not excluded from the rights and obligations arising from a contract of employment which were transferred to the transferee in the event of a relevant transfer. Given the general objective of safeguarding the rights of employees in the event of a transfer, the exception in Art.3 (3) was to be construed very strictly.”

In Martin v. South Bank University [2004] ICR 1234, the ECJ followed its decision in Beckman and found that the transferor was bound to provide the section 46 benefits to its former NHS employees in the event of early retirement.

Finally in Procter & Gamble v. Svenska [2012] IRLR 733 transferred employees were unable to compel the transferor to make certain payments paid after normal retirement age even though the events that triggered this obligation occurred before normal retirement age.

Promises Promises!!

Transferors need to be aware of anything that might have been said about pension arrangements after the transfer by the transferee in the past.

In Hagen v. ICI [2002] IRLR 31 ICI told 438 of its employees that they would be no worse off under the transferee’s new pension arrangements after the proposed TUPE transfer had taken place. In fact the new arrangements were not as good as the old arrangements with a fairly marginal loss suffered by the transferred employees. They successfully claimed against ICI for negligent misstatement!

In Whitney v. Monster Worldwide Limited [2010] EWCA 1312 a promise to a particular group of employees that they would be no worse off after their final salary scheme was replaced with a money purchase scheme bound a subsequent transferee under the principle of contractual novation.

In BT plc v. Adamson (2012) EAT 0282/12 the claimant had claimed loss of pension as part of a compensatory award for unfair dismissal. It was argued that this should not be based on the pre-transfer pension entitlement, which the respondent employer said it was not bound to pay as it had not passed on the transfer under TUPE. The claimant said that BT always honoured the pre-transfer pension rights of transferring employees and the EAT held that the ET had been entitled to accept that evidence and award compensation for loss of pension on the basis of the pre-transfer pension arrangements.

Transferees’ Obligations After a Transfer – Replacement Pensions

Employers are not obliged to continue the transferors’ pension arrangements. Transferors and transferees can make their own arrangements. However, where an occupational pension scheme was in place before the transfer, the transferee must provide a replacement scheme for employees who were members of the pre-transfer scheme or eligible to be members: See section 258 of the Pensions Act 2004. Save in the case of money purchase schemes, the replacement pension must meet what is referred to as the Statutory Standard as set out in sections 12A and 12B of the Pension Schemes Act 1993. Transferors must obtain appropriate advice from a pensions adviser and/or actuary but the statutory standard stipulates a pensionable age of 65 and a rate equivalent to “… (i) 1/80th of average qualifying earnings in the last three tax years preceding the end of service, multiplied by (ii) the number of years service, not exceeding such number as would produce an annual rate equal to half the earnings on which it is calculated.”

It cannot be over-emphasised that transferors must obtain reliable pension advice when deciding how a replacement pension might be provided if new arrangements are to be put in place at the time of the transfer.

And finally…

Reflecting the fact that pensions are generally exempt from the effects of the TUPE regulations, employees cannot claim constructive unfair dismissal on the basis that, as a consequence of a transfer, there has been a loss or diminution of the value of their pension rights.

Calculating Holiday Pay – Overtime

By robh@wearefinally.co.uk,

matthewBear Scotland & Others v. Fulton & Others UKEAT/0047/13/BI

EAT Langstaff J- Calculating Holiday Pay

Case Note by Matthew Pascal, Barrister

 

Summary & Practical Issues:

  1. Employees are now entitled to holiday pay calculated by reference to overtime payments they have received averaged out over a period of 12 weeks from the date holiday pay is paid to the employee. Employees must alter the way they calculate holiday pay accordingly.
  2. Employers are at risk of claims for underpaid holiday pay in the past. Each case will depend on the need for the employee to be able to show an underpayment within 3 months of the date any claim is presented and a series of similar underpayments, each within 3 months of each other.
  3. Sales commission also needs to be included and averaged out in the same way (not decided in this case but decided by the CJEU in Lock v. British Gas Trading Ltd [2014] ICR 813).

Regulation 13 of the Working Time Regulations 1998 provides that workers are entitled to four weeks’ annual leave in each leave year. Regulation 16 provides that workers are entitled to be paid during any period of annual leave at the rate of a week’s pay in respect of each week of leave.

A weeks pay is determined by reference to sections 221 to 224 and 234 of the Employment Rights Act 1996. S. 234 appears to exclude overtime when calculating a week’s pay, unless the employer guarantees to provide the overtime (“guaranteed overtime.”).

First Issue: Scope of Article 7

The case was concerned with “non-guaranteed” overtime, that is, overtime offered by an employer to an employee where the employer is under no duty to offer it.

Langstaff J concluded in relation to Article 7 that: “’Normal pay’ is that which is normally received.” That is either a settled amount or, where the amount paid varies, an average calculated in accordance with the relevant national legislation.

Second Issue: How to interpret the Working Time Regulations and the relevant sections of the ERA?

Langstaff J decided that to give effect to his interpretation of Article 7, regulation 16 of the Working Time Regulations had to be read with the following text (underlined italics) inserted:

16 Payment in respect of periods of leave

  1. A worker is entitled to be paid in respect of any period of annual leave to which he is entitled under regulation 13 and regulation 13A, at the rate of a week’s pay in respect of each week of leave.
  2. Sections 221 to 224 of the 1996 Act shall apply for the purpose of determining the amount of a week’s pay for the purposes of this regulation, subject to the modifications set out in paragraph (3).
  3. (3) The provisions referred to in paragraph (2) shall apply -(a) …;(b) …:(c) … and;(d) as if the references to sections 227 and 228 did not apply and, in the case of the entitlement under regulation 13, sections 223 (3) and 234 do not apply

Third Issue: Jurisdiction of the ET to hear a Deduction From Wages Claim More than 3 Months After the Payment of the Wages from Which a Deduction Has been Made

This remains the most contentious issue. How far back can an employee go?

What constitutes “a series of deductions?” Langstaff J emphasized that in each case this would be a question of fact. A series implied a set of common events of the same character, having a factual similarity, occurring within a period of time, having a temporal connection. In these cases the common theme will be leave under regulation 13 and payments for that leave omitting payments in respect of non-guaranteed overtime. These under-payments will be made, normally, in the month after the leave was taken and in which holiday pay is paid to the employee. Where, however, there is a gap of more than three months between these underpayments, that will extinguish the right to bring a claim in respect of the last underpayment. Where there are a series of underpayments within three months of each other, the decision seems to leave open the possibility that claims going back to the date the Regulations came into force would be permitted.

Employers and employees will need to look carefully at the dates when holiday pay was paid, see if over-time had been worked in the 12 weeks before the leave was taken, and see if the holiday pay reflected the basic pay plus the 12 week average of overtime payments.

The EAT considered two other issues – one concerning contractual interpretation of the particular contracts of employment applicable to the Claimants and the second concerned whether or not pay for time spent travelling to and from a place of work also fell to be included in the calculation of pay for the purposes holiday pay. Langstaff J said it did.

Langstaff J granted permission to appeal to the Court of Appeal, so this decision is not, as yet, set in stone.

Guildford Chambers Barrister Helps Care Home Win Fees Case Against Local Authority in High Court Battle

By robh@wearefinally.co.uk,

rogerRoger Smithers has successfully represented a Care Home in a High Court dispute over fees with a Local Authority.

There have been a number of well publicised disputes between care home owners and Councils about the level of funding provided to support vulnerable adults in privately run care homes.

The usual remedy for a care home provider dissatisfied with the rate offered by the Council is to apply to the Court to quash the Council’s decision because it has not been made lawfully. If successful the Court will instruct the Council to re-make the decision, taking into account the proper factors they ought to have considered in the first place. However, under this system, a complainant who remains unhappy with the new rate offered by the Council has to go back to Court to complain all over again. The Court does not itself determine what is a reasonable fee.

A Different Way

In a new departure, the case of Abbeyfield Newcastle upon Tyne Society Ltd –v- Newcastle City Council [July 2014] in which Dr Roger Smithers, a barrister from Guildford Chambers acted for Abbeyfield care home, the High Court for the first time determined a claim for a reasonable rate brought under the service contract between the Council and the care home.

The Facts

Abbeyfield offers residential care homes, supported sheltered houses and respite care and had a written agreement with Newcastle City Council for the supply of care services between 2009 and April 2010. At expiry of the contract, the Council offered a new three year contract with rates frozen at the old level of £436 per week. Abbeyfield refused to sign the new contract accepting this offer, but continued for about 2 years to provide the services for which the Council paid the old rate of £436.

The Council used a number of tactics to ensure that every care home other than Abbeyfield (51 of them) signed up to the new terms. One such tactic was to threaten to strike any care home which did not sign up from its standing list. The Court said this was ‘plainly unlawful’.

The expiring contract contained a mechanism for accountants PriceWaterhouseCoopers (PWC) to prepare a rate model used to determine the actual costs of care to providers. Following the refusal by the Council to implement this mechanism, the local care homes trade association, Care North East did so. The lowest rate determined by PWC was £477 per week. The Council ignored the PWC report into the rates.

Abbeyfield sued the Council for £465 per week on the basis it was a reasonable rate because it was lower than any PWC determined rate and that it was the market rate for the services which the Council ought justly to pay.

The Decision

The case examined the Council’s defence that it had set a lawful rate which the Abbeyfield had accepted by continuing to provide services. The Court decided the rate set by the Council was not lawful, nor had the Abbeyfield accepted it. A reasonable rate was not indicated either by the rate paid to the 51 other providers because the Council had used its dominant position to skew the market.. The Court determined a reasonable rate at more than the Council had paid, resulting in a substantial back payment to Abbeyfield by the Council going back to the expiring contract date in April 2010, together with accrued interest.

Lessons to Care Home Providers

This case provides care homes with a number of lessons which should be useful to those in negotiation with Councils. These include:

1. Rate Review Models. The importance of an independent professional analysis of costs and corresponding fee rates like the PWC was key in this case. Providers in current or future negotiations with a Council should think about commissioning independent rate reviews themselves if the Council is not using such tools.

2. The need for a provider to communicate regularly and carefully with a Council. If a provider wishes to make concessions to a Council with whom they are negotiating, it is vital that any limits are set out very clearly in writing to avoid an effective allegation of having accepted objectionable terms by conduct.

3. Vindication through contractual rights or the right to receive the market rate can still be very effective, even if a provider stands alone against a dominant Council which has successfully brow-beaten every other care home in its area.

 

The Legal 500 – Regional Bar 2013 Rankings

By robh@wearefinally.co.uk,

Guildford Chambers is ranked as a leading 2nd tier set in the South Eastern Circuit.

Within Employment, Guildford Chambers’ Matthew Pascall is recommended for unfair dismissal and discrimination work. Rowan Morton is ‘tough but sensible; willing to fight for a point, but will not pursue a fruitless argument’.

Within Commercial and Chancery, Guildford Chambers’ Gregory Tee has a broad Chancery and commercial practice which includes insolvency matters.

Within Family, Guildford Chambers’ Janet Haywood, Christine Julien and Fiona Griffin are recommended for care and adoption proceedings. George Coates has notable financial relief expertise.

The Legal 500 is a legal directory which is published annually. Based on thousands of interviews, the directory ranks solicitors and barristers in over 60 specialist areas of law.

Keeping it quite: the NHS and Beyond

By robh@wearefinally.co.uk,

rowan

In the wake of the Government’s announcement that they are to ban gagging orders in NHS compromise agreements, the question to ponder is how non NHS organisations are affected?

Jeremy Hunt, Health Secretary has stated that all NHS compromise agreements for departing staff will have to be approved by the Department for Health and the Treasury and they won’t approve any with a confidentiality clause that prevents people from speaking out about patient safety or patient care.

A commonplace clause in a compromise agreement would include a term not to make or publish any disparaging remarks concerning the company or its staff. Such remarks will not necessarily relate to patient care or safety.

The Public Interest Disclosure Act 1998 ( ‘PIDA 1998’) protects workers who make disclosures about malpractice during their employment and the Employment Rights Act 1996 (‘ERA 1996’) at section 43J stipulates that any term in the worker’s contract or any other agreement is void in so far as it purports to preclude the worker from making a protected disclosure about malpractice, or to bring proceedings under the ERA 1996. The type of disclosures that would qualify for protection are wide reaching and include for example tax evasion within a company, or workplace harassment.

The meaning of ‘a worker’ is extended for the purposes of this protection, and it includes past employees but only in certain contractual arrangements, one of which is for those in medical practice. Therefore compromise agreement terms that seek to bind ex NHS employees against making a disclosure about malpractice are in fact void already, and there would be no need for the government to incur the expense of approving all compromise agreements.

Gary Walker, the former chief executive of United Lincolnshire Hospitals Trust who received a reported settlement of over £500,000 need not worry about a breach of contract because it seems the term that prevented him making the comments he did will be considered void and therefore unenforceable, but the position is less clear for other organisations. For workers not covered by the definition at section 43K of the ERA 1996 such terms are still valid, but are they enforceable if the disclosures an ex-employee wishes to make are in the public interest?

Both employers and employees need to first consider s 43K carefully to establish if the definition of worker is satisfied. If it is, then a gagging term on disclosures about malpractice (but not disparaging remarks generally) will be void. If it is not then it seems that without government intervention, and without the protection of section 43J an employee may well be bound by a compromise term not to make any disparaging remarks, even if they are within the public interests.