Holiday Pay

CJEU judgment opens door to backdated claims for unpaid holiday

A recent decision by the CJEU has expanded the scope of the right to carry over holidays to situation where workers are stopped from taking their leave for reasons other than sickness absence. Here’s a look at the case, and why employers need to pay attention.

 The background

Between 1999 – 2012 Mr King Worked for Sash Windows as a salesperson on a self-employed basis, and was paid on a commission only basis. Because he was self-employed, his contact did not state if he should receive annual leave.

In 2009, Sash Windows offered Mr King an employment contract, but he decided to remain self-employed. Mr King took his full annual leave entitlement on some years, but he did not request all of it in a number of other years. The tribunals have accepted that Mr King would have taken more holiday if he had been paid for his leave.

When Mr King reached 65, Sash Windows terminated his contract. Subsequently, Mr King brought claims for age discrimination and unpaid holiday pay under the WTR 1998 to the employment tribunal. The employment tribunal accepted these claims, stating that both the company and Mr King had wrongly believed that he was self-employed when he was, in fact, a worker.

The case

Mr King claimed that he was entitled to holiday pay relating to:

  1. paid leave accrued but untaken during Mr King’s final (incomplete) leave year
  2. holiday which Mr King actually took during the previous 13 years with Sash Windows but was not paid
  3. leave which Mr King was entitled to by virtue of being a worker whilst working with Sash Windows but had not actually taken

With respect to his claim for discrimination and paid holidays, Mr King succeeded in the employment tribunal. The third point above, however, was appealed to the EAT and then the Court of Appeal, with the court of Appeal referring the case to the CJEU.

What this means for employers

The decision is particularly topical given the recent high-profile worker status cases involving Uber and Deliveroo and others. Whilst the CJEU’s decision is not binding on UK employers at this stage, businesses with individuals on contracts without paid holiday will need to keep an eye on this case’s outcome as it could result in further holiday pay being due.

We’ll keep you updated as the holiday pay law moves on. In the meantime, you can click here to contact Alison for more expert advice.

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Lessons to be learned from Uber and Deliveroo

Last November we updated you on the EAT’s ruling that Uber drivers should be classified as ‘workers’ and not self-employed. Now one of the most high-profile cases regarding the ‘gig economy,’ most employers will be familiar with the case. You can read the full judgement here.

Essentially, two Uber drivers brought a claim to the Employment Tribunal for unlawful deduction from wages, as well as a failure to provide paid leave. The drivers won the case, successfully persuading the Employment Tribunal that they were workers, and as such were protected under the Employment Rights Act 1996 (ERA). Uber, however, continued to argue that the drivers were in fact self-employed, and so the protections of the ERA did not apply to them.

Whilst Uber appealed this decision to the EAT (unsurprisingly, given the potential costs to Uber that the ruling could incur), the EAT upheld the Tribunal decision and found that the drivers are workers. This means that Uber drivers, as well as being entitled to the minimum wage and paid annual leave, can also raise claims for unlawful deduction of wages.

It’s a good idea to pause and consider the arguments that Uber put forward, which the EAT subsequently dismissed. Uber argued that:

  • It only provides the technology platform to facilitate a taxi service, rather than providing a taxi service itself;
  • The taxi service is, instead, provided by the driver and there is a contract between driver and passenger for each journey;
  • The drivers are self-employed;
  • Uber London Limited holds the required private hire vehicle operator licence.

But the EAT backed the Tribunal’s original decision, stating that this arrangement was indicative of worker status. It claimed that:

  • There is an interview process for potential Uber drivers and successful candidates must complete an induction;
  • A driver can be terminated in the case of serious misconduct or if their ratings drop;
  • Whilst drivers might be able to decide where they can work, they are required to undertake to the work personally for Uber, which indicated an employment relationship.

Whist the Tribunal held that Uber drivers are not obliged to turn on the Uber application or accept an assignment, a driver is working for Uber under a worker contract if:

  • Has the application turned on;
  • Is within their authorised territory for work;
  • Is able and willing to accept assignments.

This means that they should be afforded worker rights and protections in accordance with the ERA.

But it isn’t all bad news for the flexible workforce, or those that want one. It’s certainly not impossible for companies to enter into a genuine contract of self-employment, but employers must remember how this operates in practice. It doesn’t matter what label either party may put on their relationship, if the legal definition with ‘worker’ is met then the party providing the service is likely to benefit from worker rights.

The outcome of the Uber case is similar to that of Deliveroo, which received a judgement on their case last November. Deliveroo is another app-based service, with riders delivering takeaway food to customers from participating restaurants. Unlike the Uber case, however, Deliveroo riders were not found to be workers by the Central Arbitration Committee (the CAC) after the Independent Workers Union of Great Britain submitted an application.

The CAC made a decision on the basis of section 296 of TULRCA, whereas in the Uber case, the definition of a “worker” is set out in section 230 of the Employment Rights Act. The interpretation of the Employment Rights Act is outside the jurisdiction of the CAC, and so its comments would not be binding on an employment tribunal here. In the Deliveroo case, on there was evidence that riders took advantage of their right of substitution and sent another rider on a delivery in their place.

This goes to show that, whilst genuine self-employment is possible, it needs thought out, particularly in the current climate, if you’re to avoid a costly dispute.

For more expert HR advice, you can contact Alison here.

 

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EAT rules that Uber drivers are workers

The Employment Appeal Tribunal (EAT) has upheld a tribunal’s ruling that two Uber drivers were ‘workers’ and, therefore, entitled to worker benefits such as the National Minimum Wage and holiday pay.

The background

In UK law, ‘workers’ are entitled to a range of employment rights such as the national minimum wage, holiday pay and access to a pension scheme. Full employment rights, however, including statutory sick pay and protection against unfair dismissal, only apply to a category of workers normally referred to as ‘employees’.

For a non-employee to qualify as a ‘worker’ status there usually has to be a contract between the individual and the ‘employer,’ under which the individual undertakes to do work personally, and the ‘employer’ must not be a client or customer of a business operated by the individual.

How does this apply to Uber?

In this particular case, the EAT found that those conditions were satisfied. In particular, it found that the tribunal was entitled to reject the description of the relationship between Uber and the drivers in the written contractual documentation. Rather, the drivers were incorporated into Uber’s taxi business and subject to controls that pointed away from their working in business on their own account in a direct contractual relationship with the passenger each time they accepted a trip. The EAT confirmed that the tribunal had been entitled to consider the true agreement between the parties as not one in which Uber acted as the drivers’ agent.

But the EAT’s decision is unlikely to be the final one. It’s certain that Uber will look to bring a further appeal and it is likely that the case could go straight to the Supreme Court.

What can we learn from this?

The fact that the Uber drivers have won ‘worker’ status, however, does not mean that cases brought by others who work in the ‘gig economy’ will have the same success. In fact, the tribunal that originally heard the case said it did not doubt that Uber could have created a business model which did not involve the drivers having worker status. However, companies that rely on the ‘on demand’ freelance workforce will be keeping an eye on similar cases for any emerging trends that could impact their business model.

Particularly, these employers should review any possible risks of misclassifying the status of their workforce, including the affordability and practicability of paying statutory minimum wage, pension auto-enrolment and holiday pay entitlements.

Additionally, those businesses utilising IT platforms to exercise significant control over ‘on demand’ workers should be aware of the potential challenge in maintaining that such workers are genuinely self-employed, as opposed to one based on worker status (although it will always depend on the circumstances).

For more expert employment advice, you can contact Alison here.

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Do you know how many holidays you have coming up?

We all deserve a break from our hard work now and again. Luckily, under The Working Time Regulations (2004), employees and workers are entitled to a minimum number of paid holidays per year. In England and Wales, this is set as 5.6 weeks per year and includes Bank/Public Holidays. This means that anyone working five days per week must receive 20 days of paid leave, plus the eight Bank/Public Holidays observed each calendar year. Part-time employees and workers receive a pro-rata allowance based on how many days they work per week.

But… wait… do we have a problem on the horizon?

Employers set the dates of the holiday year. For most this is 1st January to 31st December (although it’s up to you, as the employer).

However, if you decide to run your holiday year over more than one calendar year, the number of Bank/Public holidays might be higher or lower than eight and that can cause problems. Let’s look at an example.

  • Imagine an employer, which allows only the statutory minimum holiday allowance of 5.6 weeks, runs their holiday year between 1st April 2018 and 31st March 2019.
  • In that period, there will only be seven Bank/Public Holidays instead of eight, because Good Friday falls on 30th March.
  • In effect, there will be nine Bank/Public Holidays in the 2017/18 year, rather than eight.
  • This means that the employer might have to grant an additional day’s holiday during the 2018/19 year, so that they do not fall below the statutory minimum.
  • If the employer’s contract states the specific number of Bank/Public holidays that the employee is entitled to, e.g. ‘20 days holiday plus eight Bank/Public Holidays,’ then the employer might be able to deduct the additional 2017/18 one and add the 2018/19 one.
  • However, if the contract simply states ‘20 days holiday plus Bank/Public Holidays,’ as most do, the employer will have to add the 2018/19 one but won’t be able to deduct the 2017/18 one.
  • If the contract states 5.6 week including Bank/Public Holidays, then the employee would take eight Bank/Public Holidays plus 19 days paid holiday, meaning the employer would not fall below the statutory minimum.

Phew. That’s a lot of Bank/Public Holidays to keep track of!

So, what do you need to do?

You might not have realised the potential discrepancies caused by Bank/Public holidays.

  1. Check the exact wording of any contracts.
  2. Make any necessary plans concerning annual leave, now.
  3. It is up to you, as the employer, to ensure you are fulfilling your duties and to manage this through your holiday booking system.

For plain-English, expert advice on the matter, you can contact Alison here.

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Can an employee be too sick to take holiday?

Most of us have been there. You’re getting excited for your upcoming holiday, getting last minute details sorted and then suddenly a cough or cold comes on. Most of us power through and end up having a good time, but what happens if it’s worse and you come back to work feeling anything but refreshed? Should you be entitled to reschedule your holiday – or even claim sick pay?

The European Court of Justice has said in a recent case that a worker who falls ill or becomes incapacitated before a period of pre-arranged statutory holiday should have the right to reschedule their holiday to a later date. As well as this, the court also suggested that the same should apply to workers who become sick whilst on holiday – not just before. Although a contentious suggestion, the ECJ later confirmed this in Asociacion Nacional de Grandes Empresas de Distribucion v Federacion de Asociaciones Sindicales & Ors.

It’s important to note here that the ECJ ruling only applies to four weeks’ holiday, and not the full 5.6 weeks’ statutory holiday or any contractual amount in addition to this. On top of this, there could be argument about whether the UK’s own Working Time Regulations already provides this.

Employees are becoming more aware of their rights than ever, and holiday rights come high up on the list. The ECJ’s decisions mean employers can expect to receive claims from employees that they should be paid sick pay and allowed to re-schedule their holiday. But this can put employers in a difficult position. With the risk of false claims out there, how can you prove your suspicions that an employee didn’t spend their whole holiday holed up in the hotel room? How sick do you have to be before a day in bed counts as sick leave rather than annual leave?

Our advice

Employers have to adopt a clear and consistent approach to avoid any arguments of unfairness or discrimination. The employer is going to have a tricky decision to make – do you follow the ECJ decisions (and the UK decisions following them) and allow employees with legitimate claims to reschedule their leave, or do you adopt a riskier approach and try to stick to the letter of the Working Time Regulations?

Employers are also going to need to be robust in many of these situations – whilst you may choose to allow employers to reschedule their holidays you need to protect yourself from abuse or manipulation. The best way to go forward is with clear, concise policies and expected standards of behaviour – such as asking staff to report and notify sickness in the usual way (even when they’re on holiday), having return-to-work meetings and not being shy to ask necessary question or request medical evidence.

You should also be keeping up-to-date records of sickness absence to review closely, which can help to identify patterns of ‘holiday sickness’. A judicious checking of the employee’s social media posts may another option, and questions should be asked if posting about a big night out and is struck down with ‘stomach flu’. As well as this, you should make clear contracts and disciplinary policies, and the serious consequences for any dishonesty.

The important thing to remember is to be clear, concise and consistent in your approach, with support from your contract of employment and holiday, sickness, equal opportunities, disciplinary, social media and data protection policies.

For more information, you can contact Alison here. For help with your documentation, click here.

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Tribunal awards – calculating a week’s pay

In a recent case the Employment Appeals Tribunal ruled that a week’s pay should include employer pension contributions, rather than just basic pay, for calculation of compensation for claims under the Employment Rights Act 1996.

Let’s take a look at the facts.

Ms Drossou (D), who worked for the University of Sunderland, was dismissed on the grounds of an irretrievable breakdown in working relations, of which the University claimed D to be the main cause. Subsequently, D brought a claim of unfair dismissal that was eventually upheld by the Tribunal.

As a result, the EAT ordered compensation from the University, calculating a week’s pay by including the employer pension contributions. On the normal grounds that payments are not paid to the employee but into the pension fund, this decision went against the longstanding practice of excluding employer pension contributions from the calculations of a week’s pay.

The Tribunal felt that this deviation from standard practice was necessary, and said that the law under the Employment Rights Act 1996 (‘the ERA’) does not state that the amount payable by the employer has to be payable to the employee (i.e. it could be payable to a third party such as a pension provider). Additionally, the EAT stated that “remuneration” in the context of the ERA means a reward in return for services, and employer pension contributions are no less a reward for service than basic pay. The University was not satisfied with the ruling, but when it appealed to the EAT the Tribunal’s decision was upheld.

So, what does this mean for employers?

For the time being (at least until we see whether this decision is appealed) employers need to increase their calculations in accordance with the potential value of claims. Employers facing unfair dismissal claims need to be careful. If the claimant’s base salary is below £80,541 – the current statutory cap for unfair dismissal compensation – the calculation of a week’s pay becomes highly relevant. Where the employee earns less than the statutory cap on a week’s pay (currently £489), the basic award will also be increased – as well as all other awards based on the ERA definition such as the eight-weeks’ pay for a flexible working rules breach.

But, more importantly, the decision may impact protective awards. If employers fail to inform and consult under TUPE or, in a redundancy process, under the Trade Union and Labour Relations (Consolidation) Act 1992, then they could face large increases in the total compensation payable. The final amount will depend on the number of affected employees, the generosity of the pension provision and the size of protective award made up to the 13-week maximum. But if each employee has a 10% employer pension contribution and they all get an award of 13 weeks, then the total payable increases considerably.

For more information on this please contact Alison.

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Holiday Pay & Voluntary Overtime

Back in September 2016 the case of Brettle v Dudley Metropolitan Borough Council decided that voluntary overtime payments should be included in calculating holiday pay, provided that overtime is worked with “sufficient regularity” to constitute “normal pay”.

In July 2017, the Employment Appeal Tribunal upheld this decision and set out that payments for normally worked, voluntary, overtime must be included when calculating holiday pay for the first four weeks of holiday.  The case that upheld this was Dudley Metropolitan Borough Council v Willetts and Others, available here.

In this case the EAT explained that, given holiday pay needs to correspond with “normal remuneration”, any voluntary overtime payments that are paid over a sufficient period of time on a regular basis fall within this definition.

This did leave some questions open, however.  For example, the EAT offered little guidance on the level of regularity or frequency required for a payment to qualify as “normal remuneration”.  We can only ‘watch this space’ but we’ll post a longer summary in a few weeks… so watch this space.

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5 summer employment issues to consider as the heat rises

As the temperature continues to rise across the UK, employers may have to start considering the employment issues that often come hand in hand with the summer sunshine. We’ve put together five to look out for over the next few weeks.

Summer dress codes

An employment issue that many employers face during the warmer months is dress codes. Employers may consider it reasonable to allow a more relaxed dress code during the summer but rules need to be put in place to standardise the extent of this. Employers may choose to vary the dress code depending on the role the employee plays. For example customer-facing roles still need to meet certain standards of presentation and, for health and safety reasons, some employees may need to continue to wear protective clothing. How ever employers choose to implement a summer dress code, they must ensure that it is reasonable, appropriate to the business and does not discriminate any groups of employees.

Office temperatures

Office temperatures are a difficult issue to deal with during the summer because there is no ‘maximum temperature’ listed in the Workplace (Health, Safety and Welfare) Regulations 1992. The regulations simply state that the workplace needs to be a ‘reasonable’ temperature. For different work environments, what is considered as reasonable will vary. Employers need to take into account factors such as whether work is strenuous or physical, access to the outdoors and fresh air, air conditioning and more.

Holiday request clashes

The summer months are particularly popular for holiday requests and it is likely that there will be many competing requests received from different workers. In these scenarios the employer must prioritise these requests in a way that is fair and consistent. For many this means doing it on a first-come, first-served basis. Setting out a holiday policy with notice provisions and other details can help avoid short periods of notice for requests and refusals.

Returning late from a summer holiday

It’s not uncommon for workers to book time off for holiday and return a little later than planned. In many cases this is a genuine illness or delay but it can also be reason for suspicion. When this does happen, the first thing employers should do is allow the employee an opportunity to provide an explanation; this could include seeking supporting evidence such as a medical certificate. In cases where the explanation does not appear genuine, the employer will need to consider disciplinary action.

For more information, visit http://79.170.40.162/enlightenhr.com or contact Alison Benney:

alison@enlightenhr.com

Tel: 01803 469466

Mobile: 07967221595

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Holiday Pay : Including commission in calculations

There has been some speculation about holiday pay and how it should be calculated with results-based commission. A recent case has helped shed some light on what EU regulations are currently in place and how they may, or may not, change during Brexit.

The case of British Gas v Lock

Mr Lock, a salesman for British Gas, was paid a monthly commission on top of his basic salary that fluctuated based on his sales. When absent on holiday leave, his pay did not reflect any of the commission he would have earned. He issued a claim that British Gas had failed to properly calculate his holiday pay and owed him money.

The European Court of Justice agreed with the ET that since the commission is directly linked to the work Mr Lock carries out, it should be taken into account when calculating the amount owed for holiday pay. The case was returned to the ET for this ruling to then be applied in UK law. For this to happen, the ET needed to add an extra subsection to the Working Time Regulations 1988

What does this mean for the future?

This case has shown that representative results-based commission and non-guaranteed overtime must be taken into account in the calculation of holiday pay for the first 4 weeks of holiday under the Working Time Regulations. However, the issue of how to calculate this has still been left unanswered.

The government will be, in theory, able to change this EU requirement law after the UK leaves the EU. But, it is likely that this holiday pay calculation will stay in place due to Theresa May’s confirmation that workers’ rights will not be diminished under a future Tory government.

In a nutshell…

Currently when calculating an employee’s holiday pay entitlement, regarding the first four weeks, results-based commission must be included in employer calculations. Moving forwards, employees can expect these rules to stay. How this commission pay entitlement will be calculated, however, is something we are still awaiting guidance on.

For more information, visit http://79.170.40.162/enlightenhr.com or contact Alison Benney:

alison@enlightenhr.com

Tel: 01803 469466

Mobile: 07967221595

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