UK Employment Law Coffee Break | Looking ahead to 2023, Court of Appeal ruling on waiving employment claims, and discretionary pension increases

Looking ahead to 2023: Supreme Court ruling on holiday pay and pipeline of legislative reforms

2022 has been a year of continuing uncertainty as businesses address the pandemic, political turmoil at home and abroad, and wider economic concerns. While we have seen some limited statutory regulation introduced this year, for example around strike rules and exclusivity clauses, 2023 looks set to see a number of proposed reforms potentially progressed through Parliament – albeit in many cases through private members' bills (some of which have been backed by the government).

These reforms include:

• Extending the statutory right to request flexible working to all employees from day one of employment, alongside some changes to the current rules around making statutory requests (Employment Relations (Flexible Working) Bill 2022-23);
• A new right for carers to take a week's unpaid leave in a 12 month period to care for a dependant with a long-term care need (Carer's Leave Bill 2022-2023);
• A right to one week's leave where a child receives neonatal care (Neonatal Care (Leave and Pay) Bill 2022-23);
• Extending the existing rules providing specific protection on redundancy during maternity, adoption and/or shared parental leave, to those who are pregnant, and for an 18 month period after an employee returns from maternity, adoption and/or shared parental leave (Protection from Redundancy (Pregnancy and Family Leave) Bill 2022-2023);
• Enhancing protection on sexual harassment (Worker Protection (Amendment of Equality Act 2010) Bill);
• Ensuring tips, gratuities and service charges are allocated fairly between workers (Employment (Allocation of Tips) Bill 222-2023);
• Providing for minimum service levels of transport services in connection with strike action (Transport Strikes (Minimum Service Levels) Bill 2022-2023). The government has indicated that a legislative requirement for minimum service levels could be extended to other public services; and
• Requiring employers to allow employees to take time off work for appointments for fertility treatment (Fertility Treatment (Employment Rights) Bill) and providing for employees to have three days paid leave where they experience miscarriage, ectopic pregnancy or molar pregnancy before 24 weeks (Miscarriage Leave Bill). While these bills do not have express government backing they have both received media attention.  

We are also watching closely the progress of the Retained EU Law (Revocation and Reform) Bill 2022-23 which as drafted would see the automatic "sunset" of retained EU law on 31 December 2023 unless specific legislation is introduced to preserve it. The sunset may be extended for specified pieces of retained EU law until 2026. Where retained EU law does remain in force after the sunset date, under the bill it will be "assimilated in the domestic statute book" meaning that "the principles of the supremacy of EU law, general principles of EU law and directly effective EU rights" will also end on 31 December 2023, as the government states that "there is no place for EU law concepts in our statute book" and "EU interpretative features" will no longer apply. Domestic courts will be provided "with greater discretion to depart from retained case law". The implications of this are significant; areas including the Transfer of Undertakings (Protection of Employment) Regulations, working time, paid holidays, laws protecting fixed term and part-time workers and agency workers are all potentially affected.

Data protection and the regulation of artificial intelligence are areas where we may also see statutory developments. The government's Data Protection and Digital Information Bill is currently in the House of Commons and is intended to update and simplify the current data protection framework. Employers should also note that the Information Commissioner's Office is currently consulting on guidance on monitoring at work (which closes on 11 January 2023) and information about workers' health (which closes on 26 January 2023).  

The government response to the consultation on non-compete provisions in employment contracts remains outstanding, along with any further legislative proposals around the use of non-disclosure provisions in employment and termination agreements and the proposed new Statutory Code of Practice on dismissal and re-engagement (fire and rehire).

As well as our regular UK Employment Law Coffee Break, our immigration, GDPR for HR and incentive teams provide regular newsletters providing updates on important developments in those areas. If you would like to subscribe to any of these publications, please speak to your usual Osborne Clarke contact or click here.

Statutory pay rates in 2023

As outlined in last week's Coffee Break, the government has now set out the increased minimum rate of £172.48 per week for statutory maternity, paternity, shared parental and bereavement leave pay which will apply from April 2023, together with the rate of statutory sick pay which will increase to £109.40 from 6 April 2023.

The autumn statement also saw confirmation of the statutory national minimum wage rates which will apply from 1 April 2023.

Holiday pay ruling from the Supreme Court

2023 should also see an important ruling from the Supreme Court on holiday pay (the case is being heard this week, 14 to 16 December 2022), including what is "normal remuneration" when calculating holiday pay, whether a particular holiday day can be classed as a specific type of leave (that is, can it be attributed as being leave derived from the Working Time Directive or leave derived solely from domestic legislation?), and whether or not the Bear Scotland rules are correct: that a series of unlawful deductions from pay is broken where the alleged deductions are more than three months apart.  

The case is an appeal from the Northern Ireland Court of Appeal (NICA), which on the Bear Scotland rule stated "as a matter of law" a series is not ended by a gap of more than three months between unlawful deductions. In a case earlier this year, the England and Wales Court of Appeal gave a "strong provisional view" that the NICA "is correct on this point" and "it is a question of fact and degree, based on the evidence, whether deductions are sufficiently similar or related over time to constitute a 'series''".  Employers should note that although the appeal before the Supreme Court is from the NICA, the Supreme Court's ruling will have potentially significant implications for all employers.

Court of Appeal decision emphasises the need for unambiguous waiver wording

The Court of Appeal has confirmed that potential employment claims which relate to facts in existence at the time a claim is settled can be waived under a COT3 or a settlement agreement provided that the wording of the waiver is sufficiently clear to do so.  

Here, the claimant had entered into a COT3 settlement with his former employer on 1 March 2018 relating to a race discrimination claim. However, in May 2018 the claimant brought a new claim against his former employer on the basis that it had victimised him when he had applied for a new role with a wholly-owned subsidiary of his employer in February 2018 but been rejected.

The COT3 agreement purported to settle all claims that the claimant "has or may have" against his former employer arising "directly or indirectly out of or in connection with" the claimant's employment with that employer, even if the claimant was unaware of any such claim at the date of the agreement. The Court of Appeal acknowledged that it "may be difficult to interpret or apply" those words "in particular circumstances" but "that does not, of itself, mean that the agreement is ambiguous. It is the role of the court to determine the proper interpretation of the contract and to resolve any difficulty". Here the Court of Appeal held there was "no ambiguity which might justify giving a different interpretation to the COT3 agreement"; the purpose of the COT3 agreement was to settle claims connected with the claimant's employment which existed at the date of the agreement and while the new claim of victimisation did not arise directly or indirectly "out of" the claimant's employment with his former employer, it did arise indirectly "in connection with" it.

We reported in an earlier Coffee Break on a recent Employment Appeal Tribunal decision that looked at the difficulties of settling unknown claims arising after the date of the agreement.

As we enter the new year, it will be important for employers to revisit and review existing "standard" wording to ensure that it reflects this latest decision, to protect themselves from any claims which may be directly or indirectly connected to an individual's employment.

HR Pensions Spotlight for December: should UK Pension schemes award a discretionary pension increase as inflation is high?

Pension increases help to protect pensioner members against the effects of inflation. Final salary pension schemes must provide at least a minimum level of increase. However, the scheme rules might give the trustees, the employer, or both a discretion to pay additional increases and might also require them to review the pensions in payment on a periodic basis, with a view to exercising such discretion if appropriate. As the cost of living continues to rise, it is possible that members of final salary pension schemes will start to ask questions about the pensions increases they receive. In our Insight, we suggest actions for trustees and employers. We also look at what the courts and Pensions Ombudsman have had to say on this topic.