Welcome to the Summer Employment Law Update. In our employment and HR updates, Tom Evans outlines recent cases, updates to the law and other Employment and HR news. If you want to ensure you don’t miss the latest in Employment and HR, you can subscribe to our Employment Law Update Newsletter.
Employment Rights Act
The next set of changes under the Employment Rights Act are expected to come into force in October 2026. Employers should be aware of and start to prepare for the October reforms which are as follows:
Third-party harassment
Employers will become liable for harassment of their workers by third parties (clients, customers, suppliers) if they fail to take all reasonable steps to prevent it.
- Employers should consider where risks arise in their business and whether additional protective procedures are required.
Sexual harassment
There will be a strengthened duty on employers to prevent sexual harassment. A requirement introduced in October 2024 to take reasonable steps will be replaced with a higher standard of taking all reasonable steps.
- Employers should review risk assessments and ensure there are clear policies and plans in place.
- Employers should also ensure that there is effective training for staff in place, and there are robust systems for reporting and handling complaints.
Tips & gratuities
Employers can no longer unilaterally create or amend a tipping policy. Before creating or updating a written policy, an employer must consult with a recognised trade union, elected worker representatives, or directly with workers if no representatives exist.
In addition, every written tipping policy must be formally reviewed at least once every three years, and each review requires a new, transparent worker consultation process.
Employers must provide workers with an anonymised summary of the feedback gathered during the consultation process.
Employers should be aware that the new Fair Work Agency will enforce these rules.
- Employers should begin reviewing current policies to prepare for the required 3-year review cycle. The written policy must clearly set out how tips are allocated, how they are paid, and the results of the recent consultation.
- Employers should consider how to conduct consultations, particularly if there are no formal unions or elected representatives in place.
- Ensure systems are in place for maintaining detailed records of tip distribution for at least three years, as employees have a legal right to request to see these
Trade union information
Written statements of employment particulars must now include information advising workers of their right to join a trade union. The statement must be given at the same time as providing the worker’s section 1 statement and at other prescribed times (which will be set out in secondary legislation). Failure to provide a statement is addressed in the way that failure to provide a section 1 statement is addressed.
- Employers should ensure that have a written statement in place ahead of the reforms.
** Unfair dismissal
Whilst the new rules relating to unfair dismissal (i.e. the qualifying period for unfair dismissal will be reduced from 2 years to 6 months) does not take effect until 1 January 2027, employers should consider the potential impacts and start to prepare for this change now.
Currently, employers have two years to decide if an employee is the right fit before they gain protection against unfair dismissal, however from 1 January 2027 that window will shrink to 6 months. Employers should be aware that any employee who has completed six months service by 1 January i.e. who starts on or after 1 July 2026, will immediately gain protection from ordinary unfair dismissal from 1 January onwards.
- Employers should consider whether shorter probation periods are more appropriate. For example, a 3-month period with the option to extend.
- Employers should tighten probationary processes and ensure that probationary review meetings are held in good time.
Case law update
Donna Vale v The Chief Constable of Avon and Somerset Constabulary
Facts:
- The Claimant was employed as a victim and witness care officer on a fixed term contract between September 2023 and May 2024.
- The Claimant had received an ADHD diagnosis via a private assessment with ADHD360 and disclosed this diagnosis during the onboarding process.
- The Claimant requested noise cancelling headphones as part of workplace adjustments. The Claimant’s manager was notified of the request but failed to refer the matter to either HR or occupational health and the headphones were never issued (despite a further request).
- The Claimant suffered a medical episode on 8 November 2023 where she described feeling “out of it” and disclosed to a colleague that her ADHD medication was not prescribed via a GP but was managed by ADHD360. When the Claimant returned to work, she mentioned to a colleague that she was having doubts about her diagnosis as ADHD360 had been scrutinised by a BBC Panorama investigation (in which an undercover journalist was diagnosed with ADHD despite being told by his GP that he did not have the condition). The Claimant’s GP had not thought she had ADHD which led to her seeking a private assessment.
- The Claimant’s line manager began to repeatedly question the legitimacy of ADHD360 and the Claimant’s diagnosis.
- The Claimant commenced sickness absence in early December 2023 and formally raised a grievance on 18 December. Her fixed-term contract was not renewed and her employment ended on 10 May 2024.
- The Claimant brought claims for unfair dismissal, failure to make reasonable adjustments, unlawful discrimination amounting to harassment and discrimination arising from a disability.
Outcome:
- The tribunal upheld claims of unlawful harassment and failure to make reasonable adjustments but dismissed other discrimination complaints.
- The claimant’s unfair dismissal complaint was dismissed for lack of the required two years’ service.
- The tribunal found that the Claimant’s manager did question the validity of the Claimant’s diagnosis and found the effect of the conduct in doing so and insinuating the Claimant had been exploited and that the medication might be unapproved and unsafe amounted to unlawful harassment.
- Employment Judge Beever ruled that the failure to provide the Claimant with noise cancelling headphones amounted to a failure to make a reasonable adjustment, even though the Claimant owned her own headphones at home, the employer’s duty to make reasonable adjustments remained.
- In terms of discrimination arising from disability, the tribunal found that the Claimant was not treated unfavourably and the claimant’s dismissal was not because of the claimant’s absence and it was not therefore because of something arising from disability.
- A remedy hearing will be held on 30 June 2026 to decide on compensation.
Key Takeaways:
- This case shows that employers cannot rely on employees providing their own solutions. Despite the fact that the Claimant had her own headphones which she could have used, the duty to make reasonable adjustments still existed and responsibility rests with the employer.
McMahon v AXA ICAS Ltd
Facts:
- The Claimant began working for the Respondent in 2000.
- In September 2013 she was dismissed because a long-term illness was preventing her from working.
- The Claimant had a contractual entitlement to permanent health insurance which provided that if she remained unable to work after 26 weeks of absence caused by illness or injury, she would be paid 75% of her normal earnings less state benefit, increasing by 5% each year until she recovered or reached 65 years old. The benefits were supposed to be secured by a policy with an insurance company effected by and paid for by AXA. However, it later emerged that AXA had failed to secure the insurance policy due to an administrative error, meaning that it would become liable for the PHI benefit under the terms of the Claimant’s contract.
- The Claimant brought a claim for unauthorised deductions from wages in respect of unpaid PHI benefits prior to dismissal and later sought to extend that claim to cover the post-dismissal period.
Outcome:
- The Employment Tribunal allowed the pre-dismissal claim but refused the amendment relating to post-dismissal losses. It considered that any entitlement after dismissal amounted to damages for breach of contract rather than “wages”. The EAT upheld that approach.
- The Claimant appealed to the Inner House of the Court of Session who has now allowed the appeal. The court held that:
- The obligation to provide PHI benefits was collateral to the core employment relationship. Unlike ordinary wages, entitlement to PHI does not require the employee to provide services. The contractual obligation can therefore continue even after termination of employment, provided the conditions for entitlement remain satisfied.
- Even if that analysis were wrong, the dismissal itself could not defeat the entitlement. Where a contract contains an implied term preventing dismissal for the purpose of avoiding PHI liability, a dismissal in breach of that term has no effect on the employee’s entitlement.
- On either basis, the court concluded that PHI payments could fall within the extended definition of “wages” under section 27 of the Employment Rights Act 1996.
- The case was remitted to the Tribunal, with a direction that the amendment be allowed.
Key takeaways:
- This case is a clear warning that PHI obligations do not necessarily end when employment ends and serves as a reminder that dismissal for ill health when there is a contractual PHI scheme risks high value claim of unlawful deduction from wages.
- This decision also highlights potential risk exposure where PHI arrangements are not properly managed. Employers should ensure that insurance cover is actually in place and aligns with the contractual wording.
For further advice on recent Employment Law Changes, please contact the employment team at employment@dtmlegal.com or call 01244 354 800 / 0151 321 0000
