Adcock & Ors v H Flude & Co (Hinckley) Ltd [1998] UKEAT 521_97_2901

EAT
Adcock & Ors v H Flude & Co (Hinckley) Ltd
[1998] UKEAT 521_97_2901 · 1998-01-29

JUDGE PETER CLARK :

This is an appeal by 18 Applicants before the Leicester Industrial Tribunal against that Tribunal's decision to dismiss their complaints of unlawful sex discrimination and for contractual benefits accrued during maternity leave brought against their respective employers following a hearing held on 24 February 1997. Extended Reasons for that decision are dated 14 March 1997.

The Facts

Each Applicant was employed in the hosiery and knitwear industry and was a member of the Trade Union KFAT.The individual terms and conditions of employment of the Applicants incorporated the terms of a national agreement made between the Union and the relevant Employer's Federation.That agreement incorporated a system of crediting holiday pay which has existed within the industry for many years. It works as follows. Because the industry generally works on a piece-work basis it is difficult to calculate a suitable level of pay for holiday periods. The method in operation was this. A calculation was made showing the standard holiday period (including Bank Holidays) of 32 days a year, amounting to 14 per cent of the working days in the year. Then for each week that an employee works during the holiday year he or she is credited with a sum amounting to 14 per cent of gross earnings for that week. That sum is then credited to a holiday fund or "box". The weekly pay slips show each employee's accumulated total in the box.The employee then takes an agreed amount out of the holiday box when each holiday is taken. Tax and National Insurance is deducted from such payments at source. If the employee leaves the employment during the holiday year he or she is entitled to take away the amount accumulated in the holiday box. The amount withdrawn from the holiday box bears no relationship to the number of days' holiday which the employee is permitted to take. The employee is entitled to draw down the whole amount credited to his or her account regardless of the number of days holiday actually taken during the holiday year.The national agreement provides that an employee is entitled to holiday credits for weeks during which he or she is not at work in certain circumstances, for example, during absence through sickness for up to 13 weeks and when taking time off for Trade Union activities. However, no credits are applied in respect of weeks during which an employee is taking maternity leave. During those weeks she is entitled to statutory maternity pay.

The Complaints

The gravamen of the complaints was that the Respondent employers unlawfully discriminated against the Applicants and were in breach of Section 71 of the Employment Rights Act 1996 in not giving holiday credits during weeks of maternity leave. Each of the Applicants had completed a period of maternity leave prior to their complaints being presented.

The Industrial Tribunal Decision

Before the Industrial Tribunal it was accepted on behalf of the Appellants by Counsel then appearing on their behalf, Mr Dowes, that the claims raised a single issue for determination by the Industrial Tribunal.Section 71 of the 1996 Act provides:
"(1) An employee who is absent from work at any time during her maternity leave period is, (subject to sections 74 and 75) entitled to the benefit of the terms and conditions of employment which would have been applicable to her if she not been absent (and had not been pregnant or given birth to a child).

(2) Subsection (1) does not confer any entitlement to remuneration."

The issue was formulated in paragraph 6 of its reasons in this way:
"He [Mr Dowes] also accepted that the relevant statutory provision is section 71 of the Employment Rights Act 1996 and conceded that, if we found that the payment was remuneration, then the applicant's case would fail, but if we found that it was not remuneration, the applicant's case would succeed."
For the reasons given in paragraph 8 of their reasons the Tribunal concluded that the holiday credits were remuneration and accordingly the claims were dismissed.

The Appeal

Mr Rigby, now appearing on behalf of the Applicants, recognises that the only point in this appeal is that identified by the Tribunal below.He submits that the holiday credits in this case were not remuneration within the meaning of Section 71(2).He referred us to the debate in Parliament, reported in Hansard, in relation to the Trade Union Reform and Employment Rights Bill 1993 . Section 33 of the Trade Union Reform and Employment Rights Act was later re-enacted in Section 71 of the Employment Rights Act 1996 . During the course of that debate the Minister explained that the word "remuneration" was substituted for the word "pay" in Clause 33 of the Bill because "pay" may be interpreted too widely by Industrial Tribunals to include benefits in kind. He made it clear that the intention was that only monetary payment would be included in what is now the Section 71(2) exception. Its is only the monetary elements of the contract which are not required to be continued during maternity leave, they to be replaced by maternity pay.Mr Rigby summarises his position in this way. Remuneration includes only the wage in the weekly wage packet. Every other benefit continues. Since holiday credits do not involve an element in the weekly pay packet, they do not constitute remuneration.For the Respondent Mr Sendall invites us to consider the special facts of this case. This is not a system of holiday stamps, which are only of value to the employee when he takes paid holiday. Nor are these benefits in kind, such as a free car or free housing. Here, the employee has the benefit of a rolling fund which, subject to the exceptions fully set out in Clause 15(j) of the national agreement, is directly related to a fixed percentage uplift on monies actually earned in work week by week. The employee is entitled to the accumulated credits if she leaves the employment during the holiday year, and regardless of how much holiday she actually takes during that year. In this sense it is deferred contractual pay. There is no contractual right to holiday credits for weeks spent on maternity leave, when statutory maternity pay is paid.Having considered the rival contentions we have no hesitation in accepting those advanced by Mr Sendall to those of Mr Rigby. The Industrial Tribunal was plainly correct in our judgment in finding that holiday credits, on the particular facts of this case, amounted to remuneration within the meaning of Section 71(2) of the 1996 Act. That being the sole point argued in this appeal, it must fail.