Judgments - Her Majesty's Revenue and Customs (Respondents) v Stringer and others (Appellants)

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49.  Section 23 provides for complaints to employment tribunals by workers alleging breaches of a number of provisions, including section 13. It sets time limits as follows:

“(2)  Subject to subsection (4), an [employment tribunal] shall not consider a complaint under this section unless it is presented before the end of the period of three months beginning with—

       (a)  in the case of a complaint relating to a       deduction by the employer, the date       of payment of the wages from which       the deduction was made, or

      (b)  in the case of a complaint relating to a payment         received by the employer, the date when the         payment was   received.

  

  (3)  Where a complaint is brought under this section in respect     of—

    (a)  a series of deductions or payments, or

    (b)  a number of payments falling within subsection         (1)(d) and made in pursuance of demands for         payment subject to the same limit under section         21(1) but received by the employer on different         dates,

  

  the references in subsection (2) to the deduction or payment are   to the last deduction or payment in the series or to the last of the   payments so received.

    

  (4)  Where the [employment tribunal] is satisfied that it was   not reasonably practicable for a complaint under this section to be   presented before the end of the relevant period of three months,   the tribunal may consider the complaint if it is presented within   such further period as the tribunal considers reasonable.”

The correct construction of section 27 of the ERA

50.  It is common ground that section 13 of the ERA has a wide scope, extending to a variety of statutory and contractual entitlements to liquidated sums, provided always that they fall within the definition of “wages” in section 27. That definition is at the heart of these appeals.

51.  It is on its face a very wide definition. Section 27(1) starts with words of a generous ambit,

“Any sums payable to the worker in connection with his employment...”

The ambit of these words is cut down by the five general exclusions in section 27(2), but none of them has any possible application here. The wide opening words of section 27(1) are then followed (in the subsection as amended) by eleven paragraphs of specific inclusions, the first of which is itself in wide and general terms:

“(a) any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise.”

The remaining ten paragraphs refer with differing degrees of particularity to various statutory entitlements, including statutory maternity pay (included in section 27(1)(c) as originally enacted) and statutory paternity and adoption pay (added as paragraphs (ca) and (cb) by amendments made by the Employment Act 2002).

52.  Mr Cavanagh QC (appearing with Mr Tolley for the Revenue) relied on the absence of any reference to the WTR in the long list of statutory rights enumerated in section 27(1)(b) to (j). It was significant, he submitted, that Parliament made amendments specifically mentioning some new rights but had not done the same when the WTR were made in 1998. Statutory paid annual leave did not exist when the ERA was enacted, and Parliament cannot have intended, by the general words “or otherwise” in section 27(1)(a), to cover a non-existent right, based on considerations of health and safety, which might be introduced in the future. He relied on the general observations of Lord Bingham of Cornhill in R (Quintavalle) v Secretary of State for Health [2003] 2 AC 687, paras 8-10, citing a passage (now recognised as authoritative) in the dissenting opinion of Lord Wilberforce in Royal College of Nursing of the United Kingdom v Department of Health and Social Security [1981] AC 800, 822:

“In interpreting an Act of Parliament it is proper, and indeed necessary, to have regard to the state of affairs existing, and known by Parliament to be existing, at the time. It is a fair presumption that Parliament’s policy or intention is directed to that state of affairs. Leaving aside cases of omission by inadvertence, this being not such a case, when a new state of affairs, or a fresh set of facts bearing on policy, comes into existence, the courts have to consider whether they fall within the Parliamentary intention. That may be held to do so, if they fall within the same genus of facts as those to which the expressed policy has been formulated. They may also be held to do so if there can be detected a clear purpose in the legislation which can only be fulfilled if the extension is made. How liberally these principles may be applied must depend upon the nature of the enactment, and the strictness or otherwise of the words in which it has been expressed. The courts should be less willing to extend expressed meanings if it is clear that the Act in question was designed to be restrictive or circumscribed in its operation rather than liberal or permissive.”

Mr Cavanagh submitted that Parliament must have intended the WTR to remain as a single and exclusive regime for the enforcement of the rights which it created.

53.  In the Court of Appeal Maurice Kay LJ (with whom Kennedy and Laws LJJ agreed) accepted these submissions. Maurice Kay LJ dealt with the point quite shortly in para 24 of his judgment:

“I do not consider that, in 1996, Parliament can have intended to refer to a subsequently created statutory right which comes with its own enforcement regime. If there were any doubt about this it is dispelled by section 205(2) of the 1996 Act which provides that the remedy in respect of any contravention of section 13 ‘is by way of a complaint under section 23 and not otherwise'. If List Design were correct, it would not be possible for a claim of statutory holiday pay to be pursued under regulation 30 which expressly provides for such a claim. Parliament cannot have so intended.”

54.  Before your Lordships Mr Cavanagh expressly disclaimed any reliance on section 205(2) of the ERA. In my opinion he was right to make that disclaimer. So the Court of Appeal’s reasoning comes down to the simple assertion that Parliament cannot, in this context, have intended to refer to a statutory right to be created in the future. That all depends, in my opinion, on the width of the language used by Parliament, on the one hand, and the degree of novelty of the new statutory right, on the other hand. The decision in Quintavalle (a case concerned with scientific and technological progress in human embryology) is miles away on the facts. In this case Parliament chose to use wide language, and the statutory right to paid annual leave is by no means dissimilar from rights which have for many years appeared in many employment contracts. Statutory paternity pay and adoption pay, by contrast, were relatively unusual rights which called for specific mention, especially as statutory maternity pay was already specifically mentioned. The statutory purpose of the definition of “wages” appears to be wide and inclusive.

55.  In the Royal College of Nursing case Lord Wilberforce referred to what Parliament would have known about the existing state of affairs. The ERA was enacted on 22 May 1996, and there can be little doubt that Parliament was well aware, when the Bill which became the ERA was before it, that the Working Time Directive conferred rights to annual paid leave and that the United Kingdom was under an obligation to transpose them into domestic law by the end of 1996. Initially I was inclined to see this as an argument in favour of the appellants but on reflection I think it is (in Housman’s phrase) a two-edged sword, with both edges fairly blunt. The Bill was a consolidating measure, and the introduction of any amendment containing fresh material would have altered its character. Moreover the decision of the Court of Justice in United Kingdom v Council of the European Union on the United Kingdom’s assault on the vires of the Working Time Directive was not yet known; it was given on 12 November 1996, very shortly before the expiry of the time limit for transposition of the Directive. I do not think it is possible, or appropriate, to draw any inference from these aspects of the ERA’s parliamentary history.

56.  In the end it is a short point of statutory construction. I respectfully consider that the Court of Appeal had no good reason, either linguistically or on policy grounds, to take a restrictive view of the wide natural meaning of the definition in section 27.

The principle of equivalence

57.  Before the House Mr Jeans QC (appearing with Mr Ford for the appellants) asked leave to rely on a point of Community law not taken below, that is the principle of equivalence. Under that principle, and the linked principle of effectiveness, national remedies for breaches of Community rights must be no less favourable than those available in similar domestic proceedings, and must be capable of effective exercise in practice: Case C-78/98 Preston v Wolverhampton Healthcare NHS Trust [2001] 2 AC 415, para 31 (citing numerous earlier decisions of the Court of Justice to the same effect). Preston was concerned with the exclusion of female part-time workers from “contracted-out” pension schemes. Their claims appeared to be time-barred under section 2(4) of the Equal Pay Act 1970 and (as regards retrospective entitlement) under section 2(5) and equal access regulations made in 1976.

58.  National courts are required to consider relevant issues of Community law even if not raised at the right time by the parties: Case C-312/93 Peterbroeck, Van Campenhout & Cie v Belgium [1995] ECR I-4594, para 21. Your Lordships did therefore hear argument on this point. For my part I do not think that reliance on the principle of equivalence is necessary for the appellants to succeed in these appeals, but consideration of the principle does to my mind serve to emphasise the substantial similarity between the Community right to paid annual leave and similar rights conferred by employment contracts.

59.  Mr Jeans submitted that the time limit under regulation 30 of the WTR was obviously less favourable than that provided for by section 23 of the ERA, since section 23(3) contains the possibility of an extension of time for a “series” of deductions. Against that Mr Cavanagh submitted that it was artificial to equate annual leave under the WTR with a claim for unauthorised deductions from wages. He also submitted that the appellants’ argument proved too much, because of the six-year period available for a contractual claim by an employee brought in a county court (there are strict time limits for complaints invoking the employment tribunal’s extended jurisdiction: Employment Tribunals Extension of Jurisdiction (England & Wales) Order 1994 S.I. 1994/1623, articles 7 and 8).

60.  I comment first on Mr Cavanagh’s submission that the appellants’ argument proves too much. That submission was to my mind disposed of when Preston returned to this House after the decision of the Court of Justice: see the opinion of Lord Slynn of Hadley [2001] 2 AC 455, at paras 24-31. The comparison between procedure in an employment tribunal and in the county court must be made in the round, and the informal and inexpensive procedure in the employment tribunal confers many benefits. Lord Slynn’s views on that point were accepted by all the other members of the Appellate Committee, either directly or through their agreement with the opinion of Lord Clyde. The relevant comparison is therefore between regulation 30(2) of the WTR and section 23(2), (3) and (4) of the ERA, and there is no doubt that the latter is more advantageous.

61.  Lord Clyde (with whom Lord Goff of Chieveley and Lord Nolan agreed) was less ready to accept Lord Slynn’s views (paras 14-23) as to the similarity of the suggested domestic parallel in a case where part-time workers had for years been deprived of the opportunity of joining a pension scheme. Indeed Lord Slynn himself was cautious about the point (para 21):

“…one should be careful not to accept superficial similarity as being sufficient. It is not enough to say that both sets of claims arise in the field of employment law, nor is it enough to say of every claim under article 119 that somehow or other a claim could be framed in contract.”

62.  In these appeals, however, the parallel between the statutory right to paid annual leave and a contractual right to holidays with pay is to my mind much clearer and closer. It is not less close because of the Working Time Directive’s emphasis on health and safety at work. Similar thinking has for many years informed the approach of responsible employers in framing contractual terms of employment. Moreover in each case the remedy would be an order for payment of the liquidated sum due.

63.  In concluding that the appeals on the outstanding issue should be allowed I would therefore base my conclusion both on normal principles of statutory construction and on the principle of equivalence. On this issue also I would set aside the order of the Court of Appeal and restore the order of the Employment Appeal Tribunal.

LORD BROWN OF EATON-UNDER-HEYWOOD

My Lords,

64.  I have had the advantage of reading in draft the opinions of my noble and learned friends Lord Rodger of Earlsferry, Lord Walker of Gestingthorpe and Lord Neuberger of Abbotsbury. I agree with them and for the reasons they give I too would allow the appeals, set aside the order of the Court of Appeal and restore the order of the Employment Appeal Tribunal.

LORD NEUBERGER OF ABBOTSBURY

My Lords,

65.  The facts, background and relevant statutory provisions are admirably set out by my noble and learned friend Lord Walker of Gestingthorpe in his opinion, which I have had the privilege of seeing in draft. Following the rulings of the Grand Chamber of the European Court of Justice (“ECJ”) in Case C-350/06 Gerhard Schultz-Hoff v Deutsche Rentenversicherung Bund, Case C-520/06 Stringer v HM Revenue and Customs [2009] IRLR 214, there only remains one issue in dispute between the parties.

The issue between the parties

66.  The issue is whether a claim based on an alleged failure to make payments due under the Working Time Regulations 1998 (SI 1998/1833) (“the WTR”) can be brought by way of a claim for unauthorised deduction from wages under Part II of the Employment Rights Act 1996 (“the ERA”). In particular, the issue is whether claims for payment in respect of periods of annual leave under regulation 16, and claims for payment in lieu of leave on termination of employment under regulation 14, of the WTR are claims for “holiday pay… referable to [a worker’s] employment, whether payable under his contract or otherwise” within section 27(1)(a) of the ERA.

67.  If the answer is in the negative, then such a claim could only be brought under regulation 30 of the WTR, in which case the limitation period is “three months … beginning with the date on which it is alleged that … the payment should have been made” - regulation 30(2)(a). But if the answer is in the affirmative, and the claim could alternatively be brought under section 23 of the ERA, the regime is more generous. While section 23(2)(a) has a similar three month limitation period, section 23(3) provides that, where there has been a “series of deductions or payments", the period starts from “the last deduction or payment in the series".

68.  In my judgment, claims under regulations 14 and 16 of the WTR are claims within section 27(1)(a) of the ERA, and are therefore capable of benefiting from the section 23 regime. Like Lord Walker, I have reached this conclusion for two reasons, namely the language of section 27(1)(a) and the doctrine of equivalence.

The language of section 27(1)(a)

69.  As a matter of ordinary language, I am of the view that a payment due to a worker in lieu, or in respect, of his annual leave under the WTR is a sum “payable … in connection with his employment", and, in particular, that it is “holiday pay … payable under his contract or otherwise".

70.  Two submissions were advanced by the respondent against this view. First, it was said that that a payment due under regulation 14 or 16 of the WTR was in respect of leave under those Regulations, and not in respect of a “holiday". The purpose of the WTR is to give effect to the Working Time Directive (originally 1993/104/EC, now consolidated in 2003/88/EC), which was aimed at promoting health and safety at work. Accordingly, it was said, “leave” under the Regulations is not equivalent to a “holiday” in the Act.

71.  I do not agree. The purpose of a “holiday” from work is, at least in part, the psychological and social well-being of the employee. Further, regulation 17 of the WTR appears difficult to reconcile with the submission. It provides that, where a worker is “entitled to … annual leave both under a provision of these Regulations and under a separate provision (including a provision of his contract)", he can take advantage of the more favourable entitlement, but not of both entitlements. Quite apart from this, I would have thought that, even if the submission had been correct, it would not have availed the respondent: the right to payments under regulations 14 and 16 would be within the ambit of “other emolument” in section 27(1)(a) of the ERA.

72.  The respondent’s second point was that a payment due under the provisions of a statutory instrument was not within the ambit of the words “or otherwise” in section 27(1)(a) of the ERA. As a matter of ordinary language, I find that very difficult to accept. It is said to derive support from the reasoning of the Court of Appeal in New Century Cleaning Co Ltd v Church [2000] IRLR 27, paras 43 and 62 (per Morritt LJ and Beldam LJ respectively).

73.  I am not sure that this was indeed the effect of the reasoning in those two passages, but, if it was, then I must respectfully disagree. The respondent’s argument that the reach of the words “or otherwise” is effectively limited to terms implied into the employment contract not only seems to attribute an artificially narrow meaning to those words. On analysis, it gives them no meaning, as if a right to a payment is implied (by common law or statute) into a contract, then it seems to me that the sum is “payable under his contract". In any event, the argument overlooks the wide compass of the opening part of section 27(1), which refers to “sums payable to the worker in connection with his employment".

74.    Accordingly, unless there is some telling reason for excluding payments in lieu of annual leave under the WTR from the ambit of section 27(1)(a) of the ERA, it would appear to be included as a matter of ordinary language.

75.    Mr Cavanagh QC, in his attractive argument for the respondent, contended that there was some telling reason for reaching a different conclusion. He pointed to the fact that the WTR came into force some time after the ERA, and that, in paras (b) to (j), section 27(1) appears to contain an exhaustive list of statutory payments to employees. He also pointed out that section 27(1) has been amended to accommodate later enacted payments such a paternity pay and adoption pay - see paras (ca) and (cb) - but no such amendment was made to accommodate payments under the WTR, which have their own procedure and time limits for claims in regulation 30.

76.    In my view, the argument has some force, but not nearly enough to justify cutting down the natural meaning of the words of section 27(1)(a). When introducing paternity pay and adoption pay through the medium of the new Parts 12ZA and 12ZB of the Social Security Contributions and Benefits Act 1992, those drafting the Employment Act 2002 would have noticed that maternity pay, which was already provided for in Part XII of the 1992 Act, was specifically referred to in section 27(1)(c) of the ERA. It would therefore no doubt have been thought sensible to state in terms that the new paternity and adoption pay were to be treated in the same manner. No such imperative would have existed for payments in respect of leave under the WTR, for two reasons. First, there was no equivalent in respect of such payments to section 27(1)(c) in relation to paternity and adoption pay. Secondly, unlike paternity pay and adoption pay, payments in respect of leave could have been regarded as already covered by the reference to “holiday pay” in section 27(1)(a), so that they did not need to be covered in an additional new paragraph.

77.    It is true that, on this basis, very little is served by the provisions of regulation 30 of the WTR, as the time limits in section 23 of the ERA would almost always be the same or more generous. However, the time limit under regulation 30 is six months, rather than three months, for members of the armed forces. Quite apart from this, regulation 30 is concerned with claims which are not only for payments. Further, the statutory payments referred to in section 27(1) (d) (e) and (f) are subject to the same three months regime as that contained in regulation 30 of the WTR, which appears to be in fairly similar form to procedural provisions governing most of the other payments referred to in section 27(1)(a) to (j) of the ERA.

The principle of equivalence

78.    For the reasons so far given, it seems to me that, on purely domestic legal principles, the appellants are correct in their contention that payments due under regulations 14 and 16 of the WTR fall within section 27(1) of the ERA. However, if the contrary had been arguable, or even probably right, if one confined oneself to domestic law, I would still have found for the appellants on an additional ground persuasively advanced by Mr Jeans QC for the appellants, based on the EC law principle of equivalence. As succinctly put by Lord Slynn of Hadley in Preston v Wolverhampton Healthcare NHS Trust [2001] 2 AC 455, para 13, this principle generally requires that a limitation period in respect of an action on a claim arising out of EU law must not be “less favourable than for similar actions based on domestic law". In Levez v T H Jennings Ltd [1999] ICR 521, para 39, the ECJ said that it was primarily for the national court to ascertain whether the principle applies in a particular case.

79.    The issue which arises in the present appeal is whether there are claims under section 27(1) which are similar to, but benefit from more favourable limitation periods than, claims under regulations 14 and 16, if such latter claims do not fall within section 27(1). If the answer is in the affirmative, that would reinforce the conclusion, indeed it would provide an additional reason for concluding, that claims under regulations 14 and 16 did fall within section 27(1). Otherwise the UK Government would be in breach of its European Treaty obligations.

80.    This issue requires one to address two points, namely difference in limitation period and similarity of claims. In relation to contractual holiday pay, and all other sums covered by section 27(1), an employee can rely on section 23(3) of the ERA. This effectively extends the start of the three month limitation period, in any case where the deduction was one of a “series of deductions", until the date of the last deduction in the series. On the other hand, an employee who can only rely on regulation 30 of the WTR is subject to a similar three month time limit, but cannot contend for a postponement of the commencement of the period where the deduction or non-payment is part of a “series".

81.    As Lord Walker explains in para [5], section 23(3) is plainly a provision which is intended to have, and no doubt has, real value to many employees in relation to many claims based on deductions from their wages, even though I accept that it may on occasion be capable of being a little “hit and miss” in its effect. This is therefore not a case where it could be said that the appellants are seeking to benefit from the “most favourable rules” of limitation, which I understand to mean exceptional or unusually beneficial rules (as mentioned by the ECJ in Levez [1999] ICR 521, para 42).

82.    The argument on this appeal concentrated on the difference in limitation period for claims in respect of contractual holiday pay and claims for payments due under regulations 14 and 16. In my view, that may well be too narrow a comparison. However, whether one confines oneself to contractual holiday pay or considers all the types of payment covered by paras (a) to (j) of section 27(1), I consider that the principle of equivalence would be infringed if payments due under regulations 14 and 16 of the WTR were not comprehended within section 27(1)(a), and thereby within the ambit of section 23(3) of the ERA.

 
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