Topics covered in this month's webinar include:

• PSNI Holiday Pay Case
  • What do you recommend employers should do?
  • The appeal of PSNI Case
  • Conducting a holiday pay audit
  • Liability for back pay if employers take action now
  • Implications for employers who took action following the Bear Scotland case
  • Should travel allowance be included in holiday pay?
  • Can you define ‘regularity?’
  • Claims to the County Court
  • Pension and tax implications of back pay
  • Calculating holiday pay for zero-hours workers
  • Specifying working hours on a contract of employment

• Calculating pay during suspension

Scott Alexander, Head of Learning and Development at Legal Island, discusses your Northern Ireland employment law questions and topical HR issues with Seamus McGranaghan from the employment team at O'Reilly Stewart Solicitors.

Don’t forget to visit the ‘Seamus Says – Employment Law Discussion’ section on the employment law hub, which provides answers to hundreds of employment-related questions addressed throughout this webinar series.

Transcript

Scott: Good morning, everybody. Scott Alexander here from Legal Island. I'm joined by Rolanda Markey from Legal Island, and we also have, of course, Seamus McGranaghan and Hannah McGrath from the employment team in O'Reilly Stewart.

We're dealing with your questions today. We're following up with some of the holiday pay questions that arose and we didn't quite get time to deal with last month. We'll also be dealing with a number of other questions about suspension and whether, similarly, overtime should be paid or factored in, if you like, during suspension. And we've also got issues there about working hours and contracts.

So anything else you have, you've got the little question box there, the little chat box, if you like. You can send questions to us. They're anonymous here. You can send me, Scott@LegalIsland or use that little chat box there.

Poll Results from July 2019

Just before we start and get into things, we did a poll, and we're going to do a poll again this time, but just to feedback the results from last month's polls, we asked three questions.

Do you have employees who regularly work extra hours over and above contracted hours? And Seamus, the responses there were 80% of the people listening said that they did indeed and therefore they would be impacted on by the PSNI and Agnew case.

We also asked how much do you estimate the cost of back pay. We had about 22% said it was over £100,000 they reckon. The rest, clearly, less than £100,000.

And we had, "Have you received any notice from employees or their reps that they intend to make a claim for back pay and all that?" We had 25% said that they had. Seventy-five percent, clearly, said that they haven't.

So, we have a situation here, Seamus, where let's assume it's the same statistics, if you like, or percentages. Eighty percent of people listening have people who regularly do overtime. Twenty percent of those is going to be over £100,000, it's going to cost them. And of the 80% who do regular overtime, we have had a little bit of a claim yet to come, because 75% of them haven't yet had claims in from employees. So, any comments on that, generally?

Seamus: Well, I think just, you know, unsurprisingly, I mean, I think within the majority of employers that there is always overtime that is done. So 80%, I mean, it does seem high, but realistically, when you think about it in terms of your own business or with the business you're working in, and, you know, you would expect that to be up. I mean overtime is something that happens. And it may be seasonal. It may be during busy periods. It may be just that it's part and parcel of the normal process.

Twenty-two percent, just above that saying that the figure would be over £100,000 - significant. Any business that has not been forecasting £100,000 of compensation to pay is going to . . . I mean that's something for the business to think about certainly. I think it's important, because I think I mentioned this in the last occasion, that if there are these issues there, that's important. And no matter how you scary and intimidating your boardroom might be, that you're making your board or your employer aware of the potential liability here and keeping yourself right.

And, lastly, there that so far, a quarter, 25% of those employees have raised these issues with their employers. That figure is only going to get bigger, and that's the reality of that. If a quarter of your workforce are aware of it, then the word is going to spread. If there are employees in other businesses where maybe the employers approached them and said, "Let's resolve this or let's sort this out," if you're having a nice meal somewhere and someone is saying, "’Are you out for a treat." You're saying, "Yeah, I got a few quid off my employer. This one is for holiday pay I'm owed," you can guarantee that on the following Monday that that employee is going to be back in looking to know how they're going to get some money. So I think that what I take out of this is it's just not something that we can continue to ignore subject, and I know we're going to get on the subject to whether there's appeals or what way things end up. We need to face the reality here.

Poll Questions August 2019

Scott: Okay. So with that background, let's do our first poll and the question, it's still on holidays. The others aren't. So you'll see the voting options in on your screen. What we're going to ask you is:

Do you feel your organisation needs to take any action to recalculate the holiday pay?

And it's 50%, it's 50%, and it's 50%-ish. It's actually very high. The Brexit vote is coming in here at 52 against 48, but I'm not going to tell you which way at the moment it's going to go. So, we'll find out if it's going to go. Oh, it's a big, very much no-vote here we're coming. So that's fine.

Let's move on to the next question. I'm not sure if I can see the full question.

Do you use confidentiality clauses in termination agreements?

Seamus and I were chatting earlier about the fact that he was dealing with a government department, department of solicitors. And they're just saying it’s government policy now that they're not going to use them.

Seamus: Apparently so and surprised to hear that. And this is just a simple agreement that we're doing through the labour relations. It's not a complex compromise agreement, where we're drafting sort of clauses in respect to confidentiality. But the understanding had been that it would be a usual part of the agreement. But my understanding is that it doesn't form, for government departments mainly and those sorts of agreements a confidentiality clause.

Scott: Well, we're coming out here at about 70% of the organisations listening actually use confidentiality agreements. So there's consultation, we might talk about it or you may have questions on it there on these consultations coming from GB at the moment about law and non-disclosure agreements and so on.

The third question coming in here is:

Do you consider flexible working requests for all posts within your organisation? Again, in GB, there's a consultation on doing that...

So there should be an automatic presumption, unless you can objectively justify differently, that all jobs should be open to flexibility and variation in hours. So we're looking here. Ninety-percent, at the moment, are sitting there saying, "Yeah, all jobs are open to flexibility." So that kind of just reflects the reality.

Seamus: Absolutely.

Scott Yeah, it's very interesting, and then there must be some jobs that you can't be flexible. You know. Like you can't go part-time on a fishing boat or something like that. You know, you're either out for the tour or you're not. But the vast majority of them, there's no reason why you can't.

Seamus: Yeah, I mean, I remember doing a case a number of years ago where we were saying that this job meant that this person, it was a job that involved safeguarding and sort of health and safety issues for young people. We were saying that there was a trust and confidence issue, that the young person would put their trust and confidence in that particular person and the job couldn't be job-shared because of that. And the tribunal just said no. I think that they said in this day and age, that that wasn't realistic any longer. So I certainly tried it enough and it didn't work. So I've always taken my oil in that.

Scott: And the last question here that we're going to have on the poll:

Do you have any contractors who are likely to come under the IR35 rules?

And that's a U.K. wide change that will come in next spring. That's where people set themselves up as companies. And I know that a lot of people use self-employed contractors and to maximise their tax benefits, they set themselves up under the IR35 rules. And there are big changes coming next year. And we're looking at about 40% do, 20% no, and ~40% or thereabouts don't know whether they use them or not, but clearly, they use self-employed contractors. So, the answer is probably yes.

All of those questions that we've been dealing with there are coming up at the Annual Review of Employment Law 2019 conferences on the 7th and the 19th of November. There are early bird rates available online. Our first annual review of the year, actually, is in Dublin, and it's about to sell out. There are only 10 places left or so. So if you do want to go, have a look at the different programs this year in Northern Ireland. We've changed the timings. We've actually changed some of the topics as well.

So you might want to have a look at both. And, of course, Seamus will be there for one of them at the Ramada, or the Crowne Plaza as it's now called. And I hear that they're setting up traffic lights.

Seamus: Oh, really? yes.

Scott: Thanks very much for taking part in those polls. If you have any questions, folks, send them in.

Following PSNI Case – What Do You Recommend Employers Do?

Scott: We're going to get on to your first question, which is still about holiday pay:

If an employer has not taken any action to recalculate holiday pay, what do you recommend they do now, Seamus?

Seamus: Well, I mean, I think it was interesting following on from our last podcast that we did that the issues are fairly relevant and fairly out there, and certainly the poll tells us that there is steps that the employer needs to take. And what I said there originally was that it's not something that we can continue to ignore.

That said, I know, having spoken to a number of my clients, that there is a bit of burying the head in the sand attitude whenever I'm speaking to them. You know, they are saying, "What is the potential of this?" And, "None of my employees have come forward to me." But the reality is I do see it arising, particularly and around where there are issues that have developed in relation to your employees and that there's disciplinaries or that you're looking at the relationship breaking down and possibly a constructive dismissal claim has been taken.

Certainly, I've noticed over the past lot of months that there is an increase in these claims being made at that point, and it's maybe where there has been a relationship breakdown that said, "Oh, look. I'm entitled to this. I'm going to put my claim in." Some of them have been union-backed, and maybe it is unions that have been bringing this to the employee's attention. But equally as well, I think, given the news coverage and everything else, people are aware.

An option is certainly one thing to do is to do nothing. For me, that's not advisable. I think that you need to take cognizance. I mean, you can just see from the poll here, you know, almost a quarter of our employees are allied to this through our poll and doing nothing I don't think is a sensible route at this point.

Appeal of PSNI Case

Scott: The counterbalance to that is possibly they've asked for leave to appeal on this. And the Supreme Court might reverse elements.

Seamus: They could do. Certainly, where we were I think, on the last podcast, was that the decision we weren't clear whether or not an appeal was going to take place or not. And we had said that there was rumours and whispers of that, and we thought that there was going to be an appeal. That has now since been confirmed. There is an application for leave to appeal, and just to explain that to maybe some of the listeners is that you have to make an application from the Court of Appeal through to the Supreme Court for leave to appeal. And essentially what the Supreme Court do is they look at the application and they consider whether it's something that they are going to hear a case on and issue a decision. So not all applications for leave to appeal are successful.

Scott: There's got to be value in it and merit and reason to use up the time of the Supreme Court judges.

Seamus: Absolutely and, you know, they like juicy apples in terms of that. It has to be something that is attractive.

Scott: Or cakes.

Seamus: Yeah, or cakes. That's very good. The reality here, I think, is that I would imagine that there either will be some keen interest from the Supreme Court, or there will be elements that they will be very attracted to. Certainly what we have at the minute is that we have our decision in Northern Ireland from the tribunal. It is being supported and backed and maybe some steps further taken in the Court of Appeal decision. And then we have our Bear Scotland decision, which is applying to other parts of the U.K. So there is an opportunity here for the Supreme Court to give clarification on two cases that are not in agreement. I would think that that would be encouraging for the Supreme Court to move forward to consider the matter.

Scott: But one thing, even if they do reverse, you could do nothing. And that's one of the options here. But the Supreme Court is simply not going to reverse the fact that people are entitled to normal pay for at least the first 20 days, which is the Bear Scotland position. The least you can do, the least that you have to do is start averaging pay for at least 20 days in the year. So . . .

Seamus: Yeah, and that's a step that you should have been doing, you know, from about 2014, at this point. And if you read — Hannah and I were discussing this — and if you read through the decisions, they're critical. The courts are critical of employers that have not taken those steps as of yet, because that has been what the interpretation was and certainly what the LRA guidance has been telling employers to do and everything else. So that's not an impressive point, and I think that if you end up in a tribunal where you have sat back and done nothing, you're going to be criticised, at the very least, for it.

Scott: So if doing nothing isn't an option, what might be an option?

Seamus: I think certainly from the employer's point of view, I think absolutely incorrect to bury your head in the sand. The first thing that you should be doing is trying to identify what the position is within your business.

Conducting a Holiday Pay Audit

Scott: So you've got to audit really.

Seamus: You've got to carry out an audit, and you've got to identify through that audit: Are we a business that has a lot of overtime? How do we pay that overtime, and what do we do when it comes to holiday pay? What does our contract say? So I think it's an audit of all of your contractual documents.

In addition to that, you want to assess what the liability is going to be, and your audit is going to have to look at various factors. And it's the factors that really sit outside of what we would consider the basic pay in the contract.

I am making a distinction between what the basic pay is and then what your normal pay is, because what the decisions have been clear about is, that we are looking at what an employee takes home regularly, takes home every month in their pay pack and what they assume is their normal pay. So what we're going to have to look at is the likes of the overtime and whether that's guaranteed, non-guaranteed, or voluntary overtime.

Scott: They're all covered though anyway. That's fairly much established now.

Seamus: Absolutely.

Scott: They're all part of it. It's whether it's regular or not, and we'll come to that in a minute.

Seamus: Yes, and we're, you know, commissions, if there's allowances for working late at night, if there are, you know, for shift working, out-of-hours allowances, things like that. Everything that the employee would consider to be normal pay. And you're going to have to audit it and have a look back to see what exactly has been the position in terms of what the employee has been paid during the period and then what they have been paid on their holidays. Where you have a problem arising where there's a distinction between the two, that's where your liability is going to be. And I think a calculation in terms of what that liability is - is certainly your first step.

So an audit has to be conducted. It could take a lot of time to do the audit. If you have the technology and it's all digital and maybe all the records have been moved over digitally, you could do it very quickly. But I'm assuming that going back, right back to 1998, which is the start of the commencement of the legislation, you're going to have to do this audit. It could be time-consuming, and you possibly might need to assign it to somebody within your organisation to pick it up and to do it.

So there's your starting point. I think once you find out what your liability is, then you have a number of decisions to make after that.

Liability For Back Pay If Employers Take Action Now

Scott: Okay. Well, one of the decisions, one of the questions that just come through on the chatbox here is if a company changes the position, so they haven't been paying average pay, and starts to average holiday pay to include overtime, etc., is the requirement to back pay the difference, because you are raising a hair? So that's one of the difficulties with taking action. You raised a hair, and certainly everybody in the organisation knows that they haven't been getting paid in the past. So . . .

Seamus: Yeah, it's a double-edged sword. In one way, it's a positive step to start taking the action to say, "Well, listen, we know what our liability is. We know what we have to do. We are going to start to do it."

Hannah: Well, that's a necessary step. You can't not do.

Seamus: Yes, and then the other side is you're letting people know. The cat is out of the bag, in that sense, and people are going to say, "Well, why am I getting this now? You must owe me money for previous times."

Scott: The cat's already out of the bag anyway. I mean, that's its set up home and it's having kittens. I mean, it's not . . . people should know about that. All you're doing is increasing your liability. So I take the point that you may have changed it, but something like that, the impression I'm getting from both of you is it's too risky not to raise it.

Seamus: Yeah, and I mean I think another important aspect is if you are going to deal with this, you know, are you going to just surreptitiously, all of a sudden, start giving them increased money? Because you're going to be guaranteed that two things will happen. The very straightforward employee will come to you and say, "Why am I getting this additional money when I haven't had it before?" You will get others that will go, "Well, great, I'm not say anything about this. There's been an error made, and it's all good for me." It's the ATM aspect where you ask for 20 and you get 50 and you think, "Great." But those things will always come out in the wash, I think. But it's how its presented to your employees.

And another aspect, I think, of the steps of this is that if you do make a decision, if you look at the liability and the liability is, you know, that there's money there to be paid, but it's doable and you can take an honest approach as the employer, go to the employees and say, "Let's try and resolve this." I think that any resolution or any discussions or any agreement between the company and the employee, my recommendation would be that you deal with that through an LRA agreement. Certainly, I don't think it's just matter of paying the money and being done with it or writing a letter. I think that you'll want to tie down any liability, close that off, and move forward then after it.

So I think that the Labour Relations Agency could have an inundation of work if everyone took this approach. But I think that that's the best way. The other side of the coin is that if you look at it and you think, "Gibberish. This is potentially going . . ."

Scott: This is massive.

Hannah: This is going to break us.

Seamus: Yeah, or put our lights out in terms of an organisation, that there is an approach, also, that you can . . . and it needs to be carefully thought about and it needs to be presented in such a light where you go to the employees and say, "You know, there is the potential here that you could be awarded a sum and the company can't afford to pay you that amount of money. We want to take a fair approach here. Here's a formula or a way that we have looked at this to try and deal with it, and if it's acceptable to you, we propose that we'll pay the money instead of us coming to a binding agreement that will close these matters out."

You would have thought and the hope would be that if you have employees working for you for 20 years, going back to 1998, that they're loyal and they'll see that you're taking an honest approach with them and that they'll work with you in relation to it. That said, of course, you know, money speaks volumes for the majority of people as well. And the essence could be whether, well, you know, you can take the claim. If the company can't pay it, then the company is going to close. You won't have a job. You know, your decision what you think. But it does need to be a considered approach.

Implications For Employer Who Took Action Following The Bear Scotland Case

Scott: Good luck getting the money after that. But it's the not the first time that we've seen companies close because of pension liabilities. This could be up there with them. Just while we're on there, we've got another question coming in there.

"We as a company have been paying enhanced holiday pay on the first 20 days since 2014," so since the Bear Scotland case came out. "Do we need to do anything further at present?"

And this comes down to what's the liability effectively at the end of the year? Because the Court of Appeal decision was all about under the working time directive, you're entitled to 20 days at normal pay.

Under our working time regulations, it's arguable. It's actually 28 days. But if you're paying it on the working time directive for most people, then you're looking at 20 days. And although the Northern Irish case said like you can't distinguish one day from another as a percentage, at the end of the year, the liability is pretty much the same. You've made your liability at the end of that particular year.

Seamus: And interestingly, I know what the decision says, but interestingly all of the end calculations and formula and the discussion throughout the decision is obvious that the 20 days or the 28 days, although they say they're indistinguishable, they have used the 20-day calculation as well. So I would have thought that if you had been taking an approach from, where you've been paying those 20 days, on a manual basis, when you look at it, it should work out.

Scott: More or less.

Seamus: I mean, there might be a little bit, but it would be certainly lesser than what the scary figures would be.

Scott: And, of course, this listener here has been following Bear Scotland. And if the Supreme Court come down on the side of the Bear Scotland decision, then your liability is complete at the end of 20 days, and effectively they say there is a break of 3 months because everyone is taking their holidays before the end of the year. Then it may well be that there is no back pay issue for this employer going back. And there certainly have no intention on this employer's part to unlawfully deduct wages, albeit technically they may well have done so.

Seamus: Yeah, I mean, the other aspect as well, and it's a difficult one with clients are saying too, "Sure, but this decision is now being appealed to the Supreme Court. Should I not just wait and see what the outcome is in that?" And you're thinking to yourself, "Well, look, there's a number of variables there that can happen between now and the Supreme Court decision and whether they're even going to accept it and make a decision on it and hear a case."

Hannah: And the time frame, if they do hear the case and the decision is issued, what would they?

Scott: Yeah, it could be 18 months or whatever before you get anything out, maybe two years.

Seamus: Yeah, and whether we get another visit over here or not is a, you know, a whole another matter to think about. But, at the same time, you know, if claims are put in, in the meantime, to the tribunal, what will the tribunal's process be? Will they say, "Well, look, we're going to stay these pending any decision from the Supreme Court," or will they say, "But we made this decision in our jurisdiction in Northern Ireland, and we are going to stick to that and, you know, proceed on."

So it's hard to know exactly what the outcome would be on that. But I think the overall general answer has to be that you're going to have to take some form of steps. The first thing to do is conduct your audit and look at those differentials that are in basic pay to what would be considered normal pay and have a look at your liability. It's much better to be informed than kicking this down the line and it being a bigger issue, you know, in 18 months' time.

Scott: Yeah, so that last listener has probably less risk, less liabilities to worry about than people who have done nothing. So from . . .

Seamus: Yeah. Well, they've complied with their obligations, so, you know, that's always a good starting point, you know.

Should Travel Allowance Be Included in Holiday Pay?

Scott: Good start. So moving on, could you clarify other things? So if travel time is paid, working say on a project, so this is again really goes to the complexity of the thing, so it's a project. So it becomes normal but only for the duration of that project. Where does that come in? Now, this isn't travel allowances. This is travel time. So, Hannah, have you any views on it?

Hannah: I think this just comes down to what is normal pay, which is going to have to be assessed on a case-by-case basis on the individual. You know, we have discussed, like you said there, if it's a case of the employee who has to fill in this sheet at the end of each month saying I claimed so much managed and I get so much pence for it, that's an expense towards what you've had to do for your work. That's not really going to fall under your regular pay.

However, if you are, in your pay slip, every month getting a set sum, regardless of whether you've had to do the travel or not, for work travel purposes, then there's a regularity to that, and that is most likely going to come into your normal pay. The whole idea of they only have to travel for a project, now we don't know how long this project lasts, but that all comes into this issue of the reference period. What reference period are we going back for? And, unfortunately, we don't have a defined answer. Yes, the court says, it's a case-by-case basis for use to assess what is the appropriate reference period to go back. So whether you decide that it's appropriate to include that project in the reference period, you know, it has to be assessed, and that's all part of your liability.

Seamus: But it could be a situation there where the project lasts a year, and you turn around and say, "Well, no. It's not part of your normal pay. It's for this year." But in a year's time or six months' time, it doesn't form part of your normal pay. You no longer get it because you no longer have to travel. It could be something, the civil service you used to get up to three years, I think it was, where you were moved location and you were getting additional payment, or you would maybe get a couple of hours off for your travel time. So you didn't have to be in work through contracted hours because you were travelling for longer. That would become part of your normal pay. But once that is gone, it would disappear.

Hannah: Yeah, and you always have to remember your holidays are for the year as well. So if it is for a year or three years, that's potentially three years' worth of offsets of holiday, you know, your 20 days, 28 days holiday.

Can You Define ‘Regularity?’

Scott: So let's tease out this question on regularity as well. So we don't know the reference period. It could be 12 months. It could be 12 weeks. It could be longer. It could be less. But 12 months seems, felt fair for most people. But when you look at redundancy payments and such, like in terms of the employment, it's 12 weeks if you go back. So it's going to be something around there, but it should be what's reality? What gives a better idea of regularity or normality? But working regularly, what does that mean? I mean, then there's no real guidance. If you do it once every two months, if you do it every three months, if you do it twice a year, if you do it every month, what's regularity?

Hannah: Well, it would be great if we actually got a definition of it, but unfortunately not. Yet again, our guidance is it's individually-based. You know, you have to go case-by-case on this to decide what it is. I think what you would be looking at is, is your employee getting this, you know, every week and if it's, you know, every month? Is it once a year, for example? Is the bonus coming in once-a-year? Because if it's once-a-year, the likelihood of that coming in as a regular payment is less likely. You know, it's one-off or irregular. You know, it might fall outside the context of what is regular.

And like the court did talk a little about what's predictable? What can both the employee and employer predict is going to be in the payslip every month or week? If the employee knows that every month or week, "I get my commission," that's a regular payment there. That, you know, ends up being part of their normal salary. There's, you know, a defined period, and they know that they're getting that continuously.

Scott: But it doesn't always work out that way for people. There's questions come up there just about, you know, which do you include even? You know, so if you're off sick and you don't get any money at all that week, or in this case the question is, you know, somebody was off holiday and then a few weeks later they take another one, so does that week's holiday pay be included so that you can end up in an average pay? It becomes very difficult. I don't feel like I got an answer in that. But what can't be logical is that you don't go back and discount, if you like, the periods when somebody was off on maternity leave and so on. It just doesn't make sense.

Seamus: Yeah, I mean, I think that ultimately. . .

Scott: And that leads to what is the proper reference period? Well, it can't really be a period when somebody wasn't in work.

Seamus: Like a number of these cases could end up with decisions about whether or not the formula which you have applied is fair and reasonable. And that could end up that it's the job of the tribunal. I mean, I suppose ideally what you want to get to you is that there is a calculation or a formula in place to look at those things. But, ultimately, what it has to be, I mean, I think if you're coming from a position of saying, "I'm only going to look at it over a 12-week period because, as an employer, I can pay less," it's probably going to be unfair from that perspective. There has to be something there, sort of saying, "This is what's fair and reasonable in those circumstances."

Scott: But if you do that, I mean, we were chatting beforehand and really the advice is like as well as not doing nothing, work out your liability, it would be let's get together with the unions or with the workforce and say, "Let's work out what we think is a felt fair formula or calculation. Let's see if we can afford it and pay it over the period," and then do some kind of an agreement, probably through the LRA actually.

You know, if every T hasn't been crossed and I dotted, then that takes away the liability. That takes away the risk of going to the tribunal. because looking at this, it's just so complex and each case on its merits and each calculation dealt with separately, it's much better to come up with something that's felt fair. And that's kind of indicated in the judgment as well, where the Court of Appeal recognises it's so complex. Just get together and do something.

Seamus: Yeah, and I mean you could operate a small business. You could have 10 positions and each of those 10 positions could be operating very differently in terms of how they're remunerated, how they're paid, and what the allowances are. And you might need to have a different formula for looking at each of the individual 10 and where you could potentially have 1 rule that 50 people are dealing, 1 formula, you know, deals with it all for you. I think it really is coming down to it's the particular circumstances that you're looking at and being fair and reasonable about it.

Claims To The County Court

(Please note that this question with regard to County Court claims will be clarified further in the next Webinar on the 6th September 2019)

Scott: Okay. We've also got a question there about the county court claim or high court cases and such like. So if you're out of time, and certainly there's an argument that if you've been paying correctly for the last number of years, then people are out of time for back claims. So what's the risk of a county court claim? It's for breach of contract, presumably, rather than unlawful deductions.

Seamus: Yeah, I mean, I think that the avenue is certainly there for an employee to bring a claim in the county court or the high court. Obviously, there's different, you know, statutory levels that apply to the amount that you can claim in the county court and in the high court, the high court obviously being the larger amount. It is an avenue that's opened there, breach of contract.

In the county court or the high court, you can go back for a period of six years, which would be very different to what you can claim in the tribunal potentially from the Court of Appeal decision to go back to 1998 and the introduction of the legislation. So if you were found, you know, to be out of time in the tribunal and you wanted then to go to the court to say, "Well, look I can go back for six years," there's a potential with that.

I think the reality is and that's part of the advice that you're providing as an employment lawyer is that when a client comes in to see you, they might not be aware of the correct jurisdiction to bring their case in. They’ll talk about court cases. And you'll say, "Well, actually this is the appropriate authority and the appropriate place to bring this case is the tribunal." And that's because the statute behind that, that tells us where these claims should be brought. These particular claims, and I think that there's reference within the Court of Appeal decision that they are statutory claims and that they should be appropriately brought in the tribunal. So you might get a decision where a court will say, "Sorry, knocking at the wrong door. You know, move on."

And if you have already been time-barred in the tribunal then, you could be at risk. But certainly, from my own point of view, I think that you'd be looking at a clear liquidated claim in the high court or the county court. And the in the Tribunal there tends to be you will provide the tribunal with a schedule of loss. And if you can't agree it, the panel will decide how much the award is going to be.

Scott: And the civil courts, you have to establish what your claim is worth upfront.

Seamus: Yeah, I mean, I think and there would be a discovery process maybe in terms of exchanging documents and things like that to arrive at a decision. But I don't think that a judge is going to have the same approach as what a tribunal might have. A tribunal is certainly more akin and is certainly more familiar with dealing with these types of cases. So I could see a little bit of kickback potentially from the court, but we did note, whenever we were going through the appeal decision, Hannah I think there was . . .

Hannah: Three high court claims – three writs issued

Seamus: Three writs that the court acknowledged that were issued. So it's a live issue, absolutely, and it's one that I think that we're going to have to watch out for.

Scott: Okay, and these . . . oh, sorry.

Hannah: It's all right, but I think also like while it's great that we have this limitation order in the high court that says they can only back six years in comparison to the Court of Appeal decision that suggests going all the way back to 1998. What you need to remember with the proceedings in the high court or the county court is unlike the tribunal, where it's a no-cost jurisdiction, where win, lose, or draw you take your own costs. And if someone issues a writ and, you know, you potentially are going to be liable for the other party's costs. While there's a limit in the number of years, there's legal costs to factor in there.

Scott: Yeah, and from an employee's point of view, they can actually get their cost back as opposed to going through the tribunal, where the costs of taking the claim are basically going to be more than they'll get from the holiday pay claim potentially if they do it on an individual basis it will.

Seamus: Certainly the risk, of course, is wide open in the county court or the high court, and it can work both ways. If you end up having to bring your claim and you're successful, you get your costs paid for. Great. It can work the other way too.

(Please note that this question with regard to County Court claims will be clarified further in the next Webinar on the 6th September 2019)

Pension and Tax Implications of Back Pay

Scott: And these payments, presumably, are pensionable and subject to tax, because it would have been earnings, or they should have been earnings?

Seamus: Yeah, I think that's fairly clear. You know, if during your holiday period, which if you're talking roughly 6 weeks in the year, if you've lost out pension contributions for 6 weeks at a lower rate than what you should have been paid and you times that over 20 years, it could be a significant amount in terms of pension calculations and pension contributions. A couple of things to watch out for there is that there's likely to have been a company contribution but also an employee contribution. So any monies that would be obtained would have to probably go back into the pension scheme from the employee's point of view as well.

I would anticipate that there was talk of certainly the Court of Appeal decision was reverting us back to the tribunal for assessment in terms of liability and losses. And you would anticipate, depending on what happens in the Supreme Court case, if there are negotiations around that, the negotiations will include discussions around pension contributions, and there are some taxes that there's tax to be paid, the government will want to be paid.

Scott: Yeah. Well, if it's going to be part of your earnings you say you should have earned it, then you're going to have to be tax on it. So you'll be looking at net allowances rather than some kind of compensation payment.

Calculating Holiday Pay for Zero Hours Workers

And a final question, how do you calculate holiday pay for zero hours or casual hours based on the PSNI decision? Is that just trying to figure out the average hours of people over a proper reference period?

Seamus: Yeah, I mean, I think the one thing I would highlight on that is that you're exactly right, and you can calculate on hours and sometimes people get a bit caught up in terms of, you know, weeks and things like that. But the .gov calculator allows you to calculate almost in any way that you want. So, for me, the simple position is zero or casual workers are entitled to be employees, same as any other . . . or sorry, entitled to holidays in the same way that any other employee is as well. Again, that comes down to interestingly that reference period and how they're worked out. And the suggestion seems to be that rather than looking at it over a period of 12 weeks, just look at the hours that they've worked and then calculate on that basis.

Scott: Yeah, people get mixed up sometimes with overtime. It's to do with working over 35 or 40 hours a week. Basically, it's any hours that are over and above your normal contracted hours. And if it's a zero-hour contract, it's anything over zero, you know. But if you're working 8 hours a week or 16 hours a week and you normally do 30 or 40, then that's overtime whether you like it or not. It's just additional contractual hours. And they would be trying to figure out whether they're normal or not.

Specifying Working Hours On A Contract Of Employment

Seamus: Yeah, you know, I mean that's exactly right, and I think didn't we have a query about working hours in a contract?

Scott: We did, we did. One of them that came up there, it's not quite on the working time thing, but is it necessary to specify working hours on a contract of employment? For example, daily hours of work as required although a guideline is 8 to 6 and during the weekend as required although as a guideline you will be expected to work 1 weekend in 3. However, you must be prepared to work every other weekend if necessary. Guideline hours are 8 till 12. When working weekends, you will be on call all weekend. So this is somebody that's got quite a hefty number of hours. But the Employment Rights Order 1996 has something to say on contracts or at least on written particulars and what's it's got to include on hours.

Seamus: Yeah, I mean, the basic principle is, is that the contract should specify a number of hours. And the 1996 Order says that any terms and conditions relating to hours of work, including any terms and conditions relating to normal working hours. And the sort of interpretation on that is - is that the contract should specify a number of hours. And whether it says 10 hours and you're doing 20, or whether it says you're doing 35 and you're doing 40 hours, but I think that the contract should say that.

And it's interesting, as well, for there's a number of benefits that you can obtain if you're doing a limited number. It's usually around 16 hours, and often they'll look for a contract to specify that as evidence that that's what's been done or alternatively if the employer is going to confirm that in writing. So it's a key part of the terms and conditions that the employee is clear about the number of hours that they're contractually entitled to.

Scott: Yeah, and if that varies over time, there's also a requirement if there's a change of contract that you issue an update within a month or indeed the employee could go to a tribunal and argue on these written terms that I have, it doesn't actually reflect what the contract actually says or does or what actually happens.

Seamus: Yeah, and I think that that is helpful, because that avoids then you having to get into your scenario where you're looking back over a longer period to find what the average working hours have been for the employee when it comes to looking at their holiday pay whenever they take holidays.

Calculating Pay During Suspension

Scott: Okay, a kind of related question that we got in there. It's about paying regular overtime, but it's slightly different. It's not to do with holidays, and it's calculating pay during suspension. "So could I seek a view on paying staff regular overtime whilst on precautionary suspension?" So presumably there's been some kind of disciplinary reference and you've put the person off work whilst you investigate. So what's your views there?

Hannah: So, well, we discussed about this earlier, and there was a basic principle is that there's no way you guarantee that you're going to get this. However, where I would be coming from on this is, you know, a suspension is precautionary. It's supposed to be short term on . . . you know, it's supposed to allow you the time to find out information as to whether there should be a disciplinary or not.

If someone is getting regular overtime and they are on suspension, which is precautionary, you know, there's an issue there if you're not going to pay them that, once they're off, because at the end of the day, you know, they could come back to work and there's no action taken. And then you've disciplined them because of . . . you've taken money off them because the investigation needed to be done and they have to put on suspension, which then leads to issues of, you know, if there was a claim to be taken later on, you know, did you just pre-empt the outcome if they are dismissed or, you know, issues like that?

Scott: So, Seamus . . .

Seamus: Just sort of if I was to go back to the Labour Relations Agency Disciplinary Code of Practice, and it does say that the employee shouldn't be at any detriment through a precautionary suspension. Now, a lot of those payments are not statutory payments that you would have an automatic legal entitlement to.

The risk would be that if you didn't pay the employee those, that it may feel punitive and that the employee then may decide, "Well, this is evidence that the employer is going to dismiss or wants to dismiss or is tactically using this to punish me and send me messages that they don't want me." And you could end up then, potentially, with a constructive dismissal claim perhaps that if this is over a longer period of time. And I know like Hannah is very right. there are precautionary suspension and short turnaround in terms of that. Sometimes, as you know, these things can take longer in terms of investigation.

Scott: Particularly in the public sector you find that, you know, there's almost a decision paralysis when it comes to senior people. And you could be out for months sometimes, which in itself is a breach of contract. But in this situation here, there's no European directive or guideline or treaty or anything that says you have to be paid full pay during suspension. It's one of those ones that is covered by the code, and I suppose it's implied in the contract that you will not do anything that would impugn the contract as an employer pending this period, because you're still innocent till proven guilty.

Seamus: Yeah, I mean, I think my advice to any client on this would be, yes, short turnaround and don't put the employee at any detriment as a result of the suspension, because if you end up further down the line, it could be used against you.

Scott: Now, that's totally different from somebody who's suspended as a disciplinary penalty with no pay, which is fine in some contracts as an alternative to dismissal. It certainly happens in a lot of the manual contracts I used to look at in the past when I was at the LRA. So they are totally different.

Seamus: Yeah. No, I will agree with that.

Scott: Okay, I think there was only one question that we had, and it was to do with the Employment Rights Order and whether that impinges and how much that impinges on high court or county court claims. But we'll come back to that if that's okay, because we don't really have time to go into any more. But thank you, everybody for listening. Thanks for taking part in the poll. We'll be sending those things out next week, and we'll maybe discuss them next month when we'll do another little poll.

If you have any ideas or suggestions for Hannah or Seamus or Legal-Island, indeed, to look at polls or any questions that you want us to discuss next month, it will be on the 6th of September. Just a reminder that the Annual Reviews this year. Annual Reviews Employment Law are on the 7th and 19th of November. There are early bird rates online. There are different programs. Do have a quick look at both of them and decide the ones that might suit you the best and the alternatives that you would like to choose.

So, hopefully, we'll see you there, and we'll see you the next time that we're available on the 6th of September. Those who subscribe, you can listen back to this, this afternoon, I would think. And we'll have the transcript up in a couple of weeks as you can look back on all the questions and answers. And so we've now done many hundreds of questions and answers in this series of Employment Law at 11 webinars.

Thank you very much to Seamus, thank you very much to Hannah, and thank you very much to Rolanda. We'll see you next time. Bye-bye.