Appeal No.	 EAT/151/00

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 8 February 2001
Judgment delivered on 7 June 2001

Before
MISS RECORDER ELIZABETH SLADE QC
LORD GLADWIN OF CLEE CBE JP
MISS D WHITTINGHAM

WITLEY & DISTRICT MENS CLUB	APPELLANT

MR I D MACKAY	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MISS V WOODBRIDGE 
(of Counsel)
Legal Department
Working Men’s Club 
& Institute Union Ltd
Club Union House
251-256 Upper Street
London N1 1RY	
For the Respondent	NO APPEARANCE OR
REPRESENTATION
BY OR ON BEHALF OF
THE RESPONDENT	

MISS RECORDER ELIZABETH SLADE QC:

1	This is an appeal by the Witley & District Mens Club Ltd (“the Club”) against the Decision of an Employment Tribunal made by a Chairman sitting alone, that Mr Mackay was entitled to be paid the sum of £1,164.80 on termination of his employment in respect of annual leave entitlement which he had accrued but not taken.

2	The appeal raises the following issues on the proper construction of the Working Time Regulations 1998(“the Regulations”):-

1	Whether a provision in a relevant agreement dealing with the sum payable on termination of employment in respect of leave to which a worker is entitled but which he has not taken, has to expressly refer to Regulation 14 in order for the payment due under it to fall within Regulation 14(3)(a);

2	Whether a provision in a relevant agreement that no sum is payable on termination of employment in respect of leave to which the worker was entitled but which he has not taken falls within Regulation 14(2) and (3)(a) and is therefore not void under Regulation 35(1)(a).

In addition the appeal raises the issue of whether the Employment Tribunal erred when making an award in that it failed to consider what level of compensation was just and equitable in all the circumstances as it is alleged it was obliged to do by Regulation 30(4).

The relevant facts

3	Mr Mackay was employed as a club steward from April 1989 to April 1999.  His contract of employment incorporated the terms of the National Joint Industrial Council for the Committee of Registered Clubs’ Associations Scheme of Wages and Conditions of Service (“the CORCA Agreement”).  It was not in dispute before the Tribunal that the CORCA Agreement for 1999 was incorporated into the contract of employment.  The CORCA Agreement was a collective agreement and is a “relevant agreement” within the meaning of Regulation 2.  Paragraph 5.5(c) of the CORCA Agreement provides:

“A worker who qualifies for annual holiday entitlement whose employment is terminated, either by that worker or the employer, shall be entitled to accrued holiday pay as follows:
…
(c)	No worker shall be entitled to accrued holiday pay if he is dismissed for dishonesty, for misconduct involving contravention of the licensing laws or for misconduct entitling his employer to dismiss him summarily, and he is so informed by his employer at the time of dismissal.”

4	Mr Mackay took money from the Club without authority.  When the shortfall in funds was discovered, he admitted taking the money and a few days later repaid it.  He offered his resignation to the Finance Committee which was not authorised to reach any conclusion about what action, if any, the Club should take in relation to the misconduct.  When the full Committee of the Club met on 22 April 1999 it decided to terminate Mr Mackay’s employment forthwith despite his resignation.  The reason for the summary termination was Mr Mackay’s dishonesty.  At the date of termination Mr Mackay had 26 days outstanding leave entitlement.  The Club raised no issue on the amount of leave entitlement the Tribunal found due to Mr Mackay.

The Statutory provisions

5	Regulation 13 provides for statutory minimum annual leave entitlement for a worker.  Regulation 13(9) provides:

“Leave to which a worker is entitled under this regulation may be taken in instalments, but -
…
(b)	it may not be replaced by a payment in lieu except where the worker’s employment is terminated.”

Regulation 14 specifies how outstanding leave entitlement or excess leave taken is to be dealt with on termination of employment.  Regulation 14 provides:

“(2)  Where the proportion of leave taken by the worker is less than the proportion of the leave year which has expired, his employer shall make him a payment in lieu of leave in accordance with paragraph (3).
(3)  The payment due under paragraph (2) shall be -
(a)	such sum as may be provided for the purposes of this regulation in a relevant agreement, or  …”

a sum calculated according to a formula.

Regulation 35(1)(a) provides:

“(1)  Any provision in an agreement (whether a contract of employment or not) is void in so far as it purports - 
(a)	to exclude or limit the operation of any provision of these Regulations, save in so far as these Regulations provide for an agreement to have that effect, …”

Regulation 30 deals with the remedies for breach of the Regulations.
Regulation 30(1) provides:

“(1)  A worker may present a complaint to an employment tribunal that his employer –
…
(b)	has failed to pay him the whole or any part of any amount due to him under regulation 14(2) or 16(1).”

and Regulation 30(5):

“(5)  Where on a complaint under paragraph (1)(b) an employment tribunal finds that an employer has failed to pay a worker in accordance with regulation 14(2) …, it shall order the employer to pay the worker the amount which it finds to be due to him.”

The Decision of the Employment Tribunal 

6	The Chairman held at paragraph 16 of the Extended Reasons:

“… I concluded that Mr Mackay had been guilty of dishonesty or other misconduct which would disentitle him under his contract to be paid for accrued holiday.  However I was not satisfied that such a deduction was permissible under the Working Time Regulations.  By contrast with other provisions in the Regulations there was no ability to contract out or agree not to be bound by the provisions in relation to annual leave.  There did not appear to me to be any provision which expressly entitled an employer to fail to pay for accrued holiday on the termination of employment.  Regulation 14(3) which I set out above appeared to me to relate to methods of calculation of sums to be paid to the worker on the termination of his employment.  In any event it was expressed in such a way that it referred to a specific agreement which had been reached in relation to the Regulations.  I did not consider that it was correct to interpret section 5.5(c) of the contract as falling within Regulation 14(3)(a) as section 5.5 was not expressly related to the Regulations.”

The construction of Regulation 14

7	Regulation 35(1)(a) would render paragraph 5.5(c) of the CORCA Agreement void unless the provision for no payment in respect of leave to which a worker was entitled but had not taken fell within Regulation 14(3)(a).  In our view the relevant purpose of Regulation 14 is to provide for payment by the employer to the employee when on the date termination of employment takes effect the leave taken by him is less than that to which he is entitled, calculated on a pro rata basis.  Payment of a sum in accordance with a provision in a relevant agreement dealing with payment by the employer in respect of outstanding leave entitlement would, in our judgment, fall within Regulation 14(3)(a) notwithstanding that the provision was not expressed to be for the purpose of Regulation 14.  Regulation 35(1)(a), which places restrictions on contracting out of the Regulations, renders void agreements in so far as they purport to exclude or limit the operation of any provision of the Regulations save in so far as the Regulations provide for an agreement to have that effect.  The consequences of Regulation 35(1)(a) cannot be avoided by omitting a reference to the Regulations in the agreement.  A term in an agreement falls within section 35(1)(a) if it purports to affect the operation of any provision of the Regulations.  Similarly, in our judgment, a term in an agreement falls within Regulation 14(3)(a) if it makes provision for payment in respect of outstanding leave entitlement, whether or not express reference is made to Regulation 14.  In this respect we differ from the Decision of the Chairman.

8	Miss Woodbridge on behalf of the Club contends that “such sum” in the phrase “such sum as may be provided for the purposes of this regulation in a relevant agreement” in Regulation 14(3)(a) includes no sum.  Thus it is said that a provision in a relevant agreement for no sum to be paid in respect of leave outstanding on termination of employment is permitted by Regulation 14 and is not rendered void by Regulation 35.  Miss Woodbridge submits that a term such as the one under consideration does not detract from the purpose of the 1998 Regulations to regulate workers’ hours and periods of work and rest.  It is said that the Regulations were not intended to prevent employers from withholding certain employment benefits where an employee has been guilty of misconduct.

9	The Regulations implement in domestic law, the provision of Directive 93/104 (“the Directive”) on working time.  The Directive includes no provision for payment in respect of annual leave on termination save that it states in Article 18:1(b)(ii):

“… annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated.”

The DTI guidance on the Regulations refers to the formula for calculating pay due to workers who leave employment with outstanding holiday entitlement but it does not refer to such sums as may be payable in such circumstances pursuant to a relevant agreement.

10	In our judgment Regulation 14(3)(a) has to be construed in its statutory context.  Regulation 13 confers on workers a statutory minimum entitlement to annual leave.  Regulation 13(9) (b), implementing the passage from Article 18 of the Directive referred to above, provides that leave

“ … may not be replaced by a payment in lieu except where the worker’s employment is terminated.”

The way in which an employer is obliged to deal with leave entitlement outstanding on termination of employment is set out in Regulation 14(2).  That Regulation requires the employer to make a payment in lieu of leave.  The amount of the payment due under Regulation 14(2) is calculated in accordance with Regulation 14(3).  In our judgment Regulation 14(2), as does Regulation 13(9)(b), contemplates the payment of a sum but not no sum in respect of leave entitlement outstanding on termination.

Having regard to the respective purposes of Regulation 14(2) and 14(3) and the natural meaning of the words used in both sub-paragraphs, in our judgment “such sum” in Regulation 14(3)(a) does not include no sum.  Thus paragraph 5.5(c) of the CORCA Agreement which provides for no sum to be paid in respect of outstanding leave entitlement in the event of termination of employment for dishonesty does not fall within the exception to Regulation 35(1)(a).  The lay members of the Employment Appeal Tribunal regret that a provision in a collective agreement denying pay in lieu of outstanding holiday entitlement to a worker dismissed for dishonesty is rendered void by the Regulations.  However, in our judgment the Chairman did not err in holding that Regulation 14 required the payment of a sum in respect of leave entitlement outstanding on termination and that there was no provision permitting the payment of no sum.  Thus paragraph 5.5(c) of the CORCA Agreement was rendered void by Regulation 35(1)(a).

Remedy – Regulation 30

11	Miss Woodbridge on behalf of the Club contends that the Chairman erred in failing to limit compensation to what is just and equitable in the circumstances pursuant to Regulation 30(4).  Regulation 30(4) does not apply to a claim for breach of contract which this was, nor would it apply if the claim had been for payment under Regulation 14.  Regulation 30(5) provides that where an Employment Tribunal finds that the employer has failed to pay a worker the whole sum or any part of any amount due to him under Regulation 14(2) it shall order the employer to pay to the worker the amount which it finds to be due to him.

Conclusion

12	The appeal is dismissed.