Evans v Malley Organisation Ltd (t/a First Business Support)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PILL,LORD JUSTICE JUDGE,Lord Justice Pill,LADY JUSTICE HALE |
| Judgment Date | 27 November 2002 |
| Neutral Citation | [2002] EWCA Civ 1834 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | A1/2002/0855 |
| Date | 27 November 2002 |
[2002] EWCA Civ 1834
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM EMPLOYMENT APPEAL TRIBUNAL
Royal Courts of Justice
Strand
London, WC2
Lord Justice Pill
Lord Justice Judge
Lady Justice Hale
A1/2002/0855
MR J STUART (instructed by Messrs Woodcock & Sons, Rossendale BB4 6NN) appeared on behalf of the Appellant
MR R COHEN (instructed by Employment Dispute Solutions Ltd, Shipley BD18 1YN) appeared on behalf of the Respondent
This is an appeal against a decision of the Employment Appeal Tribunal ("EAT") (His Honour Judge Wilkie QC presiding) given on 10th April 2002, reversing the decision of an Employment Tribunal ("ET") held at London south given in extended reasons dated 20th November 2001. The ET had held that the Malley Organisation Ltd (trading as First Business Support) ("the appellants") had not made any unauthorised deductions from the wages of Mr M Evans ("the respondent") and that the respondent was not unfairly dismissed. It was the first of those findings which was in effect reversed by the EAT. There was no appeal to the EAT against the second finding.
The relevant claim was clearly put to the ET by the respondent as a claim for holiday pay which, it was argued, had been calculated by the appellants on the wrong basis. The Working Time Regulations 1998 (1998 no 1833) implement Council Directive 93/104/EC and confer on workers the right to a period of paid annual leave. It was also argued that the payment made to the respondent during the period of 11 days immediately before the termination of his contact of employment when he was under suspension was calculated on the same erroneous basis.
The ET found, and the finding is not challenged, that the respondent resigned and was not dismissed from his employment. He left to work on the same day for a competitor of the appellants. He had been under suspension on the ground that he was allegedly part of a conspiracy between several members of staff to leave at the same time to work for a competitor.
The appellants provide services to businesses in employment law and health and safety. The respondent was employed by them from 9th March 1998 until 24th March 2000 as a sales representative under a written contract of employment. The particulars of the contract provided, so far as is material:
" Hours of Work
Your hours of work will normally be 9am to 5.30pm (Monday to Friday), but you will be required to work additional hours as determined by the needs of the business.
Remuneration
Your salary is currently £10,000 per annum payable monthly in arrears by credit transfer to your Bank and is detailed on payslip, and you are entitled to receive commission payments as detailed in your offer letter…"
[The offer letter is not before the court]
" Holiday pay
Your rate of pay for holidays is your normal basic rate."
Commission was much the larger part of the respondent's income under the contract. It was paid at the rate of 25% of the value of the contract to the appellants. The right to commission arose when the client had paid a quarter of the overall fee under his contract with the appellants. Contracts were usually for three years, so that the right to full commission usually arose after nine months.
Holiday pay had been paid during the period of employment on the basis of the appellants' view of the 1998 Regulations. The sum paid had been determined by calculating a weekly rate on the basis of the salary of £10,000 a year. Commission falling due during the holiday period had also been paid on the basis stated above.
The respondent's contention in his originating application was:
"I contend that holiday pay should be at the full normal rate of pay. Earnings in excess of basic pay (by way of commission paid on sales value) amounted to an average of £1,098 per week since introduction of the WTD. The statutory minimum holiday between this date and the date of termination totalled 4.6 weeks producing a net of underpayment of £5,031.
PAYMENT DURING SUSPENSION
I was suspended for a period of 11 working days leading up to my last day (24th March 2000) and paid at basic rate of pay. I contend that I am due my full average earnings during this period, calculated as an additional £2,416 over basic pay."
Before the ET the parties agreed what the relevant issue was. They were both represented, the respondent by an employment law consultant and the appellants by counsel. The issue was stated as follows:
"The Applicant received basic pay plus commission. He will say that during periods of holiday leave and during his suspension from work he should have been paid his average salary and not his basic salary."
The nature of the claim appears to me to be clear. With respect both to holiday pay during the period of employment and pay during the short period of suspension, the calculation was made on the wrong basis. A statutory right to holiday pay, though not mentioned, was clearly in contemplation. A procedural difficulty has arisen in that the ET, in their finding and in their extended reasons, have introduced section 13 of the Employment Rights Act 1996 ("the 1996 Act") dealing with unauthorised deductions from wages.
Having rejected the claim for unfair dismissal, the ET stated:
"23. We considered the Applicant's complaint that holiday pay should be paid at a rate equivalent to his average earnings. We found that the Applicant is an employee who is remunerated for employment in normal working hours; and whose remuneration does not vary with the amount of work done in the period, within the meaning of section 221(2) Employment Rights Act 1996. The Tribunal has considered the contract of employment. It clearly states that holiday pay is payable at the normal basic rate of pay. This has been accepted by the Applicant throughout the duration of his employment. The Tribunal was satisfied that the Applicant received all sums properly payable within the meaning of section 13 Employment Rights Act 1996. We reject the Applicant's submission that the Working Time Regulations operate so as to enhance the calculation of his holiday pay by commission earned."
The reference to section 13 was in my judgment unfortunate and unnecessary. In what was plainly a claim that holiday pay had been calculated on the wrong basis, the respondent's right arose by reason of section 221 of the 1996 Act and Regulations 13 and 16 of the 1998 Regulations.
Regulation 13 of the 1998 Regulations created an entitlement to annual leave. Regulation 16 provides, in so far as is material:
"(1) A worker is entitled to be paid in respect of any period of annual leave to which he is entitled under regulation 13, at the rate of a week's pay in respect of each week of leave.
(2) Sections 221 to 224 of the 1996 Act shall apply for the purpose of determining the amount of a week's pay for the purposes of this regulation, subject to the modifications set out in paragraph (3)."
The modifications set out in paragraph (3) are not material in this case.
Section 221 provides, in so far as is material:
"(1) This section and sections 222 and 223 apply where there are normal working hours for the employee when employed under the contract of employment in force on the calculation date.
(2) Subject to section 222, if the employee's remuneration for employment in normal working hours (whether by the hour or week or other period) does not vary with the amount of work done in the period, the amount of a week's pay is the amount which is payable by the employer under the contract of employment in force on the calculation date if the employee works throughout his normal working hours in a week.
(3) Subject to section 222, if the employee's remuneration for employment in normal working hours (whether by the hour or week or other period) does vary with the amount of work done in the period, the amount of a week's pay is the amount of remuneration for the number of normal working hours in a week calculated at the average hourly rate of remuneration payable by the employer to the employee in respect of the period of twelve weeks ending—
(a) where the calculation date is the last day of a week, with that week, and
(b) otherwise, with the last complete week before the calculation date.
(4) In this section references to remuneration varying with the amount of work done includes remuneration which may include any commission or similar payment which varies in amount."
It is not suggested that the other sections mentioned in section 221 affect the issue of construction to be decided in this appeal.
Regulation 35 of the 1998 Regulations provides that any provision in an agreement is void in so far as it purports to exclude or limit the operation of any provision of the regulations, save in so far as the Regulations provide for an agreement to that effect. I see no basis on which the operation of Regulations 13 and 16 can be excluded in this case. Moreover, the reference by the ET to section 13 and to "unauthorised deductions" does not affect the validity of their reasoning on section 221. Their reasoning in paragraph 23 is clear. It is not now suggested that their reference to section 13 taints their decision, provided of course that their construction of section 221 was correct. It is upon the meaning of that section, in my judgment, that the issue on holiday pay in this appeal turns.
Before considering that issue, I refer to Regulation 14 of the 1998 Regulations. Issues upon it have been raised on behalf of the appellants. The...
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