Welcome to the end of financial year legislativeupdate for 2016 /2017. This is designed as
a digest for business leaders to review the changes in legislation, as they affect
There will be read across at this time of the year with the budget - so this is an excellent time of the
year for a health check on the moving sands of employment legislation and what is likely to hit
businesses in terms of changes to people costs etc. Additionally, this update, and the budget align
with the stated policy objective of applying changes to National Living Wage in April each year
(previously August each year).
So as an employer you should use this as a basis to plan for increases in costs through 2017 /2018
and 2018 /2019, both arising from not only NLW changes, but changes to pensions, salary sacrifice
schemes, holiday pay calculations and where your business employs sub-contractors (IR35). If you
need assistance pulling a 3 year total pay plan together, by Catherine Kane Associates working
together with your Finance leads/accountants, then email [email protected] – it
really helps make business decisions not to drift into a higher cost base.
So in terms of HR legislation key themes coming out this year is how employment law and HMRC are
viewing the gig economy, and Gender Pay Gap reporting which goes live in England on 7th April
2017, and we believe is forecasted to start impacting larger Northern Ireland employers in
September 2018. There are some changes imminent in April 2018 on how employer’s process
employee data. Then there is the impact of Brexit, which will not likely to impact in the forthcoming
financial year, but should be on your radar for 2018 /2019 as additional levies on employing non-
UK/Ireland, EU and Non EU employees will come into play.
Please note: The content of this article is for information purposes only and further advice should be
sought before any action is taken.
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CONTENTS 03 Salary sacrifice
05 Modern Slavery
06 Tax relief for Shareholders
07 Pensions auto-enrolment
08-09 Employment Act NI and Zero Hours Contracts
10 Gender Pay Gap
11 Statutory Pay and National Insurance and Income Tax
12-13 IR35 and Tax Free Childcare
14-15 Immigration and Brexit
16-17 Data Protection, Company Director and Grand Parental Leave
18 Public sector exit payments and Personal Allowance linked to NLW
19-20 Termination payments and Shareholder Influence
21 The Apprenticeship Levy NI
Cases of Interest
22 Gig Economy and Gramps 23 Indecent Proposal and
22 Restrictive Covenants 24 Vicarious Liability
23 Workplace Dress codes 24 Holiday Pay
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From April 2017, the government will abolish tax exemptions on most salary sacrifice benefit
schemes, in a move that will fundamentally redefine the nature of employee benefits.
Employees who use these schemes will pay the same taxes as everyone else.
Employer-Provider pension schemes, childcare, cycle-to-work programmes and ultra-low
emission vehicles with CO2 emissions of up to 75g/km will be exempt from the changes, but
the provision of gym memberships, mobile phones and white goods, among others, will
become highly unattractive.
The government has decided to take away the tax benefits from 6th April 2017 in relation to
many salary sacrifice schemes, including those relating to company cars (unless ultra -low
emission vehicles), work-related training, workplace parking, private health schemes and
health screening checks, mobile phone contracts, mobile phones and computers, gym
membership, accommodation and school fees.
Arrangements already in place are protected until April 2018 and until April 2021 for some
benefits – but if you have employees who currently benefit from salary sacrifice schemes,
now is the time to review the implications.
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National Living Wage
On 1 April 2017, the rates of the national minimum wage will increase, despite an increase
in most rates on 1 October 2016.
This is so that the timing of the annual increase in the national living wage rate for workers
aged 25 or over can align with the other national minimum wage rates.
The National Minimum Wage is the minimum pay that all Workers regardless of age are
entitled to. It doesn’t matter what size of company you run, or how many people you
employ you are always required to pay the correct minimum wage. We’ve listed the rates
below to help you.
New Increased Rates of pay from 1st April 2017
£7.50 per hour - 25 years old and over
£7.05 per hour – 21-24 years old
£5.60 per hour – 18-20 years old
£4.05 per hour – 16-17 years old
£3.50 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.
Most workers are entitled to at least the National Minimum Wage including home -
workers, agency workers, people who work on commission, part-time workers and casual
workers. The only exempt groups are as follows: Self-employed workers, Voluntary
workers, Company Directors, family members or family household members who
undertake household tasks.
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On first pass the regulations around the Modern Slavery Act 2015 don’t seem that they
would impact small/medium enterprises. The Modern Slavery Act 2015 requires certain
organisations to produce and publish an annual statement setting out the steps taken to
ensure that no form of modern slavery exists anywhere in its business or its supply chain.
The aim is to encourage organisations to take responsibility for not only their own use of
labour but also the use of labour in the organisations that supply goods and services to
them. The intention is that in doing so, this will raise standards across the board.
The Act applies to all commercial organisations producing goods or services that do
business in the UK and have an annual global turnover of over £36 million. Those
organisations covered by the Act must produce their first statement within six months of
the end of the first financial year. For example, companies whose financial year end was
on 31 December 2016 will have until 30 June 2017 to produce their first statement.
Whilst most organisations in Northern Ireland do not meet the £36 million turnover, they
may still need to be on the front foot in terms of reporting practices if they are in the
supply chain providing goods or services to a larger global organisation – so this will
impact the Agri-food sector, for example. It is good practice to review the requirements of
the statement and be able to provide a statement reflecting your own organisation which
can be provided on request.
Source : International Labour organisation www.ILO.org
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Tax relief for employee-shareholder agreements
Income tax reliefs and capital gains tax exemption will no longer be available on any
shares acquired in consideration of an employee-shareholder agreement. (Effective from
1st December 2016)
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2017 is a year when many smaller businesses are likely to have their staging date coming in,
that is the date by which they need to have a pension set up for employees. So if you
haven’t already started preparing for this, you can’t really afford to wait any longer.
lt’s worth noting that the government has delayed some of the increases in employer
contributions so that the 2% minimum is due in April 2018, and the 3% minimum is only due
to begin in April 2019 – your pension provider should be able to explain more
The earnings trigger for auto-enrolment is frozen for 2017/18 at £10,000 and the
upper and lower levels of qualifying earnings increase.
The state pension age for women is equalised with the state pension age for men by
November 2018, with an expedited increase from April 2016.
A new consultation considering the security and sustainability of defined benefit
pension schemes has been launched. This Government Green Paper on defined
benefit pension schemes aims to consult with the pensions industry, employers and
scheme members to see what more can be done to increase confidence in defined
benefit pensions. The government will also consider strengthened powers for The
Did you know, you can access our free Pension auto-enrolment checklist, which gives you
the top 10 steps to consider when planning for Pension auto-enrolment?
Plus as a HR Managed Service client your access to our cloud software also includes a
pensions auto-enrolment reporting function, which allows you to compile a list of eligible
staff and helps you monitor those, not yet, but due to be eligible, in the future. For further
information on accessing this feature, login to our website and watch the Reporting
Webinar within the iCloud Academy.
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The Employment Act (NI) 2016
The Act (date of implementation to be confirmed) brings some alignment with employment
law practices in Great Britain. The Bill covers several areas of reform including:
Labour Relations Agency Early Conciliation Introduces pre-claim conciliation to require
potential claimants to lodge specified details with the LRA prior to issuing a tribunal claim at
an industrial tribunal or FE Tribunal. The intention behind this change is to encourage
potential Claimants to resolve their disputes without the need for the issue being taken
through the judicial route. This has been in force in GB for some time and has had a high
Protected Disclosures The Employment Rights (Northern Ireland) Order 1996 (ERO) is
amended to say that a worker will only be provided with protection against unfair dismissal
and detriment if a whistleblowing disclosure is made, that is in the public interest (in their
reasonable belief). There is no effective commencement date for this provision. This mirrors
the public interest test that was inserted into the Employment Rights Act 1996 in Great
Britain in 2013.
Unfair Dismissal Qualifying Periods The Employment Rights Order 1996 states, an employee
has the right not to be unfairly dismissed but this does not apply to continuous employment
that is less than one year. This qualifying period was to be increased from one year to two
years, as is the case in Great Britain however this was removed during the Consideration
Stages. The qualifying period remains at one year.
Employment Law Payments & Awards The Act provides for more accurate annual rounding
to the maximum unfair dismissal award and other employment rights – related payments.
The Employment Act amends the effective date to 6 April each year and makes changes to
the way the values are rounded when they are reviewed. The Act also makes rounding
changes so that all awards and limits are rounded up or down to the nearest whole pound
and mirrors the change that were made in Great Britain effective 06 April 2014.
Zero Hour Contracts – See below
Gender Pay Gap – See below
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Zero Hour Contracts
In Northern Ireland, given the controversy over the misuse of zero-hours contracts,
Section 18 of the Employment Act 2016 allows for the Department for Employment and
Learning (DEL) “to prevent abuses associated with the use of zero-hours contracts.” These
Regulations have not yet been published. We will have to wait to see if the preventative
measures are aligned to the ban on exclusivity clauses that applies in Great Britain.
Protection has been introduced for workers on Zero Hour Contracts in GB. Previously,
legislation banned the use of exclusivity clauses in zero hour contracts (those which
prevented the worker for working for another employer or requiring their employer’s
permission before doing so); however there was no remedy available for a worker
subjected to such a term. The ‘Exclusivity Terms in Zero Hour Contracts (Redress)
Regulations 2015 provide that:
• Any dismissal of a zero hour worker will be automatically unfair, if the principal
reason for the dismissal is that the worker breached a term of the contract prohibiting/
restricting the worker, from working for another employer.
• It is unlawful for an employer to submit the worker to any detriment as a result of
the worker working for another employer.
• There is no qualifying period required to bring such a claim before an Employment
Best practice in this case would be to review any Zero hour contracts you currently offer
and plan to introduce the expected and relevant changes as detailed above, not least so
that you are ahead of the legislation but also that you can mitigate any brand/reputational
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Gender Pay Gap
Section 19 of the Employment Act (NI) 2016 introduces a ‘Gender pay gap information’
reporting obligation on employers, similar to the provisions that already exist in Great
The Act is due to be published by 30 June 2017, which will stipulate that employers must
publish information which will show whether there are gender pay gap differences in their
workforce. Where gender pay differences are identified it requires employers to publish an
action plan and provide a copy of it to employees and any recognised trade union. The aim
is to reduce discrimination and inequality in the workplace.
In the meantime where your workforce is large enough, you can apply the Standard
Occupational Classifications (which are used in the Fair Employment Monitoring re turns),
and applied in our iCloud software, to report and analyse at a high level if you have
exposure to a significant gender pay gap. If you need more assistance drop me a line.
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If you need to make payments to staff who are having children, the statutory rates of pay for
maternity, paternity, shared parental leave and adoption are increasing from £139.58 to
£140.98 (or 90% of the employee’s average weekly earnings if this figure is less than the
statutory rate) on 2 April 2017, as is the rate of statutory sick pay. This is the first time these
rates will have raised since April 2015.
In addition, the rate of Statutory Sick Pay, which has also been the same since April 2015, will
be increased from the beginning of April from £88.45 per week to £89.35 per week.
Employers need to plan their budgets for 2017/18, and to prepare amendments to their
policies and documents on family-friendly benefits for April 2017.
NI and Income Tax
The lower earnings limit for primary Class 1 national insurance contributions increases for
2017/18 to £113 per week.
The personal income tax allowance will increase for 2017/ 2018 to £11,500, and the basic rate
limit will be increased to £33,500 for 2017/ 2018. As a result, the higher rate threshold will be
£45,000 in 2017/ 2018.
Tax and national insurance on voucher incentive schemes. The taxable value of a voucher
depends on whether it is a cash or a non-cash voucher. Employers now need to payroll non-
cash vouchers and credit tokens provided to employees.
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IR35 in the public sector ‘Disguised Employees’
A significant percentage of the economy is made up of small businesses who are
subcontractors. ‘IR35’ is the name given to a tax legislation that is aimed at identifying
individuals who are avoiding paying the tax that they should be. The IR35 legislation
specifically challenges those people who supply their services to clients via their own
company, often known as a ‘personal service company’, or a limited liability partnership,
and are also classed as ‘disguised employees’.
From 6 April 2017 a new duty will require tax and national insurance contributions (NICs)
to be deducted on all payments made by public sector organisations to workers supplied
by personal service companies on short-term assignments. This basically means from a
taxation perspective ‘self-employed’ should be taxed the same way that a general
employee should be, thus falling under what is called IR35.
It is possible that similar changes may follow in the private sector.
These new rules affect all sectors and industries where public money is involved. This
could have a huge impact on both the employer and contractor.
For the contractor – they may be seen as being an employee by the HMRC, however with
none of the associated benefits; bonuses or ‘perks’ that employees’ often have. Likewise
for the employer, they must determine if contractors are affected by the new rules – the
key point is whether the contractor is supplying services or supplying people. The HMRC
have an online tool which checks employment status.
Source: The Association of Independent Professionals and the Self-Employed (IPSE)
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Tax-free childcare scheme
The new scheme is being trialled at the moment and is due to be rolled out based on the
results of the trial, in April 2017.
The rules are a little complex, but where both parents work and earn at least £115 per
week, they will be able to put up to £8,000 a year into a special account which the
government will top up with 20p for every 80p contributed by the parents. This account
can only be used to pay for childcare such as nursery fees.
It was anticipated that the new scheme will eventually replace the existing childcare
Families where both parents work and each parent earns less than £100,000 per year are
eligible to receive 20% of their yearly childcare costs. Existing employer-supported
childcare voucher schemes will remain open to new entrants until April 2018 and existing
members of such schemes will be able to continue to access childcare vouchers (and the
associated tax and NICs benefits) for so long as their employer maintains the scheme.
However, after the launch of the new tax-free childcare scheme, employers will no longer
be able to offer childcare vouchers to new employees on a tax-exempt basis.
For more information, give us a call or you can read the government’s guide here -
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The immigration skills charge is due to come into force on 6 April 2017. Employers that
sponsor skilled workers under tier 2 of the immigration points-based system will have to pay
a levy of £1,000 per certificate of sponsorship per year (£364 for small employers and
The levy will apply in relation to each worker under tier 2, although there are some
From April 2017, the Government is planning to introduce a requirement for those workers
coming to the UK under tier 2 for certain posts in the education, social care and health
sectors, to obtain criminal records certificates from the countries that they have lived in over
the last 10 years.
The tier 2 (general) salary threshold will increase to £30,000 from 6 April 2017, for migrants
who are "experienced workers".
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Whilst the triggering of Article 50 on 29th March 2017, does not of itself bring about
immediate changes, organisations can position themselves to respond with more agility by,
amongst other things, laying the groundwork for the future.
The CIPD Autumn 2016 and Winter 2016-17 Labour Market Outlook have reported that 27%
of EU nationals are considering leaving their organisations or the UK in 2017. The sectors
most likely to feel the adverse impact will be in hospitality, agriculture, reta il, health and
social work, construction and manufacturing which employ 56% of the 2.26 million non-UK
EU nationals if those plans to leave are realised.
So going forward, we suggest you ‘future proof’ your organisation, using these 3 key
Risk Assessment - Of the many events that could have an influence on your staffing levels
and your organisation’s ability to meet its objectives, Brexit-related changes are perhaps the
largest on the horizon. An essential part of preparing for these eventualities is to carry out a
risk assessment by way of deploying workforce planning tools, techniques and analytics.
Recruitment proposition - In the competition for skills and labour, it will be particularly
important to make your recruitment proposition as appealing as possible within available
resources. Businesses can make a push to increase social media activity to engage with and
attract potential hires. Many organisations, especially SMEs, are missing this relatively
inexpensive trick to increase their standing amongst bigger names and competitors due to
lack of social interaction and effective branding. (see Web’n’hr on social media in the
Employment legislation - At this stage, it has yet to be established which pieces of
employment legislation will be affected in the years ahead. Changes to the Working Time
Regulations, TUPE, immigration policy and the tier system, discrimination compensation for
injury to feelings and the latest call to remove ‘worker’ from the 3-tier employment
relationship structure may also be anticipated. So, organisations should aim to set aside
some time to understand possible changes and implement accordingly.
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In 2016 an EU General Data Protection Regulation (GDPR) was passed by the European
Parliament with the purpose of harmonising data protection rules across the EU including
in the UK. The regulation is due to come into effect in May 2018 and should become part
of UK law at that point, but Brexit may change this. The government has so far indicated
that we should assume that the GDPR will come into force in the UK.
For employers, the GDPR is important as it will change the rules regarding consent by
employees to processing of their data. There will also be changes to data request
processes, the introduction of the ‘right to be forgotten’ which will allow requests for
erasing information in certain circumstances, and the ‘right to rectification’ allowing
employees to insist, in certain circumstances, on making changes to their personal
information. All this will be introduced in an environment of increased penalties for non-
Therefore, it is important for businesses to start taking steps now to prepare for
implementation of the new rules.
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Presently, a director of a company can be another company. However, there are plans to
change this so that all directors of companies incorporated in the UK (including England,
Wales, Scotland and Northern Ireland) will need to be ‘natural persons’ and not companies.
This change was expected to be brought in during October 2016 but that did not happen so it
is presumably imminent. Companies will want to check their corporate structures to ensure
they do not need to make any new appointments as a result of this expected change.
The government has plans to extend shared parental leave and pay to working grandparents
by 2018. The government has yet to provide further consultation dates.
This is expected to be implemented by 2018 so details should emerge this year. Given the
relatively small uptake of men taking family leave, it will be interesting to see whether this right
proves more popular with grandparents.
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Public sector exit payments
We had expected restrictions on public-sector exit payments to have come into force in 2016,
and, although still anticipated, an implementation date has not yet been confirmed.
The effect would be a cap of £95,000 on the pre-tax value of exit payments made to most
public sector workers for loss of employment. This would include any redundancy pay,
voluntary exit payments or other payments made due to loss of employment. The principle of
clawback would then apply if any such affected employees also earn £80,000 or more. They
would be required to repay exit payments if they return to any public-sector role within 12
Employers in the public sector will need to start to review their policies and terms and
conditions of employment in order to be ready to deal with the impact of this change on
arrangements for the termination of employees.
Income tax personal allowance to be linked to national minimum
Future rates of income tax personal allowance will ensure that workers on the national
minimum wage working 30 hours a week will not pay income tax. Date tbc
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Tax on termination payments
From 6 April 2018 the government is committed to simplifying the tax and NICs treatment of
termination payments which includes Payment In Lieu Of Notice (PILON).
These changes include all contractual and non-contractual PILONs, to be taxable as earnings
and require employers to tax the equivalent of an employee's basic pay (excluding expected
bonuses) if notice is not worked. (Currently only contractual PILONs are taxable).
Legislation will also be introduced to align the tax and employer NICs treatment of Termination
Payments so that employer NICs will be payable on the elements of the termination payment
exceeding £30,000 on which income tax is due. (The first £30,000 of a termination payment will
remain exempt from income tax and NICs.)
For employers, there will be a significant impact on the cost of providing termination packages
in excess of £30,000. Employers will have to consider whether they need to compensate for the
increased cost to employees, who will suffer tax and employee NIC on the element of their
termination packages going forward.
The details of how employers are to calculate the taxable payment still have to be confirmed
and employers should start to review policies and include the new rules into their processes for
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Shareholder Influence over Executive Pay
The recently published Green Paper considers what changes might be appropriate in the
corporate governance regime to help ensure that the economy works for everyone, especially
in light of the recent negative publicity generated by large private companies such as BHS and
It considers options for increasing shareholder influence over executive pay in quoted
companies is aligned to long-term performance, it gives greater voice to employees and
consumers in the boardroom and considers whether features of governance standards for
listed companies should be extended to the largest privately-held companies.
Responses to the green paper were required by 17 February 2017
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The Apprenticeship Levy – Northern Ireland
The apprenticeship levy to fund apprenticeship training is due to come into effect on 6 April
2017. Employers will pay the monthly levy via PAYE if they have a payroll bill of more than £3
Different arrangements exist around how apprenticeship funding will work will apply in
Scotland, Wales and Northern Ireland (although the levy applies across the UK).
HM Treasury allocates funding to the Northern Ireland Executive through the Block Grant and it
is for the Executive to decide how to spend the money received. It is not certain that all of it will
be allocated to vocational training.
Also on apprenticeships - larger public-sector employers will have to meet apprenticeship
The Department launched a short consultation which closed on 3rd January 2017 to gather the
opinions of those impacted. Although most private sector employers in Northern Ireland will
not have to pay the Levy this will be a consideration for large employers and, in particular, the
The fact that multiple schemes will apply in different parts of the United Kingdom will mean
that employers who are based in multiple regions of the United Kingdom will need to
understand the regional differences.
Overall, it is impossible to say how exactly employers in Northern Ireland will be affected by the
levy. However, this is not a matter which the Northern Ireland Executive will be able to opt out
Ultimately employers in Northern Ireland who meet the £3 million threshold will have to pay
the Levy. What benefits exactly they will be able to obtain for this, if any, remains to be seen.
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Tribunal cases of interest
Contained within this annual update is an additional feature on tribunal cases. We have
selected eight cases in total, which we feel, summarise the HR legislative landscape over the
past 12 months.
A short summary of each are listed below. Alternatively if you wish to read a more in depth
account please open our online flip book “Tribunal Cases of Interest” available within the
Client Only section of our website.
Employment Status in the Gig Economy
Over the past few months there have been a number of high profile cases of workers
in the so called “Gig Economy” suing the companies they work for. In most of the
cases the workers have been treated as self-employed contractors by the companies
and have sought to be reclassified as employees by the courts. The main reason for
this is that employees have employment rights such as the right to holidays, sick pay,
maternity and paternity leave and protection from unfair dismissal.
Age discrimination - Gramps
In March last year "Gramps" joined "Yoda", "Borat" and "Sooty & Sweep" in the range
of workplace nicknames quoted by claimants to employment tribunals as evidence of
illegal discrimination – contributing to large pay-outs when their claims were upheld.
A restrictive covenant is a clause in an employment contract which is designed to
prevent the solicitation of customers, clients, suppliers, other employees, or general
competition for a defined period after the employee ceases his or her employment.
The purpose of it is to protect the employer’s confidential information, customer
connections, its goodwill and the stability of its workforce. This article will examine a
recent case in which the restricted covenant was declared unenforceable.
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Tribunal cases of interest
Workplace Dress code
Nicola Thorp was sent home from work without pay for not wearing high heels. She then
launched a parliamentary petition which received over 150,000 signatures. This led to a joint
report by the Parliamentary Petitions Committee and Women and Equalities Committee
during their research, the MPs heard from a number of women about their own similar
experiences. Some had to unbutton blouses and wear shorter skirts.
The indecent proposal
In this case a solicitor and his employer were ordered to pay more than £20,000 in damages
to a female employee, after the solicitor proposed marriage during a job interview and
subjected the female employee to a prolonged campaign of sexual harassment.
The amount of compensation in a discrimination case, such as this, will depend on the
circumstances of the case and the effect that the discriminatory conduct has had on the
employee. The Tribunal can also make recommendations that the respondent takes specified
steps to eliminate such conduct from being repeated.
Flexible working - Landmark parental cases
It was a contentious year for the implementation of shared parental leave, with a number of
cases demonstrating the teething troubles businesses have experienced with the legislation,
and the reluctance of some employers to embrace it fully.
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Tribunal cases of interest
Is the principle in law which holds one party responsible for the acts of another. The
most obvious example is in the context of employment, where the Employer is
generally responsible for the acts or omissions of its employees, provided the employee
is ‘acting in the course of his/her employment’.
The principle is construed quite widely and it is relatively rare for a Court to find that an
employer is not vicariously liable. In an interesting Judgment the Supreme Court held
that the principle is capable of being extended beyond the normal employer/employee
relationship, to include those who are not engaged under a contract of employment.
A five-year legal struggle came to its conclusion when the Court of Appeal ruled that
holiday pay must include commission as it finally resolved the case of Lock v British Gas.
All of these decisions have been based on the specific facts of the cases and this is the
approach that the courts will always take. Before making any decisions with regards to
employee contracts or disciplinary action please ensure you follow your procedures and if
necessary seek advice.
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© Catherine Kane Associates 2017
Belfast 028 900 800 17
L/ Derry 0777 37 666 93
Please note: The content of this article is for information purposes only and further advice should be
sought from a professional advisor before any action is taken.
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