Employment Update - 25 September

Welcome to our fortnightly round-up of what's happening in employment law.

Stop press! Heyday – designated retirement age is lawful, but still likely to go

The Government is likely to be forced to remove the designated retirement age of 65. While the High Court has handed down its decision in the long-running Heyday case today, confirming that the designated retirement age of 65 under the Employment Equality (Age) Regulations 2006 is lawful, the future of 65 as the retirement age for many employees looks uncertain.

While the limit when it was brought into force in 2006 was lawful the Court has, however, acknowledged that the case for advancing the designated retirement age beyond 65 is compelling. It noted that before the hearing, as reported in an earlier Employment Update, the Government announced its intention to bring forward its review of the designated retirement age from 2011 to 2010. The Court indicated that, if a default retirement age of 65 had been introduced in 2009, or there had been no indication of an imminent review, it would not have found it to be proportionate.

The Court stated that a designated retirement age of 65 "creates greater discriminatory effect than is necessary on a class of people who both are able to and want to continue in their employment. A higher age would not have any detrimental labour market consequences or block access to high level jobs by future generations. If the selection of age 65 is not necessary it cannot therefore be justified". Mr. Justice Blake also noted that "if a [designated retirement age] is retained at all, the review must give particular consideration as to whether the retention of 65 can conceivably be justified."

This case will be reported in more detail in a future Employment Update.

Workers can defer holiday if it coincides with sick leave

The European Court of Justice (ECJ) has confirmed that workers who are sick during a period of annual leave have the right, on their request and so that they may actually use their annual leave, to take that leave at a later date.

In Pereda v Madrid Movilidad SA, Mr Pereda was allocated a period of annual leave from 16 July to 14 August 2007, in accordance with a collective agreement with the works council. Following an accident at work, he was unable to work until 13 August 2007 and therefore most of his annual leave coincided with his sick leave. When Mr Pereda asked his employer to allocate a new period of annual leave to him on the basis he had been sick, the employer refused, without giving any reasons.

Mr Pereda challenged the decision in the labour court in Madrid. The court referred the matter to the ECJ to establish whether, under the Working Time Directive, a worker who is sick during a scheduled period of annual leave can take the annual leave at another time, if necessary after the end of the corresponding leave year.

The ECJ confirmed that the purpose of the entitlement to paid annual leave is to enable workers to rest and enjoy a period of relaxation and leisure. The purpose of entitlement to sick leave, however, is different, and this is given so that workers can recover from being ill. The ECJ said that it follows that a worker who is on sick leave during a period of previously scheduled annual leave has the right, on his request and so that he may actually use his annual leave, to take that leave during a period that does not coincide with the period of sick leave. In these circumstances, the employer must now grant the worker a replacement period of annual leave at a different time, possibly to a subsequent leave year if it cannot be rescheduled in the current leave year.

This decision will be disappointing for many employers who do not permit workers to reschedule their holiday if it coincides with a period of sick leave. Much has also been made of the potential abuse of this new right to gain extra holiday entitlement. Employers should therefore request adequate evidence of sickness during annual leave before allowing it to be rescheduled. It is also important for all employers to track the frequency with which workers are sick during annual leave, to ensure that workers are not taking unfair advantage of the arrangements.

It is also worth noting that this case follows the controversial decision in Stringer (see our earlier update), which, in essence, decided that workers can accrue annual leave during sick leave. Following the current case, if a worker does not wish to take annual leave during sick leave, it should therefore be granted at a later date.

However, a number of other issues arise from this case. For example, it is not clear whether the decision is limited to the four weeks' annual leave which applies under the Directive, or whether it extends to the 5.6 weeks' leave entitlement which applies under the Working Time Regulations 1998 (WTR). Also, although the case indicates that annual leave may be carried over to the next leave year, this is not permitted under the WTR. Whilst private workers may have to wait for the WTR to be amended, public sector workers will probably be able to rely on these cases directly both to reschedule their annual leave otherwise lost due to sickness and to carry it forward.

TUPE – guidance on service provision changes

In a decision that will be welcomed by incoming contractors, the Employment Appeal Tribunal (EAT) has upheld a tribunal decision that the "service provision change" provisions of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) did not apply to the re-tendering of a catering contract. The EAT confirmed that the tribunal was entitled to find that the new contract was a wholly different operation.

In OCS Group UK Ltd v Jones and another, OCS Group UK Ltd (OSC) had entered into a contract to provide catering services to a BMW car plant. This contract provided for a centrally located restaurant and deli bar facility, supported by what were described as four satellites and a general shop. A new contractor, MIS, took over the contract in 2007. It provided a substantially reduced service, with five dry goods kiosks selling pre-prepared sandwiches and salads. There was no requirement for hot food preparation. A number of catering staff brought claims against OCS following termination of the OCS contract. OCS argued that a "service provision change" had occurred under TUPE and that the staff had transferred under TUPE to MIS.

The tribunal disagreed and found that the MIS contract was materially different to the OCS contract and that the activities being carried out were different. The catering operation had changed from the provision of a full canteen service where the employees were chefs to them becoming sales assistants in a kiosk. OCS appealed to the EAT.

The EAT dismissed the appeal. It confirmed, following earlier case law, that tribunals should adopt a common sense and pragmatic approach when looking at the differences between pre-transfer and post-transfer activities. The tribunal needs to ask itself whether the activities carried on by the alleged transferee are "fundamentally or essentially the same" as those carried out by the alleged transferor. The answer to that question will be one of fact and degree. In this case, the EAT held that the tribunal were on the facts entitled to come to a view that there were substantial differences in the new contract. There was therefore no service provision change under TUPE.

Additional paternity leave – from April 2011

The Government has announced plans to introduce "additional paternity leave" for parents of babies due on or after 3 April 2011.

The new right will apply where the mother ends her maternity or adoption leave early, and will enable the father, in effect, to take the remainder of that leave, up to a maximum of three months paid at the statutory rate and three months unpaid. The proposal to increase statutory maternity pay from 39 to 52 weeks, which was due to be implemented at the same time as additional paternity leave, is thought to be on hold. Draft regulations on additional paternity leave will be published for consultation in due course.

Under the new scheme:

• families will have the choice to transfer up to six months leave to the father should they want to, which can be taken by the father once the mother has returned to work;
• this new provision will be available during the second six months of the child's life, giving parents the option of dividing a period of paid leave entitlement between them;
• some of the leave may be paid if taken during the mother's 39 week maternity pay period. This would be paid at the same rate as Statutory Maternity Pay (currently £123.06);
• parents will be required to "self certify" by providing details of their eligibility to their employer. Employers and HMRC will both be able to carry out further checks of entitlement if necessary.

Subject to consultation and parliamentary procedure, the Government intends the law to be in force by April 2010.

Agency Workers Directive - announcement

Gordon Brown recently announced that the law implementing the Agency Workers Directive will be on the statute book "in the coming few months". The Directive aims to protect agency workers by applying the principle of equal treatment in relation to basic working and employment conditions (although, in the UK, this will be subject to a 12 week qualifying period).

All member states are required to adopt the necessary laws to implement the Directive by 5 December 2011. No firm decision has been taken as to the proposed implementation date in the UK. However, many employer bodies have expressed concern about whether the Government will rush to implement the Directive by April 2010, on the basis that businesses will need sufficient time to prepare for the new law.

New helpline to protect vulnerable workers

Vulnerable workers will be able to seek advice about their workplace rights and report any abuses through a new Pay and Work Rights helpline.

The helpline is part of a wider campaign to raise awareness of workplace rights and provides a unified point of contact for both employers and workers. It has been developed in cooperation with employers, trade unions and the different enforcement agencies across Government.

The employment rights in question are:

• National Minimum Wage
• Agricultural Minimum Wage
• Working Time (48 hour average working week)
• Employment agency standards
• Gangmaster licensing

Previously, calls about each of these rights were taken by five separate Government bodies. Workers can now report abuses of these rights to one point of contact that can address multiple complaints.

Subscribe

If you wish to receive this update on a fortnightly basis, please click here to subscribe.

The Employment and Pensions Group also provides a range of other value added services, in addition to the fortnightly employment update.

If you would like to receive any of our other services, simply click here, to indicate which service(s) you would like to receive and to confirm your contact details.