Important ECJ decision opens up the possibility of valuable retrospective holiday claims

I have written in this blog on many occasions about the importance of getting it right if you are going to treat all or part of your workforce as self-employed, rather than as fully fledged workers or employees. As you may recall, the Pimlico Plumbers case earlier this year ruled in favour of the claimants, finding that they were workers rather than being “fully” self-employed and therefore entitled to holiday pay and other benefits. The issue has been a hot topic throughout 2017 with the Uber and Addison Lee cases for example showing a willingness on the part of the courts to find that there was an employment relationship where, previously, there was assumed not to be.

But what basis should be applied for calculating losses if an entitlement to retrospective holiday pay or other benefits is established. The normal cut off point for calculations is six years, since this is the time limit for claims based on breach of contract. However, the entitlement to paid holidays arises under the EU Working Time Directive and this has a statutory footing.

This issue was recently considered by the Court of Justice of the European Union (CJEU/ECJ) and judgment was delivered in the case of King v The Sash Window Workshop Limited and Dollar on 29 November. Mr King had started working for Sash Window Workshop (“the Company”) in June 1999 on a “self-employed commission only contract”. He continued to work for the Company until his retirement in 2012. He took numerous holidays during the 13 years that he worked for the Company, but was not paid for them. Following his retirement he asked to be paid all his holiday pay for the entire period of his engagement. Unsurprisingly, the Company refused.

Mr King took his claim to an employment tribunal which held that there were in effect three types of holiday claims: (i) holiday pay for 2012-13 accrued but untaken when he left, (ii) holiday pay for leave actually taken but in respect of which no payment was made and (iii) pay in lieu covering accrued but untaken leave (amounting to a further 24.15 weeks). The tribunal found that Mr King was a worker (within the meaning of the statutory definition – see the Pimlico case) and therefore ruled in his favour in respect of all three.

The Company appealed to the Employment Appeal Tribunal.

TUPE and “pre-pack” administrations

So-called “pre-pack” (or back to back) administrations are controversial because they often leave behind them a trail of destruction as far as creditors, and particularly unsecured creditors, are concerned.

They typically arise in situations where a company is in serious financial (generally cash flow) difficulties and provide a way for the business to survive, albeit (or at least it should be the case) in the hands of different owners. they are often used for management buy-outs.

Although such arrangements tend to favour secured lenders such as banks, the same cannot be said for unsecured (e.g. trade) creditors, who can often be left with a measly dividend of as little as 2 or 3p in the £. They are therefore often seen as unfair but, in fact and as long as the procedure is not grossly exploited, they are consistent with the Cork Report of 1982 which did much to shape modern insolvency law and practice and which has at its heart the promotion of a “rescue culture”.

But what about the employees? Does TUPE come to the rescue? For years, there was uncertainty, as the result of a number of conflicting judgments. In 2012 the Court of Appeal, in Key2Law (Surrey) LLP v De’Antiquis (Key2) held that the exemption from TUPE that can arise in other insolvencies (such as liquidations) does not apply to administrations because their objective (even if it is in the short term) is to secure the survival of the business as a going concern. Consequently, all employees will transfer to the buyer in the usual manner (although there is some relaxation of the rules taking into account the insolvency, such as limited contract variations).

The Court of Justice of the European Union has now weighed in on the matter in its decision (on a referral from the Netherlands) in the case of Federatie Nederlandse Vakvereniging and others v Smallsteps BV.

European Court of Justice gives OPINION on unpaid and untaken holidays

Does a worker’s holiday entitlement continue to accrue into successive years if they do not take their annual leave because their employer will not pay them for these holidays?

The Advocate General at the European Court of Justice (ECJ) has answered ‘yes’ to this question, in a non-binding opinion.

In the case of King v The Sash Window Workshop Ltd, the Claimant, Mr King (who was a self-employed salesperson), brought an Employment Tribunal (ET) claim against the Respondent, The Sash Window Workshop, on the basis that he felt he was owed monies for annual leave that he had accrued, but not taken.  In addition, the Claimant sought compensation for annual leave that he had taken, but not been paid for during the 13 years he had been working for the Respondent – his claim for holiday pay therefore amounted to over £27,000.00.  It is of note that the contract under which Mr King was employed, provided no right to paid annual leave and that this contract was terminated in 2012, on his 65th birthday.  The Claimant also submitted a claim for age discrimination.

The claim was initially heard by the ET in August 2013.  It was ruled at first instance that Mr King was to be deemed a worker for the purposes of the Working Time Regulations 1998, and also that his discrimination claim was well founded.

The Respondent subsequently appealed against the decision of the ET in respect of the holiday pay aspect of the claim, the Employment Appeal Tribunal (EAT) allowing the appeal and remitting the holiday claim back to the ET.  Mr King then submitted an appeal to the Court of Appeal who referred the case to the European Court of Justice (ECJ).

ECJ Advocate General Evgeni Tanchev, stated that employers had to provide “adequate facilities to workers” to enable them to take their paid annual leave.  Tanchev further stated:

“A worker, like Mr King, may rely on [EU law] to secure payment in lieu of untaken leave, when no facility has been made available by the employer, for exercise of the right to paid annual leave … Upon termination of the employment relationship a worker is entitled to an allowance in lieu of paid annual leave that has not been taken up.

“I appreciate that the answers to the questions referred I am here proposing would require employers rather than workers to take all the necessary steps to ascertain whether they are bound to create an adequate facility for the exercise of the right to paid annual leave, whether those steps be the taking of legal advice, consultation with relevant unions or seeking counsel from Member State bodies that are responsible for the enforcement of labour law.

“If an employer does not take such action, it will risk having to make a payment in lieu of unpaid leave on termination of the employment relationship. However, this would be in keeping with guaranteeing the effet utile of the right to paid annual leave, a fundamental right of substantive normative weight in Member State law, EU law, and international law, and would also be consistent with the practical reality, recognised in the Court’s case-law, of the worker’s position as the weaker party in the relationship.”

Does a ban on wearing headscarves amount to direct discrimination?

In a somewhat surprising decision, given the views expressed in some other recent cases, the Court of Justice of the European Union (CJEU) has decided that a ban on wearing headscarves at work does not (necessarily) constitute direct discrimination with reference to religion or belief. In  Achbita, Centrum voor Gelijkheid van kansen en voor racismebestrijding v G4S Secure Solutions the European Court was asked to consider a case which was referred from the Hof can Cassatie (Court of Cassation) in Belgium, where the respondent, G4S, operated from 2006 a policy of neutrality which prohibited the visible wearing of any political, philosophical or religious signs.

Samira Achbita, a Muslim, was employed as a receptionist with G4S in 2003. In 2006 she told her employer that she wanted to start wearing an Islamic headscarf during working hours. After a period of absence due to illness she notified her employer on 12 May 2006 that she was returning to work on 15 May and would be wearing the headscarf. On 29 May the G4S works council approved an amendment to workplace regulations which provided that, with effect from 13 June 2006 “employees are prohibited, in the workplace, from wearing any visible signs of their political, philosophical or religious beliefs and/or from engaging in any observance of such beliefs”. On 12 June Ms Achbita was dismissed because she refused to accept the new policy.

The CJEU noted that G4S’s rule covered any manifestation of political, philosophical and religious beliefs without distinction. The rule was not applied to Ms Achbita in a way which was different from the way in which it would be applied to any other employees. Consequently, there was no direct discrimination.

However, such a prohibition could constitute indirect discrimination if the apparently neutral obligation in fact resulted in people adhering to a particular religion or belief being put at a particular disadvantage. Even if that was the case there could nonetheless be a legitimate aim such as the pursuit of a policy, in relation to customers, of political, philosophical and religious neutrality, provided that the means of achieving that aim were appropriate and necessary. In that case the policy might be maintained, for example, by allowing Ms Achbita to wear hear headscarf at work, but not in a role which involved any visual contact with customers, as an alternative to dismissal. The matter was referred back to the Belgian court for further consideration accordingly.

Also reported at the same time was the case of Bougnaoui and Association de défense des droits de l’homme (ADDH) v Micropole Univers. In this case, prior to being recruited by Micropole, Asma Bougnaoui was told that wearing her headscarf might pose a problem if she was in contact with customers of the company. Initially Ms Bougnaoui wore a bandana during her internship. Thereafter she wore a headscarf. A customer complained and, relying on the principle of neutrality, the employer asked her to stop wearing the headscarf.

Is it discriminatory to exclude over 35s from police recruitment?

In the UK applicants for police recruitment have to be at least 18 years old. There is no upper age limit but the normal retirement age is 60. Eligibility requirements also cover such matters as nationality, criminal record, tattoos, financial status, physical fitness, health and eyesight.

In Gorka Salaberria Sorondo v Academia Vasca de Policia y Emergencias the European Court of Justice (CJEU) was asked to consider whether an age limit of 35 for a competition for recruitment to the Basque Police was discriminatory on the ground of age. Mr Sorondo brought proceedings in the Spanish High Court concerning the decision of the Director-General of the Basque Police and Emergency Services Academy, objecting to the conditions for participation in the competition and, in particular, the requirement of candidates to be under 35 years old. He was over 35 and claimed that there was no justification for the age limit imposed.

Local legislation provided as follows:
A candidate for recruitment as a police officer must be aged 18 or over and under 35. However, with respect to recruitment to local forces, the upper age limit may be revised taking into account services provided within the local administration, in the local police forces.
The High Court referred the question to the CJEU, noting as it did so that there was a previous ruling that an upper age of 32 years for the recruitment of Basque police officers complied with the requirements of proportionality and that a similar decision permitted a limit of 30 years for intermediate career posts in a fire service.

What are the likely implications of Brexit on UK Employment Law/HR practices?

Employers may not be aware that much of the current legislation in place to protect employee rights actually derives from the European Union – for example, working time regulations, rights of the employees on a business transfer (TUPE) and family leave rights to name but a few. Indeed some Politicians for the ‘Leave Campaign’ will no doubt have argued that such laws were inhibitive to British businesses and produced too many rules and regulations having a negative effect on both time and profits.

What is likely to happen?

In reality it is doubtful that the UK Government would look to repeal any employment law which implements minimum EU requirements, the reason being that many of these laws simply complement existing UK law (equal pay rights for example). In addition, much of our existing employment law simply reflects good/acceptable practice in business (or indeed life generally!) such as the right not to be discriminated against on the grounds of sex, age, disability etc. Furthermore some UK Laws actually go above and beyond the minimum requirements of EU legislation – in respect of holidays for example, the EU Working Time Directive 2003/88/EC only requires EU Member States to provide for a minimum of 20 days’ annual leave for employees, whilst the UK statutory minimum leave entitlement is actually 28 days inclusive of normal bank and public holidays.

As a final point it is worth noting that despite a (potential) Brexit, the UK will still need to maintain strong trading relations with Europe. If the UK is a member of the EEA (European Economic Area) it would be required to remain subject to many aspects of EU employment law.

In light of the above, whilst in my view the majority of employment law legislation will not be repealed or significantly changed, the UK Government may look to alter some employment law that UK businesses have struggled with. The following are areas that may be most susceptible to change:

Judge at EU’s top court backs workplace ban on headscarf

An advocate general at the European Court of Justice has said that companies should be free to ban Muslim women from wearing head scarves if they have a general policy barring all religious and political symbols.

This was said in the run up to a landmark ruling expected from the EU’s highest Court this year. The case involved a woman who worked as a receptionist for the company G4S. After working for the company for three years she decided to start wearing a headscarf for religious reasons. As a result the employee was dismissed given that she had contravened Company policy, which at the time was an unwritten rule.

The employee brought a claim for wrongful dismissal. This was dismissed by the lower courts and further on appeal. However it was referred to the European Court of Justice in Luxembourg to establish whether G4S had contravened the European Union’s anti-discrimination directive.

The Advocate General provided an indication that such a ban would not be deemed direct discrimination and could be justified in order to enforce a policy on religion and ideological neutrality. In arriving at this decision it was said that “whilst an employee cannot leave their sex, skin colour, ethnicity, sexual orientation, age or disability at the door, upon entering their employer’s premises, they may be expected to moderate the exercise of his religion in the workplace.”

If the European Court of Justice’s final ruling agrees with that of the Advocate General, then this will be landmark decision. However, this is not the first time that the contentious issue has come before the European Courts.

Holiday calculations when work pattern changes

Kathleen Greenfield v The Care Bureau Limited is a decision of the European Court of Justice which provides very welcome practical and common sense advice for those tasked with calculating holiday entitlement when an employee’s working pattern changes.

The case was referred to the ECJ by the Birmingham Employment Tribunal in April 2014. Ms Greenfield had worked for The Care Bureau since June 2009. Her working days and hours could vary from week to week. She was entitled to 5.6 weeks’ holiday per year and the holiday year ran from 15 June. She left the employer on 28 May 2013, having taken seven days’ paid leave during her final leave year (in July 2012). In the twelve weeks prior to taking her leave her pattern of work was one day per week.

However, from August 2012 she worked twelve days on and two days off (taken as alternate weekends). This equated to 41.4 hours per week. In November she asked for a week’s paid leave but was told that as a result of the holiday taken in June and July she had exhausted her entitlement to paid annual leave. This was because the entitlement to paid leave was calculated at the date on which the leave was taken, based on the working pattern for the prior 12 weeks. Since that pattern was one day per week she had taken the equivalent of seven weeks’ paid leave, thereby exhausting (and exceeding) the annual entitlement.

Ms Greenfield took her case to the Birmingham Employment Tribunal and won. The Care Bureau Limited requested written reasons and the Tribunal proposed to reconsider its decision on the basis that the law was unclear, thereby justifying a reference to the European Court. However, after considering written representations the tribunal decided that a reference was unnecessary and confirmed its decision to find in favour of Ms Greenfield. The Care Bureau Limited appealed to the Employment Appeal Tribunal.

It also applied to the Birmingham Employment Tribunal to reconsider its judgment. It did so and revoked its judgment, partly on account of a mathematical error and also to enable the reference to the ECJ.

Ms Greenfield contended that leave already accrued and taken should be retroactively recalculated and adjusted following an increase in working hours in order to be proportional to the new number of working hours rather than the hours worked at the time that the leave was taken.

The Care Bureau Ltd maintained that EU law did not provide for a new calculation and there is therefore no need to make such an adjustment under national law.

Does time taken travelling to and from work count as working time?

It has long been the case that time spent in travelling to and from work does not form part of the working time of employees. Occasionally, specific issues have been considered, such as when an employer relocates, but the main principle has not altered.

However the European Court of Justice has now had its say in the case of Federación de Servicios Privados del sindicato Comisiones Obreras. This case, on referral from the Spanish national court, concerned workers who were required to travel to different locations to work. The Advocate General described them as “peripatetic workers, that is to say workers who are not assigned to a fixed or habitual place of work [and] spend time travelling from home to the first customer designated by their employer and from the last customer designated by their employer to their homes”.

It was noted that, under Spanish law, working hours should not exceed 40 hours of “actual work” per week, calculated on an annual basis. There has to be at least 12 hours between the end of one working day and the beginning of another and  normal working hours should not exceed nine per day.

The employees concerned were technicians who worked for security system installation and maintenance services. They were allocated to areas and they used company vehicles to travel to homes and industrial and commercial premises where they were required to carry out work. Unsurprisingly the distances from a worker’s home to the first workplace varied considerably and were sometimes more than 100 km. They were also required to travel at least once a week to the offices of a transport logistics company to collect parts. Their place of work each day was notified to them by messages sent to company issued Blackberrys provided to each of them.

For the purpose of calculating working time the employer did not include time spent on the first journey of the day, from home to work, and the last journey of the day, from work to home. Instead, time was calculated with reference to the time of arrival at the first job and the time of departure from the last job.

In the view of the national court this arrangement meant that workers could not adjust their private life and their place of residence for the purpose of proximity to the place of work. Travelling time could not therefore be regarded as rest time, having regard also to health and safety issues. Equally it was not time that the worker was at the employer’s disposal so that he could be assigned to other work. It was therefore not clear whether this was working time or a rest period, hence the referral to the European Court.

coming in 2015

In late October I wrote about what is probably the most significant change coming in 2015, the introduction of shared parental leave. As I pointed out at the time, although the changes apply to babies due or due to be adopted on or after 5 April, requests for leave could come as soon as next month so arrangements need to be in place now.

Due in May 2015 is the introduction of the Fit for Work service following pilot runs which were supposed to have started already but seem to be awaiting implementation. Under a partnership agreement 45 NHS occupational health teams covering 103 sites will provide face to face appointments for the new service. This is in addition to the telephone helpline and website that were initially announced. When I wrote about the service last August I gave it a qualified welcome. However, doubts have emerged about its likely effectiveness. Guidance for employers is yet to be published and it is entirely voluntary, on the part of both employers and employees. If an employee refuses to take part, that is the end of the process. Even if a report is prepared the employee can refuse consent for its disclosure to the employer. It is down to GPs to decide whether to refer employees for assessment. According to recent research the proportion of likely referrals of eligible patients varied widely from 11% to 72%.

As usual statutory rates will increase on 5 April 2015 with statutory maternity, adoption and shared parental leave rates increasing to £139.56 per week and SSP to £88.45 per week.

Also on 5 April the right to unpaid parental leave will be extended to parents of any child under the age of 18 years.

Cases to watch out for include the decision of the European Court in USDAW v Ethel Austin Ltd and others concerning whether the 20 employees’ threshold for collective consultation applies to one “establishment” or a whole organisation (likely to be the latter).