Employment review 2020/2021

Published on 11 January 2021

1 min read

After what has been a year like no other, we offer our assessment of the most significant employment-related developments of 2020, grouped into 10 topics, and reflect on their continued significance into 2021.

Health and safety: responding to the pandemic

Given how much else has changed, it has been surprising that the Government has not been more interventionist in legislating for health and safety in the workplace during the pandemic. Instead, employers have had to grapple with a plethora of new guidance to help them interpret their existing health and safety duties, as well as complying with the rapidly changing local and national restrictions on their operations.

While core health and safety obligations have not been significantly modified, the rapid spread of the Coronavirus has brought some long-established employment protections into greater prominence. Of these the most significant has been section 44 Employment Rights Act, which protects employees from victimisation in a number of circumstances relating to health and safety. These include when they refuse to return to their workplace in response to a danger which they reasonably believe to be “serious and imminent”. Last November the High Court ruled that these provisions – which ostensibly apply only to employees – should be read as extending to workers too. However we are still waiting for a tribunal decision to clarify exactly how these provisions should be interpreted in context of a worldwide pandemic, where the threat to an individual’s health does not reside solely in the workplace.

Another consequence of the Coronavirus has been the growth in homeworking. Apart from a short spell over the summer, it has been clear that employers are expected to direct staff to work from home where this is possible. Given the third country-wide lockdown in England, with similar measures being adopted across the rest of the UK, this situation is likely to continue at least until Easter 2021. This has raised a number of issues for employers, who have found that ad-hoc changes to working arrangements, which started in response to the first national lockdown in March, have been taken on a degree of permanence. Among these is the need to conduct a formal assessment of homeworkers’ workstations and equipment as well as addressing connectivity and security issues. There has also been a growing recognition of the adverse impact of a prolonged absence from the workplace on mental health, and the need to explore new ways of supporting and managing a remote workforce.

One way of tackling the impact of the virus on the UK economy is to extend workplace testing to identify asymptomatic cases. This is likely to grow in prominence in 2021 as the Government continues to explore alternative ways of controlling the virus, in conjunction with accelerating its vaccination programme. As well as the obvious issues in relation to consent and data protection, rolling out workplace testing will typically require revised health and safety assessments and a fresh round of consultation with the workforce.
Employment status and atypical workers
The Coronavirus pandemic has increased the visibility of the role of non-employee workers in keeping essential services going, particularly during periods of national lock down. The relatively precarious status of some so-called atypical workers has concerned both our major political parties for some years, culminating in the publication of the May Government’s Good Work Plan in 2018. The first significant group of measures to implement the Plan took effect in April 2020. These included:
- Extending the right to a written statement of key terms to all workers, as well as expanding the requirements for their contents;
- Abolishing the “Swedish derogation” from the scope of the Agency Workers Regulations (which means that they now also apply to workers with a continuous contract with the agency that supplies their services);
- Changing the reference period for calculating holiday pay under the Working Time Regulations from 12 to 52 weeks.
Litigation over employment status continued through 2020. The case everyone has been waiting for – Uber’s final appeal against the categorisation of its drivers as workers – was heard by the Supreme Court in July, but its decision has not been released at the time of writing.

However, there have been a number of other significant decisions over the past year. Of these the guidance from the European Court of Justice in Yodel and the Employment Appeal Tribunal’s ruling concerning cyclist Jessica Varnish stand out. In Yodel the ECJ emphasised a key factor that separated the self-employed from non-employee workers was the degree of “subordination” in the relations with their employer, while in Varnish the EAT honed in on the importance of the “work/wage bargain”, without which the relationship of non-employee worker cannot arise. It will be interesting to see how the Supreme Court draws these threads together when its decision in Uber is published.
Redundancy and the Job Retention Scheme

The Coronavirus Job Retention Scheme emerged as what appeared to be a back of the envelope promise from the Chancellor as we went into the first national lock-down in March 2020. It rapidly evolved into a fully-fledged scheme, accompanied by detailed guidance and underpinned by rather less comprehensible Treasury Directions. At its peak in May 2020 the Scheme supported nearly 9 million jobs.

Because the Scheme had been running longer than originally envisaged by the summer of 2020, the Government acted to preserve the redundancy pay of employees who were made redundant after a period of furlough. The necessary legislation was introduced at short notice and took effect on 31 July 2020. The aim of the new regulations, which amend the definition of a week’s pay in the Employment Rights Act, is to ensure that statutory redundancy payments and other statutory dismissal-related entitlements are calculated using the employee’s pre-furlough pay, rather than any reduced furlough rate. At the risk of stating the obvious, this legislation applies only to staff who have been furloughed.

Although the Scheme’s primary purpose was to mitigate unemployment, it was not until December 2020 that the Government acted to stop employers claiming for furloughed employees who were under notice of redundancy. Following the most recent of many adjustments to the Scheme at the end of 2020, employers now have the Government’s assurance that the Scheme will remain funded at its current level until April 2021. The Chancellor has committed to announcing the next phase of support for employers in the March budget, though he is under pressure to bring this forward.

Combined with other Government support for business, the Scheme has undoubtedly saved many jobs, but it could not prevent the number of redundancies rising. Particularly over the summer, employers in the worst hit sectors were running collective redundancy consultations with most of their workforce either on furlough or working from home. That gave rise to a number of practical difficulties about how to run meaningful and compliant consultation with a remote workforce. Best practice is continuing to emerge, but in our experience 2020 has shown that with careful planning and the right technology, effective consultation can take place online.
Black lives matter and ethnicity pay reporting
The sight of mass demonstrations on both sides of the Atlantic in response to the death of George Floyd in Minnesota last May has been one of the abiding images of 2020. While the increased prominence these demonstrations have given the Black Lives Matter movement in civil society can be readily discerned, they have so far not resulted in any concrete changes to the UK’s discrimination law. They have, however, undoubtedly increased the pressure on the Government to take concrete action in a number of areas where people from minority groups have measurably worse outcomes that their white peers, including in the employment field.

The introduction of ethnicity pay reporting on a national basis is one change we believe the Government is likely to announce in 2021. Consultation on making it a requirement for larger employers closed in January 2019, but no response to the consultation has yet been published. However, there have been a number of developments in 2020 which could pave the way for further action:
- A petition to implement ethnicity pay reporting reached 100,000 signatures in June 2020, triggering a formal response from the Government. It cited the “genuine difficulties in designing a methodology that produces accurate figures that allows for interpretation and action from employers, employees and the wider public”. It also said that it was “important that any reporting protects employee anonymity and avoids undue burdens on business.”
- In July 2020 the Government announced the membership of the newly formed Commission on Race and Ethnic Disparities, chaired by Dr Tony Sewell, an international education consultant. In September its sub-group priorities were announced, including one focusing on employment and enterprise. Among the previous reports this sub-group has been considering is the 2017 McGregor-Smith review on race in the workplace, which included the introduction of ethnicity pay reporting among its recommendations.
- Last month, Dr Sewell wrote to the Secretary of State for Women and Equalities, Liz Truss, outlining the approach the Committee would be taking, focusing on “multiple, interacting factors” that lead to disparities in outcomes for different ethnic groups. This approach was endorsed in a speech the Minister delivered on 17 December, calling for greater transparency and improved data to “understand where the real problems lie”.
There are still some difficult issues to address, not least agreeing on a suitable categorisation of the ethnic groups to report on, but we believe that the latest Government announcements point to concrete proposals being announced in the course of 2021.
Immigration: the evolution of the post-Brexit system
The expiry of the Brexit transition period on 31 December 2020 brought EU freedom of movement to an end, marking one of the most significant changes to the UK’s immigration system for several decades. From 1 January 2021 the UK’s new points based immigration system has applied to EU as well as non-EU nationals. The new system has introduced significant changes to the UK’s work, business, study and visit routes.

Key changes affecting employers include the following:
- Skilled Worker visa - this new category replaces the Tier 2 (General) category. Applicants require a job offer from a licenced sponsor and will require a minimum of 70 points to qualify for permission to work in the UK. Some points characteristics are mandatory (eg, job offer at an appropriate skill level (which has been reduced from RQF Level 6 to RQF Level 3) and English language skills), with others being ‘tradeable’ (eg, salary level, filling a shortage occupation role, and holding a relevant PhD). As a result, the number of roles that qualify for sponsorship has significantly expanded. The resident labour market test has been abolished and there is no cap on the number of visas that can be issued each year, helping to reduce recruitment lead-in times by up to around a month. There is no maximum time that can be spent in the Skilled Worker category and no ‘cooling’ off period will apply.
- Switching - n a significant change, switching (ie, moving from one immigration category to another whilst remaining in the UK) is now allowed from most immigration categories. That means, for example, that migrants who have Tier 5 / Temporary Worker visas (eg, Government Authorised Exchange, and Youth Mobility) will be able to switch to the Skilled Worker visa. This will reduce costs and disruption for employers and in many cases enable employees to continue working for their employer (rather than have to leave the UK) pending a fresh application being determined.
- Intra group mobility - provisions to enable established workers to transfer from their employer abroad to work at a related business in the UK, as well as for graduate trainees, remain. The Tier 2 (Intra Company Transfer) category has been renamed Intra Company Transfer (ICT) but the eligibility criteria remain broadly the same, including the required skill level of RQF Level 6 and minimum salary threshold of £41,500 or the SOC Code going rate, whichever is higher. There is some additional flexibility in relation to ‘cooling off’ provisions and other minor changes have been made to the category. The ICT category is due to be reviewed by the Migration Advisory Committee (MAC) in 2021, with the MAC’s report due by the end of October 2021.
- Visitors - the Visitor rules that have applied to non-EU nationals remain broadly the same and now extend to EU nationals. Changes to the rules in 2020 included allowing visitors to study at an accredited institution for up to six months (effectively enabling short term study as a visitor), removing the requirement for volunteering to be ‘incidental’ to the main purpose of the visit, and allowing academic visitors who are experts in their field to extend their stay in the UK to a total of 12 months.
- Other categories - the Global Talent visa was introduced in February 2020, providing a non-sponsored route for roles in the tech, science, and research sectors. Additional Global Talent endorsement options for academics and researchers were introduced in December 2020, opening up the route further. A new Frontier Worker Permit has also been introduced to enable EU workers who live abroad, but who work in the UK on a regular basis, to continue to be able to do so from 1 January 2021.
No significant changes have been made to the Shortage Occupation List (SOL), despite the fact that a number of changes were recommended by the MAC. Controversially, there is limited provision for roles deemed to be low skilled, including in social care, construction, retail or hospitality. Many roles in these sectors will not be at a sufficiently high skill level to qualify for sponsorship for a Skilled Worker visa.

The Coronavirus pandemic saw the introduction of a number of temporary concessions, including in relation to right to work checks (reflecting the reality of remote working), application processes, and the implementation of the Job Retention Scheme. Most of these concessions currently remain in place, but will be lifted in the weeks and months ahead.

Further changes are likely to be made to the immigration system in 2021. For example, the introduction of a new unsponsored work visa category is currently under consideration. The conclusion of the EU/UK Trade Agreement in December 2020 may also make it possible for some uniform arrangements to be agreed with the EU in some areas (eg, youth mobility, and British nationals working in the EU).
TUPE: still delivering surprises

This year will mark the 40th anniversary of the original TUPE Regulations, which became law in December 1981, before coming into force in 1982. There have been some significant changes and refinements since then, but two cases from 2020 have shown that this area of employment law remains as complex and unpredictable as ever.

In March 2020, a ruling from the European Court of Justice (following a reference from Belgium) suggested that it could be possible to split the hours of a transferring employee between different transferees where a service contract operated by a single incumbent was awarded to two new providers. Looking at the underlying purpose of the Acquired Rights Directive, the ECJ considered that it was possible that the hours of the administrator originally responsible for the whole service could be divided between the two new employers, provided this did not adversely affect her working conditions. It considered that would be fairer than requiring one provider to assume the responsibility for all her hours, even though it had not secured all the work. This decision could transform our understanding of TUPE in the UK, where it is currently assumed that an employee can only transfer to one new employer, even where the business in which they were previously working is split between different organisations.

Later in 2020 we had a ruling from Employment Appeal Tribunal about the interpretation of a provision in the TUPE Regulations which says that a purported variation of transferring employees’ terms and conditions is void if the reason for the variation is the transfer. It had been widely assumed that this provision was solely designed to prevent the transferee from making changes to the detriment of those employees. However, drawing on earlier ECJ case law, the EAT decided that this provision can also be used to protect a transferee, where the transferor had engineered a significant uplift in the terms and conditions of its senior staff shortly before the transfer.

The influence of the ECJ, which until now has been the final arbiter in the UK of the meaning of the Directive which the TUPE Regulations implement, has been strongly felt in our domestic case law. Now that the Brexit transitional period has ended, its future decisions will no longer be legally binding on our domestic courts and (in theory at least) the Government will be free to change our domestic law in a way that diverges from the Directive. In that sense 2021 has opened a new chapter in the story of our TUPE legislation, though we do not expect any significant changes in the immediate future. As with all other core elements of EU-derived employment law, the starting point in 2021 will be EU law as it applied at the end of 2020.
Employment tribunals: responding to a rising case load

There has been a steady rise in employment tribunal claims in 2020, continuing a trend which started with the abolition of fees in 2017. This has coincided with a significant reduction in capacity due to Covid restrictions. The latest quarterly statistics (for the quarter to September 2020, published last month) confirm what practitioners already knew anecdotally: tribunals’ case load has risen significantly compared with the same period last year and disposal times have fallen.

There have been two main elements in tribunals’ response to these challenges. Firstly, work was accelerated to improve their ability to manage hearings remotely. After a planning stage during the first three months of the pandemic, when hearings were postponed, capacity was progressively increased. Full practice directions about the managing of remote hearings were finally published in September. However, experience has shown that remote hearings take longer than in person hearings, and it has also become clear that they are not appropriate in some circumstances. However, as we moved into a third national lockdown, the President of the Employment Tribunals has made it clear that physical attendance at an employment tribunal should be the exception, and only where it is necessary in the interests of justice.

The second group of measures were aimed at moving cases through the system more speedily. One plan – which is still in the early stages of implementation – is to free up judicial time by delegating some of the simpler case management tasks to legal officers. This change was authorised by amendments to the rules of procedure which took effect in October 2020. Other amendments taking effect at the same time have allowed the re-deployment of judges from elsewhere in the system to sit in the employment tribunal, and have simplified some procedural rules to allow cases to progress more rapidly.

As we move into 2021, we hope that the cumulative effect of these changes will relieve some of the pressures that both staff and users of the employment tribunal service have experienced over the past year. Looking further ahead, it is worth recalling that back in April 2020 the Law Commission published a report with recommendations on how to improve the way employment law disputes are decided. The more radical proposals included extending the time limit for bringing all types of claim in employment tribunals to six months and broadening the scope of their jurisdiction to hear breach of contract claims, including raising the limit on the compensation they can award to £100,000. Due to the current crisis, these proposals may not have received the attention they merit, but we expect the Government will return to them once the current crisis has eased.
Wages and the labour market
The most significant intervention in the labour market in 2020 was of course the Coronavirus Job Retention Scheme. That was not targeting rates of pay, but it will have had an impact of average wage levels in 2021, since most furloughed employees only receiving 80% of their normal pay for their furloughed hours. In addition, there are three other measures of note, which will have an impact on remuneration in 2021:
- A public sector wage freeze: In the November 2020 spending review the Government announced that pay increases in the public sector would be “paused” in 2021/2022. The pay freeze will not apply in the NHS, and all public sector workers earning less than £24,000 will receive a £250 pay increase.
- Public sector exit payments cap: After many years of delay, regulations to impose a cap of £95,000 on public sector exit payments took effect on 4 November 2020. Because these regulations override some contractual entitlements on termination of employment, as well as restricting ex-gratia payments, they have been controversial. Indeed, a challenge to their legal validity has been mounted in the High Court, and a ruling is expected early in 2021.
- Extension of the National Living Wage: From April 2021 the minimum age to qualify for the National Living Wage (ie the top rate of the National Minimum Wage) will be lowered from 26 to 23 years. This top rate will rise to £8.91 and there will be modest rises in all the other rates.
Steady increases in the rate of the National Minimum Wage in real terms remains an important element of the Government’s strategy to tackle low pay. That means that a rising percentage of the workforce is paid at or just over the National Minimum Wage. It is therefore not surprising that litigation about the interpretation of the underlying regulations is becoming more prominent. The most obvious example is the litigation involving Mencap about the correct way to calculate the pay of their “sleep-in” workers. The worker’s appeal against the Court of Appeal’s decision (which in effect decided that workers were not entitled to the NMW for time spent on-call during night shifts) was heard by the Supreme Court in February 2020. We are still waiting for the judgment, which is expected in the first quarter of 2021.

In conjunction with taking action to enforce the NMW regulations, the Government has revived its “naming and shaming” strategy. On the final day of 2020, alongside the announcement of the New Year’s honours, the Government published a list of 139 companies (including some household names) who had failed to pay their workers correctly. Although many of the errors could be described as “technical” and were quickly corrected, no employer will want to find itself on the list.
Unfair dismissal: the old and the new
Because of the time lag between starting proceedings and getting a final ruling, there has as yet been little guidance from employment tribunals about how employers should be approaching some of the difficult workplace issues that have emerged during the pandemic.

Topics that are likely to be explored in employment tribunal decisions towards the end of this year or early in 2022 include:
- Whether furloughed staff who are not happy with the arrangements made by their employer can preserve a claim for unfair dismissal, as well claims for unlawful deduction from wages;
- How the provisions protecting employees from dismissal or other detriment on health and safety grounds will be interpreted in the context of a global pandemic;
- The circumstances in which employers can fairly dismiss members of their workforce who refuse to participate in workplace testing programmes, or decline to be vaccinated.
There have been fewer appeals determined by the Employment Appeal Tribunal than in previous years, but there are two unfair dismissal decisions from 2020 which stand out. They both involve allegations of sexual misconduct, and provide helpful additional guidance about how disciplinary proceedings should be handled.

The first case involved an alleged sexual assault by the claimant on another member of staff. It had taken place in a toilet at a bar during a post-work event, but both the claimant and his colleague had been too drunk to have a clear recollection of what exactly had happened. There was some circumstantial evidence, including a statement that the colleague had made to the police, after the investigation report had been completed. However, only the investigating officer, who had presented the management case, knew that the statement to the police had been withdrawn. He failed to reveal this information at the disciplinary hearing, and the EAT ruled that the dismissal had been unfair as a result. This case is a reminder that even if there is a fair investigation, ensuring that all material facts are available to the disciplinary panel is essential if an unfair dismissal finding is to be avoided.

The second case involved a school teacher in Scotland. The police had found indecent images of children on a computer in his home, but there was no evidence that he was responsible for downloading them, and he was not prosecuted. In this case there was a different procedural error, namely the failure to make it clear in the course of the disciplinary proceedings that the employer was concerned about reputational damage, as well as possible misconduct. That was one reason why the EAT overturned the employment tribunal’s ruling and substituted a decision that the dismissal had been unfair. This underlines the importance of getting the disciplinary charges clear at the outset: with complex investigations, this is often easier said than done.
Pensions: three issues to watch in 2021

Employer obligations

As we head into 2021 and a new national lockdown, employers should continue to ensure that they meet their automatic enrolment (and re-enrolment) obligations, including those applicable to any furloughed employees. Additional employer obligations might also be contained in individual employment contracts, legislation or the provisions governing the employer’s pension scheme.

New criminal and civil offences seem likely to be introduced later this year, in relation to defined benefit occupational pension schemes. Contained in the Pension Schemes Bill 2019/21, the draft offences are broad in scope and could influence future corporate strategy. The Bill also provides a framework to support pension dashboards offering users access to a single platform to view all of their pensions information. In due course, HR professionals may need to co-ordinate the information on company arrangements to be included in the dashboards.

Pension scams

An employee who falls victim to a pension scam may lose some or all of their pension savings if they transfer their funds from their employer’s pension scheme to the scammer’s arrangement, and could also incur a tax liability. With the current economic uncertainty, employees may be more susceptible to scam promises.

The Pensions Regulator provides a variety of anti-scam information and resources for employers, trustees and others. Trustees and scheme providers can also sign up to the Regulator’s new pledge to combat pension scams, which includes a commitment to warn members about pension scams and to encourage members asking for cash drawdown to get impartial advice from The Pensions Advisory Service.

New type of pension scheme

Legislation is expected later this year to allow a new type of pension arrangement – a Collective Defined Contribution (CDC) scheme. Under a CDC scheme, employers and employees could pay a set rate of contributions and target a retirement income, although this amount would not be guaranteed. Members’ pension pots would be combined to benefit from economies of scale, and with the aim of evening out investment performance and reducing volatility over the member’s lifetime, which can be one of the main member disadvantages of a traditional defined contribution scheme.

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David Mills

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David Mills

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