Guidance on making staff take holiday during the Coronavirus outbreak
Declan O’ Dempsey
In this article, Declan O’Dempsey considers the implications of the Guidance issued by the government on 13 May 2020 on holiday entitlement and pay during coronavirus (Covid-19) and urges employers to use considerable caution in seeking to follow the Guidance ordering workers to take annual leave on dates specified by the employer. Employers who choose to order staff to take holidays on specific dates within the Coronavirus outbreak shut down may face contractual or tribunal claims later. Further, the legal uncertainty may mean that they will face claims for penalising those who assert a right to take annual leave at a non-Covid 19 affected time or who refuse to take the leave as annual leave.
WHAT THE GUIDANCE SAYS
The Guidance issued on 13 May 2020 says that it is designed to help employers understand their legal obligations, in terms of workers who continue to work and those who have been placed on furlough as part of the government’s Coronavirus Job Retention Scheme (CJRS).
The Guidance deals solely with the obligations of the employer concerning Working Time Regulations 1998 requirements. It does not constitute legal advice, nor comprehensive advice. It does make the point, briefly, that the parties to the contract should check individual contracts and, if necessary, get legal advice. However, it does not develop the significance of that point at all.
This article deals with one aspect of the Guidance. The Guidance advises that employers can require workers to take holiday on specific dates, provided that they give enough notice to the worker before the first day of the holiday.
The Guidance gives the following advice which might at first seem odd if it is thought that there is a general unfettered right for an employer to require a worker to take a holiday on a particular date:
“If an employer requires a worker to take holiday while on furlough, the employer should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday.”
The difficulty for the employer is that this statement refers to a significant legal problem which such compulsion may carry with it: where the leave is in such circumstances that everyone knows that the legal restraints on a person’s activities mean that they would not be able fully to rest, relax or enjoy leisure time (without significant risk to their health or breaching the criminal law), it may not constitute annual leave.
The current advice on social distancing and the ability of persons to go about their ordinary lives whilst not at work creates massive uncertainty on this question. Someone who is required to take holiday under these circumstances may want to argue that they cannot relax and enjoy leisure time.
Once the outbreak is more under control, employers who have stipulated dates using the notice system may find themselves faced with claims that they have not afforded WTR rights to annual leave. They may also face contract claims based on the contractual rights of the workers to annual leave.
The right to stipulate dates on which holidays must be taken
There are two major issues concerning an employer’s right to stipulate the dates on which the worker must take their holiday. The first, in the context of Covid-19 restrictions, is whether the leave could constitute annual leave at all. The second is the interrelationship of the statutory right to annual leave and the contract under which the worker works. The latter issue may restrict the employer’s right to only those cases where solely the terms of the WTR have been incorporated into the contract of employment explicitly.
The right of the worker to take holiday autonomously will be governed by whichever is the more favourable to the worker of two regimes:
The Working Time Regulations 1998; and
The contractual stipulations.
WORKING TIME REGULATIONS 1998
The WTR provide for a minimum of 5.6 weeks' paid annual leave. There are two types of annual leave rights conferred.
There is a right under the Working Time Directive to a minimum of four weeks' annual leave each year (see regulation 13(1) of the WTR 1998). The WTR implement the Working Time Directive (2003/88/EC) (WTD) Article 7 of which leaves to each member state to ensure that every worker is entitled to paid annual leave of at least four weeks. The conditions for entitlement to such leave are to be set by national legislation or practice. There is a UK law based right of an additional 1.6 weeks' annual leave each year (see regulation 13A WTR 1998). This is the annual number of UK public holidays.
Regulation 15 notices
Under regulation 15 the worker can give notice of taking part or the whole of their entitlement under the WTR on particular days. A worker must give notice if they wish to take statutory holiday (regulation 15(1)). The notice must be at least twice the period of leave that they are requesting (regulation 15(4)(a)).
An employer may refuse a worker's holiday request. This is done by serving counter-notice which must be given at least as many calendar days before the date on which the leave is due to start as the number of days which the employer is refusing (regulation 15(4)(b), WTR). Most contracts will include some system of booking holiday which this reflects.
The employer has an additional right under the WTR to give notice requiring a worker to take statutory holiday on specified dates (regulation 15(2), WTR). The written notice must be at least twice the length of the period of leave that the worker is being ordered to take (regulation 15(4)(a)).
Such a right of stipulation is a rarer express contractual term. The consequences of this point are explored below.
Does it matter what the quality of the leave is so long as it is a period during which the worker is not working? The International Labour Organisation Convention 132, and the Charter of Fundamental Rights suggest that the quality of the leave is important. The UKSC in the Transocean case[1] suggests that all that matters is that the worker has rest from the work they are contracted to do. Unfortunately, the UKSC does not appear to have had the benefit of CJEU case law decided at the same time as it was making its decision which reaffirms that the quality of the leave must be taken into account when assessing whether the right to annual leave has been properly implemented in practice in a member state.
What is annual leave?
To constitute leave for the WTD the leave must serve the dual purposes of the concept under that Directive. In KHS AG v Schulte (C-214/10) [2012] 1 C.M.L.R. 46 the CJEU stated
“31. The right to paid annual leave, as laid down in art.31(2) of the Charter of Fundamental Rights of the European Union and in art.7 of Directive 2003/88, has the dual purpose of enabling the worker both to rest from carrying out the work he is required to do under his contract of employment and to enjoy a period of relaxation and leisure (see Schultz-Hoff [2009] E.C.R. I-179 at [25]).”
The recitals to the Directive refer to the ILO Convention C132:
Holidays with Pay Convention (Revised), 1970 (No. 132). Article 10(2) provides, having recognized the right of the employer to fix times for holidays:
“In fixing the time at which the holiday is to be taken, work requirements and the opportunities for rest and relaxation available to the employed person shall be taken into account”
This suggests that if there is no opportunity for rest and relaxation available to the person, what is granted is not a “holiday”.
The significance of KHS’s reference to the Charter (which remains effective until the end of 2020) is that the right to paid annual leave is a fundamental right, which can be directly effective between individuals, and which informs its specific expression in the Directive which the WTR, in turn, implement in the UK.
The purpose of annual leave is a dual purpose; the right to a period of relaxation and leisure is as important as the rest from carrying out the work required under the contract. It goes beyond simply the right to rest for a period from work.
In Transocean the UKSC held that the requirement for paid annual leave in article 7 of Directive 2003/88 relates to the provision of a period of rest of the requisite length without any additional requirement as to its qualitative nature. “Rest period” simply means any period which was not working time and includes every such period, irrespective of where the worker was at that time and what he was doing, so long as it was a period when he was not working (see paras 21 and 36 of the UKSC judgment). The UKSC did not consider the impact of Article 31 of the Charter[2] which makes provision for annual leave as such, and not simply for periods of rest.
Case law of the CJEU (which was not before the UKSC when Transocean was determined[3]) also asserts the dual purpose of annual leave and requires the qualitative nature of the leave to be assessed.
The qualitative nature of the leave in Transocean was perhaps not significant because that was not a case in which a serious argument that the essence of the right was being undermined could have been mounted. However in cases where there are legal, health, and practical restrictions on what a worker foreseeably can and cannot do during their leave which mean that they will not be able to enjoy a period of rest, relaxation and leisure, a strong argument can be made that the Transocean analysis cannot be regarded as the ultimate word.
The Charter is capable of being invoked in cases between individuals and relied upon directly. The UK courts have yet to give a ruling on the impact of the Charter in this area.
It may be for this reason that the Guidance hedges its bets when it comes to advising employers to take account of the qualitative nature of the leave.
CONDITIONS AND RESTRICTIONS ON THE RIGHT
The extent to which the principle that workers should enjoy annual leave is infringed cannot be assessed simply in general terms but must be assessed based on the facts of a particular situation. Although the Directive permits conditions to be placed on the exercise of the right to annual leave by a member state, any condition or restriction would not be valid if it undermines the very essence of the right conferred. In determining whether the essence of the right is being removed a range of factors may be examined.
The Advocate General in KHS made this point in the context of a case concerning the distinction between sick leave and annual leave. The Opinion states at paragraph 73 that the state of the health of the individual is an important factor which can impede the exercise of the entitlement to annual leave, but that nothing in the case law to that date indicated that the state of health of the worker is the only deciding factor.
“Rather, there are indications [in the case law] that it depends to a large extent on the national legislation and/or practices that are applicable to workers and whether they permit the actual exercise of the entitlement to annual leave.”
At present, in the UK, it is an offence under criminal law to be outside the place of residence without reasonable excuse (see regulation 6 of the Health Protection (Coronavirus, Restrictions) (England) Regulations 2020 as amended).
Where there is a state of lockdown and the criminal law sanctions anyone who is outside their own residence the worker can reasonably argue that being forced not to work during this time does not permit them a period of relaxation and leisure in any normal sense, where a reasonable excuse is not needed for a person to be outside their residence.
However, once the criminal law no longer applies it becomes more difficult to argue that the worker is not able to enjoy relaxation and leisure for the time they are not working. Conceivably the same may be true in a situation in which although there is a criminal sanction on being outside one’s residence without reasonable excuse, the guidance on when that will be exercised is (a) clear and (b) indicates that most leisure activities will constitute a reasonable excuse.
However, where there is a period of what might (faux de mieux) be described as “Johnsonian uncertainty” employers seeking to impose annual leave dates on workers should be very cautious. They will have to consider the actual situation of the worker. Can the worker leave their residence in the same way as they could usually to enjoy leisure? If the answer to that is foreseeably “no”, then the employer runs the risk of requiring the worker to take leave which will not be categorized as annual leave for working time purposes.
In the light of the Advocate General’s Opinion in KHS, and given the purpose of the right to annual leave, it appears that the list of factors which the courts and tribunals can take into account is not closed. Like any international treaty, the rights which are conferred under the Charter, Directive, and hence under the WTR must be practical and effective and not theoretical and illusory. For all those reasons, workers whose holiday is likely to be spent locked down in a small flat unable to go out for leisure for long periods can hardly be said to be afforded the right to annual leave in practice.
IS IT IN THE CONTRACT?
The above discussion concerns those contracts where it is clear that the WTR rights have been incorporated en masse into the contract. The CJRS does not alter the contractual relationship between employer and worker and, save in respect of prohibiting contracting out of the Regulations, neither do the Regulations.
Not everything that a worker does as a result of the contract is work. A worker might remain bound by the negative obligations, including a duty of loyalty, during a period of garden leave, and might in other circumstances become entitled to a guarantee payment without being released from any such negative obligations. The CJRS scheme Guidance appears to operate on the premise that those on furlough can work for other employers if given permission by the employer (see Guidance “Claim for wage costs”). Without such permission under the contract, a worker on furlough is bound by the implied duties of loyalty and similar negative duties. In this respect, the duties of the worker on holiday are no different from those on furlough.
The statutory scheme for conferring rights to annual leave under the Working Time Regulations 1998 (WTR), SI 1998/1833 allows for contractual rights to exist alongside those under the statutory scheme and that those rights may diverge. Where they do diverge, the worker is entitled to rely on the more advantageous one (see regulation 17). Thus if the contract does not contain a term allowing the employer to stipulate the dates on which holiday must be taken, the worker can rely on the more advantageous contractual right.
Whether the employer can stipulate the dates on which the worker must take holidays will require answers to the following questions as to the existence of any such contractual right:
Does the contract make any express provision incorporating solely the rights to annual leave conferred by the WTR?
If not does the contract have an express term permitting the employer to stipulate the date(s) on which holidays must be taken?
If not, is there any basis for implying such a term?
If the contract states expressly that only the rights conferred under the WTR govern annual leave, then the employer can rely on the right contained in regulation 15 of the WTR to stipulate that the worker must take annual leave on specific dates (and hence taken during what would otherwise be a furlough period).
Many contracts simply give the number of weeks’ holiday and provide notice periods to be given by the worker (and sometimes mechanisms for cancellation by the employer) without mentioning the right of the employer to stipulate the date on which the holiday must be taken. In these cases, subject to the argument based on implication, the employer does not have the contractual right to stipulate the dates on which the worker must take the annual leave.
The worker is entitled, in that situation, to refuse to take the annual leave on the day stipulated (see below). If the employer insists on the worker not doing any work for them and the worker agrees to do no work (but not to take the time as part of their holiday entitlement) the conditions for the furlough have been satisfied.
Where there is no express term incorporating a right for the employer to stipulate the date of the holiday, is there a basis for implying such a term? It seems unlikely. The term is not one which the parties would immediately have agreed, as it appears to be a highly unusual limitation on the freedom of the worker to take leave (after appropriate notice). Second, the existence of any express term under which the worker is to give notice of, and the employer agrees to, particular leave dates, suggests that once the dates are booked and agreed, the worker has a right to take those dates. Derogation from that right would need to be express. Third, the term is not one which is necessary to give business efficacy to the whole of the agreement, in the sense of being necessary to make the whole agreement workable (see Scally and ors v Southern Health and Social Services Board and anor 1991 ICR 771). It is unlikely, but not impossible, that such a term might be implied because reasonable, notorious and certain in a particular sector or because it has been the custom and practice of the parties to an individual’s agreement. The Court of Appeal’s approach in Mears v Safecar Security Ltd 1982 ICR 626, may assist in making this point clear. In determining whether an employee had a right to sick pay the Court looked at the behaviour of the parties in the conduct of the contract (to determine what their original intentions must have been). So a court would ask whether, on the evidence, the employer had ever stipulated that holiday must be taken on particular dates (or done so after a holiday request had been notified and accepted).
A worker would be entitled to a declaration that their contract never contained a right in the employer to require them to take their holidays on particular days if no term could be shown to exist to this effect. "The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result, the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear." (Wickman Machine Tool Sales Ltd. v. L. Schuler A.G. [1974] A.C. 235 @ 251 per Lord Reid).
Where there is a term of the contract permitting notice under regulation 15 to be given by the employer that annual leave must be taken on specific dates, questions can be asked about whether or when that notice is effectively given. The type of contract that a worker is working under will make a difference to the answer. Where there is a pattern to the work (such as a seasonal one) it may be the employer has given a pattern of leave under the contract (as happened in Transocean). This will constitute sufficient notice of the dates on which leave must be taken both for contractual rights to holiday and the purposes of the WTR.
However, where there is no such contractual pattern, a clear written notice specifying dates will have to be given.
Employers will, therefore, have to be very careful in seeking to insist that workers must take holidays on specific dates in the absence of either minimal incorporation of the WTR rights and obligations as a whole or an express term allowing the employer to require holiday to be taken on specific dates (provided the minimum notice under the regulations is given).
REFUSING THE ORDER
If the worker refuses to take annual leave on the stipulated dates, but presents themselves for work as ready willing and able, or if they later assert their right to take annual leave, would this constitute an act of misconduct by the worker? It is unlikely. Rather it is likely to be a genuine difference over the construction of the contract between the parties (see Bridgen v Lancashire County Council [1987] IRLR 58). However, workers will have to be careful about such refusals as the bias of the case law is towards finding there is not breach where what would otherwise occur would be an anticipatory breach of the contract. Where the disputed event has taken place already it is more difficult for a party simply to say that they were relying on what turns out to be a mistaken interpretation of the contract.
Finally, under section 104 ERA, an employee can claim unfair dismissal if the principal reason for dismissal was their assertion of rights under the WTR. By section 104(2) it is immaterial whether the employee has the right in question or not. Thus if an employee is dismissed for asserting that they have a right to statutory annual leave on the basis that the leave they were forced to take was not annual leave under the WTD (and hence WTR), it will not matter whether the legal analysis of annual leave falls in the employee’s favour or not. Similarly, under section 45A a worker has the right not to be subjected to any detriment on the ground that they refused to comply with a requirement which the employer imposed or proposed to impose in contravention of the Working Time Regulations 1998, or refused to forgo a right under those regulations or alleged that the employer had infringed those regulations. Again, it is immaterial in the case of a worker asserting that they have a right under the WTR whether or not they have such a right or whether it has been infringed provided that the worker asserts the claim in good faith. The detriment could include termination of the worker’s contract. However, if the worker is also an employee they could not make such a claim (section 45A(4)) but must bring a claim for unfair dismissal in relation to the dismissal itself.
If the claim is for the termination of the contract, however, the upper limit on the compensatory element of an unfair dismissal award will apply both in the case of a worker or an employee. However, if the tribunal also finds that the dismissal was principally due to the making of a protected disclosure under section 103A (or for workers as a result of s49(6)) there is no upper limit on the compensatory element (see s124(1A) ERA).
19 May 2020
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[1]Russell and ors v Transocean International Resources Ltd and ors 2012 ICR 185
[2] Article 31 - Fair and just working conditions
1. Every worker has the right to working conditions which respect his or her health, safety and dignity.
2. Every worker has the right to limitation of maximum working hours, to daily and weekly rest periods and to an annual period of paid leave.
[3] Neither the AG’s Opinion nor the judgment in KHS was before the UKSC in Transocean. It was handed down on 22 November 2011, and Transocean was handed down on 7 December 2011.