Roll up, roll up. The great 'rolled-up' holiday pay debate is over &150; or is it?


In these days of endless age discrimination law seminars, it is hard to give some issues the interest they deserve, such as the holiday provisions of the Working Time Regulations 1998 and, in particular, regulation 13. The difficult questions are often overlooked, especially in relation to rolled-up holiday pay.



For organisations with 'ordinary' full-time daily contracts, the regulations present few issues in this area. But for those dealing with the calculation of holiday entitlement for part-time workers/those seeking flexible working, issues are introduced that raise practical questions, such as how to deal with bank holidays (namely, to ensure that those who never work on Mondays/Fridays do not lose out).



Although the answer to the bank holiday question is usually straightforward (add them to the holiday leave proper, pro rata them, give the same number to all (pro rata), then require those who work on a bank holiday to take the day off as a holiday), how to deal with the worker who has more irregular working patterns is much tougher.



Here, the workers themselves (often those with families abroad) will wish to avoid the strait-jacket of set holiday leave and will prefer simply to be paid for the work they provide and to work when called on/when they agree to do so. The practical answer has usually been to focus on the hourly rate paid and, effectively, 'build in' to it the full holiday pay they would otherwise be due. Twenty days' paid holiday leave simply will not work for these people, but with rolled-up pay they can perhaps be absent whenever they like. Even if they chose to be away for 20 weeks in a year, they will still have the same entitlement.



The problem is that for some years there has raged (ever so quietly) a dispute as to whether this is permissible at law. The confusion began even before the regulations, with the Court of Appeal case of Morley v Heritage Plc (1993) IRLR 400 and the difficulty in discussing the matter in contractual terms without confusing the concepts of 'a paid day off' (which costs the company no more than if you worked the day) and of being owed 'extra money', where a worker received pay for the day in question but did not enjoy a day off.



With the Working Time Directive (2003/88/EC) and then the regulations, the law has been pushed towards protecting the well-being of workers - and it is workers, rather than simply employees, who are protected - by ensuring they have time away from work, rather than simply receiving 'extra' pay.



Perhaps, for this reason, the European Court of Justice (ECJ) has handed down judgment in three conjoined cases, headlining with Robinson-Steele v RD Retail Services Ltd (2006/C/7 in the Official Journal of the European Union for June 2006). The ECJ has clarified that rolled-up holiday pay is, on its face, unlawful, and that even if it is transparent that the employer is making such payments and they are genuinely additional amounts, this will not comply with the directive (and hence any interpretation of the regulations).



This may seem a boost for the philosophy that the law should ensure people actually take their minimum holidays. However, the ECJ spoilt it by stating that, provided such rolled-up payments were transparent (and genuine), the employer should be able to offset such monies against liability for any payments due during the relevant holiday period. Although the burden is on the employer to show this, it is hard to see how this part of the ruling fits with the rationale of the first.



Officially, therefore, the practice of 'rolling up' should be avoided, but those stuck with it are advised to look carefully at the scheme's transparency and practical operation and to ensure they can benefit from this potential off-set.



Politics, not race



One area that never fails to register interest is that of race discrimination, and seldom more so than in the case of Redfearn V SercoLimited T/A West Yorkshire Transport Service (2006) EWCA Civ 659. After a short wait, the Court of Appeal has handed down judgment in this infamous case that involved an employee who was dismissed by reason of his membership of the British National Party (BNP).



The employee in question is white and worked as a bus driver and escort for people with learning disabilities. It was learned through a local newspaper that he had been elected as an official of the BNP. The employee was summarily dismissed after representations from trade unions. They expressed concerns about the employment of someone holding the views of an official of the BNP, while working with a large proportion of passengers and workers of Asian origin. The respondent dismissed the employee on the basis that the continuation of such employment would present a health and safety risk to these groups.



The employee claimed that 'on racial grounds' he had been treated less favourably than the respondent would have treated other persons and, accordingly, that he had been discriminated against, contrary to section 1(1)(a) of the Race Relations Act 1976. Although the employment tribunal rejected that, commentators reacted with some surprise when the Employment Appeal Tribunal upheld his argument, pointing to the broad construction of the Act.



If allowed to stand, this would have been an extraordinary use of the Act and not one envisaged on its introduction, since the Act may have become an inadvertent shield for those holding views contrary to racial equality.



The appeal court has now backed the original tribunal decision, having regard to the purpose of the Act and the context of its provisions. It found that while race considerations were involved, the employee had not been dismissed on grounds of race within the proper meaning of the Act. Indeed, he had been dismissed on the grounds of a non-racial characteristic shared by a small proportion of the community - being a BNP member and official. The suggestion was that he was, if anything, dismissed on 'political grounds', which was not an area of discrimination law. His secondary claim of indirect discrimination was also rejected.



Darren Clayton, Doyle Clayton, London