HR in Hospitality Employment Law Update

HR in Hospitality Employment Law Update

DLA Piper: Breakfast Seminar 22 October 2014

Vinita Arora

Partner

[email protected]

+44 20 7796 6611

Jonathan Exten-Wright

Partner

[email protected]

+44 207 796 6619

mailto:[email protected]

mailto:[email protected]

Agenda

Holiday pay

Shared parental leave

Breakfast Seminar 22 October 2014 2

Holiday For Workers – Headache for Employers?

What is the legal entitlement to holiday and holiday pay for workers and employees?

What happens when employees are absent from work on account of sickness or maternity leave?

How do you calculate holiday entitlement and pay for atypical workers?

What are the implications for calculating holiday pay following the decision in Williams?


The European Right To Paid Leave

The European Working Time Directive (WTD) was introduced as a health and safety measure and mandates "minimum safety and health requirements for the organisation of

working time"

Art 7 of the WTD requires all Member States to: Ensure that all workers are entitled to paid annual leave of at least

4 weeks

Provide that the minimum period of annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated


The Right To Leave In The UK

The Directive is implemented in the UK by the Working Time Regulations 1998 (as amended) (WTR)

The WTR provide that: A worker is entitled to be paid in respect of any period of annual

leave at the rate of a week's pay in respect of each week of leave

Either the worker or employer may give notice to take leave

Leave may not be replaced by a payment in lieu except where the worker's employment is terminated

Leave may only be taken in the leave year in respect of which it is due

Workers are entitled to 5.6 weeks' leave


Bringing The Contract Into The Mix …

No legal obligation to provide holiday in respect of bank/public holidays

Employers are obliged to set out details regarding holiday in the written particulars of employment

Many employers provide additional holiday rights for employees under the contract

This can result in 3 types of leave/entitlement and potentially 3 tiers of protection: 4 weeks' leave under the WTD

1.6 weeks' leave under the WTR

additional leave under the Contract of Employment


Calculating Holiday Pay

Reg 16(1) WTR provides that a worker is entitled to be paid in respect of annual leave to which he is entitled… at a rate of a week's pay in respect of each week of leave

Reg 16(2) WTR specifies the method for calculating the rate of a week's pay Sections 221 to 224 of the Employment Rights Act 1996 (ERA)

shall apply

For the purposes of the calculation employees fall into 2 broad categories Employees with "normal working hours" Employees without "normal working hours"


Normal Working Hours

There are 3 types of "normal working hours" employees Employees whose remuneration varies according the day/time

they work their normal hours (shift workers)

Employees whose remuneration varies according to the amount of work done during their normal hours (pieceworkers)

Employees whose remuneration does not vary (time workers)

For the first two categories a week's pay is calculated by averaging their remuneration over the 12 week period immediately preceding the calculation date

For the last category, a week's pay is the amount payable by the employer under the contract of employment


Determining Normal Working Hours

How do you determine whether an employee has "normal working hours"?

s234 ERA provides that where an employee is entitled to overtime pay when employed for more than a fixed number of hours this amounts to normal working hours The normal working hours are the fixed working hours or

(if greater) the minimum number of hours the employee is contracted to work

So it should follow that where an employee has normal working hours, overtime does not count to calculating a week's pay unless the contract requires that a number of overtime hours be worked But does this apply when applied to the WTD?


Voluntary Overtime

Bamsey v Albon Engineering & Manufacturing plc Is the ERA compatible with the WTD?

Employees regularly worked overtime and were obliged to work overtime if required to do so

Employer not obliged to offer overtime

Court of Appeal ruled that: though workers compelled to work overtime because

employer not obliged to offer overtime exception did not apply

holiday pay was to be calculated without reference to overtime

the statutory provisions within the WTR and ERA are consistent with WTD


Calculating Holiday Pay

British Airways Plc v Williams Pilots sought holiday pay calculated on the basis of the payments

to which they were entitled whilst working to avoid being dis-incentivised from taking leave

Case relates to the Aviation Regulations (not WTR) which contain no express means of calculating holiday pay

CJEU concluded the pilots were to be put in the position, as regards remuneration, which was comparable to a period of work any inconvenient aspect which is linked intrinsically to the performance

of the tasks which the worker is required to carry out under his contract and in respect of which a monetary amount is provided must be taken into account when calculating holiday pay

Supreme Court distinguished between remuneration and expenses for ancillary costs (not incurred during leave)


The Williams Conundrum

The emphasis of the decision in Williams, that any payment made to workers is either pay or expenses, suggests that few aspects of remuneration escape inclusion for calculation of holiday pay

Prior to the Williams case: Overtime is excluded where an employee has normal working

hours

Commission and bonus only taken into account where the worker's pay varies with the amount of work done (e.g. productivity bonuses)


The Conundrum – Voluntary Overtime (1)

Does Bamsey still apply and should voluntary overtime be included when calculating Holiday Pay?

Neal v Freightliner and Fulton and anor v Bear Scotland In both instances workers regularly work overtime

In Neal the contract requires employees to work overtime when necessary

In Bear employees are required to work "not less than 37.5 hours a week"

Two more cases (Amec and Hertel) also concerning holiday pay

All claimants are seeking backdated holiday pay which is calculated to include their overtime payments


The Conundrum – Voluntary Overtime (2)

In both cases the Tribunal have considered the decision in Williams and considered that any components that are "intrinsically linked", such as overtime, must be included

Both Tribunal have concluded they are entitled to read words into the Regulations to make them compatible with the WTD

These cases are being appealed in late July 2014

The Government have been granted permission to intervene on the basis they believe the WTR and ERA properly implement the WTD


The Conundrum – Commission and Bonuses

Lock v British Gas Trading Employee paid basic salary and commission on sales but holiday

paid at basic rate only

Should commission payments be included in the calculation of holiday pay

ECJ decision is "yes" Commission is an intrinsically linked component of remuneration If not paid it would deter him from taking leave - a worker has the right

to enjoy, during his period of rest, entitlements which are comparable to those relating to the exercise of his employment

for national courts to decide how should be calculated


Implications for Employers

Employers may need to adjust holiday pay to include other elements than basis pay – at least for WTD leave

Significant potential liability as unlawful deduction claims can go back for many years back to 1998?


Possible Options

Watch and wait? Path of least resistance in the absence of legal certainty

Reorganise working patters/commission schemes? Practical difficulties in introducing change

Include overtime/commission now (but don't include back pay)? Possibly make discretionary payment

Calculations will be difficult

Could trigger claims for back pay

Pay up the shortfall Risk of significant expense


Holiday pay ready reckoner

Element of pay Included? Not included? Query?

Commission

Allowances

Bonuses

Expenses

Overtime


Shared Parental Leave

A new system of statutory parental rights will be introduced on 5 April 2015

It will apply to both employees and agency workers

The aim is to allow parents to share the statutory maternity leave and pay that is currently available only to mothers

The system will also apply to adoptive parents


What stays the same?

Two weeks' paternity pay

18 weeks' unpaid EU parental leave Although the age limit of the child does increase from eight to 18

from 5 April 2015

Two weeks compulsory maternity leave

52 weeks of maternity leave

39 weeks of maternity pay


The proposed changes

Qualifying parents will be able to share up to 50 weeks of leave and 37 weeks of pay.

So, everything other than the compulsory maternity leave period.

The current system of additional paternity leave will be abolished.

It will be up to the employees to propose the pattern of leave that they wish to take, and to discuss this with their individual employers.


Patterns of leave

Parents will be able to take SPL: at the same time as each other or separately.

in minimum periods of 1 week

in any combination

at any time during the 52 weeks after the birth/adoption

Employer agreement is required if the employee wants to take multiple blocks of leave.

Each employee can make up three notifications for leave or changes to periods of leave.


Agreement?

Employers will not be obliged to agree to the SPL pattern proposed by their employees.

The parents' respective employers will not need to contact each other to discuss their employees' leave entitlements.

The default position where agreement cannot be reached will be for a parent's portion of leave to be taken in one continuous block, to start on a date of their choice.


Notice requirements

Both parents must give their employers eight weeks' notice to begin SPL and claim SPP.

If they wish to take several blocks of leave, they must give their employers eight weeks' notice in respect of each period of leave.

The mother will be entitled to give notice that she wishes to end her maternity leave and start SPL before the child's birth.

However, she can change her mind within six weeks of the birth.

Employees will be required to provide a non-binding indication of their expected pattern of leave when they notify their employer of their intention to take SPL.


Eligibility

Each parent or prospective parent must meet employment and earnings and other qualifying conditions.

However, statutory maternity and adoption leave for a mother remain a right from day one.

For a self-employed woman with an employee partner who meets the qualifying conditions, a notional 52 weeks' leave (less the weeks that are paid as maternity allowance) can be transferred to SPL.

Her partner can also get the unpaid balance of weeks of maternity allowance as SPP.


SPP

SPP will be paid at the flat rate of statutory maternity pay (SMP).

This is £138.18 from 6 April 2014.

Therefore, it is likely that most couples will choose to forgo no more than 33 weeks of SMP.

The first six weeks of SMP is paid at 90% of the woman's pay if that is higher than flat rate SMP.

If she takes less than six weeks, the balance of the higher rate is lost.


Keeping In Touch Days

Each partner has 20 Keeping in Touch (KIT) days available to use in a period of SPL or SPP.

These cannot extend the period of leave.

However, they can be used to supplement the low rate of SPP or to try out patterns of part-time work.

As with the current KIT days, pay and the nature of the work to be done are both matters to be agreed.

NB - these days are in addition to the mother's 10 KIT day entitlement during maternity leave.


Returning to Work

An employee returning to work from SPL will have the right to return to the same job no matter how many periods of shared parental leave they have taken, as long as they have taken 26 or fewer weeks' leave in total.

This 26-week total will include periods of maternity, adoption, paternity and shared parental leave.

Once they have exceeded 26 weeks' leave, they would only have the right to return to the same or a similar job.


Implications for employers?

Careful planning will be required.

Encourage and facilitate planning in advance – allowing you most certainty.

Your policies will need to be redrafted and reviewed.

Consider the impact on your business and what you can accommodate.

A key unresolved question is enhanced maternity pay and how this should be treated.

Given the sharing of leave, should the enhanced rate of pay also be applied across the workforce?


Implications for employers?

The notice requirements are complicated and the legislative framework is confusing.

Employees are likely to get it wrong whilst these bed down.

Employees could be negatively impacted (in terms of their SPP entitlement) by getting this wrong, so be wary.

ACAS has just released its long awaited guidance.


Questions


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HR in Hospitality Employment Law Update

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