BRIEFING
August 2025
MARC JONES 1 EDITORIAL Marjon Law
CASPAR GLYN KC 2 ELA NEWS Cloisters
NATASHA ADOM 4 IN BRIEF Littler
CHARLES WYNN-EVANS 6 STRIKE-OUTS AND UNLESS ORDERS
FELIX LEVAY 8 TRADE UNION ACCESS TO THE DIGITAL WORKPLACE St Philips Chambers
KERRY GARCIA 11 YET MORE IMMIGRATION CHANGES: WHAT YOU AND Stevens & Bolton LLP YOUR CLIENTS NEED TO KNOW
PETER FROST and JOSH PETERS 14 KRISTIE HIGGS v FARMOR’S SCHOOL: WELCOME Herbert Smith Freehills Kramer LLP CLARITY FROM THE COURT OF APPEAL
ED BELAM 18 WHERE NEXT FOR PROFESSIONAL EMPLOYER Marriott Harrison LLP ORGANISATIONS?
SHANE CRAWFORD 21 DEPOSIT ORDERS; A MORE REALISTIC AND Five Paper Chambers EFFECTIVE APPLICATION?
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Editor MARC JONES Marjon Law marc@marjonlaw.co.uk
Editorial committee
NATASHA ADOM Littler
KATHLEEN BADA Charles Russell Speechlys LLP
CLARE FLETCHER Slaughter and May
JO-ANNE GRAHAM / NICOLA TAYLOR Government Legal Department
CLIVE HOWARD Keystone Law
DOUGLAS LEACH Guildhall Chambers
RICHARD LINSKELL Gunnercooke LLP
CRAIG LUDLOW 3PB
LOUISE MASON Linklaters LLP
SARA MEYER DAC Beachcroft
NIKITA SONECHA Browne Jacobson
Advertising CYNTHIA CLERK Cynthiac@elaweb.org.uk
a word from the editor
The Employment Law Rights Bill is in the House of Lords: it went through the report stage on 24 July and will have its third reading on 3 September. Three amendments to the Bill caught my eye: (i) reducing the qualifying period for unfair dismissal from two years to six months, rather than the day-one right as originally proposed; (ii) regulations to strengthen the protection for whistleblowers; and (iii) expansion of employee rights to be accompanied by a certified professional at disciplinary and grievance hearings.
‘employers
will be less willing to settle claims where there will be no confidentiality for allegations of discrimination’
The introduction of a new clause 22A in the Bill will render void any provision in a contract (for example, a settlement agreement) between an employer and a worker that attempts to prevent the worker from speaking out about harassment and discrimination in the workplace. However, the Secretary of State will be able to make regulations through delegated powers to introduce exemptions (for example, if the agreement is requested by the worker). You can imagine the employment lawyers brainstorming on how this will operate in practice; where an employer would previously have had a protected conversation, where say an employee had raised a grievance for discrimination. That said, the Government appears to appreciate that clause 22A will increase costs for Acas and the Employment Tribunal Service due to an increase in claims, as employers will be less willing to settle claims where there will be no confidentiality for allegations of discrimination.
The Government has published an ‘implementation roadmap’ for the Bill, confirming the timetable of the changes and when they come into force: see https://www.gov.uk/government/publications/implementing-the-employmentrights-bill
A report by economist, Juliet Schor, for CNBC Make It has revealed surprising benefits for both businesses and employees of a four-day working week. Using research from 245 organisations and more than 8,700 employees across the world, including the US, Canada and the UK, which had primarily adopted a fourday work week with no pay cut, Schor found that employees reported a better work–life balance. The employees experienced better mental and physical health, while business profits grew. Shor commented: ‘Beyond maintaining productivity, people just feel so much better. They feel on top of their work and their life, and they’re not stressed out. They feel recovered when they come to work on Monday morning ... That productivity bump they get, of feeling so good about their work quality, that has a big positive impact on their overall well-being, which we never expected.’
This is the last ELA Briefing before the summer break. The next edition will be September/October. If you would like an article to be considered by the editorial committee, please can you send it to me by 5 September to ELABriefingEditor@ elaweb.org.uk.
I sign off this month with a quote from US author and pubic speaker, Tucker Max: ‘The devil doesn't come dressed in a red cape and pointy horns. He comes as everything you've ever wished for.’
MARC JONES, Marjon Law
ela news
The Employment Rights Bill tour dates announced
Birmingham: 3 September
Norwich: 4 September
Newcastle: 9 September
Liverpool: 10 September
Belfast: 11 September
Cardiff : 15 September
Bristol: 16 September
Edinburgh: 17 September, with the EAT and Scottish Employment Tribunal Presidents and Vice Presidents
Leeds: 16 October – SOLD OUT
Ok, ok, I realise that this is not exactly Taylor Swift, but I am so excited at the prospect of my ELA tour.
‘changes to familybased rights tend to stay – they are not repealed whatever the colour of government’
We are running a training session to introduce the major parts of the Bill and to discuss both its intended and unintended consequences and what this means for us as employment lawyers at each of the above venues, apart from Belfast, where different rules apply, literally, so we shall be more focused on devolved issues.
I shall not just be taking people through the Bill, the changes to it, the future implementation dates and how we need to prepare for it, but trying to examine the legal consequences that it may have. Then we shall move seamlessly from learning to networking, with each event followed by an ELA social so that we can deepen knowledge of our colleagues and get to share our experiences.
A lot is happening on the Bill and you may have seen that the Government has sponsored some big changes to the fire and hire provisions, as well as moving on more family-based rights – the latter are particularly interesting because while governments may flip and flop on trade union rights/obligations and qualifying periods for unfair dismissals, our experience is that changes to family-based rights tend to stay – they are not repealed whatever the colour of government. Furthermore, there are some big opposition amendments that I expect the Government to reverse. To receive the most up-to-date information, please come along to a session – I am really excited at the opportunity to meet more members throughout the UK.
This tour reinforces one of my beliefs that our ELA is emphatically not a London-only organisation. We have a fantastic roster of regional representatives who are our living, beating heart in Scotland, Wales, Northern Ireland and throughout England. They lay on regional networking as well as our sectorleading training events.
I also hope that regional employment judges and employment judges will be able to come, and thank the Presidents for their support too. Building networks with colleagues and professional links with judges is so important, as we all try and work managing busy and difficult litigation.
I understand that tickets are selling quickly, although unlike Oasis we are not using dynamic pricing … So please book, mention it to your team and to judges, and we hope to see as many of you there as possible.
Recent activities
• Training Committee: webinars included ‘Legal privilege: what is it, barriers to obtaining it and how to avoid losing it’ on 1 July.
• The regions: a Wales regional social event took place in Cardiff on 17 July.
Looking ahead
• Forthcoming Training Committee events include a half-day online Settlement Agreements course on 24 September.
• International Committee: the 9th ELA/ABA Transatlantic Conference will be held on 22 and 23 October in London.
• The regions: a Midlands region lunch is planned for 14 August. The Leeds Training Day will take place on 16 October.
ELIPS Online has been running successfully for over four years now, having received full approval from HMCTS to be a permanent scheme. It also has the support of the judiciary and has been endorsed by the President of the Employment Tribunals (England & Wales), Judge Barry Clarke.
ELIPS is extremely grateful to all of its valued volunteers who give up their time in order to help with the clinics (we couldn’t run this scheme without you!).
We are currently seeking new volunteers who would be interested in being involved with our online clinics.
If you would like to volunteer (or would like to know more about the scheme), please contact the Pro Bono Administrator (elips@elaweb.org.uk). (To be eligible, barrister volunteers must be tenants at a set of chambers, solicitor volunteers must have a minimum of two years’ PQE and hold a current practising certificate. All volunteers must be a member of ELA).
CASPAR GLYN KC, Cloisters
in brief
Government launches review of parental leave and pay
The Government has launched a review of all parental leave and pay rights, beginning with a call for evidence to consider how the current parental leave and pay system could better support families. It has also published a summary of existing evidence, including statistics on the uptake of leave and levels of parental pay. The call for evidence will close on 25 August 2025 and the wider review is expected to run until the end of 2026, with the aim of developing a roadmap for future reform. This review is in addition to existing proposals under the Employment Rights Bill, which include removing the qualifying period for paternity leave.
Latest Acas statistics published
‘there has been a significant increase in demand for Acas services’
Acas has published its latest annual report for April 2024 to March 2025. Key highlights include:
• a significant increase in demand for Acas services. It dealt with more than 117,000 individual early conciliation cases, an increase of 13,000 over the previous year and the highest number since the Covid pandemic;
• some 38% of individual conciliation cases were settled at the early conciliation stage;
• where conciliation took place after an employment tribunal application was submitted, Acas’s resolution rate was 79%; and
• Acas facilitated confidential collective conciliation talks between trade union and employers in more than 522 disputes (down from 618 last year), resolving or supporting progress towards settlement in 93% of cases.
FCA confirms final rules on non-financial misconduct and publishes SMCR review
On 2 July, the Financial Conduct Authority (FCA) published an important policy statement and consultation paper, CP25/18, addressing non-financial misconduct. Among other measures:
• the FCA will amend its code of conduct (COCON) to expressly include bullying, harassment or violence, setting out how it expects such allegations of nonfinancial misconduct to be handled. Notably the definition of harassment is broader than under the Equality Act 2020, as there is no requirement for such behaviour to relate to a protected characteristic. This means that employers may be faced with scenarios that breach COCON but do not breach employment law;
• additional guidance on fitness and propriety will clarify that conduct outside of the workplace may be relevant to fitness and propriety assessments and when this may be the case; and
• the scope of COCON will be expanded to apply to non-banking regulated firms, which will also be subject to non-financial misconduct rules. Consultation on the draft guidance is open until 10 September 2025. The FCA intends to set out its final regulatory approach before the end of 2025, with the new rules coming into force on 1 September 2026.
Separately, on 15 July, the FCA, the Prudential Regulation Authority (PRA) and HM Treasury published consultation papers with the aim of reforming the senior managers and certification regime (SMCR). These proposals aim to improve efficiency and effectiveness of the regime, streamline processes and reduce burden. The deadline for responses is 7 October 2025. The FCA and PRA are expected to publish the final policy and rules in mid-2026.
EAT grants permanent anonymity order
In AYZ v BZA [2025] EAT 91, the employment tribunal refused the appellant’s anonymity application, holding that such an order would derogate from the principle of open justice. However, the EAT overturned that decision based on new evidence not presented to the tribunal, namely that in 2023, the claimant had previously made a police complaint alleging sexual assault by the respondent. This allegation concerned events that were not the subject of the tribunal claim; the tribunal claim did not include allegations of a criminal offence and the existence of the police report had not been raised with the tribunal in the original anonymity application. Nevertheless, the EAT held that in order to comply with s.1 of the Sexual Offences (Amendment) Act 1992 (SOA), the claimant must be granted permanent anonymity. The SOA provides lifelong anonymity to complainants in sexual offences cases. Although the respondent had not been questioned arrested or charged in relation to the alleged offence, the police complaint amounted to an ‘allegation’ under the SOA. The EAT held that the anonymity provisions under the SOA do extend to a judgement in a non-criminal matter.
The EAT noted that without anonymity there was a risk that the claimant might become identifiable from the judgment or by means of ‘jigsaw identification’, where a reader of the tribunal or EAT judgment could link the appellant to the sexual assault allegation. In addition to granting the order, the EAT took several additional steps to protect the anonymity of both parties, including issuing two separate judgments with a time gap, using a random combination of initials for the parties and omitting reference to counsel names and hearing dates. The EAT noted that identifying one party could risk identifying the other.
No apparent bias in equal pay case
In Swansea City & County Council v Mrs D Abraham [2025] EAT 93 – a multiple claimant equal pay claim – the respondent appealed against the employment judge’s refusal to recuse herself from a case management hearing. It was submitted that a fair-minded and informed observer would conclude there was a real possibility of bias (Porter v Magill [2001] UKHL 67; [2002] 2 AC 357), on the basis that the judge had previously acted as a solicitor in union-backed equal pay litigation against local authorities. While this was more than 10 years earlier, the same union was involved, some claimants overlapped and the respondent was the same. However, the EAT held that the Porter threshold had not been met, noting that the judge’s recollection of any facts about the previous litigation was diminished by such a long lapse of time; the appellant had not identified any specific area or potential factual overlap which could give rise to residual knowledge influencing case management decisions and; case management is distinct from making findings of fact or issuing a judgment. Beyond the specific facts of this case, of wider application the EAT also held that:
• it is not necessary to establish perversity when challenging a refusal to recuse, the test is whether the judge was wrong in law to conclude the Porter test was not met;
• there was no error of law in the judge’s decision not to pass the recusal application to another judge; and there was nothing procedurally unfair. In line with the precautionary principle under Locabail (Locabail (UK) Ltd v Bayfield Properties Ltd [1999] APP LR 11/17), in certain situations judges may opt to recuse themselves as a matter of prudence. However, that is not part of the Porter test itself. Such a ruling does not preclude future reconsideration as a claim proceeds. The EAT emphasised the need for ‘ongoing vigilance’ acknowledging that new facts might emerge which require the Porter test to be revisited.
NATASHA ADOM, Littler
Strike-outs and unless orders
CHARLES WYNN-EVANS
The Briefing reviews a recent EAT decision addressing the strike-out of a claim for non-compliance with an employment tribunal case management order, without an unless order first having been made.
Introduction
Rule 38 of the ET Rules of Procedure 2024 enables – as did its predecessor, rule 37 of the 2013 ET Procedure Rules – an employment tribunal ‘on its own initiative or on the application of a party’ to strike out all or part of a claim, response, or reply for non-compliance with any of those rules or with an order of the tribunal. In Forrest, the EAT considered an appeal against an order striking the claimant’s claim out - on the basis of his failure to comply with an order to provide certain information - without an unless order having first been made pursuant to what is now rule 39(1) of the ET Rules of Procedure 2024.
Forrest
The claimant, a litigant in person, brought various claims set out in particulars of claim which the employment judge described (para 9) as ‘very articulate and set[ting] out a clear factual background’. At a case management hearing, the judge ordered the claimant to send to the respondent, using a framework contained in the appendix to the judge’s order, a completed list of issues on the basis that it was not possible to work out from the claimant’s particulars of claim ‘the precise allegations that the claimant wishe[d] to pursue’ (para 9). The claimant was also ordered to send an impact statement and all his GP medical notes to the respondent. The order made by the judge was not an unless order.
Strike-out
When the claimant did not comply with this order, the respondent applied to the employment tribunal for an order striking out all the claimant’s claims, seeking in the alternative unless orders requiring the claimant to take the relevant steps within two weeks.
At the ensuing case management hearing, the employment judge concluded that he would not make an unless order on the basis, in summary, that ‘this is not a case of the claimant not being able to provide the further particulars but that as a matter of principle he will not provide the particulars being requested’.
The employment judge struck out the claim on the basis that there had been a persistent and deliberate delay by the claimant (although the judge accepted that there were reasons for it), the claimant had been warned (when an extension of the original deadline had been given) that strike out was ‘likely’, and that his failure to respond led to the application. The employment judge considered that it was proportionate to strike the claim out as there was no benefit in making an unless order which would ‘simply lead to further expense and delay which runs counter to the overriding objective’ (para 27).
General principles
In Baber, Simler J, as she then was, made the points (para 11) that ‘non-compliance with tribunal rules or a tribunal order is an express ground for a strike-out decision; and can lead to striking out the whole or part of the claim or response. However, and critically, there is nothing automatic about a decision to strike out and such orders are not punitive’. Moreover, she made clear (para 12) that employment tribunals must have regard to the overriding objective of seeking to deal with cases fairly and justly which:
Strike-outs and unless orders
‘sanctions for breaches of orders are designed to secure compliance and are not punitive’
‘requires consideration of all the circumstances and, in particular, the following factors: the magnitude of the non-compliance; whether the failure was the responsibility of the party or his or her representative; the extent to which the failure causes unfairness, disruption or prejudice; whether a fair hearing is still possible; and whether striking out or some lesser remedy would be an appropriate response to the disobedience in question.’
The appeal
The EAT (per Griffiths J) concluded (para 34) that the judge should not have proceeded ‘straight from an order which had no sanctions attached to it, to striking out the [claimant’s] claims, without at least trying the effect of an unless order’. On the facts of the case, the ‘rigour and lack of patience’ demonstrated by the decision to strike out all the claimant’s claims at the preliminary hearing would not have been appropriate even in the case of a represented person let alone this claimant, who was not only a party litigant but was also under a disability recognised by the judge when allowing breaks of 15 minutes in every hour (para [39]).
A fair hearing was, in the judge’s view, certainly still possible given its early stage and the claimant’s clear pleadings. While greater refinement of legal analysis was, no doubt, desirable, to strike out the claimant’s claim would be to ‘throw the baby out with the bathwater’ (para 35). The need in the particular situation of this case ‘was to apply pressure to see if it would persuade the [claimant] to change his mind. That is exactly what an unless order would have done’ (para 41).
Moreover, the EAT held (para 36) that the judge did not ‘sufficiently engage with the Baber factors’ or consider or weigh in the balance whether it was (still) possible to have a fair trial – which Griffiths J noted ‘is always an important consideration and often the most important, even … where the impugned conduct consists of deliberate failures’.
Accordingly, the EAT upheld the appeal, concluding (para 45) that ‘the only reasonable decision on the facts of the case, would have been to make an unless order rather than proceeding immediately to strike out’. In light of the fact that, by the time of the EAT hearing, the claimant had in fact provided a list of issues – another consideration taken into account in allowing the appeal – the EAT ordered that the respondent should respond to the draft list of issues within seven days and then a further case management hearing should take place before the employment judge (sitting alone) who would be hearing (with members) the full merits hearing.
Conclusion
The appeal in Forrest was, of course, considered by reference to its particular procedural history and surrounding circumstances as well as the following specific points made by Griffiths J (para 42) about the employment tribunal orders be borne in mind. As he put it, it is hard to think of a case in which it would be right to go directly from non-compliance with a case management order to striking out for non-compliance without first trying the effect of an unless order and it is usually best to ratchet up pressure rather than immediately giving up. Sanctions for breaches of orders are designed to secure compliance and are not punitive. Forrest is also a valuable reminder of the importance of the issues of proportionality and whether a fair trial remains possible when considering strike-outs for failure to comply with employment tribunal orders.
Charles Wynn-Evans is an Honorary Research Fellow at University of Bristol Law School.
KEY:
ET Rules of Procedure 2024 Employment Tribunal Procedure Rules 2024 (SI 2024/1155) 2013 ET Procedure Rules Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013 (SI 2013/1237) Forrest Forrest v Amazon Web Services EMEA SARL UK Branch [2025] EAT 81
Baber
Baber v Royal Bank of Scotland Plc UKEAT/0301/15
Trade union access to the digital workplace
FELIX LEVAY, St Philips Chambers
Amendments to the Employment Rights Bill provide for the right of unions to access an employer’s digital as well as physical workplace. Practitioners will need to be mindful of how the scope of this potentially wide-ranging right develops.
Background
The Employment Rights Bill (ERB), currently in the House of Lords, will insert a new chapter 5ZA into the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A). This chapter fills a lacuna in industrial relations law by giving unions the right to access workplaces.
Currently, s.146(1)(b) TULR(C)A protects workers from an employer that wishes to prevent them from or punish them for taking part in trade union activities. However, not only is the right limited to existing workers, but it is purely a negative right; a claimant must be subjected to a detriment before they have a cause of action.
Clause 63 of the ERB, as amended, provides for a right for trade unions officials to request access to a workplace for ‘access purposes’. These purposes comprise meeting, supporting, representing, recruiting or organising workers, as well as facilitating collective bargaining.
If no agreement is reached, unions can apply to the Central Arbitration Committee (CAC), which will then decide (i) if the officials should have access; and (ii) what that access will consist of.
While the CAC is not bound to make any particular decision, its decisions will need to be consistent with ‘access principles’, including the principle that unions should have access to the workplace.
From physical access to digital access
As introduced, the ERB defined ‘access’ as physical access. However, in its passage through the House of Commons, there were calls to widen that scope to include digital access.
The Government’s response has been a compromise. An amendment that made explicit reference to digital communications tools was not taken forward. Rather, the current version of the Bill states that an access agreement will provide ‘for one or more officials of the union to physically enter a workplace or communicate with workers (or both) for any of the access purposes’.
The Government’s position is that this expands the scope of access agreements so that they can include provisions about communicating with workers through digital means. This comes with the unspoken corollary that they may not.
The Government plans to clarify the scope of any digital access through secondary legislation, though it has also committed to a consultation on the issue. Opposition comments in the House of Lords presage the scope of digital access becoming something of a battleground.
In debate, Lord Katz has suggested that digital access may amount to little more than a requirement that employers send an email to employees on a union’s behalf. However, Conservative peers have objected that digital access could equally feasibly encompass access to an employer’s internal communications systems, such as Microsoft Teams.
Trade union access to the digital workplace
‘it is hard to envisage any secondary legislation that puts the issue to bed once and for all’
It is hard to envisage any secondary legislation that puts the issue to bed once and for all. Given the very rapid evolution of how workers communicate and collaborate digitally, it seems likely that any definition will be the subject of litigation over the coming years.
Why does it matter?
We have come a long way since the digital workplace consisted solely of emails and an intranet page. Workplace messaging apps like Microsoft Teams and Slack are no longer the preserve of tech workers.
The functionality of these apps reflects the way people use them. Specific channels are created for specific teams. Individuals and groups can set up their own private chats. Users can tag one another and comment on each other’s posts. A conversation can lead to an exchange of direct messages far more easily than a conversation in the workplace can lead to a sustained email exchange.
If digital access to the workplace is to be equally as efficacious as physical access – that is, access that enables representatives to carry out the ‘access purposes’ – it seems unlikely that, for example, it will consist solely of an employer forwarding on emails or messages from a trade union.
At the same time, if a union representative is given access to such a platform, even if that access is limited, they acquire rather more than a means to communicate with workers; it makes them a part of that digital workplace and, depending on how that workplace is organised, gives them a potentially very granular understanding of events within it.
Perhaps most importantly, these digital workplaces are designed to accommodate asynchronous working. A comment on a post from a few days ago can lead to series of direct messages, despite the two people concerned working at different locations or at different times.
In short, if a trade union has a right to access such a platform – presumably via a representative having their own account – this represents not only an enormous boost to its ability to organise but a significant increase in its ability to monitor activity within an employer’s workplace.
Trade union detriment
Another question is whether there will be knock-on effects concerning s.146(1)(b) TULR(C)A, which protects employees from being subjected to a detriment for taking part in trade union activities at an ‘appropriate time.’ Per s.146(2), an ‘appropriate time’ is either outside working hours or a time agreed with the employer.
There is little case law on how s.146(1)(b) applies to the digital workplace. In Brown, having retained a mailing list comprising every member of staff in his division, a trade union representative refused to delete it and continued to make use of it for union purposes. The EAT upheld the employment tribunal’s decision that the representative was protected by s.146(1)(b).
Where a worker is also a union representative, they will have two sets of rights arising from those two different statuses. Will the regulations and case law concerning the extent of digital access be referred to by the employment tribunal in decisions on what conduct is and is not a legitimate trade union activity for purposes of s.146(1)(b)?
If it was established that the digital access to be afforded representatives will generally include access to the relevant messaging platform, it would seem far harder for employers to limit how a representative, as a worker, was allowed to use that platform for the purposes of trade unions activities.
It might well be that the limiting factor would instead become whether the app was being used at an appropriate time. It remains to be determined how this test applies where workers are working asynchronously. In Post Office, Lord Reid held that where a worker is on an employer’s premises but not working, on a lunch break for example, this was outside working hours. It presumably follows that, assuming no issue arises concerning the use of the app itself, the worker is free to recruit members provided they are not working.
Trade union access to the digital workplace
‘the scope of union access to the digital workplace is significant, and this issue has received less attention than it merits’
Conclusion
It seems somewhat otiose to suggest practitioners keep abreast of the ERB. Nonetheless, the scope of union access to the digital workplace is significant, and this issue has received less attention than it merits. Trade unionists, employers and employment practitioners will need to consider what they wish to accomplish in any access agreement.
KEY:
ERB Employment Rights Bill (2024-25)
TULR(C)A Trade Union and Labour Relations (Consolidation) Act 1992
CAC Central Arbitration Committee
Brown University College London v Brown UKEAT/0084/19
Post Office Post Office v Union of Post Office Workers [1974] 1 WLR 89
Yet more immigration changes: what you and your clients need to know
KERRY GARCIA, Stevens & Bolton LLP
Hot on the heels of the Government’s proposals, outlined in May in its white paper, ‘Restoring control over the immigration system’, the first raft of immigration rule changes have taken effect.
The new rules apply in respect of applications under the sponsorship routes where the certificate of sponsorship is assigned on or after 22 July 2025. The sponsorship system is already a difficult and expensive process for employers to navigate. These latest changes will only exacerbate this. Further changes are also expected within the next year. We set out below the key changes which sponsors, and their employment advisers, should be aware of and what actions businesses should take.
Skilled worker route: increase to minimum skill level
The skilled worker route is the most commonly used sponsorship route to enable employers to employ overseas nationals. To be eligible for sponsorship, the role which the sponsored individual will undertake must meet the minimum skill threshold.
Prior to 22 July 2025, all medium-skilled roles (RQF level 3 or above – broadly equivalent to A-Level) were eligible for sponsorship under the skilled worker route. However, subject to limited exceptions, the minimum skill threshold for this route has now increased from medium to highly skilled. Any individuals entering the skilled worker category for the first time, and whose certificate of sponsorship is assigned on or after 22 July, must, in most cases, be sponsored in a role that is classified as highly-skilled (RQF level 6 or above –equivalent to a graduate level occupation).
Exceptions for medium skilled roles on interim shortage occupation lists
Where the person does not already have skilled worker permission, roles which are not highly skilled and fall below RQF level 6 will only be eligible for sponsorship where the certificate of sponsorship is issued on or after 22 July if they are listed on one of the shortage occupation lists. These two lists include roles where labour shortages have been identified, as well as roles within sectors the Government sees as crucial to the UK’s industrial strategy, such as tech, clean energy and life sciences.
However, these shortage occupation lists are an interim measure. The intention is that they will be phased out by 31 December 2026 at the latest. Sponsors and those advising them should be aware that there are many unknowns at this stage – for example, it is not clear whether an individual sponsored on this basis will be able to extend their leave if, at the time their skilled worker permission expires, their role is no longer on the relevant shortage occupation list.
Importantly, these individuals will not be able to bring dependants with them to the UK, unless their dependants are eligible to come to the UK in their own right under another immigration category.
Transitional rules
Those who have skilled worker permission on the basis of the pre-22 July 2025 rules (including anyone who applies for Skilled Worker leave from 22 July onwards on the basis of a certificate of sponsorship which was assigned prior to 22 July) can continue to be sponsored for medium-skilled roles for the time being. These transitional arrangements will not be in place indefinitely and will be reviewed. We will have to wait and see what approach is adopted longer-term.
Yet more immigration changes: what you and your clients need to know ‘discounted salary thresholds apply; for example, for certain roles that require a PhD or where the sponsored worker is regarded as a new entrant’
Salary increases
Minimum salary thresholds for sponsorship have also increased, both for the general minimum salary threshold and the ‘going rates’ for each particular job code (SOC code).
The general minimum annual salary thresholds have increased as follows:
• skilled worker – from £38,700 to £41,700;
• global business mobility: senior/specialist worker – from £48,500 to £52,500; and
• graduate trainee – from £25,410 to £27,300.
In some cases, discounted salary thresholds apply; for example, for certain roles that require a PhD or where the sponsored worker is regarded as a new entrant. These discounted salary thresholds will also increase.
Importantly, a sponsor must pay the higher of the general minimum salary threshold (or the relevant discounted rate where applicable) or the relevant ‘going rate’ salary for the role being sponsored. In many cases, these going rate salaries are also increasing. For example, prior to 22 July, someone sponsored as a programmer/ software developer (SOC code 2134) had to be paid at least £49,400 per year (assuming no salary discounts applied) but from 22 July, this increased to £54,700 per year (based on a 37.5 hour working week).
Where a business sponsors existing workers it is important that they check now whether they will be able to meet the new minimum salary thresholds for the sponsored worker’s extension or indefinite leave to remain application and take advice at the earliest opportunity where it appears they will not. It is worth being aware that the rules around the applicable salaries are particularly complex and confusing as different salary thresholds apply depending on the role and the worker’s circumstances, including whether they are applying under the skilled worker route for the first time or are extending their leave.
Care workers
The new rules effectively hammer in the last nail of the coffin for sponsorship of overseas nationals in care worker and senior care worker roles by closing the route for new skilled worker entry clearance applications from 22 July. It will, however, still be possible for individuals to submit applications from within the UK for this type of role where they are switching from other routes (for example, the graduate route) and have been employed by the sponsor for at least three months before their skilled worker certificate of sponsorship is assigned. This transitional arrangement will be available until 22 July 2028 at the latest, although the Government may pull the concession earlier.
Future changes
Other changes, which were detailed in the immigration white paper are expected, but were not included in the latest changes to the rules. In particular:
• the Government intends to establish a new Labour Market Evidence Group to gather and share evidence about the state of the workforce, training levels and participation by the domestic labour market. It will make recommendations about sectors or occupations where workforce strategies are needed, or where the labour market is currently failing. Key sectors with high levels of recruitment from abroad will need to produce, or update, a workforce strategy which relevant employers will be expected to comply with, detailing steps to be taken on skills, training and broader conditions, as well as engagement of the economically inactive domestic labour force;
• there will be an increase to the immigration skills surcharge of 32%;
• controversially, the standard qualifying period for eligibility for indefinite leave to remain for skilled workers is set to increase from five to 10 years. Citizenship rules will also change to align to settlement reforms. The Government has indicated that the qualifying period may be reduced based on the individual’s contributions to the UK economy and society, but no details have been provided. It is also unclear whether the change would be applied retrospectively to those who came to the UK before the new law comes into effect. Employers should keep a close eye on developments and update their sponsored workers once information
Yet more immigration changes: what you and your clients need to know
‘employers will need to check that the prospective skilled worker and their partner speak English to the required standard before offering them the UK role’
is available. It would also be sensible to explain to any employee coming to the UK under the skilled worker route that they may have to wait 10 years before applying for settlement;
• significant changes are proposed to English language requirements. English language requirements for skilled workers will increase from B1 (intermediate) to B2 (independent user) levels and, for the first time, a new English language requirement for adult dependants will be introduced at level A1 (basic user). Skilled workers and their dependants will need to show that their English language skills have improved over time by demonstrating progression to level A2 (basic user) for any visa extension, and B2 for settlement. This is a significant change, as passing an English language test at B2 level requires solid fluency in everyday and professional interactions; and
• the length of the graduate immigration route (which allows overseas students to remain and work in the UK temporarily after they graduate) will be reduced from two years to 18 months. This may not be sufficient to complete a graduate scheme, so employers should check at the outset whether it will be possible to sponsor the employee before their graduate visa expires. There is a risk that candidates who are not hired solely because of their immigration status may seek to argue this amounts to indirect race discrimination.
Action points
Employers would be advised to take the following actions:
• carry out an audit of their existing sponsored workers to check whether they would all be able to meet the new minimum salary requirements for each sponsored worker’s particular role. If not, any alternative options, including the possibility of pay rises and any other immigration routes which may be available, should be considered and expectations carefully managed. Consideration should be given as to whether individuals may have a claim for unfair dismissal or even indirect race discrimination if they are dismissed when their existing immigration permission expires;
• check their pipeline for sponsored workers to identify if the role and salary will meet the new sponsorship rules. Employment issues may arise if the employer has already made a job offer to someone who will now not be eligible for sponsorship under the new rules or does not offer an individual a job because the role does not meet the minimum salary requirements;
• if the role is not regarded as highly skilled, check whether the role is on one of the shortage occupation lists. If so, it should be possible to sponsor the individual after 22 July if the salary threshold is met but employers will need to explain to these individuals that they cannot bring any dependants to the UK, which may be a deal breaker. Businesses should also explain to these individuals that they may not be able to remain in the UK long term;
• with immigration fees to sponsor workers already running into thousands of pounds and the immigration skills charge due to increase, businesses should ensure this is factored into any financial planning discussions, together with the extra costs of potentially needing to sponsor workers for up to 10 years. Increased salary thresholds for sponsored workers may also need to be built into budgets going forward;
• any employer who regularly sponsors skilled workers undertaking medium skilled roles should consider what they can do to attract more candidates from the resident workforce; for example, offering apprenticeships, more training or, in limited cases, more generous pay or benefits;
• employers should consider reviewing training plans in anticipation of the fact there is likely to be a greater focus on this in the future; and
• in due course, once the proposals in relation to the English language requirements come into effect, employers will need to check that the prospective skilled worker and their partner speak English to the required standard before offering them the UK role. Employers may want to offer to pay for English lessons. Employment lawyers will need to be alive to these important immigration changes so that they can encourage clients to prepare as best they can and brace themselves for the immigration storm ahead. Given the increasing complexity of the rules, we would also recommend taking specialist immigration advice.
Kristie Higgs v Farmor’s School: welcome clarity from the Court of Appeal
In June, the Supreme Court refused permission to Farmor’s School to appeal against the Court of Appeal’s recent decision that Mrs Higgs had been subjected to unlawful belief discrimination.
The refusal leaves the Court of Appeal’s decision (alongside its previous decision in Page) as the highest legal authority setting out the key principles (which this article explains) that should be applied when determining the rights of employees, employers and others regarding any interference with the manifestation of a protected belief in an employment context.
Background to the Court of Appeal decision
Mrs Higgs’ claim related to her dismissal by her employer, Farmor’s School, on the basis of private Facebook posts which set out her genuinely held (but provocatively expressed) evangelical beliefs on sex education in schools. After an employment tribunal held that Mrs Higgs’ beliefs were protected but that she had not been dismissed for her beliefs but because ‘she might reasonably be perceived as holding beliefs that would not qualify for protection’, she successfully appealed to the EAT (Eady J) on the basis that the tribunal had failed to consider the proportionality of its interference with her Article 9 and Article 10 Convention rights.
For a fuller account of the decisions of the employment tribunal and the EAT, please refer to the article in the August 2023 issue of the ELA Briefing by Chris Jones and Josh Peters.
The EAT held that, per Page , the treatment complained of was in response to Mrs Higgs’ manifestation of a protected belief, and that a proportionality exercise had to be undertaken to determine if restricting her Convention rights was objectively justified. Eady J identified certain basic principles and guidance (proposed by the Church of England (CoE) as intervenor, which the authors of this article represented) applicable within the employment context to assist tribunals and other stakeholders with the proportionality assessment.
Mrs Higgs launched a ‘winner’s appeal’, arguing that the EAT’s decision to remit her claim to the original tribunal be set aside, and that Eady J’s guidance failed to recognise the importance of her Convention rights, giving too much discretion in how tribunals carried out the proportionality assessment.
The school cross-appealed, primarily on the basis that the EAT erred in importing a proportionality assessment into s.13 of the Equality Act 2010 (EqA), contending that tribunals should determine the reason for the treatment solely on matters in the decision-taker’s mind. Laing LJ refused permission since the school had conceded in the EAT that a proportionality assessment was appropriate, that there was no proper basis to allow that concession to be withdrawn, and that the Court of Appeal was bound by the ratio of Page which held that discrimination claims and the Convention rights are ‘coextensive or virtually [so]’.
The CoE intervened again, along with four others (the Free Speech Union, Sex Matters and the Association of Christian Teachers, as well as the Equality and Human Rights Commission whose principal submission was that matters involving manifestations of protected beliefs should always be treated as claims for indirect discrimination).
PETER FROST and JOSH PETERS, Herbert Smith Freehills Kramer LLP
Kristie Higgs v Farmor’s School: welcome clarity from the Court of Appeal
‘Underhill LJ confirmed that, per Page, dismissing an employee for the expression of a protected belief will constitute direct discrimination, unless the dismissal is motivated by the inappropriate manner of expression’
The Court of Appeal’s decision
The key issues for the Court of Appeal (with Underhill LJ, Bean LJ and Falk LJ sitting) were:
• What was the ratio of Page?
• How could the provisions of the Act, which made no reference to manifestation of belief, be reconciled with Articles 9 and 10?
• Was applying objective justification in determining a claim for direct belief discrimination permissible?
• Should interferences with manifesting beliefs be treated as potential indirect discrimination?
The ratio of Page (paras 66-79)
Underhill LJ, giving the leading judgment, confirmed that, per Page, dismissing an employee for the expression of a protected belief will constitute direct discrimination, unless the dismissal is motivated by the inappropriate manner of expression, and not the belief itself. Thus, Page ‘introduced a requirement of objective justification into the causation element in s.13(1)’, which ‘was not substantially different from that required under Articles 9(2) and 10(2) of the Convention’. Given that ‘the domestic and Convention jurisprudence should correspond’, Underhill LJ approved the principles and guidance given by Eady J (while cautioning that they should not be used as a one-size-fits-all approach, bearing in mind the need for nuanced fact-specific decision-making).
As Page bound the court, this was sufficient to deal with the school’s (and four of the intervenors) criticisms of the EAT’s reasoning. However, Underhill LJ also explained the jurisprudential basis of the decision in Page
Reconciling ss.4 and 13 with the Convention (paras 80-88)
Section 13 could be reconciled with the Convention either (i) via s.3 of the Human Rights Act 1998 (HRA); or (ii) by applying normal principles of domestic construction:
• first, the Court of Justice of the European Union (CJEU) in Bougnaoui held that Directive 2000/78 (the Framework Directive) (which referred simply to ‘religion or belief’) should be construed to protect both holding and manifesting a belief to achieve consistency with the Convention. The domestic courts are obliged by (assimilated) EU law similarly to construe the Act via s.3 HRA and so must read down ss.4 and 13 of the Act, albeit only to the extent necessary to achieve the qualified protection provided by the Convention. Underhill LJ favoured reading words into s.13(1) such that a proportionate response to an objectionable manifestation of a protected belief should not be treated as having been done because of that belief; and • secondly, ‘religion or belief’ necessarily includes manifestation of belief where the manifestation is ‘intimately linked’ to the underlying belief (per Eweida). Therefore, the starting point is that actions by an employer taken because of a manifestation would constitute direct discrimination. But the Act ‘cannot have intended that an employer should be obliged to tolerate any conduct at all by an employee which constituted a manifestation of a belief, whatever form it took and whatever the circumstances’. Accordingly, some form of limitation was required. The appropriate limitation was to permit a defence of objective justification in terms substantially similar to Article 9(2). This had practical advantages in using a test that practitioners were familiar with and it conformed to the test in civil court proceedings against a public authority for breach of the Article 9 right to manifest a belief. This was a ‘highly purposive approach’ but reflected that in Bougnaoui
Justifying the justification test (paras 90-92)
Underhill LJ recognised that direct discrimination generally cannot be justified and, in the ‘separability’ cases, any disproportionate response to an objectionable feature of the protected conduct would only be relevant to determining whether or not the protected conduct or the objectionable feature of it was the real reason for the impugned act. This is obviously still a relevant feature in religion or belief cases: the disproportionate response of an employer will be highly relevant to whether the true reason for their actions was the protected belief, the protected conduct or the objectionable feature of it.
Kristie Higgs v Farmor’s School: welcome clarity from the Court of Appeal
‘Higgs again endorses the foundational nature of Article 9 and Article 10 rights and that there is no ‘‘right not to be offended’’’
However, it was necessary to go further than this either by the need to incorporate an objective test by s.3 HRA, or by the fact that direct discrimination in manifestation cases differs from the norm because it flows not from the possession of the characteristic but ‘overt conduct which … has the potential to impact on the interests of society and the rights and freedoms of others’, being ‘a special category which requires a more flexible approach’.
Was the classification of manifestation cases as indirect discrimination the appropriate way to reconcile the Act with the Convention? (para 94)
Underhill LJ recognised that many manifestation claims could be characterised as ones of indirect discrimination which could be justified. However, this required a neutral provision, criterion or practice (PCP) and this would not always be the case (for example, a PCP prohibiting proselytisation). Various previous manifestation cases (Chondol, Grace and Wasteney) had all been correctly advanced as direct discrimination cases as had Mrs Higgs’ claims, because there was no apparently neutral PCP. This submission was therefore rejected.
The Court of Appeal concluded that Mrs Higgs’ dismissal was clearly disproportionate and there was no need to remit. Her other (less valuable) claims remained remitted.
Refusal of leave by the Supreme Court
The Court of Appeal refused permission to appeal and the school petitioned the Supreme Court, essentially on the grounds of its cross-appeal in the Court of Appeal and that the determination that the dismissal was clearly disproportionate was wrong. The Supreme Court refused permission on the basis that it had no jurisdiction to determine the issues that the Court of Appeal had previously ruled to be impermissible; and that the last ground disclosed no error of law.
Concluding comments and the key points for tribunals and stakeholders
The Court of Appeal’s decision, while purposive in places, provides important clarity as to the principles and guidance applicable to any interference with the manifestation of protected beliefs.
In finding that there was no error in the determination that Mrs Higgs’ dismissal was clearly disproportionate, the Supreme Court panel (one of whom – Lady Simler – had delivered a concurring judgment in Page) can arguably be seen implicitly to endorse the Court of Appeal’s reasoning.
The key practitioner points are these:
• Higgs again endorses the foundational nature of Article 9 and Article 10 rights and that there is no ‘right not to be offended’;
• an employee’s rights of freedom of expression and freedom of religion and belief are fundamental rights but they are not unlimited, and not all actions by an employee will be a manifestation of a belief that is protected. Employees do not have carte blanche to say what they want, how they want. Not every expression of a belief will be considered to be a ‘manifestation’ of a belief (see Eweida and Underhill LJ at para 35). The underlying belief must be a protected belief and for an expression of that belief to be a ‘manifestation’ it must be intimately linked. These are important precursors to any analysis under the Higgs guidance;
• in deciding whether an interference with the exercise of these rights is justified, context is crucial. In Higgs, Falk LJ helpfully highlighted that ‘for example, something that might be unproblematic on a private Facebook page could justify different treatment if communicated in a work setting’ (at para 181; see also Underhill LJ at para 136). Context will be fact-specific and should include consideration of the factors set out in the guidance approved by the EAT and endorsed by the Court of Appeal. For employees, what may be appropriate outside of work, or in certain workplaces, may be inappropriate in other contexts; and
• if an employee expresses a viewpoint on a controversial topic which causes concerns, an employer must respond carefully, even if the employer considers that the expression could harm its business. Not every
Kristie Higgs v Farmor’s School: welcome clarity from the Court of Appeal
‘kneejerk responses should be avoided, even in the face of “loud voices”. Similarly, the application of lazy stereotyping of employees’
expression will be protected by the Act but a potentially wide range of beliefs could be. The response must be considered and proportionate. An employer will need to be clear about why a manifestation of belief is inappropriate, what factors they have considered and why their response is proportionate. Kneejerk responses should be avoided, even in the face of ‘loud voices’. Similarly, the application of lazy stereotyping of employees by virtue of the nature of their comments is to be avoided (see Underhill LJ at paras 146-152).
KEY:
Higgs Kristie Higgs v Farmor’s School [2025] 6 WLUK 709
Page Page v NHS Trust Development Authority [2021] EWCA Civ 255
EqA Equality Act 2010
HRA Human Rights Act 1998
CJEU Court of Justice of the European Union Bougnaoui Asma Bougnaoui v Micropole SA (C-188/15) EU:C:2017:204 (CJEU)
Framework Directive 2000/78 establishing a Directive general framework for equal treatment in employment and occupation [2000] OJ L303/16
Eweida Eweida v United Kingdom (48420/10) (2013) 57 EHRR 8
PCP provision, criterion or practice
Chondol Chondol v Liverpool City Council [2013] UKEAT/0298/08
Grace Grace v Places for Children [2009] UKEAT/0217/13/GE
Wasteney Wasteney v East London NHS Foundation Trust [2016] UKEAT/0157/15/LA
Where next for professional employer organisations?
ED BELAM, Marriott Harrison LLP
The use of professional employer organisations has increased hugely in recent years. The Briefing looks at the challenges facing the PEO model and those using it and considers what might come next.
What are PEOs?
Professional employer organisations (PEOs) (also known as employers of record) provide a range of services to overseas end user businesses. These services include payroll processing, the employment of local employees and the provision of said employees to end users, and can even include the provision of day-to-day HR and management support.
We have seen their use increase hugely since the Covid pandemic, particularly in the technology sector where there is a trend towards distributed workforces with employees in many different jurisdictions. We understand that there could be more than 10,000 people ostensibly employed in the UK by PEOs, on behalf of overseas end user businesses.
A typical end user might be a US technology company making its first hire in the UK, with a view to expanding into Europe.
Typically an overseas end user contracts with a PEO (more precisely with the master entity of the PEO in a jurisdiction such as Switzerland), and the PEO (via a local subsidiary) will then provide the local individual employee’s services to the end user. Many PEOs have entities in more than 100 countries worldwide but in this article, we only consider the use of PEOs for individual employees based in the UK.
The ostensible advantages of the model from the end user’s perspective are numerous. They allow a quick route into hiring in the UK without having to set up a local employing entity or local payroll, without having to source local employment agreements and without having to deal with general local compliance issues. There may also be corporate tax and accounting reasons for an end user to seek to avoid directly employing a senior employee in a new jurisdiction.
The end user pays the employee’s monthly salary to the PEO, plus a fee. The end user often indemnifies the PEO in respect of claims brought by the employee, and will typically commit to allowing the PEO to control and conduct the defence (and settlement) of such claims.
Is the model actually new?
In principle, where PEOs are being used as a local ‘employer’ (as opposed to simply as a payroll provider), they appear to operate very much like traditional employment agencies. PEOs can be used to employ employees of all levels of seniority; however, one big difference that we are seeing is that PEOs are often being used for very senior hires, even CEOs and statutory directors. The established legal framework around agencies is being used in a different way and on a different scale.
This in turn raises a question as to whether the legislation around employment agencies and agency workers apply, but that is not the focus of this article.
Who is the real employer?
In a scenario where in reality (i) an end user has all the responsibility for managing a PEO employee day-today; (ii) the PEO had no role in the recruitment of the employee (say, if the individual was previously employed
Where next for professional employer organisations?
‘the PEO/agency model could be found to be a sham which does not reflect the true terms of the employment agreement’
direct by a US end-user and is moving to the UK at the US end-user’s request to kickstart the US end-user’s European operations); (iii) the employee is very heavily integrated into the end user’s organisation; and (iv) the employee works full-time for the end user in a very senior role (say C-suite) – this begs the question of whether it is the PEO or the end user that actually employs the employee?
It is clear, of course, that the existence of an employment relationship does not need to be set out in writing.
Readers of the Briefing will know that the Supreme Court decision in Autoclenz held that employment tribunals can set aside express terms that do not reflect the true terms of an employment contract. The Supreme Court referenced and approved this section of the Court of Appeal’s decision in that case: ‘In practice, in this area of the law [ie employment rather than in commercial contracts], it may be more common for a court or tribunal to have to investigate allegations that the written contract does not represent the actual terms agreed and the court or tribunal must be realistic and worldly wise when it does so.’
The Court of Appeal has looked at this in the context of employment agencies. In James, prior to Autoclenz, the Court of Appeal held that for an employment contract to be implied between an agency employee and an end user, it must be ‘necessary’ to do so in order to give business reality to what was in fact happening.
The bar of ‘necessary’ was not found to have been reached in James but the fact pattern in James is wholly dissimilar to the scenario described above. James concerned an employee who provided support work at a hostel that provided semi-independent accommodation for unaccompanied under-18-year-old asylum seekers. The individual did not, in practice, notify the end user (Greenwich Council) when she was off sick and when she was off sick, the agency would provide an alternative employee.
James was applied by the EAT post-Autoclenz in Smith. In Smith, the claimant worked in the construction industry and sought to claim the end user was his employer, such that s.146 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A) (regarding protection from detriment on grounds related to union membership or activities) would apply to him. In that case, the claimant was found to be heavily integrated into the end user but, having weighed the facts of the working relationship against the express written intention of the parties (which stated that the claimant was to be an employee of the agency), the EAT concluded that there was not enough to mean it was ‘necessary’ to imply a contract between the claimant and the end user. It should be noted that Autoclenz was comparatively hot off the press when the trial was held in 2013, and it reads from the judgment as though the claimant could have sought to go further to challenge James in light of Autoclenz
James was also recently applied in the Court of Appeal, in Lutz. The latter concerned an employment agency (that provided the claimant, a pilot, to Ryanair) rather than a PEO. The judgment in Lutz notes explicitly when discussing the relevance of Uber (and by extension presumably also Autoclenz), that it was not argued in Lutz that the express terms were a sham.
We can speculate that many more cases, on the facts, would now reach the high bar of ‘necessary’ in James (if indeed that is still the correct test post-Autoclenz). It would follow that the PEO/agency model could be found to be a sham which does not reflect the true terms of the employment agreement (ie that the true employer may be found to be the end user rather than the PEO).
We are aware of only one decision touching on this in relation to a PEO at employment tribunal level (Brown). Brown primarily concerned jurisdiction but it was nonetheless said, obiter, that there was a ‘good arguable case’ that the PEO was in that case ‘no more than a payroll agency’ for the overseas end user business. In that case, an Irish company had used a PEO to employ its Chief Marketing Officer based in London. The contract between the PEO and the individual employee specified that the individual would report to the CEO of the end user.
Other challenges when using the PEO model
A detailed analysis of this issue could form the basis of its own article in the Briefing but there is a real question around whether either the end user or the PEO would be able to enforce restrictive covenants in an employee’s
Where next for professional employer organisations?
‘there
are a number of issues that appear to be ripe for litigation –principally the question: “Who is the real employer?”’
contract with the PEO. If a PEO sought to enforce, it would need to demonstrate that it (the PEO) had a legitimate business interest in the enforcement of the restriction which protects a third party (ie the end user). If the end user sought to enforce, they would be relying on an employment contract to which they are not a party.
Particularly relevant in the technology sector is the ownership of intellectual property created by the employee. Employers can generally fall back on the provisions of s.39 of the Patents Act 1977, effectively automatically giving the employer ownership of inventions made by employees in the course of their employment. Where the PEO is the employer, ensuring that IP is appropriately assigned to the end user can be a challenge, particularly given that the employee is usually not even ostensibly employed by the PEO entity contracting with the end user, and the end user will rarely have visibility of the chain of ownership within the PEO’s group of companies.
Again, particularly relevant in the technology sector is the award of share options. Overseas share option schemes will often only allow for grants to employees of the group, and EMI relief will only be available for employees of the end user.
Conclusion
PEOs are being used more and more in the UK but case law may not yet have caught up with how they are operating on the ground. It seems likely that tribunals will soon be asked to consider whether the PEO model works as intended. If they conclude that it does not, there could be significant implications for the industry of PEOs that has emerged since Covid.
There are a number of issues that appear to be ripe for litigation – principally the question: ‘Who is the real employer?’ We tend to see a contractual indemnity from the end user in favour of the PEO in respect of claims by underlying employees, and individuals may therefore not currently be incentivised to test whether the end user is their de facto employer by suing them in preference to the PEO. We can speculate that this may change – and that there may be a commercial incentive for an individual to claim against the end user if:
• one of the big PEO companies becomes insolvent leaving an individual without a remedy against the PEO; or
• an individual settles their claim against the PEO (but not against the end user) and, subsequently, seeks to bring a claim against the end user; or
• an individual brings discrimination or whistleblowing claims against named individual employees of the end user, and those named respondents seek to argue that they are not employees of the claimant’s employer –and that there is therefore no jurisdiction to make a claim against them as individuals.
KEY:
PEO Professional employer organisations
Autoclenz Autoclenz v Belcher [2011] UKSC 41
Brown Brown v Portas Global [2024] 2219147/2023
EMI Enterprise management incentive
James James v Greenwich LBC [2008] ICR 545
Lutz
Lutz v Ryanair DAC & Storm Global Ltd [2025] EWCA Civ 849
Smith Smith v Carillion [2015] EWCA Civ 209
TULR(C)A Trade Union and Labour Relations (Consolidation) Act 1992
Uber Uber BV v Aslam [2021] UKSC/2019/0029
Deposit orders: a more realistic and effective application?
SHANE CRAWFORD, Five Paper Chambers
Strike-out applications can present a significant hurdle for any applicant to achieve success. This can be particularly frustrating where the evidence about a core of disputed fact which must be decided at a final hearing, save in exceptional cases (Ezsias), is overwhelmingly for or against one particular party.
An application for a deposit in such circumstances can represent a much more realistic approach. As stated by Simler J, the purpose of making a deposit order is ‘to identify at an early stage claims with little prospect of success and to discourage the pursuit of those claims by requiring a sum to be paid and by creating a risk of costs ultimately if the claim fails’ (para 10 Hemdan).
The tribunal’s approach
Rule 40 (previously 39) is well known to employment lawyers. Arguments must be advanced that a claim or response has ‘little reasonable prospect of success’.
The two stages to making a deposit order are (i) achieving the threshold condition that the allegation or argument stands little reasonable prospects of success; and (ii) the exercise of a judicial discretion as to whether to make such an order. The discretion must be considered judicially taking account of the effect of the imposition of such an order on the paying party.
Determining whether the threshold is met
In determining whether the threshold condition is met, Elias P observed that the employment tribunal ‘must have a proper basis for doubting the likelihood of the party being able to establish the fact essential to the claim or response’ (Van Rensburg para 27).
In order to make such a judgment, there must be reasonable attempts at identifying the claims and issues. HH Judge Taylor’s observations about this obligation in Cox (para 30) are deemed equally applicable when considering deposit order applications (Bibi para 29).
The attraction to pursuing a deposit order application as opposed to a strike-out application was encapsulated by Elias P’s observations that the lower threshold for making a deposit order compared to a strike-out gives the tribunal greater leeway to make a preliminary assessment of the strength of the case. In particular, making a ‘provisional assessment credibility can in an exceptional case be taken into consideration’; and the test is ‘plainly not as rigorous as the test that the claim has no reasonable prospect of success’ (Van Rensburg paras 26-27).
The subsequent endorsement of such an approach (Javed para 12) and (Sami para 25), provides the foothold to the applicant to present arguments in respect of the assessment of the strength of a case which, most importantly, may include the factual credibility of the allegations.
Deposit orders: a more realistic and effective application?
‘if the threshold is met, it remains fundamental that the tribunal step back and consider the position and have in mind the potential effect of the order if the deposit is made’
This guidance was revisited in Javed in which it was observed that the tribunal is not required to find exceptional circumstances before it makes a deposit order of the type described in Ezsias, but is entitled to make a provisional assessment of credibility. However, Javed reiterated the guidance from Elias P in Jansen that the tribunal in so doing requires a proper basis for doubting the likelihood of the party being able to establish the fact essential to the claim or response (para 12).
A practical approach to considering the application at a preliminary hearing is helpfully summarised by Judge Beard at para 28 in Amber:
‘Generally, this is a procedure that should not hear evidence from witnesses. However, contemporaneous documentary evidence can be considered in appropriate circumstances. A case advanced should be taken at its highest. That is a phrase regularly in use in courts and tribunals, but it does not mean naively accepting the case advanced. At its highest requires the judge to test the factual account. This would include for example examining the case against basic logic, internal inconsistency or any contradiction by contemporaneous documentary evidence. Therefore, a claim or a part of a claim is not taken at its highest within its own terms, but is examined through the prism of reality. Thus a fanciful case is subject to strike out or if not quite so fanciful to a deposit being ordered. But it is important for me to remember in dealing with this that “realistic”, as it was set out by Maurice Kay LJ, simply means “it could be the case”; it is not a substantial hurdle to cross.’
Exercising a discretion
If the threshold is met, it remains fundamental that the tribunal step back and consider the position and have in mind the potential effect of the order if the deposit is made. In Sharma, Wilkie J observed that when addressing to what extent it is within the power of the employment judge without hearing any evidence to make a determination on what maybe disputed facts, the same approach applies in considering whether to make a deposit order or a strike-out order ‘as either order is, on any view, a serious, and potentially fatal, order’’ (para 21).
This was later endorsed by Eady J in Bibi. Eady J observed that the scrutiny of the EAT of such a case management decision is similar to ‘what might loosely be described as Wednesbury grounds … that is where the tribunal applied the wrong principle, took into account irrelevant matters or failed to have regard to that which was relevant’ (para 33).
On that basis, it is my view that the tribunal must consider the bigger picture and in so doing remind itself of Simler J’s observation: ‘The purpose is emphatically not, in our view ... to make it difficult to access justice or to effect a strike-out through the back door. The requirement to consider a party’s means in determining the amount of a deposit order is inconsistent with that being the purpose’ ( Hemdan para 11).
Conclusions and application
First, in considering if the threshold is met, the same process of drilling down into the claim and the documents referred to in support of the claim in the same way that an employment judge is required to do forms the platform for an application for a deposit order.
Secondly, in view of the fact that there is greater leeway such that the tribunal may make a preliminary assessment of the strength of a case that may include the factual credibility of allegations, reliance on primary evidence which vitiates elements of the core factual dispute is permissible.
In this context, it is open to advance submissions about the claims which reflect the observation in Ahir that: ‘There must be some burden on a claimant to say what reason he or she has to suppose that things are not what they seem and to identify what he or she believes was, or at least may have been, the real story, albeit (as I emphasise) that they are not yet in a position to prove it’ (Underhill LJ, Ahir para 19). The approach should be to consider the claim or defence through the ‘prism of reality’ (Amber).
Deposit
orders: a more realistic and effective application?
‘this will require the tribunal to reflect and consider the overall effect of making a deposit order that balances the effect of a draconian order against the objective of discouraging the continuation of ostensibly weak claims’
Thirdly, it should always be borne in mind that the applicant is appealing to the exercise of a discretion. This will require the tribunal to reflect and consider the overall effect of making a deposit order that balances the effect of a draconian order against the objective of discouraging the continuation of ostensibly weak claims. Such an exercise must be conducted judicially; that it is permissible on the evidence and is also in accordance with the overriding objective.
KEY:
Ezsias North Glamorgan NHS Trust v Ezsias [2007] ICR 1126
Hemdan Hemdan v Ishmail [2017] IRLR 228 EAT
Van Rensburg Van Rensburg v Kingston-UponJansen Thames RLBC UKEAT/0095/07
Cox Cox v Adecco UKEAT/0339/19/AT
Bibi Bibi-Sobur v Harmony Trust Ltd ET2402571/2022
Javed Javed v Blackpool Teaching Hospitals NHS Foundation Trust UKEAT/0135/17/DA
Sami Sami v Avellan; Sami v Nanoavionics UK Ltd [2022] IRLR 656 EAT
Ahir Ahir v British Airways Plc [2017] EWCA Civ 1392
Amber Amber v West Yorks Fire and Rescue Service [2024] EAT 146
Sharma Sharma v New College Nottingham UKEAT/0287/11
contributor guide lines
The purpose of these guidelines is to minimise the need to edit submissions to conform to the ELA Briefing style. As the guidelines may be updated from time to time, it is important that contributors follow the latest version, available from the editor or on the ELA website. It is a condition of publication that ELA Briefing has First British Publication Rights. Do not submit articles printed elsewhere (in identical or similar form) or being considered for publication elsewhere. Authors may provide a link to their article as it appears in ELA Briefing (not the complete issue of ELA Briefing) on their firm/company website, provided they clearly acknowledge that the article was first published in ELA Briefing (© Employment Lawyers Association). Please ensure that any contributions will not expose ELA or IDS to civil or criminal proceedings.
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REFERENCES: at the end of the article, list the short form and full name (with un-italicised case reference) of all cases and legislation, in the order in which they appear in the article. Please provide a hyperlink in the key to any case report cited, and for any reports and legislation you mention (for the digital edition).
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