M P B Structures v. Employment Appeal Tribunal sub nom Munro v. M P B Structures Ltd
Inner House, Court of Session
In accordance with the Working Time Regulations 1998, an employer could only discharge its liability by paying holiday pay as and when the employee took statutory holiday leave.
Appeal by MPB Structures Ltd ('MPB') from a decision of the Employment Appeal Tribunal. The respondent's ('M') contract of employment contained a provision ('para.1.5') by which his holiday pay was 'rolled up' as part of his ordinary pay. MPB did this for administrative convenience. It intended that M save the additional monies so that when he took his holidays, he would have sufficient pay to cover himself for that period. The treatment of M’s holiday pay became the subject of proceedings. The Employment Tribunal held that para.1.5 was contrary to reg.13(9)(b) Working Time Regulations 1998 SI 1998/1833 and was rendered void by reg.35(1) of the 1998 Regulations. It also held that MPB could not rely upon reg.16(5) of the 1998 Regulations to set-off the allowance against M’s statutory entitlement. The 1998 Regulations implemented the Working Time Directive (Council Directive 93/104/EC) which entitled workers to be paid annual leave. On appeal, the Employment Appeal Tribunal held that the Employment Tribunal had erred in holding that reg.13(9)(b) applied. However, it went on to find that para.1.5 had the effect of limiting the 1998 Regulations. Therefore, the spirit of the 1998 Regulations could only be met if holiday pay was paid as and when holiday was taken.
HELD: (1) It was clear from Council Directive 93/104/EC that the right to annual leave and to payment for it was part of a single entitlement. (2) The arrangement of 'rolling up' holiday pay was not in accordance with the requirements of the 1998 Regulations and would lead to situations where workers were discouraged from taking holidays when they would otherwise have sought to do so. That state of affairs conflicted with the aim of both the 1998 Regulations and the Council Directive 93/104/EC, which was to safeguard the health and safety of workers. (3) MPB’s method of 'rolling up' holiday pay did not discharge its liability in respect of holiday pay under reg.16(1) of the 1998 Regulations.