October 6, 2020
Welcome to your monthly dose of employment law goodness!
It’s been a busy month on the employment law front. Covid-19 continues to dominate the headlines, and in this month’s edition we summarise the new Self-Isolation Regulations and provide further details of the recently announced Job Support Scheme.
It’s not all virus-related though. With the new IR35 Rules just around the corner, we analyse HMRC’s updated guidance on the Off-Payroll Working Rules as well as HMRC’s new guidance relating to performers and artists in the entertainment industry. Finally, we summarise some notable recent cases on the Equality Act and highlight key recent changes to the Employment Tribunal Rules (don’t worry… we’ve kept that section short!)
If you would like to discuss any of the below updates, please do get in touch. Alternatively, if you would like to receive these updates directly to your inbox, please subscribe here.
This month's headlines
So long furlough…
Believe it or not, it has now been 6 months since the Chancellor of the Exchequer, Rishi Sunak, announced the Job Retention Scheme (“JRS”) and introduced us all to the world of furloughing. Fast forward 6 months and the Chancellor is at it again. The recently announced Job Support Scheme (“JSS”) is certainly intriguing and at the very least it gives us all a new acronym to get used to.
We’ve already summarised the key details of the JSS in our update on 24 September 2020 (available here). As a recap, the JSS aims to protect “viable” jobs by allowing employers to reduce the hours employees work. In exchange, the employer must pay 1/3rd of an employee’s pay for the hours that they don’t work, with the Government covering another 1/3rd (subject to a cap of £697.92 a month). The employee therefore effectively foregoes the remaining 1/3rd of their pay for any unworked hours (or a larger proportion if the Government’s contribution has been capped) but has the comfort of keeping their job (at least while they remain in the scheme).
Based on recent updates, we now have further details about how the scheme will work:
- The JSS is open to all employers with a UK bank account and UK PAYE scheme;
- The JSS appears to be available to both employees and PAYE workers as eligibility will be determined on the basis of RTI submissions made to HMRC on or before 23 September 2020 (yep, that old chestnut again);
- For the first three months of the JSS, workers must work a minimum of 33% of their usual hours but the Government is considering whether this percentage should be increased for the remaining 3 months of the scheme’s duration;
- Workers can move on and off the JSS and do not need to work the same pattern of hours each month, though each short time working arrangement must cover a minimum period of seven days;
- Any short time working arrangement must be agreed with the relevant worker and this should be documented in writing;
- The calculations for a worker’s usual pay will follow a similar methodology as calculations under the JRS (the groans are palpable…);
- Grant payments will be made in arrears and will not cover Class 1 Employer National Insurance Contributions or pension contributions;
- Employers will be able to claim online from December 2020; and
- The Government “expects” that employers will not be able to top up employees’ pay at their own expense (although it should be noted that it is not clear whether this is intended to signify a prohibition on “top ups” or whether it is merely intended to flag to employees that they should not expect to receive “top ups”).
Unlike with the JRS, we should (fingers crossed!) have the luxury of having the full JSS guidance before the scheme opens on 1 November 2020 and we will provide a further update on what we know (or perhaps more likely, what we still don’t know) at that stage.
£1,000 for a trip to the pub
After recent reports that only one in five people who should be self-isolating are actually doing so, the Government has perhaps inevitably introduced new legislation to police this issue. Step forward the Health Protection (Coronavirus, Restrictions) (Self- Isolation) (England) Regulations 2020 (the “Regulations”). In short, these Regulations make it a criminal offence for a person to fail to self-isolate, punishable with an initial fine of £1,000, rising to a fine of £10,000 for a fourth offence.
The Regulations came into force on 28 September 2020 and only apply in England. They set down the mandatory periods of self-isolation for individuals who have tested positive for coronavirus or have been in close contact with someone who has tested positive. Importantly for employers, the regulations impose an obligation on individuals to let their employer know if they are required to self-isolate under the Regulations or under the International Travel Regulations (which require individuals to quarantine following travel to/through non-exempt countries).
Once the employer is aware of the requirement for the individual to self-isolate, the employer must not knowingly allow the individual to attend any place related to their work other than the place where they are self-isolating. Breach of this regulation, without reasonable excuse, could lead to a fine of £1,000 for a first offence, which rises to £10,000 for a fourth offence. Directors and officers can also be prosecuted if the offence is found to have been committed with their consent or connivance or due to their neglect.
The Regulations apply to “workers” and “agency workers” and, given the broad definition of “agency workers” (which, in short, covers any individual who is supplied to work for you by someone else), this arguably covers someone provided via an intermediary such as a personal service company / loan out vehicle as well as typical employment agencies. For our production clients, it would therefore be sensible to assume that the Regulations apply to all direct hire and loan out engagements.
Interestingly, when engaging “agency workers” additional notification requirements also apply. If an agency worker notifies you that they are required to self-isolate, you would technically be obliged to inform the person that supplied them of this fact. As above, if you fail to do so without reasonable excuse, there is the potential to be issued with a fine of £1,000. While we suspect the chance of such a fine being levied for loan out arrangements is remote, at the very least it would be advisable to implement a process that ensures that agents/agencies are kept informed of any isolation notifications.
Hoping for another delay to the IR35 changes? Don’t hold your breath.
Given everything that has been happening over the last few months, it is understandable that the extension of the Off Payroll Working Rules (more commonly known as “IR35”) to the private sector is not on the top of everyone’s to-do list. However, recent developments would indicate that the likelihood of a further delay is remote at best. So with the new implementation date (6 April 2021) fast approaching, it’s imperative we all prepare now.
HMRC has subtly reminded us of this fact by quietly updating its guidance to clarify how the new rules will work, in particular explaining how to determine whether a company is a ‘small entity’ (which as you will recall from our previous guidance, means that the new rules will not apply to it).
The new guidance confirms that a company’s size will generally be determined in line with the Small Companies Regime in the Companies Act 2006. In summary, that means that a company will be medium/large-sized if it meets at least two of the following criteria for two consecutive financial years:
- a turnover of more than £10.2 million
- a balance sheet total (assets) of more than £5.1 million
- an average of more than 50 employees (which will not include “deemed employees” – i.e. those who are not directly employed by the company).
This assessment will not apply to new corporate entities which will instead qualify as small for their first financial year following incorporation. They will be considered as small until at least the beginning of the first tax year after the period for filing their accounts for the first financial year has ended. Following this first financial year, the new entity would then need to have its size determined in line with the Small Companies Regime summarised above.
Surprisingly, the guidance suggests that the ‘new company exemption’ still applies if the new company is part of a larger group. We strongly suspect this is incorrect. If true, it would enable many businesses (including TV and Film clients setting up new production SPVs) to easily side-step the new rules and it is notable that the wording of the draft legislation contradicts the guidance on this point.
While the small companies exemption will be a helpful reprieve for many small production companies, many larger outfits will fall within the new rules and will therefore need to take steps to ensure they are prepared for the new rules coming into force on 6 April 2021. Please do contact us if you would like any advice in this area or any assistance with updating contracts and policies.
To tax or not to tax… that is the question
Clearly HMRC have had a busy few months. As well as updating their IR35 guidance, they have also set out long-awaited new rules regarding the tax status of so called ‘front of camera’ roles within the entertainment industry.
The guidance on theatrical performers/artists, designers, directors and choreographers now explains that the question of whether such an individual is employed or self-employed for tax purposes will depend on the nature of their relationship with the engager and the context of their overall business and other engagements. The guidance (available here) provides a list of factors, which, when considered together, are broadly indicative of self-employment, but it makes clear that determining an individual’s status for tax purposes is a holistic exercise and that the list of factors shouldn’t simply be seen as a checklist.
The guidance is clearly helpful but some may feel it introduces an element of uncertainty to what was previously a relatively straightforward assessment. However, this does not appear to have been the intention. Upon the launch of the new guidance, a HMRC spokesperson stated that it “confirms the long established position that most performers are self-employed for tax purposes”.
Changes to the Employment Tribunal Rules
Those of you who have recently had the pleasure of dealing with any Employment Tribunal litigation will likely be accustomed to the healthy period that you seem to have to wait to have proceedings listed. Hearings are commonly being listed at least 12 months and in some cases 18 months or more after the claim has been issued.
Clearly this doesn’t represent satisfactory justice. To address this, the Government has introduced new legislation to amend the Tribunal Rules with the aim of increasing the capacity of Employment Tribunals and reducing bureaucracy. It is hoped that the changes (which, among other matters, include allowing non-employment judges to sit as employment judges and allowing legal officers to carry out certain functions which are currently carried out by employment judges) will help address the colossal backlog of claims, which recent reports suggest has now reached 45,000!
The changes also affect the ACAS early conciliation procedure and, with effect from 1 December 2020, the standard length of the conciliation period will be increased from one month to six weeks, but it will no longer be possible to increase the period by 14 days.
Non-binary employee receives protection under the Equality Act
Taylor v Jaguar Land Rover Ltd ET/1304471/2018
Is someone who identifies as gender fluid/non-binary protected from discrimination/harassment under section 7 of the Equality Act? This is the question that an Employment Tribunal recently had to grapple with following a claim brought by one of Jaguar Land Rover’s engineers.
Section 7 of the Equality Act deals with the protected characteristic of gender reassignment and it provides that “a person has the protected characteristic of gender reassignment if the person is proposing to undergo, is undergoing or has undergone a process (or part of a process) for the purpose of reassigning the person’s sex by changing physiological or other attributes of sex”.
Based on this definition, it is not immediately obvious that it would apply to those who identify as non-binary. However, in a sensible decision, the Tribunal unanimously held that the claimant did have the protected characteristic of gender reassignment.
Although this is a first instance decision (and therefore not binding on other Tribunals), it is an important judgment as it is the first case to recognise the rights of non-binary and gender-fluid people to be protected from discrimination and harassment under the Equality Act.
Stoicism held to be protected under the Equality Act
Jackson v Lidl Great Britain Ltd/Lidl UK GmbH ET/2302259/2019
This case related to Lidl employee who described himself as a “consequentialist”. If, like us, you were previously unfamiliar with the concept, it seems that consequentialists are people for whom “the realisation that the consequence of what [they] say would cause offence would not stop [them] from saying it”. That’s unfortunate for the particular employee in this case, as he was dismissed after offending his colleagues.
The employee (or ex-employee) in question argued that his beliefs were based on stoicism and the Tribunal found, perhaps surprisingly, that stoicism was a philosophical belief protected under section 10 of the Equality Act.
The judge found that the claimant’s beliefs based upon stoicism were genuinely held, were not simply an opinion, concerned a weighty and substantial aspect of human life and behaviour and had attained a certain level of cogency, seriousness, cohesion and importance. The issue that concerned the judge was whether the beliefs could be said to be worthy of respect in a democratic society where they had caused offence to others as a result of the claimant’s conscious disregard of the consequences of his actions. The judge ultimately held that there was no fundamental right not to be offended and that the claimant’s philosophical belief in stoicism was therefore capable of protection under section 10 of the Equality Act.
This is again a first instance decision and so not binding on other tribunals but it emphasises the potentially broad reach of the Equality Act 2010 and the need to be mindful of any potential protected characteristics when disciplining/dismissing an employee.
Paranoid delusions did not constitute a disability under the Equality Act
Sullivan v Bury Street Capital Ltd  UKEAT 0317/19/0909
In this case, the claimant suffered from paranoid delusions that caused him to believe that he was being followed and stalked by a Russian gang. The delusions affected his timekeeping and attendance (which had already been a matter of concern for the company) and the claimant was ultimately dismissed. The claimant claimed that his delusions amounted to a disability and that he had therefore been subject to disability discrimination.
The Tribunal held that the claimant’s delusions did not amount to a disability. It found that although the claimant’s delusions had a substantial adverse effect on his ability to carry out day to day activities in 2013 and again in 2017, their impact was not long term as in neither case was it likely that the adverse effect would last for 12 months or that it would recur.
The claimant appealed arguing that the Tribunal was wrong to hold that the adverse impact was not likely to recur given that it had recurred in 2017. The Employment Appeal Tribunal dismissed the appeal and held that the Tribunal had approached the question of the likelihood of recurrence correctly in considering whether the available information at the time was such that it could be said that a recurrence of the effect “could well happen”. The Employment Appeal Tribunal noted that although the “could well happen” test was a low threshold, it did not mean that where a substantial adverse effect did in fact recur, the Tribunal was precluded from concluding that it was not likely to recur.
This case is a helpful reminder that a condition must have a substantial, long-term and adverse effect on an individual’s ability to carry out day to day activities before it will be held to be a disability. While, in this case, the claimant’s genuine fear that he was being stalked had a large impact on his day to day life, it was, based on the evidence to the Tribunal, not obviously foreseeable that it would have a long term effect.