Victoria Phillips examines the Tory attacks on the working time regulations and looks at the implications of recent judgments for the government’s review
David Cameron, in his Europe speech in January this year, may have pledged to renegotiate parts of the UK's relations with Europe, but he was vague about the powers the UK should take back.
He did however refer to membership of the European Union as not requiring the working hours of British hospital doctors to be set by Brussels, leading to speculation that he’s looking for a showdown over the Working TimeDirective (WTD).
No adverse impact
The Tories hate the WTD. For them it represents the ultimate in EU red tape, a burden on business that prevents a flexible labour market operating unhindered by regulations that provide minimal levels of protection to working people.
But because UK companies widely use the directive’s opt-out clause that allows individual workers to work longer than 48 hours a week, even the business lobby struggles to identify any adverse impact of the directive on the private sector.
While it is unlawful to victimise or sack someone who refuses to sign an opt-out agreement, there is no legal prohibition on refusing to hire someone unless they sign. In these economic times, people are increasingly prepared to sign anything a potential, or even current, employer puts in front of them just to get (or keep) a job.
It may be difficult for employers’ organisations to demonstrate that the WTD has significantly hindered economic growth. But, as with so many of the coalition’s employment law reforms, the case for change is based entirely on myth and anecdote. And, where the WTD is concerned, providing succour to the EU-loathing Tory right.
Tightening the rules
The chorus of disapproval grows louder whenever a European or other court judgment tightens the rules of the WTD. Businesses have particularly hated some of the rulings on annual leave and sick leave. The Department for Business, Innovation and Skills (BIS) had to propose amendments to the Working Time Regulations (WTR) 1998 as part of its 2011 Modern Workplaces consultation in order to reflect a number of such judgments. BIS had not yet published a response to that part of the consultation as LELR went to press.
The proposed amendments include allowing workers who are ill during their annual leave to reschedule or carry over up to four weeks statutory annual leave to the following year. The consultation also looked at permitting employees to carry over 5.6 weeks annual leave due to maternity, paternity, parental or adoption leave and allowing them to either “buy out” 1.6 weeks of additional annual leave or to require the leave to be carried over in the event of an overriding business need.
Judgment in BA -v- Williams
There are several judgments that the government needs to take account of. Perhaps that is why it is taking BIS so long to respond. They include my long-running case of British Airways -v- Williams. In October 2012 the Supreme Court finally clarified the issue, ruling that pilots are entitled to be paid their normal remuneration during their four-week period of statutory annual leave.
The court said that holiday pay must include all elements of remuneration, such as flying pay supplements, and not just basic pay. Only sums that are intended exclusively to cover expenses can be excluded.
The case is important not only for workers in the civil aviation sector, whose rights to annual leave are set out in the Civil Aviation (Working Time) Regulations 2004, but also for the level of holiday pay of all workers whose entitlements to annual leave are set out in the regulations.
It’s inevitable that the rulings of the Court of Justice of the European Union (CJEU) and then the Supreme Court in Williams will lead to challenges to the level of payment for annual leave under the WTR. Payments are calculated in accordance with the statutory formula for a week’s pay contained in the Employment Rights Act [ss 221-226].
If a worker’s pay during the four-week period of statutory holiday does not correspond with their normal remuneration while working – for example, if commission payments, bonuses or other “intrinsically linked” allowances (such as overtime and shift premiums) are excluded – Williams means that this is probably in breach of the WTD and so the wording and effect of the regulations must be construed to reflect this. Indeed, a number of tribunals have recently ruled to that effect.
Other rulings
Other rulings that BIS civil servants will be studying include the Thompsons case of NHS Leeds -v- Larner, in which the Court of Appeal decided that an employee who was absent for an entire leave year and did not make any requests to take annual leave during this time was entitled to holiday pay when their employment was terminated.
In the Spanish case of Anged -v- Fasga and others the CJEU confirmed that a worker who is sick during holiday leave cannot be precluded from taking that period of leave at a later date, regardless of when the incapacity for work first arose.
And in another Spanish case, that of Pereda -v- Madrid Movilidad SA, it was held that the directive precludes national provisions or collective agreements that deny a worker who is sick during a scheduled period of annual leave the right to take the holiday at a later time, even if this is outside the holiday year.
The CJEU also held, in Neidel -v- Stadt Frankfurt am Main that Germany’s legislation allowing for a carry-over period of nine months for untaken annual leave, meaning that public servants forfeited their holiday if it had not been taken within the nine-month period after the end of the leave year due to sickness absence, was unlawful.
It was the turn of France’s interpretation of the directive in Dominguez -v- Centre Informatique du Centre Ouest Atlantique in which the CJEU said that it was contrary to the directive for national legislation to make entitlement to paid annual leave conditional on a worker having worked at least 10 days for the same employer in the leave year.
Another German CJEU case was KHS AG -v- Schulte, which confirmed that the directive does not require an unlimited accumulation of paid annual leave where an employee is on long-term sickness absence.
Judgment in Stringer -v- HMRC
Of course, one of the first UK CJEU cases in this long line of decisions on holiday and sick pay was my case of Stringer and ors -v- HM Revenue and Customs. It was held that the right to paid annual leave continues to be accrued during sick leave and that, where employment is then terminated, if the worker has been unable to take paid annual leave due to sickness absence they are entitled to payment in lieu.
When the case returned to the House of Lords to decide whether unpaid annual leave under the working time regulations and/or a payment on termination could also be pursued as unauthorised deductions of wages claims, the Lords agreed with the claimants that unpaid working time holiday can be claimed as an unauthorised deduction from wages, as well as under the WTR.
Unintended consequences for employers
Should Cameron succeed in wresting control of working time from Europe, or securing reform of the directive, there may be unintended consequences for employers. Removing protections afforded by the regulations could see an increase in claims for stress or personal injury, though the government’s civil justice reforms and amendments to the Health and Safety at Work Act (which make pursuing claims more difficult) might shield them from that.
Any serious dilution of working time arrangements will also have a disproportionate impact on parents with childcare commitments, who are more typically women.
Where would that leave the coalition’s pledge to make workplaces more family friendly?