Employment Corner: Employment Updates for the Hotels, Hospitality & Leisure Sector (August 2024)

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 some updates from the UK, including the:

• Implementation of the Employment (Allocation of Tips) Act 2023, including the publication of the new statutory Code of Practice.
• Proposed reforms to TUPE Regulations and abolition of the European Works Councils framework.
• Migration Advisory Committee’s recommended retention of the Graduate visa route.
• TUC draft AI Bill and what this means for employers.
• New statutory flexible working regime and its practical application.
• Confirmed changes to annual leave and holiday pay for irregular hours and part-year workers.

Employment (Allocation of Tips) Act 2023

The Government has announced that the Employment (Allocation of Tips) Act 2023 will now take effect on 1st October 2024, instead of 1st July 2024.

Under this Act, employers must pass tips to workers. Businesses that frequently receive tips must have a tipping policy, and workers can request their tipping record to support claims in the Employment Tribunal if they believe they are not receiving their due tips.

Employers must also adhere to a new statutory Code of Practice for distributing tips.

Proposed Reforms to TUPE Regulations and Abolition of European Works Councils Framework

The UK Government has launched a consultation paper titled “Consultation: Smarter Regulation – Employment Law Reform,” focusing on proposed changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) and the abolition of the legal framework for European Works Councils (“EWCs”). This initiative follows the “Smarter Regulation to Grow the Economy” policy paper from May 2023, which aims to streamline regulations and reduce business bureaucracy post-Brexit.

Proposed Changes to TUPE

Exclusion of Limb (b) Workers

The Government proposes to amend the definition of “employee” under TUPE to exclude “limb (b) workers”, following the uncertainty created by the Employment Tribunal’s decision in Dewhurst v Revisecatch Ltd [2018] (in which it was held that “limb b” workers were covered by TUPE.

Splitting Employees’ Contracts Between Multiple Employers

The Government also seeks to amend TUPE to prevent the splitting of an employee’s contract between multiple employers following a business transfer. This follows the 2018 European Court of Justice ruling in ISS Facility Services v Govaerts, which allowed for such splits. The proposed amendment would ensure that an employment contract transfers to a single employer, with transferee employers required to agree on who is responsible for each employee’s contract.

Abolition of European Works Councils Framework

The Government proposes to repeal the remaining legal framework for EWCs, which are used for informing and consulting employees about transnational issues. The rights of UK employees to request the formation of new EWCs have already been revoked, following Brexit, but existing EWCs continue to operate and are required to be maintained under the current law. The Government believes existing structures like trade unions can adequately represent employees, making EWCs redundant. This change aims to reduce the operational costs for the small number of businesses that maintain both UK works councils and EU EWCs.

Consultation Process

The consultation seeks input on these proposals and their potential impact, particularly on employees with protected characteristics who are more likely to be affected by service provision changes. The consultation closes on 11 July 2024.

Retention of Graduate visa route – Recommendation by the Migration Advisory Committee (“MAC”)

The Graduate visa route allows students from UK universities to remain in the UK for up to two years after graduation. The MAC has recently reviewed whether the Graduate visa route requires any amendments. The review took place in light of the Government’s objective to reduce net migration and updated Immigration Rules which have increased restrictions on international students who seek to bring dependants with them to the UK.

The MAC published their findings on 16 May 2024 and found that:

1. the restrictions already placed on the dependants of students will naturally result in a reduction in the number of graduate visas issued;
2. the number of individuals, as a result of Immigration Rules increasing the minimum required salaries to be sponsored as a Skilled Worker, will also significantly decrease over the years to come; and
3. while there were “concerns over the use of recruitment agents by universities in certain markets in providing misleading information to prospective international students”, no evidence of widespread abuse was found.

The MAC went on to conclude that the Graduate route assists higher education institutions not only in expanding the range of courses offered, but also provides an income stream which compensates for any losses from domestic student fees and research. In other words, making any amends to the Graduate route could worsen current financial difficulties faced by certain UK universities, some to the point of closure.

In closing, the review recommended retaining the Graduate route in its current form but suggested “greater collaboration between the government and HE sector” and having clearer effectiveness monitoring and data collection plans moving forward. For instance, this would include the provision of course outcome confirmations whilst on the Student route.

Trade Union Congress draft Artificial Intelligence (Regulation and Employment Rights) Bill

The Trades Union Congress (“TUC”) recently published its proposed Artificial Intelligence (Regulation and Employment Rights) Bill (the “Bill”), which aims to regulate employers’ use of AI as it relates to the rights and interests of workers.

The provisions detailed in the Bill largely concern rights and obligations which apply where an employer uses AI systems as part of ‘high-risk decision-making’ processes. ‘High-risk decision-making’ refers to decisions which have the potential to have legal, or otherwise significant consequences for employees, workers, or jobseekers.

For instance, the Bill:

• imposes obligations around consultation with trade unions when high-risk decision-making systems are proposed, alongside ongoing annual reviews;
• requires employers to share with trade unions any data collected about union members;
• imposes a duty on employers, and their agents, to perform a “Workplace AI Risk Assessment” before undertaking any such high-risk activity. This assessment requires a consideration of health and safety, human rights, equality, and data protection concerns; and
• requires employers to consult with workers before deploying AI systems, be transparent about the use of such systems in decision-making processes, maintain a register of any such systems which are put in place, and provide a personalised explanation to employees of any such decisions made in relation to them.

The Bill outlines several explicit prohibitions, including a ban against relying on high-risk applications of AI in decisions around employee dismissal, and restrictions on the use of emotion recognition technology where it could detrimentally impact workers.

It also prohibits discrimination through the use of AI and amends the Equality Act 2010 to shift the burden of proof onto employers to show that no discrimination happened in AI or human-led decisions. Employers would have a statutory audit defence to fall back on, meaning they would not be liable for the discriminatory consequences of AI systems if they can show that (i) they did not create or modify the systems and (ii) they conducted thorough audits and introduced procedural safeguards before deploying them.

Finally, the Bill also proposes new rights such as the right to disconnect (the right to be unavailable to employers outside working hours), and protection from dismissal or detrimental treatment for exercising that right.

It is perhaps unsurprising that the TUC’s Bill comprises concepts imported from the European Union. For example, definitions around high-risk decision-making closely mirror those outlined by the upcoming EU Artificial Intelligence Act, and the European Parliament has called on the European Commission to draft a new EU law granting a right to disconnect, already part of legislation in several countries across Europe. However, it remains to be seen whether the Bill will become law, especially in light of the upcoming election, and the open question of whether a change in government may see this Bill going through the parliamentary process.

Flex appeal – Exploring the new statutory flexible working regime

There continues to be significant media interest in organisations requiring employees to get back to the office, for most of their working week. For example, leaked memos suggest that one global tech business has mandated that unless employees return to the office at least three days a week they will be considered ‘remote’ workers and will be excluded from promotion and career advancement opportunities. As the remote-working habits of the pandemic become an increasingly distant memory, we are continuing to see lots of businesses reflect on how, where and when their employees should work. Against this background, it is particularly important for employers to get to grips with new rules on flexible working requests. In this article, we consider the new statutory flexible working framework which came into force on 6 April 2024, how employers can appropriately deal with statutory flexible working requests and some of the key risk areas.

Annual Leave and Holiday Pay Changes for irregular hours and part-year workers

Significant reforms to statutory holiday entitlement and holiday pay calculations are now in force and will impact irregular hours and part-year workers. These reforms aim to ensure fairness, flexibility, and accurate calculations, aligning with atypical working arrangements prevalent today. We have commented on the holiday pay reforms in our previous article here but highlight the key changes impacting irregular hours and part-year workers below.

1. Accrual Method:
   • A novel ‘accrue-as-you-go’ approach will determine holiday entitlement for part-year and irregular hours workers.
   • Holiday accrues at a rate of 12.07% of the hours worked in each pay period.
   • Statutory paid holiday entitlement remains capped at 28 days per year.
2. Rolled-Up Holiday Pay:
   • Employers now have the option to implement a system of rolled-up holiday pay for irregular hours and part-year workers.
   • Under this system, a 12.07% supplement of the worker’s total pay is included within each payslip, instead of paying holiday pay when annual leave is taken.
   • Rolled-up holiday pay should be paid alongside the worker’s normal salary, ensuring it meets or exceeds the National Minimum Wage.
   • Employers not opting for rolled-up holiday pay can continue using the existing 52-week reference period to calculate holiday pay for irregular hour workers.
   • If a worker receiving rolled-up holiday pay goes on sick or statutory leave (e.g. maternity leave), their holiday pay is calculated based on average earnings during a 52-week relevant period.
3. Carry-Over Entitlements (Effective from 1 January 2024):
   • Irregular hours workers and part-year workers are entitled to carry over all of their statutory 5.6 weeks’ holiday entitlement into the following leave year if:
     • they were unable to take all/part of their holiday due to statutory family-related leave.
     • they couldn’t take their holiday due to sick leave (the carried over holiday must be taken within 18 months from the original entitlement year).
     • the employer hasn’t recognized their right to this holiday or hasn’t encouraged them to take it.
   • While holidays must generally be taken in the leave year, irregular hours and part-year workers can carry over some of their 5.6 weeks statutory entitlement (plus any contractual leave) to the following year if a relevant agreement allows this.

Employers should:

• Undertake a cost impact analysis to assess the feasibility of rolled-up holiday pay;
• Check individual contracts to determine whether worker consent is required for this change;
• Clearly indicate rolled-up payment as a separate item on the worker’s payslip;
• Ensure correct classification of leave status;
• Inform workers that untaken leave by year-end, which cannot be carried forward, will be lost; and
• Provide reasonable opportunities for workers to take leave or encourage them to do so.