Monthly Highlights – UK Employment Law – August 2023

In this month's instalment, our team highlight key updates to ACAS guidance on employee holiday entitlement and sickness absence, and artificial intelligence in the workplace. We also explore a recent Employment Appeal Tribunal case relating to the extension of an employee's termination date and the Court of Session’s findings that a share incentive plan transferred under TUPE.

1. ACAS Guidance 

ACAS have published new and updated guidance for employers and employees on holiday entitlement and sickness absence.

Holiday entitlement:

• Full time employees are entitled to 5.6 weeks' holiday pay, which can include bank holidays.
• If an employee works part-time, the holiday pay entitlement is calculated in proportion to the hours worked.
• Shift, term-time and zero-hours workers are also entitled to 5.6 weeks’ holiday pay provided they have an ongoing employment contract. The holiday pay entitlement should not be affected by how many weeks the worker works in a year. This is because the employment contract is in place for the whole year.
• If an employee has a fixed-term contract, the holiday pay entitlement is calculated in relation to the length of the employment contract rather than the hours worked.

Sick pay entitlement:

• It is important for an employment contract to outline:
  • How much sick pay is.
  • How long sick pay will last.
  • Any rules an employer has for using sick pay.
• An employer must pay statutory sick pay for an eligible employee.
• Where an employer has a discretionary sick pay policy, this must be stated in an employee’s written statement or employment contract. If better pay is offered under the discretionary policy for some sickness circumstances but not for others, this cannot be discriminatory in its application and must apply equally to part-time and full-time employees.
• Unless an employer's sickness policy allows for it, an employee will not be entitled to extra sick pay due to injury or negligence at work, or a mental health condition caused by stress at work.

Fit notes:

• An employee who is absent from work due to sickness for seven calendar days or less, can self-certify their leave, meaning that they do not have to provide medical evidence.
• If an employee is absent from work due to sickness for more than seven calendar days, the employee should provide a sick note from a registered healthcare professional. The fit note should be given to the employer on the seventh day of absence or as soon as possible after this.

An employer should only request a fit note on the seventh day of absence. If there is a delay, the employee should explain why and say when the employer should expect a note.

Medical reports from doctors: 

• If an employer requires a medical report from an employee, the employer must ask for the employee's permission and explain:
  • Why the employer is asking for the report.
  • That the information will be limited as to what the employer needs.
  • Who will have access to the report.
• Any information received should be treated as confidential and should only be available to those who need access to it.
• If an employee refuses permission, an employer will have to make decisions based on anything the employee has previously told them, any information provided in a fit note (on or after the 7th day of absence), and any occupational health report (if applicable).

2. Artificial Intelligence in the Workplace 

On 11 August 2023, the House of Commons published a research briefing addressing how areas of employment law can potentially restrict the use of artificial intelligence in the workplace. The briefing identifies the following areas of law that may impact the use of artificial intelligence:

• The relationship between an employee and employer is one of personal service. This requires a degree of mutual trust and confidence from both sides, including the ability to explain decisions. The ability for an employer to substitute their judgment with that of artificial intelligence decision-making may be limited to avoid legally undermining an employment contract.
• Relying on artificial intelligence to make or influence decisions may be unlawful under the Equality Act 2010, which prohibits discrimination by employers on the grounds of any protected characteristic.
• Privacy laws restrict the use of surveillance tools to monitor workers.
• The use of artificial intelligence tools in a dismissal could pose challenges in future employment law cases, especially when employers are required to explain or justify why they made certain decisions.

The government's approach to regulation will be non-statutory and context-specific, where regulators can leverage sector-specific expertise in deciding on regulations. Employers will need to prepare for this changing nature of work, and where the use of generative artificial intelligence occurs in the workplace, employers should have a tailored policy that addresses guidelines for use, the right to monitor and training. 

3. The Employment Appeal Tribunal have held that multiple extensions to an employee's termination date did not amount to an unfair dismissal

Facts:

• Mr. Garcha-Singh was employed by British Airways as a member of cabin crew. He went on sick leave in August 2016. Over a year later, BA gave notice that his employment would terminate on 5 January 2018, on the grounds of incapacity. However, he was told the date was “not set in stone” and that it was “the date by which he should he aim to return to work.”
• In July 2018, Mr. Garcha-Singh raised what he described as a "formal grievance" concerning a decision to extend his termination date to 31 July 2018.BA treated this as an appeal against the decision to terminate his employment, which was rejected on 24 October 2018.
• The termination date was extended seven times, mainly to give him time to return to work.The last termination date was 21 December 2018, when he was dismissed.
• BA's absence policy was contractual and set out its ill-health capability procedure. It contained a right to appeal a decision to terminate employment. It did not mention the possibility of postponing termination dates.
• Mr. Garcha-Singh brought claims for wrongful and unfair dismissal and for race and disability discrimination, but the Employment Tribunal dismissed the claims. Mr. Garcha-Singh appealed to the Employment Appeal Tribunal in respect of his unfair dismissal claim only.

Employment Appeal Tribunal Findings:

Mr. Garcha-Singh argued that the extension to his termination date was a breach of BA's absence policy and therefore a breach of contract. The Employment Appeal Tribunal dismissed the appeal, finding that extending the termination date did not breach the employment contract. The Employment Appeal Tribunal found that the absence policy was not designed to cover every eventuality, and therefore did not prevent a manager from postponing a termination date. It also found that BA followed a procedure within the range of reasonable responses and that it was evident that there was no substantive unfairness to Garcha-Singh. Instead, each of the extensions were to his advantage.

Mr. Garcha-Singh argued that he should have been given the right to appeal BA's decision not to extend the termination date further. However, the Employment Appeal Tribunal rejected the assertion that this amounted to a breach of contract. Indeed, the absence policy allowed Mr. Garcha-Singh to appeal from the “decision to dismiss,” which he did in July 2018.

Key takeaways:

This case is a useful reminder that policies should be stated as being non-contractual when incorporated into employment contracts. This will help prevent any unwanted claims of breach of contract in the event the policy is not followed. Further, employers should note that this case deals with unique circumstances and it is not common for an absence policy to allow numerous postponements to a termination date. In this case, the dismissal was found to be fair and within the range of reasonable responses open to the employer given that the termination date was extended to give the claimant time to return to work and therefore was to his advantage.

4. Share Incentive Plan transferred under TUPE

In Ponticelli Ltd v Gallagher, the Court of Session in Scotland focused on a share incentive plan transferred under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). Even though the employee’s right to participate in the share incentive plan was not included in his employment contract, it arose “in connection with” his employment contract and therefore, the court held, the transferee employer had to provide an equivalent scheme.

The facts:

• Mr. Gallagher was employed by Total Exploration and Production Ltd, and he joined the relevant share incentive plan, entering into a tripartite contractual agreement with the employer and the plan trustees. Participation in the share incentive plan was voluntary and there was no reference to it in Gallagher’s employment contract.
• When his employment transferred to Ponticelli under TUPE, Ponticelli stated that it would not provide a share incentive plan and instead offered a one-off compensatory payment of £1,800.
• Mr Gallagher rejected the payment. He argued that his right to participate in the share incentive plan had transferred under Regulation 4(2)(a) of TUPE whereby all of the transferor’s ‘rights, powers, duties and liabilities under or in connection with’ a transferring employee’s employment contract pass to the transferee on the relevant transfer, and therefore, Ponticelli had to provide a scheme of substantial equivalence.
• The Employment Tribunal and Employment Appeal Tribunal upheld the claim.  Ponticelli appealed to the Court of Session, arguing that Regulation 4(2) (a) of TUPE did not apply given that Gallagher’s entitlement arose from a contract that was separate from his employment contract and therefore, the rights and obligations did not arise either “under” or “in connection with” his employment contract.

The findings:

• The Court of Session dismissed the appeal, finding that the Employment Tribunal and the Employment Appeal Tribunal had been entitled to conclude that Regulation 4(2)(a) of TUPE applied in this case.
• Ponticelli’s argument was based on the decision in Chapman v CPS Computer Group, whereby the Court of Appeal found that the share plan did not transfer as it was separate and discrete to the employment contract. However, the Court of Appeal only considered the interpretation of a specific rule in the share scheme; it did not consider whether rights under the share scheme contract were “connected with” the employment contract and therefore capable of transferring. As such, the Court of Session held that this decision was of no assistance to the issues that arose in Gallagher’s claim.

Key takeaways

Although the Court of Session’s decision is not binding, it is a helpful reminder that TUPE can cover share scheme benefits even where the contractual documentation containing the right to participate is separate from the employment contract. As such, employers should ensure, when carrying out due diligence in transactions, that they identify which rights and liabilities are capable of transferring, including those that are not set out in an employment contract.