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What UK tech startups should be looking out for in 2019

(Image credit: Image Credit: The Digital Artist / Pixabay)

The end of a calendar year always causes a degree of reflection on the events of the previous year and a looking forward to the events that one can anticipate in the coming 12 months.  The one event that has dominated the headlines this year is Brexit and it is clear given the current difficulties in Parliament and elsewhere that it will continue to provide a resonating and percussive backdrop to all other events.

Within the Tech Sector there have been a number of important themes and issues spanning the year.   Many, but by no means all, businesses believe that the Gig Economy is important in providing a flexible workforce.  There have been a significant number of claims involving the issue of status.  The outcome of these cases demonstrates that in the world of law, despite the maelstrom that might exist outside, the legal tests to identify whether someone is an employee, worker or independent contractor remain unchanged; that Tribunals have the right if they consider that the contract itself does not reflect reality to look outside the four corners of the contract to the reality of the situation. As a result many who had been labelled as independent contractors were re-labelled as workers with an entitlement to holiday pay.

In the world of tech, data is key.  The run up to 25 May 2018 saw many businesses scrambling to comply with their GDPR obligations, both internal and external, amending business terms, drafting privacy notices and ensuring that they had data privacy by design and intent.

The importance of having good data protection systems in place to ensure that data is not capable of being misused was demonstrated by the decision involving Morrisons, where the data of nearly 100,000 employees was placed onto a file-sharing site.  The employee involved received a prison sentence, but five thousand employees brought a claim against Morrisons in relation to the data breach.  Morrisons were found to be vicariously liable for the data breach since the employee was employed to handle the data that was disclosed by his wrongful conduct.  Whilst Morrisons had no primary liability they were vicariously liable to the employees.  Others whose data has been disclosed will no doubt rely on this decision.

An on-going development throughout last year was the continued rise in the use of DSARs.  In part this may have been driven by increased awareness of data rights as a result of the introduction of the GDPR in May 2018.  Data subjects are no longer required to pay a fee and the time for compliance has been reduced from 40 to 30 days.  With the changes introduced by the GDPR data subjects now feel more emboldened to push harder for data relating to them and the ICO seems more willing to require more extensive disclosure than before the introduction of the GDPR.  Given the plethora of documents and data that are now held the only realistic way to deal with a DSAR is to rely upon IT and to have systems in place and ready to deploy.

Outside the world of data the law on whistleblowing has developed and this is likely to continue.  Traditionally, claims relating to dismissal arising from whistleblowing could only be brought as an unfair dismissal claim and not as a claim for a detriment.  The significance of the distinction is that the burden of proof is lower in detriment cases, where whistleblowing only needs to be one of the motivating factors; whereas in dismissal claims it has to be the principal reason.  The significance is that if an employee can be successfully sued because of their involvement in the decision making process the employer can then be drawn in on the basis that it is liable for the employee’s acts. Whistleblowing claims give high earning employees the ability to disapply the cap on unfair dismissal damages.        

Looking forward to 2019

At the end of 2018 it is entirely unclear with less than 100 days to 29 March 2019 what type of deal, if any, may emerge.  The Government appear to be pushing for a series of votes to be held in an attempt to clarify the “mood of the House”.   Whether there will be a deal or no deal is a continuing mystery.  The Government have announced their continued intention to see net migration reduce 

With 1.64 million jobs in the tech Sector and the sector growing at twice the rate of other sectors it is going to become increasingly challenging to find and recruit suitably skilled talent.  The challenge caused by Brexit for tech is many fold.  It will no longer be possible following Brexit to quickly recruit foreign nationals; all will have to come in through the Tier system.  This means that those relying on an international workforce will have to incur the cost of registering as a Licensed Sponsor and the issues associated with being a Licensed Sponsor.  This will significantly impair a business’ ability to be flexible and agile.  Those businesses that currently employ EU Nationals should consider becoming a Licensed Sponsor now to avoid the rush.

Gender Pay Gap reporting began in April 2018 and the second Gender Pay Gap reports are due no later than 4 April 2019.  With women significantly under-represented within the tech Sector (17 per cent but comprising 51 per cent of the national population), and last year’s figures showing a substantial gender pay gap across the sector there will be a good deal of focus on this year’s results to see what movement, if any, there has been to closing the gap.  Last year saw reports encouraging equal pay and discrimination claims, the clamour will only grow if there is no movement, or worse, if the movement has been in the wrong direction.

The #MeToo campaign which gained much momentum during 2018 will undoubtedly continue to with a number of businesses posting it as a risk factor for 2019.  However, much like gender pay, ensuring that a significant part of the workforce is free from harassment is a much needed positive step, which will only have benefits in a sector where women are currently under-represented, particularly given the challenges that there will be given the recruitment shortage which is being fuelled further by Brexit.

Sitting alongside Gender Pay Gap reporting there will be a focus on ethnicity reporting, given the lack of ethnic diversity within the tech Sector and the fact that those from an ethnic minority background are more likely to be self-employed within the tech Sector.

It had been heavily anticipated that the changes to the IR35 legislation introduced in the public sector would be replicated in the private sector in 2019.  The Government have recently announced that this will not now happen until April 2020.  Currently, where a person is provided to work through an intermediary, such as a personal service company (PSC) the PSC is responsible for deducting all applicable tax.  When the change is introduced in April 2020 the responsibility will shift to the ultimate client.  This is going to involve significant time and effort.  Businesses will need to start planning well in advance of April 2020 what they are going to do.  Adopting a blanket approach is unlikely to be possible or sensible and may result in legal challenges.  Even though the ultimate client is responsible for making the decision it is likely that the individual will have their own, robust, views on the correct application of the legislation, particularly where its application may have a detrimental impact on their earnings.                  

There will undoubtedly be a continued focus on improving mental health in the workplace as the consequences of poor working environments and increasing levels of pressure and stress take their toll.  This will have an impact at all levels within organisations and at all stages of the employment process.  It will bring a continued focus on changing working patterns and working environments and will inevitably be driven by the demands of a more enlightened workforce.

Finally, there will inevitably be much discussion of the Government’s recently announced proposals following the Taylor Review “Good Work”.  Whilst mostly points of details there are some significant changes proposed, including (i) increasing the length of time to break continuity of service from 1 week to 4 weeks, (ii) the removal of the Swedish Derogation for Agency Workers, which permits an employer in certain circumstances to pay Agency workers less than its employees, (iii) enhanced entitlement to written particulars and, (iv) a right for casual workers to request a fixed working pattern.    

There are many challenges ahead in 2019, which we can anticipate will be another busy year.

Barry Stanton, head of the Employment group, Boyes Turner (opens in new tab)
Image Credit: The Digital Artist / Pixabay

Barry Stanton is head of the Employment Law Group at Boyes Turner, and advises clients on all aspects of employment law and HR issues. He acts mainly for large and medium sized businesses, often dealing with issues with an international element.