Good news for employee backdated holiday pay claims

In King v The Sash Window Workshop Ltd and anor, the European Court of Justice has held that the means of enforcing the right to paid holiday under the Working Time Regulations 1998 SI 1998/1833 is incompatible with the EU Working Time Directive (No.2003/88). On the EAT’s interpretation of Regs 13 and 16, where an employer grants only unpaid leave to a worker, the worker would be obliged to take leave without pay and then bring an action to claim payment for it. This result is incompatible with the right to paid annual leave under Article 7 read with the right to an effective remedy under Article 47 of the EU Charter of Fundamental Rights. The ECJ also held that, where the employer refuses to pay for annual leave, the worker’s holiday rights carry over until the termination of employment.

K worked for SWW Ltd as a self-employed commission-only salesman from June 1999. He was offered an employment contract in 2008, which included the right to paid annual leave. However, he elected to remain self-employed (under a contract that was silent on the issue). While K did take some holiday throughout his years of service, he was never paid for this. When SWW Ltd terminated his engagement in October 2012, K successfully claimed holiday pay before an employment tribunal, which accepted that he was a ‘worker’ for the purposes of the Working Time Regulations 1998. Among other things, the tribunal awarded him pay in lieu of annual leave accrued but not taken during previous years, also claimed as a series of deductions. The EAT allowed SWW Ltd’s appeal on this issue, holding that the tribunal had failed to make findings of fact to support its conclusion that K was prevented from taking his annual leave for reasons beyond his control. There was therefore no basis for departing from the usual position under Reg 13 that entitlement to leave expires at the end of the relevant leave year. K appealed to the Court of Appeal, which made a reference to the ECJ, querying whether Reg 13 is consistent with the right to paid annual leave under Article 7 of the Working Time Directive, given that (on the logic of the EAT’s analysis) the worker would first have to take unpaid leave before testing his or her entitlement to pay. It also sought clarification of the extent to which untaken paid leave can be carried over, for the purpose of claiming a payment in lieu of untaken holiday upon termination of employment under Article 7(2) of the Directive.

Advocate General Tanchev gave the opinion that employers are bound to provide an ‘adequate facility’ for workers to exercise the right to paid annual leave under Article 7, such as in the form of specific contractual terms or the establishment of a legally enforceable administrative procedure. Where no such adequate facility has been made available, any reference and carry-over periods that would otherwise fall within a Member State’s discretion must necessarily be disapplied. In such a case, the worker would be entitled on termination of employment to payment in lieu of annual leave untaken up until the date on which an adequate facility was made available.

a worker must be entitled to benefit from the remuneration to which he or she is entitled when taking his or her annual leave

The ECJ has now given its judgment and has gone further than the Advocate General. It noted that it was clear from its case law that a worker must be entitled to benefit from the remuneration to which he or she is entitled when taking his or her annual leave. Thus, a worker who is faced with uncertainty as to the level of remuneration to which he or she is entitled during the leave period will not be able to benefit fully from that leave as a period of relaxation and leisure, and is likely to be dissuaded from taking leave in the first place. When seen in that light, the right to paid annual leave cannot, therefore, depend on a factual assessment of the worker’s financial situation when he or she takes leave.

Turning to the Working Time Regulations, the ECJ observed that they implement the right to paid annual leave by way of two separate rights: a right to a period of annual leave under Reg 13 and a right to be paid in respect of that leave under Reg 16. Likewise, Reg 30 provides for two separate judicial remedies. The ECJ noted that, on the EAT’s interpretation of Regs 13, 16 and 30, a worker can claim breach of Reg 13 only to the extent that his or her employer did not permit him or her to take any period of leave, whether paid or not; and can claim payment under Reg 16 only for leave actually taken. This has the effect that, where the employer grants only unpaid leave, a worker is obliged to take leave without pay in the first place and then to bring an action to claim payment for it. The ECJ held that this result was incompatible with Article 7 of the Directive when read with Article 47 of the EU Charter. In K’s particular circumstances, he would be unable to claim after the termination of employment in respect of paid leave due but not taken, which would deprive him of an effective remedy.

As to the accumulation of the right to paid annual leave, the ECJ noted that, in the case of a worker who is prevented from taking paid annual leave due to sickness, case law has permitted national law to limit the worker’s right to carry over that leave to 15 months. That case law took into account not only the protection of workers but also the protection of employers, who might otherwise be faced with the risk that a worker will accumulate periods of absence of too great a length. In contrast, in the present case, there was no requirement to protect the employer’s interests – on the facts, SWW Ltd was not faced with organisational difficulties and indeed was able to benefit from K not taking any paid annual leave. It was irrelevant that SWW Ltd considered, wrongly, that K was not entitled to paid annual leave – it is up to the employer to inform itself of its obligations in this regard and an employer that does not allow a worker to exercise his or her right to paid annual leave must bear the consequences. The ECJ therefore concluded that the Directive requires a worker to be able to carry over and accumulate paid annual leave rights until the termination of his or her employment where those rights have not been exercised over several consecutive reference periods because the employer refused to remunerate that leave.

This case has significant implications for the right to holiday pay in the UK. It suggests that workers who are wrongly classified as self-employed contractors may be able to claim back pay in respect of unpaid annual leave going back many years when their ‘worker’ status is established. It also suggests that the Deduction from Wages (Limitation) Regulations 2014 SI 2014/3322, which limit back pay claims to two years, are incompatible with EU law.

 

ECJ Judgement – Allowance in lieu of annual leave paid on termination of the employment relationship

 

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Can an employer rely on parts of without prejudice or protected conversations?

Can a Respondent employer rely on parts of a ‘without prejudice discussion’, or protected conversation, whilst at the same time using the rules as a shield?

No, held the EAT in Graham v Agilitas IT Solutions Ltd.

The Claimant was facing termination of employment. During talks which the Respondent characterised as being without prejudice and/or protected under s111A of the Employment Rights Act 1996, the Claimant made comments which the Respondent subsequently used to form the basis of disciplinary action. The Claimant alleged improper conduct/unambiguous impropriety by the Respondent in the form of bullying and threatening behaviours in the same meeting.

The EAT held that the Respondent could not waive privilege on parts of the meeting and rely on privilege in relation to other parts to shield its conduct.

The Claimant was entitled to have the employment tribunal examine the improper conduct. The case has been remitted.

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Orthodoxy restored on discrimination burden of proof and is on the Claimant

In Ayodele v Citylink Ltd and anor, the Court of Appeal has held that the burden of showing a prima facie case of discrimination under S.136 of the Equality Act 2010 remains on the claimant. This provision made no substantive change to the law when it came into force in October 2010 and Mrs Justice Elisabeth Laing was wrong to hold otherwise in the EAT in Efobi v Royal Mail Group Ltd.

A, a black man originally from Nigeria, brought a number of claims against his former employer, C Ltd, following the termination of his employment, including claims of race discrimination. The tribunal dismissed his discrimination claims on the basis that A had not established prima facie evidence of less favourable treatment and therefore the burden of proof had not shifted to the respondent. A’s appeal to the EAT was dismissed. Before the Court of Appeal, A raised a new ground of appeal. He submitted that there was a fundamental error in the approach taken by the employment tribunal as to the proper application of the burden of proof under S.136 EqA. He relied on Elisabeth Laing J’s decision in the EAT in Efobi v Royal Mail Group Ltd (Brief 1078), to the effect that the wording of S.136 EqA does not impose a burden of proof on a claimant at all. Instead, it requires the tribunal to consider all the evidence, from all sources, at the end of the hearing, so as to decide whether or not there are ‘facts’ from which it can conclude that discrimination occurred and, if so, it must so find unless the respondent can discharge the burden on it. A pointed to the fact that in his case the tribunal had directed itself that there was a burden of proof on him at the first stage of the enquiry and therefore it fell into error.

The Court of Appeal dismissed the appeal. It noted that the wording of S.136 EqA is different from the wording of the equivalent predecessor provisions, in that there is no longer any express reference to the claimant being required to prove facts. It rejected A’s suggestion that there was an analogy to be drawn with the assessment of fairness of a dismissal in an unfair dismissal case, where there is no burden on either party. In that context, the tribunal is required to make an assessment in which it is not apt to refer to the burden being on either party. However, in a discrimination case, before a tribunal can start making an assessment, the claimant has got to start the case, otherwise there is nothing for the respondent to address and nothing for the tribunal to assess.

The Court of Appeal could see no reason why a respondent should have to discharge the burden of proof unless and until the claimant has shown a prima facie case of discrimination that needs to be answered. Accordingly, it held that there is nothing unfair about requiring a claimant to bear the burden of proof at the first stage.

The Court also observed there was no reason to suppose that Parliament enacted S.136 to remove the burden of proof from a claimant. Furthermore, the EU Burden of Proof Directive (No.97/80), which S.136 gives effect in domestic law, does not require there to be no burden on a claimant at the first stage, and the legal community has proceeded for the last seven years on the assumption that no change of substance was made by S.136. The change in wording from the predecessor provisions simply made clear that what should be considered at the first stage is all the evidence, and not only the evidence adduced by the claimant: it should be regarded as no more than legislative ‘tidying up’. The Court concluded that previous decisions of the Court of Appeal, such as Igen Ltd and ors v Wong and other cases (Brief 777), as approved by the Supreme Court in Hewage v Grampian Health Board (Brief 958), remain good law and should continue to be followed by the courts and tribunals. It therefore held that the interpretation of S.136 by Elisabeth Laing J in the EAT in Efobi was wrong and should not be followed.

Link to transcript: http://www.bailii.org/ew/cases/EWCA/Civ/2017/1913.html

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Worker Status: Uber Drivers are ‘Workers’

EA Dismisses Uber Appeal against Employment Tribunal Decision

In Uber BV and ors v Aslam and ors, the EAT has dismissed Uber’s appeal against the employment tribunal’s decision that its drivers are ‘workers’ within the meaning of S.230(3)(b) of the Employment Rights Act 1996 and the equivalent definitions in the National Minimum Wage Act 1998 (NMWA) and the Working Time Regulations 1998 SI 1998/1833 (WTR). It held that the tribunal was entitled to reject Uber’s characterisation of its business as a technology platform rather than a provider of transport services, and to look beyond the contractual documentation describing drivers as self-employed contractors offering their services to passengers via the Uber app. The EAT also approved the tribunal’s finding that the drivers could be considered to be working for the purpose of the NMWA and the WTR at any time when they were logged into the Uber app, within the territory in which they were authorised to work, and able and willing to accept assignments.

The Uber business relies on a smartphone app through which customers can order and track a taxi and pay the fare. Uber treats drivers as self-employed and there is complex contractual documentation between it, the drivers and the passengers. Uber seeks to present itself as a technology platform facilitating the provision of taxi services, not as the provider of the taxi service itself. It holds itself out as acting as agent for the drivers, and its agreement with passengers states that the contract for the taxi service is between the driver and the passenger. Under the contract between Uber and the driver, the driver is not required to make any commitment to work. However, when a driver signs into the app, this usually signals that they are coming ‘on-duty’ and are therefore able to accept bookings. As for day-to-day work, prospective passengers book trips through the app. Upon receipt of a passenger request, the app locates an available driver (i.e. one who is logged in). The selected driver has ten seconds to accept the booking through the app, failing which Uber assumes that the driver is unavailable and locates another. If a driver fails to accept bookings, warning messages are generated which can lead to the driver’s access to the app being suspended or blocked (which prevents the driver working).

A number of Uber drivers brought employment tribunal claims of unlawful deductions from wages, relying on failure to pay the national minimum wage, and failure to provide paid annual leave. Two of the drivers were selected as test claimants and the employment tribunal considered, as a preliminary issue, whether the drivers were ‘workers’ for the purpose of S.230(3)(b) ERA. The tribunal found that they were. It rejected Uber’s case that the drivers were self-employed, and that it merely provided the technology platform that allows drivers to find and agree work with individual passengers. In the tribunal’s view, this characterisation of Uber’s business model and the contractual documentation created to support it did not accord with the reality of the working arrangements, which was that Uber relies on a pool of workers to provide a private hire vehicle service. As for what periods would count as ‘working time’ for the purposes of the WTR and the NMWA, the tribunal concluded that the drivers should be treated as working whenever they are in the territory in which they are authorised to drive, have turned on the app, and are ready and willing to accept fares. Uber appealed to the EAT.

The EAT dismissed the appeal. Her Honour Judge Eady QC, sitting alone, held that, following the Supreme Court’s decision in Autoclenz Ltd v Belcher and ors (Brief 934), the tribunal was entitled to find that the contractual documentation did not reflect the reality and thus that it was entitled to disregard the terms and labels used in the written agreements. The tribunal was required to determine the true agreement between the parties and, in so doing, it was important for it to have regard to the reality of the obligations and the situation. The tribunal was therefore bound to focus on the statutory language, rather than the labels used by the parties, and reach a fact-sensitive decision.

HHJ Eady QC noted that the key question was: when the drivers are working, who are they working for?

Uber submitted that the tribunal had failed to understand its argument that an agency arrangement, whereby it acted as agent in relation to contracts between drivers and passengers, was common in the private hire industry. However, in HHJ Eady QC’s view, the tribunal was not denying the possibility of individual drivers operating as separate businesses and, as such, entering into direct contracts with passengers, it was merely saying that this was not what it found to be the true position. It was entitled to take into account, among other things, the scale of the business, rejecting the notion of Uber as ‘a mosaic of 30,000 small businesses linked by a common platform’. The tribunal was also entitled to rely on its finding that drivers were integrated into Uber’s business, and were marketed as such. HHJ Eady QC also rejected Uber’s argument that the tribunal erred by taking into account features of the relationship that resulted from regulatory requirements as indicia of an employment relationship – it was not obliged to disregard factors simply because they might be seen as arising from the relevant regulatory regime.

As for the tribunal’s conclusion with regard to working time, Uber argued that the tribunal failed properly to take into account that, even while signed into the app, drivers were at liberty to take on or refuse work as they chose, or to cancel trips already confirmed, and could even work for others, including direct competitors of Uber. It therefore submitted that, in those circumstances, they were not at Uber’s disposal or working for Uber. HHJ Eady QC conceded that this aspect of the appeal had caused her some trouble. However, she was satisfied that the tribunal had grappled with this issue and reached a permissible conclusion. The tribunal had made a finding that drivers were expected to accept at least 80% of trip requests when signed in, and that being ‘on duty’ meant being ‘willing and able to accept trip requests’. Even if the evidence allowed that drivers were not obliged to accept all trips, the very high percentage of acceptances required justified the tribunal’s conclusion that, once in the territory with the app switched on, drivers were available to Uber and at its disposal.

Link to transcript: http://www.bailii.org/uk/cases/UKEAT/2017/0056_17_1011.html

 

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Working Time: Workers can work 12 consecutive days without a Weekly Rest Break

Does the EU Working Time Directive allow for weekly rest for a worker of 24 hours to be given at any point in a 14-day period?

Yes, held the European Court of Justice in Maio Marques da Rosa v Varzim Sol. The case arose from a redundant casino worker in Portugal, who claimed his employer had not given him a weekly rest period of 24 hours at the appropriate time, and it should have been given at the latest after six consecutive working days. The casino operated 12 hours a day, 364 days of the year.

The CJEU held that there was no requirement for weekly rest to be provided after six consecutive days of work, it can be provided within each 7-day period. Therefore, the Directive allows a working pattern with a rest day at the start of one 7-day period and another rest day at the end of the following 7-day period, so working 12 consecutive days is permissible under the Working Time Directive.

 

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