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Employment law continues to evolve and impact on in-house legal teams, particularly during these eventful times. From the impact made by 2020’s Black Lives Matter protests to the ramifications of Brexit, Polly Botsford explores key developments.

In keeping with the unprecedented, world-changing events of 2020, businesses in 2021 may be confronted by completely new employment-related problems. For example, they may have to decide what to do if faced with an ‘anti-vaxxer’ employee and whether their stance is sufficient to be considered a philosophical belief. Or they may have to budget for the costs and time involved in hiring EU nationals as freedom of movement comes to an end.

Organisations are facing a range of novel ‘people’ issues, alongside some more familiar ones that are being addressed with new vigour, such as diversity and inclusion, remote working or, in the UK, the anti-avoidance tax legislation IR35. These issues will be relevant to in-house legal teams themselves and will be the subject of much thought – and debate – across organisations.

One year on from #BLM

The anniversary of the death of George Floyd – a Black resident of Minneapolis who died during his arrest by police – will fall on 25 May 2021. The incident led to mass protests in the days and weeks afterwards, catapulting the diversity conversation to the forefront of many minds.

The Black Lives Matter (BLM) movement – under the banner of which many of the protests were organised – has given renewed impetus to programmes and initiatives that previously appeared to be flagging.

For instance, in the UK, the Parker Review investigated ethnic diversity in boardrooms back in 2017.

But it was the BLM movement that led the UK’s largest fund manager, Legal & General Investment Management (LGIM), to announce it would be voting against the re-election of chairpersons in businesses that fail to diversify their senior leadership team by January 2022. At the time of the announcement, around 37 per cent of FTSE-100 companies had all-white boards.

The UK government has now been tasked with making significant changes across crime and policing, education and health in response to the BLM movement. It set up a Commission for Race and Ethnic Disparities, whose first report was due in February 2021.

Leading general counsel (GCs) have been vocal about wanting change from the law firms that advise them and have been prepared to use their buying power to effect that change. In the US in 2019, an open letter was sent by 170 GCs from the likes of Cable & Wireless and Heineken, warning that law firms needed to improve on diversity or they would miss out on panel opportunities. UK counsel followed suit.

There is, however, only cautious optimism from those who are working in this space. Nwabueze Nwokolo is a director of the Black Solicitors Network and a member of the Law Society of England and Wales’ Ethnic Minority Lawyers Division. ‘Some have used the BLM [movement] to rebrand themselves as progressive and active participants of inclusion and it’s not much more than tokenism or window-dressing,’ she says. ‘The profession is on the right track but is not going far or fast enough.’

‘There have hardly been any changes at its highest echelons,’ she adds. ‘Ultimately, inclusion is right but it is also profitable, that is the message we need to get across.’

Denise Nurse is an entrepreneur in legal services, a former in-house counsel at BSkyB, and now co-creator of the Black Founders Hub, a not-for-profit organisation supporting Black entrepreneurs in professional services in growing their businesses. She has similar reservations and tells In-House Perspective that ‘it will be interesting to see how many people stay part of the BLM conversation, and whether, following all the pledges and promises, we see real change.’

Pay and ethnicity

Perhaps one positive step will be the introduction of ethnicity pay reporting. This will require large organisations to publish data on the pay levels of staff in different ethnic groups, as they have for male and female staff. Former UK Prime Minister Theresa May launched a consultation on the topic, which closed in early 2019.

After a document was leaked, more recent media reports have revealed that around three-quarters of respondents to the consultation supported ethnicity pay reporting.

Iain Larkins is former Group General Counsel with Mercedes-Benz UK and now runs his own law practice, Radius Law. ‘In-house legal will welcome initiatives on diversity, particularly if they could have a bit more teeth to them,’ he says. ‘Gender pay gap reporting has been very useful and has done a lot to expose inequalities. It would be good to match that with ethnicity pay reporting.’

There have been challenges in designing an ethnicity pay gap system. There is no consensus yet, for instance, on whether or not any pay comparisons would be between all white and all Black, Minority and Ethnic employees grouped together, or whether there should be a comparison against each ethnic group separately.

Some larger organisations already voluntarily collect pay data by ethnicity, and even publish it. In a recent paper from PriceWaterhouseCoopers on voluntary pay reporting, it stated that some of the hesitancy from businesses was not a lack of will but more that they didn’t have the necessary data. ‘Most of those not collecting data put this down to GDPR [EU General Data Protection Regulation] restrictions while others expressed concerns around low response rates, HR systems capabilities or unease about how to ask questions around race and ethnicity’, read the report.

These problems may well be overcome if it was mandatory. But at the time of writing, there has yet to be a concrete proposal.

The taxing problem of IR35

Diversity and inclusion are at least positive goals for a workplace to strive towards. In the UK, ensuring compliance with the extension of the IR35 rules to the private sector, meanwhile, may cause confusion among businesses. As in-house teams in the UK will likely know, these rules, which come into effect in April 2021, transfer the tax risk of engaging with contractors through personal service companies from the contractor to the client that engages them.

IR35 could be a challenge not only for legal teams themselves and how they buy in additional staffing resource, but may present a headache for the business as a whole: the contractor model has been ubiquitous in hiring in talent to run IT projects and a host of other business tasks.

‘IR35 will have a huge impact on outsourcing arrangements and how project work is managed across the business,’ says Larkins. Organisations are responding in different ways such as by employing former contractors directly, or using third party umbrella companies.

Larkins suggests in-house legal teams ‘may start to look at getting additional legal services resource in a different way – through new law firm model practices where the client business can buy in services on a fixed price retainer basis and they can feel confident that it is “IR35 safe”’.

Whatever the solution, organisations must have a solid paper trail for any contractor post-April 2021, advises Sarah Jane Brostoff, a partner at Temple Bright. ‘What businesses need to be aware of is that you are going to have to be able to produce the HMRC [HM Revenues & Customs] “status determination statement” for each contractor, blanket responses are not sufficient.’

These statements, she says, have to be created with ‘reasonable care’ so it’s really important that businesses have some sort of evidence. Brostoff is advising clients to have a detailed questionnaire that sits behind that statement and supports its conclusions.

Interestingly, if IR35 has created a need to resource legal teams in different ways, this desire for change has also come out of the pandemic and the shift to remote working. Sophie Gould is Head of Learning and Development at Flex Legal, the online legal resourcing platform that places paralegals and lawyers within in-house teams and law firms, and a former Head of Legal at Virgin Radio. She says the past year has spurred teams to think smarter.

Gould provides an example. ‘A business was having to do a significant data protection project. There were the standard options of either outsourcing to a law firm, but this was ruled out as too expensive, or hiring in someone senior on temporary contract to run a sort of audit.’

‘They did neither of these standard options and decided to find a fantastic senior data protection lawyer to build a playbook for the organisation, but then train up a junior lawyer on that playbook and let the junior run with it going forward,’ she continues. ‘The pandemic has given teams the motivation and courage to try different things.’

Keeping the remote-working boat afloat

As Gould identifies and many have experienced first-hand, with the pandemic has come remote working. What was once a much sought-after hallmark of work/life balance has become the norm for many professionals, and many positives flow from that.

But there are some downsides that need careful managing. ‘There have been genuine anxieties from junior lawyers about what they are missing out on during this time of remote working,’ says Gould. ‘If you think about life as it was for an in-house junior, they would, for instance, be invited to a meeting with the sales director and their GC. On the way to that meeting or whilst waiting for others to arrive, they would have had a few moments with the GC to debrief and discuss the meeting, the characters involved, the issues. That has gone.’

Peter Talibart, Council Member of the IBA Global Employment Institute and a partner at Seyfarth Shaw agrees. ‘Learning how to be a good solicitor in a pandemic requires different strategies for both the lawyer and the firm,’ he says. ‘A newly-qualified solicitor learns a lot simply by osmosis. In normal times, they are able to listen to more senior lawyers in the same room, watch how they interact with clients, peers, the support functions and partners, prepare legal advice, present ideas and discuss issues with colleagues. They mentally file it away.’

It’s a ‘passive education you get from proximity,’ he says. ‘I certainly borrowed stylistic elements of more senior lawyers that I respected and admired, and tried to reflect what I thought the best practices were, in my own approach to this job.’

Senior lawyers are trying to do something about this, says Gould. ‘We are encouraging senior team members to recreate those few moments that are lost. So, before a meeting, they can invite the junior onto a call and then go through some of those points.’

Talibart believes it’s a good idea to have as many internal calls as possible that are visual. ‘That helps with the interaction and possibly with any sense of isolation,’ he says. ‘It is hard enough to master this profession at the best of times, and these are not those.’

From the end of furlough to the end of EU laws?

More change is waiting in the wings. Whilst organisations may be planning for a return to the office, in some jurisdictions they will also be expecting the return of staff when job retention schemes end – if these schemes have not already expired. Integrating people and teams back will be a challenge in itself.

As 2021 progresses, the UK may also see the beginning of a process of adaptation in EU-derived labour laws. Earlier in 2021, there were a number of media reports that the UK government would reduce employment protections, particularly those in the Working Time Directive (such as the 48-hour working week) in the wake of Brexit.

Following speculation, the Business Secretary, Kwasi Kwarteng, first confirmed that his department was, in fact, ‘reviewing’ employment laws, only to cancel the review a week later.

Perhaps this change of tack is because Kwarteng took some legal advice: the Brexit Trade Agreement between the EU and the UK sets out pledges to uphold labour and social standards already in place.

Any changes that the UK decides to make subsequently will be subject to what is known as ‘non-regression’. The UK cannot diverge from those standards if to do so would significantly reduce the level playing field for trade and investment between the UK and the EU. The UK government’s room for manoeuvre appears limited.

Our working lives are definitely having ‘a moment’ right now – new employment laws and practices for in-house teams and organisations are part and parcel of this upheaval.

 

The ‘O Shaped Lawyer’ Alongside technical changes in HR law such as IR35 or EU law, exciting developments are also taking place in the in-house space. There’s the O Shaped Lawyer initiative, set up to fundamentally rethink the profile of lawyers with the strapline, ‘People first, then lawyers’. Dan Kayne, Founder of O Shaped Lawyer and General Counsel for Regions at Network Rail, explains ‘when I was recruiting for an in-house position, I was frustrated that we met very few with the suitable skills. This was not technical, legal skills, it was a lack of understanding of what a business needs from its in-house counsel.’ ‘It is common for GCs to take lawyers directly from private practice and they almost have to “unlearn” a lot, and leave behind the letter-of-the-law approach,’ he adds. ‘We need lawyers that the business can call up and say: “I’m thinking of doing this, do you agree about my approach?” The response is not a detailed explanation of what the law is whilst highlighting a whole bunch of risks, the response is: “Weighing up all the risks and benefits, I agree or disagree with your approach”. You have to use your judgement and come off the fence.’ Kayne says that the profession doesn’t currently educate lawyers to think this way, something the O Shaped Lawyer programme is looking to change. The initiative, which is publicly endorsed by the legal teams of major businesses such as Easyjet and Centrica, has run programmes for legal practice and with legal education providers aimed at developing lawyers towards taking greater responsibility for their advice, and being more original in their thinking. The programme is being piloted across seven different groups, including at Network Rail. ‘The pilots are already showing that there is an alternative approach for law firms and their clients to work together in a more open and joined-up way to create value for the business users,’ says Kayne.

 

Vaccinations and the workplace As breakthrough moments came with the development of multiple vaccines to combat Covid-19, and jurisdictions began rolling out vaccinations, employment lawyers began to consider the implications for employers. First and foremost, the vaccines raise the question of whether or not you can require staff to be vaccinated before they can return to work. A recent survey of 750 executives in the UK and Ireland found that a quarter of employers intend to do just that. There are certain categories of individuals who can’t have the vaccine, namely pregnant women in their first trimester, or those with certain medical conditions. But what about everyone else, and what if someone refuses? An employer’s response will depend on whether or not the vaccine was needed for the job, but also on the individual staff member’s reasons for refusal.  In the UK, someone who is an ‘anti-vaxxer’, and against having the vaccine on principle, could be protected under the Equality Act which stipulates that you cannot treat someone less favourably on the grounds of their beliefs. Would an anti-vaxxer be treated as having a ‘belief’? It depends, says Sarah Jane Brostoff, employment partner at Temple Bright. ‘The employer would need to understand what the employee’s reasons were for being anti-vaccinations. Some beliefs, such as being opposed to animal testing, might amount to a belief that would get protection.’ She notes that anti-vaxxers may have reasons that are based on conspiracy theories and disinformation. In this scenario, case law would suggest that such views would not amount to a belief protected under the law.