Sintons Employment Law E-Bulletin Issue 55

• Ali v Capita Customer Management Customer Management Ltd ET/1800990/16 – Employer’s failure to pay enhanced shared parental pay was sex discrimination
• Pereira de Souza v Vinci Construction UK Ltd [2017] EWCA Civ 879 – 10% injury to feelings uplift should be applied to employment tribunal discrimination awards
• Tax and the Taylor Report

Ali v Capita Customer Management Customer Management Ltd ET/1800990/16 – Employer’s failure to pay enhanced shared parental pay was sex discrimination.

An Employment Tribunal (“ET”) has ruled that an employer’s paternity policy, which was less favourable than its counterpart maternity policy, was directly discriminatory on the grounds of sex.

Mr Ali (the “Claimant”) was employed by Capita Customer Management Ltd (“Capita”). After giving birth, the Claimant’s wife was diagnosed with post-natal depression and, as a result, was advised to return to work resulting in the Claimant taking on the role of primary carer to assist her. On submitting the request to his employer, the Claimant was advised by Capita’s HR department that he was entitled to take a period of shared parental leave, but that he would be paid statutory shared parental pay only under the company policy.

Capita’s maternity policy allowed mothers to take 14 weeks’ leave on full pay. Conversely, its paternity policy allowed fathers to take only 2 weeks of paternity leave on statutory pay.

The Claimant acknowledged that during the first two weeks of leave following childbirth, the mother and father could not be treated as equal comparators due to the health considerations which must be taken into account for the mother following childbirth. Capita had suggested that the Claimant could not compare himself to a female employee since only women can give birth and take maternity leave, thus affording them special considerations which are unique to women. However, the Claimant argued that in the subsequent 12 week period following the two weeks after childbirth (during which, health is an issue), the role of caring for the child can be done by both a mother or a father and, as such, the two can be equal comparators.

The Claimant further argued that the Company’s policy was discriminatory in that it operated under the assumption that a man caring for his baby should not be entitled to the same pay as a woman performing the same role and, as such, treated men less favourably than woman under comparable circumstances. Furthermore, the fact that the policy afforded less pay to male employees than female employees during this time, had the effect of actively discouraging men from taking leave.

The ET noted that the health considerations and the need to focus on recovery during the two week period following childbirth were unique to women and could not be applied to men. It agreed, however, that in his submissions the Claimant did not seek to compare himself to a woman during this period and in fact, since the Claimant received full statutory pay for two weeks, he did not suffer any less favourable treatment during this period. However, it held that, following this, he could compare himself with a hypothetical female colleague who took leave to care for their child after the two week compulsory maternity leave period. Capita’s failure to pay the Claimant full pay amounted to less favourable treatment and the reason for this was the Claimant’s sex. The ET attributed importance to the ability for parents to decide how they care for their child and under what arrangement they choose to do so. In this situation, it was clear that the Claimant was better placed to take on the role as primary care provider, given his wife’s medical condition.

This decision is in contrast to the earlier decision in Hexall v Chief Constable of Leicestershire Police ET/2601223/15 in which the ET held that a police force’s policy of giving a period of full pay to mothers on maternity leave, but paying only statutory shared parental pay to partners, was not discriminatory.

We understand that Capita has appealed to the EAT, and that the Hexall decision is also subject to an appeal. We are awaiting confirmation of hearing dates for these and will report further on their outcome.

Pereira de Souza v Vinci Construction UK Ltd [2017] EWCA Civ 879 – 10% injury to feelings uplift should be applied to employment tribunal discrimination awards.

The Court of Appeal (“CA”) has held that employment tribunals must apply the 10% uplift to pecuniary damages, introduced by the ruling in Simmons v Castle in July 2012 to awards in discrimination cases.

The ruling in Simmons originally stated that the uplift should be applied to personal injury and other similar civil court claims. This came about due to the fact that claimants were no longer able to recover success fees or after the event insurance premiums from their opponents following changes to the law in 2012. The 10% uplift was designed to compensate them for this perceived disadvantage.

For discrimination claims in the employment tribunal, awards for injury to feelings are assessed in the same way as any other tort claims and furthermore, section 124(6) of the Equality Act 2010 provides that the level of compensation that a tribunal can award ‘corresponds to the amount which could be awarded by a county court’.

There has therefore been an ongoing debate and litigation over whether the uplift should be applied to the employment tribunals.

In this case, De Souza (the “Claimant”) was employed by Vinci Construction UK Ltd (the “Company”) as a cleaning lady until she was dismissed after 7 years. The Claimant had suffered from both depression and shoulder issues which amounted to a disability under the Equality Act 2010 (“EqA 2010”). As a result, she was awarded £9,000 for injury to feelings and £3,000 for personal injury arising out of discrimination. The 10% Simmons uplift was applied to her personal injury award but not the award for injury to feelings. This decision was appealed by the Claimant but was subsequently dismissed by the EAT.

On consideration by Lord Justice Underhill of the CA, whilst it was acknowledged that the rationale which led to the decision in Simmons, did not apply to claims in the employment tribunal, the Claimant succeeded in her appeal. Firstly, the effect of the wording of section 124(6) of the EqA 2010 was considered in detail, and it was decided that injuries of the same level of seriousness ought to be afforded the same award whether a claim is heard in an employment tribunal or the civil courts. Further, the CA held that no distinction should be drawn between psychiatric injury and injury to feelings and that both should be subject to the 10% uplift.

The CA therefore suggested that the President of the Employment Tribunals (England & Wales) issue guidance on the 10% Simmons uplift following this ruling to clarify the, now official, position. No guidance has been issued yet, but we will keep you updated in this respect.

This is therefore confirmation that employees will be entitled to increased sums of compensation in respect of any injury to feeling and psychiatric injury in discrimination claims. It is a useful reminder for employers as to the amount of compensation that can be awarded in discrimination claims, which is also uncapped, unlike that for unfair dismissal. Businesses and organisations should seek advice if there is a risk of a discrimination claim arising.

Tax and the Taylor Report

Following on from our last bulletin, the Taylor Report, has been in the news again.  This time in relation to its aim to address the knock on effect that the rapid growth in so called ‘self-employed’ individuals, generated as a result of the rise of the gig economy, has had on government tax receipts.

The report sets out that an employee pays National Insurance contributions on their earnings at a rate of 12%, with their employer paying 13.8% on top of this. Their self-employed counterpart pays 9% and a Class 2 National Insurance Contribution of £2.85 per week with no employer charge.  As a result, the effective tax rates of a self-employed person are significantly below that of someone in employment. The report argues that such discrepancies in the economy inevitably lead to tax avoidance but also, and importantly for the gig-economy, create incentives for employees and employers to move towards a self-employed model despite such a model being inappropriate for the circumstances by all other indications and potentially detrimental for the employment relationship in the long run.

In order to identify the appropriate tax the parties should be paying, Matthew Taylor has recommended that one must establish whether individuals holding themselves out as being self-employed are in fact workers. In order to do this he suggests that the parties need to look at the reality of the relationship.  He has identified the presence of ‘control and supervision’ as being a key indicator that an individual is in fact a worker rather than a self-employed individual, and as such, ought to be entitled to worker’s rights (and pay tax accordingly).

Taylor’s observation draws from the unique employment relationships born from the gig economy such as Deliveroo and Uber which have been at the centre of a number of high profile Employment Tribunal claims.  Having analysed the themes considered by the judiciary in such claims, Taylor explains that the judgments point towards a finding of a relationship of control and supervision as indicative of worker status and the individuals concerned should therefore be described and treated as a worker for the purposes of benefits and tax considerations including National Insurance.

Mr Taylor said: “If you look at the judgments that the judges have been making [about employment rights in the gig economy], it looks as though the courts are saying that if it looks as though somebody is subject to control and supervision they should be described as a worker and not self-employed”.

“Workers”, who Mr Taylor  has recommended be redefined as “dependent contractors”, receive a wider range of benefits and protections compared with “self-employed” people, including sick pay, holiday entitlement and the minimum wage.

Firms which engage workers are also obliged to pay national insurance contributions to HM Revenue and Customs at 13.8% of their earnings above £157 a week (as with employees).

Although it is difficult to judge the economic value of the gig economy, more than one million people work in the sector.  If large numbers of them are reclassified as “dependent contractors”, this could have a major impact on the taxes payable to the government by businesses and workers involved in the gig economy. However, enacting such a change is not easy.  In the Budget earlier in the year, Philip Hammond announced an increase in national insurance contributions to be paid by the self-employed.  He had to execute a U-turn a week later when it was pointed out that the move breached a Conservative pledge made at the time of the 2015 general election not to raise income tax, VAT or national insurance.  Nevertheless, if an organisation currently has a number of “self-employed” contractors, they should be aware that in the foreseeable future there may well be a government review of the nature of the relationship which could result in it being redefined.  This would almost certainly have a knock-on effect on an organisation’s tax liabilities with respect of those individuals.