United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR P NICHOLLS (of Counsel) Instructed by: Messrs Robbins Olivey Southern House Guilford Road Woking Surrey GU22 7UY
For the Respondent	MS M FAGBORUN (of Counsel) Instructed by: Free Representation Unit 6th Floor 289-293 High Holborn London WC1V 7HZ

SUMMARY

Contract of Employment: Sick Pay & Holiday Pay

In the light of the decision of the Court of Appeal in Commissioners of Inland Revenue v Ainsworth & Others Mr Everritt is not entitled to holiday pay for the two leave years prior to the year in which his employment was terminated. He may, depending on the amount of leave he took prior to termination, be entitled to a payment in lieu of leave in respect of the leave year in which his employment was terminated. Appeal allowed and case remitted to Tribunal in respect of the claim under the Working Time Regulations.


 


HIS HONOUR JUDGE RICHARDSON

1. This is an appeal by Apex Masonry Contractors Ltd ("AMC") against a decision of the Employment Tribunal sitting at London (South) on 5 April 2004. The Tribunal held that Mr Dean Everritt had been an employee of AMC, that he had been dismissed, that the dismissal was unfair, and that he was entitled to holiday pay. The Tribunal awarded him compensation for unfair dismissal in the sum of £3,016 and holiday pay in the sum of £6,220.
2. There are three limbs to AMC's appeal. Firstly, AMC appeals against the finding that Mr Everritt was an employee. This ground of appeal was first raised by an amended Notice of Appeal for which permission was given on 28 October. Secondly, AMC appeals against the finding that Mr Everritt was dismissed. Thirdly, AMC appeals against the award of holiday pay.
3. In a judgment delivered on 9 February 2005 we dealt with the first two limbs of the appeal. We allowed the appeal on the first limb. We held that the question whether Mr Everritt was an employee would have to be re-considered at Tribunal level. We dismissed the appeal on the second limb. If Mr Everritt was an employee, and was told there was no more work for him, the Tribunal was entitled to find that he was dismissed.
4. For reasons which we set out in our judgment we stayed the third limb of the appeal, concerning holiday pay, pending the decision of the Court of Appeal in Commissioners of Inland Revenue v Ainsworth & Others. We gave directions for further written submissions following that decision.
5. The decision of the Court of Appeal has now been given under the name Inland Revenue Commissioners v Ainsworth & Others (2005) ICR 1189. We have received written submissions from both parties. We therefore now give judgment on the remaining limb of the appeal.
6. The Tribunal found the following relevant facts. Mr Everritt began work with AMC as a bricklayer on 14 February 2001. He did not sign any terms or statement of conditions at that time. A statement entitled "terms and conditions for services", which provided for rolled up holiday pay, was not applicable to him. He worked regularly for AMC. He never received any holiday pay. The relationship between them ended on 21 October 2003.
7. The Tribunal made an award to Mr Everritt in respect of holiday pay under section 27(1)(a) of the Employment Rights Act 1996, which relates to unlawful deductions from wages. It awarded a full 4 weeks for the years ending 14 February 2002 and 14 February 2003. It awarded a proportionate amount for the part year from 15^th February 2003 to 21 October 2003. The total award was £6220.
8. It is common ground that the awards in respect of the years ending 14 February 2002 and 14 February 2003 cannot stand in the light of the decision of the Court of Appeal in Ainsworth. The Court of Appeal held that claims to enforce entitlement to holiday pay provided by the 1998 Regulations could only be pursued as applications under regulation 30 of those Regulations, and not as claims for unlawful deduction of wages under the 1996 Act. In so holding the Court of Appeal overruled the decisions of this Appeal Tribunal in List Design Group v Douglas (2002) ICR 686 and Canada Life Ltd v Gray (2004) ICR 673. Mr Everritt's claim in respect of those two years cannot succeed under regulation 30 of the 1998 Regulations because it is out of time: see r.30 (2). To that extent, therefore, the appeal must be allowed.
9. As to the period ending 21 October 2003, however, Mr Everritt's claim under regulation 30 of the 1998 Regulations was not necessarily out of time. His application was submitted on 12 January 2004. So he would certainly be entitled to claim any payment which was due to him "in lieu of leave" under regulation 14 of the 1998 Regulations. This, as submissions on Mr Everritt make clear, is the remaining claim for holiday pay he wishes to pursue.
10. Regulation 14 of the 1998 Regulations provides –

(1) This regulation applies where –

(a) a worker's employment is terminated during the course of his leave year and

(b) on the date when the termination takes effect ("the termination date") the proportion he has taken of the leave to which he is entitled in the leave year under regulation 13 differs from the proportion of the leave year which has expired.

(2) Where the proportion of leave taken by the worker is less than the proportion of the leave year which has expired, his employer shall make him a payment in lieu of leave in accordance with paragraph (3).

(3) The payment due under paragraph (2) shall be –

………

(b) where there are no provisions of a relevant agreement which apply, a sum equal to the amount which would be due to the worker under regulation 16 in respect of a period of leave determined according to the formula (A x B) – C

Where –

A is the period of leave to which the worker is entitled under regulation 13

B is the proportion of the worker's leave year which expired before the termination date

C is the period of leave taken by the worker between the start of the leave year and the termination date.

11. The purpose of regulation 14 is clear. Where a worker's employment is terminated during the course of a leave year, the worker may not have been able to take any, or a rateable proportion, of the annual leave which the Act entitles him to have. Regulation 14 remedies the potential injustice in a rough and ready way: it affords the worker a payment in lieu of leave – but only to the extent that he has not taken up a rateable part of his leave entitlement.
12. We add, for the avoidance of doubt, that a worker is entitled to a payment under regulation 14(2) whether or not he has been able to give notice under regulation 15 by the time of termination. The whole point of regulation 14 is to deal with the potential injustice that a worker may lose his opportunity to take leave because his employment is terminated during the currency of the leave year. It would therefore be absurd to read the notice provisions of regulation 15 into regulation 14. If, which we doubt, the submissions of APM were intended to argue the contrary, we have no hesitation in rejecting them.
13. In paragraph 12 of its Decision the Tribunal calculated the payment which it ordered for the period up to 21 October in the following way.

"For the proportion of the holiday year from 15 February 2003 to 21 October 2003 – 8 ¼ months and on basis that the average days worked/money earned per week over last 12 weeks was 4 days/£560 therefore the holiday entitlement for the proportion of the last holiday year worked is 8.25/12 x 4 x 560 = £1540".

14. When calculating payment in this manner, the Tribunal was exercising its jurisdiction under section 23 of the Employment Rights Act 1996 (unlawful deduction from wages). Consequent upon Ainsworth this is no longer the correct approach. The Tribunal should have adopted the formula set out in regulation 14(3) of the 1998 Regulations.
15. Applying this formula, it is not difficult to establish A and B. As to A, Mr Everritt was entitled to 4 weeks' annual leave. As to B, the proportion of the leave year which had expired before the termination date was roughly 8 ¼ / 12, as the Tribunal stated. But the Tribunal made no findings as to C – that is to say, the leave which Mr Everritt had actually taken during the period in question. This has to be deducted in applying the formula. Only when findings are made as to the leave actually taken by Mr Everritt can it be seen whether a payment was due from APM to Mr Everritt under regulation 14(2), and if so how much.
16. For these reasons we consider that the award under section 23 of the Employment Rights Act 1996 set aside, and the matter remitted to the Tribunal for the Tribunal to consider the claim for holiday pay in accordance with the Working Time Regulations 1998 and the guidance given in this judgment.

Conclusions

17. Our overall conclusions on the two parts of the appeal may therefore be stated as follows. The appeal is allowed in two respects. Firstly, it is allowed to the extent of setting aside the Tribunal's finding that Mr Everritt was an employee of AMC and remitting that question to the Tribunal. Secondly, the award under section 23 of the Employment Rights Act 1996 is set aside, and the matter remitted to the Tribunal for the Tribunal to consider the claim for holiday pay in accordance with the Working Time Regulations 1998 and the guidance given in this judgment. Otherwise the appeal is dismissed. If the Tribunal which previously heard this case can be reconstituted, we see no reason why it should not deal with the matter.