Many workers involved in care and support within the affordable housing sector are contracted to work on a casual worker basis, often through a 'bank' of available labour which can be called upon as and when their services are needed. Such workers have often signed up to what is commonly referred to as 'zero hours' contracts.

Zero hour contracts are a hot topic at the moment and the employment world has just woken up to the case of Podlasiak v Edinburgh Woollen Mill Ltd ET/270129/13, which was recently heard in the employment tribunal in Reading.

In this particular case, the claimant began working for the respondent on a zero hours contract on 19 May 2012. She left the respondent on 19 December that same year. At the point she left, she had three days' accrued but untaken annual leave.

What makes this case interesting is that the respondent had included a provision in the claimant's contract which provided that, on termination of her zero hours contract, she would be entitled to the sum of £1 in lieu of any untaken holiday.

Regulation 14 of the Working Time Regulations 1998 (WTR) says that where the worker's contract is terminated during the course of the leave year, then he or she is entitled to payment in lieu of any accrued but untaken leave.

Regulation 14(3) provides that the payment due is either:

"...such sum as may be provided for the purposes of this regulation in a relevant agreement..."


"...a sum equal to the amount that would be due to the worker at the rate of a week's pay in respect of each week of leave..."

The 'relevant agreement' in this case was the claimant's contract and, in particular, the provision regarding the payment of £1 to be paid in lieu of any untaken holiday. Holiday for zero hours workers has always been a bone of contention with employers and certainly an agreement to pay only a token sum for untaken leave has appeared in many zero hours contracts. However, this is the first time a 'relevant agreement' of this type has been challenged at an employment tribunal and the case reported.

In this case the judge took the view that Regulation 14 of the WTR should be construed so that a payment under a 'relevant agreement' cannot be less than an amount equivalent to the pay the worker could have received had they taken the leave during their employment. Instead of £1, the claimant received £176!

We should add that this is only a first instance decision and therefore not binding on other courts or tribunals. It is, however, unlikely that a higher court will overturn it. The token payment was a convenient way of trying to avoid the obligation of having to pay workers for untaken but accrued holiday and, in our view, counterintuitive to all of the other holiday cases. If you have a similar provision in the contracts you offer, then you may wish to consider reviewing them.

We suspect that one of the reasons this case has come to the fore is that the Business Secretary, Vince Cable has announced consultation on zero hours contracts (likely to be published later this year). The topics likely to be discussed will include the lack of a legal definition of a zero hours contract and the significant abuse of requiring exclusivity. Workers are not guaranteed a minimum number of hours but are prevented from working for other employers.

There are undoubtedly advantages to zero hour contracts for a number of workers (and many more employers). However, there are some clear abuses and we think everyone would welcome clarity in this area, which is hopefully on its way soon.