The new regulations are causing many employers difficulties in practice and, perhaps not surprisingly, there has been a steady stream of paid annual leave cases coming before employment tribunals. Many problems have arisen because of the difficulty in reconciling the regulatory provisions with existing contractual entitlements.
A good example of contractual difficulty is in the calculation of holiday pay itself. In a recent Employment Appeal Tribunal case involving a part-time worker, Mr Taylor, and East Midlands Offender Employment, the terms of employment stated that: In addition to public holidays, full-time employees are entitled to 20 days holiday on full pay for each completed calendar year, and to a pro rata number for each partial year. Part-time employees are entitled to the same number of days annual leave as above but for these purposes a day is one-fifth the number of hours worked in a normal working week.
When Taylors employment terminated, he was entitled to 10 days holiday. The question was how to calculate the holiday pay. Taylor maintained that his monthly or annual salary should be divided by his working day and that he should then be paid at that rate for the days due to him. The employers calculated the entitlement by dividing his annual salary by 12 to give a gross monthly salary, dividing the gross monthly salary by the number of calendar days in the month of termination in order to give a days pay, and then multiplying this sum by 10.
The Employment Appeal Tribunal decided that the employers method was right. This was because of the Apportionment Act 1870 which requires periodical payments to be considered as accruing from day to day. Therefore the correct way of calculating a days holiday pay was as 1/365th of a years pay. The tribunal claimed that its decision reflected the policy of recent legislation including the Working Time Regulations.
These regulations were directly applicable in an employment tribunal case brought against Kigass Aero Components Ltd. The question posed was whether annual paid leave applied if the employee was working or not. The outcome was that the employer was obliged to pay statutory annual leave to an employee who was on long-term sickness absence lasting 12 months even though the employee was not receiving a normal salary. Its a decision that raises questions about other types of absence from work for unusual reasons such as, for example, sabbaticals.
Holiday issues are particularly challenging where the workforce works flexibly. For example, pay may be affected by seasonal fluctuations.The regulations refer to Section 221(3) of the Employment Rights Act 1996 which provides in particular that where pay varies according to the amount of work performed in normal working hours, the weeks pay is calculated as an average of earnings for normal hours in the 12 weeks preceding the relevant date of holiday. This may include commission payments. So for some workers taking holidays at certain times during the holiday year may yield higher holiday payments than at other times of the year and vice versa.
Concern about the rights of flexible workers prompted BECTU, the broadcasting and entertainment union, to challenge the requirement in the regulations that each worker had to have been continuously employed for 13 weeks to qualify for paid holiday. The Advocate General of the European Court decided that the 13-week requirement is unlawful, that the right to paid holiday is an automatic and unconditional right granted to every worker. The European Court has upheld this finding which will mean further legislative changes.
Although the Working Time Regulations have sparked renewed interest in the rules governing holidays, contractual and statutory regulation is not new. But as is so often the case with employment law, the contract of employment itself remains the starting point for regulating holidays.
Email address:
janet.gaymer@haynet.com
Janet Gaymer is senior partner at Simmons & Simmons
