United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR C YARROW In Person
For the Respondent	MR P BEARD Representative


 


SUMMARY

WORKING TIME REGULATIONS

Holiday Pay

Appeal allowed against Chairman's order dismissing complaint without considering all information supplied by parties (ET Rule 27(6)). Application of working year, rather than calendar year computation of a day's pay for purpose of arrears of pay/holiday pay. Interest on awards made by EAT.


 


HIS HONOUR JUDGE PETER CLARK

1. The Claimant, Mr Yarrow is a chartered accountant. He was employed by the Respondent firm of Accountants from 24 July until 6 September 2006. Following termination of the employment a dispute arose between the parties as to the amount of monies then owed by the Respondent to the Claimant. So the Claimant brought proceedings in the Bury St Edmunds Tribunal claiming a total sum of £704.01.
2. By a response lodged on 20 November 2006 the Respondent set out their calculation. On the face of it they accepted that there was a balance due to the Claimant of £350.68.
3. Having received that response the Claimant promptly wrote to the Employment Tribunal a letter dated 21 November. He there contended that in the Respondent's calculation holiday pay entitlement had been rounded down, and that the daily rate of pay had been wrongly calculated on the basis of a 365 day calendar year as opposed to the number of days actually worked in a year. He also referred to an alleged discrepancy between the salary paid total in the Respondent's calculation and that stated on his form P45 issued to him by the Respondent. He contended that on a proper calculation based on the Respondent's figures the Respondent owed him £600.47. Receipt of that letter was acknowledged by the Employment Tribunal Secretariat on 30 November.
4. That was a state of play when the matter came on for hearing before a Chairman, Mr C R Ash, sitting alone on 22 December 2006. On that day Mr Tully, a partner in the Respondent firm attended; the Claimant did not. In the absence of the Claimant the Chairman dismissed his claim by a Judgment with short Reasons dated 26 January 2007.
5. Pausing there, the position where a party fails to attend a hearing is governed by Rule 27 of the Employment Tribunal Rules of Procedure 2004. Rule 27(5) permits the Employment Tribunal either to dismiss or dispose of the proceedings or alternatively to adjourn the hearing.
6. If the Employment Tribunal is minded to take the former course, Rule 27(6) provides that:

"it shall first consider any information in its possession which has been made available to it by the parties."

In this case the information made available by the parties was the Claimant's Form ET1, the Respondent's Form ET3 and the Claimant's letter of 21 November, acknowledged by the Employment Tribunal on 30 November. That letter complies, it seems to me, with the requirement for written representations set out at Rule 14(5).

7. As the Court of Appeal made clear in Roberts v Skelmersdale College [2003] ICR 1127, when considering the earlier Rule 11(3) of the 2001 Rules, the Employment Tribunal has a wide discretion in determining how far it will investigate the merits of the case before dismissing a claim. It need not give 'due' consideration to the documents before it, as the Employment Appeal Tribunal wrongly thought in Roberts.
8. However, it seems clear to me from the wording of Rule 27(6) that the Employment Tribunal must, before dismissing an absent party's claim, consider the information which the parties made available. Looking at the Judgment and Reasons of the Chairman I note 3 points:

(1) In the section headed 'Appearances' it is recorded, correctly that the Claimant was not present or represented and then "(no written submissions)". That indicates to me that the Claimant's letter of 21 November was not taken into account by the Chairman.

(2) although the Chairman considered the claim and submissions by Mr Tully on behalf of the Respondent there is no indication that he considered the Form ET3, else he would have noticed the claim was admitted to the extent of £350.68. Since there was no defence s to that amount it is apparent that the Claimant, on the face of the Response, was entitled to Judgment in that sum.

(3) the Chairman dismissed the claim on the basis that the Claimant was not present to prosecute the claim or to adduce evidence or documents. However, the principal issue between the parties was not one of fact, but of law. Should the daily rate of pay for the purposes of calculating outstanding salary and outstanding holiday pay be based on the 365 day year, pro-rated, or the working year? There is a further issue as to the 'rounding down' of holiday pay days.

9. It is right to say that having received the Chairman's Judgment the Claimant applied from a review on the ground that he had notified the Employment Tribunal he was unable to attend the hearing. That application was refused by the Chairman on the basis that no attempt was made by the Claimant to contact the Employment Tribunal.
10. It is unnecessary for me to resolve that dispute; in my view the Chairman on the face of his original Judgment, fell into error by failing to consider the information provided by the parties, contrary to Rule 27(6), before dismissing the claim. Rather than remit the case for rehearing bearing in mind the sums of money involved it seems to me that it is proportionate for me to deal with the matter on the material as it was before the Chairman.
11. I can first deal shortly with the point on accrued holiday pay, payable following termination of employment under Regulation 14(2) of the Working Time Regulations 1998. It is common ground that the proportionate days holiday outstanding is between 2 and 3 days. The Respondent in its calculation rounded that down to 2 days on the Form ET3. However, by Regulation 13(6), as Mr Yarrow submits, any fraction of a day shall be treated as a whole day. Consequently I accept his submission raised as item (1) in his letter of 21 November 2006 that his correct entitlement is to 3 days holiday pay.
12. Turning then to the principal issue between the parties, is the daily rate of pay to be calculated on the basis of a 365 day year or a working year?
13. In Thames Water Utilities v Reynolds [1996] IRLR 187 (EAT), a case on which I sat, decided before the Working Time Regulations were introduced, we held that in calculating a day's pay for the purposes of calculating outstanding holiday pay on termination of employment the Apportionment Act 1870, Section 2 applied and the relevant calculation should be based on a calendar year, not a working year.
14. However, following the introduction of the Working Time Regulations the point arose again before a different division of the Employment Appeal Tribunal presided over by His Honour Judge Wilkie QC, as he then was, in Leisure Leagues UK Ltd v Macconnachie [2002] IRLR 600. That division considered Reynolds and the effect of the advent of the Working Time Regulations.
15. At paragraph 5 Judge Wilkie said this:

"5. On the face of it, therefore, it might be thought that this was an appeal with an arguable prospect of success. It is, however, the strong view of the lay majority members of this Tribunal that such an approach is at odds with the virtual universal practice in industry in respect of the calculation of holiday pay in respect of holiday entitlement accrued which is by reference to a day's work rather than calendar days per year. Furthermore, the case of Thames Water predates the Working Time Regulations 1998 which provide the paradigm for provisions in respect of payments in respect of periods of leave. In particular paragraphs 13, 14 and 16 all contain provisions governing entitlement to annual leave, compensation related to entitlement to leave in the event of termination and payment in respect of periods of leave. Furthermore, reference is made in paragraph 16 to the provisions of sections 221 to 224 of the Employment Rights Act 1996 which concern the calculation of a week's pay, amongst other things, in employments with normal working hours and employments with no normal working hours. It is noticeable that all of these provisions take as their working assumption the hours actually required to be done, not the number of hours in a 24 hour day or a 7 day week. It therefore seems to us that in this particular context the concept of day-to-day accrual for the purposes of calculating payment for accrued holiday entitlement must be by reference to the number of working days in the year and not the number of calendar days in the year. It therefore follows that for this purpose the decision of the Employment Tribunal was plainly right and the point raised by the appellant is not reasonably arguable."

It is right to observe that that was a judgment following a preliminary hearing. However, it was an appeal by the employer against the decision of the Employment Tribunal that the working day rather than calendar day approach ought to be taken to the calculation of arrears of holiday pay. It is therefore not a question of the Employment Appeal Tribunal upholding an Employment Tribunal without thought as to the way in which the case was put by the unsuccessful employer.

16. In the present case Mr Yarrow invites me to follow the approach of the Employment Appeal Tribunal in Macconnachie, Mr Beard invites me to follow the approach which we took in Thames Water v Reynolds. I shall follow the Macconnachie approach for two reasons. First, in the interest of comity it is the practice in the Employment Appeal Tribunal to follow the most recent case where an earlier inconsistent decision has been considered unless it is thought that the later case is plainly and unarguably wrong. The second reason is that I accept the reasoning of the Employment Appeal Tribunal in Macconnachie by reference, in particular, to the advent of the Working Time Regulations. It seems to me that the modern approach not simply in relation to outstanding holiday pay but also outstanding ordinary pay ought to be the same and it ought to be consistent with the approach which is to be found in the recent statutory employment provisions as opposed to the Victorian Apportionment Act. I therefore resolve that point of principle in favour of the Claimant.
17. A third point taken by Mr Yarrow was purely one of calculation. He points to the total pay figure in his Form P45 issued by the Respondent of £3,520 which is different from the figure of £3,769.86 used in the Respondent's calculation in the Form ET3. Mr Beard is unable to explain where that latter figure came from and helpfully has agreed with the Claimant that the appropriate figure is £3,520.00.
18. Having indicated my findings on the points of principle the parties have agreed a calculation of the amount owed to the Claimant in the total sum of £771.35. I shall therefore allow the appeal and substitute a finding that the claim succeeds and award a money figure of £771.35. That leaves one final matter, the question of interest. Mr Yarrow submitted that he was entitled to interests at a rate of 8% from the date when the payment became due, that is the 30 September 2006, applying the ordinary rules in the County Court.
19. I pointed out to him that the Employment Tribunal is governed by its own particular statutory regime so far as interest is concerned. It is to be found in the Employment Tribunals' Interest Order 1990. In short, by Regulation 7, where on appeal from a relevant decision and in the present case I take that to be the judgment of the Chairman dated 26 January 2007, the Employment Appeal Tribunal makes an order varying the sum which would have been payable by virtue of the relevant decision then the relevant decision day shall be the decision day of that relevant decision. What that tortuous language means in my judgment is that the sum of £771.35 goes back to the 26 January 2007 as the relevant decision date.
20. Interest runs under the 1990 Order not from the relevant decision date but from 42 days thereafter, the time allowed for appealing against a relevant decision. Therefore interest runs from 9 March 2007 by my calculation. As to the rates of interest, Regulation 4 of the 1990 Order provides that the stipulated rate of interest shall be the rate of interest specified in Section 17 of the Judgment Act 1838 on the relevant decision day. Having consulted the civil procedural rules I note that the current rate of interest under the 1838 Act is 8%, which is the rate claimed by the Claimant.
21. Again the parties have helpfully calculated interest from the 9 March until today in the total sum of £15.38. Accordingly the Claimant is entitled to judgment for the principal sum and interest in the total amount of £786.73, that figure also being agreed.