Robinson-Steele v RD Retail Services Limited; Clarke v Frank Staddon Limited; Caulfield v Hanson Clay Products Limited (formerly Marshalls Clay Products Ltd), opinion of the advocate-general, 27 October 2005
INTRODUCTION Rolling up holiday pay into a worker’s hourly rate of pay is a common practice. It is often used by employers for administrative convenience in particular industry sectors where the workforce may be transient or operates on a shift system (eg construction and manufacturing). But recent decisions in the UK have cast doubt on whether this practice is lawful.
The European Court of Justice (ECJ) has been asked to decide whether, in principle, rolled-up holiday pay arrangements are compatible with the Working Time Directive. In advance of the ECJ’s judgment, the advocate-general – who helps the court reach its decision – has delivered his opinion on the matter.
What is rolled-up holiday pay? Generally, holiday pay is described as ‘rolled-up’ when a worker receives an element of holiday pay added to his hourly rate of pay. This is then paid to them as part of the remuneration for their working time. But when the worker actually takes their holiday leave, they receive no further payment.
Advocate-general’s opinion The advocate-general’s opinion is that rolled-up holiday pay agreements are likely to put pressure on some workers not to make use of their leave entitlement. For example, if the worker fails to budget properly and put aside the holiday pay element of their wages, they may not then be able to afford to take leave at the appropriate time. Alternatively, the possibility of earning more pay by foregoing holiday may also act as a deterrent to taking leave.
For rolled-up holiday to be valid, the advocate-general believes there must be measures in place that effectively alleviate the pressures not to take leave. In other words, rolled-up arrangements might be lawful only if the employer provides a way of actually taking the minimum amount of leave. Also, any agreement must be transparent so the worker knows how much of their wage represents holiday pay.
One consolation for employers is that the advocate-general said that even if a rolled-up holiday pay agreement was invalid, credit could be given for sums already paid under the agreement provided it was clear about how much of the remuneration represented holiday pay. Previous UK case law had found that no credit should be given to an employer for the element of holiday pay paid out in a rolled-up arrangement – a costly conclusion for the employer which then faced paying twice for the same period of holiday entitlement. However, the advocate-general’s conclusion on giving credit for sums already paid does not sit comfortably with his overall comments emphasising that a worker’s right to actually take leave is ensured.
What is the effect of this opinion? The advocate-general’s opinion is not legally binding – the ECJ makes the official ruling in cases like this. That said, the ECJ does tend to follow the advocate-general’s lead. Even if the ECJ does not follow the opinion to the letter, it will certainly consider it to be highly persuasive.
What happens next? The ECJ’s judgment on this issue is unlikely to be available until next year. If it adopts a similar approach to the advocate-general, then although rolled-up holiday pay agreements may be allowed in principle, in practice the difficulties of making sure workers are not deterred from taking leave may mean that this type of arrangement loses its appeal to many employers.