Welcome to the seventh edition of The Employment Edit – a summary of the most important recent cases and news affecting employers in the UK. We hope you find this newsletter helpful and informative. In this edition, we look at:

• The Retained EU Law (Revocation and Reform) Act 2023
• Draft regulations to amend the Working Time Regulations and TUPE
• Preserving rights under the Equality Act which are derived from EU law
• Guidance provided by EAT on 'heat of the moment' resignations or dismissals
• An update on new workers' rights

If you have any questions or would like to discuss any of the issues addressed in this edition further, please contact any of the lawyers listed at the end of this newsletter.

Retained EU Law (Revocation and Reform) Act 2023

In previous issues of The Employment Edit we reported on the revocation of EU law bill, which received Royal Assent on 29 June 2023 and is now The Retained EU Law (Revocation and Reform) Act 2023 (REUL). Although the original proposals to 'sunset' (i.e., in effect repeal) large amounts of EU-derived legislation were not taken forward, REUL does make significant changes to the way in which EU-derived legislation and case law will be interpreted as it comes into force from 1 January 2024. In particular, EU law (which will now be called 'assimilated law') will no longer have supremacy over domestic law. Domestic courts and tribunals will no longer be bound by decisions of the Court of Justice of the European Union (CJEU) and general principles of EU law used to interpret EU-derived legislation will no longer be applicable.

Takeaway: The move away from the supremacy of EU law is a significant change for UK courts and tribunals. Certain worker rights which derive from EU legislation or CJEU case law are likely to be challenged or subject to scrutiny and there is scope for significant uncertainty in respect of such rights while courts and tribunals grapple with the impact of REUL. The UK government has published two sets of draft regulations as part of its ongoing work to review, and in some cases preserve or modify, certain employment rights which are derived from EU law.

Draft regulations to amend the Working Time Regulations and TUPE

On 8 November 2023, the Government published its response to the consultation reported in Issue 6 of the Edit together with a set of draft regulations, The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (the Regulations), designed to implement a number of the proposals set out in the consultation. Some of the changes codify certain aspects of current EU law which would otherwise be lost when REUL comes into force. The Regulations also make a number of modifications to existing EU-derived employment rights.

Certain proposals trailed at the time the consultation was announced will not be taken forward. In particular, the two distinct 'pots' of annual leave to which workers are currently entitled will be maintained. So, workers will still be entitled to four weeks of 'annual leave' payable at the rate of 'normal remuneration' and a further 1.6 weeks of 'additional leave' which is payable only at the rate of basic salary. The consequences of this are discussed in more detail below. There is a suggestion that a more fundamental reform of the rate of holiday pay will be considered in the future.

In summary:

Working Time Regulations – annual leave

Annual leave for irregular hours or part-year workers

The Regulations set out new provisions to be added to the Working Time Regulations 1998 (WTR) dealing with holiday entitlement for those who work irregular hours or for part of the year only (e.g., term-time-only workers). Such workers will accrue holiday entitlement at the rate of 12.07 percent of the hours worked in the previous pay period. Such workers will therefore accrue annual leave in proportion to the hours they work (the approach which many employers took to holiday pay for such workers before the 2022 Supreme Court decision in Harpur Trust v Brazel).

In addition, employers will be permitted to pay for the annual leave entitlement of these workers by paying a 12.07 percent uplift in pay at the time of accrual, rather than when leave is actually taken. In other words, this allows the use of (so-called) 'rolled up holiday pay', which had been ruled unlawful by the CJEU.

Holiday pay

Some of the principles from CJEU case law on the calculation of holiday pay are included in the Regulations. For example, the Regulations provide that during periods of annual leave, a worker is entitled to be paid their 'normal remuneration' (albeit that normal remuneration is only payable for four weeks of annual leave; basic pay is payable for the additional 1.6 weeks of leave). In broad terms this means that, during a period of annual leave, a worker should be paid an average of the compensation they would typically be paid during a working week to include not just basic salary but also any:

(a) Payments such as commission which are intrinsically linked to the performance of tasks that a worker is obliged to carry out under the terms of their contract.

(b) Payments for professional or personal status relating to length of service, seniority or professional qualifications.

(c) Any other payments which are regularly paid, such as overtime payments.

Carry-over of untaken holiday entitlement

The Regulations also codify certain principles from CJEU case law for the carry-over of accrued but untaken holiday in circumstances where a worker has been absent from work or has otherwise not taken their leave. If a worker has:

(a) Been absent on family-related statutory leave (maternity, adoption, shared parental, parental or parental bereavement leave), they will be able to carry over up to 5.6 weeks of untaken holiday (i.e. both annual leave and additional leave into the following leave year).

(b) Been on sick leave, they will be able to carry forward up to four weeks of untaken annual leave only (not additional leave), into the following year, provided that it is taken within 18 months of the end of the leave year in which the entitlement originally arose.

(c) Not taken holiday because either (i) their worker status has been wrongly classified; (ii) the worker has not been given reasonable opportunity or encouraged by the employer to take leave; or (iii) the worker has not been informed by the employer that any untaken leave will be lost if untaken by the end of the leave year, they will be able to carry forward annual leave (but not additional leave) until the end of the first leave year in which they properly take and are paid for their holiday.

Untaken annual leave due to the COVID-19 pandemic

The regulations which permitted workers to carry over up to four weeks of annual leave if they were unable to take it due to the COVID-19 pandemic are revoked with effect from 1 January 2024. Workers must take any remaining accrued leave which was carried over on this basis by 31 March 2024.

Working Time Regulations – record keeping

The Regulations simplify the position in relation to the records which an employer is required to keep under the WTR. An employer is required to keep records which are adequate to show whether it has complied with various limits in the WTR, such as maximum weekly working time. An employer is not required to record each worker’s daily working hours if it is able to demonstrate compliance without doing so. This change clarifies the position following a CJEU case in 2019 which suggested that employers should keep a record of each worker’s daily working hours.

Amendments to the duty to inform and consult under TUPE

The Regulations amend the duty to inform and consult under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) for small employers or in relation to small-scale transfers. For transfers which take place on or after 1 July 2024, employers will be able to inform and consult with affected employees directly where either the business has fewer than 50 employees in total or the number of employees transferring under TUPE is 10 or fewer. This will remove the need to elect employee representatives if there are none in place already.

Takeaway: The most significant impact of the Regulations will be felt by employers of part-year or irregular hours workers, such as term-time-only or casual workers. Employers of such workers should review their current systems to ensure they comply with the new Regulations. This may include reversing changes put in place to comply with Harpur Trust. In addition, any employers who have not already adapted their holiday pay arrangements to comply with the CJEU case law around holiday pay and carry-over of untaken holiday should now consider making changes to comply with the new Regulations.

Preserving rights under the Equality Act which are derived from EU law

On 8 November 2023 the Government published draft regulations, The Equality Act 2010 (Amendment) Regulations (the EqA Regulations), which will come into force on 1 January 2024. The EqA Regulations will amend The Equality Act 2010 (EqA) to reproduce certain rights which are derived from EU law and would otherwise be lost when REUL comes into force (as noted above).

Rights preserved by the EqA Regulations include that:

• Special treatment given to women in relation to maternity (in addition to pregnancy and childbirth) will not amount to direct discrimination against men.
• Discrimination against women for breastfeeding constitutes direct sex discrimination in the workplace.
• Discrimination against women after they return from maternity leave constitutes direct sex discrimination if the discrimination is due to pregnancy or pregnancy-related illness occurring during pregnancy or maternity leave.
• Protection against indirect discrimination by association be preserved (i.e., treating someone less favourably because they are associated with a person who has a protected characteristic, for example, a parent of a disabled child).
• When identifying a comparator in an equal pay claim the so called ‘single source’ test will be preserved (meaning that a person making an equal pay claim can compare their pay with a person whose terms are attributable to a single body which is responsible for the alleged pay inequality).
• For the purposes of a disability discrimination claim, the provisions of the EqA which define disability by reference to a person’s ability to carry out normal day-to-day activities must be read as including a person’s ability to participate fully and effectively in working life on an equal basis with other workers (i.e. disability is not defined only by reference to whether a person can carry out day-to-day activities in their personal life such as shopping or cooking).

EAT gives guidance on 'heat of the moment' resignations or dismissals

In Omar v Epping Forest District Citizens Advice the Employment Appeal Tribunal (EAT) considered when a 'heat of the moment' resignation will stand.

During an altercation with his line manager, Mr Omar swore at her and said words along the lines of "….that’s it, from today a month’s notice…" At a subsequent meeting, the CEO told Mr Omar that his line manager had decided that she could no longer work with him and that his resignation was accepted. Mr Omar refused to confirm his resignation in writing and said that he wished to retract his resignation as it was a ‘heat of the moment’ resignation resulting from unresolved grievances. The employer refused to accept Mr Omar’s retraction and treated his employment as terminating on one month’s notice. It appeared that similar altercations between Mr Omar and his line manager had taken place previously, but that on those occasions the line manager had not accepted his resignation and his employment had continued.

Mr Omar brought claims for unfair and wrongful dismissal. The EAT found that the Employment Tribunal (ET) had made errors in the way it approached the case. The case was remitted to a new ET for a rehearing and the EAT set out guidance on how a 'heat of the moment' resignation or dismissal should be considered (whether spoken or in writing). In summary:

• Notice of resignation or dismissal cannot be unilaterally retracted after it has been given. The individual who gives notice cannot change their mind unless the other person agrees.
• The ET must assess how the words were heard both objectively and subjectively, i.e. how a reasonable person hearing the words would have understood them, and also how the recipient of the words in fact understood them. The unspoken intentions of the speaker are not relevant.
• The words spoken must indicate an immediate intention to dismiss or resign. It is not enough if the speaker threatens to dismiss or resign in the future.
• The person hearing the words must understand both that there is a genuine intention to resign or dismiss, and that the person speaking was at the time conscious and rational, i.e. they were 'in their right mind' when they spoke.

Takeaway: This decision gives helpful clarification to employers faced with a situation where an employee has either been dismissed or has resigned during a heated discussion. Such situations are highly fact sensitive and employers should take considerable care when deciding whether or not an employee is to be treated as having resigned.

New workers' rights - update

We previously reported that the UK government had backed the introduction or amendment of a number of new employment rights. The current position in respect of each is summarised below. Employers should now consider appropriate changes to their family leave policies to reflect the various new rights many of which will come into force during 2024.