Robinson Steele v RD Retail Services Ltd

Facts

Employers would give people 'rolled up' holiday pay, by adding a so-called 'premium' to wages if holidays were not taken. In three cases a Tribunal and the Court of Appeal referred to the European Court of Justice the question whether this was permissible under the Working Time Directive article 7, which states that annual leave must be taken, and only if the employment relationship terminates may there be a pay in lieu.

Robinson-Steele v RD Retail Services Ltd

Mr Robinson-Steele worked as a redevelopment agent from April 2002 to December 2003, 5 days a week, or 4 nights a week, in 12-hour shifts, with a one-week break over Christmas 2002. His first 'temporary worker' contract stated entitlement to leave was rolled into his ordinary pay at 8.33% of his hourly rate of £6.25 in the day and £7.75 at night per hour.

The Leeds Employment Tribunal held there was a conflict between an Employment Appeal Tribunal decision and the decision of the Inner House of the Court of Session, in MPS Structure Ltd v Munro over whether such 'rolled up holiday pay' was lawful. It made a reference to the ECJ.

Clarke v Frank Staddon Ltd

Mr Clarke worked as a hod carrier and brick cutter for Frank Staddon Ltd from 2 April to 23 June 2001. He was on holiday until 24 July 2001, and went back to work but was not paid between 23 June and 24 July. His contract said holiday pay is included within the daily rate of £85 per day (an August pay slip said: ‘Basic 8.689 Holiday 0.756 = £85 per day’), but in his contract before August 2001 there was no breakdown of the holiday pay in his pay slips. He claimed holiday pay from 2 April to 16 November 2001.

The Tribunal dismissed his application, and the EAT dismissed the appeal. The Court of Appeal held that the Tribunal found there was a break in continuity of the contract from 23 June to 24 July, and then a new contract. The EAT had ordered the case be referred back to the Tribunal to decide whether before August 2001 there had been any holiday pay in the contract, and any break in employment.

Caulfield v Marshalls Clay Products Ltd

Mr Caulfield worked for Marshalls Clay Products Ltd as general operators in the clay making factory at Accrington. He worked 4 days on, 4 days off, except Christmas and Boxing Day. Employees were not paid for the days when they did not work. The GMB collective agreement, incorporated into contracts, stated in clause 3 that holiday pay would be incorporated into the hourly rate, and holidays are taken during the rest day periods in the rota system. Each person could also get two 8-day consecutive breaks, and one 16-day consecutive break, with the timing agreed locally, and by pooling their 4-day breaks and agreeing with other staff to cover for them while they were off. They had 31 days' holiday per year, and the hourly rate included 13.36% holiday pay. If there was overtime, employees would get 30%, 50% or 100% more in respect of both normal and holiday pay. Mr Caulfield and his colleagues took a holiday in June 2001 for up to 16 days, and also rest days. In the end they worked 182 days, with 24.32 days' holiday pay, at £6.629 in normal pay and 88.6p for holiday pay. They claimed holiday pay for the period between 1 October 1998 and 3 September 2001, arguing the 8 and 16-day leave periods meant they did just as much as other workers who stuck to the 4 days' on 4 days' off system.

The Manchester Employment Tribunal held they should be compensated. The EAT allowed the company's appeal. The Court of Appeal held rolled up holiday pay did not discourage workers from taking holiday, that this arrangement was properly negotiated by collective agreement, which was legitimate, and it was not incompatible with the Directive or the WTR 1998. But it referred to the ECJ asking whether rolled up holiday pay violated article 7 of the Directive; was it different if no more pay was given after a contract inserted a rolled up holiday pay term; if yes can credit be given for that payment to set off the entitlement under the Directive; and does the employer need to pay the worker during the period of leave or can payments be made in instalments throughout the year?

Judgment

The European Court of Justice held that giving rolled up holiday pay was not permissible, because it could create a disincentive for workers to take holidays. Holidays are a principle of Community law from which there could be no derogations. Article 7(1) was intended to enable workers to actually take leave. The point of payment for holidays was that a worker would be in a position comparable during leave as when leave is taken. Article 7(2) made clear that a payment in lieu could be taken only where the employment relationship is terminated. Otherwise the right to leave would effectively be replaced by payment in lieu. However employers are entitled to set off rolled up pay against periods of leave that are "actually taken".