Employment Judge LewisMr A Oyegoke for claimantDate 19 February 2025
JUDGMENT
[1]The complaint in respect of holiday pay is well-founded. The respondent made an unauthorised deduction from the claimant's wages by failing to pay the claimant for holidays accrued but not taken on the date the claimant’s employment ended.[2]The respondent shall pay the claimant £8844.34. The claimant is responsible for paying any tax or National Insurance.
REASONS
[1]By a claim presented on 15 August 2020 following a period of early conciliation from 9 July 2020 to 4 August 2020 the claimant brought claims of unfair dismissal, arrears of pay and holiday pay. The claim for unfair dismissal was dismissed following withdrawal by the claimant at a hearing on 10 June 2021.[2]In her claim form the claimant states that she worked for the Respondent as a care assistant from 24 February 2010 on PAYE until 10 October 2016 and then switched to self-employment status to 3 June 2020. She claimed that she was paid less than the national minimum wage, albeit stating that she was paid £9.00 gross per hour for a normal shift and £13.50 per hour on bank holidays.
The issues
[3]The unauthorised deduction from wages was pleaded as follows:(1) The wages for the work the Claimant did from 18 May 2020 to 3 June 2020 was not paid and the computation at £9.00 per hour does not take into account annual increment and holiday pay as well as employer’s national insurance contribution therefore brought the wages below national minimum wage…(2) The wages the Claimant was paid from 11 October 2016 to 18 May 2020 did not include annual increment and her wages were below national minimum wage for each year when holiday pay and employer’s national insurance contribution are taken into account.(3) The Claimant was paid below national minimum wage from 24 February 2010 to 11 October 2016 as employee which was unlawful. That the holiday pay did not take guaranteed overtime and other parameters into account …[4]The Respondent’s case was that the Claimant chose to move to a selfemployed position on 20 September 2016 and incorporated her own care company Yemmy B Health Care Ltd, however it accepted that there was an employment relationship with the Claimant throughout. It denied that the Claimant was owed monies as alleged and sought further particulars of that part of the claim.[5]The Claimant provide a schedule of loss dated 18 February 2021 setting out her calculation of her wages claims (totalling £51,871.09) and a revised schedule on 3 June 2021 giving credit for a payment of £6,310.90 made by the Respondent on 2 March 2021, after the claim had been brought, with a new total of £40,678.05.[6]The Claimant had complained that when she became self-employed she was paid the same hourly rate as when she had been an employee but the Respondent no longer paid her employer’s national insurance contribution or pension contribution. Her claim that she was paid less than the minimum wage is based on her calculation of her hourly rate of pay after having deducted an amount for rolled up holiday pay (although in fact her holiday pay had not previously been rolled up) and after tax and national insurance. Unlawful deduction from wages/holiday pay claims[7]At the hearing before me the Claimant accepted that the national minimum wage is the hourly rate before deductions i.e. the gross rather than net pay. She accepted that her pay did not include rolled up holiday pay. The Claimant also accepted she has been paid her two weeks’ pay and confirmed the only remaining claim before me is for her holiday pay.[8]The Respondent told me that it had tried to resolve the outstanding claims but there remained some confusion as to what the Claimant says she is owed. The Respondent’s position at this hearing is that there is no longer any monies outstanding, it remedied the outstanding holiday pay amounts as soon as it established (on the basis of legal advice) that the Claimant was entitled to holiday pay and had made a payment in respect of any wages it accepted had been owed which included holiday pay.[9]The Claimant was asked to clarify how much of her holiday pay she says is still owing. She confirmed that she is claiming £14,917.04 for the period 3 October 2016 to 3 June 2020 and £9,365.79 for the period 2010 to 2016.[10]The Respondent’s calculations were set out at p 638-639 of the bundle. These cover the period 20 September 2016 to 7 June 2020 during which the Claimant was classed as self-employed and include the sum of £1,943.38 in respect of wages owed for the period week ending 26 May 2020 to week ending 7 June 2020. The total gross holiday pay paid in respect of that period being £7,474.35. The wages and holiday payment was made in the net sum of £6,310.90 into the Claimant ‘s bank on 2 June 2021.[11]The Claimant confirmed that the disagreement between the parties is whether she should be paid her holiday pay based on the flat rate for the calls she completed or based on the actual minutes she worked.
Evidence
[12]The Claimant gave evidence, the Respondent called Patience Ibeji and Obii Ibeji. I was provided with an electronic bundle described as a joint bundle, plus additional wages slips and P60s. I made the following findings of fact immediate following the hearing on 10 June 2021.
Findings of fact
[13]The Claimant was paid on an employed (PAYE) basis by the Respondent from 24 February 2010 to 10 October 2016. [see for example the pay slip at page 171]. She was paid her wages after deductions of tax and national insurance, this continued until September 2016 when the Claimant became self-employed and responsible for her own tax and national insurance.[14]It was not disputed that the Claimant was entitled to 28 days leave per year. The Claimant’s leave year was the same as the tax year.[15]The Claimant became self-employed from 10 October 2016 having incorporated her own care company Yemmy B Health Care Ltd. The Claimant says this change was at the invitation of the Respondent but in any event she agreed to the change and set up her own company [incorporated on 14 September 2016].[16]The Respondent’s record of the holidays taken by the Claimant is at p 637. I find that during the period up to September 2016 the Claimant took regular paid holidays. I find that the Claimant was aware that she had to apply for and take holiday, and that she was not prevented from taking holidays during the period in which she was classed as an employee. Normal pay[17]As a domiciliary care assistant the Claimant was required to visit the Respondent’s clients in their homes. Each visit (or call) was booked as a half hour, threequarters of an hour or one hour call. The care assistants were required to clock in and out of each call. The care assistants were paid for the full duration of the booked visit even if they finished the call before the end of that time period, having completed the tasks as allocated.[18]Ms Ibejio and Mr Ibeji both accepted in evidence that the carers were paid at least 30 minutes minimum for each visit, however, holiday pay was paid on the actual hours (or minutes) logged. The relevant wage sheets were in the bundle, for example at p 602 the wage records show a date, time and description of the call or visit. The wage sheets show that the Claimant was paid the same flat rate of £4.40 for a half hour call regardless of whether she spent 25 minutes or 16 minutes on the call. Examples of this are found in the wage records which show a 1 hour call on 20/4/20 (for shopping) which was paid at £8.80, a 45 minute call on 22/4/20 paid at £6.60. [p610] and a 40 minute call on 23/4/20 also paid at £6.60 [p611].[19]The rate of pay increased on 4 April 2020 to £4.50 per half hour [p614], £6.75 for a 45-minute call [see for example p615] and £9.00 for one hour [16/5/20 at p617].[20]The Claimant’s holiday pay was calculated by Mr Ibeji based on the record of hours worked. He went back through the wage sheets and added up all the minutes worked to find the hours worked in each year, he divided the amount by 52 week and then multiplied it by 5.6 x the hourly rate. Holidays in period 2010 to 2016[21]I do not find that the Claimant was prevented from taking her leave during the period from 2010 to 2016. I prefer the Respondent’s evidence on this point, which is consistent with various pay slips showing payments were made for holiday pay [for example at p 174 – 2/9/2016, p 186 - 18/3/16, p191 -24/12/2015]. Holidays in period 2016 to 2020[22]The Claimant took unpaid leave during the period in which she was classed as self-employed by informing the Respondent that she was unavailable for work. The dates on which she took leave are set out at p 620 of the joint bundle. The most recent dates on which she took unpaid leave were the 3 – 18 February 2020.[23]The Respondent accepts that the Claimant was a worker during the period in which she was classed as self-employed i.e. from 10 October 2016 to 5 June 2020. The Respondent also accepted that from October 2016 when the Claimant became self-employed, she did not have the opportunity to take paid holiday.[24]On 2 June 2021, after this claim had been commenced, the Claimant was paid £1,943.38 in respect of wages owed for the period week ending 26 May 2020 to week ending 7 June 2020 which included her last two weeks’ pay. The payment was made net of tax and national insurance.[25]The payment made on 2 June 2021 also included a sum in respect of the claimant’s holiday pay owed for the period October 2016 to 5 June 2020 based on the Respondent’s calculations. The total gross holiday pay calculated being £7,474.35. The wages and holiday payment was made in the net sum of £6,310.90 into the Claimant ‘s bank on 2 June 2021 [640].[26]Mr Ibeji’s calculations for the outstanding holiday pay for the period 2016 to 2020 were based on the actual minutes and hours worked by the Claimant. Submissions[27]The Respondent submitted that the claims for payment in the period 2010 to 2016 were out of time and relied on Bear Scotland, it submits that there were payments made in the relevant time frame and gaps of more than 3 months between the alleged unlawful deductions. The Respondent also relied on the Deduction from Wages (Limitation) Regulations 2014.[28]The Respondent denied that the Claimant is owed any monies from the period 2010 to 2016 when she was paid PAYE. Its position is that during that period the Claimant was aware that she had to apply for and take holiday, that she was not prevented from taking holidays and took regular paid holidays during this time; it submits that any outstanding days fall under the “use it or lose it” principal and in any event are out of time.[29]In respect of the claim for the period 2016 to 2020 the Respondent initially submitted that the Claimant was able to take holidays, albeit unpaid, and submitted that her periods of leave – when she was unavailable for work operated on the time limit and against the Claimant’s contention that there was a series of deductions.[30]At the hearing before me the Respondent accepted that from the date in 2016 when the Claimant became self-employed she did not have the opportunity to take paid holiday.[31]In summary, the Claimant maintained her claim to holiday pay for the period 2010 to 2016 and 2016 to 2020. She disputed the Respondent’s computation of hours used to calculate her holiday pay. The Claimant says that the holiday pay rate ought to have been calculated on the basis of the length of the booked call not the actual time spent. Stay[32]Following the parties’ respective legal submissions the claims for holiday pay were stayed pending the appeals in the cases of Agnew and others v Police Service of Northern Ireland and another due to be heard in the Supreme Court. The parties were invited to send in written submissions and the date for doing so was extended to September 2021.[33]In the meantime the case of Agnew was taken out of the Supreme Court’s list, it was re-listed and the hearing took place on 14 and 15 December 2022 and the judgment was delivered on 4 October 2023 (neutral citation [2023] UKSC 33). The Court of Appeal handed down judgment in Pimlico Plumbers v Smith (No 2) on 1 February 2022 and that decision has been reported, including at [2022] IRLR 347.[34]On 12 February 2025 I lifted the stay and considered the effect of the above cases on the facts found in July 2021 and in light of the parties’ submissions. Relevant law Holiday accrued but unpaid on termination
Relevant law
[35]Employees are entitled to be paid in lieu of accrued but untaken holiday on termination of employment, however the employment came to an end, as an unauthorized deduction and/or Working Time Regulations (WTR) claim, based on rights in the WTR.[36]The general rule under the WTR is that the worker is only entitled to be paid in lieu of holiday accrued but untaken in the final leave year: reg 13(9)(a). Exceptions, developed in case law, allowing the 4 weeks’ WTR leave (but not the additional 1.6 weeks’ leave) to be carried over in situations where the worker was unable to take leave: for instance, when prevented from doing so by denying the worker has any entitlement to leave as in King v Sash Window Workshop [2018] IRLR 142 EC.[37]In Pimlico Plumbers Ltd v Smith (No 2) [2022] EWCA Civ 70, [2022] IRLR 347 the Court of Appeal disagreed with the EAT (the EAT case citation is [2021] IRLR 654) in Smith v Pimlico Plumbers Ltd on the question whether a worker could carry over a right to payment for annual leave in circumstances where the worker has taken unpaid annual leave. The Court of Appeal held that a worker could carry over entitlement to paid reg 13 leave where leave was taken but it was unpaid.[38]The Court of Appeal allowed an appeal and held that the right to “paid annual leave” is a single, composite right. King is not limited to circumstances where the employee has not taken annual leave, but applies equally where annual leave has been taken but is unpaid because the employer refused to remunerate it (usually because the claimant is mistakenly not regarded as a “worker”, as has been the case with some gig economy staff). The result is that such workers can carry over all untaken portion of four weeks' leave per year and unpaid leave taken and obtain full compensation for both on termination. Lady Justice Simler, giving the only reasoned judgment, summarised the Court of Appeal's decision as follows: “If a worker takes unpaid leave when the employer disputes the right and refuses to pay for the leave, the worker is not exercising the right. Although domestic legislation can provide for the loss of the right at the end of each leave year, to lose it, the worker must actually have had the opportunity to exercise the right conferred by the WTD. A worker can only lose the right to take leave at the end of the leave year (in a case where the right is disputed and the employer refuses to remunerate it) when the employer can meet the burden of showing it specifically and transparently gave the worker the opportunity to take paid annual leave, encouraged the worker to take paid annual leave and informed the worker that the right would be lost at the end of the leave year. If the employer cannot meet that burden, the right does not lapse but carries over and accumulates until termination of the contract, at which point the worker is entitled to a payment in respect of the untaken leave.” In this case, “a claim to payment for all the leave which Mr Smith took but for which he was not paid in breach of his right to paid annual leave was inherent in Mr Smith's pleaded case. It follows that the tribunals below erred in law in deciding otherwise. Moreover, this claim was in time because he was denied the opportunity to exercise the right to paid annual leave throughout his engagement with the respondent. The respondent could not discharge the relevant burden. The right did not therefore lapse but carried over and accumulated until termination of the contract, at which point Mr Smith was and remains entitled to a payment in respect of the unpaid leave.” Although obiter, Lady Justice Simler also expressed her “strong provisional view” that, contrary to the decision of the EAT in Bear Scotland Ltd v Fulton, a “series of deductions” within the meaning of s.23(3)(a) of the Employment Rights Act is not broken by a gap of three months or more. The Court of Appeal's judgment was revised after first being issued to add an appendix which redrafts relevant parts of the Working Time Regulations to take account of the effect of King.[39]The Supreme Court in Chief Constable of the Police Service of Northen Ireland v Agnew [2023] UKSC 33 concluded that:(1) Whether two or more deductions constitute a series is a question of fact.(2) All relevant circumstances must be taken into account in deciding if the deductions constitute a series, including: 1. Their similarities and differences; 2. Their frequency 3. Their size and impact; 4. How they came to be made and applied; and 5. What links them together.(3) A series of deductions does not come to an end, as a matter of law, simply because it is interrupted by a correct and lawful payment. It depends on the reason for the deductions and whether and, if so, how the lawful payment relates to that reason.[40]Section.23(4A) of the Employment Rights Act 1996 introduced a limit on backdating the series of deductions to 2 years before presentation of the claim for claims presented on or after 1 July 2015. For claims under the Working Time Regulations (the WTR), this is 3 months beginning with the date the right to take annual leave was not permitted or the date payment should have been made.[41]In each case, the normal time limit may be extended to take account of the early conciliation provisions. Time may be extended if it was not reasonably practicable to present the claim in time and it was presented within a reasonable time thereafter. Holiday accrued but unpaid on termination[42]The payment due under reg 14(2) WTR shall be ‘such sum as may be provided for the purposes of this regulation in a relevant agreement’ (Reg 14(3)(a)) or, if no provisions of a relevant agreement apply, a sum calculated by way of the formula set out in Reg 14(3)(b).[43]The WTR adopt the calculation of a week’s pay in sections 221-224 ERA with a few modifications, including that the statutory maximum on a week’s pay does not apply for these purposes. It is a question of fact for the tribunal as to what constitutes normal pay and has it been paid.[44]The rate of payment for paid leave is a week’s pay per week of leave, or pro rata for periods shorter than a week, calculated in accordance with ERA 1996 Part XIV (WTR 198 Reg 16).[45]Lady Justice Simler in Smith v Pimlico Plumbers Ltd (No 2) found that leave can be carried over where the worker was not able to take leave because they were denied the right, the right to payment only crystallises on termination and they therefore are not caught by the two year limitation period under the Deduction from Wages (Limitation) Regulations 2014.[46]In Chief Constable of the Police Service of Northern Ireland and another v Agnew and others [2023] UKSC 33, the Supreme Court confirmed that the case law of the CJEU in relation to article 7 of the Working Time Directive (WTD) had evolved to require workers be paid their “normal pay” during their WTR leave.[47]The Appellants in that appeal accepted that the calculation and payment of holiday pay as basic pay instead of normal pay amounted to making an unlawful deduction from wages and a failure to pay holiday pay in full. The appeal to the Supreme Court concerned the extent of the remedy available to Mr Agnew and the other Respondents, how far back the claims could reach and also the correct method of calculating unlawful deductions and underpayments, and the proper mode of calculating “normal pay”. Conclusions 2010 to 2016
Conclusions
[48]I do not find that the Claimant was prevented from taking her leave during the period from 2010 to 2016. I am satisfied that the Claimant took and was paid for periods of annual leave during that period, the last of which was on 2 September 2016 [p.174].[49]I find that the change in the employment relationship from employee to selfemployed worker means that any claim for unauthorised deductions relating to the to the period of employment ought to have been brought within 3 months of the end of the employment relationship. I find that there was no impediment preventing the Claimant from bringing a claim at the end of her PAYE employment and it was reasonably practicable for her to bring any such claim in time, as she has done in respect of the subsequent claim. I am satisfied that there is break between the claims for this period and the period 2016 to 2020 and any claims for unauthorised deductions in respect of holiday pay in the earlier period are out of time. 2016- 2020 holiday pay calculations[50]The Claimant’s calculation is based on the total amount of hours (at the flat rate) of calls for the entire period from 3 October 2016 to 3 June 2020. The Claimant’s criticism of the Respondent was(i) that there should not have been deductions made for tax and national insurance [withdrawn]:(ii) the calculation should have been on the flat rate for the call and not the actual hours or minutes worked as their agreement was that wages would be paid at the flat rate.[51]I am satisfied that the Claimant’s submission that the Respondent ought to have calculated her holiday pay based on the flat rate for each call rather than by reference to the actual minutes spent on each call or visit is correct in light of the authorities set out above. The Claimant’s holiday pay ought to have reflected the normal pay she would have received had she been at work. The claim of unauthorised deduction from wages in respect of holiday pay for the period 2016 to 2020 is well founded.[52]The Claimant’s schedule of loss [641] sets out under the heading “Wages Claimed” at “2. Holiday pay” her calculation of the holiday pay owed for the relevant period, 2016 to June 2020 as £16,318.69. She reached this calculation by applying 12.07% to her total pay received for that period.[53]I am satisfied that this calculation is the closest approximation to the correct amount that has been put before me in evidence. Doing the best that I can on the evidence before me I find that the total holiday pay which ought to have been paid in the period 2016 to 2020 based on the Claimant’s gross pay is £16,318.69; the Respondent has paid the Claimant the sum of £7,474.35 in respect of holiday pay in the same period. The balance outstanding and owed to the Claimant is therefore £8844.34 gross.[54]I therefore make an order for the respondent to pay the sum of £8844.34 in respect of unauthorised deductions from pay for the amount of outstanding holiday pay owed. The amount has been calculated on a gross basis since the Claimant will be liable to pay the relevant tax. Apology[55]The Employment Judge sincerely apologises for the delay in lifting the stay and sending out reserved judgment and written reasons in this case. This is in large part due to the lack of judicial time and allocation of scarce judicial resources to other cases.