High Court was entitled to increase employee’s commission level
The Court of Appeal has held that the High Court was entitled to increase the level of commission awarded to a salesperson by an employer and had not failed to have regard to the employer’s discretion in the matter. In the circumstances, it was reasonable for the judge to find that the commission level should have been higher. Once the employee had shown there were grounds for concluding that the employer’s decision was not reasonable, it was for the employer to show that its decision was reasonable, which it had not done.
The Court rejected the argument that the employer had “broad and untrammelled discretion” when determining the level of commission. The contractual documentation set out a detailed matrix for the calculation of commission and the evidence adduced by the employee supported the case for a higher rate of commission. (Hills v Niksun Inc  EWCA Civ 115.)
Complaints about discriminatory conduct of qualifications body fall within remit of employment tribunal
The Court of Appeal has considered the circumstances in which Employment Tribunals have jurisdiction to hear claims of discrimination against qualifications bodies brought by members. In this case, the claimant, who is a doctor, complained that the General Medical Council had harassed and discriminated against her contrary to Part 5 of the Equality Act 2010 during its investigation and the hearing relating to her fitness to practice. The complaint therefore related to the way in which the GMC conducted itself. The court distinguished this from situations where a member wishes to appeal against a decision by the GMC in relation to their professional registration, for example, where they have been suspended. In that case, there is a statutory route of appeal to the High Court as set out by relevant provisions in the Medical Act 1983.
The decision is a good reminder that Employment Tribunals’ remit extends beyond cases involving employment relationships, and clarifies the circumstances in which a claim against a qualification body or similar organisation will fall within the jurisdiction of the tribunals.
No statutory obligation to continue childcare vouchers under salary sacrifice scheme during maternity leave
The Employment Appeal Tribunal (EAT) has held that childcare vouchers provided under a salary sacrifice scheme are part of the employee’s “remuneration” under regulation 9 of the Maternity and Parental Leave etc Regulations 1999, and therefore do not have to be provided during maternity leave. Accordingly, it is not an unlawful detriment, nor discriminatory, for the employer to cease to provide them during a period of maternity leave, as the obligation to maintain terms and conditions during maternity leave does not extend to remuneration. However, where the vouchers are provided on top of salary, without a salary sacrifice, they are not part of the employee’s remuneration and must therefore be continued.
HMRC guidance to the effect that the employer must continue to provide childcare vouchers under a salary sacrifice scheme was wrong and should not be followed. The EAT expressed its conclusion somewhat tentatively, acknowledging that the issue was not clear-cut. (Peninsula Business Services Ltd v Donaldson UKEAT/0249/15.)
This case has been heavily criticised by commentators as the EAT does not appear to have fully considered how salary sacrifice operates in practice. The dust has not yet settled on this case and therefore employers may wish to wait and see how further case law develops before deciding whether to change their practices in relation to childcare vouchers and the terms and conditions on which they are offered.
In any event, the Chancellor announced in the Budget on 16th March 2016 that childcare voucher schemes would be closed to new entrants from April 2018. Existing members at that date will be able to continue for so long as the employer chooses to continue operating the scheme. Uncertainties over this case may be one of the factors that influences whether employers will continue their schemes.
No age discrimination in refusal to extend PHI cover beyond age 60
The Employment Appeal Tribunal (EAT) has upheld an Employment Tribunal’s decision to strike out an employee’s claim for unlawful deductions from wages and direct age discrimination. The employer ended payments under a permanent health insurance (PHI) scheme when the employee reached age 60, as this was the terms of the PHI policy when she first claimed benefit in 2003. Although the employer had introduced a new PHI scheme in 2007 which covered eligible employees up to the age of 65, the employee was not eligible to claim under the terms of that scheme as she was not working immediately before putting in a claim. The EAT held the tribunal was correct to find that the contractual documentation only required the employer to provide a PHI scheme and not to make further payments to the employee if payments were not made by the insurer. The decision to not cover the employee beyond age 60 was the insurer’s, not the employer’s, and there was therefore no direct age discrimination by the employer. (Smith v Gartner UK Ltd UKEAT/0279/15.)
Transfer of all activities not required under TUPE service provision change regime
The Employment Appeal Tribunal (EAT) has held that there is no requirement for the whole of the service to transfer in order for the service provision change provisions of TUPE to apply. It is possible for there to be a TUPE transfer where only part of the service being carried out by the transferor is subsequently performed by the transferee. The fact that TUPE makes express provision in regulation 3(1)(a) for there to be a business transfer in circumstances where only part of an undertaking, service or activity transfers should not be interpreted as meaning that the lack of such wording in regulation 3(1)(b) means that a service provision change cannot take place in the event of a part transfer of a service or activity.
Unlike the business transfer provisions, the service provision change provisions are domestic provisions which do not depend on a finding that there was a discrete economic entity with functional autonomy. Accordingly, a different approach should be adopted to its interpretation. Case law has established that a straightforward and commonsense reading of the service provision change provisions is required and there is nothing in TUPE that expressly requires that the relevant activities should constitute all of the activities carried out by the outgoing contractor. (Arch Initiatives v Greater Manchester West Mental Health NHS Foundation Trust & ors UKEAT/0267/15.)
Knowledge of disability could not be imputed to decision-maker to establish direct disability discrimination
The Employment Appeal Tribunal (EAT) has upheld a tribunal’s decision that an employee’s dismissal was not direct disability discrimination as the decision-maker did not know that he was disabled. The knowledge of the employer’s Occupational Health department in relation to the employee’s disability could not be imputed to the decision-maker in the disciplinary process.
Following the guidance of the Court of Appeal in CLFIS (UK) Ltd v Reynolds, the EAT held that when determining whether direct discrimination has occurred, the tribunal should focus on the thought processes and motivation of the decision-maker. Knowledge of disability could not be implied to the decision-maker; the tribunal must determine whether they personally knew of, and were influenced by, the disability. (Gallop v Newport City Council UKEAT/0118/15.)
Raising written concerns with employee on sick leave was repudiatory breach but not disability-related harassment
The Employment Appeal Tribunal (EAT) has upheld a tribunal’s decision that, in writing to an employee while she was on sick leave for work-related stress, to raise concerns with her employment that were not serious or urgent, an employer was in repudiatory breach of the implied term of mutual trust and confidence, and the employee had been constructively dismissed.
However, the EAT set aside the tribunal’s decision that the letter amounted to an act of disability-related harassment. The tribunal had not established facts to show that the conduct related to the employee’s disability, or that it had the purpose or effect of creating an intimidating, hostile, degrading, humiliating or offensive environment for her. (Private Medicine Intermediaries Ltd and others v Hodkinson UKEAT/0134/15.)
Payment described as PILON taxable as termination payment
The First-tier Tribunal has determined that a payment described as a payment in lieu of notice (PILON) in a compromise agreement was taxable as a termination payment rather than as earnings from the employment. The payment was not made pursuant to a contractual right or to compromise an “amicable unforced termination”. Rather, the payment was compensation for the abrogation of the taxpayer’s contractual rights to notice and, applying Henley v Murray (Inspector of Taxes) (1950) 31 TC, was a damages payment and therefore a termination payment within section 401 of the Income Tax (Earnings and Pensions) Act 2003.
This decision may be contrasted with the decision of a differently constituted First-tier Tribunal in Goldberg v HMRC  UKFTT 346. In that case, the tribunal determined that a payment described as a PILON made in circumstances where the contractual notice terms were not clear, was taxable as earnings. While tribunals will look behind labels, describing non-contractual PILONs as compensation or damages for lack of notice more accurately reflects their tax treatment.
It appears that HMRC did not consider how the payments should be taxed; focusing instead on the timing of the tax liability (see below). If it had, it might have applied its published guidance that confirms that where the employer and employee agree to terminate without proper notice on payment of a PILON (assuming there is no contractual PILON), provided this is done as part of the process of termination, the payment will not be from the employment but from the agreed terms for its destruction. As such, it is taxed as a damages payment. Practitioners should apply this guidance when settling claims where there is no contractual (or automatic) PILON.
Unsurprisingly, the tribunal rejected the taxpayer’s argument that the payment should be apportioned over two tax years even though received in one year. The legislation is clear that cash termination payments are taxed in the tax year of receipt.
Case: Michael Phillips v HMRC  UKFTT 0174 (TC) (7 March 2016) (Judge Ashley Greenbank and Catherine Farquharson).
Limits on tribunal awards and statutory payments to increase from April 2016
Tribunal compensation limits will increase on 6 April 2016 under the Employment Rights (Increase of Limits) Order 2016 (SI 2016/288). The maximum compensatory award for unfair dismissal will rise from £78,335 to £78,962. The maximum amount of a week’s pay, used to calculate statutory redundancy payments and various awards including the basic and additional awards for unfair dismissal, also rises from £475 to £479.
March 2016 Budget: key points for employment lawyers
The Budget announced on 16 March 2016 contained a number of points of interest for employment practitioners. The main employment-related announcements are as follows:-
- Extension of Shared Parental Leave and Pay to grandparents: The government announced that it will launch a consultation in May 2016 on how to implement its commitment to extend Shared Parental Leave and Pay to working grandparents. The consultation will also cover options for streamlining the Shared Parental Leave and Pay system, including simplifying the eligibility requirements and notification system.
- Termination payments: From April 2018, termination payments that are subject to income tax on amounts in excess of £30,000 will be subject to employer NICs. The government confirmed that the £30,000 exemption will remain and that the whole termination payment will be outside the scope of employee NICs. In addition, legislation will be introduced to ensure that all payments in lieu of notice and certain damages payments are taxed as earnings. The foreign service exemption will be abolished. These changes will be introduced in the Finance Bill 2017 and a future National Insurance Contributions Bill. There will be a further technical consultation which will be conducted over the summer.
- Salary sacrifice: The government is considering restricting the range of benefits that may be offered through salary sacrifice schemes. It has confirmed that salary sacrifice for enhanced employer pension contributions, childcare benefits and health-related benefits, such as the cycle to work scheme, would be unaffected. However, the childcare voucher scheme will be closed to new entrants from April 2018.
- Employee shareholders: A lifetime limit of £100,000 on CGT relief available for employee shareholder shares has been introduced. The change applies to shares issued as consideration for entering into an employee shareholder agreement after midnight on 16 March 2016. When the shares are disposed of, gains up to the lifetime limit will be exempt from CGT. Gains above the lifetime limit will be chargeable to CGT in the normal way.
- Apprenticeship levy: Under the proposed apprenticeship levy, employers will receive a government payment equal to 10% of their monthly apprenticeship levy contributions that will be available for them to spend on apprenticeship training.
- Loss of NICs allowance for employers of illegal workers: From April 2017, employers will be denied the NICs employment allowance for a period of one year if they are subject to a civil penalty for employing illegal workers.
The comments in this note are of a general nature only. Full advice should be sought on any specific problems or issues.