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Horizon scanner: five employment law legal issues to watch in 2021

We highlight the five key employment law legal issues to keep in mind over the next 12 months.

As the HR community braces itself for another challenging year, we highlight the key issues to keep in mind over the next 12 months.

1. IR35: a challenge deferred

Originally scheduled to come into effect in April 2020, but delayed due to the pandemic, important changes to the ‘off-payroll’ working rules (known an IR35) are now expected, COVID permitting, to be implemented in April 2021. In summary, employers will be required to assess the employment status of contractors and consider whether, ‘but for’ the presence of an intermediary personal service company or agency, they would be regarded as an employee (giving rise to an employer obligation to operate PAYE and make national insurance contributions). The expected reforms will impact every private sector organisation that engages off-payroll workers, and it is imperative that employers start preparations sooner rather than later. If you have any questions, please do not hesitate to get in touch with your usual Weightmans contact.

2. Worker status: the saga continues

As well as the changes to IR35, flagged above, employment status issues are likely to hit the HR headlines for other reasons in the coming year. Most notably, the Supreme Court is set to have the final say on whether Uber drivers are in fact workers engaged by the company, rather than independently providing services (a closely watched decision which could have knock-on effects for employers of all sizes, across many other sectors).

A key point of debate in the Uber legislation has been whether ‘waiting’ equals ‘working’ – and whether drivers are entitled to be paid for ‘down time’ between journeys. The case of Royal Mencap Society, also expected to be heard by the Supreme Court this year, tackles this issue in the very different context of round-the-clock social care. The court will rule on whether sleep-in workers are entitled to paid only when they are awake and actively engaged in work, or whether they are in fact working when permitted to sleep.

New rights for atypical workers may be on the cards too. The Employment Bill (expected last year, but once again a casualty of COVID) may potentially be published in 2021, and provides for all workers with variable hours to request a more stable and predictable contract after 26 week’s service (together with, potentially, a right to be given reasonable notice of working hours and to be compensated for short-notice cancellation of shifts). Watch this space.

3. Contractual issues: consulting on competition

The government has recently launched two separate consultations on the use of common contractual conditions that might be seen to inhibit competition.

Firstly, post-termination restrictions which require a departing employee not to compete with their ex-employer may be in the firing line. It is perceived that such ‘non-compete’ clauses are sometimes excessively onerous, and unreasonably prevent the individual from finding new work, or from starting a new venture. It is proposed that employers may be required to pay the employee compensation for the right to use non-compete clauses or, more radically, that such clauses may be banned altogether (an intervention which would be huge departure from current commercial practice). The consultation closes on 26 February 2021.

Secondly, a consultation is also underway on whether ‘exclusivity’ clauses, which prevent an employee from seeking or taking up work with another employer, should be banned in contracts where employees receive low pay. This arises from the Taylor review which found that low-paid employees, often working a low number of limited guaranteed hours, were frequently restricted from bolstering their income (often without any sound commercial reason). A ban on such clauses would be an extension of the current prohibition on exclusivity clauses in zero-hours contracts, introduced in 2015. This consultation also closes on 26 February 2021.

As with any government consultation, timelines for change are uncertain, especially given that the vagaries of COVID may leave little time for any creative changes to employment policy.

4. Enhanced rights for parents and carers

Again, employment lawyers will be watching out for the publication of The Employment Bill, which is set to contain a number of far-reaching changes to enhance the employment rights of working parents and carers. Of course, any changes are likely to be far off, as the Bill, once published, may take many months to become law. However, some of the eye-catching, family-friendly proposals expected to make the draft include:

  • Making flexible working the ‘default’ position, unless employers have a good reason not to offer it (a full consultation is expected on this controversial change);
  • the introduction of 12 week’s leave for parents whose babies spend time in neonatal care;
  • the introduction of a further 1 week’s leave for carers, to help them carry out their caring responsibilities;
  • the extension of redundancy protection to pregnant employees (before going on maternity leave) and to maternity returners (for up to six months after return). The scope of current protection is limited and cover’s the employee’s period of maternity leave only.

Of these possibilities, the last appears to have gained the most traction and so, if parliamentary time allows, has the greatest chance of reaching the statute books.

5. Holiday pay

Whatever the employment law weather, we can always count on holiday pay to keep employment lawyers and HR practitioners busy.

2020 saw amendments to the Working Time Regulations to allow workers to carry up to four weeks of annual leave over into the next two leave years (a measure intended to safeguard the rights of critical workers unable to take leave due to the COVID crisis). The rules on payment in lieu of annual leave when employment terminates have also been amended to take this change into account. The practical challenges thrown up by these changes may well raise their heads in 2021. Expect to spend plenty of time debating how much leave should ‘roll-over’; how much leave employees should be allowed to accrue; and how much an employee should be paid in respect of untaken holiday when they leave employment, amongst other issues!

Remember too that the default reference period for calculating holiday pay for staff with variable hours or pay was increased to 52 weeks from April 2020. This ‘averaging’ exercise is usually relatively straightforward. However, the general upheaval of the last 12 months may, in some cases, make calculating holiday pay extremely challenging.

As 2020 emphatically proved, the best-laid plans can be upended, and we could find ourselves facing the unforeseen in the coming year. Rest assured, we will keep you updated throughout the twists and turns of 2021.

For further guidance and support, contact our employment law solicitors.

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