The issue of holiday pay is becoming more and more of a minefield. In this case - Canada Life Ltd v Gray & Anor (IDS Brief 754) - the employment appeal tribunal (EAT) decided that two ex-workers were entitled to holiday pay even though they had worked for many years without taking any.
What prompted the complaints?
The two ex-workers had operated on a commission-only basis as self-employed consultants for Canada Life for well over 25 years. Their contracts did not provide for any paid holiday.
The company terminated their contracts at the end of October 2002 and made two final commission payments to them at the end of November and December. The following January, both consultants lodged claims saying that they were entitled to holiday pay as a result of the introduction of the Working Time Regulations.
By failing to pay them, the consultants said that Canada Life had made a series of unlawful deductions from their wages under the Employment Rights Act 1996. Canada Life argued that neither of the consultants had been workers as defined by the regulations; that even if they were workers, they were not entitled to holiday pay for leave that had not been taken; and that their claims were out of time.
What did the tribunal decide?
The tribunal decided that the two consultants were, in fact, workers. It also said that as a result of the decision in List Design Group Ltd v Catley & Ors (2002, ICR 686), they did not have to take the holiday to be entitled to be paid for it.
The company's failure to pay holiday pay since 1998 therefore amounted to an unlawful deduction of wages. The claims were not out of time because they were brought within three months of the last deduction.
Was there a conflict between the cases?
Relying on the decision in List Design, the EAT agreed with the tribunal that both consultants were entitled to holiday pay, and that the company had made unlawful deductions from their wages.
It also reconciled the apparent conflict between the cases of List Design and Kigass Aero Components Ltd v Brown & Ors (2002, ICR 697), which had been decided by different divisions of the EAT.
In Kigass, the EAT said that during employment, workers should be encouraged to take their full entitlement for health and safety reasons. For that reason, it ruled that during employment, employees must actually take their leave in order to be paid for it.
There was, therefore, no conflict between the two cases because Kigass dealt with the situation during employment; List Design after employment had ended. The latter applied in this case.
Were the claims out of time?
The EAT said they weren't. The two consultants were entitled to a payment in lieu of untaken holiday when they left in October 2002, which should have been made at the end of November and December. The failure to make the payments amounted to an unlawful deduction of wages, and therefore the claims were in time.
What about Inland Revenue v Ainsworth?
The EAT has also just decided in Inland Revenue v Ainsworth that the case of Kigass Aero Components v Brown was correct to conclude that workers on long-term sick leave are entitled to four weeks' paid holiday under the Working Time Regulations, even if all their contractual entitlement has been exhausted.
The decision will be considered by the Court of Appeal in early November 2004.