Getting a Break in Annual Leave Law

It’s summertime and it seems that the Courts are finally giving employers a break!

At long last, the Court of Appeal has reversed the effects of a decision that had, in my opinion, previously defied all logic regarding holiday pay in cases of long-term sickness.

The Appeal Court found that the case of Kigass Aero Components Limited-v-Brown was wrongly decided. Because of this case I have had to advise my employer clients that despite a worker having been away from work on long-term sick leave, even if their entitlement to sick pay had expired, the worker was still entitled to request their statutory leave (holiday) under Regulation 13 of the Working Time Regulations 1998 (the Regulations); and providing they gave notice under Regulation 15, the employer was required to PAY that annual leave! Even when the worker may not have been into the office or onto the shop floor for the last six months and may well have been convalescing at home for all of that time!

As you can imagine, some of the responses I received to this advice cannot be repeated in this article!

The position has now been re-evaluated by the Court of Appeal and common sense applied in the case of Commissioners of Inland Revenue-v-Ainsworth and Others(2005). The Court looked at the natural meaning of the word ‘leave’. Within the Regulations an employee is entitled to four weeks’ annual leave in each leave year and the Court agreed with the Inland Revenue that the word ‘leave’ implies a release or a break from what would otherwise be an obligation, such as the pressures of daily work.

Another issue considered by the Court of Appeal in its deliberations was whether, for example, in the case of non-payment of holiday pay, this amounted to an unlawful deduction of wages under the Employment Rights Act 1996 (ERA) which allows a claim to be brought within three months of the last in a series of deductions (thereby allowing a longer period than three months from the initial deduction). The Court of Appeal said that was incorrect and that the Regulations (which came out after the ERA) were intended to apply and that any claims like this must be brought within three months of the breach and not within three months of the last in the series of breaches.

Finally, I would like to warn all employers of the risks of engaging a worker through an employment agency on a daily basis for a period of a year or more. In these circumstances it can be argued by the worker, were they to be dismissed, that they were an employee of your company, despite being engaged through the employment agency! This is as a result of the Court of Appeal’s comments in Dakas-v-Brook Street Bureau (UK) Limited (2004) and followed by the Employment Appeal Tribunal (EAT) in Cable & Wireless plc-v-P Muscat (2004). The EAT confirmed that, where someone has been engaged through an agency for more than a year, the worker could be regarded as the company’s employee rather than the agency’s worker. That is providing the company ‘controls’ the employee on a day-by-day basis (instructing them what to do, sometimes in providing them with the tools for the job i.e. mobile phone, van, etc) and where the worker turns up to work every day and the company requires him to turn up to work every day, mutuality of obligations exists. In such circumstances a contract of employment can be implied by the Courts regardless as to the terms of any contractual arrangements agreed between the worker and the agency which state that the worker is not an employee of either the agency or the company.

There are wide-reaching implications in these decisions which mean those companies who use temporary agency workers should now anticipate that once those workers attain one year’s service with them, they may be able to bring unfair dismissal proceedings against the company if their engagement is ended, even if the termination is via the employment agency. The whole purpose of using employment agencies, rather than recruiting directly, has been on the basis of the belief that the company has greater legal flexibility in dispensing with the worker’s services. This appears no longer to be the case!

I believe that this case will be appealed but will have to go to the House of Lords for a final decision to be made. Quite simply, this calls into question the basis upon which the whole of the employment agency industry has conducted its business to-date.

May 2005

Deborah Boylan is a Partner who specialises in employment law - email: deborah.boylan@raworths.co.uk.