Still Sick of the Working Time Regulations? - Where are we now after the decisions in Stringer and Pereda?
A talk to the Employment Lawyers Association
In Birmingham on 26 May 2010
INTRODUCTION
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Where are we now after the decisions in Stringer and Pereda? I posed this question almost exactly six months ago in a talk given to ELA members in London. At the time I took the view that the question would have different answers for different groups of people. Employers might be worried. Employees might be optimistic. Lawyers hoped to be busy. What was and undoubtedly remains true is that the decisions of the ECJ and the House of Lords answer a number of questions, sidestep others and pose still more.
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Six months on, surprisingly little has been clarified. My own experience suggests that many employers and employees have preferred to settle what are often low-value claims rather than risk the uncertainty of appellate litigation.
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This talk will consider:
what the decisions say about the operation of the Working Time Directive; what impact they have on the interpretation and status of the Working Time Regulations; what their effect is upon existing UK litigation; and what are the prospects for the future. STATUTORY PROVISIONS
The Rights
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The starting point must be the Directive.1 The Regulations were enacted in order to implement the Directive and must be construed so as to give effect to its spirit and intention. Article 7 provides:
7.1 Member states shall take the measures necessary to ensure that every worker is entitled to be paid annual leave of at least four weeks in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice.
7.2 The minimum period of paid annual leave may not be replaced by an allowance in lieu, except when the employment relationship is terminated.
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This very broad obligation has been given effect by means of regulations 13 to 17 of the Working Time Regulations 1988.
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The right to take annual leave is derived from Article 13(1):
Subject to paragraph (5),2 a worker is entitled to four weeks' annual leave in each year.
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The period of four weeks leave has been extended by regulation 13A to provide for a further 1.6 weeks (from 1 April 2009 – or 0.8 weeks from 1 April 2008). This is intended to allow the worker four weeks statutory leave in addition to the eight statutory bank holidays. This provision is not derived from the Directive but it is likely that it will be treated in the same way by the Courts.
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Crucially, regulation 13(9) provides that:
Leave to which a worker is entitled under this regulation may be taken in instalments, but-
(a) it may only be taken in the leave year in respect of which it is due, and
(b) it may not be replaced by a payment in lieu except where the worker's employment is terminated.
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Regulation 17 provides:
Where during any period a worker is entitled to... annual leave both under a provision of these regulations and under a separate provision (including a provision of his contract), he may not exercise the two rights separately, but may, in taking... leave during that period, take advantage of whichever right is, in any particular respect, more favourable.
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The employee can thus elect whether to rely on contractual or statutory entitlements, but cannot separately claim both so as to double her entitlement.
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As to the amount of pay, regulation 16 provides that a worker is entitled to be paid in respect of any period of annual leave to which he is entitled under regulations 13 and 13A at the rate of a week's pay in respect of each week of leave; the starting point being that there should be no loss of basic pay by reason of taking annual leave.3
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As to the dates of the leave, regulation 15 provides that the worker may elect when to take leave (by giving notice pursuant to regulation 15(1)), subject to the right of the employer to give notice (pursuant to regulation 15(2)) requiring leave to be taken (or not taken) on specific days.
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Finally, regulation 14 provides for payment in lieu of annual leave not taken at the date of termination of employment.
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Note that "worker" is defined widely by regulation 2 as:
"an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment..."
The Remedies
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Regulation 30 provides that the remedy for a failure to allow the employee to take annual leave to which they are entitled is that the tribunal:
(a) shall make a declaration to that effect;
(b) may make an award of compensation to be paid by the employer to the worker.4
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The amount of the compensation is what the tribunal considers to be just and equitable in all the circumstances having regard to the employer's default in refusing to permit the worker to exercise his right and any loss sustained by the worker.
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The remedy for failing to make a payment in respect of periods of annual leave under regulations 14 or 16 is that the tribunal,
shall order the employer to pay to the worker the amount which it finds to be due to him.5
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Thus the remedy for failing to allow the worker to take leave is by way of compensation to be assessed; the remedy for failing to pay is by way of an order to repay a debt.
BACKGROUND – EARLIER CASE LAW
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Before the decision in Stringer, the EAT had grappled on a number of occasions with the question of when a worker could claim arrears of holiday pay. For reasons identified below, the cases are of more than historical interest.
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In List Design v Cantley 6 and Canada Life v Gray 7 the EAT held (in the context of claims under regulation 16) that,
"it is unnecessary for actual holiday to be taken to claim arrears of holiday pay".
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The EAT in Kigass Aero Components v Brown8 found that,
"an entitlement to annual leave arises under reg. 13(1) if a claimant is or has been a "worker" during the whole or part of a leave year. Nothing more is required. There is no requirement that in order to be a "worker" some work needs to have been done. There is no express provision in the Regulations that annual leave is, and is only, leave to be absent from what would otherwise have been "working time".
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However, it went on to conclude that the right to claim holiday pay only accrued when the leave was applied for and "duly taken". That conclusion is plainly inconsistent with List Design and Canada Life.
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These decisions have been subjected to less judicial scrutiny than they might have been since a large number of claims were stayed behind Stringer, which was heard in the Court of Appeal in 2005.9 The EAT's decisions will no doubt be revisited in the near future, and almost certainly by the Court of Appeal. I consider them further below.
STRINGER IN THE ECJ
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The case was referred to the ECJ before it came before the House of Lords and decided the crucial questions whether a worker is entitled to paid annual leave while on sick leave; and correspondingly whether she is entitled on termination to pay in lieu of annual leave untaken while on sick leave.
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The Court began by noting that
"the entitlement of every worker to paid annual leave must be regarded as a particularly important principle of Community social law from which there can be no derogations..."
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The significant weight which the Court attaches to the right is reflected in...
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