Mr G Condon and Mr G Griffin v Retail Marketing Group: 3310426/2023 and Others

EMPLOYMENT TRIBUNALS

Case No 3310426/2023, 3310427/2023, 3310715/2023, 3310716/2023

Between

Mr G Condon and Mr G GriffinClaimant

Retail Marketing GroupRespondent

Before

Employment Judge Hunt

In person for claimant

Ms Y. Barlay (instructed by representative) for respondent

Date 20 November 2024

JUDGMENT

[1]The Claimants’ application for strike out of the Respondent’s response to each claim is dismissed.

[1]The respondent has made unauthorised deductions from the first claimant’s wages and the respondent is ordered to pay the first claimant the sum of £133.28 gross (subject to tax and National Insurance).

[2]The first claimant’s claims for refusing to permit him to exercise his right to paid annual leave and for failing to pay him in respect of leave are dismissed. The second claimant

[3]The second claimant’s claims for refusing to permit him to exercise his right to paid annual leave and for failing to pay him in respect of leave are dismissed.

REASONS

Introduction (from the Case Summary of Employment Judge Hunt)

[1]The claimants were employed by the respondent selling LG branded goods. The first claimant started his job on 16 October 2018 and was dismissed on the basis of redundancy on 2 June 2023. The second claimant was employed from 20 August 2018 to 6 March 2024 (which postdates the issue of his claim). Up until 31 March 2023 both claimants received holiday pay “rolled up” with their normal monthly salary. It appears that from that date onwards the respondent changed its policy to stop “rolling up” holiday pay with normal pay.

[2]Early conciliation started on 19 June 2023 for both claimants and ended on 31 July 2023 for both claimants. The first claim form was presented on 19 August 2023 (with a separate claim being registered for each claimant). A second claim form was presented, apparently unnecessarily, on 30 August 2023. On the information available at the preliminary hearing, the tribunal was satisfied that it had jurisdiction to hear the claims from both claimants, albeit the precise nature of each claim may be different due to the differing employment status of each claimant. The first claims were brought within the relevant period of three months (once extended by Acas conciliation) from 31 March 2023 (date on which the last payment of “rolled up” holiday pay was made, demonstrating that the respondent’s policy, at least until that point, was not to make any additional payments when annual leave was in fact taken.). The complaints (from the Case Summary of Employment Judge Hunt)

[3]The claimants raised two complaints.

[4]Firstly, that the respondent failed to permit the claimants to exercise their rights to paid annual leave and/or failed to pay them for leave that was taken. It appears that the claimants are relying on the principles laid down by the Court of Appeal in Smith v Pimlico Plumbers Ltd

[2022] EWCA Civ 70

[5]The respondent’s position is that it addressed annual leave through the practice of “rolling up” holiday pay with normal pay and allowing the claimants to take leave when requested.

[6]The claimants submit that “rolling up” was an unlawful practice, which had not been explained to them. They submit it amounted to reducing their agreed daily rates of pay rather than reflecting a genuine agreement between the parties that annual leave would be accounted for in this way.

[7]Secondly, that the respondent failed to pay what was properly due to each claimant on account of wages. These are stand-alone claims regarding alleged errors in the calculation of the claimants’ pay irrespective of the first claim in respect of holiday pay. The respondent denies this.

[8]The claimants should be mindful that the tribunal may consider their situations differently. The first claimant – Mr Condon – had been dismissed by the time the claim was presented, allowing him to bring a claim for breach of contract that would potentially entitle him to recovery of all unpaid wages dating back to the start of his employment. It would also entitle him to seek payment on account of accrued but untaken leave in accordance with regulation 14 of the Working Time Regulations 1998 (the “WTR”). The second claimant – Mr Griffin – was still employed at the time pf presenting his claim, so would likely be limited to recovering any unpaid wages in accordance with part 2 of the Employment Rights Act 1996, for which recovery is limited to deductions made within the period of two years ending with the date of presentation of the claim – 19 August 2023. Additionally, for recovery of the unpaid wages to be possible for that entire period, the alleged deductions must form part of a “series of deductions”. It is also unlikely he would be able to rely on regulation 14 of the WTR (although he could seek to rely on other parts of the WTR, notably regulation 30).

The issues

[9]The issues were set out in the case management summary of Employment Judge Hunt following the preliminary hearing heard on 23 May 2024. They are as follows:- “The issues the Tribunal will decide are set out below. 1. What were the terms of the employment agreement between each Claimant and the Respondent with respect to daily rate of pay and annual leave:a. was it agreed that the daily rate of pay would be inclusive of a payment on account of annual leave?

b. if so, was this a clear and transparent arrangement and did the sums paid on account of leave reflect an appropriate rate of pay?

c. if not, how much paid leave was each Claimant entitled to, and what would be the appropriate rate of pay?

d. was each Claimant’s agreement with the Respondent the same in all these respects?” 2. [Not set out here as during the course of the hearing the respondent conceded the first claimant’s unauthorised deduction of wages claim in full].

The law

[10]Regulation 16 of the Working Time Regulations 1998 provides as follows:- Payment in respect of periods of leave 16.—(1) A worker is entitled to be paid in respect of any period of annual leave to which he is entitled under regulations 13, 13A and 15B, at the rate of a week’s pay in respect of each week of leave. … (5) Any contractual remuneration paid to a worker in respect of a period of leave goes towards discharging any liability of the employer to make payments under this regulation in respect of that period; and, conversely, any payment of remuneration under this regulation in respect of a period goes towards discharging any liability of the employer to pay contractual remuneration in respect of that period.”

[11]Rolled up holiday pay arrangements cannot be lawful in any circumstances – Robinson-Steele v RD Retail Services Ltd and two other cases

[2006] ICR 932

, ECJ.

[12]As per the IDS Employment Law Handbook “Working Time”: At 4.142 “Some hope for employers reliant on rolled up holiday pay practices appeared to come from the fact that the ECJ went on to state that Article 7 did not preclude employers setting off genuine holiday payments paid under the rolled up method against a worker’s entitlement to payment when he or she actually takes leave. However, such sums had to have been paid “transparently and comprehensibly, as holiday pay”. The burden is on the employer to prove such transparency and comprehensibility. If the ECJ had taken the same approach as the Court of Session in MPB Structures Ltd v Munro

[2004] ICR 430

, Ct Sess, such payments would be completely disregarded. However, the effect of the ECHJ’s ruling was that employers who had already made genuine holiday payments, “transparently and comprehensibly”, under a rolled-up arrangement, did not have to pay workers holiday pay twice. This involved the employer ensuring that the percentage of holiday pay allocated was clearly identified in the contract and on the pay slip, and that it was a true addition to the contractual rate of pay. In such circumstances, workers would have little incentive to bring claims, as they would not receive any more money as a result – at best, they would receive their holiday pay sooner rather than later. It should be noted that the ECJ’s concession in respect of offsetting sums already paid seemed to be short term and transitional, aimed at those employers who had already made rolled up holiday payments prior to its judgment. The ECJ made it quite clear that “Member states are required to take the measures appropriate to ensure that practices incompatible with Article 7 of the Directive are not continued”.

[13]However, no amendment to the Regulations has been made, although a new Regulation 16A in respect of irregular hours and part year workers has been inserted with effect from 1 January 2024 with a statutory rolled up holiday pay rate of 12.07%.

[14]And at 4.144: “In Lyddon v Engelfield Brickwork Ltd

[2008] IRLR 198

, EAT, the EAT decided that payments forming part of a worker’s “rolled up” pay packet were made “transparently and comprehensibly” in respect of annual leave so that they could be set off against the worker’s entitlement to holiday pay.”

[15]Further, at 4.145 “The EAT examined the guidance from domestic case law. This was set out by the EAT in Marshall’s Clay Products Ltd v Caulfield and others and other cases

[2004] ICR 436

, EAT, and refined by another division of the EAT in the subsequent case of Smith v AJ Morrisroes and Sons Ltd and other cases

[2005] ICR 596

, EAT. In Smith, the EAT stated that, for an employer to be given credit for rolled up holiday payments, “There must be mutual agreement for genuine payment of holidays representing a true addition to the contractual rate of pay for time worked”. This would be best evidenced, the EAT said, by:• The provision for rolled up holiday pay being clearly incorporated into the contract of employment.

• The amount allocated to holiday pay being identified in the contract and preferably also in the payslip, and

• Records being kept of holidays taken and reasonably practicable steps being taken to ensure that workers take their holidays.” This represents best practice and every element need not necessarily be present.

[16]Smith v Pimlico Plumbers Ltd

[2022] EWCA Civ 70

does not assist on the question of setting off rolled up holiday pay payments.

The evidence

[17]I had witness statements and heard evidence from:17.1 Ms Sara Malaj, HR for the respondents since December 2022.

17.2 The first claimant.

17.3 The second claimant.

[18]I had a hearing bundle running to 447 pages.

The facts

[19]The respondent works on a field market agency basis. Employees are placed in a retail setting to sell specific products. The employees were titled “Sales Ambassadors”.

[20]Both claimants have the forename Gareth. In the bundle there is a text from Frances Albert to ‘Gareth’ dated 19 July 2018 which the index cross references to the first claimant Gary Condon. However, it must relate to the second claimant Gary Griffin due to the dates. It states: “Hi Gareth Thank you for your interest in working for RMG/LG. …• Upon successful completion of the recruitment day/interview you will be invited to attend a 3 day training course on the 21st, 22nd 23rd August…

• …. £75 per day (which includes holiday pay) [my emphasis] plus uncapped bonus.”

[21]The second claimant was employed on 20 August 2018 as a Sales Ambassador. He worked on a full time basis and was placed in the John Lewis and Partners shop, High Wycombe. He was selling home entertainment products. He states in his witness statement:- “I started my role on the basis of communications that indicated that I would be paid £75.00 per day plus commission. There were no further details indicating I would be paid a different sum for my base pay. I received no employment contract prior to starting my role, something I assumed would shortly follow. I reject the second claimant’s assertion that communications indicated that he would be paid £75 per day as base pay. The text inviting him to the recruitment day made clear that the day rate included holiday pay. Upon reviewing my first wages slip, dated 31/8/2018, I was surprised to learn that my pay had been divided into BASIC and HOLIDAY… It also showed the pay was split into two sums of £66.90 and £8.09 holiday pay per day, amounting to £74.99 per day.”

[22]The second claimant told me that in September 2018 he raised it with his line manager, Mr Lee Weller, who told him that that was how those in the sales field were paid. He asked for a contract of employment which, despite Mr Weller agreeing to provide one, never materialised. The second claimant states in his witness statement:- “I continued to work but explained that I wanted to dispute this and thus communicated working under protest.”

[23]In September 2018, the first claimant initially applied for a position selling LG TVs in Oxford. An email dated 20 September 2018 from Ms Frances Albert to the first claimant thanked him for his interest in the Oxford job and stated:- “● Start date in store the first weekend after your training, working every Saturday, Sunday and all bank holidays, £75 per day (which includes holiday pay) plus uncapped bonus.” However, the claimant did not get the job.

[24]On 29 September 2018 the first claimant applied for a role at John Lewis in High Wycombe. The advert states:- “Pay: £75 per day working every Saturday, Sunday and all bank holidays.” and “Salary: £75/day”

[25]The first claimant was successful, had his induction training on 16 October 2018 and started at John Lewis on 20 October 2018. The first claimant accepted that his first payslip indicated he was being paid at a rate of £66.90 per day and holiday pay of £8.09. The first claimant says in his witness statement that he contacted Retail Marketing Group and spoke to Frances Albert who informed him that they did not pay the full day rate for training days.

[26]The first claimant states he did not raise the issue straight away as he wanted to sell LG televisions in Oxford as it had a very good commission structure. Having done the induction training he was waiting to see if an opportunity would arise. The Oxford opportunity did arise in February 2019 but he could not take it as the role had changed to full time and not just weekends.

[27]The second claimant says that in early 2019 the first claimant assured him that the first claimant was raising the issue with Retail Marketing Group’s HR Team. The first claimant states that on 29 July 2019 he contacted his line manager, Jason Turner.

[28]On 29 July 2019, the first claimant sent an email to Jason Turner, his manager. He enquired how much holiday he got stating he began in October last year and that so far he had not taken any holiday. He refers to not having had a contract of employment and went on:- “Sadly, looking through my payslips they include an element of holiday pay in my payslip? However, the role I applied for clearly states £75 per day and no mention of holiday pay being included. To date all my payslips from 30/11/2019 to now have a line stating; holidays taken 0 remaining 0? This appears on all my payslips to date. Surely this cannot be correct everyone is entitled to holiday and paid holiday. Incidentally, every one of the payslips I have received to date have all been incorrect. I am paid at £75 per day but for some reasons my pay appears as a basic of £66.90 and a holiday pay of £8.095 per day working out at £74.995 per day not as advertised.”

[29]On 2 August 2019, Jason Turner replied:- “With regard to holiday allowance, as all SAs are employed on a contract basis, there is no specific “Holiday Allowance” - I’ve always worked on a simple system that as long as I receive four weeks’ notice by email and the amount of annual holiday doesn’t leave the business exposed on a regular basis then I am happy to grant holiday. In terms of how the pay works, as it is a legal requirement to offer paid holiday, a percentage of your daily rate is always set aside as holiday pay. The simple workings out are below: Day rate is shown on the payslip, however split to show holiday pay (as we must by law now) £66.90 – day rate plus 12.1% holiday pay = £75.00 per day. SAs are not paid “holiday pay” if they are off work, as they are paid throughout the month/quarter/year as part of their per day pay. … In terms of a contract of employment, I don’t understand how this can be, normally HR would be all over me if they hadn’t received it within a couple of weeks of the start date. It would have been posted to you very early in your time with us, you may have even signed it and taken it in your induction. Either way I have chased this up with HR to send you a copy. In terms of last weekend off as holiday – I have done this for you.”

[30]On 21 August 2019, the first claimant replied to Jason Turner. This includes:- “Clearly, I have been given one termed contract which started 20 October 2018 ended 13 January 2019 and have been given another fixed term contract which started on 13 January 2019 and ends 31 December 2019.”

[31]I have been provided with the contract starting on 20 October 2018 and ending on 13 January 2019 in the bundle. I have not been provided with the contract of employment running from 13 January 2019 until 31 December 2019. However, the first claimant confirmed that it was in the same terms as the first contract. The first claimant was therefore aware of the contents of his contract of employment in August 2019.

[32]The first contract of employment was dated 19 October 2018. It states:- “Remuneration and benefits You will be paid a “fair piece rate” of £66.90 per day plus £8.09 per day holiday pay… Holiday The company’s holiday year runs from January to December. You are entitled to the equivalent of 28 days holiday during each holiday year (including all bank and public holidays), calculated on a pro rata basis depending on the number of hours/days that you actually work. Your holiday entitlement is therefore equivalent to 12.07% of the hours/days that you actually work in each holiday year. Unless you choose to use your holiday entitlement and notify the company of this, you are entitled to 12.1% paid holiday. Alternatively, you may if you wish, take your holiday allocation in accordance with the provisions of this clause in which case you will not receive the additional 12.1% payment but would be entitled to be paid in relation to the holiday taken.”

[33]There is a letter in the bundle to the first claimant dated 13/01/18 [should be 19] which states:- “I am excited to confirm your extension on your current contract for LGHA, the extension will be effective from 13 January 2019 – 31 December 2019. All other terms and conditions will remain the same.” The first claimant’s 21/8/2019 email states the first claimant only got this with the contract of employment in August 2019.

[34]On 5 September 2019, Ms Lizz Dimitriou, HR Manager, emailed the first claimant as follows:- “Regarding the rolled up holiday piece, it is stated in your contract of employment and also there is also a line that specifies that:- “Unless you choose to use your holiday entitlement and notify the company of this, you are entitled to 12.1% paid holiday. Alternatively, you may, if you wish, take your holiday allocation in accordance with the provisions of this clause in which case you will not receive the additional 12.1% payment that would be entitled to be paid in relation to the holiday taken. This gives you the option to choose between this being paid or to take your holiday allocation in accordance with the provisions of this clause in which case you will not receive the 12.1% payment but would be entitled to be paid in relation to holiday taken. If you would like to proceed with this route moving forward so we can support you with this but please note this does mean your daily rate would be the £66.90 which is standard for this role not including holiday pay.”

[35]The first claimant did not respond to the option of being paid holiday pay for holiday taken, presumably because his daily rate would drop from £75 to £66.90.

[36]The first claimant escalated his concerns to the managing director which prompted a complaint which was investigated on 19 October 2019. On 22 October 2019 the claimant was emailed by Lizz Dimitriou pointing out that he could raise a grievance. The first claimant states that he did not take any further action as he lacked two years continuous employment and felt he should wait until he had before raising the issue again.

[37]On 5 April 2022, the daily rate was increased from £75 to £80 per day but still on a rolled up basis, namely £71.36 basic with the balance being holiday pay.

[38]On 15 November 2022, some three years later, the first claimant raised the issue again, quoting extensively from a government website.

[39]After chasing for replies, on 13 December Ms Sara Malaj, a new HR Manager, replied and tried to schedule a call with the first claimant. For whatever reason, communication was not established between the first claimant and Ms Malaj

[40]In an email dated 19 December 2022, Ms Malaj calculated that for the last two years the first claimant had been due holiday pay of £1,211.71 and had actually been paid £1,331.32, giving a credit as far as the first claimant was concerned of £119.61.

[41]Sara Malaj gave evidence that, based on the past 2 years, a comparison of the total holiday pay element of the rolled up payment with holiday pay due on a conventional basis established that both claimants had received more under the rolled up model. I accept that evidence.

[42]On 19 December 2022 the first claimant replied, reiterating that his daily rate was £75 and that he would not have accepted the job if rolled up holiday pay had been mentioned. His email quotes legal advice from the government website which includes:- “Rather confusingly, however, in the 2006 case mentioned above, the European Court of Justice also said that sums already paid to a worker under a rolled-up holiday pay scheme could legally set off against any claim made by the employee for unpaid holiday pay, provided that there was a consensual agreement identifying the sums properly attributable to periods of holiday.”

[43]On 30 March 2023 employees were informed that the basic pay would be increased from £71.36 to £80 per day and that they would receive a paid entitlement to 5.6 weeks holiday leave per year. The employees were issued with new contracts of employment. Clearly Ms Malaj, in conjunction with a new managing director, had decided to depart from the rolled up model and adopt a conventional, and indeed lawful, approach to holiday pay.

[44]I had no evidence as to when the rolled up holiday pay scheme was introduced. I was told that the respondent has operated for in excess of 20 years and consequently I find that the rolled up holiday pay scheme probably dates back to when the respondent began operating and is not new/post the Robinson-Steele decision.

[45]I find that neither claimant was denied the right to annual leave and, indeed, both could have chosen to have their annual leave paid for in the conventional way but elected not to do so in order to continue receiving the extra £8.09 per worked day.

Conclusions

[46]I find that, due to the text message cited in paragraph 20, the second claimant was aware or should have been aware prior to accepting the job that the pay rate of £75 per day included holiday pay.

[47]I find that within 11 days of starting the job the second claimant was aware that his pay was £66.90 plus £8.09 holiday. I find that the second claimant’s contract of employment was in the like terms of the one issued to the first claimant.

[48]I find that, even if the second claimant did not receive a copy of his contract of employment, had he persisted in requesting one he would have received it just as the first claimant did.

[49]Consequently, I find that it was agreed between the second claimant and the respondent that the daily rate of pay would be inclusive of a payment on account of annual leave and that this was spelt out in the contract of employment. Further, I find that the second claimant understood this.

[50]I find that the first claimant’s contract of employment was as sent to him in August 2019. I do not find that as the advert for the position referenced the pay or salary as £75 that precluded it from including an element of holiday pay. Consequently, I find that it was agreed between the first claimant and respondent that the daily rate of pay would be inclusive of a payment on account of annual leave.

[51]Further, In August 2019 the first claimant was aware of the contents of his contract of employment and that it was fixed term, expiring on 31 December 2019. The first claimant remained working after 1/1/2020. I find that that his contract of employment would have renewed on the like terms to the one sent to him in August 2019 with the claimant accepting it by conduct in remaining working.

[52]In any event, I find that both claimants became aware of the holiday pay element of their daily rate when they received their first pay slips.

[53]I find that the rolled up holiday pay scheme was unlawful.

[54]I find that the rolled up holiday pay scheme was not new and was historic.

[55]I find that the rolled up holiday pay scheme met the requirements of Robinson-Steele as it was transparent and comprehensible.

[56]I find that the respondent is entitled to set off the holiday pay paid against the holiday pay due and that, as a result, neither claimant is due any amount. Consequently, the claims are dismissed. Employment Judge Alliott Date: 20/11/2024 . Recording and Transcription Please note that if a Tribunal hearing has been recorded you may request a transcript of the recording, for which a charge may be payable. If a transcript is produced it will not include any oral judgment or reasons given at the hearing. The transcript will not be checked, approved or verified by a judge. There is more information in the joint Presidential Practice Direction on the Recording and Transcription of Hearings, and accompanying Guidance, which can be found here: https://www.judiciary.uk/guidance-and-resources/employment-rules-and-legislation-practicedirections/

Conclusions

[1]Factual inaccuracies:1.1 The judgment does not state that the first claimant began his employment in August 2018. Paragraphs 1,25 and 28 reference him beginning in October 2018.

1.2 Both claimants have the forename ‘Gary’ which is a diminutive of ‘Gareth’. The text referenced in paragraph 20 is addressed to ‘Gareth’. The index cross refences it to the first claimant which is plainly an error as it must relate to the second claimant. That is the only purpose of referencing that both claimants have the forename ‘Gareth’, ie to explain the error. If either or both of the claimants were actually named ‘Gary’ on their birth certificates then I apologise but the point remains.

[2]Merits: 2.1 The rest of the application is seeking to re-argue the claim. The judgment reasons set out findings as to the claimants’ contracts of employment, the unlawfulness of the ‘rolled up’ scheme, the fact that the scheme was transparent and comprehensible and the fact that the respondent was entitled to set off the sums claimed against the sums paid. Date: 28 January 2025 Approved by