Gowling WLG's employment, labour & equalities experts bring you the latest top five employment law developments that may affect your business - what they are, and what you can do about them.

  1. Calculating holiday pay: regular receipt is key
  2. When standby time is 'working time'
  3. Suspension is not a neutral act
  4. Calculating pension loss
  5. Abolition of tribunal fees: the immediate fall out

1. Calculating holiday pay: regular receipt is key

Since 2011, we have had a seemingly endless stream of judgments significantly impacting on how holiday pay must be calculated for workers earning overtime and/or commission payments. The latest tweak comes from the Employment Appeal Tribunal (EAT) in Dudley Metropolitan Borough Council v Willetts and Others.

Back in 2011 the Court of Justice of the European Union (CJEU) in Williams v British Airways plc stated that workers are entitled to receive their 'normal remuneration' when taking statutory holiday leave. This includes not only basic salary but also remuneration "intrinsically linked to the performance of the tasks". This has led to a plethora of cases on what is 'normal remuneration'.

Unsurprisingly, in Willetts the EAT has confirmed that entirely voluntary overtime worked 'sufficiently regularly' falls within the concept of "normal remuneration". Holiday pay should correspond to 'normal remuneration' so as not to discourage workers from taking leave and the division of pay into different elements cannot affect a worker's right in this regard. The EAT has now clarified:

  • 'Sufficient regularity'

    In order for a payment to count as "normal" it must have been paid over a sufficient period of time. That will be a question of fact and degree. Questions of frequency and regularity are likely to play a part in determining whether a payment is normal. Items which are not usually paid or which are exceptional do not count, but items which are usually paid and regular across time may do so.

    In this case, the EAT had no difficulty in concluding that a payment was 'normally' made if paid over a sufficient period of time (in this case several years) on a regular basis, say for one week each month or one week in every five weeks, even if it is not paid more frequently or even each week. Fluctuations in the amount paid would be catered for by the 12 week average.

  • 'Intrinsically linked to the performance of the tasks'

    If there is an 'intrinsic link' between the payment and the performance of tasks required under the contract, that is decisive of the question whether it is included within normal remuneration. However, that is only a decisive criterion, not the only decisive criterion - the absence of such a link does not automatically mean that a payment need not be taken into account.

In this case, while the overtime duties were not required under the contract of employment, they were nevertheless 'intrinsically linked'. The specific agreement for voluntary overtime would not exist in the absence of the contract of employment.

So "normal pay" is that which is "normally received". Focusing on whether overtime is or isn't "voluntary" is irrelevant. The key is regular receipt.

2. When standby time is 'working time'

Under the Working Time Directive, 'working time' is defined as any period during which a worker is working, at the employer's disposal and carrying out activities or duties.

All three elements must be satisfied to constitute working time. The issue of whether on call time counts as working time has been long debated. What has been clear for some time under EU law is that 'on-call' time constitutes 'working time' if the employee is required to be in the workplace rather than at home, even if the worker is asleep at the workplace for some or all of that time.

The CJEU is now being asked whether on-call time is 'working time' for fire-fighters who are on-call at home but have a duty to respond within eight minutes. The Advocate General has given her Opinion that the definition of 'working time' does not automatically include time spent on 'stand-by' duty, during which workers must be readily available to perform duties for their employer within a short period of time but need not be present at their workplace. Instead, it is the quality of the time that is spent rather than the precise degree of required proximity to the place of work that is of overriding importance in this context.

It is for the relevant court to determine whether the quality of stand-by time is undermined to such a degree by any restrictions imposed by the employer (for example, the worker's ability to devote themselves to their own interests and family) that it should be classified as working time.

Until now, EU case law has tended to focus on the worker's location during stand-by periods and whether it is at a place determined by the employer indicating that the worker cannot control their own time. This case looks at applying this principle to on-call time from accommodation of the worker's choice within a specific radius. We wait to see if the CJEU will accept and follow the Advocate General Opinion (likely). Assuming the CJEU does follow, proximity to the workplace will not necessarily be a deciding factor in determining whether on-call time is working time. Equal emphasis will be given to the quality of the time and the degree of freedom that a worker may enjoy when on stand-by duty. This approach might mean that on-call time spent in a worker's home could qualify as working time where their freedom to engage in rest activities during that time is severely impacted, even if there is no required proximity of their home to their place of work.

A 2014 case in the UK, Truslove and anor v Scottish Ambulance Service, considered the positon of relief ambulance paramedics who sometimes worked on call at night away from their base station. On such occasions, they were contractually required to take accommodation within a three-mile radius of the ambulance station at which they were working and to achieve a target three minute response time. The EAT sitting in Scotland held such on-call periods amounted to working time. Interestingly the EAT observed:

"If a worker is obliged to be away from home, or even in some circumstances to remain at or within a very close distance from home [our emphasis], time is that much less his own. The time is all the more under the control of the employer. To that extent the worker has less relief from employment and those aspects of it which might be stressful, physically and perhaps more particularly mentally. The relaxation which is available in the company of family and friends (or at least may be) and the pursuit of personal hobbies and the like, all characterised by the exercise of free choice, free from the direction of the employer, is unavailable where an employee remains shackled by his employer to a particular location and is subject whilst there to providing an immediate response to his employer's bidding."

For employers with workers undertaking such standby duties, this has important implications for:

  1. Working week

    The Working Time Regulations (WTR) limit a worker's average weekly working hours to 48, unless the worker has signed a valid opt out agreement or falls within one of the limited exemptions. If none of those exceptions applies, employers should ensure they have requisite opt out agreements in place or comply with the 48 average hour working week limit.
  2. Rest breaks

    Under the WTR, subject to certain exceptions, a worker is entitled to a 20 minute unpaid rest break after six hours and a daily rest period of at least 11 consecutive hours in each 24 hour period. While workers can opt out of the 48 hour working week limitation, it is not possible to opt out of rest breaks, although they may be varied by a collective or workforce agreement. Workers can voluntarily forego a rest break, but employers who refuse to allow the daily rest break for workers wishing to take it (or compensatory rest for those falling under the 'special cases' or shift working exemptions), will be in breach of the WTR.

3. Suspension is not a neutral act

In Agoreyo v London Borough of Lambeth, the High Court reminds employers that suspension may amount to a breach of the implied duty of mutual trust and confidence, entitling the employee to claim constructive unfair dismissal.

In a case concerning the suspension of a teacher, the High Court held that suspension as part of the disciplinary process amounted to a breach of trust and confidence as it was a default positon imposed as a knee-jerk reaction. In this case the teacher had not been asked for her response to allegations against her and there was no evidence of consideration given to any alternative to suspension to allow the investigation to be conducted fairly.

This case does not mean that suspension will inevitably result in a breach of trust and confidence, but rather that it should only be imposed with care. Suspension may be appropriate where for example there is a potential threat to the business or other employees or it is not possible to properly investigate the allegation if the employee remains at work.

Where suspension is being considered remember:

  1. The period of suspension should be as short as possible and the suspension decision should be kept under regular review.
  2. Unless there is a clear contractual right to do so, an employer will not be entitled to suspend without pay. Accordingly a suspended employee should normally continue receiving their pay and normal benefits.
  3. Suspension is a serious step and thought should be given to whether it can be avoided. Consider whether it is possible to place the employee in another area of the business whilst the investigation is carried out.
  4. Employees must be informed of the fact that they have been placed on suspension as soon as possible. Any conversation communicating the suspension should be followed up in writing. A letter should make it clear that the employee is suspended, the length of the suspension as anticipated by the employer and the employee's rights and obligations during the period of suspension. The employee should also be notified of a point of contact during their period of suspension.

4. Calculating pension loss updated guidance published

On 10 August, revised Presidential Guidance and 'Principles for Compensating Pension Loss' fourth edition on calculating compensation for pension loss in employment tribunal cases was published and came into effect.

The Presidential Guidance is issued jointly by the President of Employment Tribunals (England and Wales) and the President of Employment Tribunals (Scotland). The Guidance states that the Principles are guided by five concepts: justice, simplicity, proportionality, pragmatism and flexibility.

The 153 page Principles set presumptions which the employment tribunal will apply when assessing pension loss (in the absence of the parties presenting evidence to the contrary) on matters such as:

  • the claimant's expected retirement age
  • which cases are deemed 'simple' cases, for which occupational pension scheme loss is based on employer contributions, and
  • which cases are deemed 'complex' for which a 'seven steps' model of assessment should be adopted.

A number of worked examples are also included in the Principles.

5. Abolition of tribunal fees: the immediate fall out

Last month we reported on the momentous Supreme Court judgment abolishing tribunal fees. Fees were held to be unlawful from the outset. This momentous decision immediately resulted in:

  1. Fees no longer being payable
  2. Fees already paid needing to be reimbursed
  3. Extension of time applications for:
    1. claims that were rejected or dismissed because fees were not paid
    2. new claims not made in time due to the unlawful fees regime.

In light of the large number of fee reimbursements and potential extension applications, on 9 August the President of the Employment Tribunals issued Case Management Orders staying (putting on hold) all tribunal claims or applications brought in reliance on the Supreme Court's decision in order "to await decisions of the Ministry of Justice and Her Majesty's Courts and Tribunals Service (HMCTS) in relation to the implications of that decision".

On 17 August, the HMCTS Jurisdictional Support Team further confirmed they are now working on detailed arrangements for repayment of tribunal fees. They aim to ensure that the process is as simple and unobtrusive as possible for those who make an application, while ensuring that refunds are only paid to those who are entitled. There are, however, a number of points of detail that they do need to address including, for example, how to deal with refunds in claims involving multiple claimants, and how it will operate when the tribunal has ordered the opposing party to reimburse a fee.

A further announcement on the details of the refund scheme, is expected sometime in September. Remember that all fees are abolished. So while this predominantly relates to fees for issuing claims, employers who have paid fees to bring counter-claims, for judicial mediation or appeal fees, for example, should also watch this space.