EAT judgment in Wood v Hertel: Holiday Pay, Part 2
The EAT (Langstaff J) has delivered its important judgment in Hertel, Amec v Wood and others, joined with the appeal in Bear v Fulton from Scotland, which considered several key issues about payments for annual leave under the Working Time Regulations 1998. Contrary to what has been stated by some in the media, the case is not about voluntary overtime. In each appeal the workers were required to work overtime, though it was not guaranteed, and in fact normally worked it. But nothing was paid for overtime in respect of the four-week period of holiday guaranteed by WTR, implementing the right in Article 7 of the Working Time Directive.
In 2004 in Bamsey the Court of Appeal decided that compulsory, but not guaranteed overtime, did not need to be paid under WTR. Since then, in Case C-155/10 British Airways v Williams and Case C-539/12 Lock v British Gas, the Court of Justice ruled that workers are entitled to their normal remuneration in respect of annual leave under the Directive. What remained unclear was how these developments apply to WTR. The EAT decided four key issues relevant to workers’ rights in general (a fifth issue was specific to the contracts of the workers in Wood v Hertel).
1. Accepting the argument for the workers and rejecting the submissions of the employers and BIS, the EAT held that the judgments in Williams and Lock were clear. Under Article 7, normal pay had to be paid in respect of annual leave. The overtime was required by the employers and in fact regularly worked by the workers. Overtime pay was therefore remuneration which had to be paid in respect of annual leave. No reference to the Court of Justice was necessary.
2. On a linked point, the EAT allowed the workers’ cross-appeal that taxable elements of payments made for the time spent travelling were equally components of normal remuneration, and not expenses. They too, therefore, should be paid in respect of annual leave following Williams and Lock.
3. The critical third issue, of major importance in the private sector, was whether WTR could be interpreted to achieve the result required by the Directive, as the workers argued. The EAT held that they could be. WTR were passed to implement the Directive and their essential feature was that holidays should be paid. The fundamental premise of Bamsey, that Article 7 laid down no requirements as to payments for annual leave, was now wrong. While the precise wording did not matter, words could be read into regulation 16 WTR to ensure that the overtime payments were maintained in respect of annual leave.
4. In Revenue and Customs v Stringer the House of Lords held that a claim for holiday pay could be brought as a claim for unlawful deduction from wages. The final issue was how those provisions interact with past claims for underpaid holiday, brought as a “series” of deductions from wages. In a new development of the law, the EAT held that the sense of the legislation was that if a series was punctuated by a gap more than three months, the passage of time had broken any series of underpayments.
The EAT judgment, which may be the subject of further appeals, is important for the many thousands of claims across the UK. It confirms that holiday pay must include all elements of normal remuneration and that tribunals can and should interpret WTR to achieve that result. The point on unlawful deductions means, for the moment at least, that claims for retrospective liability may be restricted in effect. But it also creates a practical difficulty because claims may need to be lodged repeatedly - a particular problem for both workers and employers given the need to pay fees.
Michael Ford QC and Mark Whitcombe, instructed by Alys Cunningham of Thompsons, act for the workers, who are supported by their union Unite.
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