Legal Review: Gig economy shakes up employment laws

Kirsty McLuckie weighs up changes to tribunals and data protection regulations

The introduction of fees for employment tribunals caused an upheaval when they were introduced in July 2013. When they were declared illegal by the Supreme Court four years later, it was another momentous decision.

The Ministry of Justice has published its annual employment tribunal award statistics which show that applications increased for the second year in a row – but there are still 100,000 fewer than the last full year before fees were introduced.

It will be interesting to see how significantly different next year’s figures will be, now that the fee regime has been withdrawn.

Tony Hadden, head of employment at Brodies, says the introduction of fees was “the biggest event in employment law when it came in and is the biggest event in employment and constitutional law now that fees have been repealed”.

He expects the number of claims to carry on increasing. “Anecdotally, in terms of the number, claims that are in the early conciliation Acas stage we understand are up by about 50 per cent.

“We have clients who are expecting claims amounting to relatively modest amounts of money and there is no doubt that we are going to enter a period where the number of individual claims will increase.”

He says, however, it is unlikely that the number of claims will reach the level experienced before the fees were introduced. “The previous figure won’t be reached for two main reasons. We now have the compulsory Acas pre-claim conciliation and I think people are used to that.

“Secondly, at the same time that the fees came in, the government announced a cap on the amount that could be awarded in a normal unfair dismissal claim.

“Previously someone who earned £25,000 a year could take a claim to tribunal and the employer was in theory exposed to a £70,000 risk. The maximum unfair dismissal compensatory award is now limited to the employee’s annual salary and so it becomes less risky.”

Finlay McKay, employment partner at CMS, agrees on the expected impending rise in employment tribunal cases.

“We have already seen a couple of cases which I don’t think we would have seen a year ago. Not that they are necessarily less meritorious than others, just that people are more inclined to raise them now,” he says.

“We have seen a rise in whistleblowing claims, which tend to be more complex, and that is partly due to length of service [requirements] which changed two or three years ago.

“If there is the continued rise in complex cases, partly because of an increased awareness, and the more straightforward cases increase, it is possible that we will go back to the kind of levels which we were at previously.”

Hadden says there is another question looming regarding employment tribunals: whether to keep a unified administration system across the UK.

He says: “The Scottish Government is putting forward proposals to take administration of employment tribunal systems under its control. That would inevitably mean, most people think, changes to the system north of the Border.”

While it is still under discussion, there are indications of the type of changes being discussed, such as the proposal to move the current employment tribunal system into the existing tribunal system for social security and tax appeals.

Hadden says: “One of the implications of that is to change the status of judges in the employment tribunal.

“Most employment lawyers and judges are extremely concerned about the possibility of a Scottish employment case being decided by someone who had a different status to someone in an English employment case, where they would still be judges.”

Another impending change to employment law is going to apply Europe-wide.

The General Data Protection Regulation (GDPR) is an EU legal framework which shares similarities with the existing UK Data Protection Act 1998 but has some different requirements.

Companies will need to be compliant by May 2018 and McKay says the legislation transcends different practice areas.

“Where we have been getting involved is the issue of consent from employees, as a lot of the data you will be talking about will be concerned with their employment. We are advising clients about how they go about getting the consent they need,” he says.

The GDPR rules regularise how personal data is collected, stored and transferred and tighten current rules in response to advances in technology.

Karen Harvie, partner in the employment team of Shoosmiths, says companies vary in their preparedness for GDPR. “I think it is on people’s radar but it will be a significant change in how companies process data.

“The core of the new regime addresses accountability and transparency.

“Employers will have to tell employees what data they hold, why they hold it, what their grounds of processing it is, how long they hold it – which can be one of the most difficult concepts.”

Harvie says companies have traditionally relied on a standard employment contract which includes permission for use of employees’ data for employment law purposes, but that will no longer be enough.

She says: “Employers can no longer rely on consent alone for the grounds for retaining data. They are going to have to look at other grounds and a lot of employers don’t even know what other grounds there are.”

Harvie believes that, to be fully compliant, firms should be considering their data storage now.She advises: “A data audit is where you start, to discover what you hold, and at the same time that is a perfect time to orchestrate a 
strip-out of all the data you don’t need.”

The “gig economy” has been a buzz phrase of the last few years which points to a radical change in the UK’s employment patterns but one which, in the main, existing employment law is able to deal with. High-profile cases, such as the employment tribunal in October 2016 which ruled that Uber drivers were workers and not self-employed, has meant that issues such as zero hours contracts, holiday pay and the minimum wage are at the forefront of the public consciousness.

The appeal against the Uber ruling is still pending but the issues aren’t that new.

Hadden says: “I think [the gig economy] will be a growing area of discussion but it has always been an area where people have sought advice.”

He says there is now more complexity over employed or 
self-employed questions.

“The emergence of this middle category, the ‘worker category’ or the ‘dependent contractor’, will mean that it is more important for companies to understand what the regulatory and compliance landscape is.

“As we saw with the Taylor Review [a government review of employment practices], there is the perception that the current UK economy is not working for everyone the way it should.”

While the Taylor Review, which was published in July, recommended the continued use of zero hours contracts, it seems some businesses are being put off using them due to fear of bad press and the number of zero hours contracts falling. But Harvie says that in certain sectors, they have their place. “I can think of a particular example where people are working in respite care.

“They will take on an individual and work exclusively with that patient, but then understandably want a gap before they take on someone else.

“This is an example when a zero hours contract works really well. But the public perception is that they are used inappropriately.”

As with most areas of the legislation, Brexit is casting a shadow, particularly on the working rights of EU citizens in the UK.

Hadden says: “Solicitors working in employment are watching developments every day but nobody knows what is going to happen.

“Particularly in Scotland where we have parts of our economy that are very reliant on non-national workers such as the tourism industry and food production, those will not survive if they can’t get access to that labour pool.”

McKay has been asked by clients to reassure their European workers, although it can be difficult to give specific advice without 
more certainty from the government.

He says: “Manufacturing and higher education both have real concerns about what is going to happen, and the CBI reports that there are quite a few employees leaving already.”

He says this emigration of skills and talent could prove very difficult in some areas of the country.

“Think of Amazon, a good example. They are in Fife, and if there were a large-scale emigration of EU nationals, is there a large enough pool from which to employ local people?”

McKay points to another, more pressing issue: firms with more than 250 employees are required to publish details of their gender pay gaps on or before 4 April, 2018.

He says: “Companies will need to publish a variety of different reporting mechanisms to show where the gaps occur.

“It is quite a prescriptive process and the reality is that the gaps are likely to be significant.”

However, he says there is an opportunity for clients while reporting to provide an explanation as to why that has occurred.

“Companies can point to improving figures, for example, but perhaps the interesting thing will be able to see where they fit next to competitors in their industry.”

This article appeared in the Scotsman’s annual legal review 2017

The Scotsman’s annual legal review looks at some of the most active areas of legal practice in Scotland. Informed by comprehensive data published by Chambers and Partners and Legal 500, the articles give exclusive insight into the work of more than 11,000 practising solicitors and over 460 practising advocates.