Emma Cocker explores the legal action against McDonald’s over harassment allegations, in Personnel Today

Posted on: February 11th, 2025 by Natasha Cox

Senior Associate Emma Cocker discusses the BBC investigation and subsequent legal action against McDonald’s over widespread allegations of harassment and abuse, and argues that it demonstrates how the employment insecurity of zero hour workers can create a toxic work culture, in Personnel Today. 

Emma’s article was published in Personnel Today, 10 February 2025. 

McDonald’s: zero hours culture feeds sexual harassment allegations

Sexual harassment allegations at the fast food giant came to the fore in 2023 and provide an example, argues Emma Cocker, of how insecure employment can contribute to power imbalances that create a toxic workplace culture.

Marking its 50th anniversary in the UK, McDonald’s announced plans last August to open more than 200 new restaurants in the UK and Ireland over the next four years. However, problems in its current national network of 1,450 outlets continue to loom large, with a deluge of allegations of employee harassment and abuse threatening to cloud the company’s agenda.

In July 2023, a BBC investigation into working conditions at McDonald’s lifted the lid on what it described as “a toxic culture of sexual assault, harassment, racism and bullying” following allegations by more than 100 staff at UK retail outlets of the fast food chain. According to the BBC, workers, some of them as young as 17, had experience of being abused, bullied, groped and routinely harassed.

The BBC investigation was promoted by disclosures made by whistleblowers after McDonald’s signed a legally binding agreement with the Equality and Human Rights Commission (EHRC) in February 2023 in which it pledged to protect its staff from sexual harassment.

The EHRC agreement had itself been reached in response to concerns about the handling of sexual harassment complaints made by staff in its UK restaurants. McDonald’s confirmed that it had “fallen short” and it “deeply apologised”, adding that all employees deserved to work in a safe, respectful and inclusive workplace.

Last month, Alistair Macrow, CEO for McDonald’s UK & Ireland, appeared before MPs sitting on the Business and Trade Select Committee. He told them that 29 people had been dismissed over the past year following allegations of sexual harassment.

Liam Byrne MP, the chaire of the Business and Trade Select Committee, asked Macrow if McDonald’s had “basically now become a predator’s paradise”. Macrow said the allegations raised by the BBC were “abhorrent, they are unacceptable and there is no place for them in McDonald’s”, and the company was determined to create a culture where there was “no hiding place for bad actors”.

Despite repeated pledges from Macrow that the firm was taking appropriate action to improve working conditions and clean up behaviour, the situation does not appear to have improved. Since its original investigation into the company was delivered, the EHRC has received 300 reports of harassment, while more than 700 current or former employees are taking legal action and accusing McDonald’s of failing to protect them.

The law in relation to employers’ responsibilities is unambiguous. Under the Equality Act 2010, employers have a statutory duty to  protect all staff from discrimination and harassment, regardless of whether they are employees or workers, and regardless of whether they are engaged on a full-time, part-time or casual basis. 

According to the BBC, 89% of McDonald’s 170,000 UK workers were on zero-hours contracts in January 2025, despite the firm’s 2017 announcement that workers would be offered the choice of a flexible or fixed contract offering minimum guaranteed hours. The minimum hours contracts were for a minimum of 30 hours, 16 hours or four hours a week, but most workers opted for flexibility.

Insecure employment

Like many zero-hours workers, McDonald’s staff face employment insecurity, which invariably leaves them reluctant to raise complaints because of fears they will become subject to detrimental treatment as a consequence. It therefore follows that the true extent of discrimination and harassment suffered by McDonald’s staff may be much higher than current figures suggest.

Zero-hours contracts, by their very nature, result in a power imbalance in which an employer holds significantly greater power than the individual. Without any guarantee as to the number or timetable of working hours, staff have little control over their income or schedule, putting them in a vulnerable position whereby they can be easily pressurised into complying with an employer’s demands, or face not being offered hours in future.

The abuse that arises from the inherent power imbalance that exists in zero-hours workplace relationships can lead to significant liabilities for businesses. Employers therefore need to be acutely aware of potential discrimination and harassment in the workplace and what may happen if they fail to address these issues. The ongoing issues at McDonald’s and the company’s abject failure to provide a safe, harassment-free environment have generated a raft of bad publicity which will ultimately affect profits. 

The UK government’s Employment Rights Bill aims to ensure that ‘exploitative’ zero-hours contracts will end. The bill includes measures which are designed to provide workers with greater security and predictability: a right to guaranteed hours, where the number of hours offered reflects that hours worked by the workers during a reference period (which is anticipated to be 12 weeks) along with a right to reasonable notice of shifts, and a right to payment for shifts cancelled or curtailed at short notice.

While these changes will not directly reduce instances of discrimination and harassment, they may help to eradicate the fears and insecurity faced by zero-hours workers. In the meantime, it is clear that McDonald’s still has a long way to go in providing a safe working environment that is free from discrimination and harassment – and in changing public perception that this is indeed the case. How the company handles the growing number of claims made against it will be carefully scrutinised.

If you would like some advice on meeting your employer obligations regarding discrimination and harassment, please contact a member of the Employment team.

 

Government Abolishes Two-Year Rule in Leasehold Reform Act 2024

Posted on: February 6th, 2025 by Hugh Dineen-Lees

Effective from 31st January 2025, the Government has enacted a major change under the Leasehold and Freehold Reform Act 2024 (LAFRA), which abolishes the two-year ownership rule. This is the first part of the LAFRA to be implemented.

Following this change, Leaseholders will no longer need to wait two years to commence enfranchisement or lease extension processes.

This will have a particular impact on lease extensions or enfranchisement where the flat is subject to an impending sale. Given that new owners will no longer have to wait 2 years to extend their lease or commence enfranchisement proceedings, this will avoid the need for the existing owner to begin this process prior to the sale, if it is required, making the sale process more efficient.

Housing Minister Matthew Pennycook has emphasised this reform marks the initial step towards a comprehensive overhaul of the leasehold system, indicating that efforts will continue to implement the measures outlined in the Leasehold and Freehold Reform Act.

The implementation of further reforms set out in the LAFRA are planned for Spring.

The updated legislation can be seen here – Leasehold and Freehold Reform Act 2024

Practice guide 27 has now also been updated to reflect this:  Practice guide 27: the leasehold reform legislation – GOV.UK

Cancer: a disability without dispute

Posted on: February 4th, 2025 by Natasha Cox

Reports show that since the pandemic there has been a sharp rise in cancer diagnoses in those under the age of 50[1]. The NHS states that 1 in 2 people will have cancer in their lifetime[2] and the dire impact cancer can have on health and quality of life is well known. With cancer more commonly affecting the workforce, what do employers need to be aware of in relation to their employment law obligations to cancer sufferers?

Disability discrimination

Under the Equality Act 2010 (“EqA”) individuals are protected from disability discrimination at work. This protection is afforded not just to employees, but also to workers and the self-employed.

Legislation defines disability as a physical or mental condition which has a “substantial and long-term adverse effect on the ability to carry out normal day-to-day activities[3]

Individuals who suffer certain named conditions, including cancer, are protected from discrimination as soon as they are diagnosed, even if it the illness does not immediately have an impact on their ability to carry out day-to-day activities.

Disability discrimination can occur in any of the following situations:  

  • Direct discrimination: an individual is treated less favourably than others because of their cancer (section 13 EqA)
  • Indirect discrimination: a provision, criterion or practice is in place which applies equally across the workforce, but which disadvantages individuals with cancer more and without any objective justification (section 19 EqA)
  • Harassment: an individual suffering from cancer is treated in a way which makes them feel that their dignity has been violated, they are intimidated or humiliated, or their working environment is hostile, degrading or offensive (section 26 EqA)
  • Victimisation: an individual with cancer is subjected to a detriment because they have complained, or intend to make a complaint, about disability discrimination (section 27 EqA)
  • Discrimination arising from disability: an individual with cancer is treated unfavourably because of something arising from their diagnosis, for example, being penalised under an absence management policy because they are required to attend regular hospital appointments and without any objective justification (section 15 EqA)
  • Failure to make reasonable adjustments: an employer fails to make reasonable adjustments to mitigate any substantial disadvantage a person with cancer may have as a consequence of their illness or its treatment (section 20 EqA)

The extent of protection for those with cancer  

Regardless of the stage or severity of the diagnosis, once an individual has been diagnosed with cancer, they are protected from discrimination. The protection is wide ranging: In Lofty v Hamis[4], the EAT held that an employee diagnosed with a non-invasive, pre-cancerous form of melanoma was protected.

Tribunals take a holistic approach when determining the reason for the detrimental treatment. In Willis v NatWest Bank[5], the employment tribunal held that the decision not to renew Ms Willis’ secondment and the termination of her employment was due to her cancer, not redundancy as alleged. A key indicator was that the work she had been contracted to do still had to be carried out following the termination of her employment.  

The protection applies to individuals throughout their employment, including during recruitment and probationary periods. In Lyddall v The Wooldridge Partnership[6], Ms Lyddall suffered from cancer during her probationary period. Her employment was terminated at the end of her probationary period, purportedly for performance reasons. This was said to be the case despite a lack of feedback regarding her performance. The Wooldridge Partnership argued that it had not provided negative feedback due to a desire to avoid causing stress to Ms Lyddall while she was undergoing treatment. The tribunal was not convinced by this argument and held that as Ms Lyddall’s cancer was a factor in her dismissal it was discriminatory.   

Employers’ considerations in relation to employees with cancer  

Employees are not required to disclose their health concerns or diagnoses to their employer. Employers cannot rely on employees’ failure to disclose a diagnosis as a defence to discrimination claims and employers will be liable for discrimination where the facts show they should have known about an employee’s disability. Therefore, employers must be prudent and pay close attention to individuals’ behaviours and routine changes, as these may indicate an ongoing medical condition which may constitute a disability under the EqA.

To ensure that individuals with cancer are not substantially disadvantaged, employers should seek to work collaboratively with their employees to understand any issues that may arise as a consequence of their illness and treatment. Employers should seek to identify any reasonable adjustments that might provide solutions to those concerns. Referrals to occupational health can be valuable as they can help both individuals and employers understand a treatment plan and any side effects the individual may experience. Occupational health reports can also be a helpful too in working out whether any particular issues are likely down to the employee’s illness, or whether they can be properly attributed to other issues, such as performance or conduct concerns.  

Employers should also take proactive steps to ensure a work environment free from discrimination and harmful ‘banter’ relating to disability. Having comprehensive policies in place and providing training on equal opportunities can reduce the risk of discrimination. If an employer receives a complaint of discrimination, it should be properly investigated, and disciplinary action should be taken where necessary. It is important to remember that a one-off act is sufficient to constitute discrimination, and the perpetrator’s intention is irrelevant.  

How we can help

If you have any questions about employers’ responsibilities and liabilities relating to disability discrimination, or if you need assistance regarding employee complaints, please contact a member of our Employment team.

[1] Cancer rates rising in under-50s – Cancer Research UK – Cancer News

[2] Cancer – NHS

[3] Definition of disability in section 6 of the Equality Act 2010 – GOV.UK

[4] Mrs C Lofty v Mr S Hamis t/a First Café: UKEAT/0177/17/JOJ – GOV.UK

[5] Ms A Willis v National Westminster Bank plc: 2205821/2020 – GOV.UK

[6] Mrs L Lyddall v The Wooldridge Partnership Ltd: 3314738/2021 – GOV.UK

Corporate and Commercial 2024 Deal Highlights 

Posted on: January 30th, 2025 by Hugh Dineen-Lees

Our Corporate and Commercial Team completed an impressive 30+ M&A deals for our clients last year, with around 20% of those with a deal value in excess of £10m. The team has seen a strong start to the year and we look forward with confidence to the rest of 2025.

Head of Corporate and Commercial Jeff Rubenstein commented ”M&A activity shows optimistic signs of growth in 2025. Our clients anticipate more favourable macroeconomic conditions, especially in our sweet spot of owner managed SME businesses, and we’re well placed to assist them in their ambitions.”

Corporate and Commercial 2024 Deal Highlights

Matt Green provides insights on bitcoin recovery to Thomson Reuters

Posted on: January 27th, 2025 by Hugh Dineen-Lees

In a recent article published by Thomson Reuters, Matt Green, Head of Blockchain and Digital Assets, explores the topic of recovering lost Bitcoin. Alongside his co-authors, Brian Mondoh, Barrister at Titan Chambers, and Marcin Zarakowski CEO of Token Recovery, Matt addresses the common belief that Bitcoin is a decentralized network and explains how recent developments have made it possible to recover lost Bitcoin assets.

The article highlights two primary scenarios for losing Bitcoin: theft or scam, and losing access to private keys or seed phrases. They delve into the Digital Asset Recovery (DAR) process on the BSV blockchain, which allows for the reassignment of lost or stolen digital coins through valid court orders.

By ensuring compliance with court orders, the BSV network can freeze and reassign assets to their rightful owners, making the recovery process more efficient and cost-effective.

Read the full article here.

Danny Schwarz and Sophie Levitt discuss how the rise in NICs will affect property investors and landlords, in FT Adviser

Posted on: January 13th, 2025 by Natasha Cox

Head of Commercial Real Estate Danny Schwarz and Solicitor Sophie Levitt discuss how the increased rate of employer Class 1 national insurance contribution rates will impact property investors and landlords.

Danny and Sophie’s article was published in FT Adviser, 13 January 2025.

NIC Rate Hike: UK businesses brace for landlord and tenant turmoil

Rachel Reeves presented her Autumn Budget 2024 to Parliament on 30 October, to a mixed reception. One of the most controversial changes announced was that the government will be increasing the rate of employer Class 1 National Insurance Contribution (NIC) rates from 13.8% to 15%. The current rate of 13.8% is payable on the amount that an employee’s earnings exceed the secondary threshold of £9,000 per year/£175 per week. However, the increased rate will be 15% and the secondary threshold will be reduced to £96 pounds per week/£5,000 per year. These changes to employers NIC rates will come into effect on 5 April 2025, however are already posing concerns for the UK’s retail and hospitality sector.

While the increase in employer NICs aims to raise revenue for vital services, such as the NHS, and may increase funding for contributory benefits, such as the State Pension, the measure could have a profound effect on retail and hospitality businesses due to the increasing costs such businesses face and may result in shop closures, and others feeling the strain.

As a result of these changes, it is vital that property investors and landlords consider how these measures will impact their buying strategies, and tenants may well consider renegotiating their lease agreements to offset the higher operational costs which may otherwise impact their businesses.

For landlords and tenants alike, these reforms pose a number of challenges.

Operational costs

The prospect of raising employer National Insurance costs could prove to be a major setback for businesses. As a result of these reforms, businesses could be forced to face higher operational costs due to increased NICs, which would reduce their profit margins and place a greater strain on their livelihoods. For instance, it has been estimated that Tesco alone could face a £1 billion pound increase in its National Insurance bill over the course of this parliament.

Smaller and medium-sized enterprises (SMEs) are expected to be the most severely impacted as a result of these changes. SMEs often operate on tighter profit margins and many such businesses will therefore be forced to decide whether to fund the higher NICs by operating on reduced profits, cutting back on expenses or increasing their prices.

As a result, a phased introduction of the NIC threshold may be a better way for businesses to absorb the costs without passing them on to consumers in the form of higher prices.

Price increases

If a retail business opted to increase their prices of goods and services to offset the higher costs, consumer spending and demand could also be impacted as a result of the NIC hikes. Higher prices could exacerbate the cost-of-living crisis, making everyday items more expensive for shoppers.

It therefore comes as no surprise that more than 70 of Britain’s largest retailers have signed an open letter to warn the Chancellor that the NIC hike may lead to price increases and job losses throughout the high street. Some of the signatories included Aldi, Lidl, Boots, Ocado, Morrisons, Greggs and JD Sports – all of whom share concerns about the viability of such proposals.

Lease agreements

Business tenants who face the higher operational costs from the increased NIC rates may also seek to renegotiate their lease terms as a result of these changes. This could potentially lead to more flexible or reduced rent agreements since landlords are likely to be reluctant to lose longstanding tenants and will want to avoid being left with vacant properties and no rental income.

There are several ways for landlords to offer incentives and concessions to tenants to help them through this new financial burden. Temporary rent reductions could help tenants manage their cash flow during challenging times. Landlords could otherwise offer reduced rent for early renewal, waive certain fees or provide additional services such as maintenance.

Consequently, the terms of the lease could be made more manageable for tenants.

Rent arrears

Moreover, under the strain of these measures, certain landlords may also be less willing to renegotiate their lease terms and tenants may struggle to absorb the additional costs. Tenants, particularly in the retail and hospitality sectors, may be unable to generate enough income to meet their rent obligations. This could lead to higher rates of tenant defaults, leaving landlords with no choice but to forfeit their leases and to re-market the property. If landlords were left with no rental income, this would place a further strain on their finances.

There would also be additional expenses including administrative costs and legal fees when dealing with tenant defaults.

The fact that the British Retail Consortium is seeking a meeting with the Chancellor to discuss their concerns about the increased NIC rates, is proof that the scale of the new costs has the potential to cause severe financial hardship across different businesses.

Property transactions

The hike in NIC rates could affect the overall cost structure of property transactions and lead to higher property prices for buyers and sellers. Buyers may face higher purchase prices, which can affect affordability and demand in the property market. This could create a more challenging environment for property transactions, with reduced demand leading to slower market activity. 

If property investors and developers must operate on reduced profit margins, therefore, certain projects may seem less attractive or viable. This could lead to a decrease in the number of new development projects.

Higher NIC rates would also likely lead to increased labour costs for property investors and developers. This would inevitably make construction and development projects more expensive, potentially leading to higher prices for new properties.

Additionally, higher costs may be reflected by the fees of the professionals who are involved in the development projects, such as surveyors, architects and contractors.

Reduced investment

With increased costs due to higher NIC rates, landlords and tenants may also reduce investments in property improvements, expansions, or new technology, potentially slowing growth and innovation in the sector. The NIC rate hike has the potential to exacerbate economic uncertainty and make buyers, sellers and investors more cautious.

It is highly likely, therefore, that the changes will affect the overall health of the property market and have a significant knock on effect on the UK’s retail and hospitality sector.

Potential for legal disputes

Unsurprisingly, therefore, changes implemented as a result of the Budget could lead to legal disputes over lease agreements, employment terms and other obligations as parties adjust to the new financial landscape. There is also potential for businesses to struggle to comply with these new NIC regulations, which could lead to disputes with HMRC over unpaid contributions or penalties for non-compliance.

It is vital that businesses stay updated with the latest NIC regulations to ensure that they remain complaint. Payroll systems will need to be reviewed and updated to reflect the changes in the NIC rates. Compliance will reduce the risk of disputes arising from regulatory issues and will ensure a smoother operation of business.

Navigating the increased secondary NIC liability

As a result of Reeves’ proposals, the UK government estimates that 940,000 employers will face an increased secondary NIC liability. It is therefore inevitable that businesses across the UK and especially SMEs are feeling the pressure of this financial burden. It is essential for businesses to consider a variety of cost saving measures and to save price increases and redundancies as a last resort.

Landlords must also take a balanced approach and agree to renegotiate their lease agreements with loyal tenants if it is reasonable to do so. Landlords may be able to offer more flexible payment plans or allow temporary reductions with the agreement to recoup the difference at a future date.

However, maintaining open and transparent communication is fundamental.

Landlords and tenants should discuss the financial challengers together to find mutually beneficial solutions. By adopting this strategy, landlords can help their tenants through financial hardship whilst maintaining occupancy and fostering positive landlord-tenant relationships.

Looking ahead

Unsurprisingly, the proposed NIC hikes has provided cause for concern for many UK businesses in the retail and hospitality industry. From the impact on operational costs to the risk of litigation, there are a plethora of factors that must be considered if businesses are to weather the storm and remain both profitable and compliant.

In order to navigate these choppy waters, it is therefore vital that businesses seek tailored legal advice concerning their employment obligations and property agreements to ensure that they are braced for the upcoming changes and able to tackle the issues head on.

For more information on our Commercial Real Estate services, please click here. For our services in the Retail and Hospitality sector, click here

 

Matt Green comments on the rise of Big Tech lawsuits in CDR Magazine

Posted on: January 7th, 2025 by Natasha Cox

Head of Blockchain and Digital Assets and Technology Disputes Matt Green comments on the rise in litigation against Big Tech companies, and explores how regulation must adapt to provide better protection and recourse for consumers.

Matt’s comments were published in CDR Magazine, 6 January 2025.

“There have been very few useful regulatory protections for consumers, although attempts have been made under financial promotions regimes.

“There is a severe lack of protections for consumers broadly when dealing with crypto assets, particularly at retail exchanges. Under recent case law, the trend is to treat crypto exchanges like banks, which themselves are governed following hundreds of years of banking law with consumer protection in place. 

“However, these laws cannot be applied to crypto exchanges given technical and operational differences. On that basis, crypto exchanges are given wide protections for how they custody and pool assets (tilting in favour of their own interests), but consumers are left without recourse where those exchanges are unwilling to help.”

For more inforamtion on our regulatory services and crypto practice, please click here

Joanne Leach, Emma Cocker and Becci Collins examine the government’s crackdown on foreign labour exploitation, in People Management

Posted on: December 19th, 2024 by Natasha Cox

Senior Associates Joanne Leach and Emma Cocker and Solicitor Becci Collins explore the government’s recently announced plans to tighten immigration systems, and discuss how this will impact employers and employees, in People Management.

Joanne, Emma and Becci’s article was published in People Management, 17 December 2024, and can be found here.

Government cracks down on foreign labour exploitation: what employers need to know

Emma Cocker, Joanne Leach and Becci Collins explain recently announced plans to tighten immigration systems, and how they will affect business that hire overseas talent.

On 28 November 2024, the government announced that it intends to tighten immigration worker systems by extending categories of breaches, as well as strengthening sanctions. In its pre-election manifesto, the government stated that it intended “to reduce net migration through proper control and management of the visa framework”. The proposed new rules are evident of the government’s intent to “crackdown on visa abuse and prevent exploitation”.

The government proposes extending the circumstances in which sanctions can be issued to companies that sponsor overseas workers, to include those who commit serious employment breaches. It is expected that this will include the reforms proposed in the Employment Rights Bill published in October, as well as existing rights, such as the entitlement to national minimum wage. However it is unclear how a company will be judged to be in breach of employment laws. Such a finding could potentially derive from a successful employment tribunal claim, or a new regulatory body may be tasked with assessing failure to comply with minimum standards.

The current sanctions available to enforcement officers in relation to companies held in breach of immigration laws can only be issued for a period of 12 months. For those who commit repeat offences, this period will be doubled to “at least” two years, suggesting there is a possibility of longer sanction periods.

There will also to be a new initiative to take pre-emptive action against those who are suspected of committing serious breaches.  Where there are already signs of rule breaking, the government intends to use action plans to bind businesses to take specified steps to improve and correct issues. Currently, action plans can be implemented for a period of three months. However, this is to be extended to 12 months. If the required improvements are not made, the sponsor’s licence will be revoked.

Tougher rules to prevent companies exploiting cheap foreign labour should be welcomed. Workforces are strengthened by the diversity brought to organisations by migrant workers and those individuals deserve not to be exploited. This issue is also addressed by proposals that intend to prohibit exploitation by passing on the costs of recruiting overseas workers to the individual, sometimes at a premium or excessive rate. These costs can result in individuals being left with unfair and unmanageable debts to their employers. The proposal to ban these practices will help to ensure that only businesses who genuinely require overseas workers – and can afford to recruit them in a fair and respectful way – benefit from the immigration system.

Prudent employers will take the recently published statistics as a warning, indicating how seriously the government takes the issues of tackling abuse and failing to adhere to the immigration system rules. For example:

  • In October 2024, there were 856 visits conducted to businesses suspected of employing illegal workers, a 55% increase on visits carried out in October 2023.
  • Between January and October 2024, more than 6,600 visits were made, a 22% increase on the same period in 2023.
  • Between January and October 2024, over 4,600 arrests were made, a 21% increase on the same period in 2023.

The government’s intention to expand the circumstances in which sanctions can be issued to include employment law breaches, and to extend the penalty from being banned from hiring overseas workers from one year to two, will shift the compliance landscape considerably. Further extending the power of Home Office officials to permanently withdraw a company’s sponsorship licence if they breach employment laws could have catastrophic consequences for businesses relying on an overseas workforce. However, it seems that the proposed expansion only applies to companies. It may be more effective to increase the sanctions on individuals who facilitate these breaches – perhaps further changes are to come before the draft legislation reaches parliament.

It is uncertain when we can expect this law to come into effect, but we shouldn’t expect this to be the final crackdown by the government. We may also see the reintroduction of the resident labour market test, or salary thresholds and visa fees being increased. Hopefully, the government will consult early as to how these changes may be implemented but, in the meantime, companies effectively have a grace period to get their house in order.

Companies should take an active approach to ensure compliance in all areas of employment and immigration law and they should do more than take a simple ‘tick box’ approach. Employers should review their policies and procedures to ensure they are up to date and meet minimum standards to avoid the above-mentioned sanctions, as well as the reputational damage and disruption to the running of a business held to be in breach of immigration and/or employment laws.

This announcement should serve as a wake-up call to all employers that they must comply with employment laws as well as immigration rules, otherwise they will face increasingly severe consequences of enforcement.

If you have any questions about the government’s plans and how you can ensure your business is complying with employment and immigration laws, please contact a member of the Employment team.

Seasonal parties and employer liability for acts of misconduct by employees

Posted on: December 6th, 2024 by Natasha Cox

‘What happens on a staff night out, stays on a staff night out’

The holiday season is well underway with Christmas parties planned and booked. However, with seasonal joy and merriment comes a warning: inappropriate acts carried out by staff at company events can lead to liability on the part of employers.  

While it is well known and accepted that employers may be liable for inappropriate conduct by staff members in ‘the workplace’ and during office hours, employers are often less well versed in how to deal with inappropriate conduct at work-related events. So where is the line between work and non-work-related events, and how can employers best protect themselves?

Events outside the workplace and outside of working time

The law states that employers are liable for acts of harassment and sexual harassment carried out by their employees ‘in the course of employment’.

Despite this, there is a common and somewhat dangerous misconception that “what happens on a staff night out, stays on a staff night out.” This was the exact sentiment declared by a manager to Ms Pealing, a junior employee, before he attempted to place a banknote in her cleavage[1]. The respondents’ representative submitted that the manager’s conduct “wasn’t in works time, nor was it on works premises; it happened outside of work,” suggesting the employer would not be liable for the manager’s sexual harassment.

In Chief Constable of Lincolnshire Police v. Stubbs[2], the Employment Appeal Tribunal acknowledged that the dividing line between employment and off-duty conduct can become especially blurred where social events involving colleagues are concerned. Further, in Lister & Ors v. Hesley Hall Ltd[3], the House of Lords held that the question to be asked is whether the employee’s wrongful acts were “so closely connected with his or her employment that it would be fair and just to hold the employer vicariously liable”.

In the present case, the night out was attended almost exclusively by the first respondent’s employees. The premises at which the event took place was closed for the evening, and the two directors of the respondent company made a financial contribution to the night out. For these reasons, the Tribunal arrived at the unanimous view that there was a sufficiently ‘close connection’ between the employer and the incident to render it just that the employer should be vicariously liable for the manager’s sexual harassment.

The claimant in this case said she was left feeling “objectified” and “humiliated” and was awarded more than £5,000 in compensation.


Christmas parties in the employment tribunal

Each year the employment tribunal publishes a report on cases heard. This year to date, ten employment tribunal claims have cited Christmas parties and one third of the reported cases related to sexual harassment and/or discrimination related to sex.  

Employers must be aware that work-related events carry risk, in particular, where alcohol is involved. Sexual or sex-based harassment and discrimination is the largest area of risk, with the heady combination of alcohol and seasonal jollity sometimes becoming a toxic combination clouding employees’ judgement.

In addition to Ms Pealing’s case described above, there are a number of other cases which highlight the risks arising from such events, including:

  • In P v Chrest Nicholson Operations Limited[4], P’s complaints of harassment were upheld and her employer was liable, following a colleague of P attempting to kiss them whilst travelling in a taxi to a hotel following the company Christmas party, and P subsequently being raped by her colleague.
  • In Phillips v Pontcanne Pub Company Limited[5], Ms Phillips brought a successful constructive dismissal claim after she was put in a ‘playful’ headlock by a colleague during the company Christmas party which left her unconscious.


What steps can employers take to mitigate risk arising from workplace events?

While it is unlikely that employers will be able to eliminate all risks arising from workplace events, there are steps that can and should be taken both preventatively and following any complaint, to avoid escalation to an employment tribunal claim.

Preventative steps are even more important since the introduction in October of the new requirement for employers to take a positive action to prevent sexual harassment. Under the Worker Protection Act 2023 employers must take ‘reasonable steps’ to actively prevent the sexual harassment of their employees. If they don’t and the worst happens, they may be liable for compensation plus an additional uplift of 25% on the total compensation in relation to such failures. Examples of preventative steps include:

  • Carrying out risk assessments of the workplace and any particular events;
  • Implementing (or updating) policies relating to discrimination, harassment and disciplinary and grievance procedures; and
  • Training the workforce on what constitutes discrimination and harassment, the employer’s behavioural expectations and what to do if they are a victim.

As well as the positive duty to prevent sexual harassment, the law on harassment may afford an employer a defence to a claim of vicarious liability by showing that they took ‘all reasonable steps’ to avoid harassment (which is a higher bar than the ‘reasonable steps’ required under the preventative duty). An example of such a defence succeeding (albeit in the context of a personal injury claim) can be seen in the case of Shelbourne v Cancer Research UK[6] where the employer had risk assessed the event and sought to minimise any risks identified by hiring additional security guards and so they were not liable for the injuries suffered by one employee who was assaulted by another employee.

Employers should also be aware of the culture they are creating. The effect on the victim of any harassment is viewed subjectively, meaning that the effect is viewed through the eyes of the victim. As such, any claims that the behaviours were ‘banter’ or ‘a compliment’ are not an adequate defence. Employers should aim to cultivate a culture of respect and inclusivity and make it clear that discrimination and harassment will not be tolerated and will lead to disciplinary action.

If complaints of discrimination or harassment are made, these should be properly investigated, and disciplinary action meted out where necessary. In addition, complainants should never be treated less favourably for raising issues of discrimination and harassment.

How we can help

If you have any questions about employers’ duties to prevent discrimination and harassment or if you need assistance regarding employee complaints, please contact a member of our Employment team.

 

Sources:

[1] 8000363.2024_-_Miss_Freya_Pealing_v_1__The_Croft_Aberdeen_Ltd_2__Andrew_Robert_Eagar_-_Judgment.pdf (publishing.service.gov.uk)

[2] [1999] ICR 547

[3] [2001] ICR 665

[4] P v Crest Nicholson plc and Crest Nicholson Operations Limited: 3311744/2020 and 3313454/2020

[5] Phillips v Pontcanne Pub Company Ltd: 1600719/2018

[6] [2019] EWHC 842 (QB)

Joanne Leach comments on the new laws cracking down on bosses exploiting foreign workers in Personnel Today

Posted on: November 29th, 2024 by Natasha Cox

Senior Associate and employment law specialist Joanne Leach comments on the new laws just introduced that will ban bosses who fail to pay their staff the minimum wage from hiring workers from abroad for up to two years.

Joanne’s comments were published in Personnel Today, 28 November 2024, and can be found here.

“Tougher rules to prevent companies exploiting cheap foreign labour are certain to be welcomed. Workforces are strengthened by the diversity brought to organisations by migrant workers and those individuals deserve not to be exploited.

“However, extending the power of Home Office officials to withdraw a company’s sponsorship licence if they breach employment laws could have potentially catastrophic consequences for businesses which rely on an overseas workforce. This announcement should therefore serve as a wake-up call to all employers that they must comply with employment laws as well as immigration rules.

“The government’s intention to expand the circumstances in which sanctions can be issued to include employment law breaches and extend the penalty from being banned from hiring overseas workers from one year to two will shift the compliance landscape considerably. However, it seems that the proposed expansion only applies to companies. It may be more effective to increase the sanctions on individuals who facilitate these breaches – perhaps further changes are to come before the draft legislation reaches parliament.

“It is uncertain when we can expect this law to come into effect. Companies effectively have a grace period to get their house in order. To do so, they should be taking an active approach to ensure compliance in all areas. Employers should review their policies and procedures to ensure they are up to date and meet minimum standards.

“It is hoped the government also consults early as to how this change can be implemented. It is unclear how a company will be judged to be in breach of employment laws – will this finding derive from a successful employment tribunal claim or will a new regulatory body be tasked with assessing failure to comply with minimum standards?”

If you would like some advice on how these new regulations might impact you as an employer, please contact our Employment team.

Matt Green comments on the Digital Assets Bill in eprivateclient

Posted on: November 18th, 2024 by Hugh Dineen-Lees

Director and Head of Blockchain and Digital Assets Matt Green comments on the introduction of the Property (Digital Assets etc) Bill, and argues that this legislation will provide greater clarity to the treatment of cryptocurrencies and digital assets under UK law.

Matt’s comments were published in eprivateclient, 15 November 2024, and can be found here.

“Property rights allow individuals to identify and demarcate ownership. In turn, being deprived of property creates a right in either damages or for that exact property to be owed. This ensures there’s greater market confidence when dealing with property, as there are clearer legal rights to ownership, control and general treatment of that property.”

“Historically property fell into two main categories – things that are tangible and exist physically or a contractual right enforced by a legal system (such as a debt claim or contractual right to goods). Digital assets (including cryptocurrencies, digital files and records, email accounts and certain in-game digital assets, domain names, even verified carbon credits) do not fall neatly into either category.”

“Use of a negative definition as proposed in the Digital Assets Bill, future proofs how property is treated, preventing the need to return to the issue for decades to come. To give an exhaustive list of what property is limits what may or may not exist going forward, so the wording is designed to ensure policymakers and the public at large are given that freedom to treat “things” as property when required, as well as the ability to sensibly divert from the rigid definition of property when required.”

“Although a welcome change for a legal system previously often unequipped to deal with such matters, enabling a “thing” to be property even where it is not tangible or creates a legal right may create inconsistencies at common law given the broad strokes definition. However the benefit of future proofing far outweighs the potential for inconsistencies and the Law Commission included guidelines as to what may constitute property under this Bill to assist decision makers.”

“As more “things” become property at a legal level, we may see the implementation of further laws, or even Judge’s decisions, which sweep up any unanswered issues. Overall, this Bill is a huge win for those dealing in digital assets, providing much needed clarity in an economy already utilising this technology at large.”

Effects of the budget changes on owner managed businesses

Posted on: November 5th, 2024 by Hugh Dineen-Lees

Rachel Reeves finally delivered the first budget of the new Labour Government on 30 October 2024. Following intense speculation beforehand (including our own!), industry commentators in the aftermath of the announcements were suggesting that the budget was not as dramatic as they had expected. Perhaps this was more down to the carefully thought-through campaign leading up to the announcements and an excellent presentation of the changes on the day.

Most commentators have, however, pointed out that these changes will mean that businesses and entrepreneurs will be paying more tax, in some cases as soon as today. Now that the dust has settled and further analysis has taken place, we can take a look at the key changes introduced and their implications for owner-managed businesses.

Capital Gains Tax (CGT)

Business owners considering selling their company will be very interested in any changes to CGT. These were keenly anticipated, and it was confirmed that these and the tax on carried interest will rise from April 2025.

With immediate effect, the rates of CGT increased from the current 10% (for basic rate taxpayers) and 20% (for higher and additional rate taxpayers) to 18% and 24% respectively. There are special provisions for contracts entered into before 30 October 2024 but completed after that date. Anti-forestalling rules were also introduced with immediate effect which can, in certain circumstances, apply to unconditional contracts entered into before 30 October 2024 which were not completed by then. The rates for selling second properties remain at 18% and 24% respectively.

The CGT rate for Business Asset Disposal Relief (BADR), which can apply to lifetime gains of £1m on certain disposals by employees and directors in their unlisted businesses, will continue. However, the tax rate will increase from the current 10% to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026. It has been calculated that this will mean an increased bill of up to £80,000 for those planning to sell their businesses after April 2026.

Investors’ Relief (IR) provides for a lower rate of CGT to be paid on the disposal of ordinary shares in an unlisted trading company where certain criteria are met, previously subject to a lifetime limit of £10m of qualifying gains for an individual.

It is aimed at encouraging entrepreneurial investors to inject new capital investment into unquoted trading companies.

The CGT rate for IR, which applies in similar circumstances to BADR but where the investor is unconnected with the business, will increase in parallel with the BADR rates. Furthermore, the lifetime limit for this relief will also reduce from £10m to £1m for disposals made on or after 30 October 2024, significantly limiting its financial benefit going forward.

Carried interest changes

Carried interest refers to the performance-related rewards received by fund managers, primarily in the private equity industry. Previously, carried interest was taxed at lower capital gains tax rates, compared with income tax rates. The Budget changes included an increase in the CGT rate for all carried interest gains to a new flat rate of 32%, applying to carried interest arising on or after 6 April 2025. This is a temporary measure ahead of wider reforms that will apply from the following tax year. From 6 April 2026 a specific tax regime for carried interest will be introduced, moving it from the CGT framework to income tax. All carried interest will then be treated as trading profits and subject to Income Tax and National Insurance Contributions (NICs). However, the amount of ‘qualifying’ carried interest subject to tax will be adjusted by applying a multiplier resulting in an effective tax rate at 34.1% including NICs. Some might see this change as somewhat cosmetic, but it seeks to deal with some of the negative perceptions about carried interest representing remuneration rather than true capital gains.

These are all significant changes but, according to an analysis by Grant Thornton, this “still presents an attractive environment for management incentives and investors and is unlikely to discourage ongoing deal activity”. They “therefore expect the impact on M&A to be less severe than anticipated with the announcements ensuring the UK remains an attractive and internationally competitive environment for investors”.

Changes to Inheritance Tax (IHT)

While the CGT announcements were not as drastic as some had been speculating, the IHT reforms present a substantial shift in the tax landscape, especially for entrepreneurs and business owners. The changes introduced in the budget have particularly alarmed farmers and small business owners as from 6 April 2026, a 20% tax rate – half the headline inheritance tax rate of 40% – will be applied to the value of farms and businesses worth more than £1m when they are passed on.

The existing 100% business property relief and agricultural property relief will continue only for the first £1m of combined agricultural and business property after 6 April 2026. The rate of relief will be 50% thereafter, effectively making this a 20% IHT charge.

This presents a risk for family business owners as well as their companies, which will no doubt have to play a major part in funding any IHT that is due.

Changes to National Insurance contributions

From April 2025, employers’ NICs will increase from 13.8% to 15%. The threshold at which employer NICs become payable will fall from £9,100 to £5,000. To help mitigate these additional NICs costs for smaller employers, the employment allowance (which allows businesses whose annual NICs bill is less than £100,000 to reduce their NICs costs) will increase from £5,000 to £10,500 per year, and will apply to all businesses as the £100,000 threshold will be removed.

These changes present a challenging scene for our retailer and hospitality clients. The changes in NICs will be accompanied by increases to the National Minimum Wage and National Living Wage rates. This rising cost base will be particularly felt by people heavy businesses, perhaps making life on the high street even harder.