Latest Employment Law case updates - Edition 6 2019

1. Holiday pay should include regular voluntary overtime
2. Tribunal considers boundary between permissible positive action and unlawful discrimination in recruitment
3. Failure to enhance shared parental pay in line with maternity entitlements not discriminatory
4. EAT lessons on "one-off" harassment awards and dealing with post-termination grievances

1. Holiday pay should include regular voluntary overtime

East of England Ambulance Service NHS Trust v Flowers and Others (EWCA)

The Court of Appeal has confirmed that entirely voluntary overtime payments should be factored into the calculation of holiday pay where they are made with sufficient regularity to justify the label of "normal" remuneration.

Employees of the ambulance trust worked irregular overtime which was classified as either: (i) non-guaranteed shift-overrun periods, to do mandatory work that exceeded the end of a scheduled shift (e.g. completing a call made to emergency services); and (ii) genuinely voluntary overtime for which they signed up of their own accord. The employees considered that their holiday pay should factor in such overtime payments, relying in part on their contracts, which stated that holiday pay would include "regularly paid supplements… including payments for work outside normal hours" because it reflected their usual pay, when calculated over a 3 month reference period. They advanced claims for unlawful deductions of holiday pay on the basis of both this contractual wording and their general right to receive "normal remuneration" whilst on holiday under the Working Time Directive (“WTD”), as interpreted under EU and UK case law.

The Tribunal at first instance distinguished between the two types of overtime, holding that whilst non-guaranteed shift-overrun payments should form part of "normal remuneration" under both the relevant contractual provision and the WTD, whether or not an individual worked voluntary overtime was at their absolute discretion and so should not be included when calculating holiday pay. On appeal against the latter conclusion, the EAT disagreed. It held that previous case law had clearly established that voluntary overtime payments should be factored into holiday pay calculations where it was carried out over a sufficient period of time on a regular and/or recurring basis so as to justify the description "normal". The CA has now agreed with the EAT's analysis, confirming that to the extent genuinely voluntary overtime work is "sufficiently regular and settled" so that payments made for that overtime can be legitimately classified as "normal remuneration", it should be incorporated into any holiday pay calculation.

This case has re-emphasised that when assessing holiday pay, an employer should focus on an employee’s regular remuneration in fact, regardless of whether elements of such remuneration relate to voluntary or non-contractual overtime. This will be a question of degree, requiring case by case assessments of whether particular remuneration is paid consistently enough to warrant the label of "regular".

2. Tribunal considers boundary between permissible positive action and unlawful discrimination in recruitment

Furlong v Chief Constable of Cheshire Police (ET)

In the first reported decision on the scope of an employer's ability to apply "positive action" measures in recruitment and promotion exercises, an Employment Tribunal has confirmed a restrictive approach whereby candidates can only be preferred on the basis of an under-represented protected characteristic in genuine "tie breaker" scenarios as between individuals who are equally qualified for a given role. The application of blanket policies or selection criteria which promote particular protected characteristics generally are not permitted, regardless of whether their ultimate aim is the (seemingly legitimate) promotion of diversity within a workforce.

The Claimant was a white, heterosexual male who applied for the position of Constable with the Respondent. Along with many other applicants, he had completed an initial assessment centre and interview process, and was placed in a pool of potential candidates. As part of a diversity initiative, the Respondent subsequently elected to offer jobs to black, minority ethnic, female, LGBTQ+ and disabled candidates in preference to all others within that pool. When he was placed on a waiting list, the Claimant claimed that this practice represented direct discrimination on the grounds of sex, race and sexual orientation and fell outside of the scope of the limited "positive action" permitted under the Equality Act 2010 ("EqA").

The Employment Tribunal agreed. Under the EqA, candidates in recruitment or promotion exercises may only be preferred over others on the basis of a protected characteristic where the employer is reasonably satisfied that: (i) that persons who share the "preferred" protected characteristic are under-represented; (ii) the favourable treatment is "proportionate" in the circumstances; (iii) it does not have a general policy of preferential treatment for the relevant group; and, crucially (iv) the favoured candidate is equally as qualified as the individual who is rejected. This latter condition restricts the application of this provision to ad hoc "tie breaker" scenarios. Whilst the ET was satisfied that the numbers of black, minority ethnic, female and LGBT constables were disproportionately low within the Respondent's workforce, it had in effect applied a blanket policy of preferential selection to a large pool of candidates who had been objectively graded as possessing different abilities, notwithstanding that they had all "passed" their interview. As such, this was far removed from the limited "tie-breaker" provisions envisaged by the positive action provisions in the EqA.

Whilst many employers are rightly keen to take steps to increase the diversity of their workforce, they should be aware that any actions which involve the active, preferential treatment of one group of employees or candidates based on a protected characteristic will inevitably result in others suffering potentially unlawful detriment. Such "positive action" measures are only permitted in the context of recruitment and promotion in narrow, ad-hoc and tie-break scenarios as between candidates of genuinely "equal merit". Whether or not this is the case will always require a factual assessment, but is more likely to be defensible in the context of processes which are underpinned by clear, objective and consistently applied scoring criteria.

3. Failure to enhance shared parental pay in line with maternity entitlements not discriminatory

Ali v Capita Customer Management Limited; Hextall v Chief Constable of Leicestershire Police (CA)

The Court of Appeal has held that it was not discriminatory (either directly or indirectly) for an employer to pay male employees on shared parental leave less than the enhanced levels of pay (over and above statutory entitlements) available to female colleagues whilst on maternity leave.

This appeal involved two separate claims from employees who worked for Capita and Leicestershire Police respectively. Both employers operated policies whereby those who chose to take shared parental leave ("SPL") were paid at statutory rates only throughout, whereas female staff on maternity leave enjoyed a number of weeks' enhanced pay before their entitlements dropped to statutory levels. Between them, the Claimants brought claims on the basis that this disparity was both directly and indirectly discriminatory on the grounds of sex.

The Court of Appeal has now dismissed both claims. In particular, it considered that maternity leave and SPL entitlements are not comparable for the purposes of discrimination legislation; the latter relates to matters exclusive to the birth mother as opposed to broader childcare issues. The necessary "comparator", in relation to whom the claimant would need to show less favourable treatment for the purposes of a direct discrimination claim, would therefore be a female colleague on SPL as opposed to maternity leave and less favourable treatment would therefore not be established.

In relation to the indirect discrimination allegation, the CA concluded that this was precluded as a matter of statue on the basis that it was, in reality, a claim under the "sex equality" clause which is implied into his contract under the EqA. In essence, this was an equal pay claim and it failed because it is not unlawful for an employer to afford special terms to female employees in connection with pregnancy or childbirth. In any event, the CA considered that a claim for indirect discrimination would fail since the differential in benefits provided under the two schemes would be justified as a proportionate means of achieving a legitimate aim.

Employers may take comfort from the fact that this outcome suggests that they need not offer equivalent levels of pay or benefits under the terms of their maternity and shared parental schemes. Nevertheless, it appears that both claimants have applied for permission to appeal to the Supreme Court; it is therefore unlikely that this is the last we have heard of this issue.

4. EAT lessons on "one-off" harassment awards and dealing with post-termination grievances

Base Childrenswear Ltd v Otshudi (EAT)

The EAT has confirmed that "one-off" acts of discrimination can justifiably give rise to substantial injury to feelings awards which fall within the middle "Vento" band (i.e. £8,600 - £25,700). This case also implies that the ACAS Code of Practice on Disciplinary and Grievances applies equally to grievances submitted after the termination of employment and that unreasonable non-compliance by the employer can therefore give rise to a 25% uplift on total compensation.
The Claimant worked as an in-house photographer for the Respondent for little more than three months. She was summarily dismissed, purportedly by reason of redundancy. Believing that this decision was influenced by her race, she submitted a grievance and an appeal against her dismissal raising her concerns. Both went unanswered.

The Employment Tribunal held that her dismissal was an act of racial harassment and awarded her, amongst other heads of damage, £16,000 for "injury to feelings" on the basis that the severity of the incident should fall within the middle "Vento" band. It also awarded a 25% uplift to the Claimant's overall compensation, due to the Respondent's failure respond to and otherwise comply with the ACAS Code in respect of her grievance. On appeal, the EAT declined to overturn these awards. When assessing which Vento band discriminatory conduct should fall into, it noted that a Tribunal should assess the severity of the discriminatory act's effect on the Claimant; the number of unlawful acts should not be determinative.

This case is a helpful reminder that it is the severity and potential effect of discriminatory actions on the recipient, as opposed to whether they form part of a course of conduct, which is important when assessing the appropriate level of an "injury to feelings" award. The EAT also seems to have implicitly agreed with the Tribunal's assessment that it was entitled to apply a 25% uplift to compensation for an unreasonable failure to follow the ACAS Code, notwithstanding that the relevant grievance was submitted post-termination. This illustrates risks associated with not following the ACAS Code in all disciplinary and grievance cases, even where an individual does not enjoy protection against unfair dismissal or submits a grievance after the termination of their employment.