Top 5 recent workplace developments – December 2023

This is our selection of recent developments which we think will impact on HR practice.

1. Bonus claw-back clause was enforceable and not in restraint of trade

The High Court decides that a clause requiring an employee to repay his bonus if within 3 months of it having been paid, he left his job or was given or received notice, was enforceable. 

Mr Steel was paid his annual bonus of £187,500 in January 2022 under a discretionary bonus scheme. His annual basic salary was £65,000. A month later he resigned and his employer demanded repayment of the bonus he had just received. His employer relied on a provision of the contract of employment which required him to repay his bonus if within 3 months of it having been paid, he left their job or was given or received notice. When he refused to repay the bonus, his employer served a statutory demand for repayment. Mr Steel applied to the Insolvency and Companies Court (ICC) arguing that the provision was an unreasonable restraint of trade so was unenforceable. The ICC rejected his claim stating that it was not a restraint of trade because it did not restrict him from working elsewhere. 

Mr Steel appealed to the High Court which also rejected his claim stating that the ICC was right to follow the case of Tullett Prebon v BGC Brokers 2010 where the Court found that a contractual bonus clawback provision was not a restraint of trade (that case concerned a bonus scheme which was conditional on the employee remaining in employment for a certain period of time). In line with Tullett Prebon, the High Court said that the provision may have deterred the employee from leaving their job but it did not prevent them from doing so, and so was not in restraint of trade.

Practical point

A clause of this specific nature is unlikely to fall under the definition of a restraint of trade, and therefore will not be subject to the same onerous conditions necessary for such a restriction to be enforceable. Employers can therefore be confident in relying on these types of clause in seeking repayment of a discretionary bonus. However, each case of this nature turns on its own facts. Employers should still tread carefully as there will undoubtedly be a point beyond which a court may well be inclined to hold a different view, such as a clause which requires repayment of basic pay, or which disincentivises an employee from leaving for an excessive period of time. 

It should also be noted that this is merely a High Court decision and so is not directly binding on the Employment Tribunal. Despite this, it is likely to be persuasive in similar circumstances.

Steel v Spencer Road LLP (t/a The Omerta Group) (2003) 

2. Discrimination: Transgender rights

Tribunal rules that transgender employee suffered gender reassignment discrimination. 

AB informed the Council that she was intending to transition a number of months before she did. She subsequently brought a grievance when she felt that she was subjected to discrimination because of her transition.

The tribunal held that the Council which, among other incidents, failed repeatedly to update its systems and records to refer to AB’s post-transition name (“deadnaming”) had subjected her to direct gender reassignment discrimination. Indeed, the tribunal found that despite AB had suffered a “long and painful struggle”, of over two years, to change her name on the Council’s systems, including:

• IT systems, in particular directories and emails
• her pension records
• her work pass

The tribunal noted that the Council’s policies were significantly out of date and that at the relevant time, it did not have adequate training or processes for dealing with the practicalities of AB’s transition. AB was awarded compensation of £25,000.

Practical point

This case serves as a reminder of the importance of having robust policies and processes in place for supporting trans employees. In addition, employers should ensure that diversity and harassment training for staff is relevant and carried out regularly.

AB v Royal Borough of Kingston upon Thames

3. Redundancy

EAT decides that dismissal was unfair due to lack of meaningful consultation at the start of the redundancy process, which could not be repaired later in the process by way of appeal. 

DBH was employed by ADP in recruitment. Due to the COVID-19 pandemic demand to recruit staff reduced by 50% so at the end of May 2020 ADP decided to reduce the recruitment workforce. At the start of June 2020, DBH scored lowest in his team after his manager scored the team members using 17 entirely subjective criteria provided by ADP’s US parent company. After this, on 18 June ADP decided to reduce the recruitment team of 16 by 2 people. A timetable was set and DBH was called to a meeting on 30 June where he was told the need for redundancies, that he could ask questions and could suggest alternative approaches to the reduction in demand. He attended another meeting 6 weeks later and a final meeting a week after that when he was dismissed. He appealed unsuccessfully and then claimed his redundancy was unfair. Throughout the process he was not told the scores of his colleagues and only received his scores before the appeal hearing. 

The tribunal dismissed his claim, concluding that the appeal had been carried out conscientiously. DBH appealed to the EAT.  

When determining whether a dismissal is fair, a tribunal assesses whether the employer acted withing the “band of reasonableness”. The EAT said that previous caselaw indicates that this means following “good industrial relations practice”. The EAT found that DBH had been dismissed unfairly because, contrary of good industrial relations practice, there had been a clear absence of meaningful consultation at the formative stage of the redundancy process, and the tribunal had not identified any good reasons for this.

Furthermore, when an employee appeals the decision to dismiss, any missing aspect of the individual consultation process (such as giving the employee’s selection criteria scores) could be corrected but any gap of consultation at the formative stage could not be repaired.

Practical point

This case emphasises the need for meaningful consultation with individual employees at the very formative stages of the individual redundancy process, and introduces the concept of “general workforce consultation” which should take place irrespective of whether the collective redundancy consultation rules are triggered. The EAT was not prescriptive about what “general workforce consultation” might entail, but it certainly made clear that depending on the circumstances, it will be good industrial relations practice to have better consultation at an earlier stage to enable more meaningful discussions about the overall approach to the workforce at risk of redundancy, which would enable the employees to influence the employer’s decision at the formative stage of the process. 

Finally, this case is a useful reminder to use fair and objective selection criteria and to bear in mind, particularly for international employers, that just because a method of selection has been effective internationally, does not mean it will comply with UK law. 

De Bank Haycocks v ADP RPO UK Ltd [2023] EAT 129 (28 November 2023)

4. Equality diversity and inclusion: Pay gap reporting

There have been a number of recent developments in relation to pay gap reporting.

Social mobility: The Social Mobility Foundation has published figures on the class pay gap in 2023 which reveal that employees from working class backgrounds earn over £6,000 less than those in the same occupation from more privileged backgrounds.

Ethnicity pay gap: The ONS has reported on earnings statistics for different ethnic groups in 2022 which suggest that Black, African, Caribbean or Black British employees have consistently earned less than White employees since 2012, and that country of birth is an important pay-determining factor.

Disability pay gap: The TUC has published disability pay gap figures which show that the pay gap for 2022 was 14.6%. It notes that disabled women face the biggest pay gap, with non-disabled men being paid on average 30% more than a disabled woman. 

Gender pay gap: The ONS has also published gender pay gap statistics which show that, as at April 2023, the total gender pay gap among all employees was 14.3% (down slightly from 14.4% in 2022). 

Practical point

Pay discrimination has been identified as one of the key obstacles to achieving pay equality but is often thought to go undetected due to a lack of pay transparency. 

The EU Pay Transparency Directive came into force in June 2023, introducing new obligations on employers to disclose salaries at the point of recruitment, comply with employee requests for pay data, publish gender pay gap statistics and face compulsory audits and penalties where unjustified discrepancies come to light. Whilst the Directive will only directly apply to EU Member States, and non-EU employers who employ people in the EU, the Directive will undoubtedly raise expectations of pay transparency and is expected to be a catalyst for increasing obligations on UK employers. 

For further details on the implications for UK employers, see our update Pay Transparency: How are changes in the EU likely to impact UK employers now and in the future?

5. Health and wellbeing and back to work

Occupational Health

The DWP has published its response to its consultation on occupational health provision “Occupational Health: Working Better”, confirming that it will not make OH mandatory for employers or introduce automatic enrolment for OH. Instead, the DWP has confirmed that it will develop a voluntary framework setting out the minimum level of OH intervention that employers (depending on their size and resources) might want to adopt to help improve employee health at work. 

Back to work

Fit notes: As part of the government’s new Back to Work Plan, the government has announced that it plans to consult on reforming the fit note system, with the intention that individuals whose health affects their ability to work have easy and rapid access to specialised work and health support. The consultation will be launched after trials which are taking place in a small number of Integrated Care Boards which will offer better support to those who have receive a fit note for a prolonged period of time. 

In the meantime, the government has updated its guidance on fit notes, aimed at employers and managers. It includes a new checklist for employers, as well as case studies and explanations about the forms. 

Statutory sick pay: there is to be a new inquiry into the effectiveness of statutory sick pay (SSP) and how it might be reformed to better support the recovery and return to work of those who claim it. A call for evidence issued by the Work and Pensions Committee will look at the level of SSP, the three-day waiting period and eligibility criteria.