Employment Law

The legal classification of a working person determines their rights, the obligations of the person engaging them, and the tax treatment. There are three categories:

Determining status — the courts look at the substance of the relationship, not just the label:

• Control: Does the employer control how the work is done? (Ready Mixed Concrete v Minister of Pensions [1968])
• Mutuality of obligation: Is the employer obliged to provide work and the individual obliged to do it?
• Personal service: Must the individual perform the work personally, or can they send a substitute?
• Economic reality: Is the individual in business on their own account (providing own tools, bearing financial risk, able to profit from good management)?

IR35 (off-payroll working rules): Anti-avoidance legislation targeting workers who provide services through a personal service company (PSC) but who would be employees if engaged directly. If IR35 applies, the worker is treated as an employee for tax purposes (PAYE and NIC are deducted). Since April 2021, for medium and large private sector clients, the client (not the PSC) is responsible for determining whether IR35 applies and operating PAYE if it does.

An employment contract is formed in the same way as any other contract (offer, acceptance, consideration, intention, capacity). It can be oral or written, but certain terms must be provided in writing.

Written statement of employment particulars (s.1 ERA 1996):

Employers must provide a written statement of the main terms of employment on or before the first day of employment (the "principal statement"). Key terms include: names of parties, job title/description, start date, pay (amount, frequency, method), hours of work, holiday entitlement, place of work, notice periods, and any probationary period.

Key implied terms (implied by law into every employment contract):

Employer's implied duties:

• Duty to pay wages: Including during periods of sickness (statutory sick pay — SSP)
• Duty of mutual trust and confidence: The employer must not behave in a way calculated or likely to destroy or seriously damage the relationship of trust. Breach of this term by the employer may entitle the employee to resign and claim constructive dismissal.
• Duty to provide a reasonably safe working environment
• Duty to provide a reference: No general obligation to provide a reference, but if one is given, it must be accurate and fair (Spring v Guardian Assurance [1995]). A misleading reference can give rise to a negligence claim.

Employee's implied duties:

• Duty of fidelity (good faith/loyalty): Not to compete with the employer during employment, not to misuse confidential information, duty to disclose own wrongdoing in certain circumstances
• Duty to obey lawful and reasonable instructions
• Duty to exercise reasonable skill and care
• Duty not to disrupt the employer's business (e.g., not to organise unofficial industrial action during work hours)

Wrongful dismissal is a common law (contractual) claim. It arises when an employer dismisses an employee in breach of the employment contract — typically by failing to give the required period of notice.

Notice periods:

• The contract may specify a notice period (the contractual notice)
• The statutory minimum notice (s.86 ERA 1996) applies if the contractual notice is shorter: 1 week for each year of continuous service, up to a maximum of 12 weeks (so 1-12 weeks depending on length of service). Employees must give at least 1 week after 1 month's service.
• Whichever is longer (contractual or statutory) applies

Summary dismissal (dismissal without notice): Lawful only if the employee has committed gross misconduct (a fundamental breach of contract) — e.g., theft, fraud, violence, serious insubordination, gross negligence. If the employer summarily dismisses without gross misconduct, it is wrongful dismissal.

Remedy: Damages — the pay and benefits the employee would have received during the notice period they should have been given. This is typically a limited amount. No requirement for a qualifying period — even an employee dismissed on day one can claim wrongful dismissal if notice was not given.

Key distinction from unfair dismissal: Wrongful dismissal is about how the dismissal was carried out (was proper notice given?). Unfair dismissal is about why the employee was dismissed (was there a fair reason?) and whether a fair procedure was followed.

Unfair dismissal is a statutory right under the Employment Rights Act 1996 (ERA). Every employee has the right not to be unfairly dismissed.

Qualifying requirements:

• The individual must be an employee (not a worker or self-employed)
• Must have at least 2 years' continuous service (the qualifying period). Exception: no qualifying period is needed for automatically unfair dismissals (see below).

Five potentially fair reasons for dismissal (s.98 ERA):

1. Capability or qualifications: The employee is not capable of performing the job (e.g., incompetence, poor performance, ill health preventing work)
2. Conduct: Misconduct by the employee (e.g., dishonesty, persistent lateness, insubordination, breach of rules). Gross misconduct justifies summary dismissal.
3. Redundancy: The employee's job has ceased to exist (see next section)
4. Statutory restriction: Continuing employment would breach a statutory restriction (e.g., a driver who loses their licence and cannot legally drive)
5. Some other substantial reason (SOSR): A catch-all — any other genuine and substantial reason that justifies dismissal (e.g., personality clash disrupting the business, refusal to accept reasonable changes to terms, breakdown of trust, business reorganisation not amounting to redundancy)

Procedural fairness — the ACAS Code of Practice on Disciplinary and Grievance Procedures:

Even if a fair reason exists, the dismissal is unfair if the employer did not follow a fair procedure. The ACAS Code requires:

• The employer must investigate the matter fully before taking action
• The employee must be informed of the specific allegations in writing
• A meeting (hearing) must be held to discuss the matter — the employee must have the right to be accompanied by a trade union representative or fellow worker
• The employee must be given the opportunity to respond to the allegations
• The employer must make a decision and inform the employee in writing
• The employee must have the right to appeal — ideally to a more senior person not involved in the original decision

Failure to follow the ACAS Code does not automatically make the dismissal unfair, but an employment tribunal can increase or decrease any compensation awarded by up to 25% to reflect unreasonable non-compliance.

Automatically unfair reasons (no qualifying period needed):

• Pregnancy or maternity-related reasons
• Exercising a statutory right (e.g., requesting flexible working, taking family leave)
• Trade union membership or activities
• Whistleblowing (making a protected disclosure under ERA s.43A-43L)
• Health and safety reasons (e.g., refusing to work in dangerous conditions)
• Asserting a statutory right (e.g., requesting a written statement of terms)
• Transfer of undertaking (TUPE-related dismissal, unless for an economic, technical, or organisational reason)

Remedies for unfair dismissal:

• Reinstatement: The employee is re-employed in the same job on the same terms (rare — ordered in only ~1% of cases)
• Re-engagement: The employee is re-employed in a comparable or suitable job
• Compensation: The most common remedy, comprising:
  • Basic award: Calculated like statutory redundancy pay (see below) — based on age, length of service, and weekly pay (capped)
  • Compensatory award: Compensation for actual financial loss — loss of earnings, loss of future earnings, loss of statutory rights. Currently capped at the lower of £115,115 or 52 weeks' pay (amounts updated annually). No cap for automatically unfair dismissals (e.g., whistleblowing, health and safety).

Redundancy occurs when an employee is dismissed because (s.139 ERA 1996):

• The employer has ceased (or intends to cease) to carry on the business in which the employee was employed, OR
• The employer has ceased (or intends to cease) to carry on the business at the place where the employee was employed, OR
• The requirements for employees to carry out work of a particular kind have ceased or diminished (or are expected to)

In essence: the job has gone (business closure, relocation, or the role is no longer needed), not that the person was unsatisfactory.

Selection for redundancy:

• Selection must be based on fair and objective criteria — e.g., skills, qualifications, performance, attendance record, disciplinary record, length of service. "Last in, first out" (LIFO) is no longer automatically fair — it may be indirectly discriminatory.
• Selection must NOT be based on automatically unfair reasons (pregnancy, trade union membership, whistleblowing, etc.)
• The employer should define the pool of employees from which the selection will be made (those doing similar work)

Consultation:

• Individual consultation: The employer must consult with each potentially redundant employee — explain the situation, consider alternatives to redundancy (redeployment, retraining, reduced hours), and allow the employee to make representations
• Collective consultation (s.188 TULR(C)A 1992): Required when proposing to dismiss 20 or more employees at one establishment within 90 days. Must consult with employee representatives (trade union reps or elected representatives):
  • 20-99 redundancies: consultation must begin at least 30 days before the first dismissal
  • 100+ redundancies: consultation must begin at least 45 days before the first dismissal
• The employer must also notify the Secretary of State (via HMRC) of collective redundancies within the same timeframes

Statutory redundancy payment:

• Available to employees with at least 2 years' continuous service
• Calculation: based on age, length of service, and a week's pay (capped — currently £643 per week, updated annually):
  • For each complete year of service while aged under 22: 0.5 week's pay
  • For each complete year while aged 22 to 40: 1 week's pay
  • For each complete year while aged 41 or over: 1.5 weeks' pay
• Maximum service counted: 20 years
• Maximum statutory redundancy pay: 30 weeks × £643 = £19,290 (at current cap)
• Many employers pay enhanced (contractual) redundancy above the statutory minimum

The Equality Act 2010 (EA) prohibits discrimination in employment (and other areas) on the basis of nine protected characteristics:

1. Age
2. Disability
3. Gender reassignment
4. Marriage and civil partnership
5. Pregnancy and maternity
6. Race (includes colour, nationality, ethnic or national origins)
7. Religion or belief (including lack of belief)
8. Sex
9. Sexual orientation

Types of prohibited conduct:

Key points:

• No qualifying period — discrimination claims can be brought from day one of employment (no 2-year service requirement)
• No cap on compensation — unlike unfair dismissal, there is no statutory cap on discrimination damages (can include injury to feelings, loss of earnings, and personal injury)
• Employer's defence: An employer has a defence if they can show they took all reasonable steps to prevent the discrimination (e.g., anti-discrimination policies, training, proper grievance procedures)
• Objective justification (indirect discrimination only): The employer can defend indirect discrimination if the PCP is a proportionate means of achieving a legitimate aim
• Reasonable adjustments (disability): The employer has a duty to make reasonable adjustments for disabled employees — removing barriers that place them at a substantial disadvantage (e.g., modifying equipment, adjusting working hours, providing assistive technology)

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) protect employees when the business (or part of the business) they work for is transferred to a new employer (e.g., through a sale, outsourcing, or insourcing of services).

Key effects of TUPE:

• Employees automatically transfer to the new employer on the same terms and conditions of employment (including pay, benefits, and length of service)
• Any dismissal that is solely or principally because of the transfer is automatically unfair — unless it is for an economic, technical, or organisational (ETO) reason entailing changes in the workforce (e.g., genuine redundancy after the transfer)
• The new employer inherits all existing employment liabilities (including outstanding claims)
• Both the old and new employer must inform and consult affected employees (or their representatives) about the transfer
• The new employer cannot unilaterally change terms and conditions if the sole or principal reason is the transfer itself

Types of transfer covered:

• Business transfer: The transfer of an economic entity that retains its identity after transfer (e.g., sale of a going concern, franchise transfer)
• Service provision change: Outsourcing (a service previously done in-house is contracted out), insourcing (bringing a contracted-out service back in-house), or re-tendering (service moves from one contractor to another)

The Health and Safety at Work etc. Act 1974 (HSWA) is the primary legislation governing workplace health and safety in the UK.

Employer's duties (s.2 HSWA):

• Ensure, so far as reasonably practicable, the health, safety, and welfare at work of all employees
• Provide and maintain safe plant, equipment, and systems of work
• Ensure safe use, handling, storage, and transport of articles and substances
• Provide information, instruction, training, and supervision
• Maintain a safe workplace with safe access and egress
• Provide a safe and healthy working environment with adequate welfare facilities
• Prepare a written health and safety policy (if 5+ employees) and bring it to employees' attention
• Consult with employee safety representatives

Duty to non-employees (s.3): Employers must also ensure, so far as reasonably practicable, that non-employees (visitors, contractors, members of the public) are not exposed to health and safety risks from the employer's activities.

Employee's duties (s.7-8):

• Take reasonable care for the health and safety of themselves and others affected by their actions
• Cooperate with the employer on health and safety matters
• Not intentionally or recklessly interfere with or misuse anything provided in the interests of health and safety

Enforcement: The Health and Safety Executive (HSE) enforces HSWA. Inspectors can issue improvement notices (requiring action within a specified time) and prohibition notices (immediately stopping dangerous activities). Breaches are criminal offences — penalties include unlimited fines and imprisonment for serious offences (e.g., Corporate Manslaughter and Corporate Homicide Act 2007 for deaths caused by gross management failures).