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ECJ ruling leaves employers unsure on holiday pay claim limits

05 March 2018 by Lydia Newman

ECJ ruling leaves employers unsure on holiday pay claim limits - Read more

Employers face uncertain rulings on holiday pay claims and parental leave pay, as well as new risks for protected conversations

A case due to return to the Court of Appeal has thrown doubt on the limits on workers for making claims of unlawful conduct relating to holiday pay.

Back in November 2017, an important decision had been reached by the European Court of Justice (ECJ), further enhancing the rights of gig economy workers in relation to holiday pay.

Conley King was engaged by The Sash Window Workshop Limited and described in his contract as self-employed. He was paid on commission only, having been engaged by the firm for 13 years.

Although he had taken holiday during this time he had not been paid for annual leave because he was classed as self-employed.

But in the Employment Tribunal, prior to referral to the ECJ, his true status was held to be that of a full-time worker, under section 230 (3) of the Employment Rights Act and Regulation 2 of the Working Time Regulations.

As such he was entitled to holiday pay, in addition to other rights as a worker. King claimed that there had been an unlawful deduction from his wages in relation to his unpaid holiday pay.

The Court of Appeal referred the case to the ECJ in relation to whether King could claim for his accumulated untaken holiday pay for the duration of his time with The Sash Window Workshop.

“There is now doubt over the legal position on claim limitations for unlawful deduction from wages and non-payment of holiday pay”

Under the Working Time Regulations, statutory holiday pay cannot be rolled over into the next holiday year unless the worker was on sick leave and was unable to take their holiday entitlement.

In addition, there is a two-year cap introduced by the government in 2014 for the number of years an employee can retrospectively claim unpaid holiday – although this does not apply to King as he brought his claim before this cap.

Following the Employment Appeal Tribunal decision in the Bear Scotland case, claims are also invalid if there is a gap longer than three months between holiday underpayments.

The ECJ held that Article 7 of the Working Time Directive blocks any national law that prevents a worker from carrying over untaken holiday.

The Court of Appeal will now have to reach a decision for this case and it is likely it will overrule the Employment Appeal Tribunal decision in Bear Scotland on the basis that it is incompatible with EU law.

The courts in future may also comment on the two-year cap implemented by the government and the conflict between this and the Working Time Directive. While we remain part of the EU, British courts will be subject to the decisions of the ECJ.

As a result, there is now doubt over the legal position on claim limitations for unlawful deduction from wages and non-payment of holiday pay, which may result in limitless claims where holidays have not been taken by workers.

Employers with workers or those of questionable employment status should consider their records to determine whether or not there are any risks of a similar claim for untaken holiday entitlement. This will be a particular concern for employers with large numbers of self-employed staff and those
in the gig economy.

Parental leave discrimination

The take-up of shared parental leave from April 2015 has been small, largely because employers are not required to pay enhanced parental leave on a par with any enhanced maternity leave they provide.

This disparity between parental leave and maternity leave pay schemes is currently being challenged on the grounds of sex discrimination against male workers in two cases in the Employment Appeal Tribunal.

The cases of Ali v Capita Customer Management Ltd and Hextall v Chief Constable of Leicestershire Police have been heard in December and January respectively and are awaiting judgment.

Employers should be mindful that policies may need to be updated in line with any ruling.

Partially-protected conversations

A recent legal ruling has gone against the common view that protected conversations with staff cannot be used in any subsequent legal proceedings, because they are protected from disclosure rules.

Employers can enter into protected conversations with their staff under section 111A of the Employment Rights Act 1996 and usually there is no issue with disclosure.

But Graham v Agilitas IT Solutions Ltd, heard in the Employment Appeal Tribunal, showed that when protected conversations reveal grounds for disciplinary action rather than an agreed settlement, the status of the conversations and any related correspondence becomes trickier.

“The appeals tribunal found that the respondent could not choose the elements of the conversations that it wished to waive”

Prior to the case being launched, the claimant entered into protected conversations under the Employment Rights Act with the respondent around ending his employment.

During discussions the respondent realised it had grounds to launch a disciplinary process against the claimant and it used statements made during the protected conversations in this process. In return the claimant argued that the respondent had engaged in inappropriate and bullying behaviour during the same discussions.

The respondent wanted to rely on privilege for part of the conversations. In other words, it wanted to ‘open’ aspects of the conversations to justify the disciplinary action against the employee, while excluding aspects relating to the claimant’s claims.

The appeals tribunal found that the respondent could not choose the elements of the conversations that it wished to waive.

The discussions no longer had protected status, with both the issues pertaining to the disciplinary matter and bullying claims becoming open to enquiry. The matter has been remitted to be heard by the Employment Tribunal.

This case is a reminder that although protected conversations can be immune from disclosure, such privilege may subsequently need to be waived. Employers should also note that protected conversations cannot be relied upon where discrimination is alleged.

Both sides should take care that such conversations remain formal, properly recorded and professionally handled, as they may be subject to future disclosure, whatever the initial intention of the parties.

Unjust demotion, fair dismissal

The Court of Appeal has held that a refusal to undertake any work following an alleged discriminatory demotion can amount to misconduct and may lead to a fair dismissal verdict.

In Rochford v WNS Global Services, Brian Rochford, then vice president for WNS, was incapacitated due to a bad back for around a year. On Rochford’s return to work, the company did not allow him to return to his former duties, but moved him lesser role with reduced responsibilities – albeit on full pay.

At the Employment Tribunal this was found to be disability discrimination. However, the claimant refused to work and was dismissed for misconduct.

“Rochford’s conduct amounted to breach of contract and misconduct, even though he was discriminated against”

The Court of Appeal found that Rochford was not unfairly dismissed. His conduct amounted to breach of contract and misconduct, and this was unaffected by the fact he was discriminated against when he was demoted by WNS.

This was because Rochford did not have the right to refuse to work. He could have resigned and claimed constructive dismissal, or could have continued to work under protest. If this had been the case he might have brought a viable claim.

Employers should always explore reasonable adjustments to roles with staff when they return to work after incapacity absence. The case also shows that employees need to act reasonably and that refusal to work in breach of their employment contract can amount to breach of contract and misconduct – whatever the circumstances.

Employment Tribunal fees

For those companies who have yet to apply, the refund scheme for Employment Tribunal fees paid between 29 July 2013 and 26 July 2017 has now gone live, following an initial pilot scheme.

Refunds can be applied for via the government website using form 2-R, by email or post.

Lydia Newman is an employment solicitor

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