Jersey: Recent Decisions In The UK May Affect You If You Pay Staff The Minimum Wage And Also, How Much You Pay Them Whilst They Are On Holiday!

Last Updated: 30 December 2013
Article by Colette Hunt

IF YOU PAY AN EMPLOYEE THE MINIMUM WAGE, ARE THERE ANY TIMES WHEN YOU REQUIRE THEM TO BE ON DUTY OR ON CALL AND THEY ARE NOT CURRENTLY BEING PAID AT LEAST THE MINIMUM WAGE DURING SUCH PERIODS?

If so, you should immediately review the amount being paid to them in light of a recent decision of the EAT in England. The case involved a care worker (W) who was employed by a care agency. She was paid £6.35 per hour in accordance with the National Minimum Wage Regulations 1999 ("NMWR") applicable in England for the time spent attending to the clients in the community, but she was not paid for the time that was spent travelling between the clients' homes.

W also undertook "sleepovers", when she was required to be present at a client's home from 11pm to 7am, and during this time, she was paid £40. During these night shifts, she was provided with a bed and permitted to sleep except when her services were actually required.

W was entitled to the NMW throughout the time she was required to be present, irrespective of whether she performed any tasks. For the time she spent travelling between clients' homes, she was also entitled to be paid, and at the NMW rate.

Jersey's minimum wage Regulations set the hourly rates in the island effective from 1 April each year and in September, the Employment Forum recommended that the hourly rate be increased to £6.63 from 1 April 2014.

Since April 2013, the payment of fixed minimum hourly rates to a trainee who is on "approved training" has been a legal requirement in the island; the hourly rates currently being £4.90 for year 1 and £5.71 for year 2 of the training, with the Forum recommending that these increase to £4.97 and £5.80 respectively from 1 April 2014.

As there are various conditions which need to be complied with in order to be able to pay a trainee less than the minimum hourly rate (currently £6.53), if you are uncertain whether the training you are providing will be regarded as "approved training", then seek advice to avoid being on the end of a potential claim.

AND, ARE YOU PAYING EMPLOYEES ENOUGH WHEN THEY ARE ON HOLIDAY?

The decision of a Scottish Tribunal is a potential concern for employers who have staff who work varying hours each week and who are paid overtime.

The Tribunal analysed the amount paid to an employee ("N") during his annual leave and took into account the fluctuating hours that had been worked in the weeks leading up to his holiday commencing.

N's contract required him to work a basic week of 35 hours (5 x 7 hour shifts). He was also required to work varying shifts, including one Saturday in every three weekends. If he worked hours in excess of this (including any additional Saturdays), he was entitled to be paid overtime at a higher hourly rate of pay.

In fact, N never just worked a 7 hour shift. He regularly worked shifts which lasted between 8 and 12 hours, and for each hour that was worked after the first 7 hours of each shift, he was paid a higher rate of pay because this was regarded as overtime.

The employer argued that the normal working week was 35 hours and any hours worked over that were not guaranteed. Accordingly, when N took holiday, he was paid holiday pay based on his salary of only 35 hours.

Previous case-law on the point supported the approach taken by N's employer, namely to ignore the overtime for the purposes of calculating the holiday pay. But N argued that this was wrong in practice because he was required to work the additional hours. He relied on a previous decision which was a ruling from the European Court of Justice relating to the EU Working Time Directive ("the Directive").

N was successful. The Tribunal found that his rate of holiday pay should be calculated using not only his basic pay (the 35 hours per week) but also the average of the overtime that he had received for the shifts worked in excess of the 7 hours and additional Saturdays, in the preceding 12 weeks. This was the case notwithstanding that the overtime or shift premiums were not guaranteed.

It is not surprising that N's employer is appealing this decision but if it were to be upheld by the Employment Appeal Tribunal, it will mean that any employer who pays either overtime or shift premiums to staff but has not allowed for such payments in the weeks prior to holiday being taken could be exposed to a claim for additional holiday pay. Potentially, this could result in a large number of claims and affect many employers.

As this specific point does not appear to have been addressed previously by the Jersey Employment Tribunal, it may be just a question of time before a claim is lodged on the same premise, namely that holiday pay should correspond to or be linked to an employee's normal remuneration, or should take into account payments which are "intrinsically linked" to the performance of the tasks which the employee is required to undertake pursuant to their contractual obligations.

Potentially if upheld, by analogy, the Scottish decision could also have an impact where an employee's remuneration package includes a contractual entitlement to commission and/or a bonus, as well as basic pay. This is also supported by the decision in ZJR Lock v British Gas of the CJEU on 26 November 2013. A saleman's pay consisted of two elements, basic pay and commission. His commission varied each month in accordance with the sales he achieved. Over Christmas 2011 he was on annual leave for 2 weeks and unable to make any sales during this period. When British Gas only took his basic pay into account when calculating his holiday pay for the 2 weeks, the salesman brought a claim for additional holiday pay. Again, the Court's decision was that if commission is intrinsically linked to the performance of the tasks the worker is required to carry out under their contract, then it must be allowed for in the holiday pay calculation.

For many, the annual leave year runs from 1 January to 31 December. As the end of the year approaches, as always, there will be some employees who have not taken all of their annual entitlement by the end of the period. Some of you will have an annual leave policy which permits any untaken days to be carried forward, for a limited period (say until the end of January) and then if not taken. Others may have a policy or practice of paying an employee a sum in lieu of the days that have not been taken. If a lot of paid overtime is worked in the run up to the end of the holiday year, the calculations of the rate that is to be paid (either during the remaining days of the leave or in lieu of the untaken days) could become a point of contention.

Although the Directive is not in force locally, if you are uncertain about whether the wording in any contracts relating to overtime, commission or bonus, could mean that you are exposed to a claim for additional holiday pay, it would be prudent to seek some advice sooner rather than later to prevent holiday leave (a time to be enjoyed) turning sour.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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