UK: Two Recent Cases Of Interest

Last Updated: 25 February 2010
Article by Sarah Ozanne and Tom Cloke

We report below on two recent cases that highlight issues of interest to employers; the first UK judgment in light of the ECJ's decision in Pereda and an EAT decision on changes to terms and conditions of employment.

Tribunal decides sick worker can carry over 'lost' holiday

In the first UK judgment following the European Court of Justice (ECJ) in Pereda v Madrid Movilidad, an employment tribunal has held that the Working Time Regulations can be interpreted to give effect to the decision in Pereda. As a result, a worker who is prevented from taking annual leave due to a period of incapacity and returns to work with insufficient time to take that leave within the relevant leave year must be allowed to take the leave in the following leave year. In reaching this conclusion, the tribunal also recalled the Stringer case, in which the ECJ and House of Lords ruled that holiday continues to accrue during sick leave.

In Shah v First West Yorkshire Ltd, Mr Shah had booked four weeks' holiday, but suffered a broken ankle shortly before the holiday began. This resulted in over three months of sickness absence, including the period he had booked as holiday. By the time Mr Shah returned to work from his sickness absence, the leave year during which his holiday had been booked had ended and a new leave year had begun. When Mr Shah attempted to reclaim his holiday, his employer refused, stating that it related to the previous holiday year and had therefore been 'lost'.

The tribunal upheld Mr Shah's claim for loss of holiday under the Working Time Regulations 1998 (WTR), but in doing so acknowledged the incompatibility, which had been highlighted as a result of Pereda, between the WTR and the Working Time Directive (WTD). Under regulation 13(9) of the WTR, an individual's statutory holiday entitlement must be taken in the leave year in which it accrues. In order to cover the "limited and special situation" dealt with in Pereda, which was, according to the tribunal, "essentially the same" situation as encountered by Mr Shah, the tribunal construed some additional wording into regulation 13(9). This extra wording provided that workers who are sick whilst on annual leave, but who then return to work with insufficient time to take that annual leave before the end of the leave year, can carry over the leave into the following leave year.

The Shah decision is only at employment tribunal level and we understand that it is not being appealed. The decision will therefore not be binding upon other tribunals or courts. However, it gives a clear indication of how the EAT and the higher courts are likely to approach regulation 13(9) in similar circumstances. The WTR may also be amended by Parliament in due course, but, in the meantime, employers should be aware of workers attempting to reclaim holiday due to sickness. Employers should continue to monitor and manage such situations carefully, and may wish to review their policies and practices as a result.

For more details on Pereda v Madrid Movilidad please click here.

EAT permits variation of employment contracts without express consent of staff

The recent EAT judgment in Bateman v Asda Stores has held that Asda was entitled to rely on the wording of its staff handbook and make changes to the pay and work structure of its staff without the need to obtain their express consent.

The vast majority of Asda staff were employed on a "Top rate" pay structure while a small proportion of the staff were employed on a different pay structure. Asda wished to ensure that its entire staff were employed on the same pay and work (Top rate) structure and so amend some employment contracts to bring them in line with the Top rate structure. Asda sought to ensure that no employees suffered a reduction in pay as a result of the decision to amend the contracts and carried out extensive consultation. 9,300 employees transferred voluntarily to the new regime but ultimately 8,700 contracts were transferred involuntarily. Asda justified its decision to impose the new structure on the staff by relying on the provisions of its staff handbook, which was incorporated into the contracts of employment. This stated, "The Company reserves the right to review, revise, amend or replace the content of this handbook and introduce new policies from time to time to reflect the changing needs of the business and to comply with legislation".

Six test cases were brought against Asda. The employment tribunal concluded that it had no doubt that the staff handbook permitted Asda as a matter of contract to do what it did. The Claimants appealed. The EAT upheld the tribunal's decision and dismissed the appeal.

The employment tribunal held that the pay of the Claimants was fundamental to the employment relationship and that, in the light of the significant changes to the Claimants' contractual terms as to pay, Asda was required on ordinary principles to obtain the consent of the employees. However it accepted that an employer may reserve to itself the contractual power to vary terms in a contract of employment without consent by reserving the ability to change a particular aspect of the contract unilaterally. It held that there may be exceptions to this approach, for example where the employer had acted so unreasonably or so arbitrarily or capriciously as to amount to a breach of the implied term of trust and confidence. However, no such exceptions arose in this case. There had been consultation and several months' warning and there was no challenge that Asda infringed mutual trust and confidence.

The EAT's judgment focuses on the construction and wording of the staff handbook. It also makes it clear that grounds of appeal are limited and so, for example, it was not open to the Claimants to now argue that there had been a breach of mutual trust and confidence when they had conceded that there was no such issue in the employment tribunal.

This case will be of great interest to employers seeking to change terms and conditions of employment. It certainly supports the usefulness of contractual clauses allowing for changes by the employer. However, such clauses will need to be very carefully drafted and then carefully relied upon to avoid challenges of breach of the implied term of mutual trust and confidence.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 23/02/2010.

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