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You are in: Home Page | About Thompsons | Information and Resources |  LELR Issue 82

Issue 82 (September 2003)

Contents

Roll ups not always bad for your health
Pregnancy protection
Reasonable adjustments include assessments
Disorientating decision
Important NMW cases
Pre-operative protection  

Roll ups not always bad for your health

Marshalls Clay Products v Caulfield
Pearce v Huw Howatson Ltd
Clarke v Frank Staddon Ltd
Sutton v Potting Construction Ltd
Hoy v Hanlin Construction [2003] IRLR 552

What is the similarity between holidays and TUPE? Answer: the difficulty that employers and Employment Tribunals have in accepting and understanding the requirements of European Law. The annual leave provisions of the Working Time Directive are to the 21st Century what TUPE was to the 1990s.

Following our discussion of the recent cases on annual leave in July LELR issue 80, the position has now changed in England and Wales. The EAT in London has ruled on rolled up holiday pay rates in the above cases, departing from the principles set out by the Court of Session in Scotland in the case of MPB Structures Ltd v Munro [2003] IRLR 350.

The EAT has set out five possible contractural scenarios to cover the various situations of entitlement:
1 Contracts between the worker and the employer which are silent as to holiday pay
2 Contracts that purport to exclude any liability for, or entitlement to, holiday pay
3 Contracts where the rates are said to include holiday pay but there is no specification of an amount
4 Contracts providing for a basic wage or rate topped up by a specific sum or percentage in respect of holiday pay
5 Contracts where holiday pay is allocated to and paid during (or immediately prior to or immediately after) specific periods of holiday. The President of the EAT in his judgment in these cases holds that categories one, two and three are unlawful,. and a worker or employee is entitled to claim for paid annual leave, but that categories four and five are lawful.

The distinction between the Marshalls Clay Products cases and the earlier Scottish Court of Session case of MPB Structures v Munro is in relation to category four. Under Scottish law and the MPB Structures judgment, this type of contractual arrangement is not sufficient to discharge an employer's liability towards an employee or worker to paid annual leave entitlement.

The EAT has therefore held that a contractual provision for rolled up holiday pay, which identifies an express amount or percentage by way of an addition to basic pay, is not unlawful in terms of the Working Time Regulations 1998. It does not matter that, at the stage of its payment, it is not specifically appropriated to any particular period, and is not paid at the time of the leave, but merely paid wholly or partly in advance of the leave. This argument had been specifically rejected in Scotland as counterproductive to the purpose of the Regulations and the Working Time Directive itself, which was to ensure that holidays are actually taken as a matter of health and safety.

It is uncontroversial that category five is in compliance with the regulations, (most employees are paid in this way) and that the first three categories fall outside the parameters of the law and will require employers to make additional payment if challenged.

The EAT then issued guidelines as to how to pay a rolled up holiday rate and avoid a breach of regulations. In England and Wales rolled up holiday pay is likely to be unlawful and in breach of the Working Time Regulations unless:

1 the rolled up holiday pay is clearly incorporated into the contract of employment or work and expressly agreed
2 the allocation of the percentage or amount of holiday pay is clearly identified in the contract and preferably in the worker's pay slip
3 it is in addition to the contractual rate of pay
4 records of holiday are kept
5 reasonably practicable steps are taken to require the workers to take their holidays before the expiry of the relevant holiday year.

 

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