HR in Hospitality
Employment Law Update
DLA Piper: Breakfast Seminar 22 October 2014
Jonathan Exten-Wright
Partner
jonathan.exten-wright@dlapiper.com
+44 207 796 6619
Vinita Arora
Partner
vinita.arora@dlapiper.com
+44 20 7796 6611
Agenda
 Holiday pay
 Shared parental leave
Breakfast Seminar 22 October 2014
2
Holiday For Workers – Headache for Employers?
 What is the legal entitlement to holiday and holiday pay for
workers and employees?
 What happens when employees are absent from work on account
of sickness or maternity leave?
 How do you calculate holiday entitlement and pay for atypical
workers?
 What are the implications for calculating holiday pay
following the decision in Williams?
Breakfast Seminar 22 October 2014
3
The European Right To Paid Leave
 The European Working Time Directive (WTD) was introduced
as a health and safety measure and mandates
 "minimum safety and health requirements for the organisation of
working time"
 Art 7 of the WTD requires all Member States to:
 Ensure that all workers are entitled to paid annual leave of at least
4 weeks
 Provide that the minimum period of annual leave may not be
replaced by an allowance in lieu, except where the employment
relationship is terminated
Breakfast Seminar 22 October 2014
4
The Right To Leave In The UK
 The Directive is implemented in the UK by the Working Time
Regulations 1998 (as amended) (WTR)
 The WTR provide that:
 A worker is entitled to be paid in respect of any period of annual
leave at the rate of a week's pay in respect of each week of leave
 Either the worker or employer may give notice to take leave
 Leave may not be replaced by a payment in lieu except where the
worker's employment is terminated
 Leave may only be taken in the leave year in respect of which
it is due
 Workers are entitled to 5.6 weeks' leave
Breakfast Seminar 22 October 2014
5
Bringing The Contract Into The Mix …
 No legal obligation to provide holiday in respect of bank/public
holidays
 Employers are obliged to set out details regarding holiday in
the written particulars of employment
 Many employers provide additional holiday rights for
employees under the contract
 This can result in 3 types of leave/entitlement and potentially 3
tiers of protection:
 4 weeks' leave under the WTD
 1.6 weeks' leave under the WTR
 additional leave under the Contract of Employment
Breakfast Seminar 22 October 2014
6
Calculating Holiday Pay
 Reg 16(1) WTR provides that a worker is entitled to be paid in
respect of annual leave to which he is entitled… at a rate of a
week's pay in respect of each week of leave
 Reg 16(2) WTR specifies the method for calculating the rate of
a week's pay
 Sections 221 to 224 of the Employment Rights Act 1996 (ERA)
shall apply
 For the purposes of the calculation employees fall into 2 broad
categories
 Employees with "normal working hours"
 Employees without "normal working hours"
Breakfast Seminar 22 October 2014
7
Normal Working Hours
 There are 3 types of "normal working hours" employees
 Employees whose remuneration varies according the day/time
they work their normal hours (shift workers)
 Employees whose remuneration varies according to the amount of
work done during their normal hours (pieceworkers)
 Employees whose remuneration does not vary (time workers)
 For the first two categories a week's pay is calculated by
averaging their remuneration over the 12 week period
immediately preceding the calculation date
 For the last category, a week's pay is the amount payable by
the employer under the contract of employment
Breakfast Seminar 22 October 2014
8
Determining Normal Working Hours
 How do you determine whether an employee has "normal
working hours"?
 s234 ERA provides that where an employee is entitled to
overtime pay when employed for more than a fixed number of
hours this amounts to normal working hours
 The normal working hours are the fixed working hours or
 (if greater) the minimum number of hours the employee is
contracted to work
 So it should follow that where an employee has normal
working hours, overtime does not count to calculating a week's
pay unless the contract requires that a number of overtime
hours be worked
 But does this apply when applied to the WTD?
Breakfast Seminar 22 October 2014
9
Voluntary Overtime
 Bamsey v Albon Engineering & Manufacturing plc
 Is the ERA compatible with the WTD?
 Employees regularly worked overtime and were obliged to work
overtime if required to do so
 Employer not obliged to offer overtime
 Court of Appeal ruled that:
 though workers compelled to work overtime because
employer not obliged to offer overtime exception did
not apply
 holiday pay was to be calculated without reference
to overtime
 the statutory provisions within the WTR and ERA are
consistent with WTD
Breakfast Seminar 22 October 2014
10
Calculating Holiday Pay
 British Airways Plc v Williams
 Pilots sought holiday pay calculated on the basis of the payments
to which they were entitled whilst working to avoid being disincentivised from taking leave
 Case relates to the Aviation Regulations (not WTR) which contain
no express means of calculating holiday pay
 CJEU concluded the pilots were to be put in the position, as
regards remuneration, which was comparable to a period of work
 any inconvenient aspect which is linked intrinsically to the performance
of the tasks which the worker is required to carry out under his contract
and in respect of which a monetary amount is provided must be taken
into account when calculating holiday pay
 Supreme Court distinguished between remuneration and
expenses for ancillary costs (not incurred during leave)
Breakfast Seminar 22 October 2014
11
The Williams Conundrum
 The emphasis of the decision in Williams, that any payment
made to workers is either pay or expenses, suggests that few
aspects of remuneration escape inclusion for calculation of
holiday pay
 Prior to the Williams case:
 Overtime is excluded where an employee has normal working
hours
 Commission and bonus only taken into account where the worker's
pay varies with the amount of work done (e.g. productivity bonuses)
Breakfast Seminar 22 October 2014
12
The Conundrum – Voluntary Overtime
(1)
 Does Bamsey still apply and should voluntary overtime be
included when calculating Holiday Pay?
 Neal v Freightliner and Fulton and anor v Bear Scotland
 In both instances workers regularly work overtime
 In Neal the contract requires employees to work overtime when
necessary
 In Bear employees are required to work "not less than 37.5 hours
a week"
 Two more cases (Amec and Hertel) also concerning holiday pay
 All claimants are seeking backdated holiday pay which
is calculated to include their overtime payments
Breakfast Seminar 22 October 2014
13
The Conundrum – Voluntary Overtime
(2)
 In both cases the Tribunal have considered the decision in
Williams and considered that any components that are
"intrinsically linked", such as overtime, must be included
 Both Tribunal have concluded they are entitled to read words
into the Regulations to make them compatible with the WTD
 These cases are being appealed in late July 2014
 The Government have been granted permission to
intervene on the basis they believe the WTR and
ERA properly implement the WTD
Breakfast Seminar 22 October 2014
14
The Conundrum – Commission and
Bonuses
 Lock v British Gas Trading
 Employee paid basic salary and commission on sales but holiday
paid at basic rate only
 Should commission payments be included in the calculation of
holiday pay
 ECJ decision is "yes"
 Commission is an intrinsically linked component of remuneration
 If not paid it would deter him from taking leave - a worker has the right
to enjoy, during his period of rest, entitlements which are comparable
to those relating to the exercise of his employment
 for national courts to decide how should be calculated
Breakfast Seminar 22 October 2014
15
Implications for Employers
 Employers may need to adjust holiday pay to include other
elements than basis pay – at least for WTD leave
 Significant potential liability as unlawful deduction claims can
go back for many years
 back to 1998?
Breakfast Seminar 22 October 2014
16
Possible Options
 Watch and wait?
 Path of least resistance in the absence of legal certainty
 Reorganise working patters/commission schemes?
 Practical difficulties in introducing change
 Include overtime/commission now (but don't include back
pay)?
 Possibly make discretionary payment
 Calculations will be difficult
 Could trigger claims for back pay
 Pay up the shortfall
 Risk of significant expense
Breakfast Seminar 22 October 2014
17
Holiday pay ready reckoner
Element of pay
Included?
Not included?
Query?
Commission
Allowances
Bonuses
Expenses
Overtime
Breakfast Seminar 22 October 2014
18
Shared Parental Leave
 A new system of statutory parental rights will be introduced on
5 April 2015
 It will apply to both employees and agency workers
 The aim is to allow parents to share the statutory maternity
leave and pay that is currently available only to mothers
 The system will also apply to adoptive parents
Breakfast Seminar 22 October 2014
19
What stays the same?
 Two weeks' paternity pay
 18 weeks' unpaid EU parental leave
 Although the age limit of the child does increase from eight to 18
from 5 April 2015
 Two weeks compulsory maternity leave
 52 weeks of maternity leave
 39 weeks of maternity pay
Breakfast Seminar 22 October 2014
20
The proposed changes
 Qualifying parents will be able to share up to 50 weeks of leave
and 37 weeks of pay.
 So, everything other than the compulsory maternity leave
period.
 The current system of additional paternity leave will be
abolished.
 It will be up to the employees to propose the pattern of leave
that they wish to take, and to discuss this with their individual
employers.
Breakfast Seminar 22 October 2014
21
Patterns of leave
 Parents will be able to take SPL:
 at the same time as each other or separately.
 in minimum periods of 1 week
 in any combination
 at any time during the 52 weeks after the birth/adoption
 Employer agreement is required if the employee wants to take
multiple blocks of leave.
 Each employee can make up three notifications for leave or
changes to periods of leave.
Breakfast Seminar 22 October 2014
22
Agreement?
 Employers will not be obliged to agree to the SPL pattern
proposed by their employees.
 The parents' respective employers will not need to contact
each other to discuss their employees' leave entitlements.
 The default position where agreement cannot be reached will
be for a parent's portion of leave to be taken in one continuous
block, to start on a date of their choice.
Breakfast Seminar 22 October 2014
23
Notice requirements
 Both parents must give their employers eight weeks' notice to
begin SPL and claim SPP.
 If they wish to take several blocks of leave, they must give
their employers eight weeks' notice in respect of each period
of leave.
 The mother will be entitled to give notice that she wishes to
end her maternity leave and start SPL before the child's birth.
 However, she can change her mind within six weeks of the
birth.
 Employees will be required to provide a non-binding
indication of their expected pattern of leave when they
notify their employer of their intention to take SPL.
Breakfast Seminar 22 October 2014
24
Eligibility
 Each parent or prospective parent must meet employment
and earnings and other qualifying conditions.
 However, statutory maternity and adoption leave for a
mother remain a right from day one.
 For a self-employed woman with an employee partner who
meets the qualifying conditions, a notional 52 weeks' leave
(less the weeks that are paid as maternity allowance) can be
transferred to SPL.
 Her partner can also get the unpaid balance of
weeks of maternity allowance as SPP.
Breakfast Seminar 22 October 2014
25
SPP
 SPP will be paid at the flat rate of statutory maternity pay
(SMP).
 This is £138.18 from 6 April 2014.
 Therefore, it is likely that most couples will choose to forgo no
more than 33 weeks of SMP.
 The first six weeks of SMP is paid at 90% of the woman's pay
if that is higher than flat rate SMP.
 If she takes less than six weeks, the
balance of the higher rate is lost.
Breakfast Seminar 22 October 2014
26
Keeping In Touch Days
 Each partner has 20 Keeping in Touch (KIT) days available to
use in a period of SPL or SPP.
 These cannot extend the period of leave.
 However, they can be used to supplement the low rate of SPP
or to try out patterns of part-time work.
 As with the current KIT days, pay and the nature of the work to
be done are both matters to be agreed.
 NB - these days are in addition to the mother's
10 KIT day entitlement during maternity leave.
Breakfast Seminar 22 October 2014
27
Returning to Work
 An employee returning to work from SPL will have the right to
return to the same job no matter how many periods of shared
parental leave they have taken, as long as they have taken 26
or fewer weeks' leave in total.
 This 26-week total will include periods of maternity, adoption,
paternity and shared parental leave.
 Once they have exceeded 26 weeks' leave, they would only
have the right to return to the same or a similar job.
Breakfast Seminar 22 October 2014
28
Implications for employers?
 Careful planning will be required.
 Encourage and facilitate planning in advance – allowing you
most certainty.
 Your policies will need to be redrafted and reviewed.
 Consider the impact on your business and what you can
accommodate.
 A key unresolved question is enhanced maternity pay and how
this should be treated.
 Given the sharing of leave, should the
enhanced rate of pay also be applied
across the workforce?
Breakfast Seminar 22 October 2014
29
Implications for employers?
 The notice requirements are complicated and the legislative
framework is confusing.
 Employees are likely to get it wrong whilst these bed down.
 Employees could be negatively impacted (in terms of their
SPP entitlement) by getting this wrong, so be wary.
 ACAS has just released its long awaited guidance.
Breakfast Seminar 22 October 2014
30
Questions
Breakfast Seminar 22 October 2014
31