Gridquest Ltd (trading as Select Employment) v Blackburn

Under Regulation 16(5) of the Working Time Regulations 1998, contractual remuneration can discharge statutory holiday-pay liability only where it was paid in respect of leave. Ordinary weekly wages may include a holiday-pay element only if the employment contract so provides. An employer cannot unilaterally characterise part of wages for work done as holiday pay and thereby reduce its liability.

Six agency workers supplied to Ford Motor Company complained that their employing agencies had failed to pay holiday pay contrary to Regulation 16 of the Working Time Regulations 1998.

The Employment Tribunal found that none of the workers had agreed, expressly or otherwise, that their weekly pay included holiday pay under a rolled-up rate. It upheld their complaints. The Employment Appeal Tribunal allowed the employers' appeal and remitted the matter to determine whether a rolled-up rate had in fact been paid, holding that any holiday-pay element must be credited under Regulation 16(5).

The workers appealed. The central issue was whether an employer could obtain that credit despite the absence of a contractual term allocating part of weekly pay to holiday pay.

1. Appeal allowed unanimously. Lord Justice Pill held, with Lord Justice Robert Walker and Sir Martin Nourse agreeing, that the Employment Appeal Tribunal had erred. The Employment Tribunal's decision was affirmed.
2. For the purpose of Regulation 16, a week's pay is the amount payable under the contract for normal working hours. A weekly payment can include an amount for holiday pay only if employer and worker have agreed that it does.
3. Regulation 16(5) concerns contractual remuneration paid in respect of leave. It does not permit an employer unilaterally to apportion ordinary wages between payment for work and holiday pay. The asserted payment of holiday pay "in fact" was therefore no answer where the contract contained no agreement for a rolled-up holiday-pay element.
4. The Court approved the reasoning in The College of North East London v Leather (transcript 30 November 2001). The distinction drawn by the Employment Appeal Tribunal was immaterial: in both cases the employer sought unilaterally to allocate part of the agreed remuneration to holiday pay. The statutory right of set-off under Regulation 16(5) consequently did not arise.
5. The Court declined to decide the wider question whether a contractually agreed rolled-up rate would in any event be unlawful because it might defeat the purpose of the relevant Directive. That issue was unnecessary on the Employment Tribunal's binding findings of fact.

• Court of Appeal (Civil Division) — allowed the workers' appeal and affirmed the Employment Tribunal's decision: [2002] EWCA Civ 1037.
• Employment Appeal Tribunal — allowed the employers' appeal and remitted the case to a fresh Employment Tribunal to determine whether a rolled-up rate had been paid, directing that any holiday-pay element be credited under Regulation 16(5).
• Employment Tribunal, Stratford — unanimously upheld the workers' complaints that holiday pay had not been paid contrary to Regulation 16.