MRS L GIBSON v EAST RIDING OF YORKSHIRE COUNCIL [1999] UKEAT 526_98_0302

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [1999] UKEAT 526_98_0302Case No Appeal No. EAT/526/98Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MRS L GIBSONAPPELLANTEAST RIDING OF YORKSHIRE COUNCILRESPONDENT
Before
Mr Justice MorisonDate 3 February 1999
[1]APPEARANCES For the Appellant MISS J EADY (of Counsel) Thompsons Solicitors Congress House Great Russel Street London WC1B 3LW For the Respondents MR N WRAY (of Counsel) Instructed by: Head of Legal Services East Riding of Yorkshire Council County Hall Beverley HU17 9BA MR JUSTICE MORISON (PRESIDENT) : Since April 1996 Mrs Gibson, the appellant, has been employed by the East Riding of Yorkshire, the Respondents, as a swimming instructor at Haltemprice Leisure Centre, Anlaby, Hull. She is paid an hourly rate for that work. She is also employed by the Council as a school swimming instructor at the same centre at a slightly higher rate. Under one contract she was employed for 11½ hours a week; under the other, 14 hours per week. When she was not required to work as an Instructor during school holidays she received no pay under that contract. It is the Council's case that her hourly rates were negotiated partly on the basis that she was entitled to no paid leave. The Working Time Directive [No 93/104/EC] was adopted by the Council of Ministers of the European Communities on 23 November 1991. Eleven of the Members States voted in favour of its adoption; the UK Minister abstained and indicated that the UK Government would challenge the validity of the Directive in the European Court. Article 18(1) of the Directive required Member States either to "adopt the laws regulations and administrative provisions necessary to comply with this Directive by 23 November 1996 or ... ensure by that date that the two sides of industry establish the necessary measures by agreement, with the member States being obliged to take any necessary steps to enable them to guarantee at all times that the provisions laid down by this Directive are fulfilled." The legal challenge was, essentially, dismissed by the Court in its judgment dated 12 November 1996, given some eleven days before the date for implementation. Pending the Court's decision, there had been no draft legislation on the table and it was not until 1 October 1998 that The Working Time Regulations came into force, having been laid before Parliament on 30 July that year. Mrs Gibson presented an originating application to an Industrial Tribunal, which was subsequently amended. She made two complaints: first, she sought under section 11 of the Employment Rights Act, a determination of her terms and conditions of employment; and secondly she alleged that her employers had been making unlawful deductions from her wages. Her complaints relate to her entitlement to paid annual leave. The Industrial Tribunal concluded that she was not entitled to any such leave and, under domestic law, there could be no criticism of their decision. She had not enjoyed paid annual leave since she commenced her employment and nothing had occurred to suggest that, as a matter of contract law, anything had changed to alter the position. Her real claim rested on her contention that the Working Time Directive had direct effect and her employers were not entitled to rely on the Government's failure to implement the Directive, as they were themselves an emanation of the State: see paragraphs 46 and 47 of the European Court of Justice's judgment in Marshall v Southampton Area Health Authority [1986] ICR 335 at page 355. The Industrial Tribunal accepted that she was entitled to a determination of her terms and conditions of employment, that her employers were an emanation of the State, but concluded that she was not entitled to any paid annual leave. The Tribunal's reasoning was:
"The Directive did not meet the criteria laid down by the European Court in a number of decisions, including Van Gend en Loos v Nederlander Administratie der Berlastigen [1963] ECR 1 ; but was a complex Directive subject to extremely complex exceptions and derogations. As a health and safety measure, the Directive did not give any entitlement to holiday pay but merely to paid holiday leave."
The question which arises on this appeal is whether the Industrial Tribunal's decision was right in law. The Directive 93/104/EC In this judgment we refer to a number of the preambles and Articles, and set out extracts from the more pertinent ones:
"Whereas Article 188a of the Treaty provides that the Council shall adopt, by means of directives, minimum requirements for encouraging improvements, especially in the working environment, to ensure a better level of protection of the safety and health of workers; Whereas, under the terms of the Article, those directives are to avoid imposing administrative, financial and legal constraints in a way which would hold back the creation and development of small and medium-sized undertakings: Whereas the Community Charter of the Fundamental Social Rights of Workers, adopted at the meeting of the European Council held at Strasbourg on 9 December 1989 by the Heads of State or of Government of 11 Member States, and in particular points 7, first subparagraph, 8 and 19, first subparagraph, thereof, declared that: . .. 8. Every worker in the European Community shall have a right to a weekly rest period and to annual paid leave, the duration of which must be progressively harmonised in accordance with national practices. Whereas, in order to ensure the safety and health of Community workers, the latter must be granted minimum daily, weekly and annual periods of rest and adequate breaks; whereas it is also necessary in this context to place a maximum limit on weekly working hours; Whereas account should be taken of the principles of the International Labour Organisation with regard to the organisation of working time, including those relating to night work; Whereas, in view of the question likely to be raised by the organisation of working time within an undertaking, it appears desirable to provide for flexibility in the application of certain provisions of this Directive, whilst ensuring compliance with the principles of protecting the safety and health of workers; Whereas it is necessary to provide that certain provisions may be subject to derogations implemented, according to the case, by the Member States or the two sides of industry; whereas, as a general rule, in the event of a derogation, the workers concerned must be given equivalent compensatory rest periods, SECTION 1 SCOPE AND DEFINITIONS Article 1 Purpose and scope 1. This Directive lays down minimum safety and health requirements for the organisation of working time. 2. This Directive applies to: (a) minimum periods of daily rest, weekly rest and annual leave, to breaks and maximum weekly working time; and (b) certain aspects of night work, shift work and patterns of work. Article 7 Annual leave 1. Member States shall take the measures necessary to ensure that every worker is entitled to paid annual leave of at least four weeks in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice. 2. The minimum period of paid annual leave may not be replaced by allowance in lieu, except where the employment relationship is terminated. Article 14 More specific Community provisions The provisions of this Directive shall not apply where other Community instruments contain more specific requirements concerning certain occupations or occupational activities. Article 15 More favourable provisions This Directive shall not affect Member States' right to apply or introduce laws, regulations or administrative provisions more favourable to the protection of the safety and health of workers or to facilities or permit the application of collective agreements or agreements concluded between the two sides of industry which are more favourable to the protection of the safety and health of workers. Article 16 Reference periods Member States may lay down: 2. ... The periods of paid annual leave, granted in accordance with Article 7, and the periods of sick leave shall not be included or shall be neutral in the calculation of the average; Article 17 Derogation 1. With regard for the general principles of the protection of the safety and health of workers, Member States may derogate from Article 3, 4, 5, 6, 8 or 16 when, on account of the specific characteristics of the activity concerned, the duration of the working time is not measured and/or predetermined or can be determined by the workers themselves 2. Derogations may be adopted by means of laws, regulations or administrative provisions or by means of collective agreements or agreements between the two sides of industry provided that the workers concerned are afforded equivalent periods of compensatory rest or that, in exceptional cases in which it is not possible, for objective reasons, to grant such equivalent periods of compensatory rest, the workers concerned are afforded appropriate protection . .. Article 18 Final provisions 1. ( a ) Member States shall adopt the laws, regulations and administrative provisions necessary to comply with this Directive by 23 November 1996, or shall ensure by that date that the two sides of industry establish the necessary measures by agreement, with Member States being obliged to take any necessary steps to enable them to guarantee at all times that the provisions laid down by this Directive are fulfilled. . .. ( b )(ii) Similarly, Member States shall have the option, as regards the application of Article 7, of making use of a transitional period of not more than three years from the date referred to in ( a ), provided that during that transitional period: - every worker receives three weeks' paid annual leave in accordance with the conditions for the entitlement to, and granting of, such leave laid down by national legislation and/or practice, and - the three-week period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated."
We are grateful to counsel on both sides for their clear submissions. This appeal is more concerned with the application of settled principles of law, rather than with a dispute as to the principles themselves. The principles of law which govern the enforcement of Community Law in the United Kingdom may be summarised thus: A provision of the Treaty or of a Directive may only have direct effect in the laws of the Member States if it is sufficiently precise and unconditional. Thus, Article 119 of the Treaty has been held to have direct effect whereas the provisions of Article 97 do not: compare Defrenne v Sabena [1976] ECR 455 with Costa v ENEL [1964] ECR 585 ; and the Equal Treatment Directive [76/207/EEC] with Council Directive protecting employees on their employers' insolvency [Council Directive 80/987/EEC].[2]A Directive remains sufficiently precise even if its precise scope would require the ECJ to interpret its provisions: see Van Duyn v Home Office [1974] ECR 1337 , where the expression 'measures taken on the grounds of public policy or public scrutiny' were held to be sufficiently precise even though the extent of the grounds might have to be determined by the ECJ.[3]In the employment field the test of conditionality is satisfied if the provisions of the Directive identify the beneficiaries of the right, the persons under a duty to give effect to the right and the nature and extent, or content, of the right: Francovich v Italy [1991] ECR 1-5357 .[4]A Directive would be regarded as conditional if, before implementation, the Member State was required to have prior consultation with the Commission. But the fact that the Directive permits precise derogations from its terms by the Member States does not of itself render the Directive 'conditional'. In Karella v Ministry of Industry, Energy & Technology [1991] ECR 2691 the Court said:
"As the Court has consistently held, wherever the provisions of a directive appear, as far as their subject matter is concerned to be unconditional and sufficiently precise, individuals are entitled to invoke them against the State ... It must be held in that connection that that provision [namely Article 25 of Directive 77/91/EEC which deals with the formation of public limited liability companies and the maintenance and alteration of their capital] is clearly and precisely worded and lays down, unconditionally, a rule enshrining the general principle that the general meeting has the power to decide upon increases in capital. The unconditional nature of that provision is not affected by the derogation provided for in Article 25(2) of the ... Directive to the effect that the company's instrument of incorporation or the general meeting may authorise an increase in the subscribed capital up to a maximum amount which is to be fixed with due regard for any maximum amount provided for by law. That individual, clearly defined derogation does not leave Member States any possibility of making the principle of the power of the general meeting subject to any exceptions other than that for which express provision is made. . .. Moreover, the fact that the Community legislature provided for precise concrete derogations confirms the unconditional character of the principle set forth in Article 25(1) of the Directive."
[5]It is the duty of the Court, in applying national law, to ensure fulfilment of the obligation arising from a Directive to achieve the result envisaged by the Directive, since a Directive is binding on "all the authorities of the member States, including, for matters within their jurisdiction, the courts.": Marleasing SA v La Comercial [1992] CMLR 305 at 322. Although Directives have direct effect, they do so only in relation to employees of an emanation of the State. That is because the Directive itself is a provision directed to National Governments, and the State [or State related employer] cannot take advantage of its own failure to introduce legislation into domestic law which fully gives effect to the provisions of the Directive. The test for determining whether a body is an emanation of the State has recently been amplified by the ECJ in the case of Kamplemann [1998] ECR 1-6907 .[6]Where the United Kingdom Parliament has introduced legislation, primary or secondary, which is designed to give effect to the Directive then the courts will adopt a purposive approach to its construction so as to avoid a potential conflict between the statute (or statutory instrument) and the Directive, adding words if needs be to make the two compatible: see Litster v Forth Dry Dock & Engineering Co Ltd [1990] AC 546 . This approach will be adopted so as to give the Directive horizontal effect: that is between a private individual and a private employer. There is much to be said in favour of the conclusion reached by the Industrial Tribunal. In the first place, the Directive permits National Governments to give effect to its terms through the collective bargaining process, as an alternative to the normal legislative process. Second, extensive derogations are permitted under Article 17, and an undefined discretion to provide "appropriate protection" in lieu, in cases to which Article 17(2) applies. Third, derogations are permitted "by means of collective agreements". Fourth, the English text of the Directive suggests that Article 2.1 which defines working time was not drafted with the precision to be expected of a Directive which is capable of conferring rights on certain categories of workers. The lack of clarity has prompted a reference from a Spanish tribunal to the European Court of Justice seeking the Court's guidance as to proper interpretation of that definition. Fifth, Articles 10, 16 18(3) and 18(4) permits [ "may" ] Member States "to make the work of certain categories of night workers subject to certain guarantees", to lay down reference periods, to lay down rules to be applied in the collective bargaining process, and gives them an option to extend the reference periods. This shows, it may be argued, that the Directive permits, in certain respects, a degree of flexibility and discretion. In other words, the Directive cannot be seeking to harmonise the laws of Members States by introducing minimum standards. We have been persuaded, on balance, to accept the submission that Article 7 has direct effect so that during the period from 23 November 1996 to 1 October 1998 an employee of an emanation of the State may take advantage of its protection. Whether an individual in private employment would have a Francovich claim against the UK Government in relation to that period is not a matter falling for determination by the EAT. The question at issue in this case relates solely to Article 7. There is support for the contention made to us by Miss Eady that, when dealing with a direct effect issue, the European Court of Justice looks only to the particular provision in question: see for example the Francovich and Karella cases. We are prepared to accept the submission that the fact that some Articles of a Directive may lack certainty does not prevent others which are clear from having direct effect. On the other hand, one clear Article in a Directive which is otherwise lacking in certainty or which is conditional will not, we think, be of direct effect. Thus, we do not accept that the issue should be confined to an examination of the words of the particular Article; we must also take account of the whole Directive, having regard, in particular, to its purpose. In other words, we consider that we should first look at the totality of the Directive to set the context, and then to consider the particular Article. As the Preamble makes clear, the Directive is concerned with: The Directive lays down "minimum ... requirements for the organisation of working time" [Article 1]. Although derogations are permitted [but not from Article 7], the workers' rights are protected by the making of alternative arrangements. Derogations by means of collective arrangements are only permitted "on condition that" proper alternative arrangements are made [our words]. The fact that derogations may be made is consistent, perhaps more consistent, with the Directive having direct effect than the contrary: Karella . In short, in our view the structure of the Directive is consistent with it having direct effect. It is designed to require Member States to confer minimum rights upon workers in a way which can be said to be unconditional. Article 7 is clear and precise and, in our view, admits of no ambiguity or conditionality. In the Lay Members' experience, custom and practice in the workplace will invariably fill the gaps if there were doubts as to the start and end of a 'leave year'. It may well be that the Council has a defined leave year, which would be appropriately applicable to Mrs Gibson. No derogations are permitted from the Article. It applies to all workers, both public and private, other than those engaged in the sectors stipulated in Article 1(3). It gives effect to paragraph 8 of the Community Charter of the Fundamental Rights of Workers adopted by the European Council in December 1989. It also gives effect to the purpose of the Directive which insists that community workers ["must"] be granted minimum annual periods of rest. Although it was argued that Mrs Gibson expressly contracted on the basis that she would receive no paid annual leave, it seems to us that her contractual rights were varied by the Directive in the sense that, had the Directive been implemented timeously, she would have been entitled to paid annual leave at the date when she presented her complaint to the Industrial Tribunal. As an emanation of the State, her employers cannot rely on the lack of domestic legislation to defeat her claim. Parties are not entitled to contract out of the entitlements conferred on them by European Directives, save to the extent the Directive may permit. Under Article 18(b)(ii), National Governments were entitled to provide for a three week annual paid leave period for three years from 23 November 1996. That option has been taken up by the UK Government in the Regulations which came into force on 1 October 1998. At the date of the complaint, there were no domestic regulations. Is Mrs Gibson entitled to three or four weeks paid annual leave? It seems to us that the answer must be: four weeks. At the date of her complaint she was entitled to a finding that, absent the Government having opted for three weeks, she was entitled to four. We can see no basis for an argument in favour of three weeks, bearing in mind that she was forced to rely upon the direct effect of the Directive precisely because the Directive had not been implemented. It is not open to the State, or an emanation of it, to rely upon an option which it had not exercised. Thus, until her contract is varied, she is entitled to four weeks' paid leave. The Regulations do not deprive her of that right because they do not work to reduce a person's entitlement to paid annual leave: see Regulation 17. Accordingly, we allow the appeal and substitute a finding that under her contracts of employment Mrs Gibson was entitled to four weeks paid leave. At the close of argument we were invited to consider whether leave to appeal should be granted. This is a case where we regard the principle at issue as being of importance but where we do not have any serious doubts about our conclusions. If the Court of Appeal think it appropriate then leave may be granted by them; we for our part will refuse it.