Legal update November 2019

This update explains the major legal changes in November that could affect your business.

Data Protection: New ‘Special Category Data’ guidance from the Information Commissioners Office (ICO)

This month guidance has been provided on special category data to data protection officers by the ICO. The guidance looks at: what special category is, the rules on special category data, the conditions for processing and the substantial public interest conditions.

There is a general prohibition on processing special category data aside from the ten exceptions which are re-stated in this guidance. The usual rules apply when processing special category data, but additional conditions are required when processing special category data. If explicit consent for the processing cannot be obtained a processor should be clear on why special category data is required as the specific processing purpose is highly relevant. If the only relevant condition is substantial public interest, then a processor should consider the 23 substantial public interest conditions in the DPA 2018. Five of the conditions require a basis in Member State law, so the safeguards stated in Schedule 1 of the Data Protection Act 2018 (DPA 2018) must be met before this data can be processed in the UK.

As the ICO indicates, ‘there is more to do when processing special category data’ and ‘it is worth taking the time to get it right’ and so it is worth taking the time to consider whether data is special category data, whether it is required and if so how it can be lawfully processed, if at all, if there is no explicit consent.

IT: UK Jurisdiction Taskforce statement on cryptoassets and smart contracts

A statement on the legal status of cryptoassets and smart contracts has been made by the UK Jurisdiction Taskforce in the hope of providing more clarity and building confidence in this area. The statement defines cryptoassets as ‘property’. This is particularly important in areas of law like estate planning, bankruptcy and corporate insolvency (particularly the rights of liquidators in corporate insolvency). However, as cryptoassets are not physical but virtual, they cannot be possessed so cannot be goods under the Sale of Goods Act 1979, cannot be the object of a bailment as possession cannot be transferred and certain securities such as pledges and liens require transfer of possession of an asset so these cannot be granted over cryptoassets.

In respect of smart contracts, these do meet the requirements of English contract law formation principles and so can be enforced by the courts as more traditional contracts are. The statement made the point that where a statutory signature is required, private key encryption could fulfil that role. This, as well as the rest of the statement, is yet to be tested in the courts and so we will have to see what future legislation and case law says on this subject.

Employment: Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) can apply to workers

An Employment Tribunal has this month held for the first time that ‘workers’ as defined under the Employment Rights Act 1996 (known as ‘limb (b) workers’) can qualify for protection under TUPE. Whilst it is widely accepted that employees are protected on the transfer of an undertaking, it has now been ruled that the width of the definition of those protected should include any individual working under a contract of service or apprenticeship ‘or otherwise’ and so should also include workers.

Under the Acquired Rights Directive 2001 (ARD), an employee with protection under TUPE is ‘any person who, in the Member State concerned, is protected as an employee under national law. In the UK, the term ‘employee’ can describe both traditional employees and other individuals who benefit from some employment rights. For example, the Equality Act 2010 (EqA 2010) included within the ‘employee’ definition anyone working under a ‘contract personally to do work’. The tribunal therefore held that ‘employment relationship’ under the ARD must be read as including individuals that are workers and not employees in the narrowest definition of the word.

If ‘employment relationship’ did not include workers, the ARD would not transfer liability for discrimination against a worker from an insolvent transferor to a transferee and so it would water down protection against discrimination for those individuals if TUPE did not protect them in the same way as it does employees. Therefore, if an individual qualifies as an ‘employee’ under the EqA 2010, then it must follow that they are ‘protected as an employee under national law’ under the ARD.

It would be advisable for employers to wait until after any appeal of this case before taking action to change their policies relating to TUPE, but if your are in any doubt or have any questions about TUPE, please do speak to one of our specialist employment solicitor.

Employment: Updates to holiday pay and calculation

The ECJ has confirmed the position in respect of carry-over of employee holiday pay where an employee is on sickness leave. Employers can limit the amount of holiday which can be carried over to a new holiday year whilst an employee is on sickness absence, to the four-week entitlement under the Working Time Directive, additional contractual leave over that amount does not need to be carried over.

Also, this month, the government has released a new holiday entitlement calculator, which calculates holiday entitlement in terms of the number of weeks, as a proportion of the 5.6 weeks’ annual entitlement. There are also two new guidance documents which seek to further explain the calculation of holiday (just holiday days, not the calculation of holiday pay) and states that for those workers who do not have a regular working pattern, holiday entitlement should generally be kept in weeks. Employers may choose to calculate average days or hours over a representative reference period to make calculation of holiday easier. 

Employment: Breach of freedom of expression under the European Convention on Human Rights (ECHR) for dismissal after employee wrote blogs for another website

The European Court of Justice (ECJ) has held this month that Article 10 (Freedom of expression) of the ECHR was breached when an Human Resources (HR) manager, was dismissed after the employee’s employer, a bank, became aware of two blog posts he had written on HR strategy and tax rates. The website mentioned that the employee was an expert in HR management who worked at a large bank but did not give the bank’s name. The bank claimed that the employee had damaged the bank’s economic interests and breached its confidentiality. The Hungarian Supreme Court agreed with the bank and upheld the dismissal but the ECJ considered that Article 10 was relevant as the published comments were addressed to HR professionals, not the general public, there was no malicious motive behind the publication (the motive was simply to share knowledge with a professional readership). Also, it had to be considered that the bank did not demonstrate how the speech could have adversely affected its interests. The ECJ considered proportionality, the bank dismissed the employee, the ultimate employment sanction, it did not give the employee a warning. When considering all of this, the ECJ found that the national courts did not correctly balance the employee’s right to freedom of expression and the employer's rights to protect its legitimate business interests and so there had been a violation of Article 10 of the ECHR.

General election 2019

With the General election set for 12 December 2019, Brexit has now been placed firmly on the backburner. The main political parties have published their manifestos, which seek to describe how they might deal with commercial law, employment law and IT and IP law, amongst other matters. 

In terms of employment, all the main parties have set out their plans for employment and immigration law and the Labour party has also published a race and faith manifesto, looking at discrimination in the workplace and how to best deal with this.

From a commercial perspective the Conservatives promise to ensure that the UK leaves the EU by the end of January 2020 so that the government can concentrate on domestic issues. ‘No deal’ has not been ruled out, at time of writing. The Conservatives are confident they will be able to conclude a trade deal with the EU during 2020 after the UK leaves the single market and customs union. The Conservatives aim to have 80% of UK trade covered by free trade agreements within the next three years, starting with the USA, Australia, New Zealand and Japan. Export finance would be used to develop trade with emerging markets and open up trade in services.

The Conservatives emphasise the need for a balance between supporting business but also protecting employees and so will look at this balance carefully when considering regulation. The powers of the Competition and Markets Authority would be increased to ‘tackle consumer rip-offs and bad business practices’. The Conservatives state that they will ‘clamp down on late payment partly by strengthening the powers of the Small Business Commissioner. The Conservatives would review the Gambling Act 2005, with a particular focus on "loot boxes" and credit card misuse.

The Labour Party mainly focuses on investment in the public sector and reducing societal inequality in its manifesto. In respect of Brexit, the Labour Party opposes a ‘no deal’ Brexit and proposes to negotiate a new deal with the EU within three months of coming to power and, within six months, to put that deal to a public vote against an option to remain in the EU. Under a Labour government companies bidding for public contracts would be required to recognise trade unions, pay suppliers on time and comply with best practice on equality. Labour would introduce a new Gambling Act focussing on online gambling and would restrict gambling advertising in sports.

As has been well publicised, the Liberal Democrats’ focus for this general election is to revoke Article 50 and to stop Brexit and use ‘the Remain Bonus’ (the amount not being paid to the EU as part of the ‘divorce’ payment) to invest in the public sector, the poverty trap and inequality. This means that in terms of trade, the Liberal Democrats propose that as is currently the case we remain full members of the EU and part of the single market and customs union.

In relation to the digital economy the Liberal Democrat focus is on ethical use and to that end they would introduce a Lovelace Code of Ethics so that personal data and AI is unbiased, transparent, accurate and respects privacy. To implement this, products would be required to provide a short, clear version of their terms and conditions, stating key facts on individuals' data and privacy. The Centre for Data Ethics and Innovation would be given powers to ‘call in’ any products in breach of that code. To recognise those companies that meet the highest ethical standards in their use of AI and other technologies, there will receive a kitemark. Under the Liberal Democrats all companies with more than 250 employees would be required to sign up to the Prompt Payment Code, ensuring it is enforceable, and that companies at the top of the supply chain cannot abuse its position to shore up its own cashflow, harming smaller suppliers. Companies would also have further obligations to report on their activities in respect of child labour, modern slavery, or products resulting from deforestation. Discrimination by private hire vehicles and taxis would be prohibited and caste discrimination would become a focus under a Liberal Democrat government. The Liberal Democrats, like Labour would introduce restrictions on the marketing of junk food to children and High Fat Salt and Sugar products. Finally, the Liberal Democrats policy on gambling is to ban credit cards for gambling, restrict gambling advertising and to appoint a Gambling Ombudsman to better regulate the sector.

In terms of IP and IT the political parties discuss support for ‘online harms’, regulatory regime, improvements to the speed and reach of broadband. Labour central digital economy policy is the promise of full-fibre free broadband for all by 2030 and partial nationalisation of BT, a tax on large technology companies, and split media ownership. Labour would also introduce a legal duty of care to protect children online and introduce a Charter of Digital Rights as well as considering the role of the National Cyber Security Centre (NCSC) to see whether it should be given auditing powers.

*Please note that this update does not constitute formal legal advice and should not be relied upon as such. Always ask a solicitor if you are unsure of how the law relates to your business*