UK: Working Time - The Current Issues

Last Updated: 21 June 2005
Article by Petra Venton

Is there a future for opt-out clauses?

The Working Time Regulations 1998, limit the average working time for a worker to 48 hours per week. The average is generally taken over a 17-week period. One way of getting round this limit is to ensure that workers agree in writing not to be subject to the limit, the so-called opt-out. Under current legislation, this provides a simple way for employers to avoid the limit on average weekly working time and many employers have taken advantage of this by including an opt out clause in their contracts of employment. Such clauses are often included in all contracts of employment regardless of whether the employee concerned actually works in excess of the 48-hour limit.

This practice may be about to end. Earlier this month, the European Parliament voted to abolish the right to opt-out within 3 years of the new law coming into force. This change needs to be approved by the Council of Ministers before it becomes law. Tony Blair has vowed to block the proposal at the Council and has referred to the European Parliament’s decision as ‘wrong and misguided.’

What does this mean for employers? Not much if your workers don’t work above the statutory limit of an average of 48 hours per week. The Working Time Regulations set out how to calculate your workers’ average working time. Guidance on this can be found on the DTI website – Employers would be well advised to review their workers’ working time now to see if the abolition of the optout (if it happens) will be an issue for them. There are other ways of avoiding the statutory limit but they are limited and certainly not of universal application.

Sick Leave and Holiday Pay

Can a worker accrue statutory holiday whilst off sick?

Until recently, workers who were on longterm sick leave accrued their statutory holiday entitlement to four weeks’ paid leave per year during their absence. This was of particular value to workers who had exhausted their entitlement to sick pay but remained on their employer’s books. Such workers could top up their benefit income by four weeks’ holiday pay. Further, if their employment was ended, they had to be paid in lieu of holiday pay accrued during their sickness absence.

This has all changed. In Commissioner of Inland Revenue –v- Ainsworth and ors, the Court of Appeal held that a worker who is absent from work due to ill-health for a period that covers a complete holiday year is not entitled to four weeks statutory paid holiday. In reaching this decision, the Court of Appeal, concentrated on the definition of ‘leave’ and concluded that the purpose of the Working Time Regulations was to grant workers leave from work. It followed, that workers who are already absent from work on sick leave could not benefit from holiday at the same time. Further, workers who are off work for a whole leave year are no longer able to claim pay in lieu of holiday accrued during their sickness absence if their employment is terminated.

This decision has left a number of issues unresolved and is likely to be appealed. Not least, is the position of workers who are off sick for less than a whole holiday year. Does such an employee continue to accrue statutory holiday during their absence which they can then take when they return to work later that holiday year? Until the courts provide further guidance, employers would be advised to allow employees to accrue statutory holiday leave whilst they are off sick unless the period of sick leave exceeds a whole holiday year.

The decision only addresses statutory holiday. Employers who give their workers more than four weeks holiday per year will need to look to the wording of their contracts to see whether the additional contractual holiday will accrue during periods of absence. However, most employers adopt the same approach for contractual holiday as that taken for statutory holiday as it is easier to administer.

The decision also leaves unclear the position of additional maternity leave. Previously, employees on additional maternity leave had been believed to be in a similar position to those on long-term sick leave – i.e. they continued to accrue statutory holiday during their absence. The Court of Appeal failed to provide any guidance on this issue and so we will have to wait for a final answer on this point.

How many years’ accrued holiday pay can a worker claim?

The second issue the Court of Appeal looked at was whether a worker can only claim accrued statutory holiday pay for the current holiday year or whether they can recover unpaid holiday for a longer period. This question is particularly relevant to contractors and others whose status as a worker is in question. Prior to this case, employers who had wrongly treated a worker as a self-employed contractor could have faced a claim for accrued holiday pay going back to 1998. The cost of such claims, particularly in the construction industry, was potentially vast. However, the Court of Appeal has significantly limited such claims by deciding that workers’ claims for unpaid holiday can only relate to their last holiday year.

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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