EAT/0966/00 LIST DESIGN GROUP LTD v 1) MRS H DOUGLAS 2) MISS A J STRICKLAND 3) MISS H J FRY 4) MR K M FAULKNER [2002] UKEAT 0966_00_2201

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2002] UKEAT 0966_00_2201

Case No Appeal No. EAT/0966/00 EAT/0481/01

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

EAT/0966/00 LIST DESIGN GROUP LTDAPPELLANT

1) MRS H DOUGLAS 2) MISS A J STRICKLAND 3) MISS H J FRY 4) MR K M FAULKNERRESPONDENT

EAT/0481/01 LIST DESIGN GROUP LTDAPPELLANT

MR N J CATLEYRESPONDENT

Before

Mr Justice Bell Ms N Amin Mrs J M Matthias

Date 22 January 2002

[1]APPEARANCES

EAT/0966/00

For the Appellant MR J BURNS (Of Counsel) Messrs Hetts Pountney Solicitors 11 Bigby Street Brigg North Lincolnshire DN20 8EP For the Respondents MR L A SMITHSON (Representative)

EAT/0481/01

For the Appellant MR J BURNS (Of Counsel) Messrs Pepperell Machin & Co Solicitors 40 Doncaster Road Scunthorpe DN15 7RQ For the Respondent MR N J CATLEY IN PERSON MR JUSTICE BELL These are two appeals by the employer, List Design Group Ltd, in respect of awards of holiday pay to five employees. It is convenient to deal first with the appeal involving Mrs Douglas, Miss Strickland, Miss Fry and Mr Faulkner, "the four Applicants", before moving on to the appeal involving Mr Catley in the same judgment because both appeals raise the same essential point, although the Appellant has additional points relating to the amount of the award to Mr Catley if its appeal fails on the main point of principle.

[2]The appeals centre upon the different provisions in the Employment Rights Act 1996 and the Working Time Regulations 1998 relating to time limits for bringing complaints that holiday pay has not been paid in accordance with the employees entitlement under the Regulations.

[3]The essential facts of the first appeal are that the Appellant is a company of consulting engineers which employed Mrs Douglas, Miss Strickland, Miss Fry and Mr Faulkner in its Drawing Office. At their various interviews it was agreed by the Appellant's General Manager that they would be paid at an hourly rate for a normal working week of 37 hours over four and a half days and, as the Employment Tribunal in due course found, that they would be paid only for the hours worked. They were not entitled to holiday pay and holiday pay was not included or "rolled up" in the hourly rate. The Employment Tribunal was not persuaded that "roll up" pay was a standard arrangement in the relevant industry as the Appellant contended.

[4]There was no agreement as to the maximum or minimum amount of leave that could be taken. All four Applicant employees were employed by the Appellant by July 1997. There was no written contract of employment or workforce agreement or collective agreement which applied to them, that is no "relevant agreement" for the purposes of the 1998 Regulations which came into force on 1 st October 1998.

[5]On the 5 th October 1998 the Appellant sent a letter to each of its employees, including the four Applicants, concerning the 1998 Regulations. It included the following passage "As you will be aware from your existing contract your rate currently includes an allowance to cover the provision of holidays. Accordingly you should set aside 8.33% of your pay for holiday funds".

[6]In the leave year which, pursuant to Regulation 13(3)(b)(i) of the 1998 Regulations, began on 1 st October 1998, all the Applicants took annual leave of not less than three weeks, the statutory entitlement pursuant to Regulation 13(2)(a). Between the 1 st October 1999 and 13 th January 2000 all four Applicants took two weeks leave, save for Mr Faulkner who took 2.6 weeks leave. The last relevant day of leave taken by each of the four Applicants was in December 1999.

[7]In June 1999 the four Applicants took up with the Appellant its failure to implement the paid leave provisions in the 1998 Regulations. The response of the Appellant was that its position was as set out in its letter sent to employees in October 1998. The Tribunal found that position unsustainable. The letter had not varied, and could not vary, the original terms of the contract of employment that the hourly rates did not include an allowance for holidays.

[8]The four Applicants complained to the Employment Tribunal by presenting Originating Applications on 13 th January 2000. Put very shortly, Mr Jeremy Burns, Counsel for the Appellant, contended that the claims were brought under the 1998 Regulations and that the claims for the year to the 30 th September 1999 were brought outside the three month time limit contained in the Regulations.

[9]The Tribunal held that the four Applicants were entitled to, and did, bring their claims under the 1996 Act for deduction of wages, that the deductions were each part of a series and that the claims had been brought within three months of the last of the series of deductions and were in time under the Act. That conclusion is now challenged on this appeal.

[10]To understand the arguments more fully it is necessary to set out the material provisions of the Act and Regulations. Part II of the 1996 Act in Sections 13-27 provides for "Protection of Wages". Section 13(1) of the Act provides "(1) An employer shall not make a deduction from wages of a worker employed by him unless-(a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker's contact, or

(b) the worker has previously signified in writing his agreement or consent to the making of the deduction".

[11]Section 23 of the Act relates to the making of complaints to Employment Tribunals. The relevant subsections provide as follows "(1) A worker may present a complaint to an [employment tribunal] – (a) that his employer has made a deduction from his wages in contravention of section 13 . . . . (2) Subject to subsection (4), an [employment tribunal] shall not consider a complaint under this section unless it is presented before the end of the period of three months beginning with- (a) in the case of a complaint relating to a deduction by the employer, the date of payment of the wages from which the deduction was made . . . (3) Where a complaint is brought under this section in respect of – (a) a series of deductions or payments . . . the references in subsection (2) to the deduction or payment are to the last deduction or payment in the series or to the last of the payments so received".

[12]Section 27(1) of the Act provides that "(1) In this Part 'wages', in relation to a worker, means any sums payable to the worker in connection with his employment including - (a) any fee, bonus, commission, holiday pay or other emolument referable to his employment whether payable under his contract or otherwise . . ."

[13]The 1998 Regulations were made under the authority of Section 2(2) of the European Communities Act 1972 which entitles the relevant minister to make provision, by regulation, to implement any European Community obligation of the United Kingdom. The material parts of the Regulations for the purposes of this case are the domestic implementation of council directive 93/104/EC on Working Time. They came into effect, as we have already said, on 1 st October 1998.

[14]Regulation 13(1) provides that " . . . a worker is entitled in each leave year to a period of leave determined in accordance with paragraph (2)". By paragraph 2(a) the period in "any leave year beginning on or before the 23 rd November 1998 [is] three weeks". For the following year the entitlement is slightly more, three weeks and six days in fact. Regulation 13(3)(b) provides that where there are no provisions of a relevant agreement as to the beginning of the leave year and the workers employment began on, or before, 1 st October 1998, the leave year begins on 1 st October 1998 and on each subsequent anniversary of that date.

[15]Regulation 13(9) provides "(9) Leave to which a worker is entitled under this regulation may be taken in instalments, but -(a) it may only be taken in the leave year in respect of which it is due, and

(b) it may not be replaced by a payment in lieu except where the worker's employment is terminated". Regulation 14 gives further explanation of what is intended by Regulation 13(9)(b). In summary the effect of Regulation 13(9) and Regulation 14 is that the employee cannot roll over entitlement from one leave year to the next. The employee cannot take payment in lieu of holiday pay and the employer cannot pay it if the employee does not take his/her entitlement. But if the contract of employment is terminated in the course of any leave year before the employee has taken his/her entitlement, he/she can be paid money in lieu of untaken leave according to a formula which is set out in regulation 14.

[16]By Regulation 16 "(1) A worker is entitled to be paid in respect of any period of annual leave to which he is entitled under regulation 13, at the rate of a week's pay in respect of each week of leave. (2)Sections 221 to 224 of the 1996 Act shall apply for the purpose of determining the amount of a week's pay for the purposes of this regulation, subject to the modifications set out in paragraph (3) . . . (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". The amounts of the week's pay as defined by Regulation 16(2) were agreed in the case of each of the four Applicants.

[17]The relevant parts of Regulation 30 provide "(1) A worker may present a complaint to an employment tribunal that his employer - . . . (b) has failed to pay him the whole or any part of any amount due to him under Regulation 14(2) or 16(1) (2) An employment tribunal shall not consider a complaint under this regulation unless it is presented -(a) before the end of the period of three months . . . beginning with the date on which it is alleged . . . the payment should have been made . . .

(b) within such further period as the tribunal considers reasonable in a case where it is satisfied that it was not reasonably practicable for the complaint to be presented before the end of that period of three months . . ." The four Applicants did not contend that they could seek advantage of the provision in Regulation 30(2)(b).

[18]For completeness we relate that Regulation 35(1) provides "(1) Any provision in an agreement (whether a contract of employment or not) is void in so far as it purports –(a) to exclude or limit the operation of any provision of these Regulations save in so far as these Regulations provide for an agreement to have that effect, or

(b) to preclude a person from bringing proceedings under these Regulations before an employment tribunal".

[19]The Employment Tribunal found that the Appellant's failure to pay the four Applicants for the annual leave taken after 1 st October 1998 to which they were entitled was a clear breach of Regulation 16 and that the 5 th October letter was at best disingenuous and at worst a transparent attempt by the Appellant to circumvent the Regulations.

[20]However, Mr Burns argued, as he has argued this morning, that the Applicants claims in respect of holiday pay, for the year 1 st October 1998 to 30 th September 1999, were out of time. He contended first that the right to pay under Regulation 16(1) arose as leave was taken and by 13(9) it could only be taken, so far as the first year was concerned, by 30 th September 1999 so it should have been paid by 30 th September 1999.

[21]It appears that the Employment Tribunal accepted that as far as it went and we accept that. Had it been necessary Mr Burns would have argued that for the purposes of the Regulations, the Originating Application had to be presented within three months of the end of the week when the relevant holiday pay entitlement was taken. But it was not necessary for him to pursue that argument before the Tribunal since the 30 th September 1999 was itself more than three months before the Originating Applications were presented.

[22]Secondly, the Applicants complaints to the Employment Tribunal, Mr Burns argued, were complaints for the purposes of Regulation 30(1)(b) - that their employer had failed to pay them the amounts due under Regulation 16(1). The Employment Tribunal's jurisdiction to hear their complaints arose from the express terms of Regulation 30(1).

[23]Thirdly, Mr Burns contended, the four Applicants were, therefore, out of time in respect of holiday pay due to them for the year till 30 th September 1999. Their applications were not presented within three months of that date as provided by Regulation 30(1)(a) and the Applicants did not contend that it was not reasonably practicable to prevent them to present them before the end of that period for the purposes of Regulation 30(2)(b).

[24]The Employment Tribunal rejected that submission in paragraphs 27-30 of its Extended Reasons, in the following terms:

"27 The . . . principal submission pursued with determination by Mr Burns was that the only route by which the Applicants could bring these claims and the only jurisdiction within which a Tribunal can determine them is by way of a complaint under Regulation 30. He conceded that payment for holiday leave under Regulations 13 and 16 are wages under the 1996 Act but argued that they could be enforced only by reference to the particular time limits referred to in the 1998 Regulations. Regulation 30(2)(a) he argued stated unambiguously that the Tribunal could not consider a complaint under the Regulations unless it is presented before the end of the period of three months from the date the payment should have been made. The remedy is a creature of statute; this is a new right an obligation which is governed by its own regulations. The time limit in the 1998 Regulations must override the provisions in the 1996 Act or alternatively must be seen as a restriction to the way that the 1996 Act can be invoked. That was the Respondent's case. 28, The Tribunal finds that the Applicants are entitled as they elected to do to bring their claims by way of complaint under Section 13 of the 1996 Act for unlawful deduction of wages. Section 27(1)(a) of the 1996 Act provides that "wages" for this purpose include "holiday pay . . . whether payable under a workers contract of employment or otherwise"

. In this case, the holiday pay claimed by the Applicants was not payable under their contract of employment but the word "otherwise" is interpreted by the Tribunal as covering the statutory entitlement to paid holiday under 1998 Regulations. 29. The statutory rights to paid holiday under Regulations 13 and 16 exist independently of the right to enforce those statutory rights by way of a complaint brought under Regulation 30. The Tribunal finds that if it had been the intention of Parliament to exclude from Part II of the 1996 Act an employee's right not to suffer unlawful deduction of the statutory holiday pay prescribed by the 1998 Regulations, specific statutory provision would have been made. No such provision has been brought to the attention of the Tribunal. 30. Each of the Applicants brings a claim in respect of a series of similar deductions of holiday pay which arose in similar circumstances ( i.e. by way of statutory entitlement under Regulations 13 and 16) and have been withheld by the Respondent for similar reasons ( i.e. purported avoidance of the 1998 Regulations). In the judgment of the Tribunal therefore the failure of the Respondent to pay for holiday leave after the 1 st October 1998 amounts to a series of deductions within the meaning of Section 23(3)(a) of the 1996 Act. Since, in the case of each Applicant, the last such deduction made was in December 1999 within three months of the presentation of the Originating Applications, it follows that the claims of all the Applicants have been brought within the time limit prescribed by Section 23(2) of the 1996 Act". The Tribunal accordingly found that the Appellant had made unlawful deductions of wages contrary to the provisions of Section 13 of the 1996 Act and that the claims in respect of all the deductions were in time and made awards accordingly.

[25]Mr Burns submits that the Tribunal was wrong to hold that an alternative route to a complaint under Regulation 30(1) was to treat the matters in question as deductions of wages for the purposes of the 1996 Act. He particularly says that it cannot be a correct approach to say "the statutory rights to paid holiday leave under Regulations 13 and 16 exist independently of the right to enforce those statutory rights by way of a complaint brought under Regulation 30". It is perverse, he says, to hold that a new right given by Regulation 30 can be exercised independently of qualifications in the Regulation as to the time for a complaint to be brought. Regulation 30, Mr Burns contends, is intended to cover all cases under Regulations 13 and 16 and says so expressly. If an Applicant can fail to comply with the limits in Regulation 30 and go on to succeed nevertheless it makes a nonsense of Regulation 30.

[26]The Tribunal points out that the Regulations were brought into force after the Act was enacted. It is, therefore, unsurprising that no specific provision is to be found in the Act excluding the operation of Section 13 so far as the Regulations are concerned. Notwithstanding the absence of any such specific exclusion, basic principles of statutory interpretation require that where a later instrument creates a new right and the same instrument imposes a specific time limit for the purposes of determining how that right should be enforced, effect must be given to that specific limit as an exhaustive code, if necessary limiting the ambit of earlier legislation. So, if there is a conflict between the Act and the Regulations, the latter should be preferred.

[27]Mr Burns went on to contend that his argument does not extend to saying that delegated legislation in the form of the Regulations could repeal an Act of Parliament. The way he would prefer to see it is that the Regulations can help construction of the Act of Parliament. Although there is a very wide definition of "wages" in the Act, the Regulations must relate to that holiday pay which is created by the Regulations for the first time. There is no contractual or collective agreement for holiday pay such as was envisaged by the Act. If the right was created by the Regulations alone, as Mr Burns says it was in the case of the four Applicants, then in claiming it they must follow the regulatory scheme.

[28]We interpose that alternatively Mr Burns originally contended that if the 1996 Act did apply he contended that failure to pay holiday pay in successive years did not fall to be regarded as "a series of deductions" for the purposes of Section 23(3)(a) of the Act. While not resiling from that contention, he did not press it before us today, accepting that his argument faced difficulty in the light of Taylorplan Services Ltd v Jackson and others

[1996] IRLR 184

and Group 4 Nightspeed Ltd v Gilbert

[1997] IRLR 398

[29]Finally Mr Burns suggested that the purpose of the time restriction in the Regulations in relation to claiming holiday pay was probably to prevent an employer being saddled late in the day with a very heavy accumulated claim which might embarrass it commercially.

[30]Those are powerful points intelligently expressed but we have come to the conclusion that they must be rejected. In our view the events which occurred in the case of each Applicant fell firmly within the provisions of the 1996 Act for the reasons which the Tribunal essentially gave. Firstly, the sums of holiday were not payable under the Applicants contracts but they were payable "otherwise", that is by virtue of the Regulations, and they were, therefore, "wages" for the purposes of Part II of the 1996 Act by virtue of Section 27(1)(a).

[31]Secondly it follows, in our view, that by withholding the holiday pay to which the Applicants were entitled, the Appellant made deductions from wages in breach of Section 13(1).

[32]Thirdly, and moreover, the Appellant made a series of such deductions on the same point of principle contrary to the Applicants claims to their entitlement, continuing up to December 1999.

[33]Fourthly, it follows that the Applicants Originating Applications were in time for the purposes of Section 23(2) of the 1996 Act.

[34]Fifthly, although the Regulations were passed into law after the provisions of the 1996 Act and specifically relate to holiday pay, the material provisions of the Act of Parliament, a major Act of Parliament at that, equally specifically relate to holiday pay by the application of Section 27(1)(a) to Part II, including Section 13(1). We do not consider that, however attractively Mr Burns puts his construction point, the material, express provisions of the Act can be "implicitly" swept away, as we believe Mr Burns submissions would mean that they are, even if only in limited circumstances limited to holiday pay, by a provision of the Regulations which contradicts the provisions of the Act in certain circumstances.

[35]That, in our view, is a burden which the Regulations are not designed to bear. Had they been so designed we would have expected some provision in an amending Act or at the very least in the Regulations drawing express attention to the amending effect of the Regulations so far as time limits are concerned. The provisions of the Act and the Regulations are not necessarily contradictory. It is not difficult to envisage scenarios where a claim will be either in time or out of time under both sets of provisions.

[36]For the reasons we have given we judge that the Employment Tribunal was right to come to its conclusions that the four Applicants were entitled to follow their remedy under the express provisions of the Act, and that following those provisions the Applicants claims were all in time. The appeal in the case of the four Applicants is accordingly dismissed.

[37]The decision of the case in the case of the four Applicants was made by one Tribunal held at Southampton on 10 th April 2000 with a decision promulgated on 26 th April and Extended Reasons given later. The decision in Mr Catley's case was made by a differently constituted Tribunal sitting in Leeds on 19 th January 2001. Its decision with Extended Reasons was promulgated on 9th March 2001.

[38]Mr Catley's claim was expressly put under the Act and not, as the Tribunal recorded, under the Regulations. Mr Catley was employed by the Appellant over three periods of time, only the last of which from 29 th May 1998 to 29 th September 2000 is relevant. The Employment Tribunal concluded that his hourly rate did not include an element to cover holiday pay and that the same 5 th October 1998 letter as was written to the first four applicants, was equally of no effect in his case.

[39]It found that Mr Catley took 11 days holiday in the year from 1 st October 1998 to 30 th September 1999 when his entitlement was fifteen days. It found that in the year from 1 st October 1999 to the end of his employment through redundancy on 29 th September 2000 he took 25 days when his entitlement was 20. He was not paid any holiday pay. His last day of unpaid holiday was 1 st September 2000 which was within three months of the presentation of his application to the Employment Tribunal on 8 th November 2000.

[40]The Tribunal found that Mr Catley was entitled to claim his unpaid holiday pay up to his entitlement and was not out of time for essentially the same reason as the Southampton Tribunal in the case of the four Applicants. There was a series of deductions from his wages, the last of which was within three months of the presentation of his application.

[41]We dismiss the Appellant employer's appeal on principle for the same reasons as we have given in the case of the other four Applicants. However, Mr Burns has two further distinct points of appeal. The award in Mr Catley's favour was calculated at £3,653.60 on the basis, first, of his entitlement to holiday rather than on the basis of the holiday he actually took and on the basis, second, of his gross rate of pay rather than the net rate.

[42]In relation to the first point Mr Burns contends that the only claim available to Mr Catley under the 1996 Act would be for "deductions". That is holiday pay which should have been paid in respect to holidays actually taken and not compensation for holidays which could have been taken and then claimed for but which were in fact not taken. Regulation 16, he points out, says that the right to be paid is at "a rate of a weeks pay in respect of each week of leave". That, Mr Burns contends, must mean actual leave; there is no right to be paid for weeks of "non-leave", that is holidays not taken, other than under specific circumstances provided for by the Regulations which do not apply in Mr Catley's case.

[43]We cannot accept that argument on the face of the express wording of Regulation 16(1). By Regulation 16(1) Mr Catley was entitled to be paid "in respect of any period of annual leave to which he was entitled under Regulation 30 at the rate of a week's pay in respect of each week of leave". But the words, "each week of leave" which Mr Burns interprets as "actual leave", is, in our view, used in relation to the rate of pay. It cannot, in our view, detract from the opening words that the worker is "entitled to be paid in respect of any period of annual leave to which he is entitled under Regulation 13". Note particularly the word "entitled".

[44]Mr Burns developed his argument by contending that Regulation 16(1) had to be taken with Regulation 13(9)(b). If an employer cannot replace leave by a payment in lieu, the employee cannot claim it as an unlawful deduction on wages under the Act because the employer is forbidden to pay it.

[45]We do not accept that argument. In our view Regulation 13(9)(b) is clearly aimed at the vice of an employer of persuading employees not to take the leave to which they are entitled but to take more money instead. That would clearly be against the public policy of doing the best to ensure that employees take proper, refreshing periods of holiday in any given year. In our view the wording of Regulation 16(1) is clear and the provision in 13(9)(b), with the aim to which we have just referred, does not detract from it.

[46]It follows that, as the Tribunal held, Mr Catley was entitled to be paid holiday pay in respect of 15 days leave in the year to 30 th September 1999 and the Employment Tribunal was right to make its award on that basis. However, we do consider Mr Burn's last point was well made. Awards of compensation by Tribunals in circumstances such as the award in favour of Mr Catley look at what the employee has lost, which is his net earnings rather than his gross earnings.

[47]We consider that the appeal brought by this Appellant in respect of Mr Catley should be allowed to the extent that in judging what the proper award to Mr Catley should be, the figure taken should be net pay rather than gross pay. The calculations made by Mr Burns means that for the award of £3,653.60 in favour of Mr Catley should be substituted for the sum of £2,660. Save to that extent however both these appeals are dismissed.