Voluntary Overtime May Need to Be Included in the Calculation of Holiday Pay

What is the Latest?

We have reported previously on the ongoing saga concerning the calculation of holiday pay in the United Kingdom.

In the case of Dudley Metropolitan Borough Council v Willetts and others, the UK Employment Appeal Tribunal for the first time confirmed that voluntary overtime can be “normal remuneration” and, if it is “normal”, should be included in the calculation of statutory holiday pay. 

Why Does This Matter to Me?

Most people had already come to terms with the fact that voluntary overtime was capable of being included in holiday pay. What we needed guidance on was how often the worker must receive voluntary overtime, or a similar payment, before it is counted as “normal” such that it should be included in the calculation of holiday pay.

Ultimately, it is a question of fact and degree to be decided on by the Tribunal. But it may of interest to employers to note that, in this latest case, the relevant payments were made over a period of years at a rate of roughly one week in every four or five weeks. In the circumstances, such payments were considered sufficiently regular to be “normal”.

The employer's argument that the payments weren’t “normal”, and that, instead, a normal week’s pay for the employees was a week during which they did not receive overtime pay was not accepted. The Employment Appeal Tribunal decided that the focus is on determining “normal remuneration”, not a “normal working week”.

The Right to Paid Holiday Potentially Carries Over Until the Worker Has the Opportunity to Exercise It

What has Happened?

The EU Advocate General has delivered an Opinion in King v The Sash Window Workshop Ltd and another, a case involving an individual who worked as a commission-only salesman and received no salary, holiday pay or sick pay. After he was dismissed, the salesman claimed “worker” status and therefore unpaid holiday pay for the current and previous holiday years.

In the Opinion, the Advocate General has emphasised the importance of the right to paid holiday. The individual had not been prevented from taking holiday by reasons such as sickness absence. Instead, the fact that the employer refused to pay him during periods of leave was sufficient for the worker to claim that he had been prevented from exercising his right to paid leave. His right to paid leave therefore continued to accrue and was carried over until he could exercise this right, or until the termination of his engagement. As a result, in the Advocate General's view, this individual should be entitled to a significant sum in lieu of all past holiday entitlement.

Why Does This Matter to Me?

The Advocate General’s Opinion is not itself binding but will now be considered by the European Court of Justice (ECJ) in deciding the case.

The ultimate outcome of this case could potentially have a significant impact on the gig economy in particular, where a line of recent cases has found a number of individuals to be workers rather than self-employed. If these workers have not taken leave because it would have been unpaid, putative employers may find themselves faced with very expensive holiday pay claims.

The ECJ’s judgment is therefore keenly awaited.  

Employment Tribunal Fees Are No More

What has Happened?

In a remarkable turn of events, the trade union UNISON’s judicial review challenge to the Employment Tribunal fees system this summer succeeded before the UK Supreme Court, which found the system to be unlawful and quashed the legislation which introduced it.

Click here for our more detailed comment on the case reported at the time of the judgment.

Why Does This Matter to Me?

To the extent that the fee regime deterred disgruntled employees from bringing UK Employment Tribunal claims, that deterrent has now gone. UK employers now face an increased risk of employment claims being brought going forward and, also, potentially, from former employees who might seek to argue that they were previously deterred from bringing claims by the fees regime. 

Whistleblower Protection: When Is A Disclosure In The "Public Interest"? 

What Was the Issue?

In the long-running case of Chesterton Global Ltd v Nurmohamed (which we have commented on previously here and here), the Court of Appeal was this summer asked to consider what degree of “public interest” is required in order for a complainant to gain protection under UK whistleblower legislation.

Mr Nurmohamed claimed that his employment was terminated because he had made a protected disclosure to Chesterton Global, specifically by informing it that its management accounts deliberately overstated costs and liabilities to reduce the amount of commission payable to 100 senior managers (including Mr Nurmohamed) and, in turn, benefit shareholders.

Chesterton Global, the employer, sought to persuade the Court that this complaint was not made “in the public interest” and so should not be protected. In particular, it argued that because the disclosure was in the private interest of the individual employee, it could not be in the public interest as well.

Ultimately, the Court decided that where a disclosure relates to a breach of the worker’s own contract of employment, it may still be in the public interest, notwithstanding that it is also in the private interest of the worker.  Factors such as the number of workers affected, the nature of interests affected, the nature of wrongdoing disclosed and the identity of the alleged wrongdoer may be relevant. The Tribunal deciding the matter must consider all the circumstances of the particular case.  

Why Does This Matter to Me?

Any complaint that could affect others as well as the complainant could be found to be in the public interest and therefore protected by the whistleblowing framework. Potentially, this ruling makes it easier (certainly, no more difficult) for employees in the UK to assert whistleblower protections.

UK employers should, therefore, carefully consider whether disclosures of information can be said to have a wider impact when assessing the risk of a whistleblowing claim.

Employer Pension Contributions Count Towards the Calculation of a Week’s Pay

It has been longstanding practice in the United Kingdom to exclude employer pension contributions from the calculation of a week’s pay, typically on the basis that such contributions are not received by the employee but paid into a pension fund.

What has Happened?

In the recent case of University of Sunderland v Drossou, the Employment Appeal Tribunal ruled that employer pension contributions should count towards the calculation of a week’s pay when working out the maximum compensatory award for unfair dismissal.  

Why Does This Matter to Me?

This decision will affect not only unfair dismissal compensation, but also potentially other payments calculated by reference to a week’s pay under the Employment Rights Act 1996. These include redundancy and TUPE protective awards and arguably payments in lieu of accrued but untaken holiday on termination of employment, all of which could potentially become more costly as a result.   

Shared Parental Pay Arrangements Found to be Discriminatory

What has Happened?

In the case of Ali v Capita Customer Management Ltd, an Employment Tribunal had to decide whether not paying a father enhanced shared parental pay, when it would have paid a female employee enhanced maternity pay, was sex discrimination.

Mr Ali, the employee, claimed that because a couple may choose which partner takes leave to care for a child, it was direct sex discrimination for his employer to pay a mother more than a father in respect of that leave. Capita, his employer, argued that Mr Ali could not compare himself to a female employee entitled to enhanced maternity pay because only women can take maternity leave and only they can give birth. It also argued that Mr Ali could not take any account of the special treatment afforded to women in connection with pregnancy and childbirth.

In the event, the Employment Tribunal upheld Mr Ali’s complaint of direct sex discrimination.

It was accepted by both parties that the initial compulsory maternity leave period of two weeks was specifically associated with recovery after childbirth and therefore was unique to the mother. The Tribunal considered, however, that after this two-week period, Mr Ali could compare his treatment with that of a hypothetical female colleague on maternity leave. She would be entitled to full pay for 14 weeks, while he was only entitled to statutory pay. Mr Ali wanted to carry out a caring role which was not exclusive to the mother, so equality of treatment required the same pay for carrying out the same role.

Why Does This Matter to Me?

At first sight, this decision may seem worrying for employers, but it is far from certain that the decision will survive on appeal. Both men and women can share parental leave, so it is strongly arguable that the correct comparator is a female colleague taking shared parental leave and not a woman taking maternity leave. In the meantime, while employees looking for parity with enhanced maternity pay may refer to this decision, it is not itself binding because it is only an Employment Tribunal decision. In addition, to the extent that indirect discrimination arguments are made in the alternative, it may be possible to address those by showing objective justification for any discrepancy in pay arrangements. Employers in the UK may though wish to take the opportunity to review their family leave arrangements and consider afresh their justifications for any differences in entitlements.

The Taylor Review on Modern Working Practices

What has Happened?

In late 2016, the UK Prime Minister commissioned Matthew Taylor, the Chief Executive of the Royal Society of Arts, to undertake an independent review of employment practices in the United Kingdom. A particular focus of the review was to identify how those employment practices in the modern economy might need to change in order to keep pace with modern business models such as those utilised in the gig economy.

The upshot was “Good Work: The Taylor Review of Modern Working Practices” (commonly referred to as the Taylor Review), published this summer.

The Taylor Review contains a wide range of recommendations for changes that could be made to UK employment laws to strike a better balance in the pursuit of what it terms “good work” for all.    

A few of the more interesting recommendations include the following:

• Retaining the current three-tier approach to employment rights and status (namely, employees, self-employed/independent contractors, and a renamed intermediate category of “dependent contractors” to refer to those workers who are neither employees nor truly self-employed)

• Making it easier for people to establish status as a “dependent contractor” (and, therefore, entitlement to core rights) by focusing more on the degree of control exerted by the business

• Maintaining continuity of service where the break in service is less than one month, rather than the current one week

• Increasing the reference period for calculating holiday pay from 12 weeks to 52 weeks

• Allowing workers to receive “rolled up” holiday pay

• Requiring companies above a certain size to publish information regarding their employment model and use of agency worker services

What Will Happen Next?

Criticised by a trade union as being “wishy-washy and full of fluff”, and by many others for having missed the point, the Taylor Review has not been an unqualified success.

In light of the current political uncertainty following the snap General Election and ongoing Brexit negotiations, it remains to be seen if the minority Government will turn its attention to the relevant issues any time soon (or indeed, have the political capital to bring any of the suggested changes to bear).

For now, there is no immediate practical impact of the Taylor Review for business.

Increased Bands for Injury to Feelings Awards in Discrimination Claims

What has Happened?

Following a short consultation exercise held over the summer, the Presidents of the Employment Tribunals in England and Wales and in Scotland issued joint Presidential Guidance confirming that the appropriate bands for injury to feelings awards are as follows:

• A lower band of £800 to £8,400 for less serious cases

• A middle band of £8,400 to £25,200 for cases that do not merit an award in the upper band

• An upper band of £25,200 to £42,000 for the most serious cases, with only the most exceptional cases capable of exceeding £42,000

Why Does This Matter to Me?

The new bands apply to claims presented on or after 11 September 2017 and represent an increase on the previous values. Employers can expect to see these higher amounts claimed in any future discrimination claims.