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Three Cs for part-year contracts - comprehensive, clear and consistent

Part-year workers and employees are getting a lot of attention at the moment! Holiday was and still is the subject of much debate thanks to the Harpur case and the Government’s consultation (see our recent blog). A new Employment Appeal Tribunal (EAT) case, Lloyd v Elmhurst School, concerns an equally important issue; pay and part-year workers. If any case brings home the importance of clear drafting, it is this one. You would expect lawyers to drone on about drafting, it’s the tool of our trade! But when you see the expensive mess the respondent in this case got themselves into, I think it proves our point. 

Ms Lloyd was a salaried part-time learning support assistant at the school. She bought a claim for unlawful deduction of wages; she claimed her employer had failed to pay her the national minimum wage (NMW) for her basic hours. The problem stemmed from poor contract drafting.   

 What were the issues?

Issue one – what are 'basic hours' for the purpose of calculating NMW?

Reg 21 of the National Minimum Wage Regulations 2015 (NMW Regs) states at s(3) that a worker is entitled to be paid a salary 'in respect of a number of hours in a year, whether those hours are specified in or ascertained in accordance with their contract (the basic hours)'. Further down in Reg 21 at s(7) we learn that work may be salaried hours whether or not (a) all the basic hours are working hours. And Reg 26 notes that hours when a worker is absent from work can also form part of the basic hours. 

Issue two - what were Ms Lloyd’s 'basic hours'? 

Underlying Ms Lloyd’s unlawful deduction of wages claim was the disagreement over Ms Lloyd’s basic hours for the purpose of NMW calculations. This stemmed from the unclear and ambiguous language used in the employment contract. Her contract stated that she worked three days a week (21 hours) during school terms and was paid her salary in equal monthly instalments. She was required to carry out duties outside of school terms when reasonably required. Importantly it noted that she was entitled to the usual school holidays as holidays with pay. The school calculated her salary taking her basic hours as 40 weeks (school terms plus 20 days’ statutory holiday) i.e. the work she actually did, whereas Ms Lloyd argued her basic hours were 52 weeks (including school holidays) in accordance with her employment contract. Taking 52 weeks as her basic hours, meant her salary fell below the NMW. 

Issue three – what guidance did the EAT give?

The EAT overturned the earlier tribunal decision and upheld Ms Lloyd’s argument. Her contract of employment was a full-year contract given she was entitled to all school holidays and hence her basic hours were not limited to the three academic terms. It helpfully provided the following guidance:

  • Basic hours are identified according to the employment contract and not hours worked. This can include non-working hours. Ms Lloyd’s contract stated her entitlement to school holidays and hence these were included in her basic hours.
  •  Periods of absences count even if the worker would not be required to work. Ms Lloyd’s holiday absences still counted towards her basic hours even though there was no work for her to do during that time.
  • It’s the hours specified in the contract that count, not the hours actually worked. Ms Lloyd only worked term time, but her contract stated that she was entitled to be paid throughout the school holiday. It was the latter that counted when it came to calculating basic hours. 

Take away points? 

  • While this was an education case, this decision has ramifications for term time only and other part-year workers in other sectors, not just in education.
  • Despite the existence of the national agreement on pay and conditions of service (also known as the green book) which sets out key national provisions for local government services, (including education) for items such as working time and leave, in the absence of a nationally negotiated contract for time only workers, there can be various contractual interpretations of the green book. Consequently, it is key that the contract must be comprehensive, precise and consistent for part-year salaried staff. We know that Ms Lloyd’s contract lacked details of her annual salary and her work pattern. 
  • The temptation to just tweak a full-year contract leads to ambiguous drafting and could have expensive consequences.

Basic hours will always be those found in the employment contract – make sure that these reflect working practices. Note that this is different from issues of employment status where it’s the working practices which are looked at first.   

  • Basic hours include absences; these absences include ones where there was work to do but the employee was absent and absences where there was no work to be done.   

If you are concerned that your part-year contracts are insufficiently comprehensive, clear and consistent which might place you at risk of an unlawful deduction claim we can do the following;

  • review your contracts and identify any risks (£300 plus VAT); and
  • provide specific and detailed advice on what changes to make to bring clarity and minimise any risk (charged according to the nature of advice).

For further advice or a discussion, please contact Katherine Sinclair.

Tags

cjrs, employment, furlough, health and social care, national minimum wage, pensions