United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	Mr Peter Edwards (of Counsel) Instructed by: Rowley Ashworth Suite1B Joseph's Walk Hanover Walk Leeds LS 3 1AB
For the Respondent	Mr Fergus McCombie (of Counsel) Instructed by: Exel plc Legal Department Ocean House The Ring Bracknell Berkshire RG12 1 AN


 


SUMMARY

Calculation of holiday pay- did the appellants have normal working hours? Employment Tribunal said "yes". Employment Appeal Tribunal allowed appeal as the appellants did not have "fixed hours of work".


 


THE HONOURABLE MR JUSTICE SILBER

I. Introduction

1. This appeal by Michael Sanderson and Charles Griffin ("the appellants") relates to the manner in which their holiday pay should have been calculated by their employers Exel Management Services Ltd ("the respondents"). The particular issue on which the outcome of this appeal depends is whether the appellants had "normal working hours" within the meaning of sections 221 to 224 of the Employment Rights Act 1996 ("the 1996 Act"). By a decision sent to the parties on 14 December 2005, an Employment Tribunal sitting in Sheffield held that the two appellants did have "normal working hours". The appellants appeal on the basis that they did not work "normal working hours". This appeal is apparently a test case for some 6,000 workers, who are or were employed under similar provisions by the respondents.

II. The Statutory Background

2. Under Regulation 30 (1) of the Working Time Regulations 1998 ("the Regulations"), a worker may present a complaint to an Employment Tribunal that his employer has failed to pay him the whole or any part of any amount due to him under regulation 16 (1).
3. By Regulation 16 (1) of the Regulations, it is provided (with our emphasis added) that:

"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"

4. Regulation 16 (2) states (with our emphasis added) that:

"Sections 221 to 224 of the [1996 Act] shall apply for the purpose of determining the amount of a week's pay for the purposes of this regulation [subject to modifications which do not apply in this case]".

4. In order to determine what constitutes "a week's pay", it is important to ascertain if there were any "normal working hours" for the particular employee because the formula in the 1996 Act for determining "a week's pay" depends on the answer to that question. In summary, if an employee has "normal working hours", then the calculation of "a week's pay" for him is determined by the application of sections 221 to 223 of the 1996 Act while if the employee does not have "normal working hours", the calculation of "a week's pay" for him is calculated in accordance with section 224 of the 1996 Act.
5. In Bamsey and Others v Albon Engineering and Manufacturing Plc [ 2004] IRLR 457, it was held by the Court of Appeal that Regulation 16 (1) of the Regulations which, as I explained in paragraph 3 above, is the basis of the appellants' claims,

"32…clearly incorporates, for the purpose of determining a week's pay... also the interpretation of "normal working hours" in sections 234..."

(page 463 per Auld LJ with whom May and Jacob LJ agreed)

6. It is common ground that the "normal working hours" of an employee can be ascertained in some cases first from a relevant contractual term or second from the number of hours actually worked by employees or third by applying section 234 of the Act. Both Mr Peter Edwards counsel for the appellants and Mr Fergus McCombie, counsel for the respondents, agree, correctly in our view, that in this case the question of whether there were "normal working hours" depends solely on the construction of section 234 of the 1996 Act because first there were no relevant contractual provisions in this case and second there were no findings of the Employment Tribunal or evidence adduced concerning the actual number of hours worked by the appellants. In other words, if section 234 of the 1996 Act does not show that the appellants had "normal working hours", then it is common ground that he must be regarded as not having "normal working hours". Indeed in Bamsey (supra), Auld LJ explained at page 460 that:

"9….although section 234 is expressed as if overtime was its focus, its effect is to equate 'normal working hours' with those done and which are 'fixed' by the contract of employment, whether or not including over-time"

7. Thus, the issue on this appeal depends on the application of section 234 (1) of the 1996 Act, which provides, with our emphasis added that:

"Where an employee is entitled to overtime pay when employed for more than a fixed number of hours in a week or other period, there are, for the purposes of this Act normal working hours".

8. So the answer to the question of whether the appellants had "normal working hours" depends on whether they were employed for "a fixed number of hours in a week". In other words the appellants would only have had "normal working hours" if they were employed for "a fixed number of hours in a week". Indeed, it is common ground that the issue on this appeal can be refined to determining whether the appellants were employed for "a fixed number of hours in a week" because if they did, then the Employment Tribunal was correct but if they were not, the appellants did not have "normal working hours" and the Employment Tribunal's decision was wrong. As we will explain shortly in greater detail, the case for the appellants is that the words "normal working hours" mean fixed actual hours while the respondents contend that those words can also mean genuine pre-estimates of the actual hours worked. The precise nature of this dispute will become clearer after we have set out the relevant facts which we will now do.

III. The Facts

9. The Employment Tribunal found in its Reasons that:

"19.2 Both [appellants] were subject to the terms and conditions of employment [which].... were agreed following negotiations with the employees' trade unions

19.3. These terms provide a standard hours contract which gave the [appellants] a basic 40 hour week and which set out rates of pay for overtime, shift pay and for different types of work.

19.4. Whilst the terms and conditions set out overtime rates there was no obligation on the [appellants'] part to undertake overtime nor was there any obligation on the part of the [respondents] to provide it.

19.5. The terms and conditions also set out the basis on which drivers would receive enhanced pay after working 40 hours. These hours, it was agreed, were 'production hours'.

19.6. Drivers were paid at different rates dependent on the task they were obliged to undertake. Accordingly their remuneration, depending as it did upon the tasks allocated to them and over which the [appellants] had no direct control, varied from week to week.

19.7. The [appellants] were required under their terms and conditions of employment to make themselves available for early attendance at work. For this they would be paid at the rates specified within those terms and conditions.

19.8. The terms and conditions of employment set out a fixed rate of payment in respect of holiday pay".

10. It is important to stress that the hours for which the appellants were paid did not depend on the actual hours worked but were based on what were described as "production" hours, which were a form of notional or deemed hours calculated on the basis of set formulae by which certain tasks were deemed to take certain periods of time, irrespective of how long they actually took. There was according to the appellants, one exception, which was that the early shift premium was based on the actual number of hours worked.
11. According to the evidence of Anne Moorby of the respondents, the pay of the appellant drivers was made up of two elements of which the first was a productivity calculation under which for each fifty kilometres covered by a driver a payment was made equating to one hour's pay irrespective of how long that driving took. Anne Moorby also explained that the second element of the appellant drivers' pay was described as "terminal loading times" by which each product transported had a pre-determined loading and unloading period allocated to it and that this period had been calculated on the estimated length that it would take for that task to be completed irrespective of how long it actually took.
12. The evidence of Mr Sanderson, which was accepted by the Employment Tribunal, was that he had estimated that he received pay for between 90 and 110 production or notional hours a week on average whereas of course he actually worked far fewer hours. Mr Sanderson would have received pay at the standard rate for the first eight hours deemed to have been worked and he would then be paid time and half for the remaining production hours or notional hours. The contractual terms of the appellants stated that "Basic hourly rates per week are 40" but Ms Moorby explained in evidence, as recorded by the Employment Tribunal (with its underlining) that "in situations where drivers return to their depot having completed more productivity hours worked than actual hours they are expected to assist with any other work required to be done". Her evidence was that the work of the drivers, such as the appellants was assigned on a daily basis by the traffic planner.
13. All this material shows first that the pay of the appellants was based on "productivity" or notional hours worked and not on actual hours worked and second that the actual working hours of the employees were not definitely specified because the basic 40 hours were "productivity" or notional hours but subject to the exceptions specified in the last paragraph. Indeed, the Employment Tribunal did not make any findings about the precise number of actual hours, the appellants were obliged to work or actually did work each week.
14. On the issue of whether the "productivity" or the notional hours were still a correct estimate of the time taken for various jobs, Anne Moorby explained in paragraph 11 of her witness statement that:

"Since the pay structure was devised by the client, technology had advanced so that the actual time required to complete each task has reduced significantly. Using the examples stated above, Sulphuric Acid is paid at 1.5 hours to load but now only takes a maximum of 30 minutes to complete. Therefore the hours booked are not necessarily a true representation of the hours worked".

15. Thus the position is that now some 10 years or so after those productivity or notional hours were calculated, they are no longer a genuine pre-estimate of the tasks for which they are selected. Moreover the position in respect of driving times is that the pay is not linked to the time spent completing the journey but to the length of the journey, as I explained in paragraph 12 above. That means that pay for this work is not based on the number of hours worked but on the notional "productivity" hours calculated in the way Ms Moorby explained.
16. The Employment Tribunal's conclusion was that:

"34. From our findings of fact we have concluded these [appellants] had normal working hours".

17. The approach of the Employment Tribunal supported by the respondents on this appeal is that the appellants were employed for "a fixed number of hours in a week or other period" as specified in section 234 (1) of the 1996 Act
18. Mr Edwards for the appellants disagrees and he contends that the words "fixed number of hours" mean the fixed actual number of hours for which the employee was employed and not the notional hours or to use the terminology adopted in this case of "production hours". Thus he says that the appellants were not employed for "a fixed number of hours".
19. In his submissions to us Mr McCombie initially contends that those words "fixed hours" could include not only "fixed number of hours", but that they could also cover "notional hours". He later accepted correctly in our view that this interpretation could not be right. Instead he submitted that the phrase "a fixed number of hours" could include a genuine pre-estimate of the actual number of hours worked.
20. In our view, four factors individually and cumulatively lead us to the conclusion that the words "fixed number of hours" means actual fixed hours as contended by Mr Edwards and not a notional number of hours even if it was a genuine pre-estimate.
21. First, the word "fixed" is defined in the Shorter Oxford English Dictionary (1993 edition; Volume 1 page 962) as meaning among other things "definite", which supports the appellants' submission. So the employee has to be employed for a definite number of hours if he is to have "normal working hours". The respondents contend for a meaning of "fixed" which is not "definite" and which is not in accordance with any definition of the word "fixed" in the dictionary.
22. Second, if the draftsman of section 234(1) of the 1996 Act wanted to ensure that the provision only related to actual hours worked and not any form of notional or pre-estimated hours, he is likely to have considered that the words "fixed hours" would be the appropriate wording bearing in mind the dictionary meaning of the word "fixed" as including "definite".
23. Third, if Mr McCombie is right it would be necessary to redraft section 234 (1) so that it would read with the new words in italics:

"Where an employee is entitled to overtime pay and employed for more than a fixed number of hours or for any other period which is a genuine pre-estimate of the number of hours he actually works in a week or other period, there are for the purposes of this Act normal working hours in this case"

24. Fourth, there is no cogent reason put forward as to why this new wording should be adopted or should reflect the intention of Parliament. For the purpose of completeness, even if the respondents' approach was to be adopted, it would not assist the respondents because as we have explained the number of "production" hours is no longer a genuine pre-estimate of the length of time a particular task takes. Even on the respondent's case they would not be assisted by this construction.
25. For the purpose of completeness if the case for the respondent was that the words "fixed hours" included a genuine pre-estimate of the work which the employee had in the past worked at any particular time, this construction would have to be rejected for the reasons set out in paragraphs 22 to 25 above.
26. Thus the appellant's contentions are accepted and the appellants were not employed for " ...a fixed number of hours". We should explain that both counsels agree correctly in our view that we should not attach any importance to the correspondence with the Chairman of the Employment Tribunal, which took place after the decision was given because the views that were expressed in that correspondence were those of the Chairman himself rather than the views of the Employment Tribunal.
27. Finally, it has been agreed that if this appeal were to be allowed, the only order that we should make would be to allow the appeal on the basis that the two claimants did not work "normal working hours". We so order.