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An important decision by the Employment Appeals Tribunal (EAT) regarding holiday pay for employees who regularly work voluntary overtime beyond their contracted hours, could have massive implications for UK businesses.

The EAT recently heard a case concerning Dudley Metropolitan Borough Council v Willetts (and others) where they upheld a previously made decision that voluntary overtime worked for a sufficient period of time on a regular and/or recurring basis should be included in the first four weeks’ paid holiday.

Holiday pay claims had been brought against the Council by a group of 56 employees responsible for the repair and maintenance of council houses.   These employees normally worked 37 hours per week but once in every four or five weeks, they were on an ‘on call’ register and they worked additional voluntary hours. However, these voluntary payments had been excluded from their holiday pay and the workers argument was that this was contrary to the Working Time Regulations 1988 (WTRs).

When their initial claim was successful, Dudley Metropolitan Borough Council appealed to the EAT.  On upholding the earlier decision, the EAT referred to previous ECJ decisions which had stressed that all workers should receive their ‘normal remuneration’ when they take a holiday.  They should not be discouraged from implementing their right to take paid annual leave – and any decrease in their salary is presumed to be a deterrent.

The case was sent back to the Tribunal to determine whether or not Mr Willett and his co-workers had been underpaid their holiday pay.

Glenn Hayes of Irwin Mitchell stated, “This decision is extremely important and it is the first occasion the EAT has heard cases relating to purely voluntary overtime. Many businesses have adopted a ‘wait and see’ approach to voluntary overtime but this option is no longer possible and overtime that is worked regularly, must now be included in holiday pay.

“Not all voluntary overtime will have to be included but the EAT made it clear that overtime that ‘extends for a sufficient period of time on a regular or recurring basis’ will.

“There is no statutory definition of what amounts to ‘normal pay’ and Tribunals will continue to hear arguments about whether overtime, of whatever nature, has become part of an employee’s normal pay.”

 

According to the Bureau of Labor Statistics (BLS), the United States economy produced 209,000 jobs in July.  This meant that the unemployment rate was down to 4.3 percent in July – beating all expectations from economists.

Jed Kolko, chief economist for job search engine Indeed said, "This was a banner jobs report. Job growth in the past three months is ahead of the 2016 pace and way ahead of what's needed to keep up with population growth. Working-age adults are now more likely to be employed than at any time since the recession."

Since a peak of 10% in 2009, the unemployment rate has been steadily falling.  In July, the unemployment rates were 4% for adult men and women, 13.2% for teenagers 3.8% for Asians, 7.4% for blacks and 3.8% for whites – all showing little or no change,  However, the unemployment rate for Hispanics was up to 5.1% from 4.8%.  Long term unemployed rose slightly to 1.8 million – 25.9% of the total unemployed.

According to the BLS, some unemployed people – although out of work and available for work – were not actively seeking a job as they believe there are none available for them. Others did not seek work due to family responsibilities.

Jed Kolko stated, "Today's low unemployment rate masks some reasons for concern.  Today's unemployed are more than twice as likely to be out of work for more than six months as the unemployed in April 2001. They're also more likely to be underemployed, as measured by the broader U-6 unemployment rate. Finally, a larger share of prime-working-age adults is not employed today versus April 2001 because they're out of the labor force.”

President Trump has tweeted encouragement to those who have given up looking for a job altogether, to start trying again to join the labor force.  He promised that he will continue to roll back "stifling regulations" that hurt jobs.

Cathy Barrera - the chief economic adviser for the online jobs platform ZipRecruiter – had been worried about younger workers falling behind since the recovery from the recession.  However, she stated, "……. we're starting to see a trend for that particular group with modest rises in labor force participation and downward ticks in unemployment.  We're seeing more jobs that don't require a college degree get posted. As more jobs become available for them, we could see their labor force participation return to pre-recession levels."

In July, food services gained 53,000 jobs; professional and business services gained 49,000 jobs and health care gained 39,000 jobs.  Employment in other major industries, including construction; manufacturing; wholesale trade; retail trade; transportation and warehousing; information; financial activities and government showed little change over the month.

Jed Kolko pointed out that "The fastest job growth in July was in lower-wage industries. That's helping the least-educated Americans get back to work. The recovery is now strong and long enough to lift many of the people hurt most by the recession—except in manufacturing, which continues to lag overall jobs growth."

Wage growth remains sluggish - with average hourly earnings for all private-sector workers rising by 9 cents in July to $26.36. Over the year, average hourly earnings have risen by 65 cents, or 2.5 percent.

Cathy Barrera observed, "While we're still mystified by the muted wage growth, wages among the lower 25th percentile is growing a lot faster than those who are at the top 75th percentile.  This is one indication that the job market for younger workers and/or workers without college degrees may be heating up, which is great news because this is the group that has not seen as full a recovery as everyone else."

 

 

The Taylor Review into modern working practices has recently been published, with Matthew Taylor - and his colleagues on the Taylor Review, writing: “The starting point for our review has been the strength of our labour market and of the key features of our system of employment regulation, what we refer to as the British way.  Record levels of employment, low levels of unemployment, high levels of voluntary flexibility, wages now growing fastest amongst the lowest paid; these facts provide a very positive backdrop – one that would be envied in many other advanced economies – for our consideration of how to improve the quality of work.”

Peter Cheese, Chief Executive of the CIPD (the professional body for HR and people development) commented on the publication, saying, “The Taylor Review has the potential to change how we look at the future of work, which is about quality of work and not simply quantity. Translating the ambition into practice has an added importance given some of the additional challenges we face in the UK, from access to skills to labour market regulation post Brexit.” 

Some proposals suggested in the report include ‘a new role for the Low Pay Commission exploring how to improve quality and progression in sectors with a high proportion of low paid workers; a national framework for employability skills so we can develop the kind of transferable capabilities that can be acquired in formal education and also informal and on the job learning; recognising and supporting the role that employers can play in promoting health and wellbeing at work and making it much easier for employees to access rights to independent representation, information and consultation.’

It further read...‘to increase clarity for business and workers we propose primary legislation to define the boundary between self-employment and worker status; moving towards aligning the categories used in tax regulation and employment regulation and that the employment status boundary should be defined - as is the tax boundary - in terms of the level of control and supervision experienced by individuals.’

Peter Cheese declared, “We have been calling for greater clarity over workers’ rights for a long time, and therefore welcome the main thrust of the recommendations to ensure fairer treatment for gig economy workers without losing the flexibility which we know many of them value. We also support the proposals to clarify people’s employment status and rights and back plans to require employers to provide details of terms and conditions of employment to workers as well as employees.”

He also commented, “While we welcome the proposals for a stronger test of supervisory relationships in order to ensure workers get the benefits they are entitled to, we need to ensure that the framework for enforcing this is practical, otherwise we risk discouraging employers from providing flexible roles and opportunities that many people benefit from.” 

Peter Cheese added, “Crucially, Taylor stresses that the best way to improve the quality of work is through effective corporate governance, good management and strong employment relations within organisations and flags the need to boost productivity and job quality through working more closely with low pay employers and sectors. It is vital the Government develops these ideas as part of industrial strategy to ensure that the Taylor Review has lasting impact on work quality in the UK.”

The Department of Labor has asked if employing multiple salary levels for white-collar overtime exemptions is a good idea and in its request for information (RFI) on July 25, it suggested more complex alternatives to the Obama administration rule - which has been blocked.  This included adjusting the levels according to different costs of living in different states. 

It added that gathering public input on the following questions will aid in the development of a notice of proposed rulemaking:

  • Should the regulations contain multiple standard salary levels?  If so, how should these levels be set - by size of employer; census region; census division; state; metropolitan statistical area or some other method
  • Should there be multiple total annual compensation levels for the highly compensated employee exemption
  • Would updating the 2004 salary level for inflation be appropriate and, if so, what measure of inflation should be used
  • Should the standard salary level and the highly compensated employee total annual compensation level be automatically updated on a periodic basis

Alexander Passantino, an attorney with Seyfarth Shaw and former acting administrator of the DOL's Wage and Hour Division said, "Employing a cost-of-living-based salary test certainly would address a number of the concerns raised by employers in the previous go-round.  "A salary level that works for New York [City] or D.C. does not necessarily work for the rural South. Because of the way the duties test works in connection with the salary, however, the reverse is not necessarily true. The salary is a screening mechanism; if it is low enough to ensure we are not inappropriately screening out exempt employees in the rural South, it likewise serves that function in New York City."

The attorney went on to say that the DOL will have difficulty implementing different salary levels due to the fact that it will be hard to establish exactly where an employee works.      He added, "Imagine a company incorporated in Delaware with headquarters in New York; a regional office in Denver; a field supervisor working out of his home in Santa Fe who services a district covering El Paso, Texas, to Phoenix.  Then imagine he spends half his time in the Denver office and half his time working out of his home. The DOL would need to provide guidance on how to apply the proper salary level, which would be much more challenging for the department than setting one standard salary level. The multiple standard salary levels are "a great idea in principle—somewhat difficult in application."

Alfred Robinson Jr – an attorney in Washington D.C. and former acting administrator of the Wage and Hour Division, commented on the multiple standard levels by stating it ".......could result in some positions and employees being classified differently in different regions of the country even though they perform the same job duties."

Conversely, Jeffrey Brecher - an attorney with Jackson Lewis in Melville, N.Y. – said, "One of the criticisms of the original final rule was that it established a salary level that more than doubled the prior salary level and took no consideration for differences in salary levels among geographic areas. So setting a standard salary level that makes adjustments based on geographic location makes sense. Employers are used to variations in salary levels at the state-law level, so this is something the DOL will likely give serious consideration."

Speaking at the Aspen Security Forum in Colorado on 19th July, John Kelly, US Homeland Security Secretary, discussed the decision taken earlier this year to allow personal electronic devices (PED’s) to be checked into baggage placed in aircraft holds, despite them being considered a risk in the passenger cabin.

Since March of this year until the end of June when they were eventually lifted, new security measures had been implemented which meant that passengers on US-bound services from some airports were forbidden from taking large electronic devices into the cabin. The ban affected 180 airlines and 280 airports globally.

However in June, DHS announced the lifting of the ban and issued a statement which read; “These airports and airlines have successfully implemented the first phase of enhanced security measures. There are currently no airlines under restrictions for large personal electronic devices. Airlines worldwide have implemented additional security measures that ultimately make the global aviation community more secure.”

The US government lifted the laptop ban as concern about the safety of PED’s in checked baggage heightened.  Counterterrorism analysts were puzzled as the same explosive detection technology is used for both hand and checked baggage and testing by FAA’s Fire Safety Branch  showed that PED’s packed in suitcases in the cargo hold could have serious consequences to aircraft.

At the security forum this month, Kelly detailed the reasoning behind the sanctions, stating that on his appointment to the position in January, he was informed that there was a very sophisticated threat.

"It was not only sophisticated but it was real, and it was targeted at certain airports," he said.

Just as importantly however, Kelly also learned that remote detonation of the device was not a possibility and direct access would have been required – hence allowing the PED’s to be placed into the hold.

Although the ban has now been lifted, Kelly insisted that there has been "no compromise" and security measures have been enhanced. He stated, "I am reasonably confident that we can detect the devices, given all of the things that we are requiring people to [do]," he says.

In 2013, the government introduced employment tribunal fees under a secondary legislation rather than a full Act of Parliament.   After losing its case challenging the government’s decision - at both the High Court and the Court of Appeal - the trade union Unison appealed to the Supreme Court and won.  As a result, £27m in fees paid will be returned by the Government to those who paid to take their employment complaints to tribunal.

A unanimous judgment of seven Supreme Court judges noted that employment tribunals “are intended to provide a forum for the enforcement of employment rights by employees and workers, including the low paid; those who have recently lost their jobs and those who are vulnerable to long-term unemployment.” 

The judges concluded that the fees were preventing access to justice and as women were more likely to bring more serious and costly Type B cases - rather than Type A cases - the charges were also deemed to be discriminatory towards them.

Labour’s shadow justice secretary Richard Burgon said: “The Conservative Government should do the right thing, accept the ruling and consign their immoral Employment Tribunal Fees to the dustbin of history, rather than spending more taxpayers’ money trying to defend the indefensible. It’s an important day for access to justice for ordinary working people everywhere. The Conservative Government – which in coalition with the Lib Dems brought in this immoral restricted access to justice – must now pay a £32 million price for attacking workers.  Labour’s manifesto pledged to abolish Employment Tribunal Fees. Labour’s position has been vindicated by the highest court of the land and Unison should be congratulated on winning a victory for working people everywhere.”

Unison general secretary Dave Prentis said: “The government is not above the law. But when ministers introduced fees they were disregarding laws many centuries old, and showing little concern for employees seeking justice following illegal treatment at work.”

Jason Moyer-Lee, the general secretary of the Independent Workers’ Union of Great Britain (IWGB) which represents workers in the so-called gig economy, welcomed the “momentous decision”.

Experts have pointed out that the decision would probably lead to a sudden increase in the number of tribunals.  During the course of the case it was suggested that the number of tribunals brought since fees were introduced has dropped by as much as 70 per cent.

Paul McFarlane, chair of the Employment Lawyers Association’s legislative and policy committee and partner at Weightmans, called the result ‘dramatic’ and explained: “Once fees are scrapped it is likely that there will be a significant rise in the number of claims being brought. This will have knock-on implications for business, Acas and the employment tribunal system itself – all of whom will have to deal with the increased volume of claims.”

Head of the employment department at Trowers & Hamlins, Emma Burrows also agreed that claim numbers could increase and added: “Employers will also need to reassess their approach to risk when facing potential disputes with employees.”

The Financial Conduct Authority (FCA) has published interim findings of the Retirement Outcomes Review, the first major comprehensive study into how the retirement income market is changing since the pension freedoms were introduced.   The review considered how the income market is developing, focusing mainly on those who do not take any advice.

They found that consumers welcomed the pension freedoms and over one million defined contribution pension pots had been accessed since the reforms took place.  The early access of pots has resulted in 72% being accessed by consumers less than 65 years of age – most of whom took lump sums.  Over half of the accessed pots have been fully withdrawn and over half of these have been transferred into savings or investments. No evidence was found of persons being careless with their pension savings.

Since inception, tools have been developed to help consumers understand the changes.  In addition simpler flexi-access drawdown products, which consumers can buy without taking financial advice, have been introduced.

The review found however, that the market is still growing and adjusting to the changes, leaving certain issues identified - those who withdrew their pots did so partly because of mistrust of pensions and they accepted the drawdown option offered by the pension provider without shopping around; 30% did not take advice on how to manage the drawdown and, as the decision is complex, it is questionable whether further support is required.

It was found that some annuity providers were leaving the market, reducing choice for consumers and weakening competiveness. This could result in more charges/tax being paid, consumers investing unsuitably, missing out on valuable benefits or running out of savings sooner than expected.

The FCA has stated that they will carry out further assessment of the harm these issues may cause and consider remedies.

Commenting on the interim finds of this review, Tim Gosling – Policy Lead of the Pensions and Lifetime Savings Association – said,

"The FCA's interim retirement outcomes review makes for disturbing reading. Without timely action now, those retiring in the near future who are dependent on defined contribution (DC) pots and who have no access to advice will not receive the retirement they hope for.

“We need two things. First, we need a smoother customer journey at retirement that makes the line of least resistance an income product rather than cash. This may mean a form of "soft" default, intended to preserve consumer choice but designed to connect savers to the income 84% say they want1.

 “Second, we need a new generation of high quality retirement income products. These need to have strong independent governance and be suitable for those needing an income but who do not have access to advice. Government and the FCA should be mindful of lessons learnt in the workplace pensions market after the 2013 Office of Fair Trading Report to ensure product quality and also ensure they are open to fresh thinking about how to stimulate the development of new products.

“Over half (52%) of fully withdrawn pots have not been spent but moved into other retirement savings or investment vehicles – with associated tax, investment and benefit risks. The report suggests that this may be due to lack of public trust in pensions so we need to work hard to address this issue by helping the industry to evolve to meet the expectations of consumers saving for and transitioning into retirement.

“The industry does not have long to get this right."

Brexit negotiations have only just begun but already the UK is starting to feel the effects of skills shortages in the labour market.

The latest CIPD/Hays research found that three-quarters of HR professionals are already experiencing recruitment difficulties and - as a result of the UK’s decision to leave the EU - they expect competition for well-qualified talent to increase over the next three years.  As a result, they have highlighted the need for smarter, more targeted recruitment strategies, such as combining in-house and outsourced approaches.  If used well, this can be a positive resource for HR teams particularly when they require larger volumes of recruits as it can lessen the burden of administration.

Data from the survey shows that employers are endeavouring to use many options to increase their labour supply, especially in relation to younger applicants.  These include increasing the skills in their existing workers; offering apprenticeships; work placement and work experience schemes and developing a close relationship with schools and colleges.

The Resourcing and Talent Planning survey reports that there is an added cautiousness in prospective candidates and around the same proportion of increased cautiousness in businesses recruitment. Three-fifths of businesses also anticipate that as a result of the Brexit vote, they will experience increased difficulty in recruiting senior and skilled/ technical employees, whilst two-fifths anticipate increased difficulty in recruiting operational staff.

However, the survey shows that despite the Brexit decision, when it comes to employing migrants the proportion of businesses anticipating that they will recruit EU migrants in 2017 is similar to that of 2016 across all sectors.

According to the latest Labour Market Outlook findings, approximately 12% of private sector companies are considering locating their business operations abroad - with the Republic of Ireland, Germany and France as the most popular destinations.

 

According to a new survey by PayScale, women being interviewed who will not reveal their salaries tend to earn an average of 1.8% less than women who do disclose their compensation.  

Lydia Frank, vice president of content strategy at PayScale, which provides compensation data and software, states "There's a lot of research out there around unconscious bias that shows that we expect women to be cooperative and collaborative, so when a woman refuses to answer that question, it could rub people the wrong way."  

Between April and June, PayScale interviewed 15,413 job applicants and the survey asked the following question:   

At any point in the interview process, did you disclose your pay at previous jobs?

The replies received were:

  1. No, and they did not ask.
  2. No, but they asked.
  3. Yes, they asked about my salary history.
  4. Yes, I volunteered information about my salary history.
  5. I do not recall.

PayScale analyzed the responses by industry; job title; job group; job level; gender; age and income bracket - it was found that when it came to job groups, 44% of those applying for jobs in HR, 43% in marketing and advertising and 40% in accounting and finance were the most likely candidates to disclose salary history during an interview.    

Lydia Frank said "With HR, if you've been on the other side of the table discussing compensation with candidates, where salary history is something you asked of candidates, being asked yourself might feel pretty typical."

Of the applicants for C-suite jobs, 40% said they were asked about their compensation whilst 26% refused to answer the question.  However, when job candidates did refuse to say what they earned, they tended to earn more than those who revealed their salaries.

"When it comes to higher-paying positions, an employer doesn't want to waste anyone's time - theirs or yours," Lydia Frank said. "….so making sure you really understand salary expectations for those roles makes a ton of sense."  Where executive-level candidates had a tendency to sidestep the question, "….that has to do with confidence," she said and added, "If you know your skills are sought after and you're at a level in your career where you're in a highly paid role, you probably know your value and are more confident in saying hey, I don't really want to talk about my salary, I want to talk about the position and what the role is worth.”

When it came to industry, those most likely to be asked about their salaries were people applying for jobs in finance and insurance - 45% and 49% percent of the applicants revealed their compensation.

However, when it came to the older applicants they were more likely to refuse to disclose what they earned.   The survey showed that 28% of baby boomers refused to disclose their salary histories when asked; 22% of members of generation X refused and 18% of millennials also refused.

Lydia Frank remarked that by forbidding the question in the first place, women won't be put in the position of having to refuse to answer and said, "That's absolutely the advice we're giving to employers: Don't ask the question and put candidates in an awkward position of having to decide whether to answer. It's easy enough to switch to 'salary expectations,' and that's really what the employer and candidate should be talking about anyway-the market rate for the position, not an individual's salary history. If salary history does manage to influence the offer then that could lead to internal pay inequities and employee turnover."

In at least six states or cities the question of salary history being asked by prospective employers has been banned - or the possibility is being considered.   Delaware; Massachusetts; New York City; Oregon; Philadelphia (effective May 2017, but delayed pending litigation) and Puerto Rico are those already banning or planning to ban, whilst California is considering similar legislation.

The US Department of Labor alleged that a Florida manufacturing business in Flagler County is guilty of Profit Sharing Plan embezzlement and filed a complaint against the company and its owner.  According to the allegations the owner embezzled $111,624 between January and June 2009 from the company Profit Sharing Plan. 

United States Attorney A. Lee Bentley, III has now announced that the 63-year-old owner, from Volusia County, has pleaded guilty to embezzlement from an employee benefit.  According to the plea agreement, the owner embezzled all of the funds from the business’ corporate Profit Sharing Plan and unlawfully used the pension funds to pay personal and other unrelated corporate expenses.  She used some of the funds to pay personal investment obligations in another company she co-owns.  The corporate Profit Sharing Plan was a federally protected plan under the Employee Retirement Income Security Act (ERISA).

In 2009, the manufacturing company was having financial issues.  To meet the company’s payroll; pay vendors; fulfil the company’s mortgage payments and pay the financial obligations of her unrelated company, the owner of the manufacturing company made 15 separate and illegal electronic funds transfers from the company’s Profit Sharing Plan’s account.  This was carried out by electronically transferring funds from the Plan’s account to the company’s operating account.  Checks were then written from the operating account to cover personal and business obligations.  As a result, the employees’ Profit Sharing Account was depleted.

The owner and another were held to be jointly liable and, as a result, are permanently banned from acting as a fiduciary, trustee, agent or representative for employee benefit plans (as defined by the Employee Retirement Income Security Act of 1974) in the future.  In addition, they have been ordered to pay restitution plus an additional $25,253 in interest on lost earnings.

The U.S. District Court for the Middle District of Florida Jacksonville Division, appointed administrators to terminate the Plan, collect and administer the Plan’s assets and make distributions to the affected participants.

Affluent male pensioner’s life expectancy is rising faster than other groups - as revealed by a new longevity trends report published by the Pensions and Lifetime Savings Association (PLSA) in conjunction with longevity experts, Club Vita. 

The report suggests that this trend could have major implications for Defined Benefit (DB) pension schemes, as over half of their liabilities will be in this group - showing that a scheme with a high proportion of more affluent members might need to make more provision than a scheme with a more mixed demographic.

Between 2011 and 2015 men in this group continued to have rapid rises in longevity - gaining 17 weeks of life expectancy and maintaining the increasing trend from the previous 10 years, whilst other groups saw no increases.  In contrast, for men on a modest retirement income and those who are living in deprived areas on a low income, life expectancy has remained unchanged since 2011.

The importance of having an insight into the economic dynamics of longevity trends has never been greater.  Recent differences in life expectancy amongst socio economic groups is likely to be caused by a combination of factors - harsh winters, flu, access to social care and economic slowdown, to which issues the affluent group have proved to be more resilient. 

Steven Baxter, Head of research for Club Vita states, “.......Trustees of DB schemes are faced with tough decisions to make. Standard actuarial projections have shown a slowdown in rising life expectancy and some have even questioned whether DB schemes should be funding for future, uncertain increases in longevity.  However, our evidence that life expectancy is still rising at the same pace amongst affluent males is highly significant.” 

He continues, “While the nation has seen a slow-down in rising life expectancy over recent years our analysis has shown that men in ‘comfortable’ socio economic groups are, in contrast, maintaining a consistently rising life-expectancy. There has been a divergence in longevity expectations between these groups and the lower socio-economic ‘making do’ and ‘hard pressed’ groups, with the longevity improving twice as fast for the ‘comfortable’ group.  At a societal level it is concerning to see a halt in the narrowing of the longevity gap amongst different parts of society that we had seen previously.”

Graham Vidler, Director of External Affairs, Pensions and Lifetime Savings Association (PLSA) commented that trustees have to take a view on the longevity outlook for the future and this report was designed to help them with decision-making and scheme management.