Such has been the plethora of employment legislation over the last 10 years that the UK government has been forced to limit the issue of new employment laws to twice a year, in April and October. And most of the significant new legislation derives from European law. Since the Labour government ended the UK's opt-out of the Social Chapter soon after it came into power in 1997, the UK has been required to implement on average one directive a year, on topics ranging from pan-European works councils to the burden of proof in discrimination claims.
Burdens on employers
The Social Chapter came about during negotiations on the Treaty on European Union at Maastricht in 1991. In order to secure agreement on the Social Chapter, the other member states allowed the UK to opt out. Two directives, on pan-European works councils and parental leave, were adopted by the other member states during the opt-out, and were extended to the UK when it adopted the Social Chapter in 1998. At the same time, new directives were adopted, which immediately became applicable to the UK. One of these was the highly significant Burden of Proof Directive, requiring member states to alter the rules in sex discrimination cases so that the burden is on the respondent (generally the employer) to prove that discrimination is justifiable on sex neutral grounds, once the applicant has shown a prima facie case.
At the time, the Government insisted that this would make little difference, but, several years on, it is becoming clear that this is not the case. Following a high profile claim in the Employment Appeal Tribunal in 2003, Barton v Investec Henderson Crossthwaite Securities Ltd, it is now evident that a very different approach is required from employment tribunals in discrimination cases. If the basic facts establish a case, the tribunal must find unlawful sex discrimination unless the employer proves that there is no discrimination. This now applies equally to race, religious and sex discrimination. Very recently, the Court of Appeal, in the EB v BA case, has placed an even greater responsibility on employers by making it clear that respondents must do all they can, particularly in terms of the gathering of evidence, to disprove discrimination allegations.
The Burden of Proof Directive is a good example of the time lag involved in many changes in the law emanating from Brussels. The directive was passed in 1998 and implemented in the UK in 2001, but its impact on employers is only now becoming evident.
The need to consult
The UK approach to employee relations has been very different to that of most of the rest of Europe. Collective consultation has been something of an anathema to our bedrock philosophy of laissez faire. This had been recognised at EU level - the UK, along with Ireland, was allowed to implement the Information and Consultation Directive in stages. Although the directive was passed in the late '90s, it was implemented in the UK only last year, introducing mandatory collective consultation for businesses for the first time. Its forerunner, the Pan-European Works Councils Directive, had made little impact. The national version is a very different matter.
In addition to existing consultation requirements in specific areas, such as collective redundancies and business transfers, as of April last year organisations with 150 or more employees (extended to those with 100 or more from April this year) are forced to negotiate an agreement for the information and consultation of employees if 10% of the workforce demand it, unless there is a pre-existing agreement, when different rules apply. If no agreement is negotiated, then under default provisions employees have to be informed and consulted on a wide range of business developments.
Changes to workplace pension schemes are currently one of the most controversial issues in employment relations. There has been a spate of high profile closures and amendments, particularly to the ever-dwindling number of final salary schemes. The new information and consultation legislation has recently been extended to require employers to consult their workforces (whether or not there is a request to do so) before making significant changes to pension schemes.
Working time
One of the highest profile European employment issues of 2006 is expected to be the revision of the Working Time Directive. This directive was originally (and controversially) adopted as a health and safety measure and was therefore applicable to the UK despite the opt-out. It was implemented here in 1998, but the way in which it was done has been the subject of disapproval ever since, particularly with regard to the option given to individual workers to opt out of the 48 hour maximum working week. The UK makes widespread use of the opt-out: employers in some sectors include it in contracts of employment as a matter of course.
Eighteen months ago, the European Commission announced a proposal to amend the directive, in particular, to stipulate that employers cannot ask for an opt-out at the time an employment contract is signed. The European Parliament wanted to go further and voted for an abolition of the opt-out. The European Commission came up with a revised proposal under which the opt-out would be ended, but member states would be able to request permission to continue it. Since then the issue has become increasingly divisive, and no consensus has been reached at European level. However, it is widely anticipated that the opt-out will eventually be removed. The Austrian and Finnish governments, which respectively take the presidency of the EU Council of Ministers during the first and second halves of 2006, have indicated that it is among their social policy priorities.
In the meantime, another area where the UK's implementation of the directive has been criticised has finally led to the Government making a recent and unexpected change to the law. The rules on the maximum working week, night time working and rest periods do not apply to workers who determine their own working time. In 1999, an amendment to the UK regulations extended this to workers whose time was partly measured (although only their unmeasured time was exempt). The Commission threatened to bring action against the UK. In the face of this pressure, the Government has decided to remove the controversial regulation and, as from April 2006, only workers whose time is wholly unmeasured fall within the derogation. But it may not stop there. The European Commission is also concerned about the UK's rules on rest periods. Government guidelines indicate that employers must make sure that workers can take their rest periods, but are not required to make sure that they do take them. The European Court's Advocate General has recently given its formal opinion, agreeing with the Commission that this tacit approval of non-compliance is in breach of the directive.
Temporary workers
Another directive that has suffered at the hands of political divisions at European level is that relating to temporary workers. This was part of the Commission's 'atypical work' dossier, which led to directives protecting part-time workers and those on fixed term contracts. It is intended to give temporary workers the same basic rights as permanent workers in matters such as hours, holidays, anti-discrimination, maternity and even pay. The main sticking point has been the qualification period for acquiring these rights.
The directive's future looks bleak, but it is possible that it may be revived once the related directive on services in the internal market, removing regulatory barriers hindering businesses from offering their services in other EU countries, has been finalised. The Services Directive has also been dogged by controversy. A proposal to allow service providers to operate under the laws of the member state in which they are established, regardless of where in the EU services are provided, has now been rejected and, under the latest proposal, services will be governed by the laws of the countries in which they are provided. The impact of the Services Directive on employment legislation is at this stage unclear, as the latest proposal excludes employment laws from its scope.
Age discrimination
The most wide ranging directive in recent years has been the Employment Directive, passed in 2000. As a result, from the end of 2003, discrimination on grounds of religion, belief or sexual orientation has been outlawed in the UK. Tribunal cases on the meaning of these new strands are only just beginning to filter through. But before employers have had a chance to assess the impact of these new provisions, the implementation of the directive will require them to outlaw age discrimination, by October this year.
Age discrimination legislation in the UK will have a familiar structure, in that both direct and indirect discrimination will be prohibited, but that is where the similarities with any existing employment laws end. The concepts involved are, for the most part, completely alien to workplaces. The dangers of getting it wrong are grave - compensation for breaches of the new laws will generally be uncapped, in keeping with other types of discrimination.
There are two key areas; retirement age and discrimination. The Government's proposal is that there should be a default retirement age of 65. Employers 'genuinely' retiring employees at 65 will be carrying out fair dismissals, provided they have given the appropriate notice and followed the new procedure for considering requests to work beyond 65. It will also, in theory, be fair to retire someone under the age of 65 if it is 'objectively justified.' Objective justification is a concept which appears frequently in European-derived legislation, but one which is very difficult to assess, particularly in the context of age discrimination. Essentially, a balancing exercise has to be conducted between the needs of the business and the individual - not a very precise basis for employers to operate on. In the case of justification for compulsory retirements under 65, it seems that it will be rare, if not impossible, to demonstrate objective justification in practice.
The regulations outlaw discrimination, both direct and indirect, on the grounds of age (not old age, so it will be unlawful to discriminate against younger workers as well). Employers will need to look at all aspects of the employment cycle, including:
- recruitment and training opportunities, to make sure age-neutral language is used, and there are no indirectly discriminatory conditions: even one as apparently innocuous as a need for a degree may fall foul of the law
- terms and conditions of employment, particularly because in certain circumstances long-service benefits (such as extra holidays) will not be allowed unless they can be justified. One of the unfortunate flaws of the legislation is that by striving to protect younger workers it can affect arrangements that aim to encourage and reward loyalty
- dismissals - in addition to the new 'duty to consider' procedure on retirement, there are other effects - redundancy selection based on age will no longer be allowed, for example.
Both direct and indirect discrimination will be capable of objective justification, but given what we know about this concept, that is likely to be an unattractive proposition. Risk aversion is therefore the name of the game for the next few months.
Naomi Feinstein is a partner and Helena Davies is a professional support lawyer, Lovells Employment Group, Tel: 020 7296 2000
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