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In a decision given on 15 June 2006, the London Employment Appeal Tribunal (EAT) ruled that, in the case Sanderson and Griffin v Exel Management Services, the workers did not have "fixed hours of work". As a result, their holiday pay should be based on their average earnings over a twelve-week period.
This was a test case for some 6,000 drivers who were employed on the same basis as Mr. Sanderson and Mr. Griffin by Exel Management Services, a UK logistics company. (Exel was acquired by DHL in December 2005.)
Sections 220 to 229 of the Employment Rights Act 1996 provide the rules for calculating "a week's pay" for a variety of different statutory payments, including statutory holiday pay. The way in which "a week's pay" is calculated varies according to the pay and hours provisions of their contracts. In this case, an employment tribunal had been asked to decide whether or not the workers had "normal working hours". Workers have "normal working hours" if they are entitled to overtime pay when they work for more than a fixed number of hours in a week, e.g." time and half is paid for all hours worked above 40 in a week". If this condition is met, their holiday pay is calculated using the fixed number of hours. If the condition is not met, their holiday pay is based on their average earnings over a twelve-week period. The employment tribunal, in December 2005, decided that Mr. Sanderson and Mr. Griffin had "normal working hours".
Based on the terms of the workers' contracts, it appeared that they had "fixed hours". The contract provided for a basic 40-hour week, with enhanced payments after working 40 hours. Different rates of pay applied to different tasks and, as the drivers had no control over the tasks allocated to them, their pay varied from week to week.
However, in practice, the hours for which the drivers were paid were not the actual hours worked but were based on "productivity" hours, namely a notional number of hours calculated on the basis of set formulae by which certain tasks were deemed to take certain periods of time, irrespective of how long they actually took. The drivers' pay was made up of two elements. The first was a productivity calculation under which each 50 kilometres travelled was treated as equating to one hour's pay, however long it actually took. The second was a payment based on "terminal loading times", where the pay differed for each product transported according to the estimated loading and unloading times, not the actual time taken. If, at the end of the day, drivers had completed more "productivity" hours than actual hours, they were expected to work on other assigned tasks.
In addition, due to technology improvements, the productivity hours for each task were no longer an accurate pre-estimate of the actual time taken for a task to be completed.
The EAT decided that the term "fixed hours" in the legislation could not include notional hours, even if they were a genuine pre-estimate of the actual number of hours worked, as the meaning of "fixed" includes the idea of "definite". Also, the fact that the pre-estimates of the time taken for different tasks were no longer accurate counts against them being "definite".
The EAT allowed the appeal and ruled that Mr. Sanderson and Mr. Griffin did not work "normal working hours". The effect of the decision is that the weekly holiday pay rate would have to be calculated using their average weekly pay in the twelve weeks preceding each period of holiday leave.
...back to 22 June 2006
Sources:
Michael Sanderson and Charles Griffin v Exel Management Services Ltd
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