Working Time Directive: What are the new legal developments?

Under the Working Time Directive, employers must offer workers at least four weeks’ paid holiday, daily and weekly rest periods, and an average working week of no more than 48 hours unless (in the UK) an “opt out” has been signed. 

And the UK Working Time Regulations say precisely that – but issues such as what should be included in holiday pay; how holiday rights are affected by long-term sickness absence and what elements of a worker’s job count as “working time” are still being fought over, and decisions are being made in both UK and EU courts and tribunals which affect all employers.

Holiday pay calculations

The first concerns the calculation of holiday pay. In 2011, British Airways had an ongoing battle with its staff about the calculation of holiday pay. Pilots and cabin crew’s pay is made up of a variety of supplements and allowances in addition to basic pay – but these payments were dependent on the crew actually doing their jobs and so were not included in holiday pay. 

Staff felt short-changed by their employer, as they were missing out on receiving their usual salary when on holiday and their unions took their claim to the European Court of Justice. 

The European Court of Justice set out the principle that holiday pay should include all payments that were “intrinsically linked” to the performance of the workers’ duties, not just basic pay. It was estimated by the British Airline Pilots’ Association (BALPA) that the total retrospective value of holiday pay claims totalled over £20m for pilots and more than £50m for cabin crew. 

But the reverberations of this case are being felt way beyond the airline industry. 

UK courts and tribunals are bound by the European Court’s interpretation of the Working Time Directive and the issue of what additional payments count as being “intrinsically linked” to the performance of the worker’s duties is a knotty one that the courts are still grappling with. 

In the UK, many workers receive overtime or commission in addition to their basic pay and the bad news for employers is that courts have ruled that in many circumstances holiday pay should include an element for these payments, in particular if they are received sufficiently regularly to amount to “normal” earnings. 

But all circumstances are different and employers should take specific legal advice to assess the extent of their obligations. 

Sickness absences

A second area where the calculation of holiday pay continues to cause a headache for employers concerns what happens to holidays during periods of long-term sickness absence. In the case of Stringer v Inland Revenue, workers who had been on extended sick leave due to illness complained they weren’t paid for the holidays that they had accumulated whilst absent. 

The European Court of Justice ruled that the employees had the right to accrue holiday whilst on sick leave and were entitled to take leave once they had returned to work.

Alternatively, if employment was terminated due to prolonged absence, then the employee must be paid in lieu. 

Most recently, in the case of Plumb v Duncan Print Group, the UK Employment Appeal Tribunal, whose decisions are binding, held that in such cases untaken holidays roll over for a period of up to 18 months following the end of each holiday year and that there are no conditions the employer can apply to the worker’s right to take the holiday in the relevant holiday year for rollover rights to apply. 

What counts as “working time”?

Perhaps surprisingly, another aspect of the Working Time Directive that is still being explored is the issue of what counts as “working time” – particularly important in ensuring sufficient rest periods are taken by workers and in the UK whether an “opt-out” is required from a worker

The recent case of Spanish alarm company Tyco, concerned burglar alarm engineers whose local offices were abolished to save money and who consequently travelled directly from home to their daily appointments and back again. 

The European Court noted that the Working Time Directive defined “working time” as any period in which an employee is working at the employer’s disposal and so travel to customer appointments in these circumstances must count as “working time.” The headache for employers is to ensure rosters do not take workers over daily and weekly working time limits. 

These three examples highlight the challenges faced by employers when attempting to keep abreast of changes to employment regulation constantly being made by “judge-made” case law, and demonstrate how looking at UK Regulations is increasingly unlikely to reflect the actual legal position. 

Employers need to keep their obligations under the Working Time Directive under constant review to ensure compliance and avoidance of potentially costly claims.

Nick Soret is head of consultancy support at NatWest Mentor.

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