1. Statutory holiday pay: EAT confirms pay for non-guaranteed overtime must be taken into account

“Non-guaranteed” compulsory overtime pay (“non-guaranteed” in that the employer is not obliged to offer overtime, but it is compulsory for the worker to perform it if offered) should be taken into account when calculating statutory holiday pay for a worker’s 4 week EU-derived holiday entitlement, notwithstanding that UK regulations exclude this. Following a hearing at the end of October, the EAT has now handed down judgment upholding the ET decision last year. (Bear Scotland v Fulton, EAT)

The EAT confirmed that the Working Time Regulations can be interpreted purposively to comply with EU law requiring the payment during statutory holiday of “normal remuneration” reflecting both basic salary and remuneration “intrinsically linked to the performance of the tasks” carried out under the employment contract. The ruling confirmed that pay for non-guaranteed overtime was remuneration to be taken into account when calculating statutory holiday pay; this could be achieved by reading the rules on calculating a week’s pay as amended so that such overtime pay is included (and presumably applying the provision to average pay over 12 weeks where the amount of overtime varies). A large number of workers who have received only basic pay for holiday potentially now have the right to bring an unlawful deductions from wages claim. However, the EAT gave permission to appeal and the ruling is likely to be appealed to the Court of Appeal.

Holiday pay claims can be brought within 3 months from the last of the series of deductions (or underpayments) and could therefore potentially go back several years. However, there is some good news for employers. The EAT ruled that a gap of more than 3 months in any alleged series of deductions will prevent a claim in relation to earlier deductions. If this is upheld on any challenge, it is likely to significantly reduce the scope for claims as a number of employees may well have gone 3 months without taking any of their 4 week EU-derived holiday entitlement. Further, the EAT ruled that workers cannot retrospectively designate which holiday was the 4 weeks’ EU-derived holiday and which was the additional 1.6 weeks’ domestic leave so as to create a longer unbroken series – the 4 weeks’ leave will be the first to be taken unless otherwise provided by the contract or directed by the employer.

The judgment (available here) leaves open the position where overtime is voluntary for both parties, ie where there is no obligation on the employer to offer it and no obligation on the worker to accept.

Business Secretary Vince Cable has announced the creation of a taskforce (made up of government departments and business representatives) to assess the impact of the ruling for business and how it can be limited.

Meanwhile, the returned ET hearing in Lock v British Gas was postponed from October pending the Bear Scotland v Fulton ruling, and is now due to be heard on 4 February 2015. The ET will consider whether UK legislation can be interpreted in line with the ECJ ruling that commission payments must also be reflected in statutory holiday pay.

We are preparing a more detailed practical analysis of the impact of the various holiday pay cases, which will be available shortly to clients on request.

2. Termination: employees can be held to notice period and need not be paid if they refuse to work

The Court of Appeal has upheld a High Court ruling that, if an employee leaves without giving contractual notice (save in constructive dismissal circumstances), the employer has a choice whether to accept the breach as ending the contract, or to affirm the contract. If it chooses to affirm, it cannot force the employee to work but it can require the employee not to work for a competitor or contact clients (unless there is evidence that this would in effect compel the employee to return to work for the original employer). It can also require the employee to observe any restrictive covenants, provided the scope and full term of these are reasonable and enforceable at the date of the contract and it is reasonable to enforce them at the date of the injunction hearing. The Court of Appeal considered that the court's discretion on the latter point was not all-or-nothing and enabled it to enforce covenants only for part of their term.

Further, if the employer is willing for the employee to work during the notice period but the employee refuses, there will be no obligation to pay the employee during this period.

The case highlights the importance of making a prompt decision on how to respond to a repudiatory breach by an employee. If the decision is to hold the employee to the contract, care must be taken to avoid conduct which could be treated as accepting the breach (such as issuing a P45). Employers should also bear in mind the court's discretion to enforce only part of the term of a covenant (provided the full term was reasonable at the contract date).

Of course, in most cases an employer's desire to protect customer connections and confidential information will mean that it is safer to put employees leaving to join a competitor on garden leave, accepting that the amount paid to them during such leave is a necessary evil to keep them out of the market. It will be comparatively rare that an employer is willing to allow the employee to continue to work and thereby potentially be able to stop pay if the employee refuses to work. There are also a number of risks in taking the latter course of action: the court may conclude that the employer doesn't really want the employee back at work at all but is simply making a tactical request, and the longer the period the employee goes unpaid in a notice period (where he/she would normally be paid) the greater the chance that the court could hold that the employer is in effect forcing him/her to work for the employer. Making the wrong judgment call on such an issue can have unfortunate results if the employer is found to have committed a repudiatory breach of contract by not paying the employee, as this would entitle the employee to leave immediately and without any restrictive covenants to bind him. (Sunrise Brokers LLP v Rodgers, CoA)

3. Discipline: no breach of duty in instituting disciplinary proceedings where within range of reasonable responses

Employers will not breach their duty of care by starting the disciplinary process where this is objectively within the range of reasonable responses, given the evidence which was or should have been available after a reasonable investigation. The fact that the disciplinary charge is later dismissed or that another employer might reasonably have taken a different approach does not in itself mean that there was a breach. (Coventry University v Mian, CoA).

4. Tribunal breach of contract claims: set-off defence available to employer as alternative to counterclaim

The EAT has confirmed that an employer facing a breach of contract claim in the tribunal may be able to recover sums owed to it by the employee (eg, overpaid wages) by pleading set-off as a defence, thereby reducing the amount claimed by the employee. This will be useful if the employer has missed the 28 day time limit from receipt of the ET1 to lodge a counterclaim, although of course it does not enable the employer to recover any more of the debt than the value of the employee's own claim, and only if that claim succeeds. (Ridge v HM Land Registry, EAT)

5. Constructive dismissal: claim not prevented by employee's prior repudiatory breach

The EAT has ruled that an employee who has committed a prior repudiatory breach can still bring a constructive unfair dismissal claim, in this case based on the employer's alleged unfairness in investigating his misconduct (although compensation is likely to be reduced, potentially to nothing).

The EAT also ruled that the employer's investigation had not breached any reasonable expectation of privacy when accessing personal emails the employee had sent from his work email account, given that this was in breach of the IT policy which the employee had drafted himself and that he had not marked the emails as private or personal. (Atkinson v Community Gateway Association, EAT)

6. Shared parental leave: further regulations and guidance

BIS has published further sets of draft regulations connected with the new SPL regime, available here. These extend the regime to parents fostering to adopt, adopting from overseas and using surrogacy.

They include draft regulations extending the current right to 18 weeks' unpaid parental leave to parents of children aged under 18 (currently this right is only available to parents of children aged under 5). The draft does not include any transitional provisions so it would appear that parents of children now aged 5 or over, who have unused leave entitlement, will be able to take their remaining entitlement once the regulations come into force, planned for 5 April 2015.

ACAS has published a detailed guidance note on the new shared parental leave rules, together with supporting material including standard letters and a policy document. These documents are available here. It is expected that BIS will publish a form for employees to use to give the required notices under the new regime by the end of this month.

7. New publications: employment status review, industrial disputes report, and guidance on BYOD, tax-free childcare and surveillance 

  • BIS has launched an employment review intended to "help clarify and potentially strengthen the employment status of up to a million British workers". Interim findings are expected by the end of 2014 and recommendations should be made by March 2015.
  • The Carr review into the alleged use of 'extreme tactics' in industrial disputes has been published.  Due to the limited evidence provided, the report does not reach any firm conclusions on the level of use nor does it make any recommendations for reform.
  • The Government has published new guidance on managing BYOD risk, setting out best practice for ensuring device security and designing network architecture so as to prevent devices from accessing particularly sensitive data.
  • HMRC has invited comments by 15 December 104 on draft guidance on the new tax-free childcare regime due to be implemented in autumn 2015.
  • The Information Commissioner's Office has updated its code on the use of surveillance and CCTV, reflecting developments in technology.  The changes are summarised here.