Inland Revenue v Ainsworth & Ors

Annual leave under regulation 13 of the Working Time Regulations 1998 is leave from work. A worker unable to attend work throughout the relevant year because of long-term sickness is not entitled to the statutory four weeks’ annual leave for that year. Regulation 14 should be construed consistently, so termination compensation does not arise where there was no underlying regulation 13 entitlement. Regulation 30 provides the exclusive route for enforcing statutory holiday-pay rights. Such a claim cannot instead be brought as an unauthorised deduction of wages under Part II of the Employment Rights Act 1996.

Five appeals by the Commissioners of Inland Revenue arose from Employment Tribunal proceedings concerning statutory holiday pay under the Working Time Regulations 1998. Four respondents had been dismissed on grounds of ill-health and claimed compensation for untaken leave under regulation 14; Mrs Khan remained employed and claimed annual leave under regulation 13 after her sick-pay entitlement had ended. The Employment Tribunals and the Employment Appeal Tribunal followed Kigass Aero Components Limited v Brown [2002] ICR 697, which held that long-term sick employees could accrue the relevant entitlement despite doing no work. Mr Ainsworth also succeeded in a claim under Part II of the Employment Rights Act 1996, relying on List Design Group Limited v Douglas [2002] ICR 686. The central questions were whether Kigass was correctly decided and whether statutory holiday-pay claims could be enforced through the wages provisions of the 1996 Act.

1. Appeals allowed. The Court of Appeal, in the judgment of Maurice Kay LJ, with Laws and Kennedy LJJ agreeing, held that a worker absent from work throughout the relevant leave year because of long-term sickness has no entitlement under regulation 13 of the Working Time Regulations 1998 to four weeks’ annual leave. The critical concept was “leave”, not merely the definition of “worker”. Leave means release from an obligation to work. The respondents’ construction served no health and safety purpose and instead produced a windfall. The Regulations, made under section 2(2) of the European Communities Act 1972, had to be construed in the light of the health and safety purpose of the underlying Directive.
2. The absence from regulation 13 of wording expressly referring to periods during which the worker works did not require the contrary result. Annual leave was a macro entitlement, distinct in kind from daily and weekly rest rights. Potential anomalies were not a sufficient reason to adopt a different construction.
3. Regulation 14 was built upon the leave to which the worker was entitled under regulation 13. It should, so far as possible, be construed consistently with regulation 13. Where long-term sickness meant that there was no regulation 13 entitlement before termination, no compensatory payment arose under regulation 14. Any remedy for resulting anomalies lay in legislative amendment.
4. The formula in regulation 14(3) did not always assume four weeks’ leave. The amount represented by A depended on the entitlement properly arising under regulation 13.
5. Regulation 30 provided the single and exclusive enforcement regime for statutory holiday-pay rights. Section 205(2) of the Employment Rights Act 1996 supported that conclusion. List Design Group Limited v Douglas [2002] ICR 686 and Canada Life Ltd v Gray [2004] ICR 673 were wrongly decided.

Permission to appeal was to be dealt with on paper. An agreed order as to costs was to be submitted.

• Court of Appeal (Civil Division) — [2005] EWCA Civ 441: appeals from decisions of the Employment Appeal Tribunal were allowed.
• Employment Appeal Tribunal — The tribunal followed Kigass Aero Components Limited v Brown [2002] ICR 697 and granted permission to appeal, considering that any change should be made by the Court of Appeal.
• Employment Tribunals — The claims concerning statutory holiday pay were determined in favour of the respondents, including Mr Ainsworth’s claim under Part II of the Employment Rights Act 1996.