Bear Scotland Ltd & Ors -v- Fulton & Ors (Working Time Regulations : Holiday pay), Court of Appeal - United Kingdom Employment Appeal Tribunal, November 04, 2014, [2014] UKEAT 0047_13_0411

Resolution Date:November 04, 2014
Issuing Organization:United Kingdom Employment Appeal Tribunal
Actores:Bear Scotland Ltd & Ors -v- Fulton & Ors (Working Time Regulations : Holiday pay)
 
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Copyright 2014

Appeal No. UKEATS/0047/13/BI

UKEAT/0160/14/SM

UKEAT/0161/14/SM

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON, EC4Y 8JX

At the Tribunal

on 30 July - 1 August 2014

Judgment handed down on 4 November 2014

Before

THE HONOURABLE MR JUSTICE LANGSTAFF

SITTING ALONE

(1) BEAR SCOTLAND LTD & OTHERS UKEATS/0047/13/BI APPELLANTS

(2) HERTEL (UK) LTD UKEAT/0160/14/SM

(3) AMEC GROUP LTD UKEAT/0161/14/SM

(1)MR DAVID FULTON AND OTHERS UKEATS/0047/13/BI RESPONDENTS

(2) MR K WOODS AND OTHERS UKEAT/0160/14/SM

(3) MR LAW AND OTHERS UKEAT/0161/14/SM

JUDGMENT

UKEATS/0047/13/BI

UKEAT/0160/14/SM

UKEAT/0161/14/SM

APPEARANCES

For the Intervener MR ADAM TOLLEY QC

(of Counsel)

Instructed by:

Secretary of State for Business Innovation and Skills

Treasury Solicitor's Department

1 Kemble Street

London WC2B 4TS

UKEATS/0047/13/BI

UKEAT/0160/14/SM

UKEAT/0161/14/SM

SUMMARY

WORKING TIME REGULATIONS: HOLIDAY PAY

DAMAGES FOR BREACH OF CONTRACT

UNLAWFUL DEDUCTION FROM WAGES

The EAT held that Article 7 of the Working Time Directive is to be interpreted such that payments for overtime which the employees in two appeals before it were required to work, though which their employer was not obliged to offer as a minimum, is part of normal remuneration and to be included as such in the calculation of pay for holiday leave taken under regulation 13 of the Working Time Regulations 1998. Those Regulations could be interpreted so as to conform to that interpretation.

An appeal by Bear Scotland was thus rejected, as were (on these issues) appeals by Hertel and Amec.

A further appeal by Hertel and Amec against the ET's findings that the Claimants could claim the consequent arrears of pay as being unlawful deductions from their pay under the ERA 1996 (on the basis that on each occasion holidays were not paid in accordance with the true interpretation of Article 7 and the WTR the deduction was one of a series of deductions) was allowed insofar as in any case a period of more than three months elapsed between such deductions. Their appeal against a conclusion that contractual payments for PILON should include payment for 44 hours per week (including 6 hours overtime) also succeeded, upon a construction of the relevant contractual provisions.

A cross-appeal by the Claimants in Hertel and Amec succeeded against the ET's decision that taxable remuneration for time spent travelling to work did not fall within ``normal remuneration'' for the purpose of calculating holiday pay.

UKEATS/0047/13/BI

UKEAT/0160/14/SM

UKEAT/0161/14/SM

-30-

THE HONOURABLE MR JUSTICE LANGSTAFF (PRESIDENT)

Introduction

  1. These appeals arise in test cases concerning the calculation of holiday pay. The appeal by Bear Scotland is against a decision by Employment Judge Kearns, in Glasgow, who found that Bear Scotland (which carries out road construction and maintenance of Scottish roads) had made unauthorised deductions from the wages of two employees, David Fulton and Douglas Baxter, by failing to include overtime and other payments associated with their work in calculating the holiday pay due to them. The appeal by Hertel (UK) Ltd (``Hertel'') and AMEC Group Ltd (``Amec''), two separate companies, is against a decision by Employment Judge Camp (corrected reasons for which were sent out on 11th. March 2014) that each had made unauthorised deductions from the wages of their employees working on a construction site at West Burton in England by failing to include overtime when calculating the holiday pay due to them, and failing in breach of contract to pay them full pay in lieu of notice (``PILON'') when their employment ended. Since the central issues in the cases raised the same issues of principle, they were heard together.

  2. A third appeal (Freightliner v Neal), against a third decision to similar effect, was conjoined with the two appeals, but settled shortly before the hearing. The Secretary of State for Business, Innovation and Skills intervened in the appeals to support the arguments of the Appellants. Mr Bowers QC and Mr Napier QC for Hertel, Ms Rose QC, Mr Napier QC and Mr Richards for Amec and Mr Napier QC and Mr de Silva for Bear Scotland helpfully provided a joint skeleton argument, and divided up the issues between them, each adopting the others' submissions on those issues they did not themselves address orally. Mr. Tolley QC appeared for the Intervener. The Claimants in Hertel and Amec were represented by Mr. Ford QC and Mr. Whitcombe; Mr. Fulton and Mr. Baxter by Mr. Ed Morgan.

  3. The right to a paid holiday is provided for by the Working Time Regulations (``WTR'') 1998. These implement within the United Kingdom what is now provided for by the Working Time Directive of 4th November 2003 (2003/88/EC, replacing Directive 93/104/EC) (the ``WTD''). Article 7 of the WTD provides:

    ``Member States shall take the measures necessary to ensure that every worker is entitled to paid annual leave of at least four weeks in accordance with the conditions of entitlement to, and granting of such leave laid down by national legislation and/or practice.

    2) The minimum period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated.''

  4. In British Airways plc v Williams (``Williams'') the Claimants, airline pilots, sought pay in respect of their annual leave which consisted of three elements: first a proportionate part of the fixed annual sum paid for their services, secondly a supplementary payment which varied according to the time spent flying, and thirdly an allowance in respect of time spent away from base, each element of which was separately and specifically remunerated when not on leave. Although the Employment Tribunal, and the Appeal Tribunal (at [2008] ICR 779) found in favour of the Claimants, the Court of Appeal (at [2009] ICR 906) took the view that under the Civil Aviation (Working Time) Regulations 2004 (which implement Council Directive 2000/79/EC, relating to mobile staff in civil aviation, which includes the same provisions on annual leave as does WTD) only the fixed annual sum, applied on a pro rata basis, was payable for periods of annual leave.

  5. The Claimants appealed to the Supreme Court which referred the questions to the Court of Justice of the European Union whether under Article 7 of Directives 93/104 and 2003/88 and clause 3 of the European Agreement annexed to Directive 2000/79 (an agreement which related to mobile workers), and to what extent, if any, European law defined or laid down any requirements as to the nature and level of payments required to be made in respect of paid annual leave and to what if any extent Member States might determine how such payments were to be calculated.

  6. The CJEU responded by saying (paragraph 19):

    ``...the Court has already had occasion to state that the expression ``paid annual leave'' in Article 7(1) of Directive 2003/88 means that for the duration of ``annual leave'' within the meaning of that Directive, remuneration must be maintained and that, in other words, workers must receive their normal remuneration for that period of rest: see Robinson-Steele v R D Retail Services Ltd [2006] ICR 932... para. 50 and Stringer v Revenue and Customs Commissioners... [2006] ICR 932 para. 60''

  7. The purpose of requirement of payment for that leave is to put the worker, during such leave, in a position which is, as regards remuneration, comparable to periods of work: see Robinson-Steele para. 58 and Stringer para. 60.

  8. As the Advocate General states in point 90 of her opinion, it follows from the foregoing that remuneration paid in respect of annual leave must, in principle, be determined in such a way as to correspond to the normal remuneration received by the worker. It also follows that an allowance the amount of which is just sufficient to ensure that there is no serious risk that the worker will not take his leave, will not satisfy the requirements of European Union Law.

  9. However, where the remuneration received by the worker is composed of several components, the determination of that normal remuneration and, consequently, of the amount to which that worker is entitled during his annual leave requires a specific analysis. Such is the case with regard to the remuneration of an airline pilot as a member of the flight crew of an airline, that remuneration being composed of a fixed annual sum and variable supplementary payments which are linked to the time spent flying and to the time spent away from base.

  10. In that regard, although the structure of the ordinary remuneration of a worker is determined, as such, by the provisions and practice governed by the law of the Member States, that structure cannot affect the worker's right referred to in para. 19 of the present judgment, to enjoy, during his period of rest and relaxation, economic conditions which are comparable to those relating to the exercise of his employment.

  11. Accordingly, any inconvenient aspect which is linked intrinsically to the performance of the tasks which the worker is required to carry out under his contract of employment and in respect of which a monetary amount is provided which is included in the calculation of the worker's total remuneration such as, in the case of airline pilots the time spent flying, must necessarily be taken into account for the purposes of the amount to which the worker is entitled during his annual leave.

  12. By contrast, the components of the worker's total remuneration which are intended exclusively to cover occasional or ancillary costs arising at the time of performance of the tasks required to carry out under his contract of employment, such as costs connected with the time that pilots have to spend away from base, need not be taken into account in the calculation of the payment to be made during annual leave.

  13. In that regard, it is for the national court to assess the intrinsic link between the...

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