United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR A CLARKE QC (of Counsel) Instructed by: Ms J Ashton Messrs Merricks Solicitors 207-208 Moulsham Street Chelmsford Essex CM2 OLG
For the Respondents	MS R CRASNOW (of Counsel) Instructed by: Ms L Leslie Messrs Irwin Mitchel Solicitors London EC1N 2NS


 


JUDGE PETER CLARK

1. The issue in these combined applications was whether the Applicants, engineering workers supplied to the Ford Motor Company (Ford) by the respective agencies by whom they were engaged, the Respondents, had received the holiday pay to which they were entitled under the provisions of Regulation 16 of the Working Time Regulations 1998. An Employment Tribunal sitting at Stratford in a Reserved Decision promulgated with Extended Reasons on 30 March 2000, held that they had not. Against that Decision the Respondents now appeal.
2. The Tribunal found that each Applicant was a worker within the meaning of Regulation 2. They were therefore entitled to holiday pay under Regulations 13 and 16.
3. It was the Respondent's case that the hourly rate paid to their respective Applicants included elements of payment for sickness absence and holidays and that the Applicants knew of this "rolled-up" rate. The Applicants denied such knowledge. That factual issue as to knowledge was, in each case, resolved by the Tribunal in favour of the Applicants.
4. In these circumstances the real legal issue between the parties came to this. For the Respondents it was contended that if in fact the hourly rate of pay included an element of holiday pay that element must be taken into account in determining whether or not any further holiday pay was due to the Applicants under the Regulations
5. The Applicants' case was that the question was one of contract. Was there a term of each Applicant's contract with the relevant agency that he or she would receive a rolled-up rate of pay to include a holiday pay element.
6. The Tribunal accepted the Applicant's case. They found that since none of the Applicants were told that their hourly rate represented a rolled-up rate of pay there was no contractual term to that effect. Accordingly they were entitled to additional holiday pay under the Regulations. Regulation 16 provides:

"(1) A worker is entitled to be paid in respect of any period of annual leave to which he is entitled under regulation 13, at the rate of a week's pay in respect of each week of leave.

(2) Sections 221 to 224 of the 1996 [Employment Rights] Act shall apply for the purpose of determining the amount of a week's pay for the purposes of this regulation, subject to the modifications set out in paragraph (3).

(3) The provisions referred to in paragraph (2) shall apply -

(a) as if references to the employee were references to the worker;
(b) as if references to the employee's contract of employment were references
to the worker's contract;
(c) as if the calculation date were the first day of the period of leave in question; and
(d) as if the references to sections 227 and 228 did not apply.

(4) A right to payment under paragraph (1) does not affect any right of a worker to remuneration under his contract ("contractual remuneration").

(5) Any contractual remuneration paid to a worker in respect of a period of leave goes towards discharging any liability of the employer to make payments under this regulation in respect of that period; and, conversely, any payment of remuneration under this regulation in respect of a period goes towards discharging any liability of the employer to pay contractual remuneration in respect of that period;"

7. The Tribunal's reasoning which led them to their determination in this case relied on the following propositions:

(1) There was no contractual term, agreed between the parties, that the Applicants would be paid a rolled-up rate.

(2) The definition of a worker was linked to the worker's contract (see Regulation 16(3)).

(3) The effect of the Respondents' argument was to say that, although the Applicants were unaware of and had not agreed to a rolled-up rate the Respondents were now so treating the contractual hourly rate. That amounted to a breach of Regulation 16(4).

8. In advancing the appeal Mr Andrew Clarke QC challenges that chain of reasoning in its entirety. He fully accepts the principal purpose of the Regulations as explained by the Employment Tribunal; it is to prevent workers from sacrificing adequate weekly and annual rest or leave in order to maximise their earnings when employers failed to pay for such rest or leave. But where such payment is in fact made, he submits, the Regulations are not designed to provide for double recovery by the worker.
9. As to the Tribunal's grounds for upholding the complaints he submits:

(1) that, accepting the finding that there was no contractual term providing for a rolled-up rate, that does not answer the question posed by Regulation 16;

(2) the definition of a worker does not assist in resolving that question;

(3) Regulation 16(4) merely provides for the avoidance of doubt that the worker's entitlement to holiday pay under Regulation 16(1) is a minimum entitlement. If he receives contractual remuneration which exceeds the minimum entitlement, that entitlement under the contract is not reduced to the statutory minimum;

(4) The Tribunal has overlooked or at any rate misconstrued the significance and effect of Regulation 16(5), which Mr Clarke prays in aid in support of his submissions. Any contractual remuneration paid to a worker in respect of a period of leave goes towards discharging the liability of the employer owed to the worker under Regulation 16. That must include the holiday pay element in the rolled-up rate, if such element does in fact exist, a factual question on which no express finding is made by the Tribunal.

10. In response, Ms Crasnow submits, as she did successfully below, that the key issue is what was the contractual term as to holiday pay. Since, on the facts as found, the Tribunal accepted that the Applicants were unaware of any holiday pay element in their contractual remuneration there was no agreed contractual term as to holiday pay. That disposes of the matter in favour of the Applicants. They are entitled to additional holiday pay under the Regulations. Any further factual enquiry into whether the Respondent was paying a rolled-up rate, unbeknown to the Applicants, is irrelevant as a matter of law to the question of entitlement to holiday pay under Regulation 16.
11. In our judgment the submissions of Mr Clarke are correct. The key to the answer, in our view, lies in the potential distinction between the total remuneration payable to the worker under the contract and a week's pay as statutorily defined.
12. There is no doubt as to what was the worker's contractual remuneration. It was the total amount paid by the employer. However, that does not answer the question as to whether in fact that remuneration included a holiday pay element. If it did then applying Regulation 16(5), any element of that remuneration attributable to holiday pay must be stripped out. That will have two effects.

(a) a week's pay is less than the total contractual remuneration paid in a week, and

(b) the difference representing the holiday pay element, must be set against the number of weeks pay to which the worker is entitled under Regulation 13.

13. Mr Clarke submits that the Tribunal, albeit not expressly, in effect accepted that the Respondents did pay the rolled-up rate and that accordingly we should allow the appeal and dismiss these complaints. We are not satisfied that they did, impliedly, make that finding. On the contrary, it appears to us that having accepted the Applicants' analysis of the statutory provisions the factual question as to whether a rolled-up rate of remuneration was paid became irrelevant to their consideration. In these circumstances we shall allow the appeal and remit the matter to a fresh Employment Tribunal for determination of the complaints in the light of this judgment and on the basis of the factual findings of the first Tribunal, summarised at paragraphs 7.1 and 7.2 of their Reasons, to the effect that the Applicants had not agreed, indeed had not been informed, that their rate of pay included a holiday pay element. The factual question, to be determined by the next Tribunal, is whether, in each case, the Applicant was in fact paid a rolled-up rate. If so, credit for the holiday pay element in that rolled-up rate must be given under Regulation 16(5) against the Respondents' liability to make payments under Regulation 16.