Cases of note from 2013 - Roundup

Cases of note from 2013 - Roundup

Overtime and holiday pay
There has been an important judicial decision relating to an employee’s holiday entitlement which businesses should take note of if you pay staff for working overtime.

An Employment Tribunal has ruled that an employer should have taken an employee’s voluntary overtime payments into account when calculating his holiday pay in respect of 4 week’s statutory annual leave required by the Working Time Directive where the tasks undertaken were intrinsically linked to the performance of his contract.

In this case, Mr Neal worked as an operative for a company called Freightliner Limited. His contract provided for a 35 hour week made up of 7 hour shifts and it stated he may be required to do overtime. In reality Mr Neal never worked shifts as short as 7 hours but worked shifts of 8.5 or 9 hours in accordance with rosters and occasionally shifts of up to 12 hours to cover for colleagues. He received a premium for time worked over and above his contractual 7 hour shifts.

Freightliner’s view was that operatives could decline to undertake work beyond their 7 hour contractual requirement and so all overtime worked by Mr Neal was voluntary. It calculated Mr Neal’s statutory holiday pay on his 35 hour basic salary only, with overtime disregarded.

However the Employment Tribunal decided that Mr Neal had, throughout his overtime periods, performed tasks that he was required to do under his contract. The fact that he might have “volunteered” to perform those tasks outside his contracted hours does not mean that his overtime pay was not “intrinsically linked”. Accordingly the Employment Tribunal ruled that overtime hours, pay and premium should be included in his holiday pay calculation relating to the statutory 4 weeks annual leave entitlement.

Although the decision is significant it creates no binding precedent as yet, although Freightliner has lodged an appeal to the Employment Appeal Tribunal. It will therefore be for each Employment Tribunal to take its own view as to whether to adopt the same approach as in Mr Neal’s case. Nevertheless, for the time being, businesses should consider taking paid overtime into account while calculating holiday pay.

We shall keep clients informed of any developments.

Case reference - Neal v Freightliner Ltd ET/1315342/12.

Collective redundancy
USDAW v Ethel Austin Ltd (in administration) and another UKEAT/0547/12 (often referred to as the "Woolworths case") changed the law on collective consultation in a redundancy situation involving 20 or more employees, when the Employment Appeal Tribunal ruled that the words "at one establishment" in TULRCA 1992 are to be disregarded in these situations.

Woolworths went into administration in November 2008 and its stores closed shortly afterwards, resulting in large-scale redundancies. USDAW and employee representatives complained to an Employment Tribunal, seeking protective awards on the basis that Woolworths had breached its information and consultation obligations under section 188 of TULRCA. The Employment Tribunal upheld the claim for breach of TULRCA and made protective awards of 60 days' gross pay.

However, it found that each store was a separate "establishment" for TULRCA purposes. Consequently, the duty to inform and consult had not been engaged in respect of stores with fewer than 20 employees. The upshot was that 3,233 of Woolworths' redundant employees were not entitled to a protective award.

USDAW appealed to the EAT, arguing that the redundant employees working at stores with fewer than 20 employees were entitled to protective awards. Its primary argument was that, to comply with the Directive, section 188 of TULRCA should be interpreted purposively as requiring an employer to consult where it proposes to dismiss as redundant:

  • 20 or more employees at one or more establishments; and/or
  • 20 or more employees at one establishment, with the word "establishment" being interpreted broadly in light of the Directive's purpose as meaning the whole of a relevant retail business rather than each of its stores; and/or
  • 20 or more employees (with the words "at one establishment" being deleted from section 188 altogether).
The EAT upheld USDAW's appeal. The EAT held that the words "at one establishment" should be deleted from section 188 altogether. Therefore, it is now irrelevant where employees being made redundant are located. The duty to inform and consult will therefore arise when an employer is proposing to dismiss 20 or more employees on the grounds of redundancy across its business.

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