Employment Corner: Employment Updates for Hotels, Hospitality & Leisure Sector

In each edition of Check-In we explore the latest developments in Employment law and their importance to the Hotel, Hospitality & Leisure sector. In this edition, we will look at, among other topics:

• Important changes to UK holiday pay

• National Minimum Wage increases announced

• Workers (Predictable Terms and Conditions) Bill passed, giving new rights to many workers in the Hotels, Hospitality and Leisure sector

• Information about workers’ health: ICO publishes guidance on processing for employers

• UK Supreme Court has the final say on holiday pay: claims can be brought for a series of underpayments more than three months apart

• Employment Appeal Tribunal decision on entitlement to statutory redundancy pay where employees refuse an offer of suitable alternative employment

Important changes to UK holiday pay

The government has published the draft Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (the “draft Regulations”), which are likely to come into force as soon as 01 January 2024. The draft Regulations contain some important changes to existing legislation, in particular in relation to the calculation of holiday pay. Employers will need to consider the implications for their business and make any necessary adjustments in a relatively short period of time, ahead of the anticipated effective date.

In our article here, we consider the key changes proposed by the draft legislation in relation to holidays and working time, and the steps that employers should be taking in advance of the draft legislation taking effect.

National Minimum Wage increases announced

The government has announced the increased national minimum wage rates, which will come into effect as of 1 April 2024. The new rates follow the Low Pay Commission’s (“LPC”) recommendations.

The NLW will increase from £10.42 to £11.44 (a 9.79% rise), above current inflation rates of 6.7%. The NLW is the highest rate of the national minimum wage and applies to workers aged 23 and over. However, in April 2024, the age requirement will be lowered to workers aged 21 and over, following a recommendation made by the LPC in 2019.

More than two million people are projected to benefit from this proposed rise, with the Chancellor confirming this rise is the equivalent to an extra £1,000 a year for those on full-time contracts.

Workers (Predictable Terms and Conditions) Bill passed, giving new rights to many workers in the Hotels, Hospitality and Leisure sector

On 18 September 2023, the Workers (Predictable Terms and Conditions) Bill was passed into law.  The Workers (Predictable Terms and Conditions) Act 2023 (the Act) amends the Employment Rights Act 1996, granting workers and agency workers the right to request a predictable work schedule under specific conditions:

• When their work pattern – including the number of hours worked, the days / times worked or the total contract period - lacks predictability.  For fixed-term contracts of 12 months or less there is a presumption of a lack of predictability.
• When the requested change relates to their work pattern.
• When their goal is to achieve a more predictable work schedule.

An eligible worker will be able to make up to two requests in a 12-month period.  Employers will be able to reject requests on specific prescribed grounds, as follows:

• the burden of additional costs;
• detrimental effect on ability to meet customer demand;
• detrimental impact on the recruitment of staff;
• detrimental impact on other aspects of the employer's business;
• insufficiency of work during the periods the worker proposes to work;
• planned structural changes; and
• such other grounds as may be specified in regulations.

Where a request is granted, the worker must be offered a new contract which is no less favourable as a whole than the existing contract, and which reflects the change requested.  Regulations will specify a minimum qualifying service requirement, expected to be 26 weeks (either continuous, or in aggregate).  Workers will have the ability to bring claims against the employer for procedural errors, unlawful detriment, and automatic unfair dismissal for employees dismissed for asserting or exercising their rights under the Act.

The Act and associated Regulations are likely to have a particular impact on employers in the Hotels, Hospitality and Leisure sector, given the numbers of casual workers and workers on short-term / seasonal contracts, as well as the significant use of agency workers and zero-hours contracts.  It remains to be seen how many workers will seek more predictable working patterns via a statutory request, but employers should ensure that they are prepared to handle them in line with the legislation.  Whilst the financial remedies for failure to comply with the statutory regime are relatively limited (a maximum of eight weeks’ pay, subject to the statutory cap on a week’s pay), employers may face claims under discrimination legislation, for example where they turn down requests made by female workers to accommodate childcare responsibilities, or by workers with disabilities, and do not have a sufficiently sound rationale for doing so.           

The Act and associated Regulations are set to become effective in Autumn 2024, and ACAS is due to produce a draft code of practice shortly.

Information about workers’ health: ICO publishes guidance on processing for employers

On 31 August 2023, the Information Commissioner’s Office (ICO) published guidance on the lawful handling of information about workers’ health.  The guidance aims to help employers better understand and comply with their data protection obligations when handling data relating to their workers’ health. Such data is designated as “special category data”, which attracts stronger levels of protection under the UK General Data Protection Regulation (UK GDPR).  Given the significant penalties associated with breaches of UK GDPR, the guidance should be an essential read for all employers.

The first section of the guidance summarises how UK GDPR and the Data Protection Act 2018 apply to the processing of workers’ health data. Key points covered include compliance with special category data processing requirements, the provision of information to employees about the collection and processing of their health information, and the need to carry out a data protection impact assessment before processing any workers’ health data.

The second section sets out some common workplace examples of situations where workers’ health information is processed, including in relation to sickness and injury records, medical examinations, drugs and alcohol testing, genetic testing, and health monitoring. For each scenario, the guidance highlights the applicable legal requirements on employers, and provides some advice on good practice.

The guidance concludes with some useful checklists of key action points for employers to follow when processing workers’ health information.

UK Supreme Court has the final say on holiday pay: claims can be brought for a series of underpayments more than three months apart

The Supreme Court has published its long-awaited decision on holiday pay in Chief Constable of Police Service of Northern Ireland v Agnew.  The key point, now resolved beyond doubt by the Court, is that where a worker claims historic underpayments of holiday pay by way of a claim for unlawful deductions from wages, provided that they bring the claim within three months of the last underpayment in a “series”, all underpayments in the series can be claimed regardless of the length of the gap between each underpayment.  This overturns a previous Employment Appeal Tribunal finding that a gap of more than three months between deductions would break the series.  This decision firmly closes the door on the argument, frequently run by employers seeking to mitigate exposure to historic holiday pay claims, that a gap of more than three months between unlawful deductions breaks the “series” and prevents claims for prior underpayments.  The decision is relevant to all types of unlawful deduction, not only those related to the underpayment of holiday pay.  Employers in Great Britain do however remain insulated from significant historic liabilities by the Deduction from Wages (Limitation) Regulations 2014, which place a two-year backstop on unlawful deductions claims (there is no equivalent backstop in Northern Ireland).

As a reminder, UK employers are required to calculate pay for EU-derived statutory holiday (a minimum of four weeks per year) based on “normal remuneration”, which includes not only basic pay but also other elements of pay such as overtime, shift allowances and commission payments.  The rules on calculating holiday pay for statutory leave over and above the EU minimum are slightly different and highly complex. The UK government has recently closed a consultation on reform of the law relating to holiday pay, to include clarification of the minimum rate of holiday pay.  The outcome of the consultation is awaited; employers will no doubt welcome any news of simplification in this area.          

Employment Appeal Tribunal decision on entitlement to statutory redundancy pay where employees refuse an offer of suitable alternative employment

In Mid and South Essex NHS Foundation Trust v Stevenson and Others [2023] EAT 115 the Employment Appeal Tribunal (EAT) ruled that the fact that it would have been reasonable for an employee to accept an offer of alternative employment in a redundancy situation, does not of itself mean that the employee has acted unreasonably by refusing it. In such circumstances, the employee is not excluded from their entitlement to a statutory redundancy payment under ss. 135 and 141 of the Employment Rights Act 1996 (ERA 1996).

The Claimants were employees of the Respondent, an NHS Trust, and each had the job title “Head of Human Resources”. Owing to a restructuring exercise, their roles became redundant. The Claimants were each offered alternative employment in the role of Senior HR Lead, but they refused the offers and were dismissed as redundant. The Respondent refused to pay redundancy payments to the Claimants, arguing they had unreasonably refused offers of alternative suitable employment and were thus not entitled to statutory redundancy pay.  The Employment Tribunal (ET) concluded that although the offers were of suitable alternative employment, the Claimants had not acted unreasonably by refusing them, and so were not excluded from their entitlement to statutory redundancy payments pay.

On appeal, the EAT held that the questions under ERA 1996 of whether alternative employment is suitable in relation to an employee and whether an employee unreasonably refuses the offer should be considered separately, but that they may nonetheless be interrelated. For example, the more suitable the offer, the easier it may be for the employer to show the employee acted unreasonably by refusing it. It could also be helpful to ask how the facts “ought to have appeared” to the Claimants.

The EAT considered that the ET had applied the legal principles correctly. Specifically, the ET had taken into account that while the Claimants’ line management would have changed in the Senior HR Lead roles, their day-to-day operation at the Respondent would not have changed, it was not reasonable for them to anticipate reduced levels of autonomy or status, and there would be no substantive difference to their autonomy or status, had they accepted the role of Senior HR Lead. The ET had also held that the Claimants’ personal perceptions that the roles would have entailed a loss of autonomy or status had been “objectively groundless”.  However, the ET went on to consider how the facts ought to have appeared to the Claimants. The ET had taken the view that the Claimants’ personal perception was that there would have been a loss of autonomy and status, they would have reported to a Head of HR, they were unconvinced about the planning for the new role and its credibility in the new structure, and no reports had been identified.  Whilst objectively, these perceptions were groundless, subjectively (i.e. from the Claimant’s personal point of view) the ET found that they were not, and held that their refusal of the offer of suitable alternative employment was therefore not unreasonable.

This case demonstrates that the questions of whether alternative employment is “suitable” and whether an employee has unreasonably refused an offer of suitable alternative employment are separate and distinct.  Just because an offer is of suitable alternative employment, this does not automatically render an employee’s refusal to accept it unreasonable, and when determining whether an employee has acted reasonably or unreasonably in refusing an offer of suitable alternative employment, the employee’s own subjective perception of the role is relevant.  Employers ought therefore to take care to dispel any inaccurate or misplaced perceptions by providing clear and comprehensive information about the alternative role on offer, including details of grading / seniority, reporting line and direct reports.