Latest Employment Law case updates - Edition 8 2019

1. Agency workers not entitled to same contractual hours as direct recruits

2. Lack of leave to remain does not necessarily preclude employment claims

3. Employers should not pro-rate holiday pay for "Part-year Workers"

1. Agency workers not entitled to same contractual hours as direct recruits

Kocur v Angard Staffing Solutions Ltd and another (Court of Appeal)

The Court of Appeal has confirmed that the Agency Workers Regulations 2010 ("AWR") do not entitle agency workers to the same number of contracted working hours as an appropriate and directly-recruited comparator. Whilst agency workers are entitled to the same "basic working and employment conditions" after 12 continuous weeks in the same role with the same hirer, this protection was intended to secure equality of treatment at work, rather than regulate the amount of work which individuals are entitled to undertake.

The AWR entitle agency workers to the "same basic working and employment conditions" – including those relating to pay, the duration of working time and annual leave - as directly recruited employees after they have worked for 12 continuous weeks in the same role. In this long-running litigation, a qualifying agency worker alleged that he had received less favourable annual leave, rest break entitlements and also wasn’t given the same amount of work (typically the agency worker was allocated less than 20 hours per week) than comparable direct recruits in breach of the AWR, although he was paid a higher hourly rate.

The EAT had previously accepted the Claimant's argument that Tribunals assessing compliance with the AWR's equality principle should take a term-by-term rather than "package" approach, meaning that an enhanced rate of pay cannot be justified as offsetting other less generous rights to rest breaks and leave entitlements, for example. However, the Claimant appealed against the EAT's decision that the AWR's reference to "the duration of working time" did not confer a right to equivalent contractual hours on qualifying agency workers.

The CA rejected the appeal, holding that the AWR intended to provide equality as to the rights and protections of longer-serving agency workers while they are working or in respect of issues arising out of their work, not the overall amount of work which agency staff are entitled to be given. Taking a purposive approach, the CA thought such a finding would be inconsistent with the reason many businesses turn to agency workers; namely to provide additional flexibility and fluctuating amounts of resource in response to uncertain workloads. Instead, the references to "working time" within the AWR were limited to continuous periods of required work, such as a normal working day or shift.

Whilst the CA's decision confirms that employers do not need to offer agency workers the same number of contractual hours as a directly-recruited colleague, organisations should remain cognisant of EAT's insistence of a term-by-term approach to the AWR's equality principle, which was not challenged on appeal. This means that end users of agency staff cannot seek to offset less favourable treatment with a higher rate of pay or other enhanced benefit and seek to argue that the overall package on offer confers equality within the meaning of the AWR.

2. Lack of leave to remain does not necessarily preclude employment claims

Okedina v Chikale (Court of Appeal)

The Court of Appeal has determined, in a highly fact specific case, that employment claims brought by an employee who was illegally working in the UK were not barred by the doctrine of illegality. In this case, the employee was not culpable for her lack of valid working permission and had actually been misled by her employer. Based on broad policy-based principles, there was no reason to construe applicable statutory or common law principles in a way which would deprive an innocent employee of otherwise legitimate contractual remedies.

The employee was a Malawian national who came to the UK in July 2013 under a six month work visa which permitted her role as a live-in domestic worker. Her employer retained her passport and informed her that it would take the necessary steps to extend her visa, before making the extension application in the employee's name, on the false pretence that she was a family member and having forged her signature. This application was refused and eventually dismissed in January 2015, following an appeal submitted by the employer without the employee's knowledge. The employee continued to work for the employer until she was summarily dismissed in June 2015.

In July 2015 the employee brought various claims before the Employment Tribunal, most of which arose out of her employment contract. The ET did not consider that any of these employment claims (including for unfair and wrongful dismissal, unlawful deductions from wages and unpaid holiday pay) were barred by statutory illegality by virtue of the employee being an illegal worker from November 2013 and awarded the employee £72,271.20 as a remedy for her various claims.

Both the EAT and – subsequently – the CA rejected the employer's appeal. In particular, the CA noted that although UK immigration legislation subjects employers to potential civil and criminal sanctions in respect of illegal working, it does not expressly or impliedly render contracts made with illegal workers unenforceable.  In its view, it would be contrary to public policy to inhibit such claims in this case, where the employer had misled an employee who could not be described as blameworthy. The common law doctrine of illegality was also not applicable because the employee had not known of or actively participated in the relevant misdemeanour, in line with the now widely accepted legal test.

Employers should be aware that the simple fact an employee is an illegal worker does not necessarily prevent the same employee bringing employment claims arising out of breaches of their employment contract, particularly in circumstances where the employee is unaware of their illegal immigration status by virtue of the employer's actions. Any "defence" of illegality will be assessed on a case-by-case basis, depending on broad concepts of public policy such as culpability, fairness and parliamentary intention.

3. Employers should not pro-rate holiday pay for "Part-year Workers"

The Harpur Trust v Brazel (Court of Appeal)

The Court of Appeal has held that individuals who are engaged on permanent contracts but only work for particular periods throughout the year based on irregular hours, such as visiting school music teachers ("Part-year Workers"), should have holiday pay calculated with reference to their average pay in the 12 weeks immediately prior to the statutory calculation date (multiplied by 5.6), as opposed to a set – and commonly used - amount equivalent to 12.07% of total (expected) hours worked per year.

The Claimant in this case was employed as a visiting music teacher. She was engaged on a permanent zero-hours contract under which she was not obliged to provide a minimum amount of work, and worked – in practice – for around 10 to 15 hours per week during term time only (c.32 weeks per year), an arrangement which the CA described as Part-year Working. Since 2011, she had received holiday pay based on a pro-rated percentage of her total earnings during each term, with reference to her expected annual working hours as compared to a full time entitlement.

She brought a claim before the Employment Tribunal alleging that the Working Time Regulations 1998 ("WTR") require employers to calculate holiday pay in respect of Part-year workers who do not have "normal working hours" by calculating their average weekly pay for the 12 weeks prior to the statutory "calculation date" (generally the first day of leave, excluding any weeks in which no remuneration was payable), before multiplying this figure by 5.6. The CA has signalled its agreement with the Claimant's suggested approach in respect of those engaged on permanent contracts (including zero hours arrangements). Whilst the outcome may result in Part-year Workers receiving holiday pay which equates to a higher proportion of their annual earnings in comparison to equivalent full-year workers, the CA held that the WTR make no provision for pro-rating holiday pay in these circumstances and the ability to do so could not be implied based on the statutory language.

This decision provides helpful clarity in this area and will be relevant to employers who engage Part-year Workers on permanent contracts, including zero-hours arrangements.  These organisations will need to urgently review their method of calculating holiday pay. This is an area which will need to be kept under close review given forthcoming legal changes in this area, including the planned increase to the holiday pay reference period mentioned above (from 12 to 52 weeks) which comes into effect from 6 April 2020, as well as the uncertainty cast on the Bear Scotland decision by the Northern Ireland Court of Appeal in recent months, which could open the way to greater historic liability for employers (see here for more information).