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September 2023 Newsletter

Calendar September 29, 2023

Duty to provide ‘substantially equivalent’ share scheme after TUPE transfer

Updates in Employment Law in September

Case of the month: Ponticelli UK Ltd v Gallagher – TUPE: Transfer of benefit
In this instance, the employee participated in an employer’s all-employee tax-advantaged share incentive plan, which allowed them to acquire shares in the employer’s parent company. Notably, this plan was not specified in the employment contract and was explicitly described as non-contractual. Following the transfer of the employee’s employment under TUPE to a new employer, the latter announced its decision to replace the all-employee share incentive plan with a one-time compensation payment.

However, the employee sought recourse through the Employment Tribunal, asserting their entitlement to participate in a comparable share incentive plan with the new employer. Subsequently, the case reached the Employment Appeal Tribunal and the Inner House Court of Session, which is the Scottish counterpart to the Court of Appeal.

The Inner House Court of Session has recently determined that the share incentive plan formed an integral part of the employee’s overall financial package as an employee. Despite its absence from the employment contract, it was deemed to have arisen “in connection with” the employment contract and, consequently, transferred under TUPE. Consequently, the new employer was obliged to establish a substantially equivalent share incentive scheme to replace the previous one.

This case underscores the importance for employers to conduct thorough due diligence that extends beyond the written terms of employment. Employers must identify any existing schemes that confer financial benefits to employees, as these may be considered part of their overall compensation package. Failure to perform such due diligence may lead to legal proceedings initiated by employees seeking the enforcement of their rights.

Typically, employers design share schemes in a manner that separates them from the employment contract by explicitly stating their non-contractual nature. This practice is aimed at avoiding claims for damages related to entitlement loss under the scheme upon termination of employment and to circumvent situations like the one in this case, where the right to participate transfers to a new employer under TUPE. However, the Court of Session’s ruling, which affirmed that the participation right was “in connection with” the employment contract, and thus transferable under TUPE, has altered this perspective.

Practically speaking, this case’s outcome presents challenges for employers, particularly if they do not currently have an equivalent scheme in place within their organization. Additionally, it means that employers will be financially responsible for establishing and maintaining such a scheme, incurring substantial costs.

Workers (Predictable Terms and Conditions) Act 2023
The Workers (Predictable Terms and Conditions) Act 2023 received Royal Assent on September 18, 2023. This legislation grants all workers, including those under zero-hours contracts, the legal entitlement to request a more predictable working schedule.

If a worker’s existing work schedule lacks clarity regarding their working hours, timing, or if they are under a fixed-term contract lasting less than 12 months, they will have the opportunity to formally apply for a change to make their working pattern more predictable. Employers must respond to such requests within one month, and they may decline the request based on specific prescribed grounds, which align with the criteria for rejecting flexible working requests.

It is expected that the requirement for a minimum of 26 weeks’ service before making a request will be implemented, although this will be subject to confirmation through regulatory measures. The Act and accompanying secondary legislation are projected to become effective in about a year’s time. ACAS will develop a new Code of Practice to offer additional guidance on request procedures, aiding employers in managing this new right. The draft of this code will be open for public consultation this autumn.

CIPD’s new guide on workplace transgender and non-binary diversity, equity, and inclusion
On 5 September 2023, the CIPD published new guidance on transgender and non-binary diversity, equity, and inclusion in the workplace.

This guidance encompasses:

  • Recommendations for upholding dignity and respect, offering day-to-day support to transgender and non-binary employees, crafting effective diversity, equity, and inclusion (DEI) policies, and delivering DEI training effectively.
  • An explanation of the unique challenges faced by transgender and non-binary individuals throughout the entire recruitment process, along with strategies to attract transgender and non-binary candidates.
  • Guidelines for supporting employees in the process of transitioning, addressing workplace conflicts involving transgender and non-binary individuals, and managing data-related issues.
  • It also includes a glossary of essential terminology and appendices featuring noteworthy employment cases for employer awareness, advice on using inclusive language, and prompts for creating a transitioning-at-work action plan.
  • This guidance is a response to earlier CIPD research findings, which revealed that over 40% of LGB+ and 55% of transgender individuals had encountered workplace discrimination, physical, or sexual harassment within the preceding 12 months.
  • Statutory code of practice to accompany Strikes (Minimum Service Levels) Bill
    On August 25, 2023, the government initiated a consultation concerning the draft statutory Code of Practice (referred to as “the Code”) that outlines the “reasonable steps” required of a trade union to comply with the Strikes (Minimum Service Levels) Act 2023 (referred to as “the Act”). The consultation offers an opportunity for all interested parties to provide feedback on whether the proposed measures “establish a transparent and equitable process for trade unions to adhere to in ensuring their members comply with work notices.” The consultation period will conclude on October 6, 2023.

    The Code outlines five specific steps that trade unions must follow to fulfil the obligation of taking reasonable measures to safeguard themselves against tort liability:

    1. Identification of union members mentioned in the work notice.

    2. Encouragement of the identified members to adhere to the work notice using a “compliance notice” (a template notice is provided in the Code).

    3. Notification of members not explicitly named in the work notice via an “information notice” (a template notice is provided in the Code).

    4. Provision of guidance for picketing to minimize the possibility of the named members being discouraged from crossing the picket line.

    5. Implementation of an “assurance” step aimed at preventing actions by individual officials or members that could undermine the union’s efforts to take reasonable measures.

    Pensions (Extension of Automatic Enrolment) Act 2023
    The Pensions (Extension of Automatic Enrolment) Act 2023 was granted Royal Assent on September 18, 2023. Upon enactment, it will reduce the age at which qualified employees are automatically enrolled in a pension scheme by their employers, lowering the threshold from 22 to 18 years old. The Department for Work and Pensions will conduct a consultation to determine the appropriate steps for implementing these new provisions in the near future.

    ICO guidance on health data
    The Information Commissioner’s Office (ICO) has published new guidance for employers on processing workers’ health data in accordance with their obligations under the UK GDPR and the Data Protection Act 2018. This guidance follows the publication of a draft version for consultation in October 2022.

    Health data, categorized as ‘special category personal data,’ benefits from heightened protection under the UK GDPR. The new guidance furnishes employers with an overview of how to adhere to the more stringent legal requirements associated with processing special category data and informing employees about the handling of their data. It further delves into the necessity of conducting a data protection impact assessment (DPIA) before processing any health data, emphasizing data minimization and security.

    The guidance clarifies the application of data protection law in specific workplace scenarios, including the management of sickness absence records, occupational health programs, drug and alcohol testing, and the sharing of employee health data. It outlines both the legal obligations employers must adhere to and recommendations for best practices. Additionally, the guidance provides a collection of checklists tailored to various situations involving the collection and processing of workers’ health information.

    This newly published resource offers practical and user-friendly guidance for a complex realm of data protection. It will assist employers in fulfilling their legal obligations when handling their employees’ health information. The publication aligns with the ICO’s strategic plan, known as ICO25, which aims to empower organizations to utilize personal data while bolstering public trust responsibly and confidently in data handling practices.

    By Suraj Purohit.
    Employment Paralegal at Kalra Legal Group


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