Holidays have been a hot topic in Employment Tribunals and the ECJ recently. We set out below some snapshots of key decisions in relation to holiday entitlement.
Rolled-up holiday pay
In the conjoined cases of Robinson-Steele, Caulfield and Clarke, the ECJ considered whether rolled-up holiday pay was lawful. It held that:
a) it is unlawful to attribute part of an employee’s remuneration to payment for annual leave without the employee receiving a payment additional to that for work done;
b) an employee on annual leave should be remunerated as if he were at work, so payments in respect of annual leave paid together with remuneration for work done (i.e. "rolled-up holiday pay") are unlawful; payment for annual leave must be made in respect of a specific period when an employee actually takes leave;
however
c) if payment for holiday has been made together with remuneration for work done, it can be set off against entitlement to payment for a specific period in which an employee actually takes leave, provided that the employer can show that the payment in respect of annual leave was genuinely additional to basic remuneration, and was transparent and comprehensible.
Implications
Employers who have paid rolled-up holiday pay must be able to show that these were transparent payments, which were additional to those made for work done, otherwise employees could bring a successful Tribunal claim for holiday pay. Since the ECJ refers to payments made, and the DTI has now outlawed the practice of paying rolled-up holiday pay, employers are advised to change to a system of paying employees for their holidays when they take them.
Payment in lieu of untaken holiday
In Federatie Nederlandse Vakbeweging (2006), the ECJ was asked to rule on the legality of a Dutch legislative provision which permitted an employee who had not taken his annual leave entitlement under the Working Time Directive, to receive financial compensation in respect of that untaken leave. It held that the possibility of receiving financial compensation for untaken leave would be an incentive not to take leave, and since the purpose of the provision was the protection of employees’ health and safety, Member States could not offer such an incentive. Arrangements on termination of employment are an exception to this.
Part-timers and bank holidays
In McMenemy v Capita Business Services Ltd (2007), the Court of Session affirmed the EAT’s decision on the issue of whether an employee who worked Wednesday to Friday each week could claim that he was treated less favourably than full-time employees under the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000, because he was not entitled to take time off in lieu of public holidays which fell on Mondays. It was held that, since full-time employees who worked from Tuesday- Saturday were also denied time off in lieu of such holidays, the claimant was not disadvantaged because of his part-time status.
Implications
The EAT held that for a claim to succeed under the Regulations an employee must compare himself with an actual, rather than a hypothetical, full-time employee. In this case the employer operated a seven-day working week in which full-timers worked any five days; and since some did not work on Mondays, the claim failed. However, there is still a question mark over whether a similar part-timer could succeed if all full-time employees work from Monday to Friday. To be on the safe side, we would recommend that employers allow a pro-rated number of days’ holiday in that situation.
Calculation of a week’s pay
In the case of May Gurney Limited v Adshead (2006), the EAT held that, for the purposes of calculating holiday pay under the Working Time Regulations, an employer’s failure to take into account bonus payments amounted to an unlawful deduction of wages, contrary to the Employment Rights Act 1996.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
