Be Aware – February 2024
Changes to Holiday Pay From the 1st of January 2024
The Government has brought several significant changes to holiday pay at the start of 2024 which employers should be aware of. The main idea behind the newly introduced reforms is to simplify holiday entitlement and holiday pay calculations found within the Working Time Regulations. This article outlines the main changes.
Changes only affect certain classes of worker
The changes only affect workers with irregular hours or workers who only work part of the year.
- An irregular hour worker is defined as a worker whose paid hours of work in each pay period during the term of their contract is (under the terms of their contract) wholly or mostly variable. This may, therefore, catch certain agency workers as well as some variable hours workers and zero hours workers.
- A part year worker is defined as a worker who is only required to work part of the year under the terms of their contract and there are periods within that year (during the term of their contract) of at least a week which they are not required to work and are not paid for. This is therefore likely to catch seasonal workers and some term time only workers.
The provisions affecting irregular hours and part year workers only affects any workers after the start of the leave year on or after 1 April 2024.
The 3 Key Changes
A New Method Of Holiday Accrual For These Workers
This stems from confusion following the Supreme Court’s decision in Harpur Trust v Brazel last year which resulted in part year workers having more holiday entitlement than part time workers who worked the same number of hours on an annual basis.
Under the new legislation, employers are permitted to calculate holiday entitlement for irregular hour workers and part year workers as 12.07% of the hours worked in a pay period. This does not affect how holiday entitlement should be calculated for regular hours workers.
Rolled Up Holiday Pay
Rolled-up holiday pay is where employers pay workers a sum in addition to their normal hourly rate of pay to represent their holiday pay entitlement. What this means is that employers will be allowed to pay a “holiday pay enhancement” on top of both irregular hour workers and part year worker’s wages. Rolled up holiday pay will need to be calculated using the worker’s total earnings over the relevant pay period. Again, this does not apply to regular hours workers.
New Method For Calculating Holiday Entitlement For Long Term Sick Leave Or Family Leave
The new legislation will calculate holiday pay entitlement for such both irregular hour workers and part year workers as 12.07 per cent of the hours worked in a pay period, in a bid to level the playing field and create greater transparency. This includes use of a 52-week reference period.
However, the Government has scrapped plans to introduce an overarching 52-week holiday entitlement reference period for all employees and workers.
The Government website has a full page with examples of calculations for the holiday pay changes (hyperlinked). On a practical level, employers should ensure they are reminding workers about the need to use up their holiday entitlement within the holiday year.
Resignation and Constructive Dismissal
One of the most common claims in the Employment Tribunal is a claim of ‘constructive unfair dismissal’, whereby the employee resigns because they believe their employer has seriously breached their employment contract.
Where an employee resigns in relation to what they believe is a fundamental breach of their employment contract, if they wait too long from the date of the breach to resigning, they risk losing their entitlement to claim constructive dismissal.
How important is the length of any time delay? This is what was considered in the recent case of Leaney v Loughborough University  EAT 155.
Facts of the case
The Claimant, Dr Leaney, was employed at the Respondent university since 1979, first as a research assistant but most recently as a university teacher. Alongside his teaching role, he was also a ‘warden’ in one of the university’s halls of residence.
An incident occurred involving a student in the halls of residence and concerns were raised about the approach Dr Leaney took in dealing with the matter. A disciplinary procedure was conducted, and it was found there was no formal case to answer. However, Dr Leaney raised a grievance regarding the manager’s behaviour and approach, he then was unhappy with the university’s response to the grievance, and he raised an appeal which was dealt with formally.
The grievance was partly upheld, and Dr Leaney appealed the decision once again. This appeal was not taken forward by the university. During this time, which was over the university summer holidays, unsuccessful attempts were made to arrange mediation between Dr Leaney and his manager. After the last unsuccessful attempt Dr Leaney resigned and claimed constructive dismissal.
The ET at first instance rejected Dr Leaney’s claim on the basis that the gap between the date of the university’s last alleged breach of contract (held to be in June), and the date of the resignation (September) was too long. The Tribunal considered that over the 3-month period Dr Leaney had affirmed the contract by reason of the time delay. Dr Leaney appealed the ET’s decision to the EAT.
The EAT allowed Dr Leaney’s appeal. The EAT outlining the question for tribunals to start with which is “whether there was conduct during the relevant period (ie between the final straw act and the resignation) that might or might not have amounted to express or implied communication of affirmation”? The EAT found, in line with previous cases, that the passage of time in such cases is not the issue, it is the conduct or circumstances in that period that can infer affirmation. A mere delay in resignation alone would not mean affirmation of the contract.
In the EAT judgment, the Judge helpfully then set out some key principles to consider when there are delays between an alleged breach and resignation:
- The time between the last straw that prompted the resignation and the resignation itself is not determinative of affirmation.
- The employee’s conduct during that time should be assessed for evidence of express or implied affirmation.
- A range of factors should be considered including the employee’s workload (Dr Leaney in this case felt he could not resign until the summer break due to the damage it would cause to his students) and the employee’s length of service.
The EAT judgment provided a useful analysis on the relationship between time delay and affirmation in constructive dismissal claims. The question for employers remains, in simple terms, whether the employee accepted the breach and carried on working.
Affirmation need not be express and can be implied/inferred from the conduct of the employee post-breach. Mere delay on its own is not enough to show affirmation, which was the focus of the Leaney case explored.
Holiday Pay on Termination
When an employee leaves employment without taking all their accrued annual leave, they will be entitled to a payment in lieu of the untaken leave. Can an employee contract to receive less holiday pay on termination then they would have received had they been working?
No, held EAT in Connor v Chief Constable of West Yorkshire Police.
In Connor v Chief Constable of the South Yorkshire Police, Mr. Connor had been employed for over 18 years before his dismissal. During that time, he had worked the same hours each week. Whilst he was working, his holiday pay was calculated as the equivalent of what he would have earned during a week’s work when he took a week’s holiday. However, his contract included a clause that where he was dismissed any holiday pay entitlement was calculated as 1/365th annual salary. This calculation resulted in him receiving less holiday pay then he would have received had he been working.
The WTR permits the calculation of payment for accrued but untaken leave to be determined by a ‘relevant agreement’, so the question before the court was can a ‘relevant agreement’ result in less pay to the employee.
On first hearing the case the tribunal held that the 1/365th calculation was a valid ‘relevant agreement’ under Regulation 14(3) and that the Claimant had suffered no unlawful deduction. This was appealed by Mr Connor.
The EAT disagreed. The EAT has clarified the legal position and held that a relevant agreement cannot put the employee in a worse position financially than they would have been in if they had taken the leave during their employment and been paid for it as required by law. Only a term which provides a formula for calculation which is in keeping with the rights provided for in law will be valid.
The issue here is that Mr Connor appears to have worked regular overtime, such that his average daily wage was not 1/365th of his annual salary. This case highlights that employers will have to take care when calculating payment in lieu of holiday to ensure the correct figures are used.
Recruitment and Discrimination
“We are recruiting for a new technician. I have been through the applicants and there are two strong candidates. The most qualified candidate however has said in his application form that he suffered from depression in the past but claimed it doesn’t affect his work at the moment. I don’t want to take the risk if he proves to be unreliable, so I was going to choose the other candidate. I presume that is okay?”
The simple answer is no. The employer in this situation should be aware that discrimination law is very different from unfair dismissal law. The right protection from discrimination applies to job applicants, so the employer can be liable before they have even met the candidate, essentially from when the application arrives through the employer’s door.
The risk in the situation above is that the job applicant could prove that the depression was a “disability” under the Equality Act 2010. To prove this, they have to show that the condition has a substantial long term adverse effect on day-to-day activities. The effect of any medical condition on work is not the essential ingredient in determining the issue.
A further problem for employers is that, as a general rule, whether or not someone is disabled for the purposes of the Equality Act is assessed as if they were not taking medication for the condition. With someone with serious depression it follows that a Tribunal does not ask whether or not, when taking any medication or treatment, there is a substantial adverse effect on day-to-day activities, but rather how they would be coping with their medical condition if they were not taking such medication? The result is that a far greater proportion of the population in the UK can argue they are technically disabled in employment law than might be expected.
If the employer rejects the candidate above, then the candidate can submit a claim to an Employment Tribunal. To defend such a claim the employer essentially has to show that the decision not to offer the job was not influenced by the disability (provided always the employee can prove they are disabled within the meaning of the Act).
Employers when recruiting should make job offers “blind” to medical information, albeit offers should be made subject to the satisfactory completion of a medical questionnaire. If it later transpires on further investigation that a medical condition is particularly serious and reasonable adjustments cannot be made to the terms of the job to accommodate that condition, then the employer can subsequently withdraw the offer and can raise a potential defence in the Tribunal.
In the situation above the claim may be difficult to defend if there is one very clear strong candidate then the job applicant may be able to prove to a Tribunal that the depression was the real reason the employer acted as it did. Of course, in many situations it is more arguable and the fact that someone has a disability should not unduly scare an employer into offering the job if there are more able candidates. Treating all candidates fairly and openly is therefore important, as is laying a good paper trail in recruitment to demonstrate the relative candidate’s strengths and weaknesses, so that the employer can prove that the reason they didn’t offer a job to someone who has a disability has nothing to do with the disability. Although not common, beware that this area of the law is sometimes abused and vexatious litigants can try to bring claims to force employers to pay out, simply by making applications.
Don’t forget, this advice is general in nature and will need to be tailored to any one particular situation. As an RMI member you have access to the RMI Legal advice line, as well as a number of industry experts for your assistance. Should you find yourself in the situation above, contact us at any stage for advice and assistance as appropriate.
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