With the latest twist in the saga of the Working Time directive, will
employers really have to offer short-term holiday entitlement from day
one? Stephen Levinson provides some
timely answers
Characters
Frances: a solicitor.
Bill: her client, an HR director.
Scene
Frances’ soulless office on a damp spring evening. Her thoughts are
turning to the summer and the holiday brochures waiting for her at home when
the phone rings…
F: Hello…
B: Hi Frances, Bill here, how are you?
F: Nothing so wrong a good holiday would not cure… And you?
B: Oh, like that is it? As it happens I want to talk to you about
holidays so that should cheer you up.
F: Going to offer me the director’s villa in Barbados, Bill? About
time…you are right, you will cheer me up.
B: Is that a lawyer’s urban myth then… all director’s have a
Caribbean bolt-hole? It is about something more prosaic… our market research
division. We take on a fair number of researchers and managers on short term
contracts and…
F: (Butting in quickly) You are going to ask me about the Bectu*
case…
B: Frances, do you know how irritating that can be, even when you are
right? Yes it is about Bectu. I have been asked to find out what can be done. I
understand that the European Court has decided that everyone is now entitled to
four weeks holiday from day one. That will put some of our project costs over
budget and we may have to think about recharging customers. Have I got it
right?
F: Not exactly Bill. The advocate general has proposed that the
13-week qualifying period is incompatible with the Working Time directive and
unlawful. His opinion will be taken into account by the ECJ but there is no
formal decision yet… and the law in the private sector is still that there is
no entitlement to holiday pay until thirteen weeks have been worked.
B: So how long will that last… the ECJ usually follows the Advocate
General’s opinion, doesn’t it?
F: Yes… I think the statistics are that they do that in about 80
per cent of cases. It is unclear when the court will give a decision but we
should have it by the summer.
B: Just in time for the holiday season then. Do you think we will get
this one into the 20 per cent bracket?
F: Not where my money is going, Bill. I think the odds are on the law
changing.
B: Why?
F: The case is really part of a very long running saga going back to
the previous government. Do you recall John Major calling all of the Working
Time legislation "complete nonsense" and the attempt to annul the
directive on the grounds that it had been introduced on a false premise and
that it was really not based on health and safety?
B: I can remember that well… the UK lost its case and the
regulation was eventually introduced by Labour in 1998. But all that is old
history, why is it relevant?
F: I think the court takes an integration approach to issues like
this. It will not be keen on the UK having rules for workers that are markedly
more relaxed than the other member states because that upsets the level playing
field that is supposed to exist in a common market.
B: You mean we will not be allowed to have a more favourable regime
for employers than other member states?
F: Yes, it is only a part of the reasoning but I think that it is
influential, Bill.
B: But Frances, how come a Labour government brought in the 13-week
qualifying rule in the first place?
F: The directive says that the measures to be taken by member states
should be in accordance with conditions laid down by the member states. Both
the last government and the present one seem to have been advised that this
entitled them to provide for a qualifying period. They both wanted to allow for
the "burden on business". The Conservatives proposed 49 weeks and
Labour went for 13 weeks.
B: So they both got it wrong. What were the reasons for the advocate
general’s decision?
F: The first point in the argument was that the entitlement to paid
holiday was a fundamental social right.
B: Who would argue with that?
F: Our beloved government for starters. Anyway the advocate general
pointed out that an entitlement to paid holiday is provided for in the European
Charter of Fundamental Rights.
B: I thought that was not legally binding?
F: Right again, Bill. If you remember, Keith Vaz said it would have
as much importance as something written in The Beano. But it looks now as if he
was quite wrong.
B: How so?
F: Because the advocate general reasoned that if something is a
fundamental social right and recognised as such by the Community it cannot be
correct for a member state to have rules that effectively mean that certain
workers are deprived entirely of the right to a paid holiday. Either it is
fundamental or it is not. In Bectu most of the members work on contracts that
last less than 13 weeks and are never entitled to paid annual leave.
B: I see, anything else?
F: He also pointed out that the effect of the rule was to introduce a
distinction between the employment relationships of employees on a fixed term
contract and those working under contracts of unspecified duration.
B: Didn’t like that?
F: He called it "surreptitious" Bill. He argued that such a
distinction was not mentioned in the Directive; cannot be inferred and is
particularly inappropriate when dealing with a fundamental right.
B: Who is this man? What did he say the right to make conditions did
mean? I cannot say I blame the Government about getting that wrong, the words
must mean something.
F: Generous of you, Bill. Tizzano is the name and he gave a little
list or rather approved the list that was suggested by the Commission.
B: Good name for what he has done. Go on then, amaze me with your
list.
F: You can provide rules to allow employers to plan holiday periods;
to require advance notice; to have a way to calculate a pro rata entitlement if
you have worked for less than a year, and to set out a minimum period of
employment before leave can be taken.
B: Come again on that last one, did I hear you correctly?
F: A requirement of a minimum period of employment before leave can
be taken.
B: Oh, I see. You accrue the right from day one but cannot take
holiday until you have worked, say, three months.
F: I think that is right.
B: What will the overall effect of all of this be, Frances?
F: Probably one for you rather than me Bill, but it is bound to have
a big impact on agency workers, in a £20bn market. All employers will have to
either absorb the extra costs or pass them on to the customer. Saving expenses
such as holiday costs was one of the things that made using agency workers
attractive.
B: There are plenty of other advantages, Frances and I suppose it
will be the same for everyone.
F: As long as the work cannot be exported outside the EC. But, Bill
have I answered your questions?
B: Could we get round all this by making all of our researchers
self-employed?
F: No chance, Bill. The regulations apply to all "workers",
so that is not a runner.
B: Looks like I will be stuck with it then. Can I be sued for not
paying it now?
F: No, as I said the law has not changed yet. The effect of the ECJ’s
decision will be that the UK will have failed to implement the directive in so
far as it relates to annual holidays. A government employee can sue based on
the directive.
B: But our employees will not be able to sue us because we are not an
emanation of the State?
F: Spot on. But don’t think it will take long for the Government to
act.
B: Why not?
F: Because, in theory, anyone who suffers a loss attributable to the
Government’s failure to implement the directive can sue the Government and
recover damages for that loss and there must be hundreds of thousands of
workers who will be in that position.
B: That could keep the small claims courts busy.
F: Yes it would. So your position is that a liability to give
holidays to workers with less than 13 weeks service will begin when the new
regulations are made and not before.
B: Thanks Frances, I’d better get back to some contingency planning
and you can hit the brochures!
F: Bye Bill.
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Stephen Levinson is a partner with KLegal, the law firm associated with
KPMG
* Case C-173/99, Broadcasting, Entertainment, Cinematographic and Theatre
Union v Secretary of State for Trade and Industry
(8 February 2001)
