Appeal tribunal – Overtime & Holiday Pay Rules

Appeal tribunal rules that non-guaranteed overtime should be included when calculating holiday pay
Employers given favourable interpretation on how far back claims can stretch but may see this overturned by higher courts
Compulsory overtime

In a long-awaited judgment, the Employment Appeal Tribunal (EAT) has decided that ‘non-guaranteed’ overtime pay should be included in the calculation of holiday pay. This is overtime that an employee has to do if the employer offers it, but which the employer does not guarantee to provide. The EAT indicated that it was a significant factor in its judgment that the employees in the cases before it were required to work the overtime on a regular basis.
The EAT decision relates to a number of cases being heard together on this issue, now known collectively as the Bear Scotland case but previously known as Neil v Freightliner which has now been settled out of court.
The ruling is in line with earlier cases on the calculation of holiday pay, such as British Airways v Williams and Lock v British Gas, which gave rise to many reports suggesting that employers faced claims going back to 1998 when the Working Time Regulations came into force.
Employer liability
A positive note for employers is that the latest decision has put limitations on how far back employees can claim. The EAT said that if employees were claiming for a series of deductions from wages (one of the ways to claim for underpayment of holiday pay), the series would be broken if there is a gap of more than three months between those deductions. The EAT has also confirmed that the inclusion of non-guaranteed overtime pay in the calculation of holiday pay only applies to the four weeks’ paid leave employees are entitled to under EU rules, not to the additional 1.6 weeks’ paid leave they are due under the UK’s working time regulations. This increases the likelihood of there being a gap bigger than three months between underpayments, and law firm Pennington Manches says that claims for underpayments before the three month gap “will normally be out of time”.
Practical steps

The firm suggests that from now on employers should “consider including any variable payments which meet the test of ‘normal pay’ (a payment sufficiently permanent and intrinsically linked to the tasks the worker is required to carry out) in holiday pay.” This could include shift pay, commission, some bonuses and other variable payments “unless they are genuinely ad hoc, and will include overtime that is guaranteed by the employer or compulsory for the employee. The position regarding truly voluntary overtime is less clear and would definitely not be covered if not worked regularly.” Pennington Manches advises employers to use the 12 week reference period under the Working Time Regulations to calculate this type of holiday pay and also suggests companies should audit their ‘variable pay’ systems to assess the risk of claims and perhaps consider adjusting them for the future.

Law firm Trowers and Hamlins suggests that one possible option for employers trying to minimise their liability for increased holiday pay is to “offer voluntary overtime instead of non-guaranteed overtime, giving employees the option to refuse to work the extra hours. Bank staff or agency staff could then be used to cover periods of increased demand.”
Possible appeal

The EAT was asked to refer the way it has interpreted the time limits for bringing a claim for underpaid holiday pay to the European court. It refused that request, but did give permission for the issue to go to the Court of Appeal. Gearalt Fahy, partner at law firm Watson Burton, said the EAT judgment “may offer some welcome relief to employers” but said the possibility of an appeal may mean the “final outcome could be years, rather than months away.” Noele McClelland, head of Thorntons employment law team, thought an appeal could take as long as five years if it went all the way to the Supreme Court, and suggested employers may wish to act now.

“There are currently thousands of claims either going through early conciliation with Acas, or ready to be raised, which were waiting for the outcome of this decision,” she said. “Businesses may want to take advantage of this judgment and seek to settle any historic claims, which will most likely only have a small value, before an appeal court takes a different view.”

Glenn Hayes, a partner at Irwin Mitchell, pointed out that the judgment doesn’t deal with whether an individual can bring a claim for breach of contract for underpaid holiday in this context, and thought it was “likely that this point will be litigated as potentially employees have six years to pursue a civil claim.”

Christopher Fisher, employment partner at Mayer Brown, suggested that the “proactive approach the court has taken to interpreting domestic law in light of EU law will again raise some eyebrows. The need for legal certainty held little weight with the EAT and it was content to insert language into the current domestic legislation. This type of approach, which is now becoming more commonplace, means employers can be caught out even when they are abiding by the exact wording of domestic legalisation.”

Adam Lambert, employment partner at Clyde & Co commented that the EAT “has changed the wording of the UK legislation, interpreting it in a way that could not have been anticipated when the legislation came into force in the 1990s. Businesses that have diligently complied with UK law for years now have to be told they have got it wrong.”
Government taskforce

The government is to set up a taskforce, including employers’ groups such as the EEF manufacturers organisation, the Federation of Small Businesses and British Chambers of Commerce, to work out how to limit the effects of the judgment on businesses. Business secretary Vince Cable said the government “will review the judgment in detail as a matter of urgency”.

Acas has said it will update its advice leafleton holiday pay to reflect the judgment and in the meantime has urged employers, workers and trade unions to discuss any concerns arising from it “with a view to seeking agreement on any temporary measures or policy changes they feel may be necessary”.

Blurred lines – autonomy or control in social media?

Managing electronic communications: a new challenge for human resource managers, Bernadine Van Gramberg , Julian Teicher and Anne O’Rourke, International Journal of Human Resource Management, Vol 25 No 16, September 2014.

Our increasing use of and access to information and communication technology – in particular social media – has thrown up new challenges for people management. This article reviews a series of Australian legal cases on disciplinary measures taken against employees for misuse of ICT and draws out implications for the HR profession.

For example, the authors cite a case in which an airline was found to have unlawfully dismissed an employee for distributing a union bulletin about a joint working group through the company’s email. While company policy did prohibit using notice boards for such communications, ICT policies made no such mention.

It also cites a case where dismissal was judged too harsh for an employee who made derogatory comments about a manager on Facebook. The judge viewed the content as ‘letting off steam and trying to outdo one another in being outrageous’, having ‘the flavour of a conversation in a pub or café’. It was also judged that it would be unclear to people not familiar with the company who was being discussed.

On the other hand, in another case, an employee was found to have been fairly sacked for posting offensive comments about his employer on Facebook, even though this was done out of work hours, on a personally-owned computer at home. A critical factor in this case was that, as well as the criticism being clearly about the employer, the person had at least 11 colleagues who were Facebook ‘friends’ and could see the comments. It was thus considered as if the comments had been made at the workplace.

Through comparison of these and other cases, the authors argue that the HR function has a central role to play in setting and clarifying policies and responding to infringements when it comes to employee uses of ICT.

They also argue that in doing this, HR needs to balance the two aspects of its fundamental role, namely ‘employee champion’ and ‘strategic partner’. In other words, on the one hand, HR needs to support and protect the business from employee misuse of ICT; but on the other hand, it needs to do so in a way that is seen to be fair and does not jeopardise employee performance.

They conclude by writing: ‘blurring of the boundaries between home and work and public and private has created unprecedented scope for organisations to regulate the lives of their employees’. The challenge this brings is not only legal in nature, but also a question of how employers ‘strike an appropriate balance between autonomy and control’.

Zero Hours Employment Contracts

See the latest official information about Zero Hours Employment Contracts.

 

Click Zero Hours Employment Contracts  to download or print.

Embracing shared parental leave, calculating holiday pay and policing zero hours contracts

Embracing shared parental leave, calculating holiday pay and policing zero hours contracts
More details published on the new scheme for working parents, judgments on holiday pay awaited from the courts, and the government asks for ideas on how to ensure the ban on exclusivity clauses is observed.
Shared parental leave

Draft regulations have been produced for the new right to shared parental leave (SPL) and official guidance is beginning to appear. The government has published an employer guide, and Acas has added more details on the scheme to its website, including a two-stage eligibility test.

Existing maternity rights remain unchanged and it is for the mother of the child to decide to move from maternity leave to SPL. Adopters will have full access to the scheme. The person requesting SPL must have worked for the same employer for at least 26 weeks by the end of the 15th week before the week the baby is due (or the week an adopter is notified of a match with a child). The other parent must have worked for 26 weeks in the 66 weeks leading up to the baby’s due date, and must have earned in excess of the maternity allowance threshold (£30 in 13 of those weeks). To be entitled to statutory shared parental pay (ShPP), a parent’s average salary must be at or above the lower earnings limit (currently £111) for eight weeks prior to the 15th week before the week the baby is due.

Employers have options once they receive an SPL notification. If the request is for a continuous period of leave, employers cannot reject it but they can ‘seek an agreed modification’ to it, having considered the request, and discussed it with the employee. However, employees are under no obligation to comply. A request to take the leave in blocks can be refused, and employers could choose to make no response to the leave notification, although Acas points out that this is “not good practice and should be avoided.” More in-depth Acas guidance is to follow this autumn.

The SPL regulations are due for enforcement on 1 December 2014 and apply to babies due on or after 5 April 2015, which means employers could begin to receive notices of employees’ intention to take leave in January 2015. Fathers and partners of pregnant women will still be able to take one or two weeks’ paternity leave paid at the statutory rate and, in addition, will have the right from 1 October 2014 to unpaid leave to attend two ante-natal appointments.
Case law round-up

Judgment is now awaited on a number of cases on holiday pay, including Bear v Fulton, that have been heard together (the most well-known of the group, Neil v Freightliner, settled before the hearing). The cases deal with how holiday pay should be calculated for employees whose pay fluctuates according to what hours they work, or what commission they earn. UK courts are still grappling with how to apply the European court ruling in Lock v British Gas earlier this year, which said that employees are entitled to ‘normal remuneration’ during leave and must not be made worse off by going on holiday.

Stuart Jones, head of employment and pensions at Weightmans solicitors, commenting on the cases said that “definite risks have now been identified and some organisations may wish to take steps straight away to calculate the value of the claims they may face. For some organisations, the potential outlay will be significant.”

Last year John Lewis paid out £40 million to 69,000 of its staff to correct errors in their holiday pay going back to 2006, and Jones said some organisations were already following this lead in trying to “neutralise the issue”.

For companies with part time employees who habitually work over and above their contractual hours, “there remains a question mark over whether these extra hours should be included in holiday pay,” he continued. “For many, the sensible approach will be to wait and see how the law develops. The courts have staked out the key issues to watch in the coming months.”
Zero hours
The government is consulting on how its proposed ban on exclusivity clauses in zero hours contracts, contained in the Small Business, Enterprise and Employment Bill, can be enforced. The consultation asks whether employers are likely to try to avoid the ban and how they might do this; whether the government should make provision now for dealing with potential avoidance or wait to see whether it takes place first; whether there should be consequences for employers evading the ban and what these consequences might be.

The government says it will review existing guidance with a view to improving the information available to employers and individuals. But it also suggests that business representatives and unions, with the support of government, should consider working together to “develop industry-led, industry-owned, sector-specific codes of practice on the fair use of zero hours contracts, as the reality of the situation is likely to be different in each sector”.

The consultation closes on 3 November.

Forthcoming legislation

New legislation

Enterprise and Regulatory Reform Act 2013

Provisions under the Enterprise and Regulatory Reform Act 2013 (ERR Act 2013) are coming into force in stages.

On 6 April 2014 Acas launched its early conciliation scheme, which applies to all employment tribunal claims brought on or after 6 May 2014 (for more information go to Employment tribunals ). Discrimination questionnaires were also removed from the Equality Act 2013 on this date (see Employment tribunals ) and tribunals were given the power to fine employers that breach employment rights where there are ‘one or more aggravating features’ (see Employment tribunals ).

October 2014

There are proposals in the ERR Act 2013 to introduce

  • compulsory equal pay audits – for those employers that breach the equal pay provisions in the Equality Act 2010.

No date fixed

Some provisions in the Act have yet to be given definite enforcement dates:

 

  • whistleblowing – a government call for evidence on the laws protecting those who blow the whistle closed on 1 November 2013. In April 2014 the government said it would be responding to this “shortly” but has yet to make any reform proposals.
  • caste discrimination – provisions in the ERR Act 2013 will make caste discrimination unlawful under the Equality Act 2010. Consultations are planned for 2014, with a view to the new measures being in force by the summer of 2015 (see News ).

Children and Families Act 2014

This Act, stemming from the Modern workplaces consultation, introduces a new system of shared parental leave and extends the right to request flexible working. The legislation became law on 13 March 2014 and is coming into force in stages.

30 June 2014

  • flexible working – the right to request flexible working (previously only for parents and carers) becomes available from 30 June 2014 to all employees with at least 26 weeks’ continuity of service. The statutory procedure for considering requests will be replaced by a duty on employers to consider all requests in a reasonable manner. Organisations will be able to refuse requests on business grounds. For more information see ‘ Right to request flexible working ‘.

1 October 2014

  • ante-natal appointments – prospective fathers and partners will be given the right to take unpaid leave to attend two antenatal appointments from 1 October 2014 (see Paternity leave and pay ). 

2015

Shared parental leave

  • maternity/paternity – employed mothers and fathers/partners, both of whom meet the qualifying criteria, will be able to end the mother’s maternity leave and pay and share the balance as flexible parental leave and pay. The new right applies to parents of babies born on or after 5 April 2015. Existing rights to maternity and paternity leave and pay are unaffected. Mothers will still have two weeks’ compulsory maternity leave (four weeks for manual workers), but they can then share the remaining 50 weeks’ maternity leave and 37 weeks’ pay.
    • adoption – the same rights to maternity leave and pay, and shared parental leave, will be available to adoptive and surrogate parents. One prospective adoptive parent can have five occasions of paid time off, and the other can have two occasions of unpaid time off, for pre-adoption contact visits.
    • surrogacy – parents who have a child through a surrogacy arrangement will be entitled to take ordinary paternity leave pay and adoption leave and pay and shared parental leave and pay, provided that they meet the eligibility criteria. They will be allowed to take unpaid time off work (unpaid) to attend two antenatal appointments with the mother of the child.

Draft regulations are available on the government website .

Pensions auto-enrolment

Auto enrolment on pension schemes continues to be rolled out. Organisations come within the scope of the legislation by size, according to the number of employees they have on PAYE (see Staging date timeline at the Pensions Regulator website. Remaining compliance dates are:

Number of employeesDate
50 – 2491 April 2014 – 1 April 2015
> 501 June 2015 -1 April 2017
New businesses from 1 April 20121 May 2017 – 1 February 2018

New flexible working regulations – is your business prepared?

New flexible working regulations – is your business prepared?

This is a significant shift from the previous situation, where it was primarily parents and carers who had the right to ask for changes in their working times, practices or patterns.

Whether the new legislation will result in a flood of requests remains to be seen, but there’s no doubt that employers need to gen up on the new rules for managing requests and revise their policies accordingly.

The full details of the changes can be found in this comprehensive guide from ACAS – but in a nutshell, employees need to comply with a set procedure when making a request and employers have to respond within a three month time frame and need to have a strong business case for refusing requests (you can also find the list of specific reasons for refusing requests in the ACAS guide).

Many employers have of course already switched on to the benefits of  flexible working for all and the role it can play in helping to build happy, productive workforces.

The reality, however, is that not every request can be granted – and there will be times when it simply isn’t viable for the business to say yes without seriously compromising its ability to deliver the goods and meet customer needs.  It’s worth remembering it is a right to request, not a right to have the request granted.

The challenge for managers dealing with requests on the ground, however, is to make sure they really are making a balanced decision and are not inadvertently opening themselves up to accusations of unfair treatment.

These are some of the key questions that can help the business – and individual managers – think through their response and make sure they are making the right decision.

  • Are we stuck in a nine-to-five rut?

It’s surprising how many companies are still operating around a conventional nine-to-five model when a more flexible approach to working hours could in fact have enormous benefits for their business.    There are numerous ways to slice and dice working arrangements so that they work to commercial as well as personal advantage.  There are condensed hours (full time hours condensed into 3 or 4 days), staggered hours (full time hours over different times, i.e. 7am-3pm or 11am-7pm) or perhaps a nine day fortnight.  Other options include term time working, school hours working, job sharing or flexi time.  All of these can help the business respond to customer needs more efficiently and hang on to talented staff who might otherwise jump ship and go elsewhere.  Make sure you are thinking widely and creatively about the way work can be organised and are not stuck in a rut of ‘the way we’ve always done things around here’.

  • Are we resisting something we are already doing?

Scratch beneath the surface and you find that most businesses are actually implementing flexible working to some degree anyway.

One of the finance managers comes in late every other Friday so that     he can take his elderly mother to a regular hospital appointment – but works through his lunch to make up the time.  A member of the marketing team works remotely one afternoon a week, juggling her appointments so that she can pick her children up from school on the nanny’s day off.

All unofficial but highly effective arrangements, which are negotiated individually within teams. The work gets done, employees are grateful (and therefore more likely to remain loyal and engaged), the business benefits all round – but no-one talks about it openly for fear of opening the floodgates.  Take time to look at how much flexible working is already going on in your business – and see what you can learn from the successful experiences around you.

  • Are we talking about small tweaks or big changes?

Despite commonly held perceptions, extending flexible working doesn’t have to mean making large and disruptive changes.  Often, it’s the small tweaks that make the difference.  Allowing an employee to work 10-6 instead of 9-5, for example, could help employees better balance their responsibilities both in and outside of work.

Companies are often surprisingly reluctant to make these small changes.  I spoke to one woman recently who had left her job because her manager wouldn’t allow her to shift her working day by half an hour so she could pick her child up from nursery on time.  It’s this kind of attitude that can lead to valuable talent (not to mention knowledge and customer relationships) being lost.  Be honest with yourself.  Would it really cause a problem if you allowed an employee to make a small change to their normal working arrangements (because small changes is generally what people want)?  Or would it cause a bigger problem if they headed for the hills?  Making these small changes can also have a real impact on absence levels in the business.  Often absence isn’t really due to illness at all – it’s masquerading as illness when the problem really is that people are struggling to balance complicated lives.  If people know a request for a bit of flexibility or the odd day working from home is going to fall on deaf ears, they are more likely to ‘throw a sickie’ so that they can deal with whatever situation has arisen.

  • Can we use flexible working to our advantage?

We are now working in a 24/7 global culture where customers are becoming increasingly demanding.  They expect to be able to access goods and services outside of normal working hours and thanks to technology and the rise of social media, want an almost instant response.  Flexible working can actually help companies deliver a better, more responsive service.  It has the potential to extend the working day so that people are on hand to answer questions, deal with issues and progress projects beyond the 9-5.  Employees are often more than willing to work outside conventional hours.  Women with childcare responsibilities, for example, may find it easier to work at weekends when other family members are around.  People who are natural ‘larks’ may be happy to start early – so that they can finish early and have time to pursue a hobby or interest they have outside of work.  Try having open and honest conversations with your employees about how work could be better arranged to suit both them and the business – you may be surprised at what you hear!

  • Are we really clear about why we are saying no?

Flexible working in a knowledge-based business is a bit of a no-brainer.  Thanks to technology it now really is possible for people to work anytime, anyplace anywhere – and flexible working is positively helpful in allowing companies to bring project teams together across different time zones and from different locations.  It can, however, be more of a challenge in a business where customers need the ‘doors’ to be open at set times.  There will be cases where you feel you really have to say no to a request – but before you do, make sure you have really thought through all the issues, can justify your response and are not giving a knee-jerk reaction.  Above all, make sure you are not letting personal feelings about an employee get in the way of your decision.  If you say yes to someone who is seen as a ‘favourite’ – and no to someone who you have a less positive relationship with – it can pave the way for ill-feeling and resentment in the team.

 

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