Legal news roundup - July 2019


Date: 9 July 2019

A business man reads the news on his laptop whilst sat in shorts in a deckchair

Some interesting summer-time reading if you’re taking time off over the next few weeks -  including a shock ruling on the BIG MAC trade mark, useful new government guidance on IR35 rules and a Supreme Court ruling on business rates which will be useful for landlords. Get up to date on these and other legal news stories to hit the headlines below.

Reducing holiday pay may amount to indirect discrimination

Employers calculating redundancy, holiday or other pay-related compensation should take advice before reducing it if the employee has recently been on parental leave (or other leave during which they receive no or reduced pay), according to an EU ruling.

A full-time employee in France had been on part-time parental leave, on reduced pay. He was dismissed and redeployed, and the employer reduced the compensation payable to reflect the fact he had been on reduced pay while on parental leave. The employee went to court claiming that the employer should have ignored that period – the compensation should have been calculated as if he was on full pay throughout it.

The Court of Justice of the European Union (CJEU) agreed that the compensation payable to the employee should be based on his full-time pay. Failure to ignore the reduced salary payable to employees while they are on part-time parental leave (given that the overwhelming majority of employees taking part-time parental leave are women) would potentially be indirect sex discrimination.

Employees in the UK are not entitled to take part-time parental leave. However, the ruling may apply here to prevent employers from paying reduced redundancy or holiday pay to employees who have been on parental leave; or, perhaps, temporarily drawing a reduced salary while taking time off to care for their child. The ruling suggests these should be calculated by reference to the employee’s normal pay.

Case ref: RE v Praxair MRC SAS Case C-486/18

Court of Appeal ruling on including overtime when calculating holiday pay

Under their contracts of employment, employees working as ambulance crew were required to work 'non-guaranteed' overtime. They could also work 'voluntary' overtime if they chose to, ie overtime the employer was not obliged to offer and the employee was not obliged to work. Both types of overtime were irregular, and different crew members worked different levels of each type.

The employees claimed that voluntary overtime should be taken into account when calculating their holiday pay. They said it was part of their ‘normal remuneration’ because it was paid over a ‘sufficient period of time’. Their employer disagreed.

The Employment Appeal Tribunal (EAT) found in favour of the employees. The law says that the underlying reason for the holiday pay rules is to ensure that holiday pay should correspond to normal remuneration received while not on holiday, so there is no financial disadvantage to taking a holiday. So where patterns of work – even voluntary – prevail over a sufficient period of time, and on a ‘regular and/or recurring basis’, they can become ‘normal’. Overtime pay normally received for work within such patterns should therefore be included when calculating holiday pay.

The Court of Appeal upheld the EAT’s ruling, confirming that voluntary overtime should be taken into account when calculating statutory holiday pay if it is sufficiently regular and settled to amount to ‘normal’ remuneration. It rejected the employer’s argument that voluntary overtime was, by definition, of an ‘exceptional and unforeseeable nature’ and so could never amount to normal remuneration.

Employers should ensure voluntary overtime is taken into account when calculating holiday pay if that overtime is, over a sufficient period, broadly regular and/or recurring and predictable enough to qualify as normal remuneration, following a Court of Appeal ruling.

Case ref: East of England Ambulance Service NHS Trust v Flowers & Ors [2019] EWCA Civ 947

Court clarification on occupational health reports which assess employee disability

An employee with a history of poor attendance missed work as a result of surgery for carpal tunnel syndrome. This triggered sanctions under the employer’s attendance policy and the employee was dismissed. He claimed disability discrimination.

The law says there can only be discrimination if an employer has actual or constructive knowledge of facts that constitute an employee’s disability, ie that show they have a physical or mental impairment which has a substantial and long-term adverse effect on their ability to carry out normal day-to-day duties. The employer does not also need to know that, as a matter of law, the consequence of such facts is that the employee is disabled.

The employer argued that it did not have actual or constructive knowledge of the employee’s disability because it had obtained occupational health reports which said that the employee was not disabled.

The employee relied on a previous ruling that employers should not unquestioningly adopt opinions in occupational health reports that an employee was not disabled. Instead, it should “make the factual judgment as to whether the employee is or is not disabled: [it] cannot simply rubber-stamp the adviser's opinion that he is not”. It said that the employer had failed to make that judgement in this case.

Here, the Employment Appeal Tribunal (EAT) ruled that:

  • the occupational health reports dealt in detail with the issue of whether the employee was disabled, and
  • the employee submitted no contrary evidence, nor was there any contrary evidence from any other source

This meant that, unlike in the previous ruling where no reasons had been given for the opinion in the occupational health report, the employer in this case was entitled to rely on the report’s conclusion that the employee was not disabled.

Therefore, there had been no disability discrimination. It was irrelevant whether or not the employee was in fact disabled.

Employers should think about whether they can rely on occupational health or other reports on employees which say they are not disabled, by considering whether the report deals with the question in detail and whether there is any evidence to the contrary.

Case ref: Kelly v Royal Mail Group Ltd UKEAT/0262/18/RN

New guides on managing and progressing women in the workplace

Employers will welcome guidance from the TUC and Maternity Action on pregnancy, breastfeeding and health and safety at work; and a new government action note on the gender pay gap.

Among other useful content, the guide, Pregnancy, breastfeeding and health and safety: A guide for workplace representatives, explains the relevant risks, outlines risk assessment law and best practice, and puts forward practical measures employers can take. Although aimed at workplace representatives, the guidance is also useful for employers

'What works to reduce the gender pay gap: Women’s Progression in the Workplace Action Note', has also been published by the Government Equalities Office aimed at helping reduce the gender pay gap by showing employers how they can promote women's progression at work.

Download the TUC guidance from the TUC website and the Equalities Office Action Note from the GOV.UK website.

New guidance published on IR35 PAYE and NI deductions

HM Revenue & Customs (HMRC) has published guidance on new rules requiring medium and large private sector businesses using contractors operating through a limited company or partnership (an ‘intermediary’) to deduct PAYE and national insurance from payments to those intermediaries.

The new rules say that medium and large private sector businesses that use individual contractors (whether directly, or through an agency) who operate through an intermediary must:

  • decide whether the IR35 rules apply
  • if they do, deduct PAYE and national insurance contributions from their payments to the intermediary

IR35 applies if the individual provides their services through the intermediary and, but for the existence of that intermediary, the individual would be an employee or director of the private sector business (or, if the individual is already a director and they provide their services through the intermediary, if the services relate to the directorship).

The guidance suggests what employers subject to the new rules should be doing, including:

  • listing the contractors providing services through an intermediary
  • working out whether IR35 applies, if a contract ends after 6 April 2020
  • discussing the new rules with affected contractors
  • changing processes to identify whether IR35 applies to future contracts

Download the new guidance from the GOV.UK website.

Shock ruling on 'BIG MAC' trade mark

In a dispute between McDonalds, the high street food chain, and an Irish fast food chain, the Irish business applied to revoke McDonald’s BIG MAC European Union trade mark on grounds it had not been used in the EU for five years between 2012 and 2017.

Failure to make genuine use of a mark for five years or more can mean it is liable to be revoked. The burden is on the trade mark owner to prove there has been genuine use.

McDonalds claimed that it had made genuine use of the mark in that period. It said it was common knowledge that it sold millions of food items using the BIG MAC trade mark and produced evidence such as packaging, sworn statements by employees throughout the EU, printouts from its websites in Europe and quotes from the Wikipedia entry about the Big Mac burger.

However, the EU Intellectual Property Office (EUIPO) ruled that this was insufficient evidence. The relevant law requires evidence of the place(s) the trademark has been used, the period it has been used, the extent of its use (taking into account all the surrounding circumstances, eg the nature of the goods and services covered by the mark, the characteristics of the relevant market, the geographical extent of the use and volumes of sales, including for how long and how frequently sales were made) and the nature of the use.

The EUIPO decided that McDonalds had failed these tests and revoked the BIG MAC EU trade mark. It said McDonalds should have considered producing all or any of the following:

  • independent evidence that the mark had a ‘real commercial presence’
  • comprehensive evidence of actual or potential purchases of trade marked items

Particularly, it noted that a Wikipedia entry is not a reliable source of evidence and, in relation to evidence of use of trade marks on a website, details of the place, time and extent of use of the mark is required.

Unsurprisingly, McDonalds has appealed, so this is not the end of the story. However, the case highlights the importance of putting together proper evidence of use if your trade mark is challenged.

Trade mark owners should ensure they are in fact making ‘genuine use’ of their trade marks as per the relevant tests, and can also produce sufficient evidence to convince the relevant trade mark registry that they are - or risk their trade marks being revoked.

Case ref: EUTM No. 62638

New Acas guidance on neurodiversity in the workplace

Acas has issued guidance for employers ' Neurodiversity in the workplace'.

The guidance explains what neurodiversity is; why it is important for employers to understand it; and how they can change their workplace to support. It also gives guidance on how to manage staff with, for example, ADHD, autism, dyslexia and dyspraxia. Usefully, the guidance explains relevant research and includes case studies.

Download the guidance from the Acas website.

Property's rateable value to assume a willing tenant can be found

Office premises were used by government departments for many years but they became vacant in March 2009. In 2010, the premises were given a rateable value of £490k on grounds that similar premises in the area were let for rents at that level.

Initially, the landlord persuaded the Valuation Tribunal that there was no market for this particular building, successfully arguing that it the property was pretty much unlettable because other similar properties in the area had already satisfied demand. The Tribunal reduced the rateable value to £1.

The Supreme Court had to decide whether the rateable value should only take into account the prospects of letting the particular premises; or should also take into account the demand for that type of property in the area generally. Both parties agreed that “nobody in the real world” would be prepared to occupy the property at more than a nominal rent.

However, the Supreme Court ruled that:

  • the premises should be valued on the basis a willing tenant could be found, even if, in fact, the market was saturated
  • when assessing the level of rent a prospective tenant was treated as prepared to pay, rentals payable in the area for local premises with similar characteristics could be taken into account

The Court therefore ordered the rateable value to be set at £370,000.

Landlords with little prospect of finding a tenant for their property, but where similar properties in the areas are successfully let, should consider what the rateable value of the property may be, given that the valuer may lawfully ignore the difficulty they will face letting their particular property in those circumstances.

Case law: Telereal Trillium v Hewitt [2019] UKSC 23

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