Greenfield v The Care Bureau Ltd
Matt Bradbury considers the implications of the recent judgment of the European Court of Justice
This article was originally published in the January/February 2016 issue of Adviser magazine and was correct at the date of publishing.
Background
There are two occasions on which a calculation of statutory paid holiday entitlement needs to be made:
• when a worker who is still employed takes holiday
• when a worker whose employment has come to an end receives pay in lieu of holiday which has accrued but not been taken during employment.
This judgment applies to both.
The Working Time Regulations 1998 express the right to paid holiday as the right to 5.6 weeks’ paid leave per year.
As for pay for each of those weeks, the Regulations provide that ‘a week’s pay’ is to be determined according to the statutory formula set out in the Employment Rights Act 1996, an all-purpose formula that applies, amongst other things, to the calculation of redundancy payments and basic awards for unfair dismissal. The courts have already decided that this formula does not always fall in line with the requirements of the Working Time Directive(2) when it comes to the calculation of holiday entitlement.
It is only safe to assume that ‘a week’s paid leave’ and ‘a week’s pay’ automatically mean the same thing for salaried workers or for workers who maintain the same weekly working pattern throughout the leave year. That leaves out a vast number of workers; agency workers, zero hours workers, seasonal workers, term-time only workers, people whose weekly hours of work increase or decrease in the course of the leave year, shift workers… the list goes on. For these workers, how is a week’s holiday, and how is a week’s pay, to be calculated?
There is a simple solution. 5.6 weeks of annual leave is equivalent to 12.07% of the remaining working weeks in a leave year.
Therefore for every hour worked, holiday accrues at a rate of 12.07% of an hour, paid at the same percentage of the hourly rate of pay. But, according to the Regulations, holiday pay is based on pay for normal working hours under the contract as it stands on the first day of each period of annual leave, or, for those without normal working hours under the contract, on average pay for the 12 weeks beforehand. And because paid holiday can be taken before it has accrued, or can be accrued under shifting work patterns before it is taken, calculating whether a client has received full entitlement to statutory paid holiday can be a mathematical as well as a legal conundrum.
However, Greenfield helps us to understand how to approach a situation where a worker has increased their weekly hours of work in the course of a leave year.
The case
It has already been established that where a worker moves in the other direction, from full to part time work, leave that has accrued during a period of full time work is not lost and remains an entitlement even now that the worker is working part time.(3)
Example: Jenny works 40 hours a week, eight hours per day for 26 weeks and accrues 2.8 weeks leave in that period. This equates to 14 days leave. She has taken four days leave and has 24 days still to take before the end of the leave year. She reduces her hours to 20 per week, or five hours per day. When it comes to taking her remaining 24 days holiday, it is unlawful for her employer to pay her the entire 24 days based on her new working pattern. She is entitled to 10 days based on an eight-hour day, the balance of the 14 days accrued in the first 26 weeks of the leave year, and the remaining 14 based on the five-hour day she works in the second 26 weeks of the leave year.
It has now been established that a similar approach must be taken where a worker moves from part to full time work.
The facts
G was employed under a contract of employment without set working hours. Her hours and days varied from week to week. Her leave year began on 15 June each year.
G left her employment on 28 May 2013, towards the end of the leave year that ran from 15 June 2012 to 14 June 2013.
During the final leave year of her employment G worked one day a week from June, but in August 2012 she began working an average of 41.4 hours per week on a shift pattern of 12 days on and two days off.
In July 2012, while working one day a week, G took taken seven days of paid leave.
In November 2012 G requested a further week of paid leave. The employer refused on the basis that when she took seven days’ leave in July she was working one day a week. Each of the seven days amounted to a week’s paid leave at that time, meaning that she had already taken more than her 5.6 weeks’ annual entitlement. G started ET proceedings. She argued that the Working Time Regulations 1998, read in conjunction with EU law, require a recalculation of entitlement to paid leave where there is an increase in working hours during a leave year. Having doubts as to the interpretation of EU law, the ET referred the case to the CJEU for a preliminary ruling.
The decision of the CJEU
The CJEU ruled in G’s favour. It first stated that the same calculation method must be used for remuneration in lieu of accrued leave paid on termination of employment as for entitlement to, and payment for, leave where it is being taken while employment continues. However it noted that the date on which the calculation is being carried out may have an effect on the manner in which the calculation is carried out.
To this end, it talked about cases where remuneration over a leave year might be made up of several ‘elements’. Here it is for a national court or tribunal to assess whether the methods of calculation used achieve the objective of Article 7(1) of Directive 2003/88, the Working Time Directive, that is, measures are taken to ensure that every worker is entitled to paid annual leave of at least four weeks. These measures require ‘normal’ remuneration to be maintained during the period of leave, and for pay in lieu on termination of employment to be calculated so that the worker is put in the same position they would have been in had they taken that leave during their employment.
This approach would be necessary where a worker’s remuneration was subject to variations over the course of a leave year in relation to the unit of working time to which it referred.
This leads to the conclusion that, in the event of an increase in the number of hours of work performed per week by a worker in the course of a leave year, while that does not require a retroactive recalculation of leave already accrued, and possibly taken, a new calculation must be performed for the new period, and only for that period, during which working time increased.
In G’s case, if she had continued to work for one day per week for the remainder of the leave year, she would have exhausted her leave in July. Because her hours increased, although the seven days she had taken represented more than her leave entitlement on the date when she took them, the increase in her working hours to an average of 41.4 per week required an increased entitlement to paid leave.
Example: Markus’ leave year runs from 1 January to 31 December each year. From 1 January 2015 to 31 June 2015 he works two days a week, and in May 2015 he takes 12 days paid leave. On the date when he takes the leave, this represents more than 5.6 weeks’ leave.
From 1 July 2015 Markus moves to full time employment, working five days per week. When he requests more paid leave in October, his employer refuses on the basis that he has already taken his full annual entitlement.
The employer is wrong. because Markus will have worked full time for 50% of the leave year, 50% of his annual leave entitlement, i.e. 2.8 weeks of it, should be calculated based on his new working pattern.
In theory then, 50% of his annual leave entitlement should be based on a working pattern of two days a week during the first half of 2015, meaning that up to 31 June 2015 he was entitled to 2.8 weeks at two days, or 5.6 days. He took 12 days off. Arguably that means he took 4.4 ‘too many’ days off in respect of leave that accrued in the first half of 2015. Does this mean that the employer can make him ‘pay back’ leave already taken by deducting 4.4 days from the 14 days he accrues in the second half of the year, giving him only 9.6 rather than 14 days’ entitlement up to 31 December? You might think so, and an employer might think so, but according to the CJEU, it cannot. The recalculation cannot be applied retrospectively across the whole year but must be based on calculating each period separately on the position at the time. This seems counter-intuitive and, when the case returns to the UK employment tribunal for it to get to grips with the actual calculation, they may reach a different conclusion.
Learning point
How much you are paid for a week’s leave, or a day’s leave, may vary in the course of a year. But where you are translating leave entitlement from days to weeks, or from weeks to days, you must, where appropriate, recognise that the pro-rata calculation is based on the current working pattern.
Matt Bradbury is an employment expert at Citizens Advice and employment subject editor on the Adviser editorial board.
Endnotes
(1) CJEU C219/14
(2) Directive 2003/88/EC
(3) Zentralbetriebsrat der Landeskrankenhauser Tirols, C-486/08, EU:C:2010:215, para 32, and order in Brandes, C-415/12, EU:C:2013:398, para 30
