Employers who have been paying a “rolled up” rate of pay, which includes an element of holiday pay, should be aware of the Scottish Court of Session’s recent decision in MBP Structures Limited -v- Munro. Mr Munro was paid £10 per hour which included an 8% allowance for holiday pay. He was not paid when he took holiday. His contract stated that it was his responsibility to retain the advance allowance for holiday pay to ensure that he was in funds at the time he took his holiday.
The Court of Session held that this arrangement did not satisfy the requirements of the Working Time Regulations 1988. They were of the opinion that “it is essential not only that payment should be made for annual leave, but also that it should be made in association with the taking of that leave”. The Court considered that this “rolled up” arrangement would discourage workers from taking holiday when they would otherwise have sought to do so and, as such, conflicted with the objectives of the Working Time Regulations and the Working Time Directive which are to ensure that workers take sufficient rest periods.
The Court went on to rule that the 8% allowance included in Mr Munro’s pay did not go towards discharging MBP’s liability to pay him holiday pay under the Working Time Regulations. The combination of this case and the EAT’s recent decision in List Design Group Limited -v- Catley and Others is that workers who are paid a “rolled up” rate of pay may now be able to bring a claim for unpaid holiday pay dating back to the introduction of the Working Time Regulations in October 1998, such a claim under would be under the unlawful deduction of wages provisions in the Employment Rights Act 1996.
Note that decisions of the Court of Session are not binding on English Employment Tribunals, but are highly persuasive. If you require any further information about this please contact Simon Jeffreys at simon.jeffreys@cms-cmck.com or on +44 (0)20 7367 3487 or Anthony Fincham at anthony.fincham@cms-cmck.com or on +44 (0)20 7367 2783 or Alex Green at alex.green@cms-cmck.com or on +44 1224 622022
