Patterson v Castlereagh Borough Council [2014] NIIT 1793

THE INDUSTRIAL TRIBUNALS

CASE REF: 1793/13

CLAIMANT: Robert Patterson

RESPONDENT: Castlereagh Borough Council

DECISION

The unanimous decision of the tribunal is that:-

(1) The tribunal makes a declaration that the respondent made unauthorised deductions from the claimant’s wages in relation to holiday pay contrary to Article 45 of the Employment Rights (Northern Ireland) Order 1996 and in the alternative, the tribunal finds the respondent has failed to pay the claimant amounts in respect of holiday pay, to which he is entitled under Regulation 16 of the Working Time Regulations (Northern Ireland) 1998, in relation to casual work carried out by him under his worker’s casual contract with the respondent.

(2) A remedy hearing will be arranged, in due course, to determine, any remedy to which the claimant is entitled on foot of the tribunal’s decision on liability, as set out above.

(3) The tribunal refuses to make a declaration the respondent made unauthorised deductions from the claimant’s wages in relation to holiday pay contrary to Article 45 of the Employment Rights (Northern Ireland) Order 1996 and, in the alternative, the tribunal does not find the respondent has failed to pay the claimant amounts in respect of holiday pay, to which he was entitled under Regulation 16 of the Working Time Regulations (Northern Ireland) 1998, as amended, in relation to any overtime work carried out by him under his contract of employment as an assistant plant engineer.

Constitution of Tribunal:

Employment Judge: Employment Judge Drennan QC

Members: Mr R Hanna

Ms D Adams

Appearances:

The claimant was represented by Mr B McKee, Barrister-at-Law, instructed by McCartan Turkington Breen, Solicitors.

The respondent was represented by Mr C Hamill, Barrister-at-Law, instructed by Worthingtons, Solicitors.

Reasons

1.1 The claimant presented a claim to the tribunal on 9 October 2013. His claim was part of a multiple claim (Wray & Others, Case Reference No: 1793/13 and Others). However, following presentation to the tribunal of a response to the said ‘multiple’ claim by the respondent on 13 November 2013 and Case Management Discussions on 27 February 2014 and 8 April 2014, it was agreed that the claim of the claimant, Robert Patterson, would be the ‘lead’ claimant, for the purposes of this multiple claim; and it would be listed for a substantive hearing before a full tribunal on liability only. Subsequently, the claimant’s claim was amended, following leave granted by the tribunal, on 29 April 2014 and the respondent presented an amended response on 30 April 2014. It will be necessary to set out in some further detail, later in this decision, the circumstances relating to the making of the said amendment and the terms thereof.

1.2 As shall become apparent later in this decision, the central facts which were necessary for the tribunal to find in order to determine the claimant’s claim, on liability, were largely agreed and/or were not in dispute between the parties. However there was considerable dispute between the parties on the proper interpretation of the relevant law, in light of the facts so found by the tribunal.

1.3 The claimant’s claim is a claim for unauthorised deductions from wages contrary to Article 45 of the Employment Rights (Northern Ireland) Order 1996 and/or breach of the Working Time Regulations (Northern Ireland) 1998. It will be necessary to set out the precise nature of the dispute in more detail elsewhere in this decision; but, in essence, it relates to whether the respondent has calculated properly the sums properly payable by the respondent to the claimant in respect of paid annual leave for ‘casual work’ carried out by the claimant for the respondent as a worker, under a worker’s contract, and, further and in the alternative, following the said amendment of the claim, for overtime as an employee, on foot of a contract of employment, as an assistant plant engineer (see later).

1.4 At the Case Management Discussion on 8 April 2014, as set out in the Record of Proceedings dated 9 April 2014, the following list of issues were agreed by the representatives, namely:-

“Legal Issues :

(1) What are the claimant’s entitlements to annual leave under:-

(a) his contract of employment;

(b) the Working Time Regulations (Northern Ireland) (‘WTR');

(c) the Employment Rights (Northern Ireland) Order 1996 (as amended) (‘ERO’); and

(d) the Working Time Directive

(2) Whether the claimant has:-

(a) a single contract with the respondent as an Assistant Plant Engineer and casual worker, and if so what are his normal working hours; or

(b) two contracts with the respondent: one as an assistant plant engineer and one as a casual relief worker; and if so what are his normal working hours in respect of each contract.

(3) What remedy, if any, has the claimant under his contract(s), the WTR or the ERO?

(4) Has the claimant suffered an unlawful deduction from his wages contrary to Part IV of the ERO?

(5) What time-limits apply to the relevant remedy? If the application is out of time can/should it be extended?

(6) If he is found to have been entitled to same, is the claimant entitled to seek financial compensation or other relief which was not taken?

Factual Issues :

(1) What are the terms of the casual contract?

(2) What is the length of the claimant’s normal working week:-

(a) as an assistant plant engineer; and

(b) as an casual relief worker.

(3) What is the claimant’s contractual entitlement to annual leave under:-

(a) his full-time contract of employment; and

(b) his casual contract?

(4) Has the claimant taken all leave to which he has been entitled under those contracts?

(5) Has the respondent refused to permit the claimant to take leave to which he was entitled?

(6) Has the claimant requested leave from the respondent during the relevant period?

(7) Did the respondent inform the claimant that it was its policy not to pay annual leave in respect of casual work for employees who also had full-time jobs.

(8) Has the respondent refused to pay the claimant for leave which he has taken.

(9) Has the claimant suffered any financial loss?”

(When these issues were agreed, the claimant’s claim had not been amended, which, as set out previously, occurred during the course of the substantive hearing – see later.)

1.5 The tribunal heard oral evidence from the claimant. The respondent did not call any evidence. In addition, the representatives provided oral and written submissions to the tribunal, supplemented by various agreed documents contained in the ‘trial bundle’. As set out later in this decision, following the conclusion of the hearing, the representatives provided further written submissions to the tribunal. All submissions have been considered by the tribunal before reaching its decision, even if not specifically referred to.

1.6 The tribunal became aware, during the course of the hearing of this matter, that there were a number of first instance decisions by Employment Judges in Great Britain, which had potential relevance to the issues in this matter, and that these decisions had gone on appeal to the Employment Appeal Tribunal. The representatives did not wish the hearing of this matter to be postponed, pending the outcome of those appeals, which it was anticipated were due to be heard at the end of July 2014 by the Employment Appeal Tribunal. After discussion, it was agreed that, following the conclusion of the hearing, the tribunal would give its decision as soon as possible thereafter; but would not do so if it became aware the decisions of the Employment Appeal Tribunal were likely to be given at or about the same date. The decisions due to be heard on appeal were the cases of:-

Neal v Freightliner Ltd (Case Reference No: 131542/2012)

Wood and Others v Hertel (UK) Ltd

and AMEC Group Ltd (Case Reference No: 260383/13

and Others)

Fulton and Others v

Bear Scotland (Case Reference No: 4112472/12

and Others)

1.7 In the event, the tribunal subsequently ascertained the case of Neal was settled prior to the appeal. The conjoined appeals by Bear Scotland; and by Hertel (UK) Ltd and Amec Group Ltd (Bear Scotland) were jointly heard by the Employment Appeal Tribunal on 30 – 31 July 2014 and 1 August 2014. Unfortunately, in the event it was not possible, due to illness of the Employment Judge, for the tribunal to issue its decision in early October 2014, as it had intended.

The tribunal then became aware the decision of the Employment Appeal Tribunal in Bear Scotland was imminent and therefore, having regard to the terms of the overriding objective,, decided not to issue its decision until after the issue of the decision of the Employment Appeal Tribunal and after having taken it into account. In so doing, the tribunal was also mindful, from the submissions made to it, the issues in both these proceedings and those on appeal in Great Britain are of importance to many other employers and employees in both jurisdictions and it is clearly possible, given their importance to employers and employees alike, that the issues may still require to be finally resolved by the Higher Courts in either jurisdiction and/or the European Court of Justice (see later). Before issuing its decision the tribunal invited the representatives to make further written submissions in light of the decision in Bear Scotland provided further written submissions on foot of the said invitation.

2.1 The tribunal made the following findings of fact, insofar as relevant and necessary for the determination of the claimant’s claim, as set out in the following sub-paragraphs.

2.2 The claimant from on or about 7 July 2001 carried out relief and occasional work for the Council on foot of a contract entered into between the claimant and the respondent.

The following were relevant and material terms of the said contract:-

“1. It is agreed that the Worker wishes to undertake relief and occasional work for the Council.

2. The Council will place the Worker’s name on a register of relief staff.

3. If the Council requires work to be done, the work, the rates of pay and the hours and place of work will be notified to the Worker when contacted and requested to work. Workers will be paid on a weekly basis.

4. There is no obligation on the Worker to be available for or agree to undertake such work.

5. The Council reserves the right at its discretion to give or refuse work to any person at any time and will not be required to give any reasons for its decision.

6. The Worker will remain on the register of relief staff until written notice is given by either the Worker or Council removing the Worker’s name from the register.

7. The Council’s disciplinary rules and grievance procedure which are available from the Human Resources Department will apply to the Worker whilst they are engaged on work for the Council.

8. There are no provisions in relation to sick pay, pensions or notice of termination applicable to relief staff.

9. In the event that a Worker undertakes at the request of the Council continuous relief work for 13 calendar weeks he/she may [tribunal’s emphasis] be entitled to paid leave in accordance with the provisions of the Working Time Regulations 1998.

10. No period of work of whatever duration carried out under the terms of this agreement shall entitle the Worker to be classified as a non-relief employee unless same is for a continuous period of six months or longer.”

2.3 Initially, the claimant carried out regular occasional/relief work for the Council as a recreation assistant. He was paid the relevant basic rate for such work. Every three months or so he received a sheet stapled to his pay-slip which set out the number of hours he had accrued of annual leave during the relevant period, by working the said casual hours for the relevant period. In addition to his pay for the occasional/relief work he was also subsequently paid a sum, calculated at basic rate, in respect of the said hours of annual leave accrued, calculated as set out in the said pay-slip. Later, the claimant also carried out occasional/relief work for the Council as an assistant plant engineer. This occasional/relief work as an assistant plant engineer was paid at a different rate, which was higher than that for a recreation assistant; but the system of payment, outlined above, remained the same taking account of the different rates of pay. Indeed, the claimant began to carry out more occasional/relief work as an assistant plant engineer than as a recreation assistant.

2.4 On or about 6 January 2003, the claimant commenced full-time employment with the respondent as an Assistant Plant Engineer at the Dundonald International Ice Bowl on foot of a contract of employment with the respondent, which contained the following terms relevant and material to these proceedings, namely:-

“(a) Hours of work

The basic hours of your employment are 37 per week. The pattern of work will be agreed with your supervisor. The working week will be seven days Monday to Sunday and the post holder may be scheduled to work at any times relating to the operation of the centre.

(b) Holiday entitlement

You are entitled to 28 days’ holiday (now agreed by the parties to have been subsequently amended to 32) within the leave year running from 01 April to 31 March. This figure includes an element in relation to both annual holidays and statutory holidays. On the termination of your employment you shall be entitled to pay in lieu of outstanding holiday entitlement in respect of that holiday year and you shall be required to repay to the Council for holidays taken in excess of your entitlement during your final holiday year of employment.”

The said contract also set out the claimant’s basic rate of pay as a full-time assistant plant engineer, which has increased over the subsequent years of his employment. The contract of employment did not contain any express term relating to overtime. However, the tribunal is satisfied that, pursuant to his contract of employment, the claimant has carried out overtime as an assistant plant engineer and has been paid for the said hours worked, as overtime, at the rate of time and a half. The tribunal is further satisfied, on the evidence before it, which was not disputed that any such overtime carried out by the claimant, however regular, was voluntary and non-compulsory. The claimant was not required to do the overtime, if it was offered by the respondent and there was no requirement on the respondent to offer it under the contract (see further later the term ‘unguaranteed overtime’). He did not carry out overtime as a casual worker for the respondent.

2.5 Since 6 January 2003 the claimant has continued to do regular occasional/relief work on foot of the said 2001 contract (and subsequent ‘successor’ contracts) but has only done such work as a recreation assistant and was paid for such work at the recreation assistant’s basic rate.

2.6 Following the claimant’s employment as a full-time assistant relief manager from 6 January 2003, although the claimant continued to carry out occasional/relief work for the respondent, as set out above, as a recreation assistant, he has no longer received, from the respondent, any payment for annual leave, calculated on the basis of such occasional/relief work, as he had received previously prior to his full-time employment. When he queried this, the claimant maintained he was told by a manager of the respondent, in terms, it was Council policy that full-time employees did not get annual leave for casual hours worked in another role. The respondent disputed this was ever said to the claimant. On balance, the tribunal accepts this was said to the claimant but it was ‘shorthand’ explanation by a manager for why the claimant was no longer receiving paid holiday pay for his casual work rather then a full explanation of the respondent’s policy on the issue. That statement, by a manager, lies at the heart of the issues, the subject-matter of these proceedings.

2.7 On or about 12 January 2007 the claimant signed a further contract with the respondent in relation to his occasional/relief work which replaced the earlier July 2001 contract. In essence, the ‘new’ agreement was in the same terms as the previous contract, but with the addition of the following terms, namely:-

“(a) To remain on the relief register of staff you will need to work at least one shift in each financial year.

(b) This agreement is the complete and exclusive statement of the terms of engagement between the Council and the worker relating to work offered by the Council to the Worker.”

2.8 On or about 15 September 2007 the claimant signed a further contract with the respondent in relation to his occasional/relief work which replaced the earlier January 2007 contract. Again the terms were not dissimilar to the terms of the earlier contracts. Given the potential for backdated claims at any remedy hearing, in the circumstances, the tribunal considers it appropriate and necessary to set out below, in full, the relevant and material terms of this ‘new’ contract:-

““1. It is agreed that the Worker wishes to undertake relief and occasional work for the Council.

2. The Council will place the Worker’s name on a register of relief and occasional workers.

3. If the Council requires work to be done, the work, the rates of pay and the hours and place of work will be notified to the Worker, when contacted and requested to work. Workers will be paid on a weekly basis.

4. There is no obligation on the Worker to be available for or agree to undertake such work.

5. There is no obligation on the Council to offer work to the Worker. The Council reserves the right at its discretion to give or refuse work to any Worker whose name is maintained on the register of relief and occasional Workers at any time and will not be required to give any reasons for its decision.

6. The Worker will not be an employee of the Council.

7. The Worker will remain on the register of relief and occasional Workers until written notice is given by either the Worker or Council removing the Worker’s name from the register.

8. The Council’s disciplinary rules and grievance procedure which are available from the Human Resources Department will apply to the Worker whilst engaged on work for the Council.

9. There are no provisions in relation to sick pay, pensions or notice of termination applicable to relief and occasional Workers.

10. In the event that a Worker undertakes relief and occasional work at the request of the Council, he/she may [tribunal’s emphasis] be entitled to paid leave in accordance with the provisions of the Working Time Regulations (Northern Ireland) 1998.

11. This agreement is the complete and exclusive statement of the terms of engagement between the council and the Worker relating to work offered by the Council to the Worker.”

2.9 On 9 November 2007, the claimant received a letter from the Council, which stated, insofar as relevant and material:-

“Ref. Relief General Assistant

Further to your recent interview for the above position, I am pleased to inform you that you have been placed on the Register for Relief General Assistant.

You will be engaged on an ‘as and when required basis’. In the event that you are required to work a supervisor will contact you to advise you of the type of work and hours required. Under the relief working arrangements, the Council is under no obligation to offer hours in any given week, and you have the right to refuse an offer of engagement. However, availability will be a factor in determining the number of engagements, if any, that you are offered throughout the year.

If the Council requires work to be done, the work, the rates of pay and the hours and place of work will be notified to you. There is no provision in relation to sick pay, pensions or notice of termination applicable to relief staff. In the event that you are required to work you will [tribunal’s emphasis] be entitled to paid leave in accordance with the provisions of the Working Time Regulations 1998.

Your performance will be continuously employed during periods of employment, and if it is determined that your performance is not at the required standard, you may be removed from the relief register.

Whilst you are engaged on work for the Council you will be subject to the Council’s disciplinary and grievance procedures ... .”

The letter enclosed a job description and job specification for a relief general assistant in the Leisure Services Department of the respondent. The job specification included a summary of the main terms and conditions of employment for such relief staff, which included the following terms, material to the present proceedings:-

“Holiday entitlement

Relief workers are not, on appointment, automatically awarded a holiday entitlement for the leave year; however holidays are accrued on a pro rata basis in line with the Working Time Regulations and are calculated on a quarterly basis (ie every 13 weeks from 1 April).

Hours of work

The hours of work will vary in accordance with the operational needs of the Centre.

Absence of mutuality of obligation

Relief workers are not obliged to accept work engagements offered to them by the Council. Similarly the Council is under no obligation to offer the relief worker any work engagement.

Rate of pay

Relief workers are paid at the basic rate for hours worked only and have no entitlement to overtime or any additional payments ... .”

2.10 Under the express terms of the various contracts, referred to previously, there is reference to ‘relief and occasional work’ and ‘relief and occasional worker’. Indeed, during the course of the hearing, it became apparent the terms more commonly in use by the parties to describe the said work carried out by the claimant under these contracts were ‘casual work’ and ‘casual worker’; the tribunal has continued to adopt this terminology, where appropriate, in the remainder of this decision. The tribunal does not consider, in the circumstances, anything turns on this difference of terminology used by the parties in contrast to the express terms of the contracts. Further, the tribunal is satisfied that at all material times when the claimant worked as a casual worker on foot of the said contracts he did as a worker and not as an employee, despite various references therein to ‘employment’. Indeed, this was not disputed by the claimant. In the circumstances, the tribunal is satisfied the claimant was working as a worker on foot of a worker’s contract (see further later Article 2 of the Working Time Regulations (Northern Ireland) 1998).

3.1 In essence, the claimant’s claim, as set out in his claim form, before amendment, related to his complaint that, following his employment as a full-time employee in January 2003, as an assistant plant engineer, he no longer received, as he had previously, any paid annual leave in respect of any casual work carried out by him with the respondent; albeit he had continued to do such casual work as well as his full-time employment as an assistant plant engineer. In particular, his claim to the tribunal had made no express complaint relating to any failure by the respondent to pay him the monies due to him, properly calculated, in relation to paid annual leave on foot of his contract of employment as a full-time assistant plant engineer. Whilst in the course of correspondence/replies to interlocutory notices, there was reference to the issue of hours worked as overtime in the calculation of paid annual leave, the tribunal was satisfied it was done with reference to the claim already made, relating to the claimant’s casual work. There was reference in the statement of issues to the claimant’s full-time employment as an assistant plant engineer; but the tribunal is satisfied these were part of the factual matrix in respect of his claim for paid annual leave for his casual work. Further, the tribunal is satisfied the respondent’s representative had not understood the references were part of any additional claim out of his work as an assistant plant engineer. The tribunal was satisfied that from these references it could be implied that any such additional claim had been made by the claimant, having considered the terms of the whole claim form.

Further, none of the references made it clear that they were also intended to be the subject of an application for leave to amend the claim, to enable the claimant to raise issues relating to the calculation of paid annual leave by the respondent, in respect of the said full-time contract of employment of the claimant as an assistant plant engineer, and, in particular, that any such calculation should include reference to hours of voluntary overtime worked by him over and above his basic hours, as an assistant plant engineer.

It must be noted the working of such overtime hours only related to the claimant’s work as an assistant plant engineer, not his casual work. It became clear, during the course of the hearing, the claimant’s representatives believed they could rely on these references, without any such application, in order to widen the scope of the claim to include a claim relating to calculation of paid annual leave to include his work as an assistant plant engineer but also his work as a casual worker. As the tribunal made clear to the claimant’s representatives an amendment such as this cannot be introduced by such a ‘back door’ method and, if it was to be proceeded with, had to be the subject of a formal application for leave to amend to which the respondent would be entitled to object.

3.2 The claimant’s representative confirmed that he did wish to proceed with his application for leave to amend, the details of which are set out later in this decision. Having heard the application, the tribunal granted the application and the hearing continued on the basis of the amended claim. It was agreed, as the application was not consented to, that the tribunal would set out, in this decision, its reasons for granting the said application.

3.3 The claimant’s application for leave to amend, as subsequently formally confirmed in writing by letter dated 29 April 2014, was stated to include the following in the claim form:-

“The claimant has worked and continues to work overtime as an assistant plant engineer. The claimant’s payment for annual leave is paid to reflect his basic working hours. The claimant contends that his annual leave payment should be comparable to the wages he earns as an assistant plant engineer. The claimant contends that his earnings should be calculated over a reference period, such as 13 weeks and that the payment for annual leave should be at a comparable level.”

3.4 The respondent’s representative formally objected to the application for amendment but more in principle then in substance; as he recognised, properly in the tribunal’s view, if his objections were upheld, the respondent would still be faced, on foot of fresh proceedings, with the necessity to deal with the same issues. He therefore accepted there were good and compelling reasons, having regard to the terms of the overriding objective, for these amended issues to be determined in the context of these proceedings.

3.5 The tribunal was satisfied that this amendment added a further claim but related to the claimant’s full-time employment as an assistant plant manager; and it was one which was linked to or arose out of the same facts as the original claim, which had related only to the claimant’s casual work for the respondent. Indeed, as stated previously, the facts relevant to this further claim were already part of the factual matrix relating to the original claim. This was properly and fairly recognised by the respondent’s representative in the course of his submissions. As stated in Harvey on Industrial Relations and Employment Law, Volume 3, Section PI (Paragraphs 312-01 – 02), it is not necessary for such a proposed amendment to be subjected to scrutiny in respect of the time-limits for any such claim, but for the proposed amendment to be considered under the general principles contained in the well-known decision of Selkent Bus Co v Moore [1996] IRLR 661.

Having regard to the principles set out in Selkent, the tribunal accepted this was not a minor amendment and raised further substantial complex issues. It strongly regretted the timing and manner in which the application had been brought, as referred to previously. The tribunal emphasised that mere references in the interlocutory and/or case-management process, without more, is no substitute for bringing a formal application for leave to amend in accordance with the Rules of Procedure. However, despite this criticism by the tribunal, this was not a determinative factor in the tribunal’s determination of the application. The tribunal noted there was no real prejudice to the respondent, albeit its representatives had been taken somewhat by surprise by the claimant seeking to enlarge the claim during the course of the hearing. The representatives of the respondent were able, as was acknowledged by them, to deal with the issues raised by the amendment, without any additional adjournment of the proceedings. Further, the tribunal noted that the claimant, at all material times, would have been at liberty to issue ‘new’ proceedings raising the issues, the subject-matter of the amendment. However, the tribunal concluded, after balancing the relative injustice and hardship, to each of the parties, involved in refusing or granting the amendment, in the circumstances set out above, that it fell in favour of granting the application for leave to amend the claimant’s claim in the terms set out above. The tribunal therefore granted leave to the claimant to amend his claim.

3.6 In light of the tribunal’s decision to grant leave to amend the claimant’s claim, the respondent formally amended its response by letter dated 30 April 2014, by incorporation of the following by way of response to the claim, as amended:-

“The respondent confirms that the claimant worked and continues to work voluntary (ie non-compulsory) overtime as an Assistant Plant Engineer (although the claimant is currently on sick leave). The claimant also undertakes casual work but there is no mutuality of obligation in respect of this second contract. The claimant is required to indicate when he is available to work on a weekly basis and shifts may/may not be offered to him. The claimant is not required to accept same.

The respondent confirms that the claimant’s annual leave has been calculated and is paid exactly as per his normal week’s pay as provided for in the Working Time Regulations (Northern Ireland) 1998 (‘WTR'), the Working Time Directive (‘WTD’) and the Employment Rights (Northern Ireland) Order 1996 (‘ERO’) (ie under his full-time, permanent contract as an Assistant Plant Engineer).

The respondent denies that the claimant’s annual leave ‘should be comparable to wages he earns as an assistant plant engineer’ and/or ‘that his earning shall be calculated over a reference period such as 13 weeks and that the payment for annual leave should be at a comparable level’ as alleged or at all.

In order to earn more salary/wages in any given week, the claimant either has to undertake voluntary overtime or voluntary casual work. The method of calculation in respect of the rate of pay for payment of annual leave adapted by the respondent satisfies the requirements of the WTR, WTD and ERO; and the respondent’s providing the claimant with annual leave in excess of the statutory requirements of the WTR and in excess of the stated aims of the WTD. For the sake of complete clarity, the respondent denies the claimant’s allegations in their entirety.”

Relevant law

4.1 Insofar as relevant the Employment Rights (Northern Ireland) Order 1996 (‘ERO’) states as follows:-

“Article 45 – Right not to suffer unauthorised deductions

(1) An employer shall not make a deduction from wages of a worker employed by him unless —

(a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker's contract, or

(b) the worker has previously signified in writing his agreement or consent to the making of the deduction.

...

(3) Where the total amount of wages paid on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion (after deductions), the amount of the deficiency shall be treated for the purposes of this Part as a deduction made by the employer from the worker's wages on that occasion.

Article 55 – Complaints to Industrial Tribunals

(1) A worker may present a complaint to an industrial tribunal –

(a) that his employer has made a deduction from his wages in contravention of Article 45 ...

Article 59 – Meaning of ‘wages’ etc

(1) In this Part ‘wages’, in relation to a worker, means any sums payable to the worker in connection with his employment, including—

(a) any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise ... .”

4.2 Further, insofar as relevant the ERO states, as follows:-

“16 – Introductory

The amount of a week's pay of an employee shall be calculated for the purposes of this Order in accordance with this Chapter.

General

17(1) This Article and Articles 18 and 19 apply where there are normal working hours for the employee when employed under the contract of employment in force on the calculation date.

(2) Subject to Article 18, if the employee's remuneration for employment in normal working hours (whether by the hour or week or other period) does not vary with the amount of work done in the period, the amount of a week's pay is the amount which is payable by the employer under the contract of employment in force on the calculation date if the employee works throughout his normal working hours in a week.

(3) Subject to Article 18, if the employee's remuneration for employment in normal working hours (whether by the hour or week or other period) does vary with the amount of work done in the period, the amount of a week's pay is the amount of remuneration for the number of normal working hours in a week calculated at the average hourly rate of remuneration payable by the employer to the employee in respect of the period of twelve weeks ending —

(a) where the calculation date is the last day of a week, with that week, and

(b) otherwise, with the last complete week before the calculation date.

(4) In this Article references to remuneration varying with the amount of work done includes remuneration which may include any commission or similar payment which varies in amount.

(5) This Article is subject to Articles 23 and 24.

Remuneration varying according to time of work

18(1) This Article applies if the employee is required under the contract of employment in force on the calculation date to work during normal working hours on days of the week, or at times of the day, which differ from week to week or over a longer period so that the remuneration payable for, or apportionable to, any week varies according to the incidence of those days or times.

(2) The amount of a week's pay is the amount of remuneration for the average number of weekly normal working hours at the average hourly rate of remuneration.

(3) For the purposes of paragraph (2) —

(a) the average number of weekly hours is calculated by dividing by twelve the total number of the employee's normal working hours during the relevant period of twelve weeks, and

(b) the average hourly rate of remuneration is the average hourly rate of remuneration payable by the employer to the employee in respect of the relevant period of twelve weeks.

(4) In paragraph (3) “the relevant period of twelve weeks” means the period of twelve weeks ending —

(a) where the calculation date is the last day of a week, with that week, and

(b) otherwise, with the last complete week before the calculation date.

(5) This Article is subject to Articles 23 and 24.

Supplementary

19(1) For the purposes of Articles 17 and 18, in arriving at the average hourly rate of remuneration, only —

(a) the hours when the employee was working, and

(b) the remuneration payable for, or apportionable to, those hours,

shall be brought in.

(2) If for any of the twelve weeks mentioned in Articles 17 and 18 no remuneration within paragraph (1)(b) was payable by the employer to the employee, account shall be taken of remuneration in earlier weeks so as to bring up to twelve the number of weeks of which account is taken.

(3) Where —

(a) in arriving at the average hourly rate of remuneration, account has to be taken of remuneration payable for, or apportionable to, work done in hours other than normal working hours, and

(b) the amount of that remuneration was greater than it would have been if the work had been done in normal working hours (or, in a case within Article 1(3), in normal working hours falling within the number of hours without overtime),

account shall be taken of that remuneration as if the work had been done in such hours and the amount of that remuneration had been reduced accordingly.

Employments with no normal working hours

20(1) This Article applies where there are no normal working hours for the employee when employed under the contract of employment in force on the calculation date.

(2) The amount of a week's pay is the amount of the employee's average weekly remuneration in the period of twelve weeks ending —

(a) where the calculation date is the last day of a week, with that week, and

(b) otherwise, with the last complete week before the calculation date.

(3) In arriving at the average weekly remuneration no account shall be taken of a week in which no remuneration was payable by the employer to the employee and remuneration in earlier weeks shall be brought in so as to bring up to twelve the number of weeks of which account is taken.

(4) This Article is subject to Articles 23 and 24.”

(Articles 23 and 24 relate to maximum amount of weeks pay and are not relevant and material for the purposes of this decision on liability.)

4.3 Article 5 of the ERO states as follows:-

“Normal working hours

5(1) Where an employee is entitled to overtime pay when employed for more than a fixed number of hours in a week or other period, there are for the purposes of this Order normal working hours in his case.

(2) Subject to paragraph (3), the normal working hours in such a case are the fixed number of hours.

(3) Where in such a case —

(a) the contract of employment fixes the number, or minimum number, of hours of employment in a week or other period (whether or not it also provides for the reduction of that number or minimum in certain circumstances), and

(b) that number or minimum number of hours exceeds the number of hours without overtime,

the normal working hours are that number or minimum number of hours (and not the number of hours without overtime).”

4.4 The Working Time Directive 2003/88 EC (‘WTD’) states:-

“Article 7

Annual leave

1. Member States shall take the measures necessary to ensure that every worker is entitled to paid annual leave of at least four weeks in accordance with the conditions for entitlement to and granting of, such leave laid down by national legislation or practice.

2. The minimum period of annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated.”

4.5 Insofar as relevant the Working Time Regulations (Northern Ireland) 1998, as amended (‘WTR') provide as follows:-

“Article 16 – Payment in respect of periods of leave

(1) A worker is entitled to be paid in respect of any period of annual leave to which he is entitled under regulation 13, at the rate of a week’s pay in respect of each week of leave.

(2) Articles 17 to 20 of the ERO shall apply for the purpose of determining the amount of a week’s pay for the purposes of this regulation, subject to the modifications set out in paragraph (3).

(3) The provisions referred to in paragraph (2) shall apply–

(a) as if references to the employee were references to the worker;

(b) as if references to the employee’s contract of employment were references to the worker’s contract;

(c) as if the calculation date were the first day of the period of leave in question; and

(d) as if the references to Articles 23 and 24 did not apply.”

4.6 Regulation 30 of the WTR states as follows:-

“(1) A worker may present a complaint to an industrial tribunal that his employer –

...

(b) has failed to pay him the whole or any part of any amount due to him under ... Regulation 16(1).

(2) An industrial tribunal shall not consider a complaint under this Regulation unless it is presented –

(a) before the end of the period of three months ... beginning with the date on which it is alleged the exercise of the right should have been permitted (or in the course of a rest period or leave extending over more than one day, the date on which it should have been permitted to begin) or, as the case may be, the payment should have been made; or

(b) within such further period as the tribunal considers reasonable in a case where it is satisfied that it was not reasonably practicable for the complaint to be presented before the end of the period of three months ...

...

(5) Where on a complaint under Paragraph 1(b) an industrial tribunal finds that an employer has failed to pay a worker in accordance with Regulation 16(1) it shall order the employer to pay to the worker the amount which it finds to be due to him.”

4.7 Worker, as used in Article 45 of ERO is defined in Article 3 of the ERO as follows:-

“(3) In this Order ‘worker’ means an individual who has entered into or works under (or, where the employment has ceased, worked under) –

(a) a contract of employment;

(b) any other contract, whether express or implied and (if it is express) whether oral or in writing whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any professional or business undertaking carried out by the individual;

and any reference to a worker’s contract shall be construed accordingly.”

The same definition of ‘worker’ is contained in Regulation 2 of the WTR.

5.1 There is no doubt that the basic entitlement to holiday pay is given by Regulation 16 of WTR, as referred to above. In essence, this Regulation entitles a worker to be paid in respect of any period of annual leave to which he or she is entitled under Regulation 13, and additional leave under Regulation 13A, at the rate of a week’s pay in respect of each week of leave. Central to the issue in the present proceedings is the fact that the said Regulation provides the rate of a week’s pay is to be calculated by reference to Article 17 to 20 of the ERO, subject to the modification set out in Regulation 16(3) of WTR – which modification, as seen previously, relates, in particular, to applying the articles of the ERO applicable to an employee and contract of employment to a worker and worker’s contract.

In particular, Article 17 – 20 of the ERO provide different methods of calculation, depending on whether the relevant employment has ‘normal working hours’ or not. If the employment does have ‘normal working hours’, a week’s pay is calculated under Article 17 – 19 of the ERO. If not, the calculation is under Article 20 of the 1996 Order.

If the employment has ‘normal working hours’, a week’s pay is calculated according to which type of ‘normal working hours’ applies, as set out in Articles 17 – 19 of the ERO. It is not necessary to discuss these provisions in any detail, for the purpose of this decision on liability. But, in essence, a week’s pay for those with ‘normal working hours’ is what they get paid for working those hours for one week; whereas, if the worker does not have normal working hours, Article 20 of the ERO applies and a week’s pay is calculated by reference to the worker’s average remuneration over the previous 12 weeks in which remuneration was received. Unfortunately, given the issues at the centre of the dispute in the present proceedings, there is no definition of ‘normal working hours’ set out in Articles 17 – 20 of the ERO.

Since the decision of the House of Lords in Revenue & Customs Commissioner v Stringer [2009] ICR 985, it has been confirmed that payments due for annual leave under Regulation 16 WTR can be brought as a claim for unauthorised deduction from wages under the ERO.

However, Regulation 16 of WTR does not expressly apply Article 5 of the ERO, and this Article, as seen above, only provides a partial definition of what are ‘normal working hours’ for the purposes, inter alia, of Article 17 – 20 of the ERO.

5.2 The above issue therefore has arisen in a series of cases in Great Britain in relation to whether, in particular, the definition in Article 5 is required to be applied in calculating a week’s pay for the purposes of Regulation 16 of WTR. If it does, it is a complex definition, to be applied. For present purposes, the particular difficulty with Article 5 of the ERO, as seen in the said case law, is that the definition of ‘normal working hours’ excludes overtime which a worker is required to work but which the employer is not obliged to provide. The series of cases culminated in the leading decision of Bamsey v Albon Engineering & Manufacturing PLc [2004] EWCA Civ 359, where the Court of Appeal held that the definition in Section 234 of the Employment Rights Act 1996 (in the same terms as Article 5 of the ERO) applied in calculating a week’s pay for the purposes of Regulation 16 of WTR; albeit Section 234 of the Employment Rights Act 1996 was not expressly referred to in Regulation 16 of WTR.

The Court of Appeal, applying the same or similar legislation in Great Britain to that which applies in Northern Ireland, as set out previously, held:-

“31. The next and central issue is whether Regulation 16 in its incorporation of Sections 221 to 224 for its purposes, also incorporates the definition in Section 234 governing those Sections for the purposes of the Act.

32. As I have already noted, neither Regulation 2, which makes comprehensive provision for interpretation of the Regulations, nor Regulation 16, which creates the entitlement to payment for annual leave (at the rate of a week’s pay) for each week leave, defines either a ‘week’ or ‘a week’s pay’ by reference to ‘normal working hours’ or otherwise. As I have also noted, those are surprising omissions unless the draughtsman consider that both definitions were incorporated by the express reference in Regulation 16(2) to Sections 221 to 224 of the Act. In my view, Regulation 16 clearly incorporates, for the purpose of determining a week’s pay, not only Sections 221 to 224, as it expressly provides, but also the interpretation of ‘normal working hours’ in respectively Sections 234 and 235, which Sections 220 to 224, by necessary implication and, in the case of Section 234, by expressed reference in Section 223(3), incorporate for the purpose. The critical connector in the Act is Section 220, which provides that to the amount of ‘a week’s pay’ is to be calculated ‘for the purposes of this Act in accordance with this Chapter’.

This clearly subjects Sections 221 to 224 and other provisions in other Chapters of the Act, insofar as they require calculation of ‘a week’s pay’, to the all-Act-purpose interpretation in Section 234 of ‘normal working hours’, if and to the extent that the work in question includes overtime.

33. There is nothing in Regulation 16 to the contrary. For example, although the draughtsman in Paragraph (3) of the Regulations expressly modified Sections 221 to 224 for its purposes, including references in them to other provisions of Chapter II, he did not expressly exclude the application of Section 234, or modify the provision in Section 223(3)(b) making express reference to it.”

Lord Justice Auld, giving the judgment of the Court of Appeal in Bamsey also dealt with the issue of the construction of Regulation 16 in the light of the Working Time Directive, when he stated:-

“34. In my view, there is nothing in the Directive to suggest the construction of the term ‘a week’s pay’ in the Regulations so as to give it the same meaning for their purposes, where overtime is involved, as that in Section 221 to 224 of the Act would offend its main or any of its purposes so as to require, as Mr Hendy suggested, a purposive construction to the contrary.

35. The clear purpose of the Directive, as I have said more than once, is to encourage a climate of protection for the working environment and health of workers. So much is clear from its Recitals, some of which I have mentioned. And Article 7, in its provision for Member States to ensure that workers are entitled to at least four weeks’ annual leave, clearly has their health in mind. But I do not see upon what basis, it can be said that it requires Member States, in its implementation, to ensure that workers receive more pay during their period of annual leave than that which they are contractually entitled to earn, and did earn, while at work.

36. First, Article 7 expressly qualifies its declaration of workers’ entitlement to at least four weeks’ paid annual leave to the qualification that such paid leave is to be ‘in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice’. Such conditions necessarily include definition of the basis upon which payment is calculated for such a period of leave.

37. Second, and consistently with that qualification, Article 7 is silent as to the level of payment for annual leave to which a worker is entitled. It does not, for example, provide that payment during such leave should equate with a normal week’s pay when the worker was at work, or that it should be calculated by reference to ‘working time’ as defined in Article 2.1. Thus, the European Union has laid down the principle of an entitlement of four weeks’ paid annual leave, but has left the conditions of entitlement for implementation by Member States. In leaving Member States that margin of appreciation, it is not for domestic courts to venture a means of calculation that would be contrary to the clear terms of such implementation effected within the margin of discretion allowed by the Directive.

...

39. As Mr Linden observed, common sense also points to the conclusion that the Directive had to leave it to Member States to decide how to calculate the amount of remuneration payable in respect of the absolute entitlement to four weeks’ paid annual leave. The pay systems of different employers across the European Union differ; a workable definition would, therefore, be difficult to achieve. In the United Kingdom alone, Sections 221 – 224 illustrate the range of issues that would need resolution, for example, where pay varies according to the amount of work done, or time worked or where there are no normal working hours, questions as to what benefits are to be included in pay for this purpose and whether pay should be calculated at basic or enhanced overtime rates. It follows in my view, that, unless the conditions of entitlement laid down by Regulation 16, as I have construed, are such that they can be said to negate or frustrate the very purpose of the Directive, the court must look at the Regulation unassisted in this respect by the Directive.

40. In my view, there is nothing in Regulation 16 on which the Marleasing principle of construction can bite, especially where, as I have concluded, the content and framework of the Regulations, when read with the Act, show that their draughtsmen clearly intended to apply the Act’s well-established domestic definition of ‘a week’s pay’ save in the immaterial respects for which he specifically provided in Regulation 16(3). In particular, there is no basis for reading Article 7 of the Directive as requiring a broad equivalence of pay for work done, namely overtime, which the employer was not bound to provide under the contract of employment, with payment on annual leave for overtime work not done at all. And in any event, Sections 221 – 224, with or without Section 234, will not necessarily achieve that. As I have mentioned, Section 223 is capable of producing in individual cases ‘a week’s pay’ that may be more or less than an employee actually earned over the 12 week period.

41. Further, although the Directive was intended to have the effect of encouraging workers , for the sake of their health, to take their full leave entitlement, which they might not do if their holiday pay is significantly less than their normal working pay, it could equally be said that it was not intended to encourage them to enter into contractual arrangements in which they submitted themselves to an obligatory long and unhealthy working hours for 11 months of the year by the additional carrot of a level of holiday pay to match such hours when they were not actually working them. There was no evidence before the EAT or other basis on which it could have found that employees would or might as a generality be discouraged from exercising their entitlement to paid annual leave where their weekly pay for the purposes is calculated by reference to Section 234 of the Act.

... .”

5.3 Indeed, it was recognised by both representatives, in the present proceedings, that, but for some recent decisions, in the area of European Law, to which further more detailed reference is set out below, these matters, the subject-matter of the present proceedings, would be unlikely to have troubled this tribunal, in light of the guidance set out in Bamsey. This decision, until recently, has been held to be good and settled law. As seen later, although not binding in this jurisdiction, it would be highly persuasive and would normally have been followed by industrial tribunals in a relevant case. In essence, the issue arises, in the present proceedings, whether the guidance set out in Bamsey remains good law, in light of these recent decisions in the area of European Law. In light of the decision in Bamsey, if the formula for calculating ‘a week’s pay’, as set out in the ERO is required to be continued to be applied, there is a consequence, in certain factual situations, for significant elements of actual remuneration to be excluded from consideration in the calculation of the holiday pay entitlement under WTR.

5.4 In a nutshell, despite the decision in Bamsey, which the respondent continues to rely upon, the claimant contends, in these present proceedings, following the recent developments in European Law, Bamsey should no longer be followed and the application of Article 5 of the ERO to the calculation of holiday pay is non-compliant with the Working Time Directive (‘WTD’); and that it is both possible and necessary to read Regulation 16 with the Directive, by finding that Article 5 does not apply to ‘a week’s pay’ under Regulation 16, in accordance with the well-known principles of interpretation of European Law as illustrated in the well-known decision of Marleasing SA v LA Comercial International de Alimentacion [1990] ECR 14135 ECJ, which, as seen above, had been effectively rejected in Bamsey (see later).

5.5 In particular, the claimant relied on the decision of the Court of Justice of the European Union (‘CJEU’) in the case of British Airways Plc v Williams C‑155/10 [2011] IRLR 948. Although it was a decision about the interpretation of the Civil Aviation Directive (2000/79 EC) (CAD) and concerned a ‘test’ case, involving 2,500 pilots, who had claimed that their employer should pay to them holiday pay calculated not just on the basis of basic pay but also on the basis of various supplements and allowances (which did not include overtime payments) and which were payable for periods spent flying away from base. In the Williams case the claimants were successful at first instance and before the Employment Appeal Tribunal but lost in the Court of Appeal. The Williams case was then referred to the CJEU by the Supreme Court. It is of interest to note that the questions referred by the Supreme Court related not only to the CAD but also the WTD but also the extent to which the said Directives defined the requirements as to the nature and/or level of payments required to be made in respect of annual leave and, in particular, whether the rate of payment must correspond precisely to, or be broadly comparable to, the worker’s ‘normal pay’, and if so how such a concept should be assessed.

Advocate General T Trstenjak proposed, in his answer, that holiday pay, both under Article 7 WTD and under CAD are to be calculated, in accordance with national legislation and/or practice but that:-

“ ... holiday pay must, in principle, be determined in such a way as to correspond to the workers’ ‘normal’ remuneration ...”;

and where the level of remuneration varied, as it did in the case of the pilots, a worker was entitled to holiday pay - “corresponding to his average earnings” based on “a sufficiently representative reference period”.

In broad terms, the CJEU, [2011] EUECJ C-155/10, followed this answer and it is readily apparent, from the court’s judgment, as set out below, that it applied not only to the CAD but also to the WTD:-

“17. The wording of Article 7 of Directive 2003/88 makes no specific reference to the remuneration to which a worker is entitled during his annual leave. The case law, however, points out that it follows from the very wording of Article 7(1) – a provision from which that Directive allows no derogation – that every worker is entitled to paid annual leave of at least four weeks and that that right to paid annual leave must be regarded as a particularly important principle of Community social law (see joined cases C-350/06 and C-520/06, Schultz-Hoff and Stringer and Others [2009] ECR 1-179, Paragraphs 22 and 54 and the case law cited).

18. The right to such an annual period of paid leave is, moreover, expressly laid down in Article 31(2) of the Charter of Fundamental Rights of the European Union, which Article 6(1) TEU recognises as having the same legal value as the Treaties.

19. In that context, the court has already had occasion to state that the expression ‘paid annual leave’ in Article 7(1) of Directive 2003/88 means that, for the duration of ‘annual leave’ within the meaning of that Directive, remuneration must be maintained and that, in other words, workers must receive their normal remuneration for that period of rest (see joined cases C-131/04 and C-257/05, Robinson v Steele and Others [2006] ECR 1-2531, Paragraph 50, and Schultz-Hoff and Stringer and Others, Paragraph 58).

20. The purpose of the requirement of payment for that leave is to put the worker, during such leave, in a position which is, as regards remuneration, comparable to periods of work (see Robinson v Steele and Others, Paragraph 58 and Schultz-Hoff and Stringer and Others, Paragraph 60).

21. As the Advocate General states in Point 90 of her opinion, it follows from the foregoing that remuneration paid in respect of annual leave must, in principle, be determined in such a way as to correspond to the normal remuneration received by the worker. It also follows that an allowance, the amount of which is just sufficient to ensure that there is no serious risk that the worker will not take his leave, will not satisfy the requirements of EU law.

22. However, where to remuneration received by the worker is composed of several components, the determination of that normal remuneration and consequently, the amount of which that worker is entitled during his annual leave requires a specific analysis. Such is the case with regard to the remuneration of an airline pilot as a member of the flight crew of an airline, that remuneration being composed of a fixed annual sum and of variable supplementary payments which are linked to the time spent flying and to the time spent away from base.

23. In that regard, although the structure of the ordinary remuneration of a worker is determined, as such, by the provisions and practice governed by the law of the Member States, that structure cannot affect the worker’s right, referred to in Paragraph 19 of the present judgment, to enjoy, during his period of rest and relaxation, economic conditions which are comparable to those relating to the exercise of his employment.

24. Accordingly, any inconvenient aspect which is linked intrinsically to the performance of the task which the worker is required to carry out under his contract of employment and in respect of which a monetary amount is provided which is included in the calculation of the worker’s remuneration, such as, in the case of airline pilots, the time spent flying, must necessarily be taken into account for the purposes of the amount to which the worker is entitled during his annual leave.

25. By contrast, the components of the worker’s total remuneration which are intended exclusively to cover occasional or ancillary costs arising at the time of the performance of the task which the worker is required to carry out under his contract of employment, such as costs connected with the time that pilots have to spend away from base, need not be taken into account in the calculation of the payment to be made during annual leave.

26. In that regard, it is for a national court to assess the intrinsic link between the various components which make up the total remuneration of the worker and the performance of the tasks which he is required to carry out under his contract of employment. That assessment must be carried out on the basis of an average over a reference period which is judged to be representative and in light of the principle established by the case law cited above, according to which Directive 2003/88 treats entitlement to annual leave and to a payment on that account as being two aspects of a single right (see Robinson v Steele and Others, Paragraph 58 and Schultz-Hoff and Stringer and Others, Paragraph 60) [Tribunal’s emphasis]

27. That stated, it must also be pointed out that the court has already held that an employee working as a purser for an airline company and transferred by reason of her pregnancy, temporarily to ground work, was entitled, during her temporary transfer, not only to maintenance of her basic salary but also to pay components or supplementary allowances relating to her professional status as an employee. Accordingly, allowances relating to her seniority, her length of service and her professional qualifications had to be maintained (see, to that effect, case C-471/08 Parviainen [2010] ECR 1-6529, Paragraph 73). That case law also applies to a pregnant worker who has been granted leave from work (case C-194/08 Gassmayr [2010] ECR 1-6281, Paragraph 65).

28. It follows that, in addition to the components of the total remuneration set out in Paragraph 24 of the present judgment, all those which relate to the personal and professional status of an airline pilot must be maintained during that worker’s paid annual leave.”

In Paragraph 31 of the judgment, the ECJ, in its formal answer to the questions the Supreme Court had referred to it, ruled that Article 7 WTD and the corresponding provision in the CAD required:-

“ ... that an airline pilot is entitled is entitled during his annual leave, not only to the maintenance of his basic salary, but also, first of all, to all the components intrinsically linked to the performance of the task which he is required to carry out under his contract of employment and in respect of which a monetary amount, included in the calculation of his total remuneration, is provided and, second, to all the elements relating to his personal professional status as an airline pilot. It is for the national court to assess whether the various components comprising that worker’s total remuneration meet those criteria.”

5.6 The dilemma for employers and workers/employees, posed by the decision in Williams by the ECJ, is summarised in Paragraph 192.07 of Harvey on Industrial Relations and Employment Law, Section 1, C1, when commenting on the judgment in Williams by the ECJ, it is stated:-

“This can only mean that a worker is entitled to be paid for annual leave at a rate equating to the average of his or her total remuneration, so far as that comprises payment for doing the job ‘as distinct from such elements as reimbursement of expenses incurred’. To the extent that the statutory formula applied by Regulation 16 WTR does not achieve this ... , the question how far the courts can stretch the meaning of the WTR (or to be more precise the incorporation therein of Part XIV Ch 11 ERA 1996) to secure compliance, has had to be addressed in a number of cases, thus far principally only at first instance, ... .”

5.7 In the case of Dominguez v Centre Informatique du Centre Oust Atlantique : C-282/10 [2012] IRLR 321 the CJEU held that WTD Article 7(1) is directly enforceable against state entities as employers. Thus, it would appear those employed by ‘an emanation of the state’ can rely on the direct effect of the WTD, if Articles 17 – 20 of the ERO (Sections 221 – 224 of ERA in Great Britain) do not of themselves ensure payment of average pay for annual leave. It will be necessary to consider later in this decision whether the respondent in the present proceedings, Castlereagh Borough Council, is an emanation of the state, for the purposes of direct effect of Article 7(1) of the WTD. In the Williams case, it was found that the employer was not a state body and the Supreme Court therefore had to apply Marleasing principles to reconcile the differences, if any, between the terms of the CAD and what European law required, as determined by the CJEU.

The Supreme Court, in its decision [2012] UKSC 43 reversed the decision of the Court of Appeal and restored the decision of the Employment Tribunal and Employment Appeal Tribunal. In particular, it decided it was possible, and therefore necessary, to interpret the relevant Regulations of the Civilian Aviation Regulations, as conferring a power on Employment Tribunals to determine what rate of pay was required to give effect to the requirements of EU law that holiday pay is the rate of average remuneration, taking a reasonable reference period to calculate the average, and reward any shortfall in the sums actually paid. The Supreme Court was of the view that it was for the employer, in the first instance, to set the period, the reasonableness of which could be assessed by the tribunal and, in default of such a period having been set by the employer, the task would fall to the tribunal.

As Harvey on Industrial Relations and Employment Law, Paragraph 193, Section 1, C1 notes:-

“The Supreme Court’s decision does not address directly any issues on the compatibility of the formula applied by Regulation 16 WTR with the approach set out by the CJEU. However, it is clear that a tribunal faced with a case where the application of the WTR/ERA formula (and in Northern Ireland ERO) does not ensure payment of the employee’s normal pay would be expected, so far as possible, to bridge the gap. In cases where the application of Regulation 16 WTR and, by incorporation, ERA 1996, Sections 221 – 224 (and Section 234, following the decision to that effect of the Court of Appeal in Bamsey ... ), do not give full effect to the decision of the CJEU as to the requirement of the WTD, the question is how far the court or tribunal can go in an effort to do so. This is both conceptually and logistically difficult, since it is not obvious how the wording of Regulation 16 WTR can be stretched to mean anything other than that the provisions of the ERA identified within it are to be applied in determining the rate of holiday pay. However those provisions cannot easily be subjected to a Marleasing exercise as they are not provisions enacted to implement an obligation under the Directive, and apply for a variety of purposes most of which are purely matters of domestic law, such as the calculation of basic awards in unfair dismissal cases and redundancy payments. Any re-interpretation of Sections 221 – 224 would thus have consequences well beyond the confines of the WTR.”

5.8 In Northern Ireland, it has long been recognised decisions of the Employment Appeal Tribunal but also decisions of the Court of Appeal in England and Wales and, indeed, relevant decisions of the Supreme Court in non-Northern Ireland appeals are of highly persuasive authority but are not strictly binding upon this tribunal; but would generally be followed, where it is appropriate to do so, and, in particular, where the relevant legislation, upon which any such decisions are based, are in the same or similar terms. (See Beaufort Developments (NI) Ltd v Gilbert Ash [1997] NI 142.) As stated in previous paragraphs, there is such similarity in relation to the relevant legislation, which applies in Great Britain and Northern Ireland, and is the subject-matter of the present proceedings and there are no relevant decisions in the Court of Appeal in Northern Ireland. At this point it is appropriate to remember that Sections 221 – 224 of the ERA, which apply in Great Britain and are referred to in the above case law and references in Harvey are in similar terms to Articles 17 – 20 of the ERO, which applies in Northern Ireland. Similarly, Article 234 of the ERA is in similar terms to Article 5 of the ERO.

5.9 In the case of Lock v British Gas Trading Ltd [2014] CJEU C-539/12 the European Court of Justice has recently given further guidance, following the Williams case. In particular, it held that the WTD requires that a worker’s statutory holiday pay is not limited to basic salary where commission is a part of the remuneration. The claimant was a salesman on a basic salary with variable commission paid in arrears. His commission depended not on the time worked, but the outcome of that work, ie sales achieved. He could not earn commission therefore whilst on leave, and therefore lost income by taking it. He brought a claim in the Employment Tribunal for his ‘lost’ holiday pay after taking leave. The Employment Tribunal referred the matter to the ECJ to ask, in terms, when calculating holiday pay, did Member States require to take measures to ensure that a worker taking leave was paid by reference to commission payments that the worker would have earned if at work, and if so, how to work out that holiday pay. The court answered “Yes” to the first question but left the calculation as a matter for the national courts to decide on the basis of the rules and criteria set out in the European Court of Justice’s case law on paid leave, and in light of the objective of the Directive, to ensure that workers take paid leave:-

“ ...

14. According to the court’s settled case law, the entitlement of every worker to paid annual leave must be regarded as a particularly important principle of the European Union’s social law from which there can be no derogations and whose implementation by the competent national authorities must be confined within the limits expressly laid down by Directive 93/104 itself, a Directive now codified by Directive 2003/88 ... That right is, moreover, expressly guaranteed by Article 31(2) of the Charter of Fundamental Rights of the European Union, which Article 6(1) TEU recognises as having the same legal values as the Treaties.

15. In that context, Article 7 of Directive 2003/88 must be interpreted in the light of its wording and of the objective pursued by it.

16. Although the wording of Article 7 of Directive 2003/88 does not give any express indication as regards the remuneration to which a worker is entitled during his annual leave, the court has already stated that the term ‘paid annual leave’ in Article 7(1) means that, for the duration of ‘annual leave’ within the meaning of that Directive, remuneration must be maintained and that in other words, workers must receive their normal remuneration for that period of rest (see Robinson-Steele and Others and Schultz-Hoff and Others, referred to previously).

17. Directive 2003/88 treats entitlement to annual leave and to a payment on that account as being two aspects of a single right. The purpose of providing payment for that leave is to put the worker, during such leave, in a position which is, as regards his salary, comparable to periods of work (see Robinson-Steele and Others and Schultz-Hoff and Others).

18. Having regard to that case law, British Gas and the United Kingdom Government submit that under national legislation and practice, the objective of Article 7 of Directive 2003/88, as interpreted by the court, is achieved, given that the applicant in the main proceedings received, during his period of paid annual leave, a salary comparable to that earned during periods of work, since he received, during that period, not only his basic salary but also commission resulting from sales which he had achieved during the weeks preceding that period of annual leave.

19. That argument cannot be accepted.

...

24. Having regard to the foregoing considerations, the answer to the first and second questions is that Article 7(1) of Directive 2003/88 must be interpreted as precluding national legislation and practice under which a worker whose remuneration consists of a basic salary and commission, the amount of which is fixed by reference to the contracts entered into by the employer as a result of sales achieved by that worker, is entitled, in respect of his paid annual leave, to remuneration composed exclusively of his basic salary.

...

26. ... It should be observed at the outset that remuneration paid in respect of annual leave must, in principle, be determined in such a way as to correspond to the normal remuneration received by the worker (see Williams and Others ... Paragraph 21)

27. Where the remuneration received by the worker is composed of several components, the determination of the normal remuneration to which the worker in question is entitled during his annual leave requires a specific analysis (see Williams and Others ... Paragraph 22)

28. As stated at Paragraph 7. above, that is the case regarding Mr Lock’s remuneration. As a sales consultant employed by a commercial company, he received remuneration composed of a fixed monthly salary and variable commission linked to the contracts entered into by the employer resulting from sales he achieves.

29. In any specific analysis, for the purpose of the case law cited above, it is established that any inconvenient aspect which is linked intrinsically to the performance of the tasks which the worker is required to carry out under his contract of employment and in respect of which a monetary amount is provided and included in the calculation of the worker’s total remuneration must necessarily be taken into account for the purposes of calculating the amount to which the worker is entitled during his annual leave (see Williams and Others ... Paragraph 24)

30. In addition, the court has stated that all components of total remuneration relating to the professional personal status of the worker must continue to be paid during his paid annual leave. Thus any allowances relating to seniority, length of service and to professional qualifications must be maintained ( ... Williams and Others ... Paragraph 27)

31. By contrast, according to that same line of case law, the components of the worker’s total remuneration which are intended exclusively to cover occasional or ancillary costs arising at the time of performance of the task which the worker is required to carry out under his contract of employment need not be taken into account in the calculation of the payment to be made during annual leave (see Williams and Others ... Paragraph 25)

32. In the case in the main proceedings, as the Advocate General observed at Points 31 to 33 of his opinion, the commission received by Mr Lock is directly linked to his work within the company. Consequently, there is an intrinsic link between the commission received each month by Mr Lock and the performance of the tasks he is required to carry out under his contract of employment.

33. It follows that such commission must be taken into account in the calculation of the total remuneration to which a worker, such as the applicant in the main proceedings, is entitled in respect of his annual leave.

34. Accordingly, it is for the national court or tribunal to assess, in light of the principles identified in the court’s case law, as referred to above, whether, on the basis of an average over a reference period which is considered to be representative, under national law, the methods of calculating the commission payable to a worker, such as the applicant in the main proceedings, in respect of his annual leave, achieve the object pursued by Article 7 of Directive 2003/88.

35. Consequently, the answer to Question 3 is that the methods of calculating the commission to which a worker, such as the applicant in the main proceedings, is entitled in respect of his annual leave must be assessed by the national court or tribunal on the basis of the rules and criteria set out by the court’s case law and in light of the objective pursued by Article 7 of Directive 2003/88 ... .”

5.10 In considering the issue of whether a particular body is an emanation of the state and if so, whether the WTD is directly enforceable (see further the case of Dominguez, referred to previously), the CJEU has held that an organ of the State does not cease to be such because it acts in a private or quasi private capacity (see Marshall v Southampton and Southwest Hampshire Area Health Authority [1986] ECR 723.

Further, in Discrimination and Employment (Tucker and George, Section B 2.028) the relevant authorities were reviewed and, in summary, stated as follows:-

“ ... it has been suggested that in the Foster case, the court identified a number of factors which characterised the concept of ‘the State’. There are some difference of view as to the correct formulation of the relevant criteria. For example, it has been suggested that in Foster the ECJ identified the following relevant factors:

(1) that the body in question has been given its powers by the State;

(2) that the body in question has been made responsible for providing a public service;

(3) that its powers are exercisable under the control of the State; and

(4) that is powers are special ones, distinguishable from those possessed by individuals.”

The learned authors recognised the identification of the precise ‘test’ or formulation was a matter of some debate, and there was always degrees of uncertainty whether a specific body or organisation should be categorised as an ‘emanation of the state’. They suggested the following factors in Foster would suggest that a particular body is an emanation of the State:-

“(a) the body is subject to the authority and control of the State;

(b) the body has special powers for that purpose;

(c) the body provides public service.”

The learned authors concluded by stating:-

... What is however relatively clear, is that the CJEU has deliberately adopted a wide interpretation of the phrase ‘the State’, not least to mitigate the effect of its decisions that Directives do not have horizontal direct effect.

Until further clarification is available, practitioners may wish to have regard to the fact that the CJEU has held that the concept of ‘the State’ includes the following:-

...

Local authorities (see further Costanzo v Commune di Milano [1989] ECR 1839.”

5.11 In the event, following clarification sought by the tribunal by way of additional written submissions, it was agreed by the parties, properly in the tribunal’s view, for the purposes of these proceedings, the respondent, under European Law, is an emanation of the State.

5.12 In both the decisions of Williams and Lock, the European Court of Justice have made clear the entitlement of every worker to be paid annual leave must be implemented within the terms set out in the WTD but also that it is a right guaranteed by Article 31(2) of the Charter of Fundamental rights of the European Union (‘the Charter’) and which Article 6(1) of the TEU (Lisbon Treaty) recognises as having the same legal value as the Treaties. Article 31(2) of the Charter states:-

“Every worker has the right to limitation of maximum working hours, to daily and weekly rest periods and to an annual period of paid leave.”

In view of the United Kingdom’s so-called ‘opt out’ from the incorporation of the Charter (Protocol 30) there has been much case law both in the United Kingdom and in the European Court of Justice to what extent, if any, is the Charter part of UK domestic law. Following the case of NS v Home Office [2011] ECR 1 – 13905, the CJEU confirmed the provisions of the Charter could be relied upon before National Courts, which would include those in the United Kingdom insofar as they are acting within the scope of EU law:-

“Member States must not only interpret their national law in a manner consistent with European Union law in a manner consistent with European Union law but also make sure they do not rely on an interpretation of an instrument of secondary legislation which would be in conflict with the fundamental rights protected by the European Union legal order or with the other principles of European Union law.”

In view of the decision of this tribunal, as set out later in this decision, it was not necessary to consider further the ability of any person to rely on the Charter in any particular circumstance and/or whether the respondent was “acting within the scope of EU Law”, as set out in NS.

5.13 As stated previously, there have been a number of first instance decisions in this area in Employment Tribunals in Great Britain. The tribunal is not aware of any previous first instance decisions in this jurisdiction.

5.14 The first instance decisions in Great Britain, referred to previously, namely Fulton and Another v Bear Scotland Ltd, Smyth and Others v Hertel (UK) Ltd, and AMEC Group Ltd and Neal v Freightliner Ltd (the latter was resolved before the appeal hearing) concerned, in particular, whether holiday pay calculations should include voluntary overtime pay. Although this issue of overtime pay is not the only issue in the present proceedings, the tribunal, in the circumstances, considered there was sufficient similarity, for it to be relevant to refer to these decisions, since the proper interpretation of the equivalent legislation in Northern Ireland and the issue of calculation of holiday pay, and, in particular, what can be included in any such calculation, are also central to the present proceedings; but also in view of the outcome of the conjoined appeals in Bear Scotland by the Employment Appeal Tribunal, which referred in considerable detail to the dicta contain in the judgments at first instance.

5.15 In Fulton and Another v Bear Scotland Ltd the issues to be determined by the tribunal were as follows:-

“(i) Whether the respondent paid the claimants less than the total amount of the holiday pay properly payable to them contrary to Section 13 ERA (for present purposes the relevant period was assumed to be 12 weeks prior to submission of the ET1).

(ii) Alternatively, whether the respondent’s failure to pay the additional sums claimed was in breach of Regulation 16 of the WTR.

(iii) Alternatively, whether the Working Time Directive has direct effect on whether the claimants are entitled to claim sums sought thereunder.”

In a nutshell, the claimants were paid holiday pay by the respondent which was calculated in accordance to their basic day shift hours only. Their holiday pay took no account of night shift hours and rates, overtime, standby payments, emergency callout payments or (in the first claimant’s case) charge hand supplement. By doing so, the issue before the tribunal was whether that method of calculation produced ‘the amount properly payable’ or whether, as the claimants contended, they should have received holiday pay based on an average of their total remuneration over the 12 weeks preceding the relevant period of leave. The key issue between the parties in the case was whether Section 234 of ERA (in the same terms as Article 5 of ERO) applies to the determination of ‘normal working hours’ for holiday pay calculation purposes. The claimants argued that the application of Section 234 of ERO to the calculation of holiday pay was non-compliant with the WTD. They contended that it was both possible and necessary to read Regulation 16 of the WTR consistently with the Directive by finding that Section 234 of ERA did not apply to ‘a week’s pay’ under Regulation 16, in accordance with the well-known principles in the case of Marleasing.

The Employment Tribunal noted that in Williams it was decided paid annual leave under the WTD must correspond to a worker’s ‘normal remuneration’ and not just basic pay.

The tribunal noted that, although the Williams case strictly related to the Civil Aviation Directive, it was satisfied, by reason of the reference by the Supreme Court to the ECJ of questions relating to the WTD, that the ECJ dicta applied to both the CAD and the WTD and gave general guidance, which was not confined to the facts of Williams and therefore could be relevant to the issue of overtime payments. On the facts of the case, the tribunal found that the respondent was not an emanation of the State and the WTD therefore did not have direct effect. However, after considering the Marleasing principle, as confirmed by Underhill P in Attridge Law LLP v Coleman [2010] IRLR 4, it concluded:-

“ ...

48. Clearly it is not permissible to subject Sections 221 – 224 ERA to a Marleasing exercise as they were not enacted to implement an obligation under the Directive. Ms Barry however submits that it is possible to read Regulation 16 in accordance with the Directive and therefore necessary to do so by finding that Section 234 does not apply under the Regulation. I agree that this is possible if I read the Regulation on the basis that Bamsey is not binding on this tribunal and should not be followed because this tribunal is bound by the dicta of the ECJ and Supreme Court in Williams to interpret Regulation 16 so far as possible to achieve the result directed by ECJ. Alternatively, it is possible if the phrase ‘and 234’ is added into Regulation 16(3)(d) so that it reads:

‘(d) As if the references to Sections 227 – 228 ‘and 234’ did not apply.’

I have concluded that Ms Barry’s submission is therefore well-founded and that it is both possible and necessary to read the Regulation as excluding Section 234 in order to achieve the purpose of the Directive as expounded in Williams: vis that ‘a worker’s is entitled during his annual leave, not only to the maintenance of his basic salary, but also to all the components intrinsically linked to the performance of tasks which he is required to carry out under his contract of employment and in respect of which a monetary amount, included in the calculation of his total remuneration is provided ...’ In excluding from the calculation of holiday pay all but the fixed or minimum number of hours binding on both sides, the application of Section 234 is inconsistent with the Directive as so interpreted.

Thus, in the present case, I have concluded that it is necessary to consider whether the claimants had ‘normal working hours’ in terms of Section 221 to 224, without recourse to Section 234.”

On the facts, the tribunal concluded that the claimants did not have ‘normal working hours’ when employed under the contract and therefore the holiday pay should be calculated according to the average weekly remuneration in terms of Section 224 of the Employment Rights Act. Further, in relation to Section 224 of the Employment Rights Act, it held Williams was authority for the proposition that ‘normal remuneration’ would include any payment that is ‘linked intrinsically to performance of tasks’ which the worker is required to carry out under his contract of employment.

After analysing the various payments, referred to above, in addition to basic pay, the tribunal found that they should have been included in the said calculation and that therefore the respondent had made unauthorised deduction from the claimant’s wages, contrary to Section 13 ERA (ie Article 45 of the ERO).

5.16 In Smyth and Others v Hertel and AMEC, the tribunal also found, inter alia, that the respondents had made, in relation to calculation of holiday pay, unauthorised deduction from wages and had failed to include various payments, which, in broad summary, were in the nature of ‘overtime pay’. In doing so, as in Fulton, the tribunal found it was not bound by Bamsey, in particular, in light of the decision in Williams.

Following Williams, the tribunal found that:-

“50. The position in EU Law is, then, clear.

50.1 The claimants should have been paid in holiday pay similar sums to those which they would actually have been paid had they been working, termed ‘ordinary’ or ‘normal’ remuneration, not sums based on a legally constructed idea of what their ‘normal working hours’ were (such as that set out in Section 234, as interpreted by the Court of Appeal in Tarmac and Bamsey).

50.2 To work out their ordinary or normal remuneration, their pay should have been averaged over a representative reference period.

50.3 Included within ordinary or normal remuneration is that ‘which is linked intrinsically to the performance of the tasks which the worker is required to carry out under his contract of employment’ and/or which relates ‘to the personal and professional status’ of the individual in question.

50.4 Not included are ‘the components of the workers total remuneration which are intended exclusively to cover occasional or ancillary costs arising at the time of performance of the tasks which the worker is required to carry out under his contract of employment’.

...

53. First, Bamsey is not just arguably wrong but clearly wrong in light of subsequent decisions of the European Court – Williams itself ..., it is based on a number of misconceptions about the WTD, namely:-

53.1 that Member States have a broad discretion as to how payment for annual leave is to be calculated;

(see Bamsey, Paragraph 36)

53.2 that the WTD does not require pay for a week’s annual leave to ‘equate with a normal week’s pay when ... at work’;

(Paragraph 37)

53.3 that the WTD does not require ‘a broad equivalence for work done, namely overtime, which the employer was not bound to provide under the contract of employment.”

(Paragraph 40)

62. Regulation 16, interpreted as a conventional piece of domestic legislation (ie interpreted as the Court of Appeal interpreted in Bamsey), does not accord with European Law, in that such an interpretation will, as detailed above, often result in workers being paid significantly less than on their four weeks’ annual leave than when working. The problem, again as above, is not so much with Regulation 16 itself but with the concept of ‘normal working hours’ in the ERA. The problem is overcome entirely, if, when calculating a week’s pay, one treats all workers as if they had no normal working hours and always uses ERA Section 224 to perform the calculation.”

The tribunal’s solution therefore was to interpret Regulation 16 of the Working Time Regulations 1998 as if it had the following words added to the end of Sub-Regulation (3)(d):-

“And, in relation to an entitlement under Regulation 13, as if he had no normal working hours and such that ‘average weekly remuneration’ in Section 224 does not include any sum not forming any part of his ordinary or normal remuneration in accordance with the law of the European Union.”

As a consequence of that interpretation, the tribunal found that overtime and any incentive bonuses fell within ‘normal remuneration’ and should have been included in the claimant’s holiday pay calculation. It accepted that taxable remuneration for travelling time payments and radius allowances did not fall within normal remuneration for the calculation of holiday pay (see later).

5.17 Similar issues were faced by the tribunal, in the case of Neal and, in particular, whether the level of pay under the Working Time Directive was based on the claimant’s actual remuneration (including overtime pay) or it was based on basic pay only; and, if it was the former, whether the provisions of the Working Time Regulations and/or Section 221 – 224 of the Employment Rights Act 1996 should be interpreted to achieve the result required by the Working Time Directive.

Since the Neal case ultimately did not proceed on appeal to the Employment Appeal Tribunal, it was not appropriate, in the judgment of this tribunal, to consider the decision in much detail; save to note that the tribunal, in Neal, found, inter alia, the following, which as seen later was found to be of relevance of the decision of the Employment Appeal Tribunal in the said conjoined appeals:-

“(1) The correct basis for calculation of the claimant’s entitlement to holiday pay is by reference to the claimant’s normal earnings which includes overtime and shift premia.

(2) In order to achieve the result required by the Directive, Regulation 16(3)(d) of the Working Time Regulations 1998 (‘the WTR') should be construed to read as though the following words had been added:

‘And, in the case of entitlement under Regulation 13, Sections 223(3) and 234 do not apply.’

[Tribunal’s emphasis]

[(3) The respondent is not entitled to credit for the annual leave premium formally paid to the employees of the respondent.

(4) The claimant’s remedy under Regulation 3 of the WTR is an award under Regulation 30(1)(b) and Regulation 30(5).

(5) The claimant is entitled to an award for unauthorised deduction of wages under Section 23 of the Employment Rights Act 1996.

... .”

5.18 At the outset of his judgment in the conjoined appeals in Bear Scotland, Langstaff P, insofar as relevant to the present proceedings, set out the central issues of the appeal, namely:-

“12. The appeals raised five central issues. The first was to determine what Article 7 required by way of paid annual leave. Does it follow from the Williams decision and the subsequent case of Lock, that non-guaranteed overtime and the other elements of remuneration which the workers in the present cases received had to be included in pay during and for the annual leave provided for by the Directive.

13. The second issue is whether the rule of conforming interpretation (‘the Marleasing principle’) permits an interpretation of Regulation 16 of the Working Time Regulations 1998 and/or Sections 221 – 224 and Section 234 of the Employment Rights Act 1996 so as to give effect to the requirement to Article 17. If so, then how should these provisions be interpreted?

14. The third issue arises in the appeals by Hertel and Amec in their respective cases. If the answer to the first two questions show that both underpaid workers in respect of annual leave, to which they were entitled under Regulation 13 of the Working Time Regulations 1998, was the tribunal entitled to find that those underpayments constituted a ‘series of deductions’ within the meaning of Section 23(3) of the Employment Rights Act 1996, so that the tribunal had jurisdiction to consider them?

...

16. Finally, a fifth issue arose in the Hertel and Amec cases by way of cross-appeal. The tribunal held that two allowances (radius allowance and travelling time payment) were not to be included in pay in respect of annual leave for the purpose of Article 7 of the Directive and/or leave under Regulation 13. Was it right to do so?”

5.19 In Paragraph 22 of the judgment, Langstaff P after setting out the relevant facts in the conjoined appeals, to which reference has already made in this decision, identified the dispute at the centre of the first issue for him to determine:-

“The appellants in the conjoined appeals argued that Article 7 does not require holiday pay to be calculated so as to equate to average pay actually received (including not only basic hours but also overtime) are the reference period applicable to the holiday, at least where there is no obligation on the employer to provide the overtime which is taken into account in the calculation. I shall call this ‘non-guaranteed overtime’ : the description ‘voluntary overtime’ has been used, but is misleading since overtime under NASECI is work which an employee if requested is obliged to perform, whereas ‘voluntary overtime’ is work which the employer asks an employee to do but which the employee is free of any contractual obligation to perform unless he agrees at the time to do so. ‘Non-guaranteed overtime’ is to the distinguished from guaranteed overtime, since in the latter case the employer is obliged by contract to offer the work, as overtime, even if the employer has none available to offer at the time.”

Thus the decision in Bear Scotland relates to ‘non-guaranteed overtime’ as defined in Paragraph 22 of the judgment. The tribunal is further satisfied that the voluntary overtime worked by the claimant pursuant to his contract of employment was non-guaranteed overtime; as defined in Bear Scotland (see Paragraph 2.5 of this decision).

5.20 After referring to the decision in Williams and Lock, referred to previously, Langstaff P concluded since they were decisions of the CJEU they were required to be treated by him as of the highest authority and read together they represented a settled view expressed by the CJEU as to the meaning of Article 7 and were a natural development of the points adopted in the earlier cases of Robinson-Steele and Stringer. He then carefully analysed the submissions of the respective counsel, he reached the following conclusion on the said issues, namely:-

“44 (First issue)

Despite the subtlety of many of the arguments, the essential points seem relatively simple to me. ‘Normal pay’ is that which is normally received. As Advocate General Trstenjak observed in Williams, there is a temporal component to what is normal: payment has to be made for a sufficient period of time to justify that label. In cases such as the present, however, where the pattern of work is settled, I see no difficulty in identifying ‘normal’ pay for the purposes of European Union Law, and accept that where there is no such ‘normal’ remuneration an average taken over a reference period determined by the Member State is appropriate. Accordingly, the approach taken in Williams is unsurprising. The Court in Lock looked for a direct link between the payment claimed and the work done. In the Hertel and Amec cases, the work was required by the employer. On the evidence, the Employment Tribunal was entitled to think it was so regularly required for payments made in respect of it to be normal remuneration.

45. Insofar as the test seeks an intrinsic or direct link to tasks which a worker is required to carry out (stressing those last four words) it would be perverse to hold that the overtime in these cases was not. In my view, therefore, Article 7 requires and required non-guaranteed overtime to be paid during annual leave. I see no scope for any such uncertainty as would persuade me to make a reference to the Court of Justice of the European Union. [tribunal’s emphasis]

The Second Issue: Is conforming interpretation possible?

46. Given that Article 7 is to be interpreted such that the claimants should have been paid during holidays in respect of their overtime, the question arises whether the domestic legislation can be interpreted to provide for this result. As between citizens, the Directive is not directly effective [of the present proceedings]. The obligation resting upon a domestic court when interpreting national legislation which implements a Directive is to do so ‘as far as possible’ in the light of the wording and the purpose of the Directive in order to achieve the result by the latter: sometimes known as the Marleasing principle ...

...

64. Next, I cannot accept that the interpretation contended for goes against the grain of the legislation. First, the Regulations were specifically made to implement the Working Time Directive. It can be presumed that the intention of Parliament was to fulfil its obligation to do so fully and accurately. If, seen through a modern lens, the words do not achieve that, then to adopt a conforming interpretation is not doing violence to the intention of Parliament but instead respecting it. True it is that it produces a result contrary to that which Bamsey states, but the principles in that case were expressed in a case argued in November 2003, and in which judgment was delivered in March 2004, before any of Robinson-Steele, Stringer, Williams and Lock were decided by the CJEU, and before the Supreme Court in Williams had recognised that the principles applicable to paid holiday for airline pilots were those applicable in respect of Article 7 more generally (Paragraph 20, per Lord Mance). ... Although Bamsey demonstrates what the interpretation of the Regulations should be if untrammelled by European Union law, it does not purport to identify a cardinal feature, guiding purpose or ‘grain’ of the legislation which would preclude a different interpretation, such that it could confidently be said that Parliament had so set its face against that other view that it could not be adopted. I also adopt Employment Judge Camp’s reasons as he set them out at Paragraphs 53.1 – 3 of his judgment.

65. It further appears to me that there is a conceptual difference between ‘normal remuneration’ on the one hand, and ‘normal hours of work’ on the other. Though both relate to work done, one looks at the money received by a worker, the other at time spent by him, rather than directly at its financial rewards. Although the Directive does not use the expression, the case law of the CJEU has interpreted it as providing for the former: the legislation, though intended to reflect the Directive, emphasises the latter. [tribunal’s emphasis]

66. There is nothing intrinsic to the Regulations which requires holiday pay to exclude payment for overtime which a worker has actually worked prior to holiday being taken, where the worker is contractually obliged to work if asked, though his employer is not contractually bound to ask. The essential feature of the Regulations is that holidays should be paid. That is not in issue. What is in question is, rather, the principle by which the amount of that payment is to be calculated. The obligation to construe legislation ‘as far as possible’ to conform is a powerful one. I cannot accept that the form, nature and purpose of the Regulations makes it impossible to construe it as the claimants contend. [tribunal’s emphasis]

67. Though it is the effect of the interpretation rather than the precise words which matters, a conforming interpretation is best expressed by amending Regulation 16(3)(d) of the Working Time Regulations to insert the following italicised words, as the Tribunal in Freightliner v Neal thought appropriate, and as the Secretary of State for Business Innovation and Skills regards as permissible, namely:

‘(d) as if the references to Sections 227 and 228 did not apply and, in the case of the entitlement under Regulation 13, Sections 223(3) and 234 do not apply’

... .”

5.21 Firstly, it is important to note that the decision in Bear Scotland on the first issue relates only to non-guaranteed overtime, as defined, and not all overtime that may be worked by a worker – there has to be the requirement under the contract to carry out the overtime offered to be included in the calculation of paid holiday pay. It is also to be noted that in carrying out this conforming interpretation, Langstaff P makes it clear it is only in relation to interpretation of Regulation 13 of the WTR (four week leave provision) and not the additional 1.6 weeks under Regulation 13A of the WTR, confirming that ‘Regulation 13A rights remain subject to Bamsey, being entirely domestic entitlements’ [Paragraph 57]

Thus the amounts due under the respective Regulations differ, since those under Regulation 13 on the basis of the Appeal Tribunal’s decision must correspond to the normal remuneration received by an employee in the reference period appropriate to the leave in respect of which it is payable, whereas the latter is subject to the provisions set out in Sections 220 – 4 and 234 ERA (ie Articles 17 – 20 and 5 of the ERO). This difference will cause considerable difficulties for employers which, as recognised by man commentators, require legislative intervention in due course.

5.22 In relation to the third issue –“the issue of time and ‘series of deductions’” – since the decision of the tribunal in the present proceedings is a liability only, it is not necessary to set out in detail, the conclusion reached by the Employment Appeal Tribunal in this third issue but to simply note it was found that claims for arrears of holiday pay will be out of time if there has been a break of more than three months between successive underpayments (subject to normal reasonable practicability test relevant to an application for extension of time).

These conclusions will arise in any remedy hearing and it is not necessary, for the purposes of this decision, to consider them further.

5.23 In relation to the fifth issue, in relation to the payment of Radius Allowances and Travelling Time payments, as set out previously, the Employment Tribunal in Hertel and Amec did not fall within the normal remuneration for the calculation of holiday pay. Langstaff P on appeal in Bear Scotland decided not to follow the decision of the Employment Tribunal and held that such payments were payments for time spent by the worker, not for his place of abode; which, on the facts, had the necessary intrinsic and direct link to work and were not in the nature of an expense, such as a bus/train fare. Thus, he found the taxable element of such payments formed part of the worker’s normal remuneration.

Since, in the present proceedings, no such similar payments were in issue, it was not necessary to consider the conclusions referred to above in any greater detail.

6.1 Whether a worker is not properly paid for a period of annual leave by the employer, it is now well established that there are two potential alternative remedies, a claim under Regulation 30 of the WTR, based on contravention of the obligation to pay under Regulation 16(1) or a claim in respect of an unlawful deduction of wages under Article 45 of ERO, referred to previously (see further HMRC v Stringer [2009] UKHL 31). It has to be noted that, although there is a three month time-limit, under both types of claim, subject to a reasonably practicable extension of time, the point at which time starts to run, may be later in an unlawful deduction of wages claim, where there has been a ‘series of deductions’ (see further Article 55 of ERO) – which issue will require to be considered further when the tribunal requires to determine such issues at any remedy hearing. The ultimate remedy, whether the claimant is able to be brought under Regulation 30 of WTR or Article 45 of ERO is an award of the pay not paid. Therefore, it is not, as stated before, necessary to consider time-issues further, for the purposes of this decision.

7.1 The tribunal reached the following conclusions, in light of the findings of fact made by it, the legislative provisions and case law referred to in the previous paragraphs of this decision and after consideration of the oral and written submissions of the representatives.

7.2 The tribunal had no hesitation in following, but also adopting, for the purposes of these proceedings, the decision of the Employment Appeal Tribunal in Bear Scotland including the detailed reasons set out in the judgment of Langstaff P, as referred to previously, for his conclusions in relation to the first and second issue, as identified at the outset of his judgment. In rejecting the appeals on those issues, the tribunal noted the conclusions reached by Langstaff P were in very similar terms to those reached by the Employment Judges at first instance. Indeed Langstaff P quoted many parts of those judgments with approval in the course of his own judgment.

In relation to the third issue (series of deductions and time) the tribunal considers that, because this decision relates to liability only, it is not appropriate, in advance of any remedy hearing to express any views on the conclusions reached by Langstaff P on this issue, which undoubtedly will require to be further considered at any remedy hearing.

In relating to the fourth issue (Radius Allowance and travel time payments), since such payments were not in issue in the present proceedings, this tribunal did not find the conclusions of Langstaff P on this issue to be of any assistance in the determination of the issues to be determined in the present proceedings, save the emphasis on the relevant test to be satisfied in respect of any such payments of an intrinsic or direct link to tasks which a worker is required to carry out.

7.3 As previously indicated, decisions of the Employment Appeal Tribunal are not binding on this tribunal, albeit they are of highly persuasive authority and are normally followed where the decisions involve the interpretation of same or similar legislation in both jurisdiction and there are no relevant decisions of the Court of Appeal in Northern Ireland or, indeed, the Court of Appeal in England and Wales and the Supreme Court, as appropriate. The tribunal is aware the Employment Appeal Tribunal in Bear Scotland has refused to grant a reference to the Court of Justice of the European Union, holding that:-

“Article 7 requires and required non-guaranteed overtime to be paid during annual leave. I see no scope for any such uncertainty as would persuade me to make a reference to the Court of Justice of the European Union.” [Paragraph 45] [tribunal’s emphasis]

This tribunal respectfully agrees with this conclusion. In any event, no such application for a reference to the Court of Justice of the European Union was made in the present proceedings. The tribunal has noted that Langstaff P has given permission to appeal his decision in Bear Scotland to the Court of Appeal in England and Wales. However, when doing so, he suggested that the third issue (series of deductions and time) might be arguable as well as of public importance albeit, in his judgment, the first and second issues did not have a reasonable prospect of success. Thus, it would appear, in due course, there will be an appeal of the Bear Scotland decision to the Court of Appeal in England and Wales. This tribunal considers it would not be appropriate to ‘stay’ issuing this decision, pending any such appeal and subsequent decision by the Court of Appeal in England and Wales. Any such appeal would not take place for some time and, at this stage, it is not known which of the various issues, if any, will require to be considered and determined by the Court of Appeal in England and Wales. Further, the parties are entitled to have a decision, on liability, at first instance in this jurisdiction. In the circumstances, the tribunal can see no reason why it is not entitled to follow, for the purposes of this decision, the decision of the Employment Appeal Tribunal in Bear Scotland, as set out above, insofar as it considers appropriate.

7.4 Overtime work, for which overtime pay is made (in the present proceedings not at basic rate but at time and a half), is work carried out by the claimant and which is additional work carried out by him outside the normal hours of work set out in the contract of employment.

As identified in the case law referred to above, issues had arisen because of the terms of Regulations of WTR, given its reference to Article 19(3) and Article 5 of ERO and what, in the circumstances, is a worker’s ‘normal’ pay and how it should be assessed. Williams did not deal with the issue of overtime pay but solely specific supplements and allowances relevant to the work of the claimants as pilots. Equally, Lock related to the issue of commission. Bear Scotland has considered the issue of overtime. In this particular case, on the facts as found by the tribunal, the overtime carried out by the claimant under his contract of employment as an assistant plant engineer did not require him to work any such overtime offered to him nor was there any requirement for him to be offered by the respondent any such overtime under his contract of employment. It was therefore not ‘non-guaranteed overtime’, as identified by Langstaff P in Bear Scotland at Paragraph 22 of his judgment; but rather it was ‘voluntary overtime’ – which Langstaff P expressly distinguished from non-guaranteed overtime. It was only the latter - non-guaranteed overtime – he concluded required to be included in the calculation of holiday pay, for the purposes of the WTR, in light of Article 7 of the WTD. Bear Scotland ‘non-guaranteed overtime’, as defined by Langstaff P, was overtime which the employer is not contractually obliged to provide but if the employer does so, the worker is contractually obliged to do it. ‘Compulsory overtime’ where the employer is contractually obliged to provide the overtime hours and the worker is contractually obliged to do them must be included in holiday pay. Indeed, this was not disputed by the parties in the present proceedings and was not required to be considered in Bear Scotland.

7.5. In light of the foregoing, since the claimant’s overtime was ‘voluntary overtime’ and not ‘non-guaranteed overtime’, as defined, the tribunal was not satisfied that Article 7 of the WTD required the said voluntary overtime worked by the claimant, on foot of his contract of employment with the respondent, as an assistant plant engineer to be included in any calculation of his paid annual leave. In the tribunal’s judgment, following the decision and reasons set out in Bear Scotland, since voluntary overtime was not part of his ‘normal remuneration’ for the purposes of the Directive, it was not therefore required to be reflected as an average taken over an appropriate reference period.

7.6 If the tribunal is wrong and the said ‘voluntary overtime’ is required to be included in the calculation of the claimant’s holiday pay, it would have followed the decision in Bear Scotland and, in particular, would have applied the interpretative solution to the legislation, at issue in these proceedings, as set out in Paragraph 67 of the Bear Scotland judgment, with relevant application to Northern Ireland, namely:-

“Regulation 16(3) of the Working Time Regulations (Northern Ireland) 1998 should be amended by inserting the following words –

‘(d) As if the reference to Articles 23 and 24 did not apply and in the case of the entitlement under Regulation 13, Articles 19(3) and Article 5 do not apply.”

7.7 Therefore, in relation to the calculation of the paid annual leave given to the claimant, in respect of his work as an assistant plant engineer, the tribunal is not satisfied the claimant is entitled to the declaration that the respondent has made unauthorised deductions from the claimant’s wages in relation to holiday pay contrary to Article 45 of the Employment Rights (Northern Ireland) Order 1996; and, in the alternative, the respondent has failed to pay the claimant amounts, in respect of holiday pay to which he is entitled under Regulation 16 of the Working Time Regulations (Northern Ireland) 1998, as amended.

7.8 However, this does not conclude the matter, as it was necessary for the tribunal to also consider and determine whether the claimant was entitled to paid annual leave, as he had previously received before the commencement of his employment as an assistant plant engineer, in connection with his casual work under his casual contract which applied at any relevant and material time. This casual work was regularly carried out by the claimant and continues to be regularly carried out by him; but he does this work under a relevant casual contract with the respondent and not under his contract of employment with the respondent as an assistant plant engineer. There was no dispute that workers who carry out such regular casual work with the respondent under similar casual contracts to that of the claimant, but who did not also have full-time employment with the respondent, have continued to be paid annual paid leave in respect of such casual work. Such an issue did not arise in the decision in the case of Bear Scotland.

7.9 The tribunal has no doubt that, on the facts as found by it, the casual work under the said casual contracts was not intrinsically linked and/or directly linked to his work, under his contract of employment as an assistant plant engineer. There was no evidence to suggest such a link. Indeed, the contractual arrangements for such work were deliberately arranged in a separate way and, in particular, any requirement to do such casual work, in addition to work as an assistant plant engineer, was under the said casual contract and was not under the contract of employment. It is not for this tribunal to speculate why this was done.

Therefore, the tribunal was satisfied that, in calculating his paid annual leave as an assistant plant engineer, it was not necessary for the respondent to include in that calculation, the period of casual work carried out by the claimant. The casual work was, in the judgment of the tribunal totally separate from his work as an assistant plant engineer and was not, on the evidence, linked intrinsically or directly in any way with his duties as an assistant plant engineer.

7.10 It has to be noted that, to bring a claim pursuant to Article 45 of the ERO and/or Regulation 16 of the WTR, a claimant does not require to be an employee working under a contract of employment. All the said provisions require is that he is a worker, as defined in the ERO and WTR and includes, within the provisions, the claimant’s work under any such casual contract. There was no dispute the claimant was such a worker under such a worker’s casual contract.

Thus, in the judgment of the tribunal, any claim for paid annual leave by the claimant, in respect of his casual work under any relevant and material casual contract, is a ‘freestanding’ claim, separate from his alternative claim made in respect of his work as an assistant plant engineer. The European case law has emphasised the importance of annual leave when considering the purpose behind the legislation and that it is a health and safety issue. The fact that the claimant may have more than ‘one job’ for the respondent, but under two separate contracts, does not prevent, in the judgment of the tribunal, the application of the relevant provisions in relation to the calculation of paid annual leave, where relevant and appropriate, in respect of each job carried out by him for the respondent under each contract. The relevant provisions in relation to holiday pay apply to each contract and must be applied. Indeed, the tribunal does not consider the use of ‘may’ and/or ‘will’ in the terms of the casual contracts, in relation to entitlement to holiday pay under WTR, is of any significance, in the circumstances. If the provisions of the WTR are relevant to the factual circumstances of the worker, the provisions must be applied. If the respondent had made the opportunity for the claimant to do this additional casual work as a term of his contract of employment as an assistant plant engineer, then it would have been necessary, for the tribunal, as has occurred in relation to the non-guaranteed overtime work, to consider whether, in light of the terms of any such contract, and the interpretation of the legislative provisions as seen in the case law referred to previously, any such casual work carried out by the claimant in such circumstances required to be included in the calculation of holiday pay. However, as set out above, the opportunity to do such casual work was not a term of the contract of employment and therefore did not require to be considered further under that contract.

7.11 In considering the claimant’s claim for holiday pay in respect of the casual work carried out under the casual contract, as a separate ‘freestanding’ claim, the tribunal noted that, before he obtained his full-time employment as an assistant plant engineer, the claimant was paid, without giving rise to any dispute, in respect of the said casual work, annual leave, pursuant to the terms of the Working Time Regulations, without the necessity for any amendment of the said legislation. Indeed, other casual workers, with no other work with the respondent, continue to be paid in respect of such annual leave pursuant to the terms of the WTR, without the necessity for any such amendment.

Such casual work under the casual contract, as must clearly have been recognised by the respondent, therefore falls within the claimant’s ‘normal remuneration’ and within Regulation 16 and without having to consider the issues that have arisen in Bear Scotland decision and the suggested amendment of Regulation 16(3)(d) of the WTR.

7.12 Thus, in respect of the claimant’s claim for holiday pay arising from his casual work under his separate casual contract, the tribunal is satisfied, by reasons of the failure of the respondent to pay the claimant paid annual leave in respect of such work, the claimant is entitled to a declaration that the respondent has made unauthorised deductions from the claimant’s wages in relation to holiday pay, contrary to Article 45 of the Employment Rights (Northern Ireland) Order 1996; and, in the alternative, the respondent has failed to pay the claimant amounts, in respect of holiday pay to which he is entitled under Regulation 16 of the Working Time Regulations (Northern Ireland) 1998.

7.13 If the tribunal is wrong and there is an issue in relation to whether such casual work falls within his normal remuneration, under that separate casual contract, the tribunal would have no hesitation in finding that, since the contract related solely to such casual work, any payments for such work, in light of the decisions of CJEU in Williams and Lock and confirmed in Bear Scotland, are intrinsically linked and/or directly linked with any casual work carried out by him under the said casual contract and are therefore ‘normal remuneration’ for the purposes of Article 7 of the WTD, and the tribunal would also have amended Regulation 16(3)(d) of the Working Time Regulations (Northern Ireland) 1998, as set out in Paragraph 7.4 of this decision, for the purposes of any such claim for holiday pay arising out of the casual work contract.

8.1 For the reasons set out in the preceding paragraphs of this decision, the tribunal has made its decision, as set out above. A remedy hearing will be arranged, in due course, to consider and determine any remedy to which the claimant is entitled on foot of this decision on liability.

Employment Judge

Date and place of hearing: 28 April 2014; and

25 June 2014, Belfast

Date decision recorded in register and issued to parties:

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	Industrial Tribunals Northern Ireland Decisions
You are here: BAILII >> Databases >> Industrial Tribunals Northern Ireland Decisions >> Patterson v Castlereagh Borough Council [2014] NIIT 1793_13IT (21 November 2014) URL: http://www.bailii.org/nie/cases/NIIT/2014/1793_13IT.html Cite as: [2014] NIIT 1793_13IT

Industrial Tribunals Northern Ireland Decisions