A Scottish skirmish and the on-going battle over holiday pay

16 February 2016

It should have been a single question: do you include overtime and commission when calculating holiday pay? However, that question has already led to numerous trips to the Employment Tribunal, Employment Appeal Tribunal (“EAT”) and the European Court of Justice (“ECJ”). We are now on the brink of an EAT decision which may finally sound the rallying call for the myriad of holiday pay claims currently stayed and sisted around the country – Lock v British Gas. There has been an appeal decision hiatus since the initial decision of the EAT in Fulton v Bear Scotland, and in the battle between employees and employers, both sides have enjoyed some victories, but neither has yet managed to deal a conclusive blow.

For the employers, some hastily introduced legislation has provided a two-year backstop period for most unlawful deductions claims which is intended to put a stop to employees claiming holiday pay shortfalls that go back many years. For the employees, there was some reassurance regarding voluntary overtime from the Northern Ireland Court of Appeal in Patterson v Castlereagh Borough Council. Now, Advocate General for Scotland v Barton, a decision of the Scottish courts from December regarding the technicalities of judicial interpretation, has the potential to provide some further succour to the employer camp.

This is a fundamental issue in the appeal of Lock. One of the key grounds of appeal in that case was that the EAT in Bear Scotland had gone beyond the requirements of EU law in the way that it read additional wording into the Working Time Regulations to give effect to the Working Time Directive. Courts are required to do “all that is possible” to interpret UK law in a way that implements EU law – often known as the Marleasing principle. However, counsel for British Gas is reported to have characterised the EAT’s approach in this regard as committing “judicial vandalism” and distorting the expressed will of Parliament.

In this context, it is timely then that we have had a decision from an appellate court – the Inner House of the Court of Session – on the proper application of the Marleasing principle by Employment Tribunals.

The case of Barton concerned a part-time worker’s right to a pension under the Part-time Workers Regulations and its compliance with the EU Directive. The EAT applied Marleasing to reword the Regulations and remove the phrase “full-time” from them, which allowed it to find that the Claimant had been subjected to less favourable treatment.

The Court of Session overruled that interpretation and commented on the proper application of the Marleasing principle as follows:

The rewriting involved in the EAT’s approach would, we consider, be so fundamental and would distort a piece of primary domestic legislation that it would not be an appropriate application of the Marleasing principle.  As indicated in the discussions of that principle in the authorities to which we refer above, there are limits to what can be done by the court to amend the expressed will of Parliament as set out in its legislation and care has to be taken to ensure that the court does not legislate under the guise of reading down.”

No submissions were made in Lock in relation to the judgment in Barton as it was handed down after the hearing of Lock before the EAT in early December. However, it is contrary to the approach adopted in Bear Scotland and illustrates that the opinion of the court in that case is not the final word. The EAT may well go the other way in Lock and leave us in desperate need of a decision from the Court of Appeal or the Supreme Court in Lock.

Even when the decision in Lock is handed down, it is unlikely to be the end of the matter, with thoughts of potential appeals to the higher courts no doubt already in the minds of the parties to that case, as well as a need for further decisions of the tribunal and therefore even more appeals on those decisions. If that is the case, then Barton shows that neither side should begin the count the spoils of war just yet.

We wait with anticipation for the decision in Lock; its arrival may edge employers and employees a little closer to an answer to that ‘simple’ question of how to calculate holiday pay.

Further information

Should you be affected or have any questions about the issues raised in this blog, please contact a member of our employment team.

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